EXHIBIT 1.2
3 NOVEMBER 2004
(CHINA NETCOM GROUP CORPORATION (HONG KONG) LIMITED)
(CHINA NETWORK COMMUNICATIONS GROUP CORPORATION)
CHINA NETCOM GROUP CORPORATION (BVI) LIMITED
THE JOINT GLOBAL COORDINATORS
(AS DEFINED HEREIN)
THE JOINT SPONSORS
(AS DEFINED HEREIN)
AND
THE HONG KONG UNDERWRITERS
(AS DEFINED HEREIN)
==============================
UNDERWRITING AGREEMENT
==============================
XXXXX & XxXXXXXX
00XX XXXXX, XXXXXXXXX XXXXX
00 XXXXXXXX XXXX
XXXX XXXX
CONTENTS
SECTION PAGE
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SECTION I: INTERPRETATION.................................................................... 3
1. Interpretation............................................................................... 3
SECTION II: CONDITIONS........................................................................ 12
2. Conditions................................................................................... 12
SECTION III: THE HONG KONG PUBLIC OFFERING, UNDERWRITING AND OTHER MATTERS..................... 14
3. The Hong Kong Public Offering................................................................ 14
4. The Hong Kong Offering Documents............................................................. 17
5. Underwriting................................................................................. 18
6. Payment under the Hong Kong Public Offering.................................................. 20
SECTION IV: COMMISSION AND EXPENSES........................................................... 21
7. Commission and expenses...................................................................... 21
SECTION V: STABILIZATION AND AUTHORITY RELATING TO THE HONG KONG UNDERWRITERS................ 23
8. Stabilization and authority relating to the Hong Kong Underwriters........................... 23
SECTION VI: REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS...................................... 24
9. Representations, Warranties and undertakings relating to the Company......................... 24
10. Rights in relation to the Warranties......................................................... 24
SECTION VII: FURTHER UNDERTAKINGS.............................................................. 27
11. Further undertakings......................................................................... 27
SECTION VIII: TERMINATION............................................................................. 32
12. Termination.................................................................................. 32
SECTION IX: INDEMNITY......................................................................... 35
13. Indemnity.................................................................................... 35
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SECTION X: GENERAL PROVISIONS................................................................ 39
14. Remedies, waivers and release................................................................ 39
15. Assignment................................................................................... 39
16. Further assurance............................................................................ 39
17. Entire agreement............................................................................. 40
18. Notices...................................................................................... 40
19. Announcements................................................................................ 42
20. Time of essence.............................................................................. 42
21. Invalidity................................................................................... 42
22. Governing law................................................................................ 43
23. Submission to Jurisdiction................................................................... 43
24. Immunity..................................................................................... 43
25. Judgment currency indemnity.................................................................. 44
26. Survival..................................................................................... 44
27. Withholding.................................................................................. 45
28. Taxation..................................................................................... 45
29. Counterparts................................................................................. 45
SCHEDULE 1 Joint Global Coordinators................................................................. 46
SCHEDULE 2 Joint Sponsors............................................................................ 47
SCHEDULE 3 Hong Kong Underwriters.................................................................... 48
SCHEDULE 4 The Warranties............................................................................ 50
SCHEDULE 5 List of Subsidiaries of the Company....................................................... 74
SCHEDULE 6 List of Restructuring Documents and Restructuring Agreements.............................. 77
SCHEDULE 7 The Conditions Precedent Documents and Documents to be Delivered to the Joint Global
Coordinators.............................................................................. 80
SCHEDULE 8 Hong Kong Underwriters' set off arrangements.............................................. 84
SCHEDULE 9 The Contingency Plan...................................................................... 85
SIGNATURE PAGE........................................................................................ 91
ii
THIS AGREEMENT is made on 3 November 2004
BETWEEN:
(1) (CHINA NETCOM GROUP CORPORATION (HONG KONG) LIMITED), of 59/F, Bank of
Xxxxx Xxxxx, 0 Xxxxxx Xxxx, Xxxx Xxxx (xxx "XXXXXXX");
(0) (XXXXX NETWORK COMMUNICATIONS GROUP CORPORATION), of Xxxxxxxx X, Xx. 000
Xxxxxxxxxxxx Xxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxxx 100031, the People's
Republic of China ("CHINA NETCOM GROUP");
(3) CHINA NETCOM GROUP CORPORATION (BVI) LIMITED, of P.O. Box 3140 Wickhams
Cay I, Road Town, Tortola, British Virgin Island ("CNC BVI");
(4) THE JOINT GLOBAL COORDINATORS, whose respective names and addresses are
set out in Schedule 1 (together, the "JOINT GLOBAL COORDINATORS" and
individually, a "JOINT GLOBAL COORDINATOR");
(5) THE JOINT SPONSORS, whose respective names and addresses are set out in
Schedule 2 (together, the "JOINT SPONSORS" and individually, a "JOINT
SPONSOR"); and
(6) THE HONG KONG UNDERWRITERS whose respective names and addresses are set
out in Schedule 3 (together, the "HONG KONG UNDERWRITERS" and
individually, a "HONG KONG UNDERWRITER").
WHEREAS:
(A) The Company was incorporated in Hong Kong under the Companies Ordinance as
a private limited liability company on 22 October 1999 under the name
Target Strong Limited.
(B) China Netcom Group is a state-owned enterprise established under the laws
of the PRC and is the indirect controlling shareholder of the Company
owning, through CNC BVI, as to 86.4% of the issued share capital of the
Company;
(C) In connection with the Restructuring, the following approvals have been
obtained:
(i) the approval (Guo Tu Xx Xxx [2004] No. 79) dated 23 March 2004 from
the Ministry of Land and Resources to China Netcom Group relating to
the general plan for disposal of land properties for the
Restructuring and listing of the Company;
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(ii) the reply letter (Guo Tu Xx Xxx [2004] No. 172) dated 4 June 2004
from the Ministry of Land and Resources to China Netcom Group
relating to the disposal plan of land properties for the
Restructuring and listing of the Company;
(iii) the approval (Guo Zi Xxxx Xxxx [2004] No. 527) dated 3 July 2004
from the State-owned Assets Supervision and Administration
Commission of the State Council to China Netcom Group relating to
assets valuation in connection with the Restructuring and overseas
listing of the Company;
(iv) the approval (Shang He Pi [2004] No. 445) dated 12 July 2004 from
the Ministry of Commerce to China Netcom Group relating to the
injection of assets to the Company; and
(v) the approval (Shang He Pi [2004] No. 1292) dated 30 August 2004 from
Ministry of Commerce in relation to CNC China's increase in share
capital, change of name, change of business scope, amendments to its
articles of association and the establishment of branch offices,
and, having obtained such approvals, the Restructuring was implemented.
(D) The Company obtained the approval (Zheng Xxxx Xxx He Zi [2004] No. 34)
dated 27 September 2004 from China Securities Regulatory Commission
authorising the Company to apply for the listing of the Shares on the Hong
Kong Stock Exchange and the listing of the ADSs on the New York Stock
Exchange, Inc.
(E) As at the date of this Agreement and immediately prior to the Global
Offering, the Company has an issued share capital of US$220,000,000
divided into 5.5 billion Shares, which are owned as to 86.4% by CNC BVI,
8.1% by CNC Fund, 0.7% by the Academy of Sciences, 0.7% by INC-SARFT, 0.7%
by CRTC, 0.7% by Shanghai Alliance and 2.8% by Shandong SASAC,
respectively. Any discrepancies in the above shareholding percentages are
due to rounding.
(F) At a meeting of the board of Directors held on 22 October 2004,
resolutions were passed pursuant to which, inter alia, any one of the
Directors was authorised to agree and sign on behalf of the Company this
Agreement.
(G) The Company has agreed to offer for subscription, and the Selling
Shareholders have agreed to offer for sale, the U.S. Offer Shares being
offered pursuant to the U.S. Offering and the International Offer Shares
being offered pursuant to the International Offering. The Company has
agreed to offer for subscription the Hong Kong Offer Shares being offered
pursuant to the Hong Kong Public Offering. The Hong Kong Public Offering,
the U.S. Offering and the International Offering shall together constitute
the Global Offering. For the avoidance of doubt, no Shares shall be
offered for sale by the Selling Shareholders under the Hong Kong Public
Offering.
2
(H) The Company and the Selling Shareholders are expected to, respectively,
grant to the Joint Global Coordinators for and on behalf of the U.S.
Underwriters and International Underwriters an Over-allotment Option to
require the Company to allot and issue and the Selling Shareholders to
sell up to an aggregate of 142,634,000 Shares and 14,263,000 Shares,
respectively (which may in each case be deliverable in the form of ADSs),
solely to cover over-allocations in connection with the U.S. Offering and
the International Offering.
(I) The Company has appointed the Joint Sponsors to sponsor the Company in
relation to the application to the Hong Kong Stock Exchange for the
granting of and permission to deal in the Offer Shares.
(J) The Company and China Netcom Group have agreed to give the
representations, warranties and undertakings hereinafter mentioned.
NOW IT IS AGREED AS FOLLOWS:
SECTION I: INTERPRETATION
1. INTERPRETATION
(A) In this Agreement (including the recitals and the Schedules), the
following expressions shall, unless the context otherwise requires, have
the following meanings:
"ACCEPTANCE DATE" 9 November 2004 being the date on which the
application lists for the Hong Kong Offer Shares will
close as stated in the section headed "How to apply
for Hong Kong Offer Shares" in the Prospectus (or such
other later date as such application lists may close
as stated in the Prospectus and the Application
Forms);
"ACCOUNTS DATE" 30 June 2004;
"ADSs" American depositary shares issued by Citibank N.A.
each representing ownership of 20 Shares, which are to
be listed on the New York Stock Exchange, Inc.;
3
"AFFILIATE" in relation to a particular company, any company or
other entity which is its holding company or
subsidiary, or any subsidiary of its holding company,
or which directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is
under common control with, the company specified. For
the purpose of this definition, the term "CONTROL"
(including the terms "CONTROLLING", "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") means the possession,
direct or indirect, of the power to direct or cause
the direction of the management and policies of a
person, whether through the ownership of voting
securities, by contract, or otherwise;
"AGREEMENT AMONG the agreement to be entered into between the Joint
HONG KONG " Global Coordinators, the Joint Sponsors and the Hong
UNDERWRITERS Kong Underwriters on the date hereof;
"APPLICATION FORMS" the white and yellow application forms for the
Hong Kong Offer Shares each in the agreed form to be
issued by the Company with the Prospectus;
"APPROVAL" any approval, order, consent, authorisation, licence,
certificate, clearance, permit, registration and
qualification of and from any Regulatory Authorities
having jurisdiction over the Company, any of its
subsidiaries or any of the Selling Shareholders;
"ASIA NETCOM" Asia Netcom Corporation Limited, a company
incorporated in Bermuda with limited liability and a
wholly owned subsidiary of the Company;
"BUSINESS DAY" any day on which licensed banks generally are
open for business in Hong Kong (excluding a Saturday
for the purpose of this definition);
"CCASS" the Central Clearing and Settlement System established
and operated by Hongkong Clearing;
"CLAW BACK the U.S. Offer Shares and the International Offer
SHARES" Shares withdrawn from the U.S. Offering or the
International Offering (as the case may be) and made
available as an additional part of the Hong Kong Offer
Shares for subscription under the Hong Kong Public
Offering pursuant to clause 3(J) and as described in
the Prospectus;
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"CLOSING" the time when payment is to be made under clause 6(A)
and in accordance with the provisions of the Receiving
Bankers' Agreement;
"CNC CHINA" China Netcom (Group) Company Limited, formerly known
as China Netcom Corporation Limited, a company
established in the PRC with limited liability as a
wholly foreign owned enterprise and a wholly owned
subsidiary of the Company;
"CNC FUND" CNC Fund, L.P., an exempted limited partnership
constituted in and under the laws of the Cayman
Islands;
"COMPANIES the Companies Ordinance (Chapter 32 of the Laws of
ORDINANCE" Hong Kong), as amended;
"COMPANY the audited combined financial statements of
ACCOUNTS" the Group for each of the financial years ended 31
December 2001, 2002 and 2003 and for the 6 months
ended 30 June 2004;
"CONDITIONS" the conditions set out in clause 2(A);
"CONTINGENCY the contingency plan substantially in the form as set
PLAN" out in Schedule 9;
"DIRECTOR(S)" the director(s) of the Company;
"EANL" East Asia Netcom Limited, an indirect wholly owned
subsidiary of China Netcom Group, incorporated in
Bermuda;
"FORMAL NOTICE" the formal notice substantially in the agreed
form required under Rule 12.02, Chapter 12 of the Hong
Kong Listing Rules to be published in connection with
the Hong Kong Public Offering in the newspapers;
"GLOBAL OFFERING" the Hong Kong Public Offering, the U.S. Offering and
the International Offering;
"GROUP" the Company and any of its subsidiaries from time to
time;
"HOLDING COMPANY" has the meaning ascribed to it in section 2 of the
Companies Ordinance;
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"HONGKONG CLEARING" Hong Kong Securities Clearing Company Limited;
"HONG KONG" Hong Kong Special Administrative Region of the PRC;
"HONG KONG DOLLARS" Hong Kong dollars, the lawful currency of Hong Kong;
and "HK$"
"HONG KONG the Rules Governing the Listing of Securities on The
LISTING RULES" Stock Exchange of Hong Kong Limited;
"HONG KONG OFFER the Initial Hong Kong Offer Shares (i) together with,
SHARES" where applicable, the Claw Back Shares, or (ii) as may
be adjusted pursuant to clause 5(G);
"HONG KONG
OFFERING DOCUMENTS" the Prospectus and the Application Forms;
"HONG KONG PRICE the letter agreement to be entered into between the
DETERMINATION Joint Global Coordinators (on behalf of the Hong Kong
AGREEMENT" Underwriters) and the Company immediately following
the determination of the Offer Price in accordance
with clause 3(I) to record the price so determined;
"HONG KONG the offering of the Hong Kong Offer Shares in Hong
PUBLIC OFFERING" Kong on and subject to the terms and conditions set
out in the Hong Kong Offering Documents;
"HONG KONG STOCK The Stock Exchange of Hong Kong Limited;
EXCHANGE"
"INITIAL HONG KONG the 104,598,000 Shares being initially offered by
OFFER SHARES" the Company for subscription pursuant to the Hong Kong
Public Offering and excluding any Claw Back Shares or
any adjustment made pursuant to clause 5(G);
"INTERNATIONAL the 470,693,000 Shares (which are represented by ADSs
OFFER SHARES" unless otherwise requested by the Joint Global
Coordinators) being initially offered by the Company
and the Selling Shareholders in the Offer Ratio
pursuant to the International Offering subject to the
provisions of clauses 3(J) and 5(G) and the
Over-allotment Option;
6
"INTERNATIONAL the offering of Shares (which are represented by ADSs
OFFERING" unless otherwise requested by the Joint Global
Coordinators) outside the United States and Canada
(including to professional and institutional investors
within Hong Kong) and which includes a public offering
without listing in Japan;
"INTERNATIONAL the group of underwriters which is expected to enter
UNDERWRITERS" into the U.S. and International Underwriting Agreement
to underwrite the International Offering;
"INTERSYNDICATE the agreement to be entered into between the Joint
AGREEMENT" Global Coordinators, the representatives of the Hong
Kong Underwriters and the representatives of the U.S.
Underwriters and the International Underwriters;
"JOINT GLOBAL China International Capital Corporation Limited,
COORDINATORS" Citigroup Global Markets Asia Limited and Xxxxxxx
Sachs (Asia) L.L.C., particulars of which are set out
in Schedule 1 to this Agreement;
"JOINT SPONSORS" China International Capital Corporation (Hong Kong)
Limited, Citigroup Global Markets Asia Limited and
Xxxxxxx Xxxxx (Asia) L.L.C., particulars of which are
set out in Schedule 2 to this Agreement;
"LAW" any law, statute, ordinance, rule, regulation,
guideline, opinion, notice, circular, order, judgment,
decree or ruling of any Regulatory Authority;
"LISTING the Listing Committee of the Hong Kong Stock Exchange;
COMMITTEE"
"NOMINEE" Bank of China (Hong Kong) Nominees Limited, in whose
name the application moneys are to be held by the
Receiving Bankers under the Receiving Bankers'
Agreement;
"OFFER PRICE" the price per Share for the Hong Kong Offer Shares as
determined in accordance with the provisions of clause
3(I);
7
"OFFER RATIO" the ratio between the number of Shares being initially
offered by the Company for subscription and the number
of Shares being initially offered by the Selling
Shareholders for sale under the U.S. Offering and the
International Offering;
"OFFER SHARES" the Hong Kong Offer Shares, the U.S. Offer Shares and
the International Offer Shares;
"OVER-ALLOTMENT the options expected to be granted by the Company and
OPTION" the Selling Shareholders to the U.S. Underwriters and
the International Underwriters exercisable by the
Joint Global Coordinators on behalf of the U.S.
Underwriters and the International Underwriters under
the U.S. and International Underwriting Agreement to
require the Company to allot and issue up to an
aggregate of 142,634,000 additional Shares and the
Selling Shareholders to sell up to an aggregate of
14,263,000 additional Shares (which may in each case
be deliverable in the form of ADSs) solely to cover
over-allocations in connection with the U.S. Offering
and the International Offering;
"PRC" the People's Republic of China, which, for the purpose
of this Agreement, excludes Hong Kong, Macau Special
Administrative Region and Taiwan;
"PRICE the date on which the Offer Price is determined in
DETERMINATION accordance with the provisions of clause 3(I), which
DATE" is expected to be on or about 9 November 2004 (New
York time);
"PROCEEDINGS" any suit, action or proceeding arising out of or in
connection with this Agreement;
"PROSPECTUS" the prospectus to be issued by the Company in
connection with the Hong Kong Public Offering
substantially in the agreed form;
"PROSPECTUS DATE" 4 November 2004;
"RECEIVING Bank of China (Hong Kong) Limited, The Bank
BANKERS" of East Asia, Limited and Industrial and Commercial
Bank of China (Asia) Limited, the banks appointed to
hold the application moneys received in connection
with the Hong Kong Public Offering pursuant to the
Receiving Bankers' Agreement;
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"RECEIVING the agreement appointing the Receiving Bankers in the
BANKERS agreed form;
AGREEMENT"
"REGISTRAR'S the agreement between the Share Registrar and the
AGREEMENT" Company in the agreed form;
"REGULATORY any regulatory agency, relevant national, provincial,
AUTHORITY" municipal, local, foreign or other governmental
authority, agency or body, self-regulatory
organization, any court, other tribunal or stock
exchange authorities (including, without limitation,
the Hong Kong Stock Exchange, the SFC and the SEC);
"RENMINBI" and Renminbi, the lawful currency of the PRC;
"RMB"
"REPORTING PricewaterhouseCoopers;
ACCOUNTANTS"
"RESTRUCTURING" has the meaning ascribed thereto in the Prospectus;
"SEC" the U.S. Securities and Exchange Commission;
"SECURITIES ACT" the U.S. Securities Act of 1933, as amended;
"SELLING CNC BVI, (Chinese Academy of Sciences), (Information
SHAREHOLDERS" and Network Center of State Administration of Radio,
Film and Television), (China Railways
Telecommunications Center), (Shanghai Alliance
Investment Limited) and (Shandong Provincial
State-owned Assets Supervision and Administration
Commission);
"SFC" the Securities and Futures Commission of Hong Kong;
"SHARE REGISTRAR" Computershare Hong Kong Investor Services Limited;
"SHARES" ordinary shares in the capital of the Company with a
nominal value of US$0.04 each;
"SUBSIDIARY" has the meaning ascribed to it in section 2 of the
Companies Ordinance;
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"TAXATION" all forms of taxation whether in Hong Kong or
elsewhere in the world wherever imposed and all
statutory, governmental, state, provincial, local
governmental or municipal impositions, duties and
levies and all penalties, charges, costs and interest
relating thereto;
"TRANSACTION" any transaction, act, event, omission or circumstance
existing of whatever nature;
"UNDER- has the meaning ascribed to it under clause 5(A);
SUBSCRIPTION"
"UNDERWRITERS" the Hong Kong Underwriters, the U.S. Underwriters and
the International Underwriters;
"UNITED STATES" the United States of America, its territories, its
and "U.S." possessions, any State of the United States of America
and the District of Columbia;
"U.S. AND the underwriting agreement relating to the U.S.
INTERNATIONAL Offering and the International Offering expected to be
UNDERWRITING entered into between the Company, China Netcom Group,
AGREEMENT"" the Selling Shareholders, the Joint Global
Coordinators, the U.S. Underwriters and the
International Underwriters on or following the Price
Determination Date;
"U.S. DOLLAR" United States dollar, the lawful currency of the
and "US$" United States;
"U.S. OFFER the 470,693,000 Shares (which are represented by ADSs
SHARES" unless otherwise requested by the Joint Global
Coordinators) being initially offered by the Company
and the Selling Shareholders in the Offer Ratio
pursuant to the U.S. Offering subject to the
provisions of clauses 3(J) and 5(G) and the
Over-allotment Option;
"U.S. OFFERING" the offering of Shares (which are represented by ADSs
unless otherwise requested by the Joint Global
Coordinators) in the U.S. and Canada;
"U.S. the group of underwriters which are expected to enter
UNDERWRITERS" into the U.S. and International Underwriting Agreement
to underwrite the U.S. Offering;
"VALID applications under the Hong Kong Public Offering from
APPLICATIONS" persons made before the closing of the application
lists (a) by giving electronic application
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instructions to Hongkong Clearing (i) which have been
duly submitted and are otherwise in accordance with
the terms and conditions of the Hong Kong Offering
Documents and (ii) the debit from such person's
Designated Bank Account (as defined in the General
Rules of CCASS) to effect such instructions has been
accepted by the relevant bank when first requested or
(b) on Application Forms which (i) have been duly
completed and submitted and are otherwise in
accordance with the terms and conditions of the Hong
Kong Offering Documents and (ii) are accompanied by
cheques or banker's cashier orders for the full amount
payable on application which are honoured on first
presentation (or, in each case, and without prejudice
to the provisions of clauses 5(A) and 5(E), if
practicable in the circumstances and requested by the
Joint Global Coordinators (for themselves and on
behalf of the Hong Kong Underwriters) or the Company,
on further request or on further presentation), and
subject to the provisions of clauses 3(G) and 3(H);
"VERIFICATION the verification notes in respect of the Prospectus
NOTES" prepared by Xxxxx & Xxxxxxxx dated 3 November 2004
(signed copies of which will be delivered to the Joint
Sponsors); and
"WARRANTIES" the representations, warranties and undertakings in
Schedule 4 and given or made, or deemed to be given or
made, pursuant to clause 9 and "WARRANTY" shall be
construed accordingly.
(B) In this Agreement, unless otherwise specified:
(i) references to recitals, clauses, sub-clauses, paragraphs and
Schedules are to recitals, clauses, sub-clauses, paragraphs of, and
schedules to, this Agreement;
(ii) a reference to any ordinance, statute or statutory provision shall
be construed as a reference to the same as it may have been, or may
from time to time be, amended, modified or re-enacted;
(iii) references to a "COMPANY" shall be construed so as to include any
company, corporation or other body corporate, whenever and however
incorporated or established;
11
(iv) references to a "PERSON" shall be construed so as to include any
individual, firm, company, government, state or agency of a state or
any joint venture, association or partnership (whether or not having
separate legal personality);
(v) references to writing shall include any mode of reproducing words in
a legible and non-transitory form;
(vi) unless otherwise specified, references to dates are to Hong Kong
dates and references to times of the day are to Hong Kong time;
(vii) all headings to clauses, sections and Schedules are for convenience
only and do not affect the interpretation of this Agreement;
(viii) all words denoting the singular shall include the plural and vice
versa;
(ix) references to the "CLOSING OF THE APPLICATION LISTS" shall be
construed in accordance with clause 3(G);
(x) the Schedules form part of this Agreement and shall have the same
force and effect as if expressly set out in the body of this
Agreement, and any reference to this Agreement shall include the
Schedules; and
(xi) a reference to a document being "IN THE AGREED FORM" means such
document in a form agreed and initialled for the purpose of
identification by Xxxxx & XxXxxxxx and Linklaters.
SECTION II: CONDITIONS
2. CONDITIONS
(A) The obligations of the Hong Kong Underwriters under this Agreement are
conditional upon:
(i) the Joint Global Coordinators, on behalf of the Hong Kong
Underwriters, receiving the documents listed in Schedule 7, Part A
not later than 3:00 p.m. on the Business Day before the Prospectus
Date (save for the documents listed as 1.(C) in Schedule 7, Part A,
not later than 5:00 p.m. on the Business Day before the Prospectus
Date) in form and content satisfactory to the Joint Global
Coordinators;
(ii) the lodging of the Prospectus (and other required documents) with
the Hong Kong Stock Exchange by 11:00 a.m. on the Business Day
before the Prospectus Date (or such later time as agreed by the Hong
Kong Stock Exchange), and the Hong Kong Stock Exchange issuing a
certificate pursuant to section 38D(5) of the Companies Ordinance
certifying that it authorises registration of the Prospectus before
the Prospectus Date;
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(iii) the lodging of one copy of the Prospectus duly certified by two
Directors (or by their agents duly authorised in writing) as having
been approved by the resolutions of the board of Directors and
having all the documents required by the provisions of section 38D
of the Companies Ordinance to be endorsed thereon or attached
thereto with the Registrar of Companies in Hong Kong not later than
3:00 p.m. on the Business Day before the Prospectus Date (or such
later time as agreed by the Registrar of Companies in Hong Kong),
and the Registrar of Companies in Hong Kong registering the same
before the Prospectus Date;
(iv) listing of and permission to deal in all the Offer Shares being
granted (subject only to allotment) by the Listing Committee in
principle on or before the Price Determination Date and dealings in
the Offer Shares being allowed by the Hong Kong Stock Exchange to
commence on the Hong Kong Stock Exchange on or before 17 November
2004 (or such later date as the Company and the Joint Global
Coordinators on behalf of the Hong Kong Underwriters may agree) (and
such listing and permission not subsequently being revoked prior to
the time and date detailed in clause 12(A));
(v) (a) the execution and delivery of the U.S. and International
Underwriting Agreement on the Price Determination Date; and
(b) the U.S. and International Underwriting Agreement becoming
unconditional in accordance with its terms (other than any
condition for this Agreement to become unconditional) and not
having been terminated in accordance with its terms or
otherwise; and
(vi) the Offer Price having been fixed on the Price Determination Date in
accordance with the provisions of clause 3(I) and the Hong Kong
Price Determination Agreement having been executed by Joint Global
Coordinators (on behalf of the Hong Kong Underwriters) and the
Company.
(B) The Company undertakes to use its best endeavours to procure the
fulfilment of the Conditions set out in clause 2(A) above and in
particular shall furnish such information, supply such documents, pay such
fees, give such undertakings and do all such acts and things as may be
reasonably required by the Joint Global Coordinators (on behalf of the
Hong Kong Underwriters), the Hong Kong Stock Exchange, the SFC, the
Registrar of Companies in Hong Kong, and regulators of any other relevant
jurisdictions in connection with the application for the listing of and
permission to deal in the Offer Shares and the fulfilment of such
conditions.
(C) The Joint Global Coordinators, for themselves and on behalf of the Hong
Kong Underwriters, may, at any time, waive any or all of the Conditions or
extend the
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deadline for the fulfilment of such Conditions by such number of days or
in such manner as they may in their absolute discretion determine.
(D) In the event that the Price Determination Date shall not occur on or prior
to 11 November 2004, or in the event that any of the other Conditions is
not fulfilled or waived on or prior to 4 December 2004, this Agreement
shall terminate with immediate effect and the provisions of clause 12(B)
shall apply.
SECTION III: THE HONG KONG PUBLIC OFFERING,
UNDERWRITING AND OTHER MATTERS
3. THE HONG KONG PUBLIC OFFERING
(A) The Company will offer the Hong Kong Offer Shares for subscription by the
public in Hong Kong at a price not to exceed the maximum offer price of
HK$8.91 per Share as stated in the Hong Kong Offering Documents, payable
in full on application in Hong Kong dollars together with relevant
brokerage, SFC transaction levy, investor compensation levy and Hong Kong
Stock Exchange trading fee on and subject to the terms and conditions set
out in the Hong Kong Offering Documents and this Agreement.
(B) The Company hereby appoints, to the exclusion of all others, the Joint
Global Coordinators to act as joint global coordinators and joint global
bookrunners of the Global Offering, and, relying on the Warranties herein
contained and subject as hereafter mentioned, the Joint Global
Coordinators respectively accept such appointments.
(C) The Company hereby appoints the Hong Kong Underwriters on the terms and
subject to the conditions of this Agreement, and to the exclusion of all
others, as underwriters of the Hong Kong Public Offering and, as agents of
the Company, to assist the Company to procure applications for the Hong
Kong Offer Shares under and in connection with the Hong Kong Public
Offering. On and subject to the terms and conditions of this Agreement,
and relying on the Warranties herein contained and subject as hereafter
mentioned, the Hong Kong Underwriters respectively accept such
appointments.
(D) The Company hereby confirms that the foregoing appointments pursuant to
clauses 3(B) and 3(C) confer:
(i) in case of clause 3(B), on the respective Joint Global Coordinators
all powers, authorities and discretions on behalf of the Company
necessary for, or reasonably incidental to, the lawful making of the
Global Offering, and hereby agree to ratify and confirm everything
which any Joint Global Coordinator shall lawfully do in the exercise
of any such powers, authorities and discretions; and
14
(ii) in case of clause 3(C), on the respective Joint Global Coordinators
and, as the case may be, the respective Hong Kong Underwriters all
powers, authorities and discretions on behalf of the Company
necessary for, or reasonably incidental to, the lawful making of the
Hong Kong Public Offering and/or the application for listing of and
permission to deal in the Offer Shares on the Hong Kong Stock
Exchange, and hereby agree to ratify and confirm everything which
any Joint Global Coordinator or, as the case may be, any Hong Kong
Underwriter shall lawfully do in the exercise of any such powers,
authorities and discretions.
(E) Each of the appointments pursuant to clauses 3(B) and 3(C) is made on the
basis, and on terms, that each appointee is irrevocably authorised to
delegate all or any of its relevant rights, duties, powers and discretions
in such manner and on such terms as it thinks fit (with or without
formality and without prior notice of any such delegation being required
to be given to the Company) to any one or more of its affiliates. Each of
the above-named appointees shall remain liable for all acts and omissions
of any of its affiliates to which it delegates relevant rights, duties,
powers and/or discretions pursuant to this clause notwithstanding any such
delegation.
(F) The Company will, subject to registration of the Prospectus in accordance
with clause 2(A)(iii), cause the Formal Notice to be published in the
newspapers and on the date(s) as the Company shall decide. The Company
will cause such number of copies of the Prospectus together with
Application Forms as the Joint Global Coordinators (on behalf of the Hong
Kong Underwriters) may reasonably request to be delivered to the Joint
Global Coordinators or as the Joint Global Coordinators (on behalf of the
Hong Kong Underwriters) may direct for the purpose of issuing the same
generally.
(G) The application lists for the Hong Kong Offer Shares will, subject as
mentioned below, open at 11:45 a.m. on the Acceptance Date and will close
at 12:00 noon on the same day. In the event of a tropical cyclone warning
signal No. 8 or above or a "black" rainstorm warning signal (in any such
case, a "SIGNAL") being in force in Hong Kong at any time between 9:00
a.m. and 12:00 noon on the Acceptance Date then the application lists will
open at 11:45 a.m. and close at 12:00 noon on the next Business Day on
which no signal remains in force at any time between 9:00 a.m. and 12:00
noon and all references in this Agreement to the closing of the
application lists shall be construed accordingly.
(H) The Company agrees that the Joint Global Coordinators shall have the sole
and exclusive right, on and subject to the terms and conditions set out in
the Hong Kong Offering Documents and this Agreement, to accept or reject
(in whole or in part) any applications for Hong Kong Offer Shares
(including, where the number of Hong Kong Offer Shares being applied for
exceeds the total number of the Hong Kong Offer Shares, the right to
determine the basis of allocation of the Hong Kong Offer Shares) and the
Joint Global Coordinators, without prejudice to clause 3(J) below, may,
but shall not be obliged to, withdraw Offer Shares from the U.S. Offering
and/or the International Offering and, on behalf of the
15
Company, make available such Offer Shares as additional Hong Kong Offer
Shares to satisfy Valid Applications.
(I) The Offer Price for the Hong Kong Offer Shares will be based on the Hong
Kong dollar equivalent of the U.S. dollar price at which ADSs are to be
offered in the U.S. Offering and the International Offering. The price of
such ADSs will be as stated in the U.S. and International Underwriting
Agreement. The Offer Price will be determined on the Price Determination
Date as that amount which, when increased by 1 per cent. brokerage, 0.005
per cent. SFC transaction levy, 0.002 per cent. investor compensation levy
and 0.005 per cent. Hong Kong Stock Exchange trading fee thereon, is
(subject to any necessary rounding) equal to the U.S. dollar price per ADS
(i) converted into Hong Kong dollars at the average of the bid and offered
exchange rates quoted by The Hongkong and Shanghai Banking Corporation
Limited at the close of business on the second Business Day prior to the
Price Determination Date and (ii) divided by 20 (being the number of Offer
Shares represented by each ADS) Provided that the Offer Price shall be not
more than HK$8.91. The Offer Price shall upon its determination be
recorded in the Hong Kong Price Determination Agreement to be executed at
such time.
(J) In the event that Valid Applications are received pursuant to the Hong
Kong Public Offering in respect of (i) 15 times or more but less than 50
times or (ii) 50 times or more but less than 100 times or (iii) 100 times
or more of the aggregate number of the Initial Hong Kong Offer Shares,
then the total number of Hong Kong Offer Shares available under the Hong
Kong Public Offering will be increased to 313,795,500, 418,394,000 and
522,992,000 Shares, respectively, representing approximately 30 per cent.
(in the case of (i)) or 40 per cent. (in the case of (ii)) or 50 per cent.
(in the case of (iii)) respectively, of the total number of Shares
initially available under the Global Offering (before any exercise of the
Over-allotment Option). In such case, the number of Shares allocated in
the U.S. Offering and/or the International Offering shall be
correspondingly reduced, in such manner as the Joint Global Coordinators
deem appropriate, and such additional Shares will be allocated to Pool A
and Pool B of the Hong Kong Public Offering for subscription at the Offer
Price. For the avoidance of doubt, the Over-allotment Option is granted by
the Company and the Selling Shareholders to the U.S. Underwriters and the
International Underwriters only, and not to the Hong Kong Underwriters.
Further, for the avoidance of doubt, no Shares of the Selling Shareholders
shall be reallocated to the Hong Kong Public Offering.
(K) The total number of the Initial Hong Kong Offer Shares plus the Claw Back
Shares (if any) shall be divided into two pools for allocation purposes.
With respect to the Initial Hong Kong Offer Shares, Pool A comprises not
less than 52,299,000 Shares and Pool B comprises not less than 52,299,000
Shares. The Shares in Pool A will be allocated by the Joint Global
Coordinators in their discretion on an equitable basis to applicants who
have applied for Shares with an aggregate subscription or purchase price
of HK$5 million (excluding the brokerage, transaction levy, investor
compensation levy and trading fee payable) or less per applicant. The
Shares in Pool B will be allocated by the Joint Global
16
Coordinators in their discretion on an equitable basis to applicants who
have applied for Shares with an aggregate subscription or purchase price
of more than HK$5 million (excluding the brokerage, transaction levy,
investor compensation levy and trading fee payable) per applicant. If the
Hong Kong Offer Shares in one pool (but not both pools) are
under-subscribed, the Joint Global Coordinators shall in their discretion
transfer the surplus Hong Kong Offer Shares to the other pool to satisfy
demand in that other pool subject to the provisions relevant thereto set
out in the section headed "Structure of the Global Offering" in the
Prospectus.
(L) The Company will prior to the Prospectus Date appoint the Receiving
Bankers to act as receiving bankers in connection with the receiving of
completed applications for Hong Kong Offer Shares and the Nominee in
connection with the receiving and holding of application moneys and any
interest accruing thereon, in both cases, on and subject to the terms and
conditions of the Receiving Bankers' Agreement.
(M) The Company will prior to the Prospectus Date appoint the Share Registrar
to provide services in connection with the processing of applications
under the Hong Kong Public Offering on and subject to the terms and
conditions of the Registrar's Agreement.
(N) The arrangements provided for in the Receiving Bankers' Agreement and the
Registrar's Agreement may be varied and/or supplemented in case of
unexpectedly high volume of applications under the Hong Kong Public
Offering as provided for in the Contingency Plan.
(O) Without prejudice to the foregoing obligations, the Company undertakes
with the Hong Kong Underwriters that it will do all such other acts and
things as may reasonably be required by the Joint Global Coordinators for
the purpose of the Global Offering and obtaining listing of and permission
to deal in the Offer Shares on the Hong Kong Stock Exchange (including in
particular effecting all necessary registrations and filings with the Hong
Kong Stock Exchange, the SFC and the Registrar of Companies in Hong Kong
and taking all steps to ensure that each of the Directors will sign or
cause to be duly signed on their behalf all documents required to be
signed by them as directors of the Company for the purpose of or in
connection with any such registrations and filings and the obtaining of
listing of and permission to deal in the Offer Shares on the Hong Kong
Stock Exchange) and that it will comply with all requirements so as to
enable the listing of and permission to deal in the Offer Shares to
commence on 17 November 2004 to be granted by the Listing Committee and to
enable such listing to be maintained.
4. THE HONG KONG OFFERING DOCUMENTS
(A) Subject to the Prospectus having been registered by the Registrar of
Companies in Hong Kong, the Company will, on the Prospectus Date, issue
such number of
17
copies of the Hong Kong Offering Documents as the Joint Global
Coordinators may direct.
(B) Except for the Hong Kong Offering Documents or except as otherwise
provided pursuant to the provisions of this Agreement or as required by
the Hong Kong Stock Exchange or the New York Stock Exchange, Inc., each of
the Company, China Netcom Group and CNC BVI respectively undertakes not,
without the prior written approval of the Joint Global Coordinators, to
issue, publish, distribute or otherwise make available any document
(including any prospectus), material or information in connection with the
Hong Kong Public Offering.
5. UNDERWRITING
(A) On and subject to the terms and conditions of this Agreement and in
reliance upon the Warranties, if and to the extent that, by 12:00 noon on
the Acceptance Date, there shall remain any Initial Hong Kong Offer Shares
for which Valid Applications, as subsequently calculated, have not been
received (an "UNDER-SUBSCRIPTION"), the Hong Kong Underwriters shall,
subject as set out in clause 5(G) apply or procure applications for the
Hong Kong Offer Shares representing the shortfall at the Offer Price in
accordance with the terms and conditions set out in the Hong Kong Offering
Documents (other than as to the deadline for making the application and
save as provided in this clause) and shall pay or procure to be paid, in
accordance with clause 5(F)(ii) the full amount payable on application
Provided that the obligations of the Hong Kong Underwriters in respect of
Hong Kong Offer Shares under this sub-clause shall be several (and not
joint and several) on the basis that each Hong Kong Underwriter shall,
subject to clause 5(I), apply or procure applications for the number of
Hong Kong Offer Shares to which this sub-clause applies in the proportions
set out against its name in the column headed "Percentage of Hong Kong
Public Offering Underwritten" in Schedule 3.
(B) None of the Hong Kong Underwriters will be liable for any failure on the
part of any of the other Hong Kong Underwriters to perform its obligations
under this clause. Notwithstanding the foregoing, each of the Hong Kong
Underwriters shall be entitled to enforce any or all of its rights under
this Agreement either alone or jointly with the other Hong Kong
Underwriters.
(C) The Company agrees with the Hong Kong Underwriters that all Valid
Applications received prior to the closing of the application lists and
accepted by the Joint Global Coordinators, either in whole or in part,
will be accepted by the Company before calling upon the Hong Kong
Underwriters or any of them to perform the obligations imposed on them by
this clause.
(D) Following the closing of the application lists on the Acceptance Date, the
Company will, in conjunction with the Receiving Bankers, calculate and
notify the Joint Global Coordinators of the number of Hong Kong Offer
Shares for which duly completed Application Forms have been received and
will procure
18
that the applications will be processed, and such calculation made, as
soon as practicable after the closing of the application lists.
(E) In the event of an Under-Subscription, the Company will procure that the
Share Registrar and/or the Receiving Bankers will as soon as possible and
in any event:
(i) not later than 5:00 p.m. on the Acceptance Date notify the Joint
Global Coordinators on behalf of the Hong Kong Underwriters their
best estimate of the number of Hong Kong Offer Shares that may fall
to be taken up pursuant to clause 5(A); and
(ii) not later than 5:00 p.m. on the first day after the Acceptance Date
notify the Joint Global Coordinators on behalf of the Hong Kong
Underwriters of the number of Hong Kong Offer Shares falling to be
taken up pursuant to clause 5(A).
(F) Subject to clause 5(G), as soon as practicable, and in any event not later
than 2:00 p.m. or (on a Saturday) 12:00 noon on the third Business Day
immediately after the date on which any notification is made under clause
5(E)(ii) and subject to the Conditions having been fulfilled (or waived),
each of the Hong Kong Underwriters will:
(i) deliver to the Receiving Bankers duly completed Application Form(s)
for such number of Hong Kong Offer Shares as fall to be taken up by
it pursuant to clause 5(A), specifying the name(s) and address(es)
of the applicant(s) and the number of Hong Kong Offer Shares to be
allocated to each such applicant; and
(ii) upon the Company duly allotting, issuing and delivering such Hong
Kong Offer Shares to the Joint Global Coordinators through the
facilities of Hongkong Clearing for credit to the CCASS
participants' accounts of the said applicants, pay, or procure to be
paid, to the Receiving Bankers for the account of the Nominee the
aggregate amount of the Offer Price (together with all brokerage,
transaction levy, investor compensation levy and Hong Kong Stock
Exchange trading fee payable by an applicant under the Hong Kong
Public Offering) for the Hong Kong Offer Shares as fall to be taken
up by it pursuant to clause 5(A) Provided that while such payments
may be made through the Joint Global Coordinators at its discretion
and without obligation, the Joint Global Coordinators shall not be
responsible for the failure by any Hong Kong Underwriter (apart from
itself in its capacity as a Hong Kong Underwriter) to make such
payment.
The Company shall make the certificates representing the above Hong Kong
Offer Shares available to Hongkong Clearing for checking at or before
12:00 noon on the Business Day before the date of Closing.
(G) If an Under-Subscription shall occur, the Joint Global Coordinators shall
have the right (but are not obliged) to reallocate to the U.S. Offering
and/or International Offering (in such proportion as the Joint Global
Coordinators
19
consider appropriate) all or any of the Hong Kong Offer Shares which any
Hong Kong Underwriter is required to apply for pursuant to clause 5(A).
Any allocation to the U.S. Offering and/or International Offering pursuant
to this sub-clause and duly subscribed for or purchased by the U.S.
Underwriters and/or the International Underwriters and/or subscribers or
purchasers procured by any one or more of them shall satisfy pro tanto the
obligation of the Hong Kong Underwriters under this clause and, as between
the Hong Kong Underwriters, on a pro-rata basis and no underwriting
commission will be payable to the Hong Kong Underwriters regarding such
reallocated Shares.
(H) All obligations and liabilities of the Hong Kong Underwriters under this
Agreement to subscribe for or purchase or to procure subscribers or
purchasers for Hong Kong Offer Shares will cease following due payment in
full by or on behalf of the respective Hong Kong Underwriters in
accordance with clause 5(F)(ii) or on the Joint Global Coordinators being
notified pursuant to clause 5(D) that the Hong Kong Public Offering is
fully subscribed or over-subscribed by Valid Applications.
(I) The obligation of each Hong Kong Underwriter pursuant to this clause 5
shall be reduced to the extent that valid Underwriters' Applications (as
defined in Schedule 8) are made or procured by such Hong Kong Underwriter
to be made in accordance with the arrangements set out in Schedule 8.
6. PAYMENT UNDER THE HONG KONG PUBLIC OFFERING
(A) The application moneys with interest thereon held by the Nominee will, in
accordance with the provisions of the Receiving Bankers' Agreement and
subject to clause 6(B) below, be paid over to the Company in accordance
therewith after the share certificates for the Hong Kong Offer Shares have
been despatched or delivered by or on behalf of the Company to the
successful applicants under the Hong Kong Public Offering through the
facilities of Hongkong Clearing for credit to CCASS participants accounts
or made available to such applicants, as the case may be. The Company
covenants and agrees that it will in accordance with the provisions of the
Receiving Bankers' Agreement, pay or cause to be paid:
(i) the underwriting commission (such payment to be made by way of
deduction from the above application moneys held by the Receiving
Bankers in accordance with the terms of the Receiving Bankers'
Agreement) and the expenses payable pursuant to clause 7; and
(ii) such sums as are required to satisfy the payments referred to in
clause 6(B) below.
(B) The Joint Global Coordinators on behalf of the Hong Kong Underwriters will
arrange for the payment by the Nominee on behalf of the Company and
successful applicants under the Hong Kong Public Offering:
20
(i) to members of the Hong Kong Stock Exchange and the Hong Kong
Underwriters (as the case may be) of brokerage at the rate of 1 per
cent. of the Offer Price;
(ii) to the Hong Kong Stock Exchange of the aggregate SFC transaction
levy at the rate of 0.01 per cent. of the Offer Price and the
aggregate investor compensation levy at the rate of 0.004 per cent.
of the Offer Price; and
(iii) to the Hong Kong Stock Exchange of the aggregate trading fee at the
rate of 0.01 per cent. of the Offer Price,
in respect of Valid Applications for the Hong Kong Offer Shares, such
amounts to be paid out of the application moneys.
SECTION IV: COMMISSION AND EXPENSES
7. COMMISSION AND EXPENSES
(A) In consideration of the services of the Hong Kong Underwriters under this
Agreement, the Company will pay to the Joint Global Coordinators, for
themselves and on behalf of the Hong Kong Underwriters, an underwriting
commission calculated at the rate of 3.25 per cent. of the Offer Price
multiplied by the number of Initial Hong Kong Offer Shares, less any
Shares reallocated under clause 5(G). For the avoidance of doubt, the Hong
Kong Underwriters shall not be entitled to any underwriting commissions in
respect of the Claw Back Shares or the Shares reallocated under clause
5(G) as the relevant underwriting discounts and commissions relating to
such Shares will be payable to the Joint Global Coordinators and the
relevant U.S. Underwriters and International Underwriters in accordance
with the U.S. and International Underwriting Agreement and deducted from
the subscription or purchase moneys payable to the Company and the Selling
Shareholders under the U.S. and International Underwriting Agreement.
(B) The allocation and distribution of the underwriting commissions referred
to in clause 7(A) between the Hong Kong Underwriters shall be separately
dealt with in the Agreement Among Hong Kong Underwriters. Payment of the
underwriting commissions by the Company to the Joint Global Coordinators
in accordance with this Agreement shall constitute good, full and final
discharge of the Company's obligations under this Agreement to the Hong
Kong Underwriters to make payment of such underwriting commissions.
(C) In addition, the Company shall be responsible for all such fees, costs and
expenses reasonably incurred in connection with or incidental to the Hong
Kong Public Offering, which shall include but are not limited to the
following:
(i) all capital duty (if any) and other fees, charges and expenses
payable in respect of the creation and issue of the Hong Kong Offer
Shares;
21
(ii) fees and expenses of the Receiving Bankers and the Share Registrar;
(iii) fees and expenses of the Reporting Accountants;
(iv) fees and expenses of Sallmanns (Far East) Limited;
(v) fees and expenses of the legal advisers to the Company;
(vi) fees and expenses of any public relations consultants engaged;
(vii) fees and expenses of the translators;
(viii) fees and expenses related to the application for listing of and
permission to deal in the Offer Shares on the Hong Kong Stock
Exchange;
(ix) fees and expenses related to the registration of the Hong Kong
Offering Documents with any relevant authority, including without
limitation the Registrar of Companies in Hong Kong;
(x) fees and expenses of the printers, for printing, advertising and
ancillary costs;
(xi) costs of preparation, printing, despatch and distribution of the
Hong Kong Offering Documents;
(xii) CCASS transaction fees payable on the initial transfer with CCASS of
Hong Kong Offer Shares applied for using yellow Application Forms;
and
(xiii) printing of share certificates and refund cheques.
(D) The Joint Global Coordinators are hereby authorised by the Company to
direct the Nominee to deduct from proceeds received from the Hong Kong
Public Offering at Closing:
(i) the underwriting commissions referred to in clauses 6(A)(i) and
7(A);
(ii) the brokerage, transaction levy, investor compensation levy and
trading fee referred to in clause 6(B);
(iii) such fees, costs and expenses set out in clause 7(C) above, which
the Company hereby agrees to be withheld or deducted,
and arrange for such sum to be paid over to the Joint Global Coordinators
or to such persons as the Joint Global Coordinators may direct.
22
SECTION V: STABILIZATION AND
AUTHORITY RELATING TO THE HONG KONG UNDERWRITERS
8. STABILIZATION AND AUTHORITY RELATING TO THE HONG KONG UNDERWRITERS
(A) To the extent permitted by and in compliance with all applicable laws and
regulatory requirements of Hong Kong or elsewhere including but without
limitation the Securities and Futures (Price Stabilizing) Rules made under
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong
Kong) (the "STABILIZING RULES"), Citigroup Global Markets Asia Limited, as
stabilizing manager (the "STABILIZING MANAGER") and in connection with the
Global Offering, may at its absolute discretion, and not as agent for the
Company, effect such transactions as are permissible under, and in
accordance with, the Stabilizing Rules with a view to stabilizing or
maintaining the market price of the Offer Shares (including, for this
purpose, ADSs) within a period prescribed under the Stabilizing Rules.
Such stabilizing actions, if commenced, may be discontinued at any time.
(B) Pending the completion of the Global Offering, each of the Hong Kong
Underwriters (other than the Stabilizing Manager) undertakes to each other
(including the Stabilizing Manager) that it will not effect or enter into
or cause or authorise any other person to effect or enter into any
transactions (in the open market or otherwise) or arrangements, whether in
Hong Kong or elsewhere, the object of which would be to stabilize or
maintain the market price of the Offer Shares at levels other than those
which might otherwise prevail in the open market.
(C) The Stabilizing Manager may, in its sole and absolute discretion, appoint
any of its affiliates or any other person(s) to be its agent(s) for the
purposes of taking any stabilizing action, with such authorities and
rights as the Stabilizing Manager has pursuant to clause 8(A).
(D) Any liability, expenses and loss resulting from the stabilizing actions
referred to in clause 8(A) shall be borne, and any profit arising from
such stabilizing actions shall be beneficially retained, by the
Stabilizing Manager on behalf of the Underwriters.
(E) In connection with the Hong Kong Public Offering:
(i) in relation to the Receiving Bankers' Agreement, each of the Hong
Kong Underwriters hereby agrees that the Joint Global Coordinators
shall have authority to decide all matters referred to therein as
being within the discretion of the Hong Kong Underwriters and to
give all confirmations and instructions to be given thereunder by
the Hong Kong Underwriters to the Receiving Bankers, the Nominee or
the Share Registrar, as the case may be; and
(ii) the Hong Kong Underwriters hereby acknowledge that nothing in this
Agreement shall be deemed to give the Hong Kong Underwriters or any
23
of them any authority to make any disclosure, representation or
warranty in writing expressly stating that such disclosure,
representation or warranty is made on behalf of the Company in
connection with the Hong Kong Public Offering, U.S. Offering,
International Offering or Global Offering unless the same is
contained in the Hong Kong Offering Documents, this Agreement or in
any of the documents or materials or information (whether given
orally or in writing) produced in connection with the Hong Kong
Public Offering, U.S. Offering, International Offering or Global
Offering or is authorised by the Company.
(F) For the avoidance of doubt, the Joint Global Coordinators shall not be
responsible or liable to the Company for any breach of the provisions in
this Agreement by any Hong Kong Underwriter (other than themselves in the
capacity as Hong Kong Underwriters).
(G) The Hong Kong Underwriters (other than the Joint Global Coordinators)
hereby authorise the Joint Global Coordinators to execute and deliver the
Intersyndicate Agreement to which they are parties on behalf of each of
them with such variations, if any, in the sole judgement of the Joint
Global Coordinators as are not material and further agree that they will
be bound by all the terms of the Intersyndicate Agreement as executed.
SECTION VI: REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
9. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS RELATING TO THE COMPANY
(A) The Company, China Netcom Group and CNC BVI jointly and severally
represent, warrant and undertake to the Joint Global Coordinators, the
Joint Sponsors and the Hong Kong Underwriters and each of them in the
terms set out in Schedule 4.
(B) The Company, China Netcom Group and CNC BVI accept that each of the Joint
Global Coordinators, the Joint Sponsors and the Hong Kong Underwriters is
entering into this Agreement in reliance upon the Warranties.
10. RIGHTS IN RELATION TO THE WARRANTIES
(A) Each Warranty shall be construed separately and shall not be limited or
restricted by reference to or inference from the terms of any other of the
Warranties or any other term of this Agreement.
(B) The Warranties shall remain in full force and effect notwithstanding
completion of the Hong Kong Public Offering.
24
(C) The Warranties are given on and as at the date of this Agreement with
respect to the facts and circumstances subsisting on the date of this
Agreement. In addition, the Warranties shall be deemed to be repeated on
and as at:
(i) the date on which the Prospectus is registered by the Registrar of
Companies in Hong Kong as required by section 38D of the Companies
Ordinance;
(ii) the Acceptance Date;
(iii) the Price Determination Date;
(iv) in the case of clause 5(F), (1) immediately prior to the delivery by
the Hong Kong Underwriters of duly completed Application Forms and
(2) payment for the Hong Kong Offer Shares to be taken up;
(v) the Closing; and
(vi) immediately prior to commencement of dealings in the Offer Shares on
the Hong Kong Stock Exchange,
in each case, with reference to the facts and circumstances then
subsisting.
(D) Each of the Company, China Netcom Group and CNC BVI undertakes to give
notice to the Joint Global Coordinators and each of the Hong Kong
Underwriters forthwith of any matter or event coming to its attention
prior to the last of the dates on which the Warranties are deemed to be
given pursuant to the provisions of clause 10(C) which shows any of the
Warranties to be or to have been untrue, inaccurate or misleading or
breached, or of any circumstances it becomes aware of which would or can
reasonably be expected to cause any of the Warranties to be untrue,
inaccurate, misleading or breached.
(E) If at any time, by reference to the facts and circumstances then
subsisting, prior to the last of the dates on which the Warranties are
deemed to be repeated pursuant to the provisions of clause 10(C), any
matter or event comes to the attention of the Company, China Netcom Group,
CNC BVI or any of the Hong Kong Underwriters which:
(i) would or might result in any of the Warranties, if repeated
immediately after the occurrence of such matter or event, being
untrue, inaccurate or misleading; or
(ii) would or might render untrue, inaccurate or misleading any
statement, whether of fact or opinion, contained in any of the Hong
Kong Offering Documents or the Formal Notice if the same were issued
immediately after the occurrence of such matter or event; or
25
(iii) would or might result in the omission of any fact which is material
for disclosure or required by applicable Law to be disclosed in the
Hong Kong Offering Documents or the Formal Notice if the same were
issued immediately after occurrence of such matter or event; or
(iv) would or might result in any breach of the Warranties or any
circumstances giving rise to a claim under any of the indemnities as
contained in, or given pursuant to, this Agreement,
the Company, China Netcom Group, CNC BVI or such Hong Kong Underwriter (as
the case may be) shall forthwith notify the Joint Global Coordinators and
each of the Hong Kong Underwriters and the Company (as the case may be)
and, but without prejudice to any other rights of any party, the Company
and the Joint Global Coordinators on behalf of the Hong Kong Underwriters
shall forthwith consult with a view to agreeing, if the Prospectus has
already been registered with the Registrar of Companies in Hong Kong or
distributed (as the case may be), what announcement or circular or
document, if any, should be issued, published, distributed or made
available or what other act or thing should be done. Each of the Company,
China Netcom Group and CNC BVI agrees not to, and to procure its
affiliates not to, issue, publish, distribute or make publicly available
any such announcement, circular or document without the prior written
consent of the Joint Global Coordinators (for themselves respectively and
on behalf of the Hong Kong Underwriters), except as required by applicable
laws or regulations or rules of the relevant stock exchange, in which case
the Company, China Netcom Group and CNC BVI shall first consult the Joint
Global Coordinators (for themselves respectively and on behalf of the Hong
Kong Underwriters) before such issue, publication or distribution.
(F) Each of the Company, China Netcom Group and CNC BVI will not, and will
procure that none of its affiliates will:
(i) do or omit to do anything which may cause any of the Warranties to
be untrue, inaccurate, misleading or breached in any respect at any
time immediately prior to the commencement of dealings in the Offer
Shares on the Hong Kong Stock Exchange (assuming such Warranties to
be repeated at the relevant time with reference to the facts and
circumstances then subsisting); or
(ii) at any time immediately prior to the commencement of dealings in the
Offer Shares on the Hong Kong Stock Exchange, enter into any
contract or commitment of an unusual or onerous nature, whether or
not that contract, if entered into prior to the date hereof, would
constitute a material contract for the purpose of the Prospectus or
any other Hong Kong Offering Documents.
(G) Save and except for any loss or damage finally judicially determined to
have arisen out of any gross negligence, wilful default or fraud on the
part of any of the Joint Global Coordinators, the Joint Sponsors and the
Hong Kong Underwriters, no claim shall be made against the Joint Global
Coordinators, the
26
Joint Sponsors or the Hong Kong Underwriters or any of them or against any
other Indemnified Person referred to in clause 13 by the Company, China
Netcom Group, CNC BVI or any of their respective affiliates, to recover
any damage, cost, charge or expense which the Company, China Netcom Group,
CNC BVI or the Directors or any of the respective affiliates of the
Company, China Netcom Group or CNC BVI may suffer or incur by reason of or
arising out of the carrying out by the Joint Global Coordinators or the
Joint Sponsors or the Hong Kong Underwriters or any of them of the work to
be done by the Joint Global Coordinators or the Joint Sponsors or the Hong
Kong Underwriters or any of them pursuant hereto or the performance of
their respective obligations hereunder or otherwise in connection with the
Hong Kong Offering Documents, the Global Offering and any associated
transactions (whether in performance of its duties as underwriter or
financial adviser or otherwise). Specifically (but without prejudice to
the generality of the foregoing), none of the Joint Global Coordinators or
the Joint Sponsors or the Hong Kong Underwriters shall have any liability
or responsibility whatsoever for any alleged insufficiency of the Offer
Price or any dealing price of the Offer Shares.
SECTION VII: FURTHER UNDERTAKINGS
11. FURTHER UNDERTAKINGS
(A) The Company undertakes to each of the Joint Global Coordinators, the Joint
Sponsors and the Hong Kong Underwriters that, and China Netcom Group and
CNC BVI undertake to procure that:
(i) the Company will comply in all respects with the terms and
conditions of the Hong Kong Public Offering and will, in particular,
without limitation:
(a) comply with the obligations imposed upon it by the Companies
Ordinance and the Hong Kong Listing Rules in respect of or by
reason of the making of the Hong Kong Public Offering
including, but without limitation, the making of all necessary
filings with the Registrar of Companies in Hong Kong, the Hong
Kong Stock Exchange and the SFC and the making available for
inspection in Hong Kong of the documents and in the manner
referred to in the paragraph headed "Documents available for
inspection" of Appendix VIII to the Prospectus during the
period specified in that paragraph;
(b) allot and issue the Hong Kong Offer Shares to successful
applicants under the Hong Kong Public Offering and, if any of
the Hong Kong Offer Shares falls to be taken up pursuant to
clause 5(A), to the applicants under clause 5(F) or, as the
case may be, as the Joint Global Coordinators direct; and
(c) as soon as practicable following announcement of the basis of
allocation of the Hong Kong Offer Shares and in any event no
27
later than 16 November 2004, cause definitive share
certificates representing the Hong Kong Offer Shares to be
posted or made available for collection in accordance with the
terms of the Hong Kong Public Offering to successful
applicants or, as the case may be, procure that the share
certificates for Hong Kong Offer Shares in respect of which
successful applicants have elected for delivery into CCASS
shall be duly delivered to the depositary for Hongkong
Clearing for credit to the stock account of such CCASS
participant(s) as may be specified for such purpose by or on
behalf of the relevant applicant;
(ii) the Company will not, at any time after the date of this Agreement
up to and including the date on which all of the Conditions are
fulfilled (or waived) in accordance with this Agreement, amend or
agree to amend the Memorandum and Articles of Associations of the
Company save as requested by the Hong Kong Stock Exchange or other
regulatory authorities which are entitled to exercise jurisdiction
over the Company lawfully;
(iii) the Company will use its best endeavours to procure that the Share
Registrar and the Receiving Bankers will comply with the terms of
their respective appointments and will do all such acts and things
as may be required to be done by each of them and by the time
specified or necessary in connection with the Global Offering and in
particular, but without limitation, the Registrar's Agreement and
the Receiving Bankers' Agreement, respectively. None of the terms of
the appointments of the Share Registrar and the Receiving Bankers
shall be amended without the prior written consent of the Joint
Global Coordinators (on behalf of the Hong Kong Underwriters);
(iv) the Company will procure that the Share Registrar duly enters the
names of the investors in the Shares under the Global Offering,
their respective nominees or the HKSCC Nominees Limited, as the case
may be, in the register of members of the Company as holders of the
relevant Shares;
(v) the Company will comply with the Hong Kong Listing Rules in relation
to supplemental listing documents and further agrees not to issue,
publish, distribute or make available any announcement, circular or
document as contemplated above without the prior written consent of
the Joint Global Coordinators;
(vi) the Company will, in compliance with the Hong Kong Listing Rules,
deliver to the Hong Kong Stock Exchange the declaration
substantially in the form set out in Xxxxxxxx 0, Xxxx X xx xxx Xxxx
Xxxx Listing Rules acceptable to the Hong Kong Stock Exchange;
(vii) the Company will procure that none of the Directors or their
associates (as defined in the Hong Kong Listing Rules) will himself
(or through a company controlled by him) apply for any Offer Shares
either in his own
28
name or through nominees unless permitted to do so under the Hong
Kong Listing Rules and having obtained confirmation to that effect,
and if any such application has been made or he has indicated an
interest to apply for Offer Shares, he shall forthwith notify the
Joint Global Coordinators (on behalf of the Hong Kong Underwriters);
(viii) the Company will use the net proceeds received by it pursuant to
the Global Offering in the manner specified in the Prospectus under
the section headed "Future plans and use of proceeds", and to the
extent that they are not immediately applied to the specific
purposes as described in the Prospectus, it shall deposit such
proceeds into interest-bearing bank accounts or invest them in
investment-grade debt securities;
(ix) the Company will pay any tax, duty, levy, fee or other charge or
expense (if any) which may be payable in the PRC, Hong Kong and
elsewhere, pursuant to the requirement of any law, rule or
regulation or as provided for in this Agreement, in connection with
the creation, allotment and issue of the Offer Shares, and the
execution and delivery of, and the performance of any of the
provisions under, this Agreement;
(x) the Company will maintain a listing for the Shares on the Hong Kong
Stock Exchange for at least one year after the date on which
dealings in the Shares first commence on the Hong Kong Stock
Exchange (the "LISTING DATE") and to pay all fees and supply all
further documents, information and undertakings and publish all
advertisements or other materials as may be necessary or advisable
for such purpose, except following a withdrawal of such listing
which has been approved by the relevant shareholders of the Company
in accordance with the Hong Kong Listing Rules;
(xi) the Company agrees and undertakes that it will not effect any
purchase of Shares, or agree to do so, which may reduce the holdings
of Shares held by the public to a level below the requisite public
float requirement as set out in the Hong Kong Listing Rules or as
agreed by the Hong Kong Stock Exchange, on or before the date
falling six months after the Listing Date, without having obtained
the prior written consent of the Joint Global Coordinators (on
behalf of the Hong Kong Underwriters);
(xii) that the documents listed in Schedule 7, Part B shall be delivered
to the Joint Global Coordinators not later than the signing of the
U.S. and International Underwriting Agreement, and that the
documents listed in Schedule 7, Part C shall be delivered to the
Joint Global Coordinators not later than the closing of the U.S.
Offering and the International Offering as provided for in the U.S.
and International Underwriting Agreement.
(B) The Company undertakes to each of the Joint Global Coordinators, Joint
Sponsors and Hong Kong Underwriters that no further Shares or securities
convertible into equity securities (whether or not of a class already
listed) may be issued or form the subject of any agreement to such an
issue within six months
29
from the date on which dealings in the Shares first commence on the Hong
Kong Stock Exchange (whether or not such issue of Shares or securities
will be completed within six months from the commencement of dealing),
except in certain prescribed circumstances, which includes the issue of
Shares pursuant to the share option scheme of the Company.
(C) Each of the Company, China Netcom Group and CNC BVI undertakes to each of
the Joint Global Coordinators, Joint Sponsors and Hong Kong Underwriters
that, without the prior written consent of the Joint Global Coordinators
(on behalf of the Underwriters), it will not, for a period of 180 days
after the date on which dealings in the Shares first commence on the Hong
Kong Stock Exchange,
(i) offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant or agree
to grant any option, right or warrant to purchase, lend or otherwise
transfer or dispose of, directly or indirectly, any of the share
capital of the Company or any securities convertible into or
exercisable or exchangeable for, or that represent the right to
receive, such share capital; or
(ii) enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership
of such share capital,
whether any such transactions described in sub-clause (i) or (ii) above is
to be settled by delivery of the share capital of the Company or such
other securities, in cash or otherwise; or
(iii) publicly disclose that it will or may enter into any transaction
described above.
The foregoing provisions of this clause 11(C) shall not apply to the
following:
(i) the sale of Shares to the Underwriters;
(ii) the issuance by the Company of Shares or ADSs upon the exercise of
an option or a warrant or the conversion of a security outstanding
on the date of the Prospectus of which the Underwriters have been
advised in writing; or
(iii) transactions by any person other than the Company relating to
Shares, ADSs or other securities acquired in open market
transactions after the completion of the Global Offering.
The 180-day restricted period described in the foregoing provisions of
this clause 11(C) is subject to extension such that, in the event that
either:
(i) during the last 17 days of the 180-day restricted period, the
Company issues an earnings release or material news or a material
event relating to the Company occurs; or
30
(ii) prior to the expiration of the 180-day restricted period, the
Company announces that it will release earnings results during the
16-day period beginning on the last day of the 180-day period,
the "lock-up" restrictions described above will, except if otherwise
waived in writing by the Joint Global Coordinators on behalf of the
Underwriters, continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of the
material news or material event.
(D) Each of China Netcom Group and CNC BVI has undertaken to the Company, the
Joint Global Coordinators, the Joint Sponsors and the Hong Kong
Underwriters that, except to the extent permitted under the Global
Offering or the Over-allotment Option:
(i) it will not and shall procure that the relevant registered holder(s)
will not, without the prior written consent of the Hong Kong Stock
Exchange and unless in compliance with the requirements of the Hong
Kong Listing Rules, during the period commencing from the date of
the Prospectus and ending on the date which is six months from the
date on which dealings in the Shares first commence on the Hong Kong
Stock Exchange (the "FIRST SIX-MONTH PERIOD"), dispose of, nor enter
into any agreement to dispose of or otherwise create any options,
rights, interests or encumbrances in respect of any Shares in
respect of which they are shown by the Prospectus to be the
beneficial owner (the "CHINA NETCOM GROUP'S SHARES");
(ii) it will not, without the prior written consent of the Hong Kong
Stock Exchange in the six-month period commencing on the expiry of
the First Six-month Period (the "SECOND SIX-MONTH PERIOD") dispose
of, nor enter into any agreement to dispose of or otherwise create
any options, rights, interests or encumbrances in respect of, any of
the China Netcom Group's Shares and to such extent that immediately
following such disposal or upon the exercise or enforcement of such
options, rights, interests or encumbrances, China Netcom Group or
CNC BVI would then cease to be a controlling shareholder (as defined
in the Hong Kong Listing Rules) of the Company; and
(iii) it will, on any disposal of such the China Netcom Group's Shares
during the Second Six-month Period, take all reasonable steps to
ensure that any such disposal will not create a disorderly or false
market, save that any offer for sale contained in a listing document
(as defined in the Hong Kong Listing Rules) shall not be subject to
such restrictions.
(E) Each of China Netcom Group and CNC BVI undertakes to each of the Company,
the Joint Global Coordinators, the Joint Sponsors and the Hong Kong
Underwriters that at any time during the period commencing on the date by
reference to which disclosure of the direct or indirect shareholding of
China Netcom Group and CNC BVI in the Company is made in the Prospectus
and
31
ending on the date which is 12 months after the date on which trading in
the Shares commences on the Hong Kong Stock Exchange:
(i) it will, if it pledges or charges any Shares or other securities of
the Company in respect of which it is the beneficial owner in favour
of an authorised institution (as defined in the Banking Ordinance of
Hong Kong) for a bona fide commercial loan, immediately inform the
Company of any such pledges or charges and the number of shares or
other securities of the Company so pledged or charged; and
(ii) it will, if it receives any indication, either verbal or written,
from any pledgee or chargee of any shares or other securities of the
Company that such shares or other securities of the Company will be
disposed of, immediately inform the Company of any such indication.
(F) The Company undertakes to each of the Joint Global Coordinators, the Joint
Sponsors and the Hong Kong Underwriters that it will inform the Hong Kong
Stock Exchange as soon as it has been informed of the matters mentioned in
clause 11(E)(i) and (ii) above by China Netcom Group or CNC BVI, and
disclose such matters as soon as possible thereafter by way of an
announcement published in the newspapers.
(G) The Company further undertakes to each of the Joint Global Coordinators,
the Joint Sponsors and the Hong Kong Underwriters that it will not use,
and will cause each of its subsidiaries not to use, the proceeds from the
sale of its Shares or ADSs, directly or indirectly, for any purpose or
activity that would cause the Underwriters or any purchaser of the Shares
or ADSs to be in violation of the United States Trading With the Enemy
Act, as amended, the United States International Emergency Economic Powers
Act, as amended, or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation or executive order relating thereto,
or in connection with business, operations or contracts with the
Governments of or with any person or entity in Angola (UNITA), Burma
(Myanmar), Cuba, Iraq, Iran, Libya, North Korea or Sudan or any agent or
"Specially Designated National" thereof, or in connection with contracts
in support of projects in or for the benefit of the Governments of the
above indicated countries.
SECTION VIII: TERMINATION
12. TERMINATION
(A) If, at any time prior to 8:00 a.m. on the day that trading in the Offer
Shares commences on the Hong Kong Stock Exchange:
(i) there shall develop, occur, exist or come into effect:
32
(a) any new Law or any change in existing Laws or any change in
the interpretation or application thereof by any court or
other competent authority of Hong Kong, the PRC, Japan, the
United States, the United Kingdom or Singapore;
(b) any change or development involving a prospective change in
local, national or international financial, political,
military, industrial, economic, currency, market or regulatory
conditions in Hong Kong, the PRC, Japan, the United States,
the United Kingdom or Singapore;
(c) a general moratorium on commercial banking activities in Hong
Kong, the PRC, Japan, the United States, the United Kingdom or
Singapore, as declared by the relevant authorities;
(d) a suspension or limitation in trading in securities generally
on the Hong Kong Stock Exchange, the Tokyo Stock Exchange, the
New York Stock Exchange, Inc., or any material disruption in
commercial banking or securities settlement, payment or
clearance services or procedures in Hong Kong, the PRC, Japan,
the United States, the United Kingdom or Singapore;
(e) a change or development involving a prospective change in
taxation or exchange control (or the imposition or
implementation of any exchange control) or currency exchange
rates or foreign investment regulations in Hong Kong, the PRC,
Japan, the United States, the United Kingdom or Singapore;
(f) the outbreak or escalation of hostilities involving Hong Kong,
the PRC, Japan, the United States, the United Kingdom or
Singapore, or the declaration by Hong Kong, the PRC, Japan,
the United States, the United Kingdom or Singapore, of a
national emergency or war or any other national or
international calamity or crisis;
(g) any change, or any development or event involving a
prospective change, in the condition (financial or trading),
business, properties or results of operations of the Group;
(h) any material litigation or claim being instigated against any
member of the Group; or
(i) any other event of force majeure, including without limitation
act of God, riot, public disorder, civil commotion, economic
sanctions, fire, flood, explosion, epidemic, terrorism, labour
dispute, strike or lock-out,
33
which, individually or in the aggregate and in the sole opinion of
the Joint Global Coordinators (for themselves and on behalf of the
Hong Kong Underwriters):
(1) is or will be or is likely to be materially
adverse to the business, financial or other
condition or prospects of the Company or the Group
or, in the case of sub-paragraph (e), to any
present or prospective shareholder of the Company
in his/its capacity as such; or
(2) has or will have or is likely to have a material
adverse effect on the success of the Global
Offering or the level of Offer Shares being
applied for or accepted or the distribution of
Offer Shares; or
(3) makes it inadvisable or impracticable to proceed
with the Global Offering or the delivery of the
Offer Shares on the terms and in the manner
contemplated by the Prospectus; or
(ii) any matter has arisen or has been discovered which would, had it
arisen immediately before the Prospectus Date, not having been
disclosed in the Prospectus, constitute a material omission
therefrom; or
(iii) any statement contained in the Prospectus has become or been
discovered to be untrue, incorrect or misleading in any material
respect; or
(iv) there shall have occurred any matter or event, act or omission which
gives rise or is reasonably likely to give rise to any material
liability of the Company, China Netcom Group or CNC BVI pursuant to
the indemnities contained in clause 13; or
(v) there comes to the notice of the Joint Global Coordinators any
matter or event showing any of the Warranties given by the Company,
China Netcom Group or CNC BVI in this Agreement to be untrue or
misleading in any material respect when given or repeated; or
(vi) there comes to the notice of the Joint Global Coordinators any
material breach on the part of the Company, China Netcom Group or
CNC BVI of any of the provisions of this Agreement,
then the Joint Global Coordinators may upon giving notice in writing to
the Company and the Hong Kong Underwriters, terminate this Agreement with
immediate effect.
(B) Upon the termination of this Agreement pursuant to the provisions of
clause 2(D) or clause 12(A):
(i) each of the parties hereto shall cease to have any rights or
obligations under this Agreement, save in respect of the provisions
of clauses 12, 13,
34
19, 22 to 25 and any rights or obligations which may have accrued
under this Agreement prior to such termination; and
(ii) with respect to the Hong Kong Public Offering, all payments made by
the Hong Kong Underwriters or any of them pursuant to clause 5(F)
and/or by successful applicants under Valid Applications shall be
refunded forthwith (in the latter case the Company shall procure
that the Share Registrar and the Nominee despatch refund cheques to
all applicants under the Hong Kong Public Offering in accordance
with the Registrar's Agreement and the Receiving Bankers'
Agreement).
SECTION IX: INDEMNITY
13. INDEMNITY
(A) The Company, China Netcom Group and CNC BVI jointly and severally
undertake to indemnify and keep indemnified (on an after-tax basis) and
hold harmless each of the Joint Global Coordinators, the Joint Sponsors
and the Hong Kong Underwriters (for themselves and on trust for their
respective directors, officers, employees, agents, assignees and
affiliates (the "RELATED PARTIES")) (each an "INDEMNIFIED PERSON") from
and against (a) all and any actions, claims (whether or not any such claim
involves or results in any actions or proceedings), demands,
investigations and proceedings from time to time made or brought or
threatened to be made or brought (together the "ACTIONS") against, and (b)
all losses, damages, liabilities, payments, costs or expenses including
legal fees and taxes (including stamp duty and any penalties and/or
interest arising in respect of any taxes) (including, without limitation,
all payments, costs or expenses made or incurred arising out of or in
connection with the settlement of any Actions or in investigating,
disputing or defending the same or the enforcement of any such settlement
or any judgement obtained in respect of any Actions) (together the
"LOSSES") which may be suffered, made or incurred by, an Indemnified
Person (with such amount of indemnity to be paid to each of the Joint
Global Coordinators, the Joint Sponsors and the Hong Kong Underwriters to
cover all the Actions against and Losses incurred by such party and its
Related Parties) arising out of or in connection with:
(i) the performance by any of the Joint Global Coordinators, the Joint
Sponsors, the Hong Kong Underwriters or any of them of its or their
obligations under this Agreement; or
(ii) the issue, publication, distribution or making available of any of
the Hong Kong Offering Documents, the preliminary prospectus dated
26 October 2004 issued by the Company in connection with the U.S.
Offering, the preliminary offering circular dated 26 October 2004
issued by the Company in connection with the International Offering
or the final prospectus and offering circular to be issued by the
Company in connection with the U.S. Offering and the International
Offering
35
respectively (including any amendment thereof or supplement thereto)
and/or any announcement or offering materials in connection with the
Global Offering (whether or not approved by the Joint Global
Coordinators pursuant to clause 19); or
(iii) the allotment and issue or the sale and transfer of the Offer
Shares; or
(iv) any breach or alleged breach on the part of the Company, China
Netcom Group or CNC BVI of any of the provisions of this Agreement;
or
(v) any failure by any of the Directors to comply with their respective
obligations under the Hong Kong Listing Rules; or
(vi) any of the Warranties being untrue, inaccurate or misleading or
otherwise breached or being alleged by any third party to be untrue,
inaccurate or misleading or otherwise breached; or
(vii) the Hong Kong Public Offering being, or being alleged to be, in
violation of the requirements of the Hong Kong Listing Rules or any
other applicable Law, rules or regulations; or
(viii) any untrue statement or alleged untrue statement of a material fact
contained in the Hong Kong Offering Documents, the Formal Notice or
the offering materials issued or to be issued by the Company in
connection with the U.S. Offering and the International Offering; or
any omission or alleged omission to state therein a material fact
necessary in order to make the statements therein not misleading; or
(ix) the settlement of any investigation or proceeding by any Regulatory
Authority, commenced or threatened in connection with the Hong Kong
Public Offering; or
(x) any transaction taken or to be taken pursuant to or otherwise in
connection with the Restructuring,
Provided that the above indemnity in respect of any Action or Loss
shall not be available to any Indemnified Person to the extent that
such Action or Loss is finally judicially determined to have been
caused solely by the gross negligence, wilful default or fraud on
the part of such Indemnified Person; and any settlement or
compromise of any Action or Loss by any of the Joint Global
Coordinators, Joint Sponsors and Hong Kong Underwriters or any other
Indemnified Person shall be made without prejudice to any claim,
action or demand which any of the other Global Coordinators, Joint
Sponsors and Hong Kong Underwriters or any other Indemnified Person
may have or make against the Company, China Netcom Group and/or CNC
BVI under this clause or otherwise under this Agreement.
(B) In case any proceeding (including any governmental investigation) shall be
instituted involving any Indemnified Person, such Indemnified Person shall
36
promptly notify the Company, China Netcom Group and CNC BVI in writing and
the Company, China Netcom Group and CNC BVI shall pay the fees and
disbursements of counsel related to such proceeding. Such Indemnified
Person shall, subject to any requirement imposed by any insurer of the
Indemnified Person, consult with the Company, China Netcom Group and CNC
BVI and the Joint Global Coordinators and keep them informed in relation
to such proceeding. Any failure by an Indemnified Person to notify or
consult with the Company, China Netcom Group or CNC BVI shall however not
in any way relieve or reduce the obligations of the Company, China Netcom
Group and CNC BVI to indemnify each and every Indemnified Person under
this clause.
(C) Counsel to the Indemnified Persons shall be selected by the Joint Global
Coordinators. The Company, China Netcom Group and/or CNC BVI, as the case
may be, may participate at its own expense in the defence of any such
action; provided, however, that counsel to the Company, China Netcom Group
and/or CNC BVI, as the case may be, shall not (except with the consent of
the Indemnified Person) also be counsel to the Indemnified Person. None of
the Company, China Netcom Group and CNC BVI, shall, without the prior
written consent of the Indemnified Person, settle or compromise or consent
to the entry of any judgement with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever in respect of which indemnification
or contribution could be sought under this clause (whether or not the
Indemnified Persons are actual or potential parties thereto), unless such
settlement, compromise or consent: (i) includes an unconditional release
of each Indemnified Person from all liabilities arising out of such
litigation, investigation, proceeding or claim; and (ii) does not include
a statement as to the admission of fault to act by or on behalf of any
Indemnified Person.
(D) The provisions of the indemnities contained in this clause are not
affected by any other forms (including any limitations) set out in this
Agreement and do not restrict the right of any Indemnified Person to claim
against the Company, China Netcom Group and/or CNC BVI on any other basis.
(E) If the indemnity provided for in clause 13(A) is for any reason
unavailable or insufficient to hold harmless an Indemnified Person, then
the Company, China Netcom Group and CNC BVI shall, jointly and severally,
contribute to the amount paid or payable by such Indemnified Person as a
result of the claims, actions, proceedings, liabilities, losses, damages,
costs, charges and expenses referred to in clause 13(A):
(i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, China Netcom Group and CNC BVI on
the one hand and the Joint Global Coordinators and the Hong Kong
Underwriters on the other hand from the Hong Kong Public Offering;
or
(ii) if the allocation provided in paragraph (i) above is not permitted
by applicable law, then in such proportion as is appropriate to
reflect not only the relative benefits referred to in paragraph (i)
above but also the
37
relative fault of the Company, China Netcom Group and CNC BVI on the
one hand and the Joint Global Coordinators and the Hong Kong
Underwriters on the other hand which resulted in the claims,
actions, proceedings, liabilities, losses, damages, costs, charges
and expenses referred to in clause 13(A) as well as any other
relevant equitable considerations.
The relative benefits received by the Company, China Netcom Group and CNC
BVI on the one hand and the Joint Global Coordinators and the Hong Kong
Underwriters on the other hand shall be deemed to be in the same
proportion as (x) the total net proceeds received by the Company (before
deducting expenses) as a result of the Hong Kong Public Offering bear to
(y) the aggregate amount of the commission which the Joint Global
Coordinators and the Hong Kong Underwriters are entitled to receive
pursuant to the provisions of this Agreement. The relative fault of the
Company, China Netcom Group and CNC BVI on the one hand and the Joint
Global Coordinators and the Hong Kong Underwriters on the other hand shall
be determined by reference to, among other things, the relative intent,
knowledge, access to information and opportunity to correct or prevent the
material breach or alleged material breach on the part of the Company,
China Netcom Group and CNC BVI on the one hand or the Joint Global
Coordinators and the Hong Kong Underwriters on the other hand of any of
the provisions of this Agreement or the Warranties being untrue or
misleading or having been breached in any material respect or being
alleged to be untrue or misleading in any material respect or being
alleged to have been breached in any material respect.
(F) The Company, China Netcom Group and CNC BVI agree that it would not be
just or equitable if contribution pursuant to this clause 13 were
determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
clause 13(E). The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages and liabilities referred to in
clause 13(E) shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this clause 13, no Hong
Kong Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the
amount of any damages that such Hong Kong Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The remedies provided
for in this clause 13 are not exclusive and shall not limit any rights or
remedies that may otherwise be available to any Indemnified Person at law
or in equity.
38
SECTION X: GENERAL PROVISIONS
14. REMEDIES, WAIVERS AND RELEASE
(A) No delay or omission on the part of any party hereto in exercising any
right, power or remedy under this Agreement shall:
(i) impair such right, power or remedy; or
(ii) operate as a waiver thereof.
(B) The single or partial exercise of any right, power or remedy under this
Agreement shall not preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
(C) The rights, powers and remedies provided in this Agreement are cumulative
and not exclusive of any rights, powers and remedies provided by law.
(D) Each party hereto may expressly release or compromise the liability of any
other party hereto or grant time or other indulgence to any party hereto
in any way without releasing or reducing or compromising the liability of
such party or any other party hereto in any other way.
15. ASSIGNMENT
(A) This Agreement shall be binding on, and enure for the benefit of, the
parties hereto and their respective successors, personal representatives
and permitted assigns.
(B) The Joint Global Coordinators, Joint Sponsors and Hong Kong Underwriters
or any of them may assign to their respective affiliates (where it is
considered by them to be appropriate or necessary to perform their
respective obligations hereunder) the benefits of and interests and rights
in or arising under this Agreement. Save as aforesaid, no other party
hereto shall assign or transfer all or any part of any benefit of, or
interest or right in, this Agreement, or any benefit, interest, right or
obligation arising under this Agreement.
16. FURTHER ASSURANCE
The Company, China Netcom Group and CNC BVI shall from time to time, on
being required to do so by the Joint Global Coordinators now or at any
time in the future do or procure the doing of such acts and/or execute or
procure the execution of such documents as the Joint Global Coordinators
may reasonably require to give full effect to this Agreement and securing
to the Hong Kong Underwriters or any of them the full benefit of the
rights, powers and remedies conferred upon them or any of them in this
Agreement.
39
17. ENTIRE AGREEMENT
(A) This Agreement and any other documents referred to in this Agreement
constitute the whole and only agreement between the Company, China Netcom
Group, CNC BVI, the Joint Global Coordinators, the Joint Sponsors and the
Hong Kong Underwriters relating to the underwriting of the Hong Kong
Public Offering and supersedes and extinguishes any other prior drafts,
agreements, undertakings, representations, warranties and arrangements of
any nature whatsoever, whether or not in writing, relating thereto made or
given by any other party or any other person, whether or not in writing,
at any time prior to the execution of this Agreement ("PRE-CONTRACTUAL
STATEMENTS").
(B) Each party hereto acknowledges that in entering into this Agreement on the
terms set out in this Agreement it is not relying upon any Pre-contractual
Statement which is not expressly set out herein or the documents referred
to herein.
(C) No party shall have any right of action (except in the case of fraud)
against any other party to this Agreement arising out of or in connection
with any Pre-contractual Statement except to the extent that such
Pre-contractual Statement is repeated in this Agreement or the documents
referred to herein.
(D) This Agreement may only be varied in writing signed by each of the parties
hereto.
18. NOTICES
(A) Any notice or other communication given or made under this Agreement shall
be in writing (other than writing on the screen of a visual display unit
or other similar device which shall not be treated as writing for the
purpose of this clause) and shall, unless otherwise specified, be in
English or Chinese.
(B) Any such notice or other communication shall be addressed as provided in
clause 18(C) and, if so addressed, shall be deemed to have been duly given
or made as follows:
(i) if sent by personal delivery, upon delivery at the address of the
relevant party;
(ii) if sent by post, two Business Days (if posted within Hong Kong) or
five Business Days (if posted outside of Hong Kong) after the date
of posting; and
(iii) if sent by facsimile, upon despatch to the facsimile number of the
recipient, with the production of a transmission report by the
machine from which the facsimile was sent which indicates that the
facsimile was sent in its entirety to the facsimile number of the
recipient and Provided that a confirmation copy of such notice or
communication shall be sent
40
by post to the addressee concerned not later than the Business Day
immediately following the date of despatch of the facsimile.
(C) The relevant addressee, address and facsimile number of each of the
Company, China Netcom Group and CNC BVI for the purpose of this Agreement,
subject to clause 18(D), are set out below. The relevant addressee,
address and facsimile number of each of the Joint Global Coordinators and
the other Hong Kong Underwriters are set out in Schedule 3 hereto.
Name of party Address Facsimile no.
------------- ------- -------------
THE COMPANY 59th Floor (000) 0000 0000
Bank of China Tower
0 Xxxxxx Xxxx
Xxxxxxx
Xxxx Xxxx
Xxxxxxxxx: The Joint Company Secretaries
CHINA NETCOM GROUP Xxxxxxxx X
Xx. 000 Xxxxxxxxxxxx Xxxxxx (000) 0000 0000
Xxxxxxx Xxxxxxxx
Xxxxxxx 000000
PRC
Attention: The Authorized Representative
CNC BVI P.O. Box 3140
Wickhams Cay I (000) 0000 0000
Road Town, Tortola
British Virgin Islands
Attention: The Board of Directors
(D) A party may notify the other parties to this Agreement of a change to its
relevant addressee, address or facsimile number for the purpose of clause
18(C) Provided that such notification shall only be effective on:
(i) the date specified in the notification as the date on which the
change is to take place; or
(ii) if no date is specified or the date specified is earlier than the
date on which a notice is deemed under clause 18(B) above to have
been duly given, the date on which such notice is so deemed to have
been duly given.
41
19. ANNOUNCEMENTS
(A) Subject to clause 19(B), no announcement concerning the Hong Kong Public
Offering or any ancillary matter shall be made by any of the parties
hereto without the prior written approval of the Joint Global Coordinators
and the Company (other than advertisements relating to the Global Offering
or any ancillary matter that may be published, or caused to be published,
by the Joint Global Coordinators).
(B) Any party hereto may make an announcement concerning the Hong Kong Public
Offering or any ancillary matter if and to the extent:
(i) required by law or by an order of a court of competent jurisdiction;
(ii) required by any securities exchange or regulatory or governmental
body to which such party is subject or submits, wherever situated,
including, without limitation, the Hong Kong Stock Exchange, whether
or not the requirement has the force of law; or
(iii) the Joint Global Coordinators have, after consultation with the
Company, given prior written approval to the making of the
announcement,
Provided that in relation to paragraphs (i) and (ii) above any such
announcement shall be made only after consultation with the Joint Global
Coordinators and the Company.
(C) The restrictions contained in this clause shall continue to apply for a
period of three months after the execution of this Agreement. The Company,
China Netcom Group and CNC BVI shall procure compliance by their
respective subsidiaries and affiliates with the provisions of this clause.
20. TIME OF ESSENCE
Any date or period referred to in this Agreement may be extended by mutual
agreement between the Company, China Netcom Group, CNC BVI and the Joint
Global Coordinators (for themselves and for and on behalf of the Joint
Sponsors and the other Hong Kong Underwriters). Save as otherwise
expressly provided, as regards any date or period originally fixed or any
date or period so extended as aforesaid, time is of the essence of this
Agreement.
21. INVALIDITY
If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any jurisdiction,
that shall not affect or impair:
42
(i) the legality, validity or enforceability in that jurisdiction of any
other provision of this Agreement; or
(ii) the legality, validity or enforceability under the law of any other
jurisdiction of that or any other provision of this Agreement.
22. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with Hong
Kong law.
23. SUBMISSION TO JURISDICTION
(A) The parties hereto irrevocably submit to the non-exclusive jurisdiction of
the Hong Kong courts for the purpose of enforcing any claim arising
hereunder.
(B) Each of China Netcom Group and CNC BVI hereby irrevocably authorises and
appoints the Company of 59th Floor, Bank of Xxxxx Xxxxx, 0 Xxxxxx Xxxx,
Xxxxxxx, Xxxx Xxxx as its agent to accept, receive and acknowledge service
of all writ, summons, order, judgment or other notice of legal process
arising out of or connected with this Agreement, and service on such agent
shall be deemed to be service on China Netcom Group or CNC BVI (as the
case may be), whether or not such agent gives notice thereof to China
Netcom Group or CNC BVI (as the case may be).
(C) If for any reason the agent named above no longer serves as agent of China
Netcom Group or CNC BVI for the purposes of clause 23(B), China Netcom
Group or CNC BVI (as the case may be) shall promptly appoint a successor
agent satisfactory to the Joint Global Coordinators, the Joint Sponsors or
the Hong Kong Underwriters, notify the Joint Global Coordinators, the
Joint Sponsors or the Hong Kong Underwriters thereof and deliver to the
Joint Global Coordinators, the Joint Sponsors or the Hong Kong
Underwriters a copy of the successor agent's acceptance of appointment
Provided that until the Joint Global Coordinators, the Joint Sponsors or
the Hong Kong Underwriters receive such notification, they shall be
entitled to treat the agent named above as the agent of China Netcom Group
or CNC BVI (as the case may be) for the purposes of clause 23(B).
24. IMMUNITY
To the extent that any party hereto may in any court proceedings arising
out of or in connection with this Agreement or in any proceedings taken
for the enforcement of any determination, decision, order or award made in
such court proceedings claim for itself or its assets immunity from suit
or other legal process or to the extent that in any such court or
enforcement proceedings there may be attributed to itself or its assets
such immunity (whether or not claimed),
43
such party hereby irrevocably waives such immunity and consents, in
respect of any such court or enforcement proceedings, to the giving of any
relief or the issue of any process including, without limitation, the
making, enforcement or execution against property whatsoever (irrespective
of its use or intended use) to the full extent permitted by applicable
laws.
25. JUDGMENT CURRENCY INDEMNITY
(A) If for the purpose of obtaining judgement in any court by the Company or
China Netcom Group or CNC BVI or a Global Coordinator or a Joint Sponsor
or a Hong Kong Underwriter as the case may be (for the purpose of this
clause 25, the "CLAIMING PARTY") it is necessary to convert a sum due
hereunder into any currency other than Hong Kong dollars, the parties
hereto agree, to the fullest extent that they may effectively do so, that
the rate of exchange used shall be the rate at which in accordance with
normal banking procedures such Claiming Party could purchase Hong Kong
dollars with such other currency in Hong Kong on the Business Day
preceding that on which final judgement is given.
(B) The obligation of any party hereto in respect of any sum due from such
party (for the purpose of this clause 25, the "OBLIGOR") to any Claiming
Party shall, notwithstanding any judgement in a currency other than Hong
Kong dollars, not be discharged until the first Business Day following
receipt by such Claiming Party of any sum adjudged to be so due in such
other currency, on which (and only to the extent that) such Claiming Party
may in accordance with normal banking procedures purchase Hong Kong
dollars with such other currency.
(C) If the Hong Kong dollars purchased pursuant to this clause are less than
the sum originally due to the Claiming Party, such Obligor agrees, as a
separate obligation and notwithstanding any such judgement, to indemnify
the Claiming Party against such loss.
(D) If the Hong Kong dollars purchased pursuant to this clause are greater
than the sum originally due to the Claiming Party, the Claiming Party
agrees, as a separate obligation and notwithstanding any such judgement,
to repay to the Obligor an amount equal to the excess of the Hong Kong
dollars so purchased over the sum originally due hereunder to the Claiming
Party.
26. SURVIVAL
The respective indemnities, covenants, undertakings, agreements,
Warranties and other statements of each of the Company, China Netcom Group
and CNC BVI as set forth in this Agreement or made by or on behalf of any
of them pursuant to this Agreement, shall remain in full force and effect
notwithstanding completion of the Global Offering and regardless of any
investigation (or any statement as to the results thereof) made by or on
behalf of any of the Joint Global Coordinators, the Joint Sponsors and the
Hong Kong Underwriters, any
44
of their respective affiliates or any of their respective representatives,
directors, officers, agents, employees and advisers.
27. WITHHOLDING
All payments by or on behalf of the Company, China Netcom Group and CNC
BVI under or in connection with this Agreement shall be paid without
set-off or counterclaim, and free and clear of and without deduction or
withholding for or on account of any Taxation. If any Taxation is required
by Law to be deducted or withheld in connection with any such payment, the
Company, China Netcom Group or CNC BVI, as the case may be, will increase
the amount so paid so that the amount of such payment received by the
payee is such amount as the payee would have received if no such deduction
or withholding had been made.
28. TAXATION
If any sum payable under or in connection with this Agreement to any of
the Joint Global Coordinators or any of the Joint Sponsors or any of the
Hong Kong Underwriters or any of the Indemnified Persons shall be subject
to Taxation in the hands of any of them or taken into account as a receipt
in computing the taxable profits or losses of any of them, the sum payable
shall be increased to such sum as will ensure that, after payment of any
Taxation which would not have arisen but for that sum, such Joint Global
Coordinator or such Joint Sponsor or such Hong Kong Underwriter or such
Indemnified Person shall be left with a sum equal to the sum that it would
have received in the absence of such Taxation.
29. COUNTERPARTS
(A) This Agreement may be executed in any number of counterparts, and by the
parties on separate counterparts, but shall not be effective until each
party has executed at least one counterpart.
(B) Each counterpart shall constitute an original of this Agreement, but all
the counterparts shall together constitute but one and the same
instrument.
IN WITNESS whereof this Agreement has been executed under hand by or on behalf
of the parties hereto the day and year first above written.
45
SCHEDULE 1
JOINT GLOBAL COORDINATORS
CHINA INTERNATIONAL CAPITAL CORPORATION LIMITED
Address: 00xx Xxxxx, Xxxxx World Tower 2
China World Trade Center, 1 Jianguomenwai Dajie
Beijing 100004, PRC
Contact person: Xx. Xxxxxxx Xxxx
Facsimile: x000 0000 0000 / +8610 6505 8150
Email: xxxxx@xxxx.xxx.xx
CITIGROUP GLOBAL MARKETS ASIA LIMITED
Address: 00xx Xxxxx, Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx, 0 Xxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Contact person: Mr. Xxxxx Xxx
Facsimile: x000 0000 0000
Email: xxxxx.xxx@xxxxxxxxx.xxx
XXXXXXX SACHS (ASIA) L.L.C.
Address: 68th Floor, Xxxxxx Kong Center
0 Xxxxx'x Xxxx Xxxxxxx, Xxxx Xxxx
Contact person: Xx. Xxxxx Xxxx
Facsimile: x000 0000 0000
Email: xxxxxxxx.xxxx@xx.xxx
46
SCHEDULE 2
JOINT SPONSORS
CHINA INTERNATIONAL CAPITAL CORPORATION (HONG KONG) LIMITED
Address: Suite 2307, 23rd Floor, One International Finance Centre
0 Xxxxxxx Xxxx Xxxxxx, Xxxxxxx, Xxxx Xxxx
Contact person: Xx. Xxxxxxx Xxxx
Facsimile: x000 0000 0000 / +8610 6505 8150
Email: xxxxx@xxxx.xxx.xx
CITIGROUP GLOBAL MARKETS ASIA LIMITED
Address: 00xx Xxxxx, Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx, 0 Xxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Contact person: Mr. Xxxxx Xxx
Facsimile: x000 0000 0000
Email: xxxxx.xxx@xxxxxxxxx.xxx
XXXXXXX SACHS (ASIA) L.L.C.
Address: 68th Floor, Xxxxxx Kong Center
0 Xxxxx'x Xxxx Xxxxxxx, Xxxx Xxxx
Contact person: Xx. Xxxxx Xxxx
Facsimile: x000 0000 0000
Email: xxxxxxxx.xxxx@xx.xxx
47
SCHEDULE 3
HONG KONG UNDERWRITERS
APPROXIMATE
PERCENTAGE OF HONG NUMBER OF
KONG PUBLIC HONG KONG OFFER
OFFERING SHARES
NAME ADDRESS UNDERWRITTEN UNDERWRITTEN
---- ------- ------------ ------------
China International Capital Xxxxx 0000, 00xx Xxxxx 28.75% 30,072,000
Corporation (Hong Kong) One International Finance Centre
Limited 0 Xxxxxxx Xxxx Xxxxxx
Xxxxxxx
Xxxx Xxxx
Citigroup Global Markets 50th Floor, Citibank Tower 28.75% 30,072,000
Asia Limited Xxxxxxxx Xxxxx
0 Xxxxxx Xxxx
Xxxxxxx
Xxxx Xxxx
Xxxxxxx Xxxxx (Asia) L.L.C. 68th Floor 28.75% 30,072,000
Xxxxxx Kong Center
0 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx
BOCI Asia Limited 26th Floor, Bank of China Tower 4.00% 4,184,000
0 Xxxxxx Xxxx
Xxxx Xxxx
ICEA Capital Limited 42nd Floor, Jardine House 4.00% 4,184,000
0 Xxxxxxxxx Xxxxx
Xxxxxxx
Xxxx Xxxx
CAF Securities Company 13th Floor, Fairmont House 3.25% 3,399,000
Limited 0 Xxxxxx Xxxx Xxxxx
Xxxxxxx
Xxxx Xxxx
48
First Shanghai Securities 19th Floor, Wing On House 1.00% 1,046,000
Limited 00 Xxx Xxxxx Xxxx Xxxxxxx
Xxxx Xxxx
Shenyin Wanguo Capital 28th Floor, Citibank Tower 1.50% 1,569,000
(H.K.) Limited Xxxxxxxx Xxxxx
0 Xxxxxx Xxxx
Xxxxxxx
Xxxx Xxxx
49
SCHEDULE 4
THE WARRANTIES
The Company, China Netcom Group and CNC BVI jointly and severally represent,
warrant and undertake to the Joint Global Coordinators, the Joint Sponsors and
the Hong Kong Underwriters and each of them as follows:
1. All information supplied or disclosed in writing or orally including,
without limitation, the Verification Notes and the answers and documents
referred to therein (and any new or additional information serving to
update or amend the Verification Notes supplied or disclosed in writing
prior to the date of this Agreement) by the Company or any other member of
the Group or any director or employee of any of them to the Joint Global
Coordinators, the Joint Sponsors, the Hong Kong Underwriters, the
Reporting Accountants or the legal and other professional advisers to the
Hong Kong Underwriters for the purposes of the Hong Kong Public Offering
was when given and (except as subsequently superseded, amended or
corrected, and subject as stated in the Prospectus) remains true and
accurate in all material respects and not misleading in any material
respect and all forecasts and estimates so supplied or disclosed were made
in good faith and are honestly and reasonably held, and have been made
after due, careful and proper consideration. All forecasts and estimates
which are contained in the Hong Kong Offering Documents are based on
assumptions referred to in the Hong Kong Offering Documents and represent
reasonable and fair expectations honestly held based on facts known to
such persons (or any of them) and there are no other assumptions on which
such forecasts and estimates are based other than the assumptions referred
to in the Hong Kong Offering Documents or on which such forecasts ought
reasonably to have been based which have not been made.
2. All statements of fact contained in the Hong Kong Offering Documents are
and will (at the Prospectus Date and the other times when the Warranties
are repeated pursuant to this Agreement) be true and accurate and not
misleading in any material respect and there are no facts known or which
on reasonable enquiry could have been known to the Company, any other
member of the Group and/or the Directors (or any of them) which are not
disclosed in the Hong Kong Offering Documents the omission of which would
make any statement therein materially misleading or which in the
circumstances of the Hong Kong Public Offering are material for disclosure
therein. All expressions of opinion or intention therein are and will (at
the Prospectus Date and the other times when the Warranties are repeated
pursuant to this Agreement) be made on reasonable grounds and are and will
be truly and honestly held by the Directors and are and will be fairly
based and there are and will be no other facts known or which could on
reasonable inquiry have been known to the Directors the omission of which
would make any such statement or expression misleading in any material
respect or which will or should reasonably be considered material in the
context of the Hong Kong Public Offering.
50
3. The Prospectus, as well as all other documents and notices filed with the
Hong Kong Stock Exchange conform, in all respects to the applicable
requirements of the Companies Ordinance, the Securities and Futures
Ordinance (Chapter 571 of the Laws of Hong Kong), any other applicable
Hong Kong government regulations or legislation and the Hong Kong Listing
Rules and all other rules and regulations of the Hong Kong Stock Exchange,
except as provided for in the Prospectus.
4. The Prospectus contains and, when it is issued, will contain all such
information as investors would reasonably require, and reasonably expect
to find there, for the purpose of making an informed assessment of the
assets and liabilities, financial position, profits and losses, and
prospects of the Group and the rights attaching to the Offer Shares. In
addition, the Prospectus, as of the date thereof and as of the date
hereof, did not and does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
5. No material information was withheld from the Reporting Accountants for
the purposes of their review of all forecasts contained in the Prospectus
or their review of the Company's working capital projections or their
review of the Company's financial reporting procedures.
6. Schedule 5 sets forth a correct and complete list of each and every
subsidiary of the Company, whether incorporated within or outside the PRC.
7. Neither the Company nor any of its subsidiaries has sustained since the
date of the latest audited financial statements included in the Prospectus
any loss or interference with its business from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or
decree, except for any loss or interference that would not, individually
or in the aggregate, have a material adverse effect on the business,
prospects, management, shareholders' or owners' equity, results of
operations or consolidated financial condition of the Company and its
subsidiaries, taken as a whole ("MATERIAL ADVERSE EFFECT").
8. Except as disclosed in the Prospectus and other than as involved in the
ordinary course of business of the Company or any of its subsidiaries,
since the date of the latest audited financial statements included in the
Prospectus, neither the Company nor any of its subsidiaries has (i)
entered into or assumed any material contract, (ii) incurred, assumed or
acquired any material liability (including contingent liability) or other
obligation, (iii) acquired or disposed of or agreed to acquire or dispose
of any business or any asset material to the Company and its subsidiaries
taken as a whole or (iv) entered into a letter of intent or memorandum of
understanding (or announced an intention to do so) relating to any matters
identified in clauses (i) through (iii) above.
9. Except as disclosed in the Prospectus, subsequent to the date as of which
information is given in the Prospectus, the Company has not purchased any
of its outstanding capital stock, nor declared, paid or otherwise made any
dividend or
51
distribution of any kind on its capital stock, nor transferred or
distributed any cash or other assets to the Selling Shareholders or any of
its subsidiaries.
10. The Company has been duly incorporated and is validly existing as a
limited liability company and in good standing under the laws of Hong
Kong, with full power and authority (corporate and other) to own, use,
lease and operate its properties, conduct its business in the manner
presently conducted and as described in the Prospectus, and is duly
qualified to transact business in each jurisdiction in which it conducts
any business and duly qualified to own, use, lease and operate its
properties in each jurisdiction in which it owns or leases properties and
such qualification is required, except where failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse
Effect. Each of the Memorandum and Articles of Association and the
business license of the Company complies with all applicable requirements
of Hong Kong law, including but not limited to the Companies Ordinance and
the Hong Kong Listing Rules, and each is in full force and effect.
11. Part 1 of Schedule 5 correctly identifies each of the subsidiaries of the
Company incorporated or established in the PRC (each a "PRC SUBSIDIARY").
Each PRC Subsidiary has been duly incorporated or established and is
validly existing and in good standing under the laws of the PRC with full
power and authority (corporate and other), as authorized by the PRC
government, to own, use, lease and operate its properties, conduct its
business in the manner presently conducted and, if such manner is
described in the Prospectus, as described in the Prospectus, and is duly
qualified to transact business in each jurisdiction in which it conducts
any business. Each PRC Subsidiary is duly qualified to own, use, lease and
operate its properties in each jurisdiction in which it owns or leases
properties and such qualification is required, except where failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. Each of the Memorandum and Articles of Association and the
business license of each PRC Subsidiary complies with all applicable
requirements of PRC law, including but not limited to the
Telecommunications Regulations of the PRC, and each is in full force and
effect; each PRC Subsidiary has passed each annual examination by the
relevant Regulatory Authorities without being found to have any material
deficiency or material default under applicable laws and regulations of
the PRC and has timely received all requisite certifications from each
applicable Regulatory Authorities.
12. Part 2 of Schedule 5 correctly identifies each of the subsidiaries of the
Company incorporated or established other than in the PRC (each a "NON-PRC
SUBSIDIARY"). Each non-PRC Subsidiary has been duly incorporated or
established and is validly existing and in good standing under the laws of
the jurisdiction of its incorporation or establishment with full legal
right, power and authority (corporate and other), as authorized by the
government of the jurisdiction of its incorporation or establishment, to
own, use, lease and operate its properties, conduct its business in the
manner presently conducted and, if such manner is described in the
Prospectus, as described in the Prospectus, and is duly qualified to
transact business in each jurisdiction in which it conducts any business
and duly qualified to own, use, lease and operate its properties in each
52
jurisdiction in which it owns or leases properties and such qualification
is required, except where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Each of
the Memorandum and Articles of Association, the business license and other
constituent documents of each non-PRC Subsidiary complies with all
applicable legal requirements, including but not limited to the laws of
its incorporation or establishment, and each is in full force and effect.
13. Each non-PRC Subsidiary has all Approvals from the appropriate Regulatory
Authority in each applicable jurisdiction required to provide the
telecommunications network services and operate its network facilities or
otherwise provide telecommunication services as presently conducted (the
"COMMUNICATIONS LICENSES"), except such as would not, individually or in
the aggregate, have a Material Adverse Effect.
14. Each of the Communications Licenses was duly issued, is valid and in full
force and effect, has not been suspended, canceled, revoked or modified in
any adverse manner, and is validly held, free and clear of all
encumbrances and, in each case, shall remain so immediately following the
consummation of the transactions contemplated by this Agreement. To the
best of the Company's knowledge, there is no circumstance, law,
regulation, event or other reason that exists that would result in
revocation, suspension or adverse modification of any material
Communications Licenses (other than revocation, suspension or modification
which would not, individually or in the aggregate, have a Material Adverse
Effect) or give rise to the right of a Regulatory Authority to take any
such action, or prevent the granting of the transfer or renewal of the
Communications Licenses on a routine basis or in the ordinary course.
15. Each holder of a Communications License (1) has operated in all material
respects in compliance with all terms thereof, including all systems
build-out requirements, and (2) is in all material respects in compliance
with, and the conduct of its business has been and is in all material
respects in compliance with, the applicable laws and regulations, and has
filed all registrations, statements, documents and reports and paid all
fees required by all applicable laws, in each case, relating to the
Communications Licenses and any other applicable laws and regulations.
There is no pending or, to the best of the Company's knowledge, threatened
action by or before any Regulatory Authority to revoke, cancel, suspend,
modify or refuse to renew any of the Communications Licenses, there is not
now issued, outstanding or, to the best of the Company's knowledge,
threatened, any notice by any Regulatory Authority of any violation or
complaint, or any application, complaint, or proceeding (other than
applications, proceedings, or complaints that generally affect the
Company's industry as a whole) relating to the business or operations of
the Company or any of its non-PRC Subsidiaries.
16. In addition to the Communications Licenses, the Company and each non-PRC
Subsidiary holds and is in compliance with all other material Approvals
required for the operation of the business as presently conducted and for
the ownership, lease or operation of the Company's and the non-PRC
Subsidiaries' properties
53
(collectively, "OTHER LICENSES"). All of such Other Licenses are valid and
in full force and effect and, to the best of the Company's knowledge, upon
grant of any Approvals applicable to the Other Licenses, shall remain so
immediately following the consummation of the transactions contemplated by
this Agreement, and the Company and its non-PRC Subsidiaries have duly
performed and are in compliance in all material respects with all of their
respective obligations under such Other Licenses. To the best of the
Company's knowledge, there is no circumstance, law, regulation, event or
other reason that exists or is likely to exist that would prevent the
granting of the Approvals or the transfer of the Other Licenses. To the
best of the Company's knowledge, no person has alleged any violation or
failure to comply by the Company or any of the non-PRC Subsidiaries, with
any Other License (other than violation or failure which would not,
individually or in the aggregate, have a Material Adverse Effect), no
suspension, cancellation or termination of any such Other License is
threatened, and no event has occurred or circumstances exist that may
(with or without notice or lapse of time) constitute or result directly or
indirectly in a violation of or failure to comply with any term or
requirement of any such Other License in a material respect, or result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any such Other
License.
17. Except as disclosed in the Prospectus, each of the Company and its
subsidiaries has valid title to all of the real properties and assets that
it purports to own and valid title to all personal properties and assets
that it purports to own, in each case free and clear of all liens,
charges, encumbrances, equities, claims, defects, options or restrictions,
except such as would not, individually or in the aggregate, have a
Material Adverse Effect. Each material real property and building held
under lease by the PRC Subsidiary is held by it under a legal and
enforceable agreement with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such
property and buildings by the PRC Subsidiary. China Netcom Group has
agreed to indemnify the Company or its PRC Subsidiary against all losses
or damages incurred or suffered by the Company or its PRC Subsidiary
caused by or arising from any challenges to, or interference with such
right or leasehold interest of the Company or its PRC Subsidiary. Each
material lease (other than the leases referred to in the second preceding
sentence) to which the Company or its subsidiaries is a party has been
duly executed and is legal, valid, binding and enforceable in accordance
with its terms against the other parties thereto. No default (and, to the
best of the Company's knowledge, no event which, with notice or lapse of
time or both, would constitute a default) by the Company or such
subsidiary (other than the PRC Subsidiary) which has or is likely to have
a Material Adverse Effect has occurred and is continuing under any such
lease referred to above. If China Netcom Group is a lessor under any such
lease, China Netcom Group has valid title to, or unfettered ability to
grant, and has granted valid leasehold interests in (and for the terms
stated therein) the real properties and assets that are the subject of
such lease. Except as disclosed in the Prospectus, each of the Company and
its subsidiaries has obtained all land-use rights and rights of way in
respect of the real properties, which are required to conduct its business
and to which it holds title, free and clear of all
54
encumbrances and defects, except such as are not material and do not
materially interfere with the use made and proposed to be made of such
property by the Company or the relevant subsidiary of the Company, as the
case may be, and all such land-use rights and rights of way are legal,
valid, binding and enforceable in accordance with the terms of their
establishment, except such as are not material and do not materially
interfere with the use made and proposed to be made of such property by
the Company or the relevant subsidiary of the Company, as the case may be.
Neither the Company nor any of its subsidiaries owns, operates, manages or
has any other material right or interest in any other real property,
except for the real property described in the property valuation report
set out in appendix IV to the Prospectus.
18. The network assets of the Group are structurally sound, are in good
operating condition and repair as is consistent with standards generally
followed in the industry (subject to ordinary wear and tear) and have been
maintained in accordance with good business practice. These network assets
are adequate for the uses to which they are being and intended to be put.
To the best of the Company's knowledge, there are no facts or conditions
affecting any of these network assets that could, individually or in the
aggregate, interfere in any material respect with the occupancy or
operation thereof as currently occupied or operated.
19. The Company has the authorized capital as set forth in the section headed
"Share Capital" of the Prospectus, and all of the issued shares of capital
stock of the Company (i) have been duly authorized, (ii) are validly
issued, fully paid and non-assessable, and (iii) were not issued in
violation of any preemptive or similar rights and conform in all material
respects to the description thereof set forth in the section of the
Prospectus headed "Share Capital". Except as disclosed in the Prospectus,
the Company has not granted to any third party any securities convertible
into or exchangeable for, rights, warrants or options to acquire from the
Company, or obligations of the Company to issue, Shares or any other
capital stock of the Company except pursuant to this Agreement and the
U.S. and International Underwriting Agreement. Except as disclosed in the
Prospectus and as described in this warranty, there are no outstanding
options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of the Company's capital
stock or any such options, rights, convertible securities or obligations,
other than options issued pursuant to stock options plans in the ordinary
course of business.
20. Each subsidiary of the Company is a legal person with limited liability
and the liability of the Company in respect of equity interests held in
such subsidiary of the Company is limited to its investment therein. All
of the outstanding shares of capital stock of, or equity interests in,
each of the subsidiaries of the Company have been duly authorized and are
validly issued, fully paid and non-assessable and, except as described in
the Prospectus, are owned directly or indirectly by the Company, free and
clear of all liens, charges, restrictions upon voting or transfer (other
than any statutory right of first refusal of any non-transferring
shareholder) or any other encumbrances, equities or claims and capital
55
verification reports issued by qualified independent accounting firms in
respect of such capital contribution fairly state the matters which such
reports purport to state and has been filed and registered with government
authorities of the PRC with respect to each PRC Subsidiary. There are no
outstanding rights, warrants or options to acquire, or instruments or
securities convertible into or exchangeable for, any shares of capital
stock of, or direct interests in, any subsidiary.
21. The Shares to be issued and sold by the Company to the Hong Kong
Underwriters hereunder (in the case of under-subscription in the Hong Kong
Public Offering) and under the U.S. and International Underwriting
Agreement and the Shares to be sold by the Selling Shareholders hereunder
have been duly and validly authorized, and, when issued, in the case of
the Shares to be issued and sold by the Company, and delivered against
payment therefor pursuant to this Agreement, as applicable, will be duly
and validly issued and delivered and fully paid and non-assessable; the
Shares and the ADSs representing such Shares conform in all material
respects to the descriptions thereof contained in the Hong Kong Offering
Documents, including but not limited to the descriptions under the section
entitled "Structure of the Global Offering" in the Prospectus; and, except
as described in the Prospectus, there are no restrictions on subsequent
transfers of the Shares or the ADSs under the laws of the PRC, Hong Kong
or the United States. No holder of any of the Shares or ADSs after the
completion of the Global Offering is or will be subject to liability in
respect of any liability or obligation of the Company by virtue only of
the holding of any such Shares or ADSs. Except as disclosed in the
Prospectus and except as prohibited by applicable laws in relation to the
Global Offering, there are no limitations on the rights of holders of the
Shares or the ADSs to hold, vote or transfer their securities.
22. The ADSs will at the time of issue have been duly approved for listing,
subject to official notice of issuance, on the New York Stock Exchange,
Inc. under the symbol "CN". The Offer Shares have been approved in
principle for listing on the Hong Kong Stock Exchange under the stock code
"906".
23. Each of this Agreement, the Receiving Bankers' Agreement and the
Registrar's Agreement has been (or will when executed have been) duly
authorized, executed and delivered by the Company, and when validly
authorized, executed and delivered by the other parties hereto and
thereto, will constitute a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
24. All Approvals required for the deposit of Shares and the issuance of ADSs
in respect thereof, and for the authorization, execution and delivery by
the Company and China Netcom Group, as the case may be, of this Agreement,
the Receiving Bankers' Agreement and the Registrar's Agreement, for the
performance by each of the Company and China Netcom Group of its
obligations contemplated hereunder and thereunder have been obtained or
made
56
(or will have been prior to Closing) and are (or will be at such time) in
full force and effect. Furthermore, there is no pending or, to the best of
the Company's and China Netcom Group's knowledge, threatened action, suit,
proceeding or investigation that could reasonably be expected to lead to
the revocation, termination or suspension of any such Approval, except as
disclosed in the Prospectus or where the failure to be so duly licensed or
authorized would not, individually or in the aggregate, have a Material
Adverse Effect.
25. Each of the Company and the PRC Subsidiaries has all necessary Approvals
of or from, and has made all filings, registrations and declarations
(collectively, the "FILINGS") with all Regulatory Authorities in the PRC,
(including, without limitation, the PRC State Council, the PRC Ministry of
Information Industry (the "MII"), the PRC Ministry of Finance (the "MOF"),
the PRC Ministry of Commerce (the "MOFCOM"), the National Development and
Reform Commission (the "NDRC"), the China Securities Regulatory Commission
(the "CSRC"), the State Administration of Industry and Commerce (the
"SAIC") and the State Administration of Industry and Commerce and the
State Taxation Administration (the "STA")), necessary to (i) own, lease,
license and use its properties and assets and to conduct its business as
in the manner described in the Prospectus, including, but not limited to,
the operation by the Company and the PRC Subsidiaries of basic and value -
added telecommunications services in Beijing Municipality, Tianjin
Municipality, Shanghai Municipality, Guangdong Province, Hebei Province,
Henan Province, Shandong Province and Liaoning Province as described in
the Prospectus, and (ii) use the proceeds to be received by the Company
from the Global Offering for (1) the expansion and upgrading of our
telecommunications network infrastructure, including support and
information systems, (2) repayment of debt, (3) development of new
applications and services, including new IP-based data communication
applications and services and voice value-added services, and (4) general
corporate purposes, such as working capital and business expansion, in the
manner contemplated by the Prospectus, subject to necessary registration
or approvals requirements under the laws of the PRC for the use of the
proceeds of the Global Offering by the PRC Subsidiary, either as a
shareholder loan or as a capital contribution by the Company; and such
Approvals contain no material restrictions or material conditions not
described in the Prospectus. Neither the Company nor China Netcom Group
nor CNC BVI nor any of their respective subsidiaries has received any
notice of any event, inquiry, investigation or proceeding that would
reasonably be expected to result in the suspension, revocation or
limitation of any such Approval or otherwise impose any material
limitation on the conduct of the business of the Company or China Netcom
Group or CNC BVI or any of their respective subsidiaries.
26. None of the Company or any affiliated purchaser of the Company made or
will make bids or purchases for the purpose of creating actual or apparent
active dealing in, or of raising the price of, the Shares or other
securities which is designed to or which has constituted, or which might
reasonably be expected to cause or result in, manipulation or
stabilization of the price of any security of the Company under the
Securities and Futures Ordinance (Chapter 571 of the Laws
57
of Hong Kong), the rules and regulations of the Hong Kong Stock Exchange
or the Hong Kong Listing Rules or otherwise.
27. All dividends and other distributions declared and payable on the shares
of capital stock of the Company may, under the current laws and
regulations of Hong Kong, be paid to the shareholders of the Company in
Hong Kong dollars, and all such dividends and other distributions will not
be subject to withholding or other taxes under the current laws and
regulations of Hong Kong and are otherwise free and clear of any other
tax, withholding or deduction in Hong Kong and may be so paid without the
necessity of obtaining any Approval in Hong Kong.
28. Except as disclosed in the Prospectus, no subsidiary of the Company is
currently prohibited, directly or indirectly, from (i) repaying to the
Company any loans or advances to it from the Company; or (ii) paying any
dividends or other distributions to the Company declared and payable on
the Company's direct or indirect equity interest in such subsidiary in
each case, except as restricted by the term loan facility dated 27 July
2004 between Asia Netcom and ICBC for ongoing funding requirements. Except
as disclosed in the Prospectus, all dividends and other distributions
declared and payable on the Company's direct or indirect equity interests
in the subsidiaries of the Company may, under the current laws and
regulations of the respective jurisdiction of incorporation or
establishment, of each of the subsidiaries of the Company be converted
into foreign currency that may be freely transferred out of such
jurisdiction and except as disclosed in the Prospectus, all such dividends
and other distributions will not be subject to withholding or other taxes
under the laws and regulations of the respective jurisdiction of
incorporation or establishment of each of the subsidiaries of the Company
and are otherwise free and clear of any other tax, withholding or
deduction in the respective jurisdiction of incorporation or establishment
of each of the subsidiaries of the Company and may be so paid without the
necessity of obtaining any Approval in the respective jurisdiction of
incorporation or establishment of each of the subsidiaries of the Company.
29. The issuance and sale of the Shares and ADSs being delivered under this
Agreement and the U.S. and International Underwriting Agreement, the
application of the net proceeds from the Global Offering (as set forth in
and contemplated by the Prospectus) and the compliance by the Company with
all of the provisions of this Agreement, the Receiving Bankers' Agreement
and the Registrar's Agreement, and the consummation by the Company of the
transactions contemplated herein and therein, did not, and will not,
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement, note, lease or other agreement or
instrument of any kind whatsoever to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the properties or
58
assets of the Company or any of its subsidiaries is subject, except for
such conflicts, breaches, violations or defaults which would not (i)
individually or in the aggregate, have a Material Adverse Effect, or (ii)
affect the validity of, or have any adverse effect on, the issuance and
sale of the Shares or the other transactions contemplated hereunder; and
such actions did not, and will not, result in any violation of the
provisions of (x) the Memorandum and Articles of Association or business
licenses of the Company or (y) any law or statute or any rule, regulation,
judgment, order, decree or Approval of any Regulatory Authority having
jurisdiction over the Company, any of its subsidiaries, any of the Selling
Shareholders, any of China Netcom Group Members or any of their
properties, or (ii) affect the validity of, or have any adverse effect on,
the issuance and sale of the Shares and ADSs and the other transactions
contemplated hereunder and under the U.S. and International Underwriting
Agreement.
30. Except as disclosed in the Prospectus, neither the Company nor any of its
subsidiaries is in conflict with, breach, default (or is aware of an event
which, with notice or the passage of time or both, would result in a
default) or violation of any of the terms or provisions of (i) any
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument of any kind whatsoever to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the properties or assets of the
Company or any of its subsidiaries is subject, (ii) its Memorandum and
Articles of Association or business license or other constituent
documents, or (iii) any law or statute or any rule, regulation, judgment,
order, decree or Approval of any Regulatory Authority having jurisdiction
over the Company or any of its subsidiaries or any of their properties,
except in each case, such conflicts, breaches, defaults or violations
which would not, individually or in the aggregate, have a Material Adverse
Effect. Neither the Company nor any of its subsidiaries has taken any
action nor have any steps been taken or legal, legislative, or
administrative proceedings been started or, to the best of the Company's
or any of its subsidiaries' knowledge threatened (x) to wind up, dissolve,
or eliminate the Company or any of its subsidiaries or (y) to withdraw,
revoke or cancel the Company's or any of its subsidiaries' licenses.
31. Except as disclosed in the Prospectus, no stamp or other issuance or
transfer taxes or duties and no capital gains, income (except for taxes on
their income and operations generally), withholding or other taxes are
payable by or on behalf of the Hong Kong Underwriters to the PRC or Hong
Kong or the United States or any political subdivision or taxing authority
thereof or therein in connection with (i) the creation, allotment and
issuance of the Shares, (ii) the deposit of Shares by the Company and the
Selling Shareholders in the form of the ADSs, (iii) the sale and delivery
by the Company and the Selling Shareholders of the Shares and the ADSs to
or for the respective accounts of the Hong Kong Underwriters in the manner
contemplated in this Agreement and in the U.S. and International
Underwriting Agreement, (iv) the execution and delivery of this Agreement,
the Receiving Bankers' Agreement and the Registrar's Agreement or (v) the
sale and delivery by the Hong Kong Underwriters of the Offer Shares
59
to the investors, applicants or initial purchasers thereof in the manner
contemplated in the Prospectus.
32. The Company, its subsidiaries and the Selling Shareholders, as the case
may be, on one hand and China Netcom Group and certain affiliates of China
Netcom Group (excluding the Company and its subsidiaries) on the other
hand (each member within the group of companies comprising China Netcom
Group and its affiliates (excluding the Company and its subsidiaries)
individually, a "CHINA NETCOM GROUP MEMBER") have completed a series of
events and transactions as described under the captions "Restructuring,"
"Relationship with China Netcom Group" and "Principal and Selling
Shareholders" in the Prospectus (the "RESTRUCTURING TRANSACTIONS")
including, among other things:
(i) the entering into by the Company, CNC China and China Netcom Group
of a restructuring agreement, dated 6 September 2004 (the "MASTER
RESTRUCTURING AGREEMENT"), pursuant to which China Netcom Group has
agreed, among other things, that it will indemnify CNC China against
any fines, claims and payments incurred by CNC China in connection
with the assets and liabilities transferred to CNC China under the
Restructuring;
(ii) the issuance by China Netcom Group of a letter of undertakings dated
5 September 2004 (the "LETTER OF UNDERTAKINGS"), pursuant to which
China Netcom Group has undertaken, among other things, that it will
extend its full support to the Company in connection with the
existing operations and future development of the Company;
(iii) the entering into by the Company, CNC China and China Netcom Group
of a non-competition agreement dated 6 September 2004 (the
"NON-COMPETITION AGREEMENT"), pursuant to which China Netcom Group
has undertaken, subject to certain conditions therein, that China
Netcom Group will not at any time, directly or indirectly, provide
basic telecommunications services or selected value-added
telecommunications services as defined in the PRC government's
Catalog of Telecommunications Services in the Company's service
regions;
(iv) the entering into by the Company, CNC China and China Netcom Group
of a trademark licensing agreement dated 8 October 2004 (the
"TRADEMARK LICENSING AGREEMENT"), pursuant to which China Netcom
Group has granted to the Company and CNC China a right to use the
registered trademarks of, and trademarks pending registration by,
China Netcom Group on a royalty-free basis;
(v) the entering into by CNC China and China Netcom Group of a support
services agreement dated 8 October 2004 (the "SUPPORT SERVICES
AGREEMENT"), pursuant to which China Netcom Group has agreed to
provide certain support services to CNC China;
60
(vi) the entering into by CNC China and China Netcom Group of an
interconnection settlement agreement dated 8 October 2004 (the
"INTERCONNECTION SETTLEMENT AGREEMENT") which allows CNC China's
domestic telephone networks to interconnect with China Netcom
Group's domestic networks within each of CNC China's and the China
Netcom Group's respective service regions;
(vii) the entering into by Asia Netcom and EANL of a capacity lease
agreement dated 30 June 2004 and amended on 6 October 2004 (the
"CAPACITY LEASE AGREEMENT"), and a capacity purchase agreement dated
30 June 2004 (the "CAPACITY PURCHASE AGREEMENT"), pursuant to which
Asia Netcom leases and purchases, respectively, from EANL certain
amount of telecommunications capacity on EANL's network;
(viii) the entering into by CNC China and China Netcom Group of a property
leasing agreement dated 8 October 2004 (the "PROPERTY LEASING
AGREEMENT"), pursuant to which CNC China leased to China Netcom
Group certain properties in the provinces and municipalities in
which CNC China operates and China Netcom Group leased to CNC China
certain properties in the provinces and municipalities in which CNC
China operates;
(ix) the entering into by CNC China and China Netcom Group of a property
sub-leasing agreement dated 8 October 2004 (the "PROPERTY
SUB-LEASING AGREEMENT"), pursuant to which China Netcom Group leased
to CNC China certain properties owned by and leased from independent
third parties;
(x) the entering into by CNC China and China Netcom Group of a master
services sharing agreement dated 8 October 2004 (the "MASTER
SERVICES SHARING AGREEMENT"), pursuant to which CNC China and China
Netcom Group have agreed to share certain resources, owned and
management services provided by each other;
(xi) the entering into by CNC China and China Netcom Group of an
engineering and information technology services agreement dated 8
October 2004 (the "ENGINEERING AND INFORMATION TECHNOLOGY SERVICES
AGREEMENT"), pursuant to which China Netcom Group has agreed to
provide engineering and information technology-related services to
CNC China;
(xii) the entering into by CNC China and China Netcom Group of a materials
procurement agreement dated 8 October 2004 (the "MATERIALS
PROCUREMENT AGREEMENT"), pursuant to which, among other things, CNC
China may request China Netcom Group to act as its agents for the
procurement of telecommunications equipment;
(xiii) the entering into by CNC China and China Netcom Group of an
ancillary telecommunications services agreement dated 8 October 2004
(the
61
"ANCILLARY TELECOMMUNICATIONS SERVICES AGREEMENT"), pursuant to
which China Netcom Group has agreed to provide ancillary
telecommunications services to CNC China;
(xiv) the entering into by CNC China and China Netcom Group of a
telecommunications facilities leasing agreement dated 8 October 2004
(the "TELECOMMUNICATIONS FACILITIES LEASING AGREEMENT"), pursuant to
which CNC China has agreed to lease certain telecommunications
facilities from China Netcom Group;
(xv) the entering into by Asia Netcom and EANL of a management services
agreement dated 30 June 2004 and amended on 6 October 2004 (the
"MANAGEMENT SERVICES AGREEMENT"), pursuant to which Asia Netcom will
provide certain services to EANL;
(xvi) the entering into by CNC BVI, CNC Fund and the Company of a share
purchase and exchange agreement dated 11 June 2004 and amendment
dated 20 July 2004 (the "SHARE PURCHASE AND EXCHANGE AGREEMENT"),
pursuant to which CNC Fund sold to CNC BVI all of the shares in the
Company that it owned before the restructuring in exchange for an
option to receive the Company's ordinary shares or a cash
alternative;
(xvii) the entering into by the Chinese Academy of Sciences, Information
and Network Center of the State Administration of Radio, Film and
Television, China Railways Telecommunications Center, Shanghai
Alliance Investment Limited, and China Netcom Group of a share
transfer agreement dated 20 April 2004 (the "SHARE TRANSFER
AGREEMENT"), pursuant to which the Chinese Academy of Sciences,
Information and Network Center of the State Administration of Radio,
Film and Television, China Railways Telecommunications Center,
Shanghai Alliance Investment Limited agreed to transfer their
interests in China Netcom Holdings Corporation ("CHINA NETCOM
HOLDINGS") to China Netcom Group in exchange for certain amount of
the Company's ordinary Shares;
(xviii) the entering into by the predecessor of Shandong Provincial
State-owned Assets Supervision and Administration Commission and
China Netcom Group of an asset transfer agreement dated 26 April
2004 (the "ASSET TRANSFER AGREEMENT"), pursuant to which Shandong
Provincial State-owned Assets Supervision and Administration
Commission, as authorised by Shandong provincial Government, agreed
to transfer its assets and liabilities of telecommunications
operations in rural areas in Shandong Province to China Netcom Group
in exchange for certain amount of the Company's ordinary shares;
(xix) the entering into by China Netcom Group and China Netcom Holdings of
a share transfer agreement dated 10 June 2004 (the "CNC BVI SHARE
TRANSFER AGREEMENT"), pursuant to which China Netcom Holdings agreed
to transfer its shares in CNC BVI to China Netcom Group;
62
(xx) the entering into by China Netcom Group and CNC China of an assets
and liabilities transfer agreement dated 23 June 2004 (the "CNC
CHINA ASSETS AND LIABILITIES TRANSFER AGREEMENT"), pursuant to which
CNC China agreed to transfer all of its PRC assets and liabilities
to China Netcom Group;
(xxi) the entering into by China Netcom Group, CNC BVI, CNC China and the
Company of an asset injection agreement dated 29 June 2004 (the
"ASSET INJECTION AGREEMENT"), pursuant to which China Netcom Group
injected to the Company substantially all of its assets, liabilities
and interests in connection with its fixed line telephone, data and
Internet and leased line services in Beijing Municipality, Tianjin
Municipality, Shanghai Municipality, Guangdong Province, Hebei
Province, Henan Province, Shandong Province and Liaoning Province;
(xxii) the entering into by Guangdong Telecommunications Company Limited
and China Netcom Group a telecommunications assets transfer
agreement dated 10 June 2004 (the "TELECOMMUNICATIONS ASSETS
TRANSFER AGREEMENT"), pursuant to which Guangdong Telecommunications
Company Limited transferred certain telecommunications assets to
China Netcom Group;
(xxiii) the entering into by Jitong Network Communications Company Limited
and China Netcom Group of a telecommunications assets transfer
agreement dated 10 June 2004 (the "JITONG TELECOMMUNICATIONS ASSETS
TRANSFER AGREEMENT"), pursuant to which Jitong Network
Communications Company Limited transferred certain
telecommunications assets to China Netcom Group; and
(xxiv) the entering into by the Company and its related parties of (A)
Sale and Purchase Agreement dated 30 June 2004 between Asia Netcom
and CNC Network Corporation Limited; (B) Management Services
Agreement dated 30 June 2004 between Asia Netcom and EANL; (C)
Settlement and Release Agreement dated 27 July 2004 among EANL, Asia
Netcom and NEC Corporation; (D) Settlement and Release Agreement
dated 27 July 2004 among EANL, Asia Netcom and KDDI Submarine Cable
Systems Inc.; (E) Deed of Acknowledge and Agreement dated 9 July
2004, among East Asia Netcom UK Holdings Limited, Asia Netcom
Corporation (Singapore) Pte. Limited and NEC Corporation; (F) Deed
of Acknowledge and Agreement, dated 12 July 2004, among Asia Netcom,
CNC Network Corporation Limited, DB Trustees (Hong Kong) Limited,
KDDI Submarine Cable Systems Inc. and NEC Corporation; (G)
Promissory Note, dated 30 June 2004, issued by CNC Network
Corporation Limited; (H) Consent to Asia Netcom Corporation
Restructuring, dated 29 June 2004, among Asia Netcom, East Asia
Netcom UK Holdings Limited, East Asia Netcom Philippines Inc., NEC
Corporation and DB Trustees (Hong Kong) Limited; (I) Consent to Asia
Netcom Corporation Restructuring, dated 29 June 2004, between Asia
63
Netcom and KDDI Submarine Cable Systems Inc.; (J) Guarantee, dated
30 June between CNC BVI and Wilmington Trust (Cayman) Limited (re
the Taiwan trust); (K) Deed of Release of Guarantee dated 30 June
2004 between Asia Netcom and Wilmington Trust (Cayman) Limited with
respect to the original Guarantee (re Taiwan trust) replaced by
Guarantee above; (L) Deed of Indemnity dated 7 March 2003 between
CNC BVI and Asia Netcom (re ANC's original guarantee obligations to
Wilmington Trust (Cayman) Limited); (M) Facility Letter, dated 30
June 2004, between CNC BVI and Taiwan Holdings Co.; (N) Share
Charge, dated 12 July 2004, among CNC Network Corporation Limited,
DB Trustees (Hong Kong) Limited, KDDI Submarine Cable Systems Inc.
and NEC Corporation; (P) Share Charge between Asia Netcom
Corporation (Singapore) Pte. Limited and NEC Corporation; (O) Term
Loan dated 27 July between ICBC and Asia Netcom, and related
guarantees and security documents for ongoing funding requirements;
(P) Second Supplemental Deed dated 27 October 2004 between ICBC and
Asia Netcom relating to the Term Loan above; (Q) Assignment and
Assumption Agreement dated 30 September 2004 between the Company and
Group Wealth Finance Limited; (R) Share Purchase Agreement, dated 30
June 2004, between Asia Netcom and CNC BVI (collectively, the "ANC
AGREEMENTS").
Each of the significant documents executed by and between the Company or
its subsidiaries on one hand and the China Netcom Group or the other China
Netcom Group Members on the other hand in order to consummate the
Restructuring Transactions (including, without limitation, (i) the Master
Restructuring Agreement, (ii) the Letter of Undertakings, (iii) the
Non-Competition Agreement, (iv) the Trademark Licensing Agreement, (v) the
Support Services Agreement, (vi) the Interconnection Settlement Agreement,
(vii) the Capacity Lease Agreement, (viii) the Capacity Purchase
Agreement, (ix) the Property Leasing Agreement; (x) the Property
Sub-Leasing Agreement; (xi) the Master Services Sharing Agreement; (xii)
the Engineering and Information Technology Services Agreement; (xiii) the
Materials Procurement Agreement; (xiv) the Ancillary Telecommunications
Services Agreement; (xv) the Telecommunications Facilities Leasing
Agreement; (xvi) the Management Services Agreement; (xvii) the Share
Purchase and Exchange Agreement; (xviii) the Share Transfer Agreement;
(xix) the Asset Transfer Agreement, (xx) the CNC BVI Share Transfer
Agreement, (xxi) the CNC China Assets and Liabilities Transfer Agreement;
(xxii) the Asset Injection Agreement, (xxiii) the Telecommunications
Assets Transfer Agreement, (xxiv) the Jitong Telecommunications Assets
Transfer Agreement, and (xxv) the ANC Agreements) are hereinafter
collectively referred to as the "RESTRUCTURING DOCUMENTS" and singly as a
"RESTRUCTURING DOCUMENT". Each Restructuring Document constituting an
agreement is hereinafter referred to as a "Restructuring Agreement" and
collectively as the "Restructuring Agreements."
33. In respect of the connected transactions (as defined under the Hong Kong
Listing Rules) entered into by the Company and its subsidiaries on the one
hand and China Netcom Group and certain affiliates of China Netcom Group
(excluding
64
the Company and its subsidiaries) on the other hand (the "CONNECTED
TRANSACTIONS"):
(a) The statements contained in the Prospectus relating to the Connected
Transactions are true, accurate and complete and there are no other
facts known or which could on reasonable enquiry have been known to
the Directors, the omission of which would make any such statements
misleading, and there are no other Connected Transactions which are
required to be disclosed under the Hong Kong Listing Rules and have
not been disclosed in the Prospectus;
(b) All information (including but not limited to historical figures)
and documentation provided by the Company to the Joint Global
Coordinators, the Joint Sponsors and the Hong Kong Underwriters are
true, accurate and complete in all material respects and there is no
other information or documents which have not been provided the
result of which would make the information and documents so received
misleading;
(c) The transactions referred to in the section entitled "Relationship
with China Netcom Group" in the Prospectus have been entered into,
and will be carried out, in the ordinary and usual course of
business, on normal commercial terms or better and are fair and
reasonable insofar as the shareholders of the Company are concerned
and the Directors in coming to their views have made, as they
consider, due and proper inquiries and investigations of such
transactions;
(d) Each of the parties to such Connected Transaction agreements has at
all relevant times complied with and will continue to comply with
the terms of the Connected Transactions disclosed in the Prospectus
for so long as the agreement relating thereto is in effect, and
shall inform the Joint Global Coordinators and the Joint Sponsors
promptly should there be any material breach of any such terms
either before or after the listing of the Shares on the Hong Kong
Stock Exchange; and
(e) Each of the Connected Transactions agreements disclosed in the
Prospectus constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms by the relevant member of
the China Netcom Group against the other party subject, as to
enforceability, to bankruptcy, insolvency, reorganization and
similar laws of general applicability relating to or affecting
creditor rights and to general equitable principles.
34. The Company, its subsidiaries, the Selling Shareholders, certain
subsidiaries of the Selling Shareholders, certain affiliates of the
foregoing and China Netcom Group have completed the Restructuring
Transactions.
35. All Restructuring Documents and Restructuring Agreements that were
executed by or issued to the Company, its subsidiaries, the Selling
Shareholders or any
65
Regulatory Authority in connection with the Restructuring Transactions are
set forth in Schedule 6. Other than the Restructuring Documents and the
Restructuring Agreements as set forth in Schedule 6, there are no other
material documents or agreements, written or oral, that have been entered
into by the Company and the Selling Shareholders in connection with the
Restructuring Transactions which have not been previously provided, or
made available, to the Hong Kong Underwriters and, to the extent material,
disclosed in the Prospectus.
36. The descriptions of the Restructuring Transactions and the legal and other
consequences thereof set forth in the Prospectus under the captions
"Restructuring" and "Relationship with China Netcom Group" are accurate in
all material respects. All of the Restructuring have been effected prior
to the date hereof in compliance with all applicable national, provincial,
municipal and local laws in the PRC. The Restructuring constitute legal,
valid and binding transactions completed by the parties to the
Restructuring Agreements.
37. Each Restructuring Document has been duly authorized, executed and
delivered by the Company, each of its subsidiaries, each of the Selling
Shareholders and other China Netcom Group Member that is a party to such
Restructuring Document, as the case may be, prior to the date hereof, and
has been duly approved by the relevant regulatory authorities, and each
Restructuring Agreement, assuming such agreement has been duly authorized,
executed and delivered by the other parties thereof, constitutes a legal,
valid and binding agreement of the Company, each of its subsidiaries and
each China Netcom Group Member that is a party to such Restructuring
Agreement, as the case may be, enforceable in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. In connection with the Restructuring Agreements, all consents
and authorizations required to be obtained by the Company or its
subsidiaries have been legally and validly obtained from third parties
under any interconnection agreements or other arrangements or contracts
relating to the Restructuring Transactions which were required to have
been transferred or assigned to the Company, except such as would not,
individually or in the aggregate have a Material Adverse Effect.
38. The application of the net proceeds to be received by the Company from the
Global Offering as described in the Prospectus, will not (i) contravene
any provision of the Articles of Association, other constitutive documents
or the telecommunications business license of the Company or any of its
subsidiaries, (ii) contravene any provision of applicable law, rule or
regulation, assuming no changes from such as they exist on the date
hereof, (iii) contravene the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement,
note, lease or other agreement or instrument binding upon the Company or
any of its subsidiaries, except for such contravention which would not,
singly or in the aggregate, have a Material Adverse Effect, or (iv)
contravene any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any of its subsidiaries.
66
39. None of the Company and its subsidiaries, nor, to the best of the
Company's knowledge, any of their respective officers or directors has,
directly or indirectly, (i) made or authorized any contribution, payment
or gift of funds or property, in each case, to the extent that such
contribution, payment or gift constitutes a violation of the applicable
laws of Hong Kong or the PRC, to any official, employee or agent of any
Regulatory Authority in the PRC, Hong Kong or any other jurisdiction for
the purpose of influencing any act or decision of such official, employee
or agent to obtain business, or failed to disclose fully any contribution
in violation of law or (ii) made any contribution, payment or gift of
funds or property to any candidate for public office, in either case,
where either the payment or the purpose of such contribution, payment or
gift, after the registration of the Shares and ADSs under the Exchange
Act, will cause the Company to be in violation of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or the rules and regulations
promulgated thereunder, if applicable.
40. There are no pending actions, suits or proceedings against or affecting
the Company, any of its subsidiaries or any of their respective properties
(including, to the best of the Company's knowledge, any actions, suits or
proceedings against or affecting current or former employees of the
Company or any of its subsidiaries or challenging the effectiveness or
validity of the Restructuring Transactions) that, if determined adversely
to the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect, or would materially and
adversely affect the ability of the Company to perform its obligations
under this Agreement or the U.S. and International Underwriting Agreement,
and, to the best of the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated.
41. Except as disclosed in the Prospectus, neither the Company nor any of its
subsidiaries has any material obligations to provide housing benefits,
severance or retirement benefits, death or disability benefits or other
actual or contingent employee benefits or perquisites to any (i) present
or past employees, whether permanent or temporary, of the Company or its
subsidiaries, (ii) present or past employees of other China Netcom Group
Members, (iii) parties that transferred assets or businesses to the
Company and its subsidiaries in connection with the Restructuring or (iv)
any Regulatory Authority.
42. All guarantees of indebtedness of the Company or any of its subsidiaries
are in full force and effect. Except as disclosed in the Prospectus, there
are no material outstanding guarantees or contingent payment obligations
of the Company or any of its subsidiaries in respect of indebtedness of
any party that is not the Company or any of its subsidiaries. Except as
disclosed in the Prospectus, no indebtedness (actual or contingent) and no
contract or arrangement (other than employment contracts or arrangements)
is outstanding between (i) the Company or its subsidiaries and (ii) any
director or officer of the Company or its subsidiaries, any of their
associates (as defined in the Hong Kong Listing Rules) or any other person
connected (within the meaning of the Hong Kong Listing Rules) with such
director or officer.
67
43. Except as disclosed in the Prospectus, there are no material relationships
or transactions between the Company or any of its subsidiaries, on one
hand, and their respective affiliates, officers, directors and
shareholders on the other hand.
44. Except as disclosed in the Prospectus, the Company and its subsidiaries
own or have valid licenses in full force and effect for the lengths of
time indicated in the Prospectus or otherwise have the legal right to use,
or can acquire on reasonable terms, all material copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (including the "China Netcom"
name and logo) currently employed by them in connection with the
businesses currently operated by them, except such as would not,
individually or in the aggregate, have a Material Adverse Effect. Neither
the Company nor its subsidiaries has received any notice of infringement
of or conflict with asserted rights of others with respect to any of the
foregoing, except where such notice or conflict would not have a Material
Adverse Effect. In conducting its business activities, none of the Company
or any of its subsidiaries has infringed any patent, copyright, title,
trademark, service xxxx, trade name or other intellectual property rights
already registered by a third party in Hong Kong, the PRC or elsewhere,
other than such infringements which, either individually or in the
aggregate, would not have a Material Adverse Effect. Neither the Company
nor any of its subsidiaries holds any patent, patent rights or inventions
that are individually or in the aggregate material to their businesses.
45. The Company and its subsidiaries maintain in all material respects
insurance in such amounts and covering such risks as the Company
reasonably believes to be required for their respective businesses and
consistent with insurance coverage maintained by companies in similar
businesses, in similar industries and in similar locations. The Company
does not have any reason to believe that it will not be able to renew its
existing insurance coverage from similar insurers as may be necessary to
continue the businesses of the Company and its subsidiaries at a cost that
would not materially and adversely affect the business, prospects,
management, shareholders' or owners' equity, results of operations of the
Company and its subsidiaries, taken as a whole.
46. All returns, reports or filings which ought to have been made by or in
respect of the Company and its subsidiaries for taxation purposes have
been made and all such returns are up to date, correct and on a proper
basis in all material respects, and, to the best of the Company's
knowledge after due investigation, are not the subject of any dispute with
the relevant revenue or other appropriate authorities nor it there any
basis for such a dispute; neither the Company nor any of its subsidiaries
has received notice of any tax deficiency that has been asserted or
assessed against the Company or its subsidiaries which, if so assessed,
would or would be likely to have a Material Adverse Effect, and all
material taxes that are required to be paid have been paid by the Company
and its subsidiaries.
47. No material labor dispute, work stoppage or slow down, or other material
conflict with the employees of the Company or any of its subsidiaries
exists or, to the best of the Company's knowledge, is imminent or is
threatened.
68
48. The statements set forth in the Prospectus (i) under the section entitled
"Structure of the Global Offering" and Appendix V - "Summary of Articles
of Association", insofar as they purport to constitute a summary of the
terms of the Offer Shares and the relevant provisions of the Articles of
Association of the Company, and (ii) under the section entitled
"Regulation" and Appendix VI - "Taxation", insofar as they purport to
describe the provision of laws, regulations and documents referred to
therein, and under the section entitled "Underwriting" insofar as they
purport to described the provisions of this Agreement and the U.S. and
International Underwriting Agreement referred to therein, are accurate,
complete and fair in all material respects.
49. Under the laws of Hong Kong and the PRC, none of the Company, any of its
subsidiaries nor any of their properties, assets or revenues are entitled
to any right of immunity on the grounds of sovereignty from any legal
action, suit or proceeding, from set-off or counterclaim, from the
jurisdiction of any court, from services of process, from attachment prior
to or in aid of execution of judgment, or from other legal process or
proceeding for the giving of any relief or for the enforcement of any
judgment. The irrevocable and unconditional waivers and agreements of the
Company in this Agreement, the U.S. and International Underwriting
Agreement not to plead or claim any such immunity in any legal action,
suit or proceeding based on this Agreement and the U.S. and International
Underwriting Agreement are legal, valid and binding under the laws of Hong
Kong and the PRC.
50. No director or officer of the Company, CNC BVI or China Netcom Group has
any direct or indirect legal or beneficial interest in CNET Foundation
Limited ("CNET") or any of its assets, and to the best of the Company's
knowledge, there is no intention on the part of CNET or any of its
officers or directors, the Company or any other person to grant or
transfer any such interest to any such person. To the best of the
Company's knowledge, no such person has received or will receive any
improper benefit in connection with the Global Offering, the transactions
contemplated by the Share Purchase Agreement, dated 28 June 2004, between
CNET and CNC Fund or the Share Purchase and Exchange Agreement, dated 11
June 2004, between CNC Fund, the Company and CNC BVI.
51. The historical consolidated financial statements and notes thereto, the
summary historical consolidated financial data and notes thereto, and the
selected historical consolidated financial data and notes thereto of the
Group included in the Prospectus were prepared in accordance with the HK
GAAP consistently applied throughout each of the periods involved, and
fairly present the consolidated financial condition and result of
operations of the Group as of the dates and for the periods presented, and
such reconciliation has been prepared in accordance with the generally
accepted accounting principles in the United States ("U.S. GAAP") applied
on a consistent basis and fully complies with the applicable requirements
of the Securities Act; and the unaudited pro forma consolidated financial
data and notes thereto and the summary thereof included in the Prospectus
were prepared in accordance with all applicable rules and
69
requirements, the Company's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the events
described therein, in the unaudited pro forma statements of income for the
year ended 31 December 2003 and the six-months ended 30 June 2004; pro
forma adjustments give appropriate effect to those assumptions, and the
calculations made to determine such pro forma amounts reflect the proper
application of those adjustments to the historical financial statement
amounts. No other financial statements, schedules or pro forma financial
information of the Group are required by any applicable rules and
regulations to be included in the Prospectus.
52. All statistical information disclosed in the Prospectus as having come
from the Company, including without limitation number of access lines and
number of subscribers, has been derived from the records of the Group
using systems and procedures which incorporate adequate safeguards to
ensure that the information, in all material respects, is accurate and
complete and presents fairly the information shown therein. Statistical
and market-related data included in the Prospectus as having come from a
source other than the Company are based on or derived from sources which
the Company reasonably and in good faith believes are reliable and
accurate, and such data accurately reflects the information or the sources
from which they are derived.
53. The Reporting Accountants are an independent public accountant within the
meaning of all applicable published rules and regulations and comply with
the guidelines on independence issued by the Hong Kong Society of
Accountants; each of the Company and its subsidiaries has devised and
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements and
notes thereto in conformity with HK GAAP, with a reconciliation to U.S.
GAAP, and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate actions taken
with respect to any differences and (v) each of the Company and its
subsidiaries has made and kept books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of assets of such entity and provide a sufficient basis for
the preparation of consolidated financial statements and notes thereto in
accordance with the HK GAAP, with a reconciliation thereof to U.S. GAAP,;
and the management information and accounting control system of the
Company and its subsidiaries has been in operation for at least six months
during which no material difficulty with regard to any of the matters
referred to in (i) through (v) above has been experienced.
54. All prospective information included in the Prospectus under the caption
"Prospective Financial Information" (the "PROSPECTIVE FINANCIAL
INFORMATION") (i) was made by the Company after due and proper
consideration and careful enquiry and represents reasonable and fair
expectations honestly held based on facts known to the Company and the
assumptions stated in the Prospectus, and (ii) has been properly compiled
based on the assumptions
70
described therein. The assumptions and methods used in the preparation of
the Prospective Financial Information (A) are all those that the Company
believes are significant in estimating the total operating revenue and the
net income of the Company for the year ending 31 December 2004, and (B)
reflect, for the year ending 31 December 2004, the Company's reasonable
estimate of the events, contingencies and circumstances described therein;
and the Prospective Financial Information presents the Company's
reasonable estimate, as of the date hereof, of the net income of the
Company and the net income per share of the Company for the year ending 31
December 2004.
55. The section entitled "Financial Information" in the Prospectus accurately
and fully describes (A) accounting policies which the Company believes are
the most important in the portrayal of the financial condition and results
of operations of the Company and its consolidated subsidiaries and which
require management's most difficult, subjective or complex judgments
("CRITICAL ACCOUNTING POLICIES"); (B) judgments and uncertainties
affecting the application of Critical Accounting Policies; and (C)
explanation of the likelihood that materially different amounts would be
reported under different conditions or using different assumptions. The
Company's board of directors, senior management and audit committee have
reviewed and agreed with the selection, application and disclosure of
critical accounting policies and have consulted with their respective
legal advisors and independent accountants with regard to such disclosure.
The section entitled "Financial Information" in the Prospectus accurately
and fully describes (x) all material trends, demands, commitments, events,
uncertainties and risks, and the potential effects thereof, that the
Company believes would materially affect liquidity and are reasonably
likely to occur; and (y) all material off-balance sheet arrangements or
any transactions with, or any obligations to, any unconsolidated entities
that are contractually limited to activities that facilitate their
respective transfer of or access to assets, including without limited,
structured finance entities and special purpose entities, that have or are
reasonably likely to have a material current or future effect on the
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity capital expenditures or capital resources
of the Group, taken as a whole. Except as disclosed in the Prospectus,
there are no outstanding guarantees or other contingent obligations of the
Company or any of its subsidiaries that could reasonably be expected to
have a Material Adverse Effect.
56. Neither the Company nor any of its subsidiaries is engaged in any trading
activities involving commodity contracts or other trading contracts that
are not currently traded on a securities or commodities exchange and for
which the market value cannot be determined.
57. Neither the Company nor any of its subsidiaries or any of the businesses
now run by the Company or any of its subsidiaries does any business,
directly or indirectly, with any governments, entities, or persons subject
to sanctions under any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation, or executive order relating thereto,
or any person or entity in those
71
countries, or performs contracts in support of projects in or for the
benefit of those countries or those persons, or facilities any business
with those countries or persons.
58. Save as disclosed in the Prospectus, none of the Directors or any of their
associates (as defined in the Hong Kong Listing Rules) is or will be
materially interested in any agreement or arrangement with any member of
the Group which is subsisting at the Prospectus Date and which is
significant in relation to the business of the Group.
59. All the interests of each of the Directors in the securities of the
Company or any associated corporation (within the meaning of the
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong))
which will be required to be notified to the Company and the Hong Kong
Stock Exchange pursuant to Divisions 7 and 8 of Part XV of such Ordinance,
or which will be required pursuant to section 352 of such Ordinance to be
entered in the register referred to therein, or which will be required to
be notified to the Company and the Hong Kong Stock Exchange pursuant to
the Model Code for Securities Transactions by Directors of Listed Issuers
in the Hong Kong Listing Rules, in each case once the Shares are listed,
and in any assets which, in the two years preceding the Prospectus Date,
have been acquired or disposed of by, or leased to, the Company or any of
its subsidiaries or are proposed to be acquired, disposed of by, or leased
to, the Company or any of its subsidiaries, are fully and accurately
disclosed in the Prospectus.
60. Except as disclosed in the Prospectus, there are no contracts, agreements
or understandings between the Company and any person or entity that would
give rise to any claim against the Company or any Underwriter for
brokerage commissions, finder's fees or other payments in connection with
the Global Offering.
61. The Company has filed with the Director-General of Kanto Local Finance
Bureau of the Ministry of Finance of Japan (the "KLFB") a securities
registration statement with respect to the Japanese POWL and its exhibits,
and amendments to such securities registration statement pursuant to the
Securities and Exchange Law of Japan; a further amendment to such
securities registration statement in the form heretofore delivered to the
Joint Global Coordinators is proposed to be filed by the Company with the
KLFB promptly after the execution of the U.S. and International
Underwriting Agreement (such securities registration statement, exhibits,
and all such amendments, collectively, the "JAPANESE SECURITIES
REGISTRATION STATEMENT"); the registration made under the Japanese
Securities Registration Statement will become effective on the date
immediately subsequent to the date hereof; and the Japanese Securities
Registration Statement, on the date hereof and as at the date of
commencement of dealings in the Shares on the Hong Kong Stock Exchange,
(i) conforms and will conform in all material respects to the requirements
of Securities and Exchange Law of Japan and the cabinet orders and
ministerial ordinances and other rules and regulations thereunder (the
"JAPANESE RULES AND REGULATIONS"), and (ii) does not and will not contain
any untrue statement of a material fact or
72
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading.
62. The Company has prepared a preliminary prospectus with respect to the
Japanese POWL (the "JAPANESE PRELIMINARY PROSPECTUS") and intends to
prepare an amendment or amendments to the Japanese Preliminary Prospectus
which together with the Japanese Preliminary Prospectus will form a final
prospectus (the "JAPANESE FINAL PROSPECTUS"); and the Japanese Preliminary
Prospectus at the time of issue thereof conformed, and the Japanese
Prospectus at the time of issue thereof will conform, in all material
respects to the requirements of the Securities and Exchange Law of Japan
and the Japanese Rules and Regulations, and the Japanese Preliminary
Prospectus at the time of issue thereof did not, and the Japanese Final
Prospectus at the time of issue thereof will not, contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading.
63. PricewaterhouseCoopers, whose reports are filed with the KLFB as part of
the Japanese Securities Registration Statement, were independent public
accountants at the time such reports were issued and during the periods
covered by such reports as required by the Japanese Securities and
Exchange Law and the Japanese Rules and Regulations.
64. Since the respective dates as of which information is given in the
Japanese Securities Registration Statement and the Japanese Prospectus,
there has not been any Material Adverse Effect.
73
SCHEDULE 5
LIST OF SUBSIDIARIES OF THE COMPANY
PART 1 - LIST OF PRC SUBSIDIARIES
COMPANY PERCENTAGE
NAME OF PRC SUBSIDIARY OWNERSHIP (%)
---------------------- ------------------
China Netcom (Group) Company Limited 100%
74
PART 2 - LIST OF NON-PRC SUBSIDIARIES
COMPANY PERCENTAGE
NAME OF NON-PRC SUBSIDIARY OWNERSHIP (%)
-------------------------- ------------------
China Netcom Corporation International Limited 100%
Asia Netcom Corporation Limited 100%
China Netcom (USA) Operations Limited 100%
Asia Netcom Corporation (Singapore) Pte Limited 100%
Asia Netcom Asia Pacific Limited 100%
Asia Netcom Asia Pacific Commercial Limited 100%
Asia Netcom Hong Kong Limited 100%
Asia Global Crossing Finance Co., Ltd. 100%
Asia Global Ireland Limited 100%
Asia Netcom Australia Pty Ltd 100%
Asia Netcom Service (S) Pte. Ltd. 100%
Asia Netcom Holding (Thailand) Ltd 49%
Asia Netcom Korea Ltd 49%
Asia Netcom Japan Corp. 100%
Asia Netcom Tsushin Corp. 100%
Asia Netcom India Private Limited 99%
Asia Netcom USA, Inc. 100%
Asia Netcom Services Sdn. Bhd. 100%
Southeast Asia Netcom (Singapore) Pte. Ltd. 100%
Asia Netcom (Thailand) Ltd (wholly-owned by Asia Netcom
Holding (Thailand) Limited) 49%
China Netcom (Hong Kong) Operations Limited 99.9%
Asia Netcom Holdings China Ltd 100%
Saturn Global Network Services Holding Limited 100%
Asia Netcom (UK) Limited 100%
Asia Netcom Singapore Pte. Ltd. 100%
75
Netcom BVI International Limited (wholly-owned by
China Netcom (Hong Kong) Operations Limited) 99.9%
South Asia ANC Philippines Services Inc. 100%
76
SCHEDULE 6
LIST OF RESTRUCTURING DOCUMENTS AND RESTRUCTURING AGREEMENTS
1. Restructuring Agreement, dated 6 September 2004, between the Company, CNC
China and China Netcom Group
2. Letter of Undertakings, dated 5 September 2004, issued by China Netcom
Group to the Company
3. Non-Competition Agreement, dated 6 September 2004, between the Company,
China Netcom Group and CNC China
4. Trademark Licensing Agreement, dated 8 October 2004, between the Company,
CNC China and China Netcom Group
5. Support Services Agreement, dated 8 October 2004, between CNC China and
China Netcom Group
6. Interconnection Settlement Agreement, dated 8 October 2004, between CNC
China and China Netcom Group
7. Capacity Lease Agreement, dated 30 June 2004 and amendment dated 6 October
2004, between Asia Netcom and EANL
8. Capacity Purchase Agreement, dated 30 June 2004, between Asia Netcom and
EANL
9. Property Leasing Agreement, dated 8 October 2004, between CNC China and
China Netcom Group
10. Property Sub-Leasing Agreement, dated 8 October 2004, between CNC China
and China Netcom Group
11. Master Services Sharing Agreement, dated 8 October 2004, between CNC China
and China Netcom Group
12. Engineering and Information Technology Services Agreement, dated 8 October
2004, between CNC China and China Netcom Group
13. Materials Procurement Agreement, dated 8 October 2004, between CNC China
and China Netcom Group
14. Ancillary Telecommunications Services Agreement, dated 8 October 2004,
between CNC China and China Netcom Group
15. Telecommunications Facilities Leasing Agreement, dated 8 October 2004,
between CNC China and China Netcom Group
16. Management Services Agreement dated 30 June 2004, between Asia Netcom and
EANL
17. Share Purchase and Exchange Agreement, dated 11 June 2004 and amendment
dated 20 July 2004, among CNC BVI, CNC Fund and the Company
77
18. Share Transfer Agreement, dated 20 April 2004, among the Chinese Academy
of Sciences, Information and Network Center of the State Administration of
Radio, Film and Television, China Railways Telecommunications Center,
Shanghai Alliance Investment Limited and China Netcom Group
19. Asset Transfer Agreement, dated 26 April 2004, between Shandong Provincial
State-owned Assets Supervision and Administration Commission and China
Netcom Group
20. CNC BVI Share Transfer Agreement, dated 10 June 2004, between China Netcom
Group and China Netcom Holdings
21. CNC China Assets and Liabilities Transfer Agreement, dated 23 June 2004,
between China Netcom Group and CNC China
22. Asset Injection Agreement, dated 29 June 2004, among China Netcom Group,
CNC BVI, CNC China and the Company
23. Telecommunications Assets Transfer Agreement, dated 10 June 2004, between
Guangdong Telecommunications Company Limited and China Netcom Group
24. Jitong Telecommunications Assets Transfer Agreement, dated 10 June 2004,
between Jitong Network Telecommunications Company Limited and China Netcom
Group
25. Sale and Purchase Agreement, dated 30 June 2004, between Asia Netcom and
CNC Network Corporation Limited
26. Settlement and Release Agreement, dated 27 July 2004 among EANL, Asia
Netcom and NEC Corporation
27. Settlement and Release Agreement, dated 27 July 2004 among EANL, Asia
Netcom and KDDI Submarine Cable Systems Inc.
28. Deed of Acknowledge and Agreement, dated 9 July 2004, among East Asia
Netcom UK Holdings Limited, Asia Netcom Corporation (Singapore) Pte.
Limited and NEC Corporation
29. Deed of Acknowledge and Agreement, dated 12 July 2004, among Asia Netcom,
CNC Network Corporation Limited, DB Trustees (Hong Kong) Limited, KDDI
Submarine Cable Systems Inc. and NEC Corporation
30. Promissory Note, dated 30 June 2004, issued by CNC Network Corporation
Limited
31. Consent to Asia Netcom Corporation Restructuring, dated 29 June 2004,
among Asia Netcom, East Asia Netcom UK Holdings Limited, East Asia Netcom
Philippines Inc., NEC Corporation and DB Trustees (Hong Kong) Limited
32. Consent to Asia Netcom Corporation Restructuring, dated 29 June 2004,
between Asia Netcom and KDDI Submarine Cable Systems Inc.
33. Guarantee, dated 30 June between CNC BVI and Wilmington Trust (Cayman)
Limited (re the Taiwan trust)
34. Deed of Release of Guarantee, dated 30 June 2004, between Asia Netcom and
Wilmington Trust (Cayman) Limited with respect to the original Guarantee
(re Taiwan trust) replaced by Guarantee above
78
35. Deed of Indemnity, dated 7 March 2003 between CNC BVI and Asia Netcom (re
ANC's original guarantee obligations to Wilmington Trust (Cayman) Limited)
36. Facility Letter, dated 30 June 2004, between CNC BVI and Taiwan Holdings
Co.
37. Share Charge, dated 12 July 2004, among CNC Network Corporation Limited,
DB Trustees (Hong Kong) Limited, KDDI Submarine Cable Systems Inc. and NEC
Corporation
38. Share Charge between Asia Netcom Corporation (Singapore) Pte. Limited and
NEC Corporation
39. Term Loan, dated 27 July 2004 between ICBC and Asia Netcom, and related
guarantees and security documents for ongoing funding requirements
40. Second Supplemental Deed dated 27 October 2004 between ICBC and Asia
Netcom relating to the Term Loan
41. Assignment and Assumption Agreement dated 30 September 2004 between the
Company and Group Wealth Finance Limited
42. Share Purchase Agreement, dated 30 June 2004, between Asia Netcom and CNC
BVI
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SCHEDULE 7
THE CONDITIONS PRECEDENT DOCUMENTS AND
DOCUMENTS TO BE DELIVERED TO THE JOINT GLOBAL COORDINATORS
PART A - THE CONDITIONS PRECEDENT DOCUMENTS
1. LEGAL DOCUMENTS
(A) Three certified copies of the resolutions of the shareholders of the
Company referred to in the paragraph headed "Resolutions of our
shareholder" in Appendix VII to the Prospectus.
(B) Three certified copies of the resolutions referred to in paragraph F of
the recitals to this Agreement.
(C) Three signed originals of the Receiving Bankers' Agreement.
(D) Three certified copies of the Registrar's Agreement.
(E) Three certified copies of the Contingency Plan.
(F) Three certified copies of the EIPO Agreement between the Company and
Hongkong Clearing.
(G) Three certified copies of the Service Contracts between each of the
executive Directors and the Company.
2. DOCUMENTS RELATING TO THE HONG KONG PUBLIC OFFERING
(A) One printed copy of each of the Prospectus and the Application Forms, each
duly signed by the Directors or their respective duly authorised attorneys
and, if signed by their respective duly authorised attorneys, three
certified copies of the relevant power of attorney or authorisation
document.
(B) One signed original of the Verification Notes.
(C) Three signed originals of the accountants' report dated the Prospectus
Date issued by the Reporting Accountants, the text of which is contained
in Appendix I to the Prospectus.
(D) Three signed originals of the comfort letter on unaudited pro forma
financial information dated the Prospectus Date issued by the Reporting
Accountants, the text of which is contained in Appendix II of the
Prospectus.
80
(E) Three signed originals of the letter dated the Prospectus Date issued by
the Reporting Accountants in connection with the forecast for the year
ending 31 December 2004, the text of which is contained in Appendix III to
the Prospectus.
(F) Three certified copies of the profit forecast memorandum issued to the
Reporting Accountants and signed by the Directors.
(G) Three certified copies of the working capital forecast memorandum issued
to the Reporting Accountants and signed by the Directors.
(H) Three signed originals of the letter dated the Prospectus Date from the
Reporting Accountants addressed to the Company confirming, inter alia, the
indebtedness statement contained in the Prospectus and commenting on the
statement contained in the Prospectus as to the sufficiency of working
capital and on the other financial information set out in the Prospectus,
such letter to be in the form previously approved by the Joint Global
Coordinators on behalf of the Hong Kong Underwriters.
(I) Three signed originals of the letter dated the Prospectus Date from the
Company to the Joint Sponsors confirming sufficiency of the working
capital of the Company, such letter to be in the form previously approved
by the Joint Sponsors.
(J) One copy of the property valuation report dated the Prospectus Date issued
by Sallmanns (Far East) Limited, the summary text of which is contained in
Appendix IV to the Prospectus.
(K) Three signed originals of the letter, summary of values and valuation
certificate dated the Prospectus Date issued by Sallmanns (Far East)
Limited, the text of which is contained in Appendix IV to the Prospectus.
(L) A certified copy of each of the letters referred to in the paragraph
headed "Other information - Consents and qualifications of experts" in
Appendix VII to the Prospectus containing consents to the issue of the
Prospectus with the inclusion of references to the respective parties'
names, and where relevant their reports, letters and valuation
certificates in the form and context in which they are included.
(M) Three certified copies of letter from the Hong Kong Companies Registry
confirming that the documents referred to in the paragraph headed
"Documents delivered to and registered with the Registrar of Companies" in
Appendix VIII to the Prospectus have been delivered to the Registrar of
Companies in Hong Kong pursuant to section 38D of the Companies Ordinance.
(N) A certified copy of each of the material contracts referred to in the
paragraph headed "Further information about our business - Summary of
material contracts" in Appendix VII to the Prospectus (other than this
Agreement).
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(O) Three certified copies of a certificate as to the accuracy of the Chinese
translation of the Hong Kong Offering Documents and given by the relevant
translator.
(P) Three certified copies of the current Memorandum and Articles of
Association of the Company as adopted on 30 September 2004.
3. LEGAL OPINIONS
(A) Three certified copies of the legal opinion dated 9 September 2004 from
Haiwen & Partners to the China Securities Regulatory Commission.
(B) Three certified copies of the legal opinion dated 18 October 2004 from
Haiwen & Partners to the Company (and copied to the Joint Sponsors and the
Hong Kong Stock Exchange) confirming that the Restructuring is not in
violation of any relevant PRC laws and regulations and that all necessary
approvals from relevant PRC regulatory authorities for the implementation
of the Restructuring have been obtained.
(C) Three certified copies of the legal opinion dated 1 November 2004 from
Haiwen & Partners to the Company and the Joint Sponsors opining on matters
including, among others, the legal form and shareholding structure of CNC
China and whether CNC China has obtained all necessary governmental
approvals to conduct its business.
4. OTHER DOCUMENTS
(A) Three certified copies of each of the responsibility letter, statements of
interests and (unless already provided under item 2(A) above) power of
attorney, signed by each of the Directors.
(B) One copy of the Forms B's signed by each of the Directors.
(C) One copy of each of the following:
(i) Each of the approval documents referred to in paragraphs C and D of
the recitals to this Agreement; and
(ii) The certificate of incorporation and the certificate of change of
name of the Company.
PART B - DOCUMENTS TO BE DELIVERED TO THE JOINT GLOBAL COORDINATORS
Three signed originals of the Hong Kong comfort letter addressed to the
Joint Sponsors as representatives of the Hong Kong Underwriters from the
Reporting
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Accountants covering the Hong Kong Public Offering in forms and substance
satisfactory to the Joint Global Coordinators.
PART C - DOCUMENTS TO BE DELIVERED TO THE JOINT GLOBAL COORDINATORS
(A) Three signed originals of the bring-down Hong Kong comfort letter
addressed to the Joint Sponsors as representatives of the Hong Kong
Underwriters from the Reporting Accountants dated as of the date of the
Closing, in a form previously approved by the Joint Global Coordinators.
(B) Three certified copies of the legal opinion dated 4 November 2004 from
Haiwen & Partners to the Company opining on the land use rights and
building ownership rights of the land and properties of the Group and the
property leasing arrangement of the Group in China.
(C) Three signed originals of the legal opinions from each of Haiwen &
Partners and Commerce and Finance Law Offices if and as required under the
U.S. and International Underwriting Agreement.
(D) Three signed originals of the legal opinions from each of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP and Shearman & Sterling if and as required under
the U.S. and International Underwriting Agreement.
(E) Three signed originals of the Hong Kong legal opinions from each of
Linklaters and Xxxxx & if and as required under the U.S. and International
Underwriting Agreement.
(F) Three signed originals of the opinion from each of Freshfields Bruckhaus
Xxxxxxxx (with respect to Hong Kong law), Rodyk & Davidson (with respect
to Singapore law) and Xxxxxxxxx Xxxxxx Xxxxxx, LLP (with respect to U.S.
law) relating to issues with respect to the operations of the Company and
its subsidiaries in those respective jurisdiction if and as required under
the U.S. and International Underwriting Agreement.
(G) Three certified copies of each of the resolutions of the board committee
of the Company relating to the Global Offering approving, inter alia, the
basis of allotment and allotment of Shares to allottees.
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SCHEDULE 8
HONG KONG UNDERWRITERS' SET OFF ARRANGEMENTS
1. This Schedule sets out the arrangements and terms pursuant to which the
obligations of each Hong Kong Underwriter under clause 5 of this Agreement
will be reduced to the extent that it makes (or procures to be made) one
or more Valid Applications which is or are accepted (hereafter referred to
as "UNDERWRITERS' APPLICATIONS"). These arrangements mean that in no
circumstances will any Hong Kong Underwriter have any further liability as
a Hong Kong Underwriter if one or more Underwriters' Applications, duly
made by it or procured by it to be made, are validly made and accepted for
not less than the number of the Hong Kong Offer Shares noted against its
name in Schedule 3.
2. In order to qualify as Underwriters' Applications, such applications must
be made on one or more Application Forms and delivered, together with a
cheque or cheques or banker's cashier order or orders for the amounts
payable on application (including brokerage, transaction levy, investor
compensation levy and Hong Kong Stock Exchange trading fee), to the Joint
Global Coordinators by not later than 10:00 a.m. on the Acceptance Date.
Each such application must bear the stamp of the Hong Kong Underwriter or
the Hong Kong Underwriter's broker or nominee by whom or on whose behalf
the application is made or, if made by the Hong Kong Underwriter's
sub-underwriter, marked to identify the relevant Hong Kong Underwriter and
there must be clearly marked on the Application Form(s) "China Netcom
Group Corporation (Hong Kong) Limited - Underwriter's Application". These
applications will subsequently be notified and delivered by the Joint
Global Coordinators to the Receiving Bankers by 12:00 noon on the
Acceptance Date.
3. If all of the Hong Kong Offer Shares shall not have been validly both
applied and paid for in the manner referred to in this Agreement, each
Hong Kong Underwriter will, subject to the provisions of this Agreement,
be obliged to take up the proportion of the shortfall that (a) its net
underwriting participation (that is its underwriting participation
pursuant to clause 5 less the aggregate number of Hong Kong Offer Shares
for which Underwriters' Applications have been made by it or procured to
be made by it to the extent that they have been accepted and up to the
limit of its underwriting participation), bears to (b) the aggregate of
the underwriting participation of all the Hong Kong Underwriters including
itself less the aggregate number of Hong Kong Offer Shares for which
Underwriters' Applications have been made (including by itself).
4. The obligations of Hong Kong Underwriters determined pursuant to paragraph
3 above may be rounded, as determined by the Joint Global Coordinators in
their sole discretion, to avoid fractions. The determination of the Joint
Global Coordinators shall be final and conclusive.
5. No preferential consideration will be given in respect of Underwriters'
Applications.
84
SCHEDULE 9
THE CONTINGENCY PLAN
TO: Bank of China (Hong Kong) Limited
The Bank of East Asia, Limited
Industrial and Commercial Bank of China (Asia) Limited
Computershare Hong Kong Investor Services Limited
CONTINGENCY PLAN IN THE EVENT OF EXCESS DEMAND IN THE PUBLIC OFFER FOR CHINA
NETCOM GROUP CORPORATION (HONG KONG) LIMITED ("CHINA NETCOM" OR THE "COMPANY")
RE: PROPOSED ISSUE OF ORDINARY SHARES OF US$0.04 EACH IN THE COMPANY (EACH,
A "SHARE") BY WAY OF, INTER ALIA, AN OFFERING OF CERTAIN SHARES TO THE
PUBLIC FOR SUBSCRIPTION IN HONG KONG (THE "PUBLIC OFFER" AND THE SHARES
TO BE OFFERED UNDER THE PUBLIC OFFER, THE "PUBLIC OFFER SHARES")
We are writing to set out the contingency plan for dealing with the potential
higher than expected level of interest in the Public Offer. Unless otherwise
defined or where the context requires otherwise, terms used in this Contingency
Plan shall have the same meanings as that defined in the Hong Kong Underwriting
Agreement to be entered into between, inter alia, the Company, China
International Capital Corporation Limited ("CICC"), Citigroup Global Markets
Asia Limited ("CITIGROUP") and Xxxxxxx Xxxxx (Asia) L.L.C. ("XXXXXXX SACHS")
(together, the "JOINT GLOBAL COORDINATORS" or "JGCs") and the Hong Kong
Underwriters (as defined therein).
In the event that demand for the Public Offer Shares is higher than expected,
such that the number of applications on the White application forms and Yellow
application forms, (together, the "APPLICATION FORMS") received altogether
exceeds the anticipated volume of 250,000, it is proposed that the following
contingency procedures may be adopted:
The three receiving banks to the Public Offer, namely, Bank of China (Hong Kong)
Limited ("BOC"), The Bank of East Asia, Limited ("BEA") and Industrial and
Commercial Bank of China (Asia) Limited ("ICBC (ASIA)") (each a "RECEIVING BANK"
and together, the "RECEIVING BANKS") have each individually undertaken to handle
and process 120,000, 120,000 and 30,000 applications and monies, respectively.
1. IN THE EVENT WHERE THE ESTIMATED AGGREGATE NUMBER OF APPLICATIONS IS LOWER
THAN OR EQUAL TO 250,000, each Receiving Bank shall provide the JGCs, no
later than 2:30 p.m. on the closing date for applications under the Public
Offer (the "CLOSING DAY") the estimated total number of applications
received. The JGCs shall, by no later than 3:30 p.m. on the same day and
after consultation with the Company, exercise its discretion to require
any of the Receiving Banks which has received applications in excess of
their respective processing commitment (as set out above) to deliver to
the other Receiving Banks with spare capacity such number and such type of
applications in different denomination for
85
processing. The JGCs will arrange for such delivery with the joint
supervision of the Receiving Bank(s) before 6:00 p.m. on the same day. The
relevant Receiving Bank(s) receiving the re-allocated applications shall
not be obliged to process such applications up to its processing
commitment (as detailed above), but shall do so on a best effort basis.
2. IN THE EVENT WHERE THE ESTIMATED AGGREGATE NUMBER OF APPLICATIONS IS IN
EXCESS OF 250.000, based on the estimated aggregate number of applications
received under the Public Offer, the relevant parties including the
Company, the JGCs, the Receiving Banks and Computershare Hong Kong
Investor Services Limited ("COMPUTERSHARE") will determine and communicate
to each of the Receiving Banks by no later than 5:00 p.m. on the Closing
Day the number of applications to be fully processed (the "CRITICAL
AMOUNT") (such number will be equal to or less than 250,000) as part of
the resources of Computershare will be employed to handle the Lesser
Applications (as defined below). The JGCs should indicate to the Receiving
Banks the preliminary Critical Amount and Cut-off Point (as defined below)
by no later than 2:00 p.m. on the day immediately prior to the Closing
Day, provided that the Cut-off Point, once indicated, can only be revised
downwards (to applications for a lesser number of shares) but not upwards.
3. Based on the Critical Amount, the Company, the JGCs, the Receiving Banks
and Computershare will determine a "cut-off" point whereby (i)
Applications for Shares equal to or above this "cut-off" point (the
"GREATER APPLICATIONS") will be fully processed by the Receiving Banks and
Computershare, the relevant cheques presented for payment, and (ii)
Applications for Shares below this "cut-off" point (the "LESSER
APPLICATIONS") will not be fully processed by the Receiving Banks and
Computershare but will be handled in accordance with paragraphs (4) to (7)
below. The relevant cheques of the Lesser Applications will not be
presented for payment until the successful Lesser Applications are
determined (see paragraph (5) below).
3.1 Once the cut-off point is established, no change can be made to the
agreed Lesser Applications as any change will result in a
significant delay in processing.
3.2 No Application will be processed on the computer system until the
Lesser Applications are agreed upon. Process before the number is
agreed upon would mean all applications processed until that point
of time would have to be re-processed and therefore will result in a
significant delay in processing.
3.3 The Lesser Applications for each category of Shares applied for will
be organised in batches of 50 applications each by the Receiving
Banks. The batches will be forwarded to Computershare and the batch
numbers will be assigned in Computershare's office. For EIPO, a
dummy batch number will be applied to Computershare's pre-balloting
system which will represent batches of EIPO applications as per the
denomination applied to paper batches. This unique number will
represent the batch
86
number. The balloting software will have the functionality to either
ballot by batch number or application number as required by the
pre-balloting procedure. Scrutineers appointed by the Company will
witness the numbering of batches at Computershare's office and the
preparation and production of the Successful Lesser Applications
list and the Reserved Lesser Applications list.
4. Computershare will, based on a basis of allocation determined by the
Company and the JGCs, conduct a computer programmed ballot of the Lesser
Applications to determine the successful Lesser Applications (the
"SUCCESSFUL LESSER APPLICATIONS") therefrom. The application `pre-ballot'
(for both physical and EIPO) process will be based on the same methodology
as for the batch number `pre-ballot'. The process of the computer
programmed ballot of the Lesser Applications is as follows:
4.1 For each type of the Application Forms pursuant to which of the
Public Offer Shares are applied for, input the batch numbers into
the computer. For EIPO, Computershare will have to apply the dummy
numbers and add to the list of physical application batch numbers.
4.2 The computer selects a number of batches pursuant to a ballot
program.
4.3 All applications under those selected batches will be numbered by
the Receiving Banks in Computershare's office and the application
form numbers will be inputted into the computer for further
balloting.
4.4 The computer system in the next phase then selects the Successful
Lesser Applications and a number of reserved Lesser Applications
("RESERVED LESSER APPLICATIONS") pursuant to a ballot program. The
number of Reserved Lesser Applications must be agreed among the
parties prior to running of the pre-balloting programs.
5. The Successful Lesser Applications will then be passed back to the
relevant Receiving Banks for processing and cheque presentation. The
Reserved Lesser Applications will then be passed to one of the Receiving
Banks for processing and cheque presentation. The relevant cheques for
both the Successful Lesser Applications and the Reserved Lesser
Applications will be presented for payment on timing to be mutually agreed
among the parties.
For EIPO, as all these applications have been considered processed, i.e.,
the cheques are banked and all EIPO information is in the computer system,
the unsuccessful EIPO applications will later be refunded (together with
unsuccessful Greater Applications).
6. After cheque presentation, on the day immediately following the Closing
Day, the Receiving Banks will send the Application Forms of all Successful
Lesser Applications and Reserved Lesser Applications back to Computershare
for processing.
87
7. If there are any bounced cheques from the Successful Lesser Applications,
then the Reserved Lesser Applications will be extracted to replace the
bounced ones.
8. The unsuccessful Lesser Applications will not be processed further (the
relevant cheques will not be presented for payment) and will be returned
to the applicants by Computershare.
For EIPO, as EIPO applications have been considered processed, those
unsuccessful applications will be refunded by cheque, at the same time as, and
as per the unsuccessful Greater Applications. The unused Reserved Lesser
Applications will be refunded by cheques also, at the same time.
Other Considerations:
9. In relation to the Contingency Plan, as discussed above, the need at short
notice to print and deliver more prospectuses and application forms has
been accommodated for by our printers, whereby the printers has agreed on
a minimum notice period of 24 hours.
10. If the demand for the Public Offer is so overwhelming that the number of
applicants trying to lodge their application forms at any one of the
collecting branches becomes unmanageable, the JGCs and/or the Company may
inform the Hong Kong Stock Exchange and request that the period for the
Public Offer or/and the opening hours of any branches of any Receiving
Bank involved be extended and/or number of any branches of any Receiving
Bank as collecting branches be added, subject to such terms and conditions
as may be agreed with the Receiving Banks.
11. We expect each of the Receiving Banks to monitor and control the order at
their respective branches, including but not limited to the distribution
of application forms and prospectuses, collection of applications forms as
well as crowd control during the IPO offering period. If the situation
becomes uncontrollable or chaotic, then we expect the relevant Receiving
Banks to inform us to discuss any immediate action, which may include
without limitation notifying the relevant authorities by the JGCs and the
Company. Each of the Receiving Banks may at its absolute discretion liaise
with the police on crowd management issue and/or draft in additional
staff. In the event of adding additional branches or drafting in
additional staff, a standard rate to be agreed by the Company and the
individual Receiving Bank shall apply and shall on demand be payable by
the Company to the corresponding Receiving Bank.
Ms Xxxxxx Xx (Office Tel no. 000 0000 0000, Mobile Phone no. 000 0000 0000) of
Citigroup will be the contact person to consult with the JGCs to make the
relevant decisions in the case of changes or revision on the number of
distribution points if in fact the need arises and/or other urgent matters.
Please confirm your agreement to the above by countersigning and returning the
attached copy of this letter.
88
For and on behalf of
China Netcom Group Corporation (Hong Kong) Limited
______________________________________
Name:
Title:
China International Capital Corporation Limited
______________________________________
Name:
Title:
Citigroup Global Markets Asia Limited
______________________________________
Name:
Title:
Xxxxxxx Sachs (Asia) L.L.C.
______________________________________
Name:
Title:
89
Accepted by:
Bank of China (Hong Kong) Limited
______________________________________
Name:
Title:
The Bank of East Asia, Limited
______________________________________
Name:
Title:
Industrial and Commercial Bank of China (Asia) Limited
______________________________________
Name:
Title:
Computershare Hong Kong Investor Services Limited
______________________________________
Name:
Title:
90
SIGNATURE PAGE
THE COMPANY
SIGNED by )
for and on behalf of )
(CHINA NETCOM GROUP )
CORPORATION (HONG KONG) )
LIMITED) )
in the presence of: )
CHINA NETCOM GROUP
SIGNED by )
for and on behalf of )
(CHINA NETWORK )
COMMUNICATIONS )
GROUP CORPORATION) )
in the presence of: )
CNC BVI
SIGNED by )
for and on behalf of )
CHINA NETCOM GROUP )
CORPORATION (BVI) LIMITED )
in the presence of: )
91
THE JOINT GLOBAL COORDINATORS
SIGNED by )
for and on behalf of )
CHINA INTERNATIONAL )
CAPITAL CORPORATION LIMITED )
in the presence of: )
SIGNED by )
for and on behalf of )
CITIGROUP GLOBAL )
MARKETS ASIA LIMITED )
in the presence of: )
SIGNED by )
for and on behalf of )
XXXXXXX XXXXX (ASIA) L.L.C. )
in the presence of: )
92
THE JOINT SPONSORS
SIGNED by )
for and on behalf of )
CHINA INTERNATIONAL )
CAPITAL CORPORATION )
(HONG KONG) LIMITED )
in the presence of: )
SIGNED by )
for and on behalf of )
CITIGROUP GLOBAL )
MARKETS ASIA LIMITED )
in the presence of: )
SIGNED by )
for and on behalf of )
XXXXXXX SACHS (ASIA) L.L.C. )
in the presence of: )
93
THE HONG KONG UNDERWRITERS
SIGNED by )
for and on behalf of )
CHINA INTERNATIONAL )
CAPITAL CORPORATION )
(HONG KONG) LIMITED )
in the presence of: )
SIGNED by )
for and on behalf of )
CITIGROUP GLOBAL )
MARKETS ASIA LIMITED )
in the presence of: )
SIGNED by )
for and on behalf of )
XXXXXXX XXXXX (ASIA) L.L.C. )
in the presence of: )
SIGNED by )
as attorney for and on behalf of )
each of the other )
HONG KONG UNDERWRITERS )
(as defined herein) )
in the presence of: )
94
