EXHIBIT 1.1
▇▇▇▇▇▇ INTERACTIVE ENTERTAINMENT LIMITED
17,318,109 AMERICAN DEPOSITARY SHARES
REPRESENTING
34,636,218 ORDINARY SHARES
(PAR VALUE US$0.01 PER SHARE)
UNDERWRITING AGREEMENT
_____________, 2004
▇▇▇▇▇▇▇ Sachs (Asia) L.L.C.,
As representative of the several Underwriters
named in Schedule I hereto,
68th Floor, ▇▇▇▇▇▇ Kong Center,
▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇.
Ladies and Gentlemen:
▇▇▇▇▇▇ Interactive Entertainment Limited, an exempted company incorporated
in the Cayman Islands (the "Company"), proposes, subject to the terms and
conditions stated herein, to issue and sell to the Underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of 9,642,857 American
Depositary Shares representing 19,285,714 ordinary shares, par value US$0.01 per
share (the "Ordinary Shares"), of the Company and, at the election of the
Underwriters, up to o additional American Depositary Shares representing
o Ordinary Shares, and the shareholders of the Company named in Schedule II
hereto (the "Selling Shareholders") propose, subject to the terms and conditions
stated herein, to sell to the Underwriters an aggregate of 7,675,252 American
Depositary Shares representing 15,350,504 Ordinary Shares and, at the election
of the Underwriters, up to o additional American Depositary Shares
representing o Ordinary Shares. The aggregate of 17,318,109 American
Depositary Shares representing 34,636,218 Ordinary Shares to be sold by the
Company and the Selling Shareholders is herein called the "Firm ADSs", and the
aggregate of 2,597,717 American Depositary Shares representing 5,195,434
additional Ordinary Shares to be sold by the Company and the Selling
Shareholders is herein called the "Optional ADSs". The Firm ADSs and the
Optional ADSs that the Underwriters elect to purchase pursuant to Section 2
hereof are herein collectively called the "ADSs". The Ordinary Shares
represented by the Firm ADSs are hereinafter called the "Firm Shares" and the
Ordinary Shares represented by the Optional ADSs are hereinafter called the
"Optional Shares" and the Firm Shares and the Optional Shares are herein
collectively called the "Shares".
The ADSs are to be issued pursuant to a deposit agreement (the "Deposit
Agreement"), to be dated as of May o, 2004, among the Company, The Bank of
New York, as depositary (the "Depositary"), and holders from time to time of the
American Depositary Receipts (the "ADRs") issued by the Depositary and
evidencing the ADSs. Each ADS will initially represent the right to receive 2
Ordinary Shares deposited pursuant to the Deposit Agreement.
It is understood by all the parties that the Underwriters are offering ADSs
in the United States and internationally outside of the People's Republic of
China (the "PRC").
Two forms of prospectus are to be used in connection with the offering and
sale of ADSs contemplated by the foregoing, one relating to the ADSs offered or
sold within the United States (the "U.S. Prospectus") and one relating to the
ADSs offered or sold outside the United States (the "International Prospectus").
The U.S. Prospectus will be identical to the International Prospectus except for
certain substitute pages, and copies of these prospectuses have been provided to
you. References herein to any "Prospectus" or "Preliminary Prospectus" (each as
defined below), whether as amended or supplemented, shall include both the U.S.
Prospectus and the International Prospectus.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form F-1 (File No. 333-114177)
(the "Initial Registration Statement") in respect of the Shares and
the ADSs has been filed with the Securities and Exchange Commission
(the "Commission"); the Initial Registration Statement and any
pre-effective and post-effective amendments thereto, each in the form
heretofore delivered to you, and, excluding exhibits thereto, to you
for each of the other Underwriters, have been declared effective by
the Commission in such form; other than a registration statement, if
any, increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the U.S. Securities
Act of 1933, as amended (the "Act"), which became or will become
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission;
and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the
Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or, to the Company's
knowledge after due inquiry, threatened by the Commission (any
preliminary prospectus included in the Initial Registration Statement
or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Act, is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form
of final prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as
amended at the time such part of the Initial Registration Statement
became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b)
under the Act, is hereinafter called the "Prospectus");
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
2
conformity with information furnished in writing to the Company by an
Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ (Asia) L.L.C. expressly for use
therein;
(iii) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through ▇▇▇▇▇▇▇ Sachs (Asia) L.L.C. expressly for use
therein;
(iv) A registration statement on Form F-6 (File No. 333-114759)
in respect of the ADSs has been filed with the Commission; such
registration statement in the form heretofore delivered to you and,
excluding exhibits, to you for each of the other Underwriters, has
been declared effective by the Commission in such form; no other
document with respect to such registration statement has heretofore
been filed with the Commission; no stop order suspending the
effectiveness of such registration statement has been issued and no
proceeding for that purpose has been initiated or, to the Company's
knowledge after due inquiry, threatened by the Commission (the various
parts of such registration statement, including all exhibits thereto,
each as amended at the time such part of the registration statement
became effective, being hereinafter called the "ADS Registration
Statement"); and the ADS Registration Statement when it became
effective conformed, and any further amendments thereto will conform,
in all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder, and did not, as of the
applicable effective date, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(v) A registration statement on Form 8-A (File No. 000-50705) in
respect of the registration of the Shares and the ADSs under the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act"), has
been filed with the Commission; such registration statement in the
form heretofore delivered to you and, excluding exhibits, to you for
each of the other Underwriters, has been declared effective by the
Commission in such form; no other document with respect to such
registration statement has heretofore been filed with the Commission;
no stop order suspending the effectiveness of such registration
statement has been issued and, to the Company's knowledge after due
inquiry, no proceeding for that purpose has been initiated or
threatened by the Commission (the various parts of such registration
statement, including all exhibits thereto, each as amended at the time
such part of the registration statement became effective, being
hereinafter called the "Form 8-A Registration Statement"); and the
Form 8-A Registration Statement when it became effective conformed,
and any further amendments thereto will conform, in all material
respects to the requirements of the Exchange Act and the rules and
regulations
3
of the Commission thereunder, and did not and will not, as of the
applicable effective date, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vi) The Company, the Company's subsidiaries set forth on
Schedule III (the "Company Subsidiaries"), Shanghai ▇▇▇▇▇▇ Networking
Co., Ltd. ("▇▇▇▇▇▇ Networking") and ▇▇▇▇▇▇ Networking's subsidiaries
set forth on Schedule III (the "▇▇▇▇▇▇ Networking Subsidiaries" and,
together with the Company Subsidiaries and ▇▇▇▇▇▇ Networking, the
"Subsidiaries"), taken as a whole, have not sustained since the date
of the latest audited financial statements included in the Prospectus
any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock, short-term debt or long-term
debt of the Company or any of the Subsidiaries or any material adverse
change, or any development reasonably likely to involve a prospective
material adverse change, in or affecting the general affairs,
management, financial position, shareholders' equity or results of
operations of the Company and the Subsidiaries, otherwise than as set
forth or contemplated in the Prospectus; and other than the
Subsidiaries, no other subsidiary of the Company is a "Significant
Subsidiary" as defined in Regulation S-X under the Act;
(vii) Each of the Company and the Subsidiaries has good and
marketable title to all real property and good and valid title to all
personal property owned by it, in each case, free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by each of the Company and the Subsidiaries; and
any real property and buildings held under lease by each of the
Company and the Subsidiaries are held by it under valid, subsisting
and enforceable leases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by each of the Company and the Subsidiaries;
(viii) The Company has been duly incorporated and is validly
existing as a company in good standing under the laws of the Cayman
Islands, with power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in
the Prospectus, and has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except
where the failure to be so qualified in any such jurisdiction would
not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on or affecting the general affairs,
management, business, financial position, shareholders' equity,
results of operations or prospects (a "Material Adverse Effect") of
the Company and the Subsidiaries, taken as a whole; and each of the
Subsidiaries has been duly incorporated and is validly existing in
good standing under the laws of its jurisdiction of incorporation,
with
4
power and authority (corporate or other) to own, lease and operate its
properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except where the
failure to be so qualified in any such jurisdiction would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company and the Subsidiaries, taken as
a whole;
(ix) Shengqu Information Technology (Shanghai) Co., Ltd., an
indirect wholly-owned subsidiary of the Company ("Shengqu"), has the
legal right, power and authority (corporate and other) to enter into
and perform its obligations under each of the agreements described
under the caption "Related Party Transactions" in the Prospectus and
filed as Exhibits 10.2 through 10.15 to the Registration Statement
(collectively, the "Restructuring Agreements") to which it is a party
and has taken all necessary corporate action to authorize the
execution, delivery and performance of, and has authorized, executed
and delivered, each of the Restructuring Agreements to which it is a
party; and each of the Restructuring Agreements to which Shengqu is a
party constitutes a valid and legally binding obligation of Shengqu,
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(x) None of Shengqu, ▇▇▇▇▇▇ Networking or any of the ▇▇▇▇▇▇
Networking Subsidiaries owns or leases properties or conducts any
business outside of the PRC and none of ▇▇▇▇▇▇ Networking and the
▇▇▇▇▇▇ Networking Subsidiaries needs to be duly qualified as a foreign
corporation for the transaction of business under the laws of any
jurisdiction in which it is not now so qualified;
(xi) ▇▇▇▇▇▇ Networking has the legal right, power and authority
(corporate and other) to enter into and perform its obligations under
each of the Restructuring Agreements to which it is a party and has
taken all necessary corporate action to authorize the execution,
delivery and performance of, and has authorized, executed and
delivered, each of the Restructuring Agreements to which it is a
party; and each of the Restructuring Agreements to which ▇▇▇▇▇▇
Networking is a party constitutes a valid and legally binding
obligation of ▇▇▇▇▇▇ Networking, enforceable in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles;
(xii) The execution and delivery by Shengqu of, and the
performance by Shengqu of its obligations under, each of the
Restructuring Agreements to which it is a party and the consummation
by Shengqu of the transactions contemplated therein will not: (A)
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 or other agreement or
instrument to which Shengqu is a party or by which Shengqu is bound or
to which any of the properties or assets of Shengqu is bound or to
which any of the properties or assets of Shengqu is subject, except
where any such conflict, breach, violation or default would not
reasonably be expected to have a Material Adverse Effect
5
on Shengqu; (B) result in any violation of the provisions of the
articles of association or business license of Shengqu; and (C) will
not result in any violation of any laws, regulations, rules, orders,
decrees, guidelines or notices of the PRC, except where any such
violation would not reasonably be expected to have a Material Adverse
Effect on Shengqu;
(xiii) The execution and delivery by ▇▇▇▇▇▇ Networking of, and
the performance by ▇▇▇▇▇▇ Networking of its obligations under, each of
the Restructuring Agreements to which it is a party and the
consummation by ▇▇▇▇▇▇ Networking of the transactions contemplated
therein will not: (A) 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 or other
agreement or instrument to which ▇▇▇▇▇▇ Networking or any of the
▇▇▇▇▇▇ Networking Subsidiaries is a party or by which ▇▇▇▇▇▇
Networking or any of the ▇▇▇▇▇▇ Networking Subsidiaries is bound or to
which any of the properties or assets of ▇▇▇▇▇▇ Networking or any of
the ▇▇▇▇▇▇ Networking Subsidiaries is bound or to which any of the
properties or assets of ▇▇▇▇▇▇ Networking or any of the ▇▇▇▇▇▇
Networking Subsidiaries is subject, except where any such conflict,
breach, violation or default would not reasonably be expected to have
a Material Adverse Effect on ▇▇▇▇▇▇ Networking; (B) result in any
violation of the provisions of the articles of association or business
license of ▇▇▇▇▇▇ Networking or any of the ▇▇▇▇▇▇ Networking
Subsidiaries; and (C) will not result in any violation of any laws,
regulations, rules, orders, decrees, guidelines or notices of the PRC,
except where any such violation would not reasonably be expected to
have a Material Adverse Effect on ▇▇▇▇▇▇ Networking;
(xiv) Each of the Restructuring Agreements is in proper legal
form under the Laws of the PRC for the enforcement thereof against
each of Shengqu, ▇▇▇▇▇▇ Networking [and the Controlling Shareholders],
as the case may be, in the PRC without further action by any of
Shengqu, ▇▇▇▇▇▇ Networking [or the Controlling Shareholders] (as
defined herein); and to ensure the legality, validity, enforceability
or admissibility in evidence of each of the Restructuring Agreements
in the PRC, it is not necessary that any such document be filed or
recorded with any court or other authority in the PRC or that any
stamp or similar tax be paid on or in respect of any of the
Restructuring Agreements.
(xv) Except as disclosed in the Prospectus, the Company and each
of the Subsidiaries has all necessary licenses, franchises,
concessions, consents, authorizations, approvals, orders, certificates
and permits of and from, and has made all declarations and filings
with, all governmental agencies to own, lease, license and use its
properties, assets and conduct its business in the manner described in
the Prospectus, except where the failure to have any such license,
franchise, concession, consent, authorization, approval, order,
certificate or permit would not reasonably be expected to have a
Material Adverse Effect on the Company and the Subsidiaries, taken as
a whole, and such licenses, franchises, concessions, consents,
authorizations, approvals, orders, certificates or permits contain no
restrictions or conditions not described in the Prospectus, except
such restrictions or conditions as would not reasonably be expected to
have a Material Adverse Effect on the Company and the Subsidiaries,
taken as a whole. Except as described in the Prospectus, none
6
of the Company or any of the Subsidiaries has a reasonable basis to
believe that any regulatory body is considering modifying, suspending
or revoking any such licenses, consents, authorizations, approvals,
orders, certificates or permits and the Company and each of the
Subsidiaries is in compliance with the provisions of all such
licenses, consents, authorizations, approvals, orders, certificates or
permits in all material respects.
(xvi) Except as disclosed in the Prospectus, none of the Company
or any of the Subsidiaries to the knowledge of the Company after due
inquiry is (A) in breach of or in default under any laws, regulations,
rules, orders, decrees, guidelines or notices of the PRC, except where
any such breach or default would not reasonably be expected to have a
Material Adverse Effect on the Company and the Subsidiaries, taken as
a whole, (B) in breach of or in default under any approval, consent,
waiver, authorization, exemption, permission, endorsement or license
granted by any court or governmental agency or body of any stock
exchange authorities ("Governmental Agency") in the PRC, except where
any such breach or default would not reasonably be expected to have a
Material Adverse Effect on the Company and the Subsidiaries, taken as
a whole, (C) in violation of its constituent documents or (D) in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be
bound, expect where such default would not reasonably be expected to
have a Material Adverse Effect on the Company and the Subsidiaries,
taken as a whole.
(xvii) The Company has an authorized and paid-in capitalization
as set forth in the Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and all of the issued
Ordinary Shares conform in all material respects to the description of
the Ordinary Shares contained in the Prospectus; and all of the issued
shares of capital stock of each of the Subsidiaries have been duly and
validly authorized and issued, and are fully paid and non-assessable;
all of the issued shares of capital stock of the Company Subsidiaries
are owned by the Company, free and clear of all liens, encumbrances,
equities or claims; ▇▇▇▇▇▇ Networking owns the equity interest of the
▇▇▇▇▇▇ Networking Subsidiaries in the percentages set forth in the
Prospectus under the caption "Our Corporate Structure", free and clear
of all liens, encumbrances, equities or claims; the holders of
outstanding Ordinary Shares are not entitled to preemptive or other
rights to acquire the Shares or the ADSs; there are no outstanding
securities convertible into or exchangeable for, or warrants, rights
or options to purchase from the Company, or obligations of the Company
to issue, Ordinary Shares or any other class of capital stock of the
Company except as set forth in the Prospectus under the captions
"Capitalization", "Management - Common Stock Option Plan" and "Related
Party Transactions"; the Shares, when issued and delivered against
payment therefore, may be freely deposited by the Company and the
Selling Shareholders with the Depositary against issuance of ADRs
evidencing ADSs; the ADSs, when issued and delivered against payment
therefore, will be freely transferable by the Company and the Selling
Shareholders to or for the account of the several Underwriters and (to
the extent described in the Prospectus) the initial purchasers
thereof; and there are no restrictions on subsequent transfers
7
of the ADSs under the laws of the Cayman Islands, the PRC or the
United States except as described in the Prospectus under the captions
"Description of Share Capital", "Description of American Depositary
Shares" and "Shares Eligible for Future Sale";
(xviii) The Shares to be issued underlying the ADSs to be sold by
the Company to the Underwriters hereunder have been duly and validly
authorized and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued and fully paid and
non-assessable and will conform in all material respects to the
description of the Ordinary Shares contained in the Prospectus;
(xix) All of the outstanding shares of Series A Redeemable
Convertible Preferred Stock and Series A-1 Redeemable Convertible
Preferred Stock of the Company (collectively, the "Preferred Stock")
conform in all material respects to the descriptions thereof contained
in the Prospectus; all of the Ordinary Shares issuable upon the
mandatory conversion of the Preferred Stock as described in the
Prospectus have been duly authorized; and, prior to or concurrently
with the First Time of Delivery (as defined in Section 4 hereof), all
of the shares of Preferred Stock will be converted into Ordinary
Shares and all such Ordinary Shares will be duly authorized, validly
issued and fully paid and non-assessable;
(xx) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to the Registration Statement, the ADS Registration Statement
or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act;
(xxi) This Agreement has been duly authorized, executed and
delivered by the Company;
(xxii) The Deposit Agreement has been duly authorized and, when
executed and delivered by the Company and the Depositary, will
constitute a valid and legally binding agreement of the Company,
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles; upon issuance by the
Depositary of ADRs evidencing ADSs and the deposit of Shares in
respect thereof in accordance with the provisions of the Deposit
Agreement, such ADRs will be duly and validly issued and the persons
in whose names the ADRs are registered will be entitled to the rights
specified therein and in the Deposit Agreement; and the Deposit
Agreement and the ADRs conform in all material respects to the
descriptions thereof contained in the Prospectus;
(xxiii) Except as described in the Prospectus, 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 the
Cayman Islands be paid to the Depositary, and all such dividends and
other distributions will not be subject to withholding or other taxes
under the laws and regulations of the Cayman Islands and are otherwise
free and clear of any other tax, withholding or deduction in the
Cayman Islands and without the necessity of obtaining any
8
consents, approvals, authorizations, orders, registrations, clearances
or qualifications of or with any Governmental Agency having
jurisdiction over the Company or any of the Subsidiaries or any of
their respective properties (hereinafter referred to as "Governmental
Authorizations") in the Cayman Islands;
(xxiv) Except as described in the Prospectus, all dividends and
other distributions declared and payable on the shares of capital
stock of ▇▇▇▇▇▇ Holdings Limited ("▇▇▇▇▇▇ BVI") may under the current
laws and regulations of the British Virgin Islands (the "BVI") be paid
to the Company, and all such dividends and other distributions will
not be subject to withholding or other taxes under the laws and
regulations of the BVI and are otherwise free and clear of any other
tax, withholding or deduction in the BVI and without the necessity of
obtaining any Governmental Authorization in the BVI;
(xxv) Dividends declared with respect to after-tax retained
earnings on the equity interests of Shengqu may under the current laws
and regulations of the PRC (which are subject to change, possibly with
retroactive effect) be paid to ▇▇▇▇▇▇ BVI in U.S. dollars subject to
the successful completion of PRC formalities required for such
remittances and all such dividends and other distributions will not be
subject to withholding or other taxes under the laws and regulations
of the PRC and are otherwise free and clear of any other tax,
withholding or deduction in the PRC, and without the necessity of
obtaining any Governmental Authorization in the PRC;
(xxvi) The issue and sale of the Shares to be sold by the Company
hereunder and the deposit of the Shares being deposited with the
Depositary against issuance of the ADRs evidencing the ADSs and the
compliance by the Company with all of the provisions of this Agreement
and the Deposit Agreement and the consummation of the transactions
herein and therein contemplated will not (A) 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 or other agreement or instrument to which the Company
or any of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries is bound or to which any of the property or assets
of the Company or any of the Subsidiaries is subject, (B) result in
any violation of the provisions of the constituent documents of the
Company or any of the Subsidiaries or (C) result in any violation of
any statute or any order, rule or regulation of any Governmental
Agency having jurisdiction over the Company or any of the Subsidiaries
or any of their properties or assets, except for, as to (A) or (C),
such conflicts, breaches, violations or defaults as would not
reasonably be expected to have a Material Adverse Effect on the
Company and the Subsidiaries, taken as a whole; and no consent,
approval, authorization, order, registration, clearance or
qualification of or with any such Governmental Agency is required for
the issue and sale of the Shares or the ADSs, for the deposit of the
Shares being deposited with the Depositary against issuance of ADRs
evidencing the ADSs to be delivered or the consummation by the Company
of the transactions contemplated by this Agreement and the Deposit
Agreement, except (A) the registration under the Act of the Shares and
the ADSs and listing of the ADSs on the Nasdaq National Market, (B)
such Governmental Authorizations as have been duly obtained and are in
full force and effect and copies of which have been furnished to you
and (C) such
9
Governmental Authorizations as may be required under state securities
or Blue Sky laws or any laws of jurisdictions outside the Cayman
Islands and the United States in connection with the purchase and
distribution of the Shares and ADSs by or for the respective accounts
of the several Underwriters;
(xxvii) ADSs have been approved for quotation on the National
Association of Securities Dealers Automated Quotations National Market
System ("Nasdaq"), subject to notice of issuance;
(xxviii) Except as disclosed in the Prospectus, none of the
Company or any of the Subsidiaries is engaged in any trading
activities involving commodity contracts or other trading contracts
which are not currently traded on a securities or commodities exchange
and for which the market value cannot be determined;
(xxix) Except as set forth in the Prospectus, no stamp or other
issuance or transfer taxes or duties and no capital gains, income,
withholding or other taxes are payable by or on behalf of the
Underwriters to the government of the Cayman Islands, the BVI or the
PRC, or any political subdivision or taxing authority thereof or
therein, in connection with: (A) the deposit with the Depositary of
the Shares by the Company against the issuance of ADRs evidencing the
ADSs, (B) the sale and delivery by the Company of the Shares and the
ADSs to or for the respective accounts of the several Underwriters or
(C) the sale and delivery by the Underwriters of the Shares and the
ADSs to the initial purchasers thereof in the manner contemplated by
this Agreement [(provided, however, that no representation, warranty
or agreement is made hereby with respect to any commission or other
payment to the Underwriters pursuant to Section 2 of this Agreement)]
[Drafting TBD]
(xxx) Neither the Company nor any of its Subsidiaries has taken,
directly or indirectly, any action which was designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares and the ADSs;
(xxxi) The statements set forth in the Prospectus under the
captions "Description of Share Capital" and "Description of American
Depositary Shares", insofar as they purport to constitute a summary of
the terms of the Common Stock and the ADSs, respectively, and under
the captions "Taxation" and "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are true, accurate and complete in all material respects;
(xxxii) Other than as set forth in the Prospectus, there are no
legal, arbitration or governmental proceedings pending to which the
Company or any of the Subsidiaries is a party or of which any property
of the Company or any of the Subsidiaries is the subject (A) that, if
determined adversely to the Company or any of the Subsidiaries, would
individually or in the aggregate have a Material Adverse Effect on the
Company and the Subsidiaries, taken as a whole; or (B) that are
required to be described in the Registration Statement or the
Prospectus and are not so described; and, to the Company's knowledge
after due inquiry, except as described in the Prospectus, no such
proceedings are threatened or contemplated by any Governmental Agency
or threatened by others;
10
(xxxiii) The statements set forth in the Prospectus under the
caption "Business - Legal Proceedings", insofar as they purport to
summarize the facts and status of pending or threatened legal
proceedings involving the Company or the Subsidiaries, are true,
accurate and complete in all material respects;
(xxxiv) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company",
as such term is defined in the U.S. Investment Company Act of 1940, as
amended (the "Investment Company Act");
(xxxv) Each of this Agreement and the Deposit Agreement is in
proper form to be enforceable against the Company in the Cayman
Islands in accordance with its terms; to ensure the legality,
validity, enforceability or admissibility into evidence in the Cayman
Islands of this Agreement or the Deposit Agreement, it is not
necessary that this Agreement or the Deposit Agreement be filed or
recorded with any court or other authority in the Cayman Islands or
that any stamp or similar tax in the Cayman Islands be paid on or in
respect of this Agreement, the Deposit Agreement or any other
documents to be furnished hereunder;
(xxxvi) The Registration Statement, the Prospectus and the ADS
Registration Statement and the filing of the Registration Statement,
the Prospectus and the ADS Registration Statement with the Commission
have been duly authorized by and on behalf of the Company, and the
Registration Statement and the ADS Registration Statement have been
duly executed pursuant to such authorization by and on behalf of the
Company;
(xxxvii) In each case, except as described in the Prospectus,
including any adverse judgment or ruling in any proceeding described
in "Business-Legal Proceedings" therein, (A) each of the Company and
the Subsidiaries own, possess, license or have other rights to use the
patents and patent applications, copyrights, trademarks, service
marks, trade names, Internet domain names, technology, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary rights) and other intellectual property necessary or used
in any material respect to conduct their business in the manner in
which it is being conducted and in the manner in which it is
contemplated as set forth in the Prospectus (collectively, the
"Intellectual Property"); (B) none of the material copyrights owned or
licensed by the Company or any of the Subsidiaries is unenforceable or
invalid; (C) neither the Company nor any of the Subsidiaries has
received any notice of violation or conflict with (and none of the
Company or any of the Subsidiaries knows of any basis for violation or
conflict with) rights of others with respect to the Intellectual
Property that would reasonably be expected to have a Material Adverse
Effect on the Company and the Subsidiaries, taken as a whole; (D)
there are no pending or, to the Company's knowledge, threatened
actions, suits, proceedings or claims by others that allege the
Company or any of the Subsidiaries is infringing any patent, trade
secret, trade ▇▇▇▇, service ▇▇▇▇, copyright or other intellectual
property or proprietary right that would reasonably be expected to
have a Material Adverse Effect on the Company and the Subsidiaries,
taken as a whole; (E) the discoveries, inventions, products or
processes of the Company and the Subsidiaries referenced in the
Prospectus do not, to the Company's knowledge after due inquiry,
violate or conflict with
11
any intellectual property or proprietary right of any third person, or
any discovery, invention, product or process that is the subject of a
patent application filed by any third person; (F) the Company and the
Subsidiaries are not in breach of, and have complied in all material
respects with all terms of, any license or other agreement relating to
the Intellectual Property; to the extent the Intellectual Property is
sublicensed to the Company or any of the Subsidiaries by a third
party, such sublicensed rights shall continue in full force and effect
if the principal third party license terminates for any reason; and
there are no contracts or other documents related to the Intellectual
Property required to be described in or filed as an exhibit to the
Prospectus other than those described in or filed as an exhibit to the
Prospectus;
(xxxviii) The Company was not a Passive Foreign Investment
Company ("PFIC") within the meaning of Section 1297(a) of the United
States Internal Revenue Code of 1986, as amended, for its most recent
taxable year, the Company is not likely to become a PFIC for the
taxable year 2004, and the Company will not take any action that would
result in the Company becoming a PFIC in the future;
(xxxix) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(xl) PricewaterhouseCoopers, who have certified certain
consolidated financial statements of the Company, are the independent
public accountants of the Company as required by the Act and the rules
and regulations of the Commission thereunder;
(xli) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that: (A)
transactions are executed in accordance with management's general or
specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles in the United States ("US
GAAP"); (C) access to assets is permitted only in accordance with
management's general or specific authorization; (D) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate actions are taken with respect to
any differences; and (E) the Company 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;
(xlii) Other than as set forth in the Prospectus, the Company has
no material obligation to provide retirement, death or disability
benefits to any of the present or past employees of the Company or any
of the Subsidiaries, or to any other person;
(xliii) No material labor dispute, work stoppage, slow down or
other conflict with the employees of the Company or any of the
Subsidiaries exists or, to the knowledge of the Company or any of the
Subsidiaries, is threatened;
(xliv) The section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Critical
Accounting Policies" in the Prospectus truly, accurately and
completely in all material respects describes: (A) accounting policies
which the Company believes are the most
12
important in the portrayal of the Company's financial condition and
results of operations 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) the likelihood that materially different
amounts would be reported under different conditions or using
different assumptions; and the Company's board of directors and
management have reviewed and agreed with the selection, application
and disclosure of Critical Accounting Policies and have consulted with
its legal advisers and independent accountants with regard to such
disclosure;
(xlv) Since the date of the latest audited financial statements
included in the Prospectus, none of the Company or any of the
Subsidiaries has: (A) entered into or assumed any contract, (B)
incurred or agreed to incur any liability (including any contingent
liability) or other obligation, (C) acquired or disposed of or agreed
to acquire or dispose of any business or any other asset or (D)
assumed or acquired or agreed to assume or acquire any liabilities
(including contingent liabilities), that would, in any of clauses (A)
through (D) above, be material to the Company and the Subsidiaries
taken as a whole, and that are not otherwise described in the
Prospectus;
(xlvi) The section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" in the Prospectus accurately and fully describes:
(A) 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; (B) all off-balance sheet transactions, arrangements, and
obligations, including, without limitation, relationships with
unconsolidated entities that are contractually limited to narrow
activities that facilitate the transfer of or access to assets by the
Company or the Subsidiaries, such as structured finance entities and
special purpose entities (collectively, "off-balance sheet
arrangements") that are reasonably likely to have a material effect on
the liquidity of the Company or the Subsidiaries or the availability
thereof or the requirements of the Company or the Subsidiaries for
capital resources; and (C) all factors that are reasonably likely to
affect the ability of the Company or the Subsidiaries to continue
using off-balance sheet arrangements; and at least 10% of the startup
equity of each of the Company's and the Subsidiaries' special purpose
entities are funded by independent investors, and neither the Company
nor any of the Subsidiaries have any obligations with respect to such
portion of the startup equity funded by such independent investors (as
used herein in this Section 1(a)(xlix), the phrase "reasonably likely"
refers to a disclosure threshold lower than "more likely than not");
(xlvii) Except as set forth in the Prospectus, none of the
Company or any of the Subsidiaries is engaged in any material
transactions with its directors, officers, management, shareholders,
or any other affiliate, including any person who formerly held a
position as directors, officers, managers and/or shareholders, on
terms that are not available from unrelated third parties on an
arm's-length basis;
(xlviii) No holder of any of the Shares or the ADSs after the
consummation of the transactions contemplated by this Agreement or the
Deposit Agreement is or will be subject to any liability in respect of
any liability
13
of the Company by virtue only of its holding of any such Shares or
ADSs; except as set forth in the Prospectus, there are no limitations
on the rights of holders of the Shares or the ADSs to hold, vote or
transfer their securities;
(xlix) The audited consolidated financial statements (and the
notes thereto) of the Company included in the Prospectus present
fairly and accurately the consolidated financial position of the
Company as of the dates specified and the consolidated results of
operations and changes in consolidated financial position of the
Company for the periods specified, and such financial statements have
been prepared in conformity with US GAAP applied on a consistent basis
throughout the periods presented (other than as described therein);
the summary and selected consolidated financial data and the
preliminary unaudited financial results for the three months ended
March 31, 2004 included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent
with that of the audited consolidated financial statements included
therein, subject, in the case of the preliminary unaudited financial
results, to the fact that such results are subject to completion of
the Company's normal quarter-end closing procedures and review by the
Company's independent accountants in accordance with Statement of
Auditing Standards No. 100;
(l) Under the laws of the Cayman Islands, each holder of ADRs
evidencing ADSs issued pursuant to the Deposit Agreement shall be
entitled, subject to the Deposit Agreement, to seek enforcement of its
rights through the Depositary or its nominee registered as
representative of the holders of the ADRs in a direct suit, action or
proceeding against the Company;
(li) Except as set forth in the Prospectus or this Agreement, all
amounts payable by the Company in respect of the ADRs evidencing the
ADSs or the underlying Shares shall be made free and clear of and
without deduction for or on account of any taxes imposed, assessed or
levied by the Cayman Islands or any authority thereof or therein
(except such income taxes as may otherwise be imposed by the Cayman
Islands on payments hereunder to the Underwriter whose net income is
subject to tax by the Cayman Islands or withholding, if any, with
respect to any such income tax) nor are any taxes imposed in the
Cayman Islands on, or by virtue of the execution or delivery of, such
documents;
(lii) All returns, reports or filings which ought to have been
made by or in respect of the Company and the Subsidiaries for taxation
purposes as required by the law of the jurisdictions where the Company
and the Subsidiaries are incorporated, managed or engage in business
have been made and all such returns are correct and on a proper basis
in all material repsects, and are not the subject of any dispute with
the relevant revenue or other appropriate authorities except as may be
being contested in good faith and by appropriate proceedings; the
provisions included in the audited consolidated financial statements
as set out in the Prospectus included appropriate provisions required
under US GAAP for all taxation in respect of accounting periods ended
on or before the accounting reference date to which such audited
accounts relate for which the Company was then or might reasonably be
expected thereafter to become or have become liable; and none of the
Company or any of the Subsidiaries has received notice of any tax
deficiency with respect to the Company or any of the Subsidiaries;
14
(liii) The Company has provided or made available to you true,
correct, and complete copies of all documentation pertaining to any
extension of credit in the form of a personal loan made, directly or
indirectly, by the Company or any of the Subsidiaries to any director
or executive officer of the Company; and since December 31, 2003, the
Company has not, directly or indirectly, including through any of the
Subsidiaries: (A) extended credit, arranged to extend credit, or
renewed any extension of credit, in the form of a personal loan, to or
for any director or executive officer of the Company, or to or for any
family member or affiliate of any director or executive officer of the
Company; or (B) made any material modification, including any renewal
thereof, to any term of any personal loan to any director or executive
officer of the Company, or any family member or affiliate of any
director or executive officer, which loan was outstanding on December
31, 2003, in either case, that (x) is outstanding on the date hereof
and (y) constitutes a violation of any applicable law or regulation;
(liv) Any statistical and market-related data included in the
Prospectus are based on or derived from sources that the Company
believes to be reliable and accurate, and the Company has obtained the
written consent for the use of such data from such sources to the
extent required;
(lv) The application of the net proceeds from the offering of
ADSs, as described in the Prospectus, will not contravene any
provision of any current and applicable laws or the current
constitutive documents of the Company or any of the Subsidiaries or
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 currently binding upon the Company or
any of the Subsidiaries or any Governmental Authorization applicable
to any of the Company or the Subsidiaries;
(lvi) Except as may be provided herein and as disclosed in the
Registration Statement and the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any
Underwriter for a brokerage commission, finder's fee or other like
payment in connection with the issuance and sale of the ADSs;
(lvii) Under the laws of the Cayman Islands, the courts of the
Cayman Islands recognize and give effect to the choice of law
provisions set forth in Section 17 hereof and enforce judgements of
U.S. courts obtained against the Company to enforce this Agreement;
under the laws of the PRC, the choice of law provisions set forth in
Section 17 hereof will be recognized by the courts of the PRC and any
judgment obtained in a New York court arising out of or in relation to
the obligations of the Company under this Agreement will be recognized
in PRC courts subject to the applicable provisions of the Civil
Procedure Law of the PRC relating to the enforceability of foreign
judgments;
(lviii) To the Company's knowledge after due inquiry, none of the
Company or any of the Subsidiaries, nor any director, officer, agent,
employee or other person associated with or acting on behalf of the
Company or any of the Subsidiaries, has used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful
expenses relating to a political activity, made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation
15
of any provision of the Foreign Corrupt Practices Act of 1977; or made
any bribe, payoff, influence payment, kickback or other unlawful
payment or rebate;
(lix) Each of Tianqiao Chen and ▇▇▇▇▇▇ ▇▇▇▇ is a citizen of the
PRC, excluding Taiwan, The Hong Kong Special Administrative Region and
The Macau Special Administrative Region, and no application is pending
in any other jurisdiction by him or on his behalf for naturalization
or citizenship;
(lx) The descriptions of the events and transactions (the
"Restructuring") set forth in the Prospectus under the captions "Our
Corporate Structure" are true, accurate, and complete in all material
respects;
(lxi) The Restructuring does not (A) contravene any provision of
applicable law or statute, rule or regulation of any Governmental
Agency having jurisdiction over the Company or any of the Subsidiaries
or any of their properties, (B) contravene the articles of
association, business license or other constituent documents of the
Company or any of the Subsidiaries, or (C) conflict with or result in
a breach of violation of any of the terms or provisions of, or
constitute a default under, any license, indenture, mortgage, deed of
trust, loan agreement, note, lease or other agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries is bound or to which any of the
property or assets of the Company or any of the Subsidiaries is
subject; and
(lxii) All consents, approvals, authorizations, orders,
registrations and qualifications required in connection with the
Restructuring have been made or unconditionally obtained in writing,
and no such consent, approval, authorization, order, registration or
qualification has been withdrawn or is subject to any condition
precedent which has not been fulfilled or performed.
(b) Each of the Selling Shareholders severally represents and warrants as
to and in respect of itself to, and agrees with, each of the Underwriters and
the Company that:
(i) Such Selling Shareholder, if an entity, has been duly
organized and is validly existing as a company or a limited
partnership, as the case may be, in good standing in its jurisdiction
of formation;
(ii) No Governmental Authorizations are required for the deposit
of the Shares being deposited by such Selling Shareholder with the
Depositary against issuance of the ADRs evidencing the ADSs to be
delivered at each Time of Delivery (as defined in Section 4 hereof),
for the sale and delivery of the ADSs to be sold by such Selling
Shareholder hereunder and for the execution and delivery by such
Selling Shareholder of this Agreement, and for the sale and delivery
of the ADSs to be sold by such Selling Shareholder hereunder, except
for the registration of the Shares and the ADSs under the Act, and any
filings required under Rule 424 of the Act; and such Selling
Shareholder has full right, power and authority to enter into this
Agreement, and to sell, assign, transfer and deliver the ADSs to be
sold by such Selling Shareholder hereunder;
(iii) The sale of the ADSs to be sold by such Selling Shareholder
hereunder, the deposit of the Shares by such Selling Shareholder with
the Depositary against issuance of the ADRs evidencing the ADSs to be
delivered by such Selling Shareholder at each Time of Delivery and the
compliance by such Selling Shareholder with all of the provisions of
this Agreement, and the
16
Deposit Agreement and the consummation of the transactions herein and
therein contemplated will not (A) conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Selling
Shareholder is a party or by which such Selling Shareholder is bound,
or to which any of the property or assets of such Selling Shareholder
is subject, (B) result in any violation of the provisions of the
constituent documents of such Selling Shareholder if such Selling
Shareholder is an entity or (C) result in any violation of any statute
or any order, rule or regulation of any Governmental Agency having
jurisdiction over such Selling Shareholder or the property of such
Selling Shareholder, except, in the cases of (A), (B) and (C), any
such conflicts, breaches, violations or defaults as would not
reasonably be expected to materially impair the ability of such
Selling Shareholder to consummate such transactions in accordance with
such agreements;
(iv) Such Selling Shareholder has, and immediately prior to each
Time of Delivery such Selling Shareholder will have, good and valid
title to the Shares to be represented by the ADSs to be sold by such
Selling Shareholder hereunder at such Time of Delivery, free and clear
of all liens, encumbrances, equities or claims; and, upon delivery of
the ADSs representing such Shares and payment therefor pursuant
hereto, good and valid title to such ADSs, free and clear of all
liens, encumbrances, equities or claims, will pass to the several
Underwriters;
(v) Neither such Selling Shareholder nor any of its affiliates,
nor any person acting on its or their behalf has taken or will take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares or the ADSs;
(vi) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(vii) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
(viii) The ADSs to be sold by such Selling Shareholder, when
issued and delivered against payment therefor, will be freely
transferable by the Selling
17
Shareholders to or for the account of the several Underwriters and (to
the extent described in the Prospectus) the initial purchasers
thereof; and there are no restrictions on subsequent transfers of such
ADSs under the laws of the Cayman Islands, the PRC or the United
States except as described in the Prospectus under the captions
"Description of Share Capital", "Description of American Depositary
Shares" and "Shares Eligible for Future Sale";
(ix) Except as set forth in the Prospectus, no stamp or other
issuance or transfer taxes or duties and no capital gains, income,
withholding or other taxes are payable by or on behalf of the
Underwriters to the government of the Cayman Islands, the BVI or the
PRC, or any political subdivision or taxing authority thereof or
therein, in connection with (A) the deposit with the Depositary of the
Shares by such Selling Shareholder against the issuance of ADRs
evidencing the ADSs to be sold by such Selling Shareholder, (B) the
sale and delivery by such Selling Shareholder of the Shares and the
ADSs to be sold by such Selling Shareholder to or for the respective
accounts of the Underwriters or (C) the sale and delivery by the
Underwriters of the Shares and such ADSs to the initial purchasers
thereof [in the manner contemplated by this Agreement (provided,
however, that no representation, warranty or -------- -------
agreement is made hereby with respect to any commission or other
payment to the Underwriters pursuant to Section 2 of this Agreement)]
[Drafting TBD];
(x) All amounts payable by such Selling Shareholder under this
Agreement shall be made free and clear of and without deduction for or
on account of any taxes imposed, assessed or levied by the Cayman
Islands or the PRC (except such income taxes as may be imposed by the
Cayman Islands or the PRC on payments hereunder to the Underwriter
whose net income is subject to tax by the Cayman Islands or the PRC or
withholding, if any, with respect to any such income tax) or any
authority thereof or therein except as described in the Prospectus nor
are any taxes imposed in the Cayman Islands or the PRC on, or by
virtue of the execution or delivery of, such documents;
(xi) This Agreement has been duly authorized, executed and
delivered by such Selling Shareholder, and is enforceable against such
Selling Shareholder in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and to ensure the legality, validity, enforceability or
admissibility into evidence in the Cayman Islands or the PRC of this
Agreement, it is not necessary that this Agreement be filed or
recorded with any court or other authority in the Cayman Islands or
the PRC or that any stamp or similar tax in the Cayman Islands or the
PRC be paid on or in respect of this Agreement or any other documents
to be furnished hereunder;
(xii) Other than this Agreement, there are no contracts,
agreements or understandings between such Selling Shareholder and any
person that would give rise to a valid claim against such Selling
Shareholder or any Underwriter for a brokerage commission, finder's
fee or other like payment in connection with the offer and sale of the
Shares and the ADSs;
(xiii) The Shares represented by the certificates to be held in
custody for such Selling Shareholder the by Hong Kong office of Hong
Kong and Shanghai Banking Corporation Limited, as custodian for the
Depositary, are
18
subject to the interests of the Underwriters hereunder; the
arrangements made by such Selling Shareholder for such custody are to
that extent irrevocable; the obligations of such Selling Shareholder
hereunder shall not be terminated by operation of law, whether by the
death or incapacity of any individual Selling Shareholder or, in the
case of an estate or trust, by the death or incapacity of any executor
or trustee or the termination of such estate or trust, or in the case
of a partnership or corporation, by the dissolution of such
partnership or corporation, or by the occurrence of any other event;
and if any individual Selling Shareholder or any such executor or
trustee should die or become incapacitated, or if any such estate or
trust should be terminated, or if any such partnership or corporation
should be dissolved, or if any other such event should occur, before
the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of such Selling Shareholder
in accordance with the terms and conditions of this Agreement and the
relevant custodial arrangements.
(c) [Each of Tianqiao Chen, ▇▇▇▇▇▇ ▇▇▇▇ and Skyline Media Limited (the
"Controlling Shareholders") severally represents and warrants with respect to
itself to, and agrees with, each of the Underwriters and the Company that:
(i) each of the Restructuring Agreements to which such
Controlling Shareholder is a party has been duly authorized, executed
and delivered by such Controlling Shareholder, and constitutes a valid
and legally binding obligation of such Controlling Shareholder,
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(ii) Each of the Controlling Shareholders has executed and
delivered each of the Restructuring Agreements to which such
Controlling Shareholder is a party; and each of the Restructuring
Agreements to which such Controlling Shareholder is a party
constitutes a valid and legally binding obligation of such Controlling
Shareholder, enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(iii) The execution and delivery by each of the Controlling
Shareholders of, and the performance by each of the Controlling
Shareholders of his obligations under, each of the Restructuring
Agreements to which such Controlling Shareholder is a party and the
consummation by such Controlling Shareholder of the transactions
contemplated therein will not: (A) 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
or other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries is bound or to which any of the properties or assets of
the Company or any of the Subsidiaries is bound or to which any of the
properties or assets of the Company or any of the Subsidiaries is
subject; or (B) result in any violation of any laws, regulations,
rules, orders, decrees, guidelines or notices of the PRC;
(iv) Tianqiao Chen owns 70% of, and ▇▇▇▇▇▇ ▇▇▇▇ owns 30% of, the
issued shares of capital stock of ▇▇▇▇▇▇ Networking, in each case free
and
19
clear of all liens, encumbrances, equities or claims, other than as
set forth in the Prospectus; and
(v) Each of Tianqiao Chen and ▇▇▇▇▇▇ ▇▇▇▇ is a citizen of the
PRC, excluding Taiwan, The Hong Kong Special Administrative Region and
The Macau Special Administrative Region, and no application is pending
in any other jurisdiction by him or on his behalf for naturalization
or citizenship.]
2. Subject to the terms and conditions herein set forth, (a) the Company
and each Selling Shareholder agree, severally and not jointly, to sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company and each of the Selling Shareholders, at a
purchase price per ADS of US$___, the number of Firm ADSs (to be adjusted by you
so as to eliminate fractional shares) determined by multiplying the aggregate
number of Firm ADSs to be sold by the Company and each of the Selling
Shareholders as set forth opposite their respective names in Schedule II hereto
by a fraction, the numerator of which is the aggregate number of Firm ADSs to be
purchased by such Underwriter as set forth opposite the name of such Underwriter
in Schedule I hereto and the denominator of which is the aggregate number of
Firm ADSs to be purchased by all of the Underwriters from the Company and all of
the Selling Shareholders hereunder and (b) in the event and to the extent that
the Underwriters shall exercise the election to purchase Optional ADSs as
provided below, the Company and each Selling Shareholder agree, severally and
not jointly to sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company and each of the
Selling Shareholders, at the purchase price per ADS set forth in clause (a) of
this Section 2, that portion of the number of Optional ADSs as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional ADSs by a
fraction the numerator of which is the maximum number of Optional ADSs which
such Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional ADSs that all of the Underwriters are entitled to purchase
hereunder.
The Company and each Selling Shareholder, as and to the extent indicated in
Schedule II hereto, hereby grant, severally and not jointly, to the Underwriters
the right to purchase at their election up to 2,597,717 Optional ADSs, at the
purchase price per ADS set forth in the paragraph above, for the sole purpose of
covering sales of shares in excess of the number of Firm ADSs. Any such election
to purchase Optional ADSs shall be made in proportion to the maximum number of
Optional ADSs to be sold by the Company and each Selling Shareholder as set
forth in Schedule II hereto initially with respect to the Optional ADSs to be
sold by the Company and then among the Selling Shareholders in proportion to the
maximum number of Optional ADSs to be sold by each Selling Shareholder as set
forth in Schedule II hereto. Any such election to purchase Optional ADSs may be
exercised only by written notice from you to the Company, given within a period
of 30 calendar days after the date of this Agreement and setting forth the
aggregate number of Optional ADSs to be purchased and the date on which such
Optional ADSs are to be delivered, as determined by you but in no event earlier
than the First Time of Delivery (as defined in Section 4 hereof) or, unless you,
the Company and the Selling Shareholders otherwise agree in writing, earlier
than two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm ADSs, the
several Underwriters propose to offer the Firm ADSs for sale upon the terms and
conditions set forth in the Prospectus.
4. (a) The ADSs to be purchased by each Underwriter hereunder, in
definitive
20
form, and in such authorized denominations and registered in such names as
▇▇▇▇▇▇▇ ▇▇▇▇▇ (Asia) L.L.C. may request upon at least forty-eight hours' notice
to the Company and the Selling Shareholders prior to a Time of Delivery (as
defined below) (the "Notification Time"), shall be delivered by or on behalf of
the Company and the Selling Shareholders to ▇▇▇▇▇▇▇ Sachs (Asia) L.L.C., through
the facilities of The Depository Trust Company ("DTC"), for the account of such
Underwriter, against payment by or on behalf of such Underwriter of the purchase
price therefor by wire transfer of Federal (same-day) funds to the accounts
specified by the Company and the Selling Shareholders to ▇▇▇▇▇▇▇ ▇▇▇▇▇ (Asia)
L.L.C. at least forty-eight hours in advance of such Time of Delivery. The
Company and the Selling Shareholders will cause the certificates representing
the ADSs to be made available for checking at least twenty-four hours prior to
the Time of Delivery with respect thereto at the office of DTC or its designated
custodian (the "Designated Office").
The time and date of such delivery and payment shall be, with respect to
the Firm ADSs, 9:30 a.m., New York City time, on o , 2004 or such other time and
date as ▇▇▇▇▇▇▇ Sachs (Asia) L.L.C. and the Company may agree upon in writing,
and, with respect to the Optional ADSs, 9:30 a.m., New York City time, on the
date specified by ▇▇▇▇▇▇▇ ▇▇▇▇▇ (Asia) L.L.C. in the written notice given by
▇▇▇▇▇▇▇ Sachs (Asia) L.L.C. of the Underwriters' election to purchase such
Optional ADSs, or such other time and date as ▇▇▇▇▇▇▇ ▇▇▇▇▇ (Asia) L.L.C. and
the Company may agree upon in writing. Such time and date for delivery of the
Firm ADSs is herein called the "First Time of Delivery", such time and date for
delivery of the Optional ADSs, if not the First Time of Delivery, is herein
called the "Second Time of Delivery", and each such time and date for delivery
is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the ADSs and any additional documents requested by the
Underwriters pursuant to Section 7(q) hereof, will be delivered at the offices
of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
(the "Closing Location"), and the ADSs will be delivered as specified in Section
(a) above, all at such Time of Delivery. A meeting will be held at the Closing
Location at 6 p.m., Hong Kong time, on the New York Business Day (as defined
herein) next preceding such Time of Delivery, at which meeting the final drafts
of the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this Section 4,
"New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. (a) The Company agrees with each of the Underwriters:
(i) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly
after it receives notice thereof, of the time when any amendment to
the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you copies thereof; to file promptly all reports
required to be filed by the Company with the Commission pursuant to
Section 13(a), 13(c) or 15(d) of the Exchange Act subsequent to the
date of the Prospectus for so long as the delivery of a prospectus is
required in connection with the offering or sale
21
of the ADSs; to advise you, promptly after it receives notice thereof,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
Prospectus, of the suspension of the qualification of the ADSs for
offering or sale in any jurisdiction, of the initiation or threatening
of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the ADSs for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution of the ADSs; provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(iii) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with written and electronic
copies of the Prospectus in New York City in such quantities as you
may reasonably request, and, if the delivery of a prospectus is
required at any time prior to the expiration of nine months after the
time of issue of the Prospectus in connection with the offering or
sale of the ADSs and if at such time any events shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon
your request to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many written and electronic copies
as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a Prospectus in connection with
sales of any of the ADSs at any time nine months or more after the
time of issue of the Prospectus, upon your request but at the expense
of such Underwriter, to prepare and deliver to such Underwriter as
many written and electronic copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(iv) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), a consolidated earnings statement of the
Company and the Subsidiaries (which need not be audited) complying
with Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the
22
Company, Rule 158);
(v) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell, pledge, grant any
option to purchase, make any short sale or otherwise dispose of,
except as provided hereunder: (A) any ADSs or shares of Common Stock
or any securities of the Company that are substantially similar to the
ADSs or Common Stock, including but not limited to any securities that
are convertible into or exchangeable for, or that represent the right
to receive, ADSs or Common Stock or any such substantially similar
securities; and (B) any common stock of the Subsidiaries or depositary
shares or depositary receipts representing such common shares,
including but not limited to any securities that are convertible into
or exchangeable for or that represent the right to receive such common
stock or such depositary shares or depositary receipts or any such
substantially similar securities (in each case other than pursuant to
(x) employee stock option plans existing on the date of this Agreement
and which are described in the Prospectus, (y) a sale or transfer to
an affiliate, provided that such affiliate agrees to be bound, in a
writing satisfactory to the representative, to the restrictions set
forth therein, or (z) sales or transfers in the aggregate of up to
7,000,000 shares (as adjusted for stock splits, combinations, and the
like) of Common Stock to strategic partners that are engaged in the
Internet or entertainment businesses and that are non-financial
institutions, provided that such strategic partner agrees to be bound,
in a writing satisfactory to the representative, to the restrictions
set forth therein), without your prior written consent, except for
ADSs and shares of Common Stock represented thereby being sold
hereunder;
(vi) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, to cause each of the Subsidiaries not to offer, sell,
contract to sell, pledge, grant any option to purchase, make any short
sale or otherwise dispose of, except as provided hereunder and under
this Agreement: (A) any ADSs or shares of Common Stock or any
securities of the Company that are substantially similar to the ADSs
or Common Stock, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, ADSs or Common Stock or any such substantially similar
securities; and (B) any common stock of such Subsidiaries or
depositary shares or depositary receipts representing such common
stock, including but not limited to any securities that are
convertible into or exchangeable for or that represent the right to
receive such common stock or such depositary shares or depositary
receipts or any such substantially similar securities (in each case
other than pursuant to (x) a sale or transfer to an affiliate,
provided that such affiliate agrees to be bound, in a writing
satisfactory to the representative, to the restrictions set forth
therein, or (y) sales or transfers in the aggregate of up to 7,000,000
(as adjusted for stock splits, combinations, and the like) shares of
Common Stock to strategic partners that are engaged in the Internet or
entertainment businesses and that are non-financial institutions,
provided that such strategic partner agrees to be bound, in a writing
satisfactory to the representative, to the restrictions set forth
therein), without your prior written consent, except for equity
securities whose issuance and sale by any of the Subsidiaries that
will not result in a decrease of the Company's beneficial ownership
interest in that Subsidiary;
23
(vii) To furnish to its shareholders within such time period
required by the Exchange Act after the end of each fiscal year an
annual report (in English) (including a consolidated balance sheet and
consolidated statements of income, shareholders' equity and cash flows
of the Company certified by independent public accountants and
prepared in conformity with US GAAP;
(viii) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to shareholders,
and to deliver to you (A) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any securities exchange on which any class of securities
of the Company is listed; and (B) such additional information
concerning the business and financial condition of the Company as you
may from time to time reasonably request (such financial statements to
be on a consolidated basis to the extent the accounts of the Company
are consolidated in reports furnished to its shareholders generally or
to the Commission);
(ix) To use the net proceeds received by it from the sale of
the ADSs pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(x) Prior to each Time of Delivery to deposit Ordinary
Shares with the Depositary in accordance with the provisions of the
Deposit Agreement and otherwise to comply with the Deposit Agreement
so that ADRs evidencing ADSs will be executed (and, if applicable,
countersigned) and issued by the Depositary against receipt of such
Ordinary Shares and delivered to the Underwriters at such Time of
Delivery;
(xi) Not to (and to cause the Subsidiaries not to) take,
directly or indirectly, any action which is designed to or which
constitutes or which would reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company or facilitate the sale or resale of the Shares and the ADSs;
(xii) To use its best efforts to include for quotation the
shares and the ADSs on Nasdaq;
(xiii) To file with the Commission such information on
Form 20-F as may be required by Rule 463 under the Act;
(xiv) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 p.m., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the
Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act;
(xv) Upon request of any Underwriter, to furnish, or cause
to be furnished, to such Underwriter an electronic version of the
Company's trademarks, servicemarks and corporate logo for use on the
website, if any, operated by such Underwriter for the purpose of
facilitating the offering of the Shares (the "License"); provided,
however, that the License shall be used solely for the purpose
described above, is granted without any fee and may not be
24
assigned or transferred; and
(xvi) To indemnify and hold each Underwriter harmless against
any documentary, stamp or similar issuance or transfer taxes, duties
or fees and any transaction levies, commissions or brokerage charges,
including any interest and penalties, which are or may be required to
be paid in connection with the creation, allotment, issuance, offer
and distribution of the Shares and ADSs to be sold by the Company and
the execution and delivery of this Agreement and the Deposit
Agreement.
(b) Each of the Selling Shareholders agrees with each of the
Underwriters:
(i) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, such Selling Shareholder will not offer, sell, contract to
sell, pledge, grant any option to purchase, make any short sale or
otherwise dispose of, except as provided hereunder and under this
Agreement: (A) any ADSs or Ordinary Shares or any securities of the
Company that are substantially similar to the ADSs or Ordinary Shares,
including but not limited to any securities that are convertible into
or exchangeable for, or that represent the right to receive, ADSs or
Ordinary Shares or any such substantially similar securities; and (B)
any common shares of the Subsidiaries or depositary shares or
depositary receipts representing such common shares, including but not
limited to any securities that are convertible into or exchangeable
for or that represent the right to receive such common shares or such
depositary shares or depositary receipts or any such substantially
similar securities (in each case other than pursuant to a bona fide
gift by an individual to a donee or a sale or transfer by an entity to
an affiliate, provided that such donee or affiliate agrees to be bound
in writing by the restrictions set forth therein), without your prior
written consent, except for ADSs and Ordinary Shares represented
thereby being sold hereunder;
(ii) Prior to each Time of Delivery, to deposit, or cause to be
deposited on their behalf, shares of Common Stock with the Depositary
in accordance with the provisions of the Deposit Agreement and
otherwise to comply with the Deposit Agreement so that ADRs evidencing
ADSs will be executed (and, if applicable, countersigned) and issued
by the Depositary against receipt of such shares of Common Stock and
delivered to the Underwriters at such Time of Delivery;
(iii) Not to (and to cause its affiliates not to) take, directly
or indirectly, any action which is designed to or which constitutes or
which might reasonably be expected to cause or result in stabilization
or manipulation of the price of any security of the Company or
facilitate the sale or resale of the Shares or the ADSs;
(iv) To indemnify and hold each Underwriter harmless against
any documentary, stamp or similar issuance or transfer taxes, duties
or fees and any transaction levies, commissions or brokerage charges,
including any interest and penalties, which are or may be required to
be paid in connection with the creation, allotment, issuance, offer
and distribution of the Shares and ADSs to be sold by such Selling
Shareholder and the execution and delivery of this Agreement;
provided, however, that such Selling Shareholder shall not be
responsible for any such taxes, duties, fees, levies or charges that
arise as a result of the distribution of the Shares or ADSs by any
Underwriters in a manner
25
other than that as is customary in such transactions; and
(v) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Shareholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-8BEN
(or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
6. The Company agrees with the several Underwriters that (A) the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's accountants and U.S., PRC and Cayman Islands
counsel in connection with the registration of the Shares and the ADSs under the
Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement, the ADS Registration Statement, the Form
8-A Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Deposit Agreement, closing
documents (including compilations thereof) and any other documents in connection
with the offering, purchase, sale and delivery of the ADSs; (iii) all expenses
in connection with the qualification of the shares and the ADSs for offering and
sale under state securities laws as provided in Section 5 hereof, including the
fees and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any Blue Sky survey; (iv) all fees and
expenses in connection with applying to include the ADSs for quotation on the
NASDAQ; (v) all roadshow expenses including travel, accommodation and meal
expenses; (vi) the reasonable out-of-pocket expenses (including fees,
disbursements and expenses of counsel to the Underwriters) incurred by the
Underwriters in connection with the transactions contemplated by this agreement
(B) the Company will pay or cause to be paid: (i) all expenses and taxes arising
as a result of the deposit by the Company and each of the Selling Shareholders
of the Shares with the Depositary and the issuance and delivery of the ADRs
evidencing ADSs in exchange therefor by the Depositary to the Company, of the
sale and delivery of the ADSs and the Shares by the Company to or for the
account of the Underwriters and of the sale and delivery of the ADSs and the
Shares by the Underwriters to each other and to the initial purchasers thereof
in the manner contemplated under this Agreement, including, in any such case,
any the Cayman Islands income, capital gains, withholding, transfer or other tax
asserted against an Underwriter by reason of the purchase and sale of an ADS or
a Share pursuant to this Agreement; (ii) the fees and expenses (including fees
and disbursements of counsel), if any, of the Depositary and any custodian
appointed under the Deposit Agreement, other than the fees and expenses to be
paid by holders of ADRs (other than the Underwriters in connection with the
initial purchase of ADSs); (iii) the fees and expenses of the Authorized Agent
(as defined in Section 15 hereof); (iv) the cost of preparing the ADRs; (v) the
cost and charges of any transfer agent or registrar; and (vi) all other costs
and expenses incident to the performance of its obligations hereunder which are
not otherwise specifically provided for in this Section;
7. The obligations of the Underwriters hereunder, as to the ADSs to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Shareholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Shareholders shall have performed all of its and their respective obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to
26
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m., Washington,
D.C. time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or, to the
Company's knowledge, threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, United States counsel for the
Underwriters, shall have furnished to you such written opinion or opinions,
dated such Time of Delivery, with respect to the matters as you may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(c) ▇▇▇▇▇▇▇ ▇▇▇▇ & Co., PRC counsel for the Underwriters, shall have
furnished to you such written opinion or opinions, dated such Time of Delivery,
with respect to the matters covered in paragraphs (i) through (xxvi) of
subsection (e) below as well as such other related matters as you may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(d) O'Melveny & ▇▇▇▇▇ LLP, United States counsel for the Company,
the Selling Shareholders [and the Controlling Shareholders], shall have
furnished to you their written opinion, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) This Agreement has been duly executed and delivered by
each of the Company, the Selling Shareholders [and the Controlling
Shareholders];
(ii) The Deposit Agreement has been duly executed and
delivered by the Company and, assuming due authorization, execution
and delivery of the Deposit Agreement by the Depositary and that each
of the Depositary and the Company has full power, authority and legal
right to enter into and perform its obligations thereunder,
constitutes a legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except
(i) as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally (including, without limitation, fraudulent conveyance laws)
and by general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or
at law and (ii) we express no opinion regarding any indemnification
provisions contained in the Deposit Agreement.
(iii) Upon issuance by the Depositary of ADRs evidencing ADSs
against the deposit of Common Stock in respect thereof in accordance
with the terms of the Deposit Agreement, such ADRs will be duly and
validly issued and will entitle the holders thereof to the rights
specified therein and in the Deposit Agreement;
(iv) Upon payment of the purchase price for the ADSs to the
Selling Shareholders by the Underwriters and delivery to the
Depositary of the ADSs registered in the name of Cede & Co. or such
other nominee designated by the
27
Depositary, the Underwriters will have a security entitlement within
the meaning of Section 8-501 of the Uniform Commercial Code in effect
in the State of New York (the "UCC") with respect to such ADSs free of
any adverse claim under Section 8-102 of the UCC;
(v) Except for the matters described in the Prospectus, we
have not given substantive attention on behalf of the Company or any
of the Subsidiaries to, or represented the Company or any of the
Subsidiaries in connection with, any actions, suits or proceedings
pending or threatened against the Company or any of the Subsidiaries
before any court, arbitrator or governmental agency, which (i) seek to
affect the enforceability of this Agreement, (ii) seek damages in
excess of US$1,000,000 or (iii) seek an injunction or other equitable
remedy which would materially affect the business or prospects of the
Company as described in the Registration Statement and the Prospectus.
We call your attention to the fact that our engagement is limited to
specific matters as to which we are consulted by the Company or any of
the Subsidiaries;
(vi) The execution and delivery by the Company of this
Agreement, the deposit of the Shares with the Depositary against
issuance of the ADRs evidencing the ADSs, the issue and sale of the
Shares and the ADSs being delivered at such Time of Delivery, the
Company's performance of its obligations under this Agreement and the
Deposit Agreement, and the consummation of the transactions herein and
therein contemplated will not (i) violate, breach, or result in a
default under, any existing obligation of or restriction on the
Company or any of the Subsidiaries under any agreement filed as an
exhibit to the Registration Statement or (ii) breach or otherwise
violate any existing obligation of or restriction on the Company or
any of the Subsidiaries under any order, judgment or decree of any New
York or U.S. federal court or governmental authority binding on the
Company or any of the Subsidiaries. If any other agreement is governed
by the laws of a jurisdiction other than New York, we have assumed
such other agreement is governed by the laws of the State of New York.
(vii) The execution and delivery by each of the Selling
Shareholders of this Agreement, the deposit of the Shares with the
Depositary against issuance of the ADRs evidencing the ADSs, the sale
of the ADSs being delivered at such Time of Delivery, the performance
by such Selling Shareholder of its obligations under this Agreement
and the consummation of the transactions herein contemplated will not
(i) violate, breach, or result in a default under, any existing
obligation of or restriction on such Selling Shareholder under any
agreement [identified in such Selling Shareholder's certificate
attached to this opinion] or (ii) breach or otherwise violate any
existing obligation of or restriction on such Selling Shareholder
under any order, judgment or decree of any New York or U.S. federal
court or governmental authority binding on such Selling Shareholder.
If any other agreement is governed by the laws of a jurisdiction other
than New York, we have assumed such other agreement is governed by the
laws of the State of New York;
(viii) [The execution and delivery by each of the Controlling
Shareholders of this Agreement, the performance by such Controlling
Shareholder of its obligations under this Agreement and the
consummation of the transactions herein contemplated will not (i)
violate, breach, or result in a default under, any existing obligation
of or restriction on (A) the Company or any
28
of the Subsidiaries under any agreement filed as an exhibit to the
Registration Statement or (B) such Controlling Shareholder under any
agreement [identified in such Controlling Shareholder's certificate
attached to this opinion], (ii) breach or otherwise violate any
existing obligation of or restriction on the Company or any of the
Subsidiaries under any order, judgment or decree of any New York or
U.S. federal court or governmental authority binding on the Company or
any of the Subsidiaries or (iii) breach or otherwise violate any
existing obligation of or restriction on such Controlling Shareholder
under any order, judgment or decree of any New York or U.S. federal
court or governmental authority binding on such Controlling
Shareholder. If any other agreement is governed by the laws of a
jurisdiction other than New York, we have assumed such other agreement
is governed by the laws of the State of New York];
(ix) The execution and delivery by each of the Company, the
Selling Shareholders [and the Controlling Shareholders] of this
Agreement, the deposit of the Shares with the Depositary against
issuance of the ADRs evidencing the ADSs, the issue and sale of the
ADSs being delivered at such Time of Delivery, the performance by the
Company of its obligations under this Agreement and the Deposit
Agreement and by each of the Selling Shareholders [and the Controlling
Shareholders] of its obligations under this Agreement and the
consummation of the transactions herein and therein contemplated do
not violate any New York or U.S. federal statute or regulation that we
have, in the exercise of customary professional diligence, recognized
as applicable to the Company or any of the Subsidiaries or to the
transactions of the type contemplated by this Agreement and the
Deposit Agreement;
(x) No order, consent, permit or approval of any New York or
federal governmental authority is required for the execution and
delivery of this Agreement or for the issuance and sale of the ADSs,
except such as have been obtained under the Act and such as may be
required under applicable Blue Sky or state securities laws;
(xi) The statements in the Prospectus under the caption
"Description of American Depositary Shares," insofar as they summarize
provisions of the Deposit Agreement and the ADSs, and under the
captions "Shares Eligible for Future Sale", "Taxation" and
"Underwriting", insofar as they summarize provisions of the laws and
documents referred to therein, are fair and accurate in all material
respects;
(xii) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(xiii) The Registration Statement and the ADS Registration
Statement have been declared effective under the Act and, to our
knowledge, no stop order suspending the effectiveness of the
Registration Statement or the ADS Registration Statement has been
issued or threatened by the Commission;
(xiv) Under the laws of the State of New York relating to
personal jurisdiction, the Company has, pursuant to Section 14 of this
Agreement and Section 7.8 of the Deposit Agreement, validly and
irrevocably submitted to the personal jurisdiction of any state or
federal court located in the Borough of Manhattan, The City of New
York, New York (each a "New York Court") in any action arising out of
or relating to this Agreement or the Deposit Agreement or the
transactions contemplated hereby or thereby, has validly and
irrevocably
29
waived any objection to the venue of a proceeding in any such court,
and has validly and irrevocably appointed CT Corporation System as its
authorized agent for the purpose described in Section 14 hereof and
Section 7.8 of the Deposit Agreement; and service of process effected
on such agent in the manner set forth in Section 14 hereof and Section
7.8 of the Deposit Agreement will be effective to confer valid
personal jurisdiction over the Company;
(xv) Under the laws of the State of New York relating to
personal jurisdiction, each of the Selling Shareholders [and the
Controlling Shareholders] has, pursuant to Section 14 of this
Agreement, validly and irrevocably submitted to the personal
jurisdiction of any New York Court in any action arising out of or
relating to this Agreement or the transactions contemplated hereby,
has validly and irrevocably waived any objection to the venue of a
proceeding in any such court, and has validly and irrevocably
appointed CT Corporation System as its authorized agent for the
purpose described in Section 14 hereof; and service of process
effected on such agent in the manner set forth in Section 14 hereof
will be effective to confer valid personal jurisdiction over such
Selling Shareholder [or Controlling Shareholder, as the case may be];
(xvi) The Registration Statement and the Prospectus appeared
on their face to comply in all material respects with the requirements
as to form for registration statements on Form F-1 under the Act and
the related rules and regulations in effect at the date of filing,
except that we express no opinion concerning the financial statements
and other financial information contained therein; and the ADS
Registration Statement appeared on its face to comply in all material
respects with the requirements as to form for registration statements
on Form F-6 under the Act and the related rules and regulations in
effect at the date of filing;
(xvii) We have participated in conferences in connection with
the preparation of, and have reviewed, the Registration Statement, the
ADS Registration Statement and the Prospectus, but have not
independently verified the accuracy, completeness or fairness of the
statements in those documents. The limitations inherent in such
participation and review, and the knowledge available to us, are such
that we are unable to assume, and we do not assume, any responsibility
for such accuracy, completeness or fairness (except as otherwise
specifically stated in paragraph (viii) above). However, on the basis
of such participation and review, we do not believe that the
Registration Statement or the ADS Registration Statement as of their
respective effective dates contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and we do
not believe that the Prospectus as of its date or at such Time of
Delivery, contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. However, we express no opinion
or belief as to the financial statements and other financial
information contained in the Registration Statement or the Prospectus;
and
(xviii) We do not know of any amendment to the Registration
Statement required to be filed or of any contract or other document of
a character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement or
the Prospectus which is not filed or
30
described as required;
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States, and make
such other assumptions and qualifications as they consider reasonable or
customary;
(e) Grandall Legal Group (Shanghai), PRC counsel for the Company,
the Selling Shareholders [and the Controlling Shareholders], shall have
furnished to you such written opinion or opinions, dated such Time of Delivery,
in form and substance satisfactory to you, to the effect that:
(i) Shengqu has been duly organized and is validly existing
as a wholly-foreign owned enterprise with limited liability under the
laws of the PRC and its business license is in full force and effect;
Shengqu has been duly qualified as a foreign invested enterprise; all
of the equity interests of Shengqu are owned by ▇▇▇▇▇▇ BVI and, to the
best of such counsel's knowledge after due inquiry, such equity
interests are free and clear of all liens, encumbrances, equities or
claims; the articles of association of Shengqu comply with the
requirements of applicable laws of the PRC and are in full force and
effect; Shengqu has full power and authority (corporate and other) and
all consents, approvals, authorizations, orders, registrations,
clearances and qualifications of or with any court, governmental
agency or body having jurisdiction over Shengqu or any of its
properties required for the ownership or lease of property by it and
the conduct of its business and has the legal right and authority to
own, use, lease and operate its assets and to conduct its business in
the manner presently conducted and as described in the Prospectus;
(ii) ▇▇▇▇▇▇ Networking and each of its subsidiaries has been
duly organized and is validly existing as a limited liability company
under laws of the PRC and its business license is in full force and
effect; 70% and 30% of the equity interest of ▇▇▇▇▇▇ Networking are
owned by Tianqiao Chen and ▇▇▇▇▇▇ ▇▇▇▇, respectively, and to the best
of such counsel's knowledge after due inquiry, except for the Share
Pledge Agreement among Tianqiao Chen, ▇▇▇▇▇▇ ▇▇▇▇ and Shengqu dated
December 30, 2003 and the Purchase Option and Cooperation Agreement
among the Company, Shengqu, Tianqiao Chen and ▇▇▇▇▇▇ ▇▇▇▇ dated
December 30, 2003, such equity interests are free and clear of all
liens, encumbrances, equities or claims; [each of the Controlling
Shareholders is a PRC citizen]; ▇▇▇▇▇▇ Networking owns the equity
interest of its subsidiaries in the percentages set forth in the
Prospectus under the caption "Our Corporate Structure", and to the
best of such counsel's knowledge after due inquiry, such equity
interests are free and clear of all liens, encumbrances, equities or
claims; the articles of association of ▇▇▇▇▇▇ Networking comply with
the requirements of applicable PRC Laws and are in full force and
effect; all of the issued shares of capital stock of ▇▇▇▇▇▇ Networking
and each of its subsidiaries have been duly and validly authorized and
issued and are fully paid and non-assessable; ▇▇▇▇▇▇ Networking and
each of its subsidiaries has full power and authority (corporate and
other) and, except as disclosed in the Prospectus, has all consents,
approvals, authorizations, orders, registrations, clearances and
qualifications of or with any court, governmental agency or body
having jurisdiction over ▇▇▇▇▇▇ Networking or any of its subsidiaries
or any of its properties required for the ownership or lease of
property by it and the conduct of its business and has the legal right
and authority to own, use, lease
31
and operate its assets and to conduct its business in the manner
presently conducted and as described in the Prospectus;
(iii) To the knowledge of such counsel, none of Shengqu,
▇▇▇▇▇▇ Networking and ▇▇▇▇▇▇ Networking's subsidiaries own any real
property; and all real property and buildings held under lease by
Shengqu, ▇▇▇▇▇▇ Networking and ▇▇▇▇▇▇ Networking's subsidiaries are
held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by Shengqu,
▇▇▇▇▇▇ Networking and ▇▇▇▇▇▇ Networking's subsidiaries (in giving the
opinion in this clause, such counsel may state that no examination of
record titles for the purpose of such opinion has been made, and that
they are relying upon a general review of the titles of the Company
and its subsidiaries, upon opinion of local counsel and abstracts,
reports and policies of title companies rendered or issued at or
subsequent to the time of acquisition of such property by the Company
or its subsidiaries, upon opinions of counsel to the lessers of such
property and, in respect of matters of fact, upon certificates of
officers of the Company or its subsidiaries; provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions, abstracts, reports, policies
and certificates);
(iv) Shengqu has the corporate power to enter into and
perform its obligations under each of the Restructuring Agreements to
which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of, and has
authorized, executed and delivered, each of the Restructuring
Agreements to which it is a party; and each of the Restructuring
Agreements to which Shengqu is a party constitutes a valid and legally
binding obligation of Shengqu, enforceable in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles;
(v) ▇▇▇▇▇▇ Networking has the corporate power to enter into
and perform its obligations under each of the Restructuring Agreements
to which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of, and has
authorized, executed and delivered, each of the Restructuring
Agreements to which it is a party; and each of the Restructuring
Agreements to which ▇▇▇▇▇▇ Networking is a party constitutes a valid
and legally binding obligation of ▇▇▇▇▇▇ Networking, enforceable in
accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(vi) [Each of the Controlling Shareholders has executed and
delivered each of the Restructuring Agreements to which he is a party;
and each of the Restructuring Agreements to which each of the
Controlling Shareholders is a party constitutes a valid and legally
binding obligation of each of the Controlling Shareholders,
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;]
32
(vii) The execution and delivery by Shengqu of, and the
performance by Shengqu of its obligations under, each of the
Restructuring Agreements to which it is a party and the consummation
by Shengqu of the transactions contemplated therein will not: (A)
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 or other agreement or
instrument to which Shengqu is a party or by which Shengqu is bound or
to which any of the properties or assets of Shengqu is bound or to
which any of the properties or assets of Shengqu is subject; (B)
result in any violation of the provisions of the articles of
association, business license of Shengqu; or (C) result in any
violation of any laws of the PRC;
(viii) The execution and delivery by ▇▇▇▇▇▇ Networking of, and
the performance by ▇▇▇▇▇▇ Networking of its obligations under, each of
the Restructuring Agreements to which it is a party and the
consummation by ▇▇▇▇▇▇ Networking of the transactions contemplated
therein will not: (A) 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 or other
agreement or instrument to which ▇▇▇▇▇▇ Networking or any of its
subsidiaries is a party or by which ▇▇▇▇▇▇ Networking or any of its
subsidiaries is bound or to which any of the properties or assets of
▇▇▇▇▇▇ Networking or any of its subsidiaries is bound or to which any
of the properties or assets of ▇▇▇▇▇▇ Networking or any of its
subsidiaries is subject, (B) result in any violation of the provisions
of the articles of association, or business license of ▇▇▇▇▇▇
Networking; or (C) result in any violation of any laws of the PRC;
(ix) [The execution and delivery by each of the Controlling
Shareholders of, and the performance by each of the Controlling
Shareholders of his obligations under each of the Restructuring
Agreements to which each of the Controlling Shareholders is a party
and the consummation by each of the Controlling Shareholders of the
transactions contemplated therein will not: (A) 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 or other agreement or instrument to which each of the
Controlling Shareholders is a party or by which each of the
Controlling Shareholders is bound or to which any of the properties or
assets of each of the Controlling Shareholders is bound or to which
any of the properties or assets of each of the Controlling
Shareholders is subject or (B) result in any violation of any laws of
the PRC;]
(x) Each of the Restructuring Agreements is in proper legal
form under the laws of the PRC for the enforcement thereof against
each of Shengqu, ▇▇▇▇▇▇ Networking [and the Controlling Shareholders],
as the case may be, in the PRC without further action by any of
Shengqu, ▇▇▇▇▇▇ Networking [or the Controlling Shareholders]; and to
ensure the legality, validity, enforceability or admissibility in
evidence of each of the Restructuring Agreements in the PRC, it is not
necessary that any such document be filed or recorded with any court
or other authority in the PRC or that any stamp or similar tax be paid
on or in respect of any of the Restructuring Agreements (in the case
any such stamp or tax is required, the Company or its relevant
Subsidiaries have duly paid the stamp or tax as of the date hereof);
(xi) Except as disclosed in the Prospectus, each of Shengqu,
▇▇▇▇▇▇
33
Networking and ▇▇▇▇▇▇ Networking's subsidiaries has all necessary
licenses, consents, authorizations, approvals, orders, certificates
and permits of and from, and has made all declarations and filings
with, all governmental agencies to own, lease, license and use its
properties, assets and conduct its business in the manner described in
the Prospectus and such licenses, consents, authorizations, approvals,
orders, certificates or permits contain no materially burdensome
restrictions or conditions not described in the Prospectus; except as
described in the Prospectus, neither Shengqu, ▇▇▇▇▇▇ Networking nor
any of ▇▇▇▇▇▇ Networking's subsidiaries has any reason to believe that
any regulatory body is considering modifying, suspending or revoking
any such licenses, consents, authorizations, approvals, orders,
certificates or permits and each of Shengqu, ▇▇▇▇▇▇ Networking and
▇▇▇▇▇▇ Networking's subsidiaries is in compliance with the provisions
of all such licenses, consents, authorizations, approvals, orders,
certificates or permits in all material respects;
(xii) All dividends and other distributions declared and
payable upon the equity interests in Shengqu may under the current
laws and regulations of the PRC be paid to ▇▇▇▇▇▇ BVI in Renminbi that
may be converted into U.S. dollars and freely transferred out of the
PRC, and all such dividends and other distributions are not and,
except as disclosed in the Prospectus, will not be subject to
withholding or other taxes under the laws and regulations of the PRC
and, except as disclosed in the Prospectus, are otherwise free and
clear of any other tax, withholding or deduction in the PRC, and
without the necessity of obtaining any Governmental Authorization in
the PRC;
(xiii) To the best of such counsel's knowledge after due
inquiry, except for the alleged violations of the PRC copyright law
and the PRC anti-unfair competition law in connection with the pending
litigation filed by Wemade Entertainment Co., Ltd. with the Beijing
First intermediate People's Court on October 9, 2003, with respect to
which such counsel need not express any opinion, neither Shengqu,
▇▇▇▇▇▇ Networking nor any of ▇▇▇▇▇▇ Networking's subsidiaries is (A)
in breach of or in default under any laws, regulations, rules, orders,
decrees, guidelines or notices of the PRC, (B) in breach of or in
default under any approval, consent, waiver, authorization, exemption,
permission, endorsement or license granted by any Governmental Agency
in the PRC (C) in violation of their respective constituent documents,
business licenses or permits or (D) in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(xiv) The statements in the Prospectus under "Prospectus
Summary", "Risk Factors", "Our Corporate Structure", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", "Our Industry", "Business", "Regulation", "Management",
"Related Party Transactions", "Taxation" and "Enforcement of Civil
Liabilities" to the extent such statements relate to matters of PRC
law or regulation or to the provisions of documents therein described,
are true and accurate in all material respects, and nothing has been
omitted from such statements which would make the same misleading in
any material respect;
(xv) No stamp or other issuance or transfer taxes or duties
and no capital gains, income, withholding or other taxes are payable
by or on behalf of
34
the Underwriters to the government of the PRC or to any political
subdivision or taxing authority thereof or therein in connection with
(a) the deposit with the Depositary of Shares against the issuance of
ADRs evidencing the ADSs, (b) the sale and delivery by the Company and
the Selling Shareholders of the ADSs and the Shares to or for the
respective accounts of the Underwriters or (c) the sale and delivery
outside the PRC by the Underwriters of the ADSs and the Shares to the
initial purchasers thereof in the manner contemplated herein;
(xvi) The irrevocable submission of each of the Company, the
Selling Shareholders [and the Controlling Shareholders] to the
jurisdiction of any New York Court, the waiver by each of the Company,
the Selling Shareholders [and the Controlling Shareholders] of any
objection to the venue of a proceeding in a New York Court, the waiver
and agreement not to plead an inconvenient forum, the waiver of
sovereign immunity and the agreement of each of the Company, the
Selling Shareholders [and the Controlling Shareholders] that this
Agreement and Deposit Agreement shall be construed in accordance with
and governed by the laws of the State of New York are legal, valid and
binding under the laws of the PRC and will be respected by PRC courts;
service of process effected in the manner set forth in this Agreement
and the Deposit Agreement will be effective, insofar as PRC law is
concerned, to confer valid personal jurisdiction over each of the
Company, the Selling Shareholders [and the Controlling Shareholders];
and any judgment obtained in a New York Court arising out of or in
relation to the obligations of each of the Company, the Selling
Shareholders [and the Controlling Shareholders] under this Agreement
and the Deposit Agreement will be recognized in PRC courts subject to
the conditions described under the caption "Enforceability of Civil
Liabilities" in the Prospectus;
(xvii) The indemnification and contribution provisions set
forth in Section 8 hereof and Section 5.8 of the Deposit Agreement do
not contravene the public policy or laws of PRC;
(xviii) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal, arbitration or
governmental proceedings pending to which Shengqu, ▇▇▇▇▇▇ Networking
or any of ▇▇▇▇▇▇ Networking's subsidiaries is a party or of which any
property of Shengqu, ▇▇▇▇▇▇ Networking or any of ▇▇▇▇▇▇ Networking's
subsidiaries is the subject which, if determined adversely to any of
Shengqu, ▇▇▇▇▇▇ Networking or any of ▇▇▇▇▇▇ Networking's subsidiaries,
would individually or in the aggregate have a Material Adverse Effect
on Shengqu, ▇▇▇▇▇▇ Networking and ▇▇▇▇▇▇ Networking's subsidiaries
taken as a whole; and, to the best of such counsel's knowledge after
due inquiry, no such proceedings are threatened or contemplated by any
Governmental Agency or threatened by others;
(xix) The issue and sale of the Shares and the ADSs being
delivered at such Time of Delivery and the deposit of the Shares with
the Depositary against issuance of the ADRs evidencing the ADSs to be
delivered at such Time of Delivery and the compliance by the Company
with all of the provisions of this Agreement, and the Deposit
Agreement, the compliance by each of the Selling Shareholders [and the
Controlling Shareholders] with all of the provisions of this
Agreement, and the consummation of the transactions herein and therein
contemplated 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 or other
agreement or instrument known to such
35
counsel to which Shengqu, ▇▇▇▇▇▇ Networking or any of ▇▇▇▇▇▇
Networking's subsidiaries is a party or by which Shengqu, ▇▇▇▇▇▇
Networking or any of ▇▇▇▇▇▇ Networking's subsidiaries is bound or to
which any of the property or assets of Shengqu, ▇▇▇▇▇▇ Networking or
any of ▇▇▇▇▇▇ Networking's subsidiaries is subject, nor will such
action result in any violation of the provisions of the articles of
association of Shengqu, ▇▇▇▇▇▇ Networking or any of ▇▇▇▇▇▇
Networking's subsidiaries or any statute or any order, rule or
regulation known to such counsel of any Governmental Agency having
jurisdiction over Shengqu, ▇▇▇▇▇▇ Networking or any of ▇▇▇▇▇▇
Networking's subsidiaries or any of their properties;
(xx) No Governmental Authorization of or with any
Governmental Agency in the PRC is required for the issue and sale of
the Shares and the ADSs, the deposit of the Shares with the Depositary
against issuance of the ADRs evidencing the ADSs to be delivered at
such Time of Delivery or the consummation of the transactions
contemplated by this Agreement and the Deposit Agreement;
(xxi) None of Shengqu, ▇▇▇▇▇▇ Networking or ▇▇▇▇▇▇
Networking's subsidiaries is in violation of its articles of
association or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any
of its properties may be bound;
(xxii) The descriptions of the events and transactions (the
"Restructuring") set forth in the Prospectus under the captions "Our
Corporate Structure" are true and correct in all material respects;
(xxiii) The Restructuring does not (A) contravene any provision
of applicable law or statute, rule or regulation of any Governmental
Agency having jurisdiction over Shengqu, ▇▇▇▇▇▇ Networking or any of
▇▇▇▇▇▇ Networking's subsidiaries or any of their properties, (B)
contravene the articles of association, business license or other
constituent documents of Shengqu, ▇▇▇▇▇▇ Networking or any of ▇▇▇▇▇▇
Networking's subsidiaries or (C) conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any license, indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which
Shengqu, ▇▇▇▇▇▇ Networking or any of ▇▇▇▇▇▇ Networking's subsidiaries
is a party or by which Shengqu, ▇▇▇▇▇▇ Networking or any of ▇▇▇▇▇▇
Networking's subsidiaries is bound or to which any of the property or
assets of the Company or any of the Subsidiaries is subject;
(xxiv) All consents, approvals, authorizations, orders,
registrations and qualifications required under the laws of the PRC in
connection with the Restructuring have been made or unconditionally
obtained in writing, and no such consent, approval, authorization,
order, registration or qualification has been withdrawn or is subject
to any condition precedent which has not been fulfilled or performed;
and
(xxv) Although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, they have no reason to
believe that, as of its effective date, the Registration Statement or
any further amendment thereto
36
made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained
an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as
of such Time of Delivery, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules therein, as
to which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In giving such opinion, such counsel may state that (A) with respect to
all matters of United States federal and New York law they have relied upon the
opinions of United States counsel for the Company delivered pursuant to
paragraph (d) of this Section 7 and (B) with respect to all matters of Cayman
Islands and BVI law they have relied upon the opinions of Cayman Islands and BVI
counsel for the Company delivered pursuant to paragraph (f) of this Sections 7;
(f) ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, Cayman Islands and BVI counsel for
the Company, the Selling Shareholders [and the Controlling Shareholders], shall
have furnished to you their written opinion, dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a company in good standing under the laws of the Cayman
Islands with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; the holders of outstanding shares of
capital stock of the Company are not entitled to preemptive or other
rights to acquire the ADSs to be deposited by the Company and the
Selling Shareholders or to be purchased from the Company and the
Selling Shareholders under this Agreement which have not been complied
with; the Shares to be deposited by the Company and the Selling
Shareholders may be freely deposited by the Company with the
Depositary against issuance of ADRs evidencing ADSs; the ADSs and the
Shares to be sold by the Company and the Selling Shareholders are
freely transferable by the Company to or for the account of the
several Underwriters in the manner contemplated herein;
(iii) ▇▇▇▇▇▇ BVI has been duly incorporated and is validly
existing as a corporation in good standing under the laws of BVI; and
all of its issued shares of capital stock have been duly and validly
authorized and issued, are fully paid and non-assessable, and are
owned directly by the Company, free
37
and clear of all liens, encumbrances, equities or claims;
(iv) Each of the Selling Shareholders that is an entity has
been duly incorporated and is validly existing as a company in good
standing in its jurisdiction of incorporation;
(v) To the best of such counsel's knowledge, after having
conducted a search of the register of writs and other originating
processes, and other than as set forth in the Prospectus, there are no
legal, arbitration or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect on the
Company and the Subsidiaries, taken as a whole; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by any Governmental Agency or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company, the Selling Shareholders [and the
Controlling Shareholders] and constitutes a valid and legally binding
agreement of the Company, the Selling Shareholders [and the
Controlling Shareholders] enforceable in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency,
reorganization and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles;
(vii) The Deposit Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and legally
binding agreement of the Company, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles;
(viii) Each of this Agreement and the Deposit Agreement is in
proper form to be enforceable against the Company in the Cayman
Islands in accordance with its terms; to ensure the legality,
validity, enforceability or admissibility into evidence in the Cayman
Islands of this Agreement or the Deposit Agreement, it is not
necessary that this Agreement or the Deposit Agreement be filed or
recorded with any court or other authority in the Cayman Islands or
that any stamp or similar tax in the Cayman Islands be paid on or in
respect of this Agreement, the Deposit Agreement or any other
documents to be furnished hereunder or thereunder;
(ix) The issue and sale of the Shares and the ADSs being
delivered at such Time of Delivery and the deposit of the Shares with
the Depositary against issuance of the ADSs evidencing the ADRs to be
delivered at such Time of Delivery and the compliance by the Company
with all of the provisions of this Agreement, and the Deposit
Agreement and the consummation of the transactions herein and therein
contemplated 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 or other
agreement or instrument known to such counsel to which the Company or
▇▇▇▇▇▇ BVI is a party or by which the Company or ▇▇▇▇▇▇ BVI is bound
or to which any of the property or assets of the Company or ▇▇▇▇▇▇ BVI
is subject, nor will such action result in any violation of the
provisions of the constituent
38
documents of the Company or any statute or any order, rule or
regulation known to such counsel of any Governmental Agency having
jurisdiction over the Company or ▇▇▇▇▇▇ BVI or any of their respective
properties;
(x) The sale of the ADSs to be sold by the Selling
Shareholders hereunder and the compliance by the Selling Shareholders
with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or result
in a breach or violation of any terms or provisions of, or constitute
a default under, any statute, indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel to
which a Selling Shareholder is a party or by which a Selling
Shareholder is bound, or to which any of the property or assets of a
Selling Shareholder is subject, nor will such action result in any
violation of the provisions of the constituent documents of a Selling
Shareholder or any order, rule or regulation known to such counsel of
any court or governmental agency or body having jurisdiction over a
Selling Shareholder or the property of a Selling Shareholder;
(xi) No Governmental Authorization of or with any
Governmental Agency in the Cayman Islands is required for the issue
and sale of the Shares and the ADSs, the deposit of the Shares with
the Depositary against issuance of the ADSs evidencing the ADRs to be
delivered at such Time of Delivery or the consummation of the
transactions contemplated by this Agreement and the Deposit Agreement;
(xii) Immediately prior to such Time of Delivery each Selling
Shareholder had good and valid title to the ADSs to be sold at such
Time of Delivery by such Selling Shareholder under this Agreement,
free and clear of all liens, encumbrances, equities or claims, and
full right, power and authority to sell, assign, transfer and deliver
the ADSs to be sold by such Selling Shareholder hereunder and
thereunder; and, upon delivery of the ADSs representing such Shares
and payment therefore pursuant to this Agreement, good and valid title
to such ADSs, free and clear of all liens, encumbrances, equities or
claims, will pass to the several Underwriters;
(xiii) The statements set forth in the Prospectus under the
caption "Description of Share Capital", insofar as they purport to
constitute a summary of the terms of the Common Stock are accurate,
complete and fair;
(xiv) The opinions of such counsel set forth in the Prospectus
under the caption "Taxation - Cayman Islands Taxation" are confirmed
as of such Time of Delivery;
(xv) No stamp or other issuance or transfer taxes or duties
and no capital gains, income, withholding or other taxes are payable
by or on behalf of the Underwriters to the Cayman Islands or to any
political subdivision or taxing authority thereof or therein in
connection with (A) the deposit with the Depositary of Shares by the
Company and the Selling Shareholders against the issuance of ADRs
evidencing the ADSs, (B) the sale and delivery by the Company of the
ADSs and the Shares to or for the respective accounts of the
Underwriters or (C) the sale and delivery outside the Cayman Islands
by the Underwriters of the ADSs and the Shares to the initial
purchasers thereof in the manner contemplated herein;
39
(xvi) Insofar as matters of the Cayman Islands law are
concerned, the Registration Statement and the filing of the
Registration Statement with the Commission have been duly authorized
by and on behalf of the Company; and the Registration Statement has
been duly executed pursuant to such authorization by and on behalf of
the Company;
(xvii) Each of the Company's agreement, the Selling
Shareholders' agreement, [and the Controlling Shareholders' agreement]
to the choice of law provisions set forth in Section 17 hereof will be
recognized by the courts of the Cayman Islands; the Company, the
Selling Shareholders [and the Controlling Shareholders] can ▇▇▇ and be
sued in their own names under the laws of the Cayman Islands; the
irrevocable submission of the Company, the Selling Shareholders [and
the Controlling Shareholders] to the exclusive jurisdiction of a New
York Court, the waiver by the Company, the Selling Shareholders [and
the Controlling Shareholders] of any objection to the venue of a
proceeding of a New York Court and the agreement of the Company, the
Selling Shareholders [and the Controlling Shareholders] that this
Agreement shall be governed by and construed in accordance with the
laws of the State of New York are legal, valid and binding; service of
process effected in the manner set forth in Section 14 hereof will be
effective, insofar as the law of the Cayman Islands is concerned, to
confer valid personal jurisdiction over the Company, the Selling
Shareholders [and the Controlling Shareholders]; and judgment obtained
in a New York Court arising out of or in relation to the obligations
of the Company, a Selling Shareholder [or a Controlling Shareholder]
under this Agreement would be enforceable against the Company, such
Selling Shareholder [or such Controlling Shareholder], respectively,
in the courts of the Cayman Islands;
(xviii) The indemnification and contribution provisions set
forth in Section 8 hereof and Section 5.8 of the Deposit Agreement do
not contravene the public policy or laws of the Cayman Islands or the
BVI;
(xix) 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 the Cayman Islands be paid to the
Depositary and freely transferred out of the Cayman Islands, and all
such dividends and other distributions will not be subject to
withholding or other taxes under the laws and regulations of Cayman
Islands and are otherwise free and clear of any other tax, withholding
or deduction in the Cayman Islands and without the necessity of
obtaining any Governmental Authorization in the Cayman Islands;
(xx) All dividends and other distributions declared and
payable on the shares of capital stock of ▇▇▇▇▇▇ BVI may under the
current laws and regulations of the BVI be paid to the Company and
freely transferred out of the BVI, and all such dividends and other
distributions will not be subject to withholding or other taxes under
the laws and regulations of the BVI and are otherwise free and clear
of any other tax, withholding or deduction in the BVI and without the
necessity of obtaining any Governmental Authorization in the BVI;
(xxi) Neither the Company nor ▇▇▇▇▇▇ BVI is in violation of
its constituent documents or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any license, indenture, mortgage, deed of
trust, loan agreement, lease or other agreement
40
or instrument to which it is a party or by which it or any of its
properties may be bound; the Restructuring does not (A) contravene any
provision of applicable Cayman Islands law or statute, rule or
regulation of any Governmental Agency having jurisdiction over the
Company or any of the Company Subsidiaries or any of their properties,
(B) contravene the articles of association, business license or other
constituent documents of the Company or any of the Company
Subsidiaries, or (C) conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any license, indenture, mortgage, deed of trust, loan agreement, note,
lease or other agreement or instrument to which the Company or any of
the Company Subsidiaries is a party or by which the Company or any of
the Company Subsidiaries is bound or to which any of the property or
assets of the Company or any of the Company Subsidiaries is subject;
In giving such opinion, such counsel may state that (A) with respect to all
matters of United States federal and New York law they have relied upon the
opinions of United States counsel for the Company delivered pursuant to
paragraph (d) of this Section 7 and (B) with respect to all matters of PRC law
they have relied upon the opinions of PRC counsel for the Company delivered
pursuant to paragraph (e) of this Section 7. In addition, in rendering the
opinion in subparagraph (xi) such counsel may rely upon a certificate of the
Selling Shareholders in respect of matters of fact as to ownership of and liens,
encumbrances, equities or claims on, the Shares or ADSs sold by the Selling
Shareholders; provided that such counsel shall state that they believe that both
you and they are justified in relying upon such certificate;
(g) ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for the Depositary, shall
have furnished to you their written opinion, dated such Time of Delivery,
in form and substance satisfactory to you, to the effect that:
(i) The Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and constitutes a valid and binding
agreement of the Depositary enforceable against the Depositary in
accordance with its terms, except as enforcement of it may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or similar laws of general application relating to or
affecting creditors' rights and by general principles of equity;
(ii) Upon execution and delivery by the Depositary of ADRs
evidencing the ADSs against the deposit of Shares in accordance with
the provisions of the Deposit Agreement, the ADRs will be duly and
validly issued and fully paid and non-assessable and will entitle the
holders thereof to the rights specified therein and in the Deposit
Agreement; and
(iii) The ADS Registration Statement has been filed and the
Commission have informed us that the Commission declared the ADS
Registration Statement effective and, to the best of our knowledge, no
stop order suspending the effectiveness of the ADS Registration
Statement or any part thereof has been issued and no proceedings for
that purpose have been instituted or are pending or contemplated under
the Act and the ADS Registration Statement, and each amendment as of
their respective effective dates, complied as to form in all material
respects with the requirements of the Act and the rules and
regulations of the Commission thereunder;
(h) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective
41
amendment to the Registration Statement filed subsequent to the date of this
Agreement and also at each Time of Delivery, PricewaterhouseCoopers ▇▇▇▇▇ ▇▇▇▇
CPAs Co., Ltd. shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to you,
to the effect set forth in Annex I hereto (the executed copy of the letter
delivered upon the execution of this Agreement is attached as Annex I (A) hereto
and a draft of the form of letter to be delivered on the effective date of any
post-effective amendment to the Registration Statement and as of each Time of
Delivery is attached as Annex I (B) hereto);
(i) (A) None of the Company or any of the Subsidiaries shall have sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus and (B) since the respective dates as of
which information is given in the Prospectus there shall not have been any
change in the capital stock, short-term debt or long-term debt of the Company or
any of the Subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company and the
Subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (A) or (B), is in the
judgment of the representative so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares and the ADSs being delivered at such Time of Delivery on the terms
and in the manner contemplated in the Prospectus;
(j) Certificates in negotiable form representing all of the Shares to be
sold by such Selling Shareholder hereunder will be placed in custody with the
Hong Kong office of Hong Kong and Shanghai Banking Corporation Limited, as
custodian for the Depositary; and;
(k) On or after the date hereof there shall not have occurred any of the
following: (A) a suspension or material limitation in trading in securities
generally on the Nasdaq National Market, the New York Stock Exchange or the
London Stock Exchange, (B) a suspension or material limitation in trading in the
Company's securities on the Nasdaq National Market, (C) a general moratorium on
commercial banking activities in New York, London, the PRC or the Cayman Islands
declared by the relevant authorities, or a material disruption in commercial
banking or securities settlement or clearance services in the United States, the
United Kingdom, the PRC or the Cayman Islands, (D) a change or development
involving a prospective change in taxation affecting the Company, any of the
Subsidiaries or the Shares or the ADSs or the transfer thereof, (E) the outbreak
or escalation of hostilities involving the United States, the United Kingdom the
PRC or the Cayman Islands or the declaration by the United States, the United
Kingdom, the PRC or the Cayman Islands of a national emergency or war or (F) the
occurrence of any other calamity or crisis or any change in financial, political
or economic conditions or currency exchange rates or controls in the United
States, the United Kingdom, the PRC, the Cayman Islands or elsewhere, if the
effect of any such event specified in clause (E) or (F) in the judgment of the
representative makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares and the ADSs being delivered at such Time
of Delivery on the terms and in the manner contemplated in the Prospectus;
(l) The Shares and the ADSs to be sold by the Company and the Selling
Shareholders at such Time of Delivery shall have been duly included for
quotation on Nasdaq National Market;
(m) The Depositary shall have furnished or caused to be furnished to you at
42
such Time of Delivery certificates satisfactory to you evidencing the deposit
with it of the Shares being so deposited against issuance of ADRs evidencing the
ADSs to be delivered by the Company and the Selling Shareholders at such Time of
Delivery, and the execution, countersignature (if applicable), issuance and
delivery of ADRs evidencing such ADSs pursuant to the Deposit Agreement;
(n) Each party set forth in Annex II attached hereto shall have entered
into an agreement (each a "Lock-Up Agreement") whereby during the period
beginning from the date hereof and continuing to and including the date 180 days
after the date of the Prospectus, such party shall not, except as provided
hereunder offer, sell, contract to sell, pledge, grant any option to purchase,
make any short sale or otherwise dispose of: (A) any ADSs or shares of Common
Stock or any securities of the Company that are substantially similar to the
ADSs or Common Stock, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to receive,
ADSs or Common Stock or any such substantially similar securities; and (B) any
common shares of the Subsidiaries or depositary shares or depositary receipts
representing such common shares, including but not limited to any securities
that are convertible into or exchangeable for or that represent the right to
receive such common shares or such depositary shares or depositary receipts or
any such substantially similar securities (in each case other than pursuant to a
bona fide gift by an individual to a donee or a sale or transfer by an entity to
an affiliate, provided that such donee or affiliate agrees to be bound in
writing by the restrictions set forth therein), without your prior written
consent, except for ADSs and shares of Common Stock represented thereby being
sold hereunder (a draft of such Lock-Up Agreement is attached as Annex III
hereto);
(o) The Company shall have complied with the provisions of Section
5(a)(iii) hereof with respect to the furnishing of Prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(p) The Company and the Selling Shareholders shall have furnished or caused
to be furnished to you at such Time of Delivery certificates of officers of the
Company and of the Selling Shareholders, respectively, satisfactory to you as to
the accuracy of the representations and warranties of the Company and the
Selling Shareholders, respectively, herein at and as of such Time of Delivery,
as to the performance by the Company and the Selling Shareholders of all of
their respective obligations hereunder to be performed at or prior to such Time
of Delivery, and as to such other matters as you may reasonably request, and the
Company shall have furnished or caused to be furnished certificates as to the
matters set forth in subsections (a) and (i) of this Section, and as to such
other matters as you may reasonably request; and
(q) All of the shares of Preferred Stock have been converted into Ordinary
Shares in accordance with the terms of the Preferred Stock.
8. (a) The Company, [each of the Controlling Shareholders] and each of the
Selling Shareholders, jointly and severally, will indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the ADS Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
43
action or claim as such expenses are incurred; provided, however, that the
Company, [the Controlling Shareholders] and the Selling Shareholders shall not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement, the ADS Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇
(Asia) L.L.C. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company, [each of
the Controlling Shareholders] and each Selling Shareholder against any losses,
claims, damages or liabilities to which the Company, [such Controlling
Shareholder] or such Selling Shareholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the ADS Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement, the ADS Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through ▇▇▇▇▇▇▇ Sachs (Asia) L.L.C. expressly for use therein; and will
reimburse the Company, [each Controlling Shareholder] and each Selling
Shareholder for any legal or other expenses reasonably incurred by the Company,
[such Controlling Shareholder] or such Selling Shareholder in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the relevant indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim against such indemnified party in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of such indemnified party from all liability arising out of such action
or claim and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party
44
from whom such consent is required hereunder but has not been obtained.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company, [the Controlling Shareholders] and the Selling Shareholders on
the one hand and the Underwriters on the other from the offering of the ADSs.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company, [the Controlling Shareholders] and the
Selling Shareholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company, [the Controlling Shareholders] and the Selling Shareholders on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the ADSs purchased
under this Agreement (before deducting expenses) received by the Company, [the
Controlling Shareholders] and the Selling Shareholders bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the ADSs purchased under this Agreement, in each case as set forth in the
table on the cover page of the U.S. Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, [the Controlling
Shareholders] or the Selling Shareholders on the one hand or the Underwriters on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, each
of [the Controlling Shareholders], each of the Selling Shareholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the ADSs underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
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 (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company, [the Controlling Shareholders] and the
Selling Shareholders under this Section 8 shall be in addition to any liability
which the Company and the respective [Controlling Shareholders] and Selling
Shareholders may otherwise have and shall extend, upon the same terms and
conditions, to the respective affiliates of each
45
Underwriter and to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his or her
consent, is named in the Registration Statement as about to become a director of
the Company) and any Selling Shareholder and to each person, if any, who
controls the Company or any Selling Shareholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
ADSs which it has agreed to purchase hereunder at a Time of Delivery, you may in
your discretion arrange for you or another party or other parties to purchase
such ADSs on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such ADSs,
then the Company and the Selling Shareholders shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such ADSs on such terms. In the event
that, within the respective prescribed periods, you notify the Company and the
Selling Shareholders that you have so arranged for the purchase of such ADSs, or
the Company and the Selling Shareholders notify you that they have so arranged
for the purchase of such ADSs, you or the Company and the Selling Shareholders
shall have the right to postpone such Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
ADSs.
(b) If, after giving effect to any arrangements for the purchase of the
ADSs of a defaulting Underwriter or Underwriters by you and the Company and the
Selling Shareholders as provided in subsection (a) above, the aggregate number
of such ADSs which remains unpurchased does not exceed one-eleventh of the
aggregate number of all of the ADSs to be purchased at such Time of Delivery,
then the Company and the Selling Shareholders shall have the right to require
each non-defaulting Underwriter to purchase the number of ADSs which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of ADSs which such Underwriter agreed to purchase
hereunder) of the ADSs of such defaulting Underwriter or Underwriters for which
such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
ADSs of a defaulting Underwriter or Underwriters by you or the Company and the
Selling Shareholders as provided in subsection (a) above, the aggregate number
of such ADSs which remains unpurchased exceeds one-eleventh of the aggregate
number of all of the ADSs to be purchased at such Time of Delivery, or if the
Company and the Selling Shareholders shall not exercise the right described in
subsection (b) above to require non-defaulting Underwriters to purchase ADSs of
a defaulting Underwriter or Underwriters, then this Agreement (or, with respect
to the Second Time of Delivery, the obligations of the Underwriters to purchase,
and of the Company and the Selling Shareholders to sell, the Optional ADSs)
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or the Selling Shareholders, except for the expenses
to be borne by the Company and the Selling Shareholders and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting
46
Underwriter from liability for its default.
10. The respective indemnities and contribution provisions in Section 9,
and the agreements representations, warranties and other statements of the
Company, the Selling Shareholders and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any of the Selling Shareholders, or any officer or director or controlling
person of the Company, or any controlling person of any Selling Shareholder, and
shall survive delivery of and payment for the ADSs.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Shareholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any ADSs are not delivered by or on behalf of the
Company and the Selling Shareholders as provided herein, the Company and each of
the Selling Shareholders pro rata (based on the number of ADSs to be sold by the
Company and such Selling Shareholder hereunder) will reimburse the Underwriters
through you for all out-of-pocket expenses approved in writing by you, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the ADSs not so
delivered, but the Company and the Selling Shareholders shall then be under no
further liability to any Underwriter in respect of the ADSs not so delivered
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representative c/o Goldman ▇▇▇▇▇ (Asia)
L.L.C., ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
facsimile number: (▇▇▇) ▇▇▇▇ ▇▇▇▇, attention: Special Execution Group; if to any
Selling Shareholder shall be delivered or sent by mail, telex or facsimile
transmission to such Selling Shareholder and counsel for such Selling
Shareholder at its and their addresses set forth in Schedule II hereto; and if
to the Company shall be delivered or sent by mail, telex or facsimile
transmission to ▇▇.▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ China, Attention:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇; provided, however, that any notice to an Underwriter pursuant
to Section 8 (c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth on Schedule I hereto.
Any such statements, requests, notices or agreements shall take effect upon
receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Shareholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Shareholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the ADSs from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Each of the parties hereto irrevocably (A) agrees that any legal suit,
action or proceeding against the Company or the Selling Shareholder brought by
any Underwriter or by any person who controls any Underwriter arising out of or
based upon this Agreement or the transactions contemplated hereby may be
instituted in any New York Court, (B) waives, to the
47
fullest extent it may effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such proceeding and (C) submits to
the exclusive jurisdiction of such courts in any such suit, action or
proceeding. Each of the Company and the Selling Shareholders has appointed CT
Corporation System, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, as its authorized
agent (the "Authorized Agent") upon whom process may be served in any such
action arising out of or based on this Agreement or the transactions
contemplated hereby which may be instituted in any New York Court by any
Underwriter or by any person who controls any Underwriter, expressly consents to
the jurisdiction of any such court in respect of any such action, and waives any
other requirements of or objections to personal jurisdiction with respect
thereto. Such appointment shall be irrevocable. Each of the Company and the
Selling Shareholders represents and warrants that the Authorized Agent has
agreed to act as such agent for service of process and agrees to take any and
all action, including the filing of any and all documents and instruments, that
may be necessary to continue such appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent and written notice of
such service to the Company shall be deemed, in every respect, effective service
of process upon the Company and the Selling Shareholders as the case may be.
15. In respect of any judgment or order given or made for any amount due
hereunder that is expressed and paid in a currency (the "judgment currency")
other than United States dollars, the Company and the Selling Shareholders, as
the case may be, will indemnify each Underwriter against any loss incurred by
such Underwriter as a result of any variation as between (A) the rate of
exchange at which the United States dollar amount is converted into the judgment
currency for the purpose of such judgment or order and (B) the rate of exchange
at which an Underwriter is able to purchase United States dollars with the
amount of the judgment currency actually received by such Underwriter. The
foregoing indemnity shall constitute a separate and independent obligation of
the Company and the Selling Shareholders and shall continue in full force and
effect notwithstanding any such judgment or order as aforesaid. The term "rate
of exchange" shall include any premiums and costs of exchange payable in
connection with the purchase of or conversion into United States dollars.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
18. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
19. This Agreement constitutes the entire agreement among the parties and
supersede all prior agreements and understandings, oral or written, with respect
to the matters set forth herein.
48
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company, [the
Controlling Shareholders] and each of the Selling Shareholders. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters,
the form of which shall be submitted to the Company, [the Controlling
Shareholders] and the Selling Shareholders for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
▇▇▇▇▇▇ Interactive Entertainment Limited
By:
--------------------------------------
Name:
Title:
[Tianqiao Chen]
-----------------------------------------
[▇▇▇▇▇▇ ▇▇▇▇]
-----------------------------------------
SB Asia Infrastructure Fund L.P.
By:
--------------------------------------
Name:
Title:
Skyline Media Limited
By:
--------------------------------------
Name:
Title:
Central Digital International Limited
By:
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇
Title: Sole Director
Star Palace Technology Limited
By:
--------------------------------------
Name: Haibin Qu
Title: Sole Director
Solar Legend Holdings Limited
By:
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇
Title: Sole Director
Accepted as of the date hereof
on behalf of each of the Underwriters
▇▇▇▇▇▇▇ Sachs (Asia) L.L.C.
By:
----------------------------------
Name:
Title:
2
SCHEDULE I
NUMBER OF OPTIONAL
ADSS
TOTAL NUMBER OF TO BE
FIRM PURCHASED IF
ADSS MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- -------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ (Asia) L.L.C....................... o o
Bear, ▇▇▇▇▇▇▇ & Co. Inc.......................... o o
CLSA Limited..................................... o o
The Hong Kong and Shanghai Banking Corporation
Limited.......................................... o o
▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. ............................. o o
---------- ---------
TOTAL............................................ 17,318,109 2,597,717
========== =========
SCHEDULE II
NUMBER OF OPTIONAL
TOTAL NUMBER OF ADSS
FIRM TO BE
ADSS SOLD IF MAXIMUM
TO BE SOLD OPTION EXERCISED
--------------- -------------------
The Company...................................... 9,642,857 o
The Selling Shareholder(s):......................
SB Asia Infrastructure Fund L.P............. 2,857,143 o
Skyline Media Limited....................... 4,285,714 o
Central Digital International Limited....... 212,958 o
Star Palace Technology Limited.............. 186,338 o
Solar Legend Holdings Limited............... 133,099 o
---------- ---------
TOTAL 17,318,109 2,597,717
========== =========
SCHEDULE III
COMPANY SUBSIDIARIES
--------------------
▇▇▇▇▇▇ ▇▇▇▇, LLC
▇▇▇▇▇▇ ▇▇▇▇ Limited
Shengqu Information Technology (Shanghai) Co., Ltd.
▇▇▇▇▇▇ NETWORKING SUBSIDIARIES
------------------------------
Shanghai Shengjin Software Development Co., Ltd.
Shanghai Shengpin Nework Technology Development Co., Ltd.
Shanghai Shengda Xinhua Network Development Co., Ltd.
Chengdu Jisheng Technology Co., Ltd.
Shanghai Shulong Technology Development Co., Ltd.
Shenzhen Fenglin Huoshan Computer Technology Co., Ltd.
2
ANNEX I
FORM OF DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(h) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and the Subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary financial
information and schedules (and, if applicable, financial forecasts and/or pro
forma financial information) examined by them and included in the Prospectus or
the Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published rules
and regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of Certified
Public Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, financial forecasts
and/or condensed financial statements derived from audited financial statements
of the Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representative");
(iii) They have made a review in accordance with standards established by the
American Institute of Certified Public Accountants of the unaudited condensed
consolidated statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus as indicated in their
reports thereon copies of which have been separately furnished to the
Representative; and on the basis of specified procedures including inquiries of
officials of the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated financial
statements referred to in paragraph (vi)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the Act and the
related published rules and regulations, nothing came to their attention that
caused them to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to their attention as a
result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 8 and 11 of Form 20-F and of Regulation S-K;
(v) On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited financial statements and other information referred to below, a
reading of the latest available interim financial statements of the Company and
its subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements included
in the Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their attention
that caused them to believe that:
(a) (i) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus do not comply as to form in all material respects with the
applicable accounting
F-1
requirements of the Act and the related published rules and regulations, or
(ii) any material modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus for them
to be in conformity with generally accepted accounting principles;
(b) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in the
unaudited consolidated financial statements from which such data and items
were derived, and any such unaudited data and items were not determined on
a basis substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included in the
Prospectus;
(c) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in clause (a) and any unaudited income statement
data and balance sheet items included in the Prospectus and referred to in
clause (b) were not determined on a basis substantially consistent with the
basis for the audited consolidated financial statements included in the
Prospectus;
(d) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements;
(e) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were outstanding
on the date of the latest financial statements included in the Prospectus)
or any increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
Shareholders' equity or other items specified by the Representative, or any
increases in any items specified by the Representative, in each case as
compared with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(f) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in clause (e)
there were any decreases in consolidated net revenues or operating profit
or the total or per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding length
specified by the Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
(vi) In addition to the examination referred to in their report(s) included in
the Prospectus and the limited procedures, inspection of minute books, inquiries
and other procedures referred
F-2
to in paragraph (iii) above, they have carried out certain specified procedures,
not constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representative, which are derived from the general
accounting records of the Company and the Subsidiaries, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representative, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and the Subsidiaries and have found them to be in agreement.
F-3
ANNEX I (A)
[To insert executed comfort letter delivered prior to execution of this
Agreement]
F-4
ANNEX I (B)
[To insert form of comfort letter to be delivered on the effective date of
any post-effective amendment to the Registration Statement and as of each Time
of Delivery]
F-5
ANNEX II
PARTIES TO EXECUTE LOCK-UP AGREEMENT
Tianqiao Chen
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇▇
W. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
F-6
ANNEX III
FORM OF LOCK-UP AGREEMENT
▇▇▇▇▇▇ INTERACTIVE ENTERTAINMENT LIMITED
LOCK-UP AGREEMENT
_____________, 2004
▇▇▇▇▇▇▇ ▇▇▇▇▇ (Asia) L.L.C.,
As representative of the several Underwriters
named in Schedule I to the underwriting agreement,
68th Floor, ▇▇▇▇▇▇ Kong Center,
▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇.
Re: ▇▇▇▇▇▇ Interactive Entertainment Limited -- Lock-Up Agreement
Ladies and Gentlemen:
The undersigned understands that you, as representative (the
"Representative"), proposes to enter into an underwriting agreement, on behalf
of the several underwriters named in Schedule I to such agreement (collectively,
the "Underwriters"), with ▇▇▇▇▇▇ Interactive Entertainment Limited, a Cayman
Islands corporation (the "Company"), and the selling shareholders (the "Selling
Shareholders") and certain other parties named in such agreement, providing for
a public offering of American Depositary Shares ("ADSs") representing ordinary
shares of the Company, par value US$0.01 per share (the "Ordinary Shares"),
pursuant to a Registration Statement on Form F-1 (File No. 333-114177) and a
Registration Statement on Form F-6 (File No. 333-114759) to be filed with the
U.S. Securities and Exchange Commission (the "SEC").
In consideration of the agreement by the Underwriter to offer and sell the
ADSs, and of other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the undersigned agrees that, during the period
beginning from the date of the final Prospectus covering the public offering of
the ADSs and continuing to and including the date 180 days after the date of
such final Prospectus (the "Lock-up Period"), the undersigned will not offer,
sell, contract to sell, pledge, grant any option to purchase, make any short
sale or otherwise dispose of: (A) any ADSs or Ordinary Shares or any securities
of the Company that are substantially similar to the ADSs or Ordinary Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, ADSs or Ordinary
Shares or any such substantially similar securities; and (B) any common shares
of the Company's subsidiaries or controlled affiliates or depositary shares or
depositary receipts representing such common shares, including but not limited
to any securities that are
F-7
convertible into or exchangeable for or that represent the right to receive such
common shares or such depositary shares or depositary receipts or any such
substantially similar securities, whether now owned or hereinafter acquired,
owned directly by the undersigned (including holding as a custodian) or with
respect to which the undersigned has beneficial ownership within the rules and
regulations of the SEC (in each case other than pursuant to a bona fide gift by
an individual to a donee or a sale or transfer by an entity to an affiliate,
provided that such donee or affiliate agrees to be bound in writing by the
restrictions set forth herein), without your prior written consent.
The undersigned understands that the Company, the Selling Shareholders and
the Underwriters are relying upon this Lock-Up Agreement in proceeding toward
consummation of the offering. The undersigned further understands that this
Lock-Up Agreement is irrevocable and shall be binding upon the undersigned's
heirs, legal representatives, successors, and assigns.
F-8
This Lock-up Agreement shall terminate upon the expiration of the Lock-up
Period or in the event that there is no delivery of, and payment for, the ADSs
pursuant to the underwriting agreement, upon 3 days' prior written notice of
such non-delivery and non-payment given by the undersigned to you.
Very truly yours,
-------------------------------
Exact Name of Shareholder
-------------------------------
Authorized Signature
-------------------------------
Title
F-9