Exhibit 1.1
Form of Underwriting Agreement
CHUNGHWA TELECOM CO., LTD.
AMERICAN DEPOSITARY SHARES
REPRESENTING
COMMON SHARES
---------------------
UNDERWRITING AGREEMENT
---------------------
________, 2003
[Name of Representative]
As Representative of the several Underwriters
named in Schedule I hereto
c/o [Name of Representative]
[Address of Representative]
Ladies and Gentlemen:
The Ministry of Transportation and Communications (the "Selling
Shareholder") of the Republic of China (the "ROC"), representing the government
of the ROC, proposes, subject to the terms and conditions stated herein, to sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of ____________ American Depositary Shares representing ____________ common
shares, par value NT$10 per share ("Common Shares"), of Chunghwa Telecom Co.,
Ltd., a company limited by shares and duly organized and existing under the laws
of the ROC (the "Company"), and, at the election of the Underwriters, up to
________ additional American Depositary Shares representing ________ Common
Shares. The aggregate of ____________ American Depositary Shares representing
____________ Common Shares to be sold by the Selling Shareholder is herein
called the "Firm ADSs" and the aggregate of ________ American Depositary Shares
representing ________ additional Common Shares to be sold by the Selling
Shareholder 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 Common Shares represented by the Firm
ADSs are hereinafter called the "Firm Shares" and the Common 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."
References herein to "you" refers to the Representative of the several
Underwriters named in Schedule I hereto.
The ADSs are to be issued pursuant to a deposit agreement (the "Deposit
Agreement"), dated as of -, 2003, among the Company, The Bank of New York, as
depositary (the "Depositary"), and holders and beneficial owners from time to
time of the American Depositary Receipts (the "ADRs") issued by the Depositary
and evidencing the ADSs. Each ADS will initially represent ten Common Shares
deposited pursuant to the Deposit Agreement.
It is understood by all the parties that the Company and the Selling
Shareholder are
concurrently entering into (i) an agreement (the "[U-1] Underwriting Agreement")
providing for the sale by the Selling Shareholder of up to a total of ________
American Depositary Shares, each initially representing ten Common Shares,
including the option to purchase additional American Depositary Shares
thereunder, through arrangements with certain underwriters (the "[U-1]
Underwriters"), for whom [U-1] is acting as lead manager, and (ii) an agreement
(the "[U-2] Underwriting Agreement") providing for the sale by the Selling
Shareholder of up to a total of ________ American Depositary Shares each
initially representing ten Common Shares, including the option to purchase
additional American Depositary Shares thereunder, through arrangements with
certain underwriters (the "[U-2] Underwriters"), for whom [U-2] is acting as
lead manager. Anything herein or therein to the contrary notwithstanding, the
respective closings under this Agreement, the [U-1] Underwriting Agreement and
the [U-2] Underwriting Agreement are hereby made expressly conditional on one
another.
Except as the context may otherwise require, the [U-1] Underwriters and the
[U-2] Underwriters are referred to herein collectively as the "Other
Underwriters" and the [U-1] Underwriting Agreement and the [U-2] Underwriting
Agreement are referred to herein collectively as the "Other Underwriting
Agreements".
The Underwriters hereunder, the [U-1] Underwriters and the [U-2]
Underwriters are simultaneously entering into an Agreement among Underwriting
Syndicates (the "Agreement among Syndicates"), which provides for, among other
things, that Goldman Sachs International shall act as the global coordinator
(the "Global Coordinator") for the offering of the ADSs. The Company hereby
confirms the appointment of the Global Coordinator by the Underwriters and the
Other Underwriters. [Name of Representative], [U-1] and [U-2] are hereinafter
collectively referred to as the "Joint Bookrunners". It is understood and agreed
that the [Global Coordinator] [Joint Bookrunners] in [its] [their] sole
discretion shall have the authority to allocate or reallocate all or some of the
aggregate total amount of the American Depositary Shares and additional American
Depositary Shares under this Agreement and the Other Underwriting Agreements
among the Underwriters and the Other Underwriters.
Two forms of prospectus are to be used in connection with the offering and
sale of ADSs contemplated by the foregoing, one relating to 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. 333-13074) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the United States Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any post-effective
amendment 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)
2
Registration Statement"), filed pursuant to Rule 462(b) under the United
States Securities Act of 1933, as amended (the "Act"), which became
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, to the knowledge of
the Company after due inquiry, no proceeding for that purpose has been
initiated or 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 Commission
under 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 conformity with
information furnished in writing to the Company by an Underwriter through
the Joint Bookrunners 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 the
Registration Statement and the Prospectus 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
any Joint Bookrunner expressly for use therein;
(iv) A registration statement on Form F-6 (File No. 333-______) in
respect of the ADSs representing Shares 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;
3
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
knowledge of the Company 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 "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 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;
(v) A registration statement on Form 8-A (File No. ______) in respect
of the registration of the Shares and the ADSs under the United States
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
knowledge of the Company 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 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 has filed with the Director General of Kanto Local
Finance Bureau of the Ministry of Finance of Japan (the "KLFB") a
securities registration statement with respect to the public offering
without listing in Japan of the Shares as part of the offering contemplated
hereunder (the "Japanese POWL") and amendments to such securities
registration statement pursuant to the Securities and Exchange Law of
Japan; a further amendment to such securities registration statement in the
form heretofore delivered to you is proposed to be filed by the Company
with the KLFB promptly after the execution of this Agreement (such
securities registration statement and all such amendments, collectively,
the "Japanese Registration Statement"); the registration made under the
Japanese Registration Statement has been declared effective by KLFB; no
other document with respect to the Japanese Registration Statement has
heretofore been filed with the KLFB; no stop order suspending the
effectiveness of the Japanese Registration Statement has been issued and,
to the knowledge of the Company after due inquiry, no proceeding for that
purpose has been initiated or threatened by the KLFB; and the Japanese
Registration Statement when it became effective conformed, and any further
amendments thereto will conform, in all
4
material respects to the requirements of the Securities and Exchange Law of
Japan and the cabinet orders and ministerial ordinances and other rules and
regulations thereunder (the "Japanese Rules and Regulations"), and 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;
(vii) The Company has prepared a preliminary prospectus with respect
to the Japanese POWL (the "Japanese Preliminary Prospectus") and intends
to prepare a supplement or supplements to the Japanese Preliminary
Prospectus which together with the Japanese Preliminary Prospectus will
form a final prospectus (the "Japanese Final Prospectus") (the Japanese
Preliminary Prospectus and the Japanese Final Prospectus, collectively, the
"Japanese Prospectus"); and the Japanese Preliminary Prospectus at the time
of issue thereof conformed, and the Japanese Final Prospectus at the time
of issue thereof will conform, in all material respects to the requirements
of the Securities and Exchange Law of Japan and the Japanese Rules and
Regulations, and the Japanese Preliminary Prospectus at the time of issue
thereof did not, and the Japanese Final Prospectus at the time of issue
thereof will not, contain 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 Company has 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, earthquake
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 material adverse
change, or any development involving a prospective material adverse change,
in or affecting the general affairs, management, financial position,
shareholders' equity, results of operations or otherwise of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(ix) The Company has good and marketable title to all real property
and good and marketable title to all personal property owned by it, in each
case free and clear of all liens, encumbrances, charges, claims, third
party rights or interests, defects and any other restrictions, except such
as are set forth 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 the Company; and any real property and
buildings held under lease by the Company are held by it under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not materially interfere with the use made and proposed to be made
of such property and buildings by the Company and no material default (or
event which with notice or lapse of time, or both, would constitute such a
default) by the Company has occurred and is continuing under any of such
leases; and the Company does not own, operate, manage or have any other
right or interest in any other material real property of any kind except as
reflected in the consolidated balance sheet of the Company as of March 31,
2003 included in the Prospectus, and no other real properties are necessary
for the Company
5
for the carrying on of the business of the Company in the manner set forth
in the Prospectus other than as would not, individually or in the
aggregate, have a material adverse effect on the combined financial
position, shareholders' equity or results of operations of the Company;
(x) The Company has been duly incorporated and is validly existing as
a company limited by shares organized under the laws of the ROC, with power
and authority (corporate and other) to own, use, lease and operate its
properties and conduct its business in the manner as set forth in the
Prospectus; the Company does not conduct any business, and does not own or
lease any properties, outside of the ROC; and the Articles of
Incorporation, the business license and other constituent documents of the
Company comply with the requirements of applicable laws, statute and
regulations of the ROC and are in full force and effect;
(xi) ____________, a corporation duly organized and validly existing
under the laws of Hong Kong (the "Subsidiary"), is the Company's only
"subsidiary" within the meaning of Rule I-02 of Regulation S-X under the
Act; all of the issued shares of capital stock of the Subsidiary have been
duly and validly authorized and issued, are fully paid and non-assessable
and are owned directly by the Company, free and clear of all liens,
encumbrances, third party rights or interests, equities or claims; the
Subsidiary is not a "significant subsidiary" within the meaning of Rule
1-02 of Regulation S-X under the Act; and the Subsidiary does not have any
operations or conduct any business, and does not own any assets or lease
any properties;
(xii) The Company has an authorized and a 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 conform to the description of the Common Shares
contained in the Prospectus; all of the Common Shares (including the
Shares) have been duly listed and admitted for trading on the Taiwan Stock
Exchange (the "Taiwan Stock Exchange"); the holders of outstanding shares
of capital stock of the Company are not entitled to preemptive or other
rights to acquire the Shares or the ADSs; except as set forth in the
Prospectus, 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, the Common Shares or any
other class of capital stock of the Company; the Shares may be freely
deposited by the Selling Shareholder with the Depositary against issuance
of ADRs evidencing ADSs; the ADSs are freely transferable by the Selling
Shareholder to or for the account of the several Underwriters and (to the
extent set forth in the Prospectus) the initial purchasers thereof; and
there are no restrictions on subsequent transfers of the Shares and the
ADSs under the laws of the ROC and of the United States, except as set
forth in the Prospectus under the captions "Description of Share Capital",
"Description of American Depositary Shares", and "Foreign Investment and
Exchange Controls in Taiwan";
(xiii) Each of this Agreement and the Other Underwriting Agreements
has been duly authorized, executed, and delivered by the Company;
(xiv) The Deposit Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid and legally binding
agreement of the
6
Company, enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, fraudulent transfer, moratorium,
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 against 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;
(xv) All consents, approvals, authorizations, orders, registrations,
filings, clearances and qualifications of or with any court or governmental
agency or body or any stock exchange authorities (hereinafter referred to
as a "Governmental Agency") having jurisdiction over the Company or any of
its properties (hereinafter referred to as "Governmental Authorizations")
required for the deposit of Shares, and the issuance of ADSs in respect
thereof and for the authorization, execution, delivery and performance by
the Company of this Agreement, the Other Underwriting Agreements and the
Deposit Agreement to be duly and validly authorized have been obtained or
made and are in full force and effect and no such Governmental
Authorization has been withdrawn or is subject to any condition precedent
which has not been fulfilled or performed, except for (A) such filings, if
any, required by the ROC "Rules for Handling Issuance and Offer of Overseas
Securities by Issuers", (B) the approval of the ROC Central Bank of China
for foreign exchange settlements and payments contemplated by the Deposit
Agreement, (C) the approval of the Ministry of Economic Affairs of the ROC
for the Company's corporate amendment registration with respect to the
Shares, (D) the application to the Taiwan Stock Exchange for listing of the
Shares on the Taiwan Stock Exchange, and (E) reports to the ROC Central
Bank of China regarding (1) conversion from New Taiwan dollars into United
States dollars for payment of any dividends or other amounts contemplated
by the Deposit Agreement, and (2) the names and telephone numbers of local
agents in the ROC appointed by the holders of the ADSs upon their
withdrawal of the Shares represented by the ADSs from the Company's
American Depositary Shares facility;
(xvi) Other than as set forth in the Prospectus, all dividends and
other distributions declared and payable in respect of the capital stock of
the Company may under the current laws and regulations of the ROC be paid
to the holders of Common Shares in New Taiwan dollars (including any such
dividends or distributions to be paid to the Depositary) that may be
converted into foreign currency that may be freely transferred out of the
ROC, and all such dividends and other distributions will not be subject to
withholding or other taxes under the laws and regulations of the ROC and
are otherwise free and clear of any other tax, withholding or deduction in
the ROC and without the necessity of obtaining any Governmental
Authorization in the ROC;
(xvii) The deposit of the Shares being deposited with the Depositary
against issuance of the ADRs evidencing the ADSs, the compliance by the
Company with all of the provisions of this Agreement, the Other
Underwriting Agreements 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
7
other agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of the
Company is subject other than such conflicts, breaches, violations or
defaults which, individually or in the aggregate, would not have a material
adverse effect on the business, operations, general affairs, condition
(financial or otherwise), shareholders' equity or results of operations of
the Company ("Material Adverse Effect"), nor will such action result in any
violation of the provisions of the Articles of Incorporation, business
licenses, government concessions or other constituent documents of the
Company or any law or statute or any order, rule or regulation of any
Governmental Agency having jurisdiction over the Company or any of its
properties, including the Telecommunications Act of the ROC, the Statute of
Chunghwa Telecom Co., Ltd., the Statute Governing Privatization of State
Owned Enterprises, the Law Governing Administration of State Owned
Enterprises, the Audit Law of the ROC and the Budget Law of the ROC;
(xviii) The Company is not (A) in violation of its Articles of
Incorporation, business license, government concessions or other
constituent documents, (B) in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any licenses,
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, except such defaults which individually or in the
aggregate would not have a Material Adverse Effect, or (C) in violation or
contravention of any law or statute or any order, rule or regulation of any
Governmental Agency having jurisdiction over the Company or any of its
properties;
(xix) Other than as set forth in the Prospectus, so long as this
Agreement and the Other Underwriting Agreements or any documents which are
deemed "receipts" under ROC Stamp Duty Law are executed outside of the ROC,
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 in the ROC or to any political subdivision or taxing
authority thereof or therein in connection with (A) the deposit with the
Depositary of Shares by the Selling Shareholder against the issuance of
ADRs evidencing ADSs, (B) the sale and delivery by the Selling Shareholder
of the ADSs representing the Shares to or for the respective accounts of
the Underwriters, (C) the sale and delivery outside the ROC by the
Underwriters of the ADSs representing the Shares to the initial purchasers
thereof or (D) the execution, delivery and performance of this Agreement,
the Other Underwriting Agreements and the Deposit Agreement (other than any
income tax that may be levied on the income of the Underwriters or the
Other Underwriters whose income may otherwise be subject to ROC tax or
withholding, if any, with respect to such income tax);
(xx) Neither the Company nor the Subsidiary 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 ADSs;
(xxi) 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 Shares and the ADSs, respectively, and under the captions
"Taxation", "Regulation", "Underwriting",
8
"The Securities Markets of Taiwan" and "Foreign Investment and Exchange
Controls in the Taiwan", insofar as they purport to describe the provisions
of the laws and documents referred to therein, are accurate, complete and
fair;
(xxii) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company is a party or of
which any property of the Company is the subject (i) which, if determined
adversely to the Company, would individually or in the aggregate have a
Material Adverse Effect, or (ii) that are required to be set forth in the
Registration Statement or the Prospectus and are not so set forth; and, to
the Company's knowledge after due inquiry, no such proceedings are
threatened or contemplated by any Governmental Agency or by others;
(xxiii) The Company is not an "investment company", as such term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(xxiv) The Company has all licenses, consents, permits,
authorizations, approvals, certificates and orders and other concessions of
and from all, and is not required to make any declarations and filings with
any, Governmental Agencies that are necessary to own, lease, license and
use its properties and conduct its businesses in the manner as set forth in
the Prospectus, and such licenses, consents, permits, authorizations,
approvals, certificates, orders or concessions contain no materially
burdensome restrictions or conditions not set forth in the Registration
Statement or the Prospectus; the Company has no reason to believe that the
Ministry of Transportation and Communications, the Directorate General of
Telecommunications or any other Governmental Agency is considering
modifying, suspending or revoking any such licenses, consents, permits,
authorizations, approvals, certificates, orders or concessions, and the
Company is in compliance with the provisions of all such licenses,
consents, permits, authorizations, approvals , orders and concessions in
all material respects;
(xxv) The Company is 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, and is not likely to become a PFIC;
(xxvi) T.N. Soong & Co., an Associate Member Firm of Deloitte Touche
Tohmatsu effective April 22, 2002, who have certified certain financial
statements of the Company, are independent public accountants of the
Company as required by the Act and the rules and regulations of the
Commission thereunder; and 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 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 and provide a sufficient basis for the preparation of
financial statements in accordance with US GAAP;
9
(xxvii) The Registration Statement, the Preliminary Prospectus, the
Prospectus, the ADS Registration Statement, the Form 8-A Registration
Statement, the Japanese Registration Statement and the Japanese Prospectus,
the filing of the Registration Statement, the Prospectus, the ADS
Registration Statement and the Form 8-A Registration Statement with the
Commission and the filing of the Japanese Registration Statement and the
Japanese Prospectus with the KLFB have each been duly authorized by and on
behalf of the Company, and the Registration Statement, the ADS Registration
Statement and the Form 8-A Registration Statement and the Japanese
Registration Statement have each been duly executed pursuant to such
authorization by and on behalf of the Company;
(xxviii) The Company owns or has the legal right to use, or can
acquire on reasonable terms, all patents, patent licenses, inventions,
copyrights, trademarks, service marks, trade names, domain names and
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
information, proprietary rights and processes ("Intellectual Property")
necessary to conduct its business as currently conducted and as proposed to
be conducted, and the Company has not received any notice or claim of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in any
Material Adverse Effect; in conducting its business activities, the Company
has not infringed any patent, copyright, title, trademark, service mark,
trade name, domain name or other intellectual property rights already
registered by a third party in the ROC or other jurisdiction;
(xxix) Other than as set forth in the Prospectus, the Company has no
obligation to provide retirement, death or disability benefits to any of
the present or past employees of the Company or the Subsidiary, or to any
other person that would, individually or in the aggregate, have a Material
Adverse Effect;
(xxx) Other than as set forth in the Prospectus, no material labor
dispute, work stoppage, slow down or other conflict with the employees of
the Company exists or, to the knowledge of the Company, is threatened;
(xxxi) The irrevocable and unconditional waiver and agreement of the
Company in Section 15 hereof not to plead or claim any right of immunity on
the grounds of sovereignty in any legal action, suit or proceeding based on
this Agreement is valid and binding under the laws of the ROC;
(xxxii) Each of this Agreement, the Other Underwriting Agreements and
the Deposit Agreement is in proper form to be enforceable against the
Company in the ROC in accordance with its terms; and to ensure the
legality, validity, enforceability or admissibility into evidence in the
ROC of this Agreement, it is not necessary that this Agreement, the Other
Underwriting Agreements or the Deposit Agreement be filed or recorded with
any court or other authority in the ROC or that any stamp or similar tax in
the ROC be paid on or in respect of this Agreement, the Other Underwriting
Agreements, the Deposit Agreement or any other documents to be furnished
hereunder, it being understood that in court proceedings in the ROC, a
translation into the Chinese language may be required;
10
(xxxiii) No holder of any of the Shares or the ADSs after the
consummation of the transactions contemplated by this Agreement, the Other
Underwriting Agreements or the Deposit Agreement is or will be subject to
any liability in respect of any liability 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;
(xxxiv) The audited financial statements (and the notes thereto) of
the Company included in the Prospectus present fairly the financial
position of the Company as of the dates specified and the results of
operations and changes in 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); and the summary and selected financial
data, including the selected unaudited quarterly financial information,
included in the Prospectus present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited financial
statements included therein;
(xxxv) Under the laws of the ROC, 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;
(xxxvi) 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
ROC or any authority thereof or therein nor are any taxes imposed in the
ROC on, or by virtue of the execution or delivery of, such documents;
(xxxvii) All returns, reports or filings which ought to have been made
by or in respect of the Company for taxation purposes have been made and
all such returns are up to date, correct and on a proper basis, and are not
the subject of any dispute with the relevant revenue or other appropriate
authorities; the provisions included in the audited accounts as set out in
the Prospectus included appropriate provisions required under generally
accepted accounting principles in the ROC ("ROC 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 the Company has not received notice of any tax deficiency that has been
asserted against the Company which, if so assessed, would have a Material
Adverse Effect;
(xxxviii) The section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Prospectus
accurately and fully describes (A) accounting policies which the Company
believes are the most 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
11
reported under different conditions or using different assumptions and an
explanation thereof;
(xxxix) 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 regards to such disclosure;
(xl) 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, and (B) neither the
Company nor the Subsidiary are engaged in any transactions with, or have
any obligations to, any unconsolidated entities that are contractually
limited to narrow activities that facilitate the transfer of or access to
assets by the Company or the Subsidiary, including, without limitation,
structured finance entities and special purpose entities, or otherwise
engage in, or have any obligations under, any off-balance sheet
transactions or arrangements. As used herein in this Section 1, the phrase
"reasonably likely" refers to a disclosure threshold lower than "more
likely than not";
(xli) Since the date of the latest audited financial statements
included in the Prospectus, the Company has not (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 be material to the Company
and that are not otherwise set forth in the Prospectus;
(xlii) Except as set forth in the Prospectus, the Company is not
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;
(xliii) Except as set forth in the Prospectus, the Company is not
engaged in any material transactions with its directors, officers,
management, shareholders, or any other person, including persons formerly
holding such positions, on terms that are not available to other parties on
an arm's-length basis;
(xliv) The Company has provided 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 to any director
or executive officer of the Company, or to any family member or affiliate
of any director or executive officer of the Company; and since -, the
Company has not, directly or indirectly, including through any subsidiary:
(i) 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 (ii) 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
12
family member or affiliate of any director or executive officer, which loan
was outstanding on -;
(xlv) 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 to the use of such data from such sources to the extent required;
and
(xlvi) All statements of fact contained in the materials prepared by
the Company for the roadshows and all statements of fact made by the
Company at the roadshows were at the date thereof in all material respects
true and accurate and not misleading and all statements of opinion,
intention or expectation contained in such documents or made at such
roadshow meetings were truly and honestly held and were or have been made
after due and careful consideration of all relevant circumstances and were
based on reasonable assumptions.
(b) The Selling Shareholder represents and warrants to, and agrees
with, each of the Underwriters and the Company that:
(i) All Governmental Authorizations required for the deposit of the
Shares being deposited 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 the
Selling Shareholder hereunder and under the Other Underwriting Agreements
and for the execution and delivery by the Selling Shareholder of this
Agreement and the Other Underwriting Agreements, have been obtained and are
in full force and effect, except for approval of the ROC Central Bank of
China for foreign exchange settlements and payments contemplated by the
Deposit Agreement; and the Selling Shareholder has power and authority
(corporate or other) to enter into this Agreement and the Other
Underwriting Agreements and to sell, assign, transfer and deliver the ADSs
to be sold by the Selling Shareholder hereunder and under the Other
Underwriting Agreements;
(ii) The sale of the ADSs to be sold by the Selling Shareholder
hereunder and under the Other Underwriting Agreements, the deposit of the
Shares with the Depositary against issuance of the ADRs evidencing the ADSs
to be delivered at each Time of Delivery, the compliance by the Selling
Shareholder with all of the provisions of this Agreement and the Other
Underwriting Agreements 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 statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Selling Shareholder is a party
or by which the Selling Shareholder is bound, or to which any of the
property or assets of the Selling Shareholder is subject other than such
conflicts, breaches, violations or defaults which, individually or in the
aggregate, would not have a Material Adverse Effect, nor will such action
result in any violation of the provisions of any statute or any order, rule
or regulation of any Governmental Agency having jurisdiction over the
Selling Shareholder;
(iii) The Selling Shareholder has good and valid title to the Shares
to be represented by the ADSs to be sold hereunder and under the Other
Underwriting
13
Agreements, and immediately prior to each Time of Delivery the Selling
Shareholder will have good and valid title to the Shares to be represented
by the ADSs to be sold by the Selling Shareholder hereunder and under the
Other Underwriting Agreements, free and clear of all liens, encumbrances,
equities or claims; and, upon delivery of the ADSs representing such Shares
and payment therefor pursuant hereto and thereto, good and valid title to
such ADSs, free and clear of all liens, encumbrances, equities or claims,
will pass to the several Underwriters or the Other Underwriters, as the
case may be;
(iv) Neither the Selling Shareholder nor any of its affiliates, nor
any person acting on its or their behalf has taken and 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 ADSs;
(v) 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;
(vi) 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;
(vii) 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, the Selling Shareholder will deliver to you prior to or at
the First Time of Delivery (as defined in Section 4 hereof) a properly
completed and executed United States Treasury Department Form W-8EXP (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(viii) Each of this Agreement and the Other Underwriting Agreements
has been duly authorized, executed and delivered by the Selling
Shareholder, and is in proper form to be enforceable against the Selling
Shareholder in accordance with its terms; and to ensure the legality,
validity, enforceability or admissibility into evidence in the ROC of this
Agreement, it is not necessary that this Agreement or the Other
Underwriting Agreements be filed or recorded with any court or other
authority in the ROC or that any stamp or similar tax in the ROC be paid on
or in respect of this Agreement, the Other Underwriting Agreements or any
other documents to be furnished hereunder, it being understood that in
court proceedings in the ROC, a translation into
14
the Chinese language may be required;
(ix) The ADSs delivered at each Time of Delivery by the Selling
Shareholder will be freely transferable by the Selling Shareholder to or
for the account of the several Underwriters and (to the extent set forth in
the Prospectus) the initial purchasers thereof; and there are no
restrictions on subsequent transfers of the Shares or ADSs under the laws
of the ROC or of the United States except as set forth in the Prospectus
under the captions "Description of Share Capital", "Description of American
Depositary Shares", and "Foreign Investment and Exchange Controls in
Taiwan";
(x) The irrevocable and unconditional waiver and agreement of the
Selling Shareholder in Section 15 hereof not to plead or claim any right of
immunity on the grounds of sovereignty in any legal action, suit or
proceeding based on this Agreement is valid and binding under the laws of
the ROC; and
(xi) There are no contracts, agreements or understandings between the
Selling Shareholder and any person that would give rise to a valid claim
against the 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 ADSs.
(c) Any certificate signed by any officer of the Company or any of its
subsidiaries (pursuant to Section 7(n) or otherwise) delivered to you or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Shareholder as such (pursuant
to Section 7(o) or otherwise) and delivered to the you or to counsel for the
Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by the Selling Shareholder to each Underwriter as to
the matters covered thereby.
2. Subject to the terms and conditions herein set forth, (a) the Selling
Shareholder agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Selling
Shareholder, at a purchase price of US$______ per ADS, the number of Firm ADSs
set forth opposite the name of such Underwriter in Schedule I hereto, and (b) in
the event and to the extent that the Underwriters shall exercise the election to
purchase Optional ADSs as provided below, the Selling Shareholder agrees to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Selling Shareholder, 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 Selling Shareholder, as and to the extent indicated in Schedule I
hereto, hereby grants to the Underwriters the right to purchase at their
election up to ______ 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 may be
exercised by written notice from you to the Selling Shareholder, given within a
15
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 or, unless you, the Company and the Selling
Shareholder otherwise agree in writing, earlier than two or later than ten
business days after the date of such notice.
The [Global Coordinator] [Joint Bookrunners] in [its] [their] sole
discretion shall have the authority to allocate or reallocate all or some of the
ADSs among the Underwriters and the Other Underwriters.
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 form, and in such authorized denominations and registered in such
names as [Name of Representative] may request upon at least forty-eight hours'
notice to the Selling Shareholder prior to a Time of Delivery (as defined below)
(the "Notification Time"), shall be delivered by or on behalf of the Selling
Shareholder to [Name of Representative], 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 account specified by the
Selling Shareholder to [Name of Representative] at least forty-eight hours in
advance to such Time of Delivery. The Company and the Selling Shareholder will
cause the certificates representing the ADSs to be made available for checking
at least twenty-four hours prior to the Time of Delivery (as defined below) 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 -, 2003 or such other time and
date as [Name of Representative], the Company and the Selling Shareholder 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 [Name of Representative] in the written
notice given by [Name of Representative] of the Underwriters' election to
purchase such Optional ADSs, or such other time and date as [Name of
Representative], the Company and the Selling Shareholder 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 Sections 7(n) and 7(o) hereof, will be delivered at the offices of Sullivan &
Cromwell LLP, 28th Floor, Nine Queen's Road Central, Hong Kong (the "Closing
Location"), and the ADSs will be delivered as specified in Section 4(a) above,
all at such Time of Delivery. A meeting will be held at the Closing Location at
4:00 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. "New York Business Day" shall mean each
Monday, Tuesday, Wednesday, Thursday and
16
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 and for so long as the delivery of
a prospectus is required in connection with the offering or sale 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
17
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 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), an earnings statement of the Company (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
Company, Rule 158);
(v) During the period beginning from the date hereof and continuing to
and including the date 90 days after the date of the Prospectus (the
"Company's Lock-up Period"), not to offer, sell, contract to sell, hedge or
otherwise dispose of, except as provided hereunder and under the Other
Underwriting Agreements, any Common Shares or ADSs or securities of the
Company that are substantially similar to the Common Shares or ADSs,
including, but not limited to, any securities that are convertible into or
exchangeable or exercisable for, or that represent the right to receive,
Common Shares or ADSs or any such substantially similar securities (other
than pursuant to (A) employee benefits plan or distribution of dividends or
employee bonuses in the form of shares of the Company existing on, or upon
the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement and in each case which have
been set forth in the Prospectus; (B) employee share purchase plans
relating to the Privatization of the Company as set forth in the Prospectus
under the caption "Business -- Employees" existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement; (C) a sale to an entity
which, in the sole judgment of the Joint Bookrunners, (y) is a
non-financial institution and (z) has as its principal line of business the
provision of [fixed-line] / [wireless] / [Internet] telecommunications
services [in the ROC], on the condition that such entity shall provide a
lock-up undertaking on substantially the same terms as set forth in this
subsection (v) for the unexpired portion of the Company's Lock-Up Period;
(D) a sale of the Common Shares to the Company arising out of a share
repurchase conducted by the Company pursuant to ROC laws and regulations
and as set forth in the Prospectus; or (E) an auction of the Common Shares
conducted by the Selling Shareholder concurrently with the offering of the
ADSs contemplated herein and as set forth in the Prospectus), without the
prior written consent of the Joint Bookrunners, provided, however, that the
Company may publicly disclose its intention to dispose of additional Common
Shares in connection with the Privatization of the Company; for the
purposes of this Agreement and the Other Underwriting Agreements, the term
"Privatization" shall mean the process through which the government of the
ROC, through the Selling Shareholder or otherwise, reduces its ownership of
the Common Shares, including Common Shares owned by entities more than 50%
owned by the government of the ROC, to less than 50% of the Common Shares
issued and outstanding, resulting in the Company becoming a non-state owned
entity);
18
(vi) For so long as the Company prepares the financial statements
contained in the Company's annual report on Form 20-F in conformity with
and under US GAAP, (A) to furnish to its shareholders (including holders of
ADSs) as soon as practicable after the end of each fiscal year an annual
report (in English) (in the same form and with the same content as the
Annual ROC Financials (as defined below)), including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries, if any, and business segment information
in accordance with Statement of Financial Accounting Standards No. 131,
certified by independent public accountants and prepared in conformity with
and under US GAAP; (B) to release to the public outside of the ROC, at the
same time the Company releases financial information for each fiscal year
to the public in the ROC and/or files such financial information with the
Taiwan Stock Exchange or the ROC Securities and Futures Commission (the
"Annual ROC Financials"), financial information for such fiscal year in the
same form and with the same content as the Annual ROC Financials and
prepared in conformity with and under US GAAP; (C) to make available to its
shareholders (including holders of ADSs) after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement), financial
information for such quarter in the same form and with the same content as
the Quarterly ROC Financials (as defined below) prepared in conformity with
and under US GAAP; and (D) to release to the public outside of the ROC, at
the same time the Company releases financial information for each quarter
to the public in the ROC and/or files such financial information with the
Taiwan Stock Exchange or the ROC Securities and Futures Commission (the
"Quarterly ROC Financials"), financial information for such quarter in the
same form and with the same content as the Quarterly ROC Financials and
prepared in conformity with and under US GAAP;
(vii) During a period of three 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 (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission, the ROC
Securities and Futures Commission, the Taiwan Stock Exchange or any other
securities exchange on which any class of securities of the Company is
listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request (such financial statements included in such additional information
to be on a consolidated basis to the extent the accounts of the Company and
its subsidiaries, if any, are consolidated in reports furnished to its
shareholders generally or to the Commission);
(viii) Not to (and to cause the Subsidiary 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 and the ADSs;
(ix) To use its best efforts to list, subject to notice of issuance,
the Shares and the ADSs on the New York Stock Exchange, Inc. (the "NYSE"),
and to maintain such listing;
(x) To file with the Commission such information on Form 20-F as may
be required by Rule 463 under the Act;
19
(xi) 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; and
(xii) 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 on-line
offering of the ADSs (the "License"); provided, however, that the License is
granted without any fee.
(b) The Selling Shareholder agrees with each of the Underwriters:
(i) (A) During the period beginning from the date hereof and continuing to
and including the date 90 days after the date of the Prospectus (the "Selling
Shareholder's First Lock-up Period"), not to offer, sell, contract to sell,
hedge or otherwise dispose of, except as provided hereunder and under the Other
Underwriting Agreements, any Common Shares or ADSs or securities of the Company
that are substantially similar to the Common Shares or ADSs, including, but not
limited to, any securities that are convertible into or exchangeable or
exercisable for, or that represent the right to receive, Common Shares or ADSs
or any such substantially similar securities (other than pursuant to (1) a sale
to an entity which, in the sole judgment of the Joint Bookrunners, (y) is a
non-financial institution and (z) has as its principal line of business the
provision of [fixed-line]/[wireless]/[Internet] telecommunications services
[in the ROC], on the condition that such entity shall provide a lock-up
undertaking on substantially the same terms as set forth in this subsection (A)
for the unexpired portion of the Selling Shareholder's First Lock-Up Period; (2)
a sale of the Common Shares to the Company arising out of a share repurchase
conducted by the Company pursuant to ROC laws and regulations and as set forth
in the Prospectus; or (3) an auction of the Common Shares conducted by the
Selling Shareholder concurrently with the offering of the ADSs contemplated
herein and as set forth in the prospectus), without the prior written consent of
the Joint Bookrunners, provided, however, that the Selling Shareholder may
publicly disclose its intention to dispose of additional Common Shares in
connection with the Privatization of the Company; and (B) during the period
beginning from the date of the completion of the Privatization of the Company
and continuing to and including the date 180 days after the date of the
completion of the Privatization of the Company (the "Selling Shareholder's
Second Lock-Up Period"), not to offer, sell, contract to sell, hedge or
otherwise dispose of, except as provided hereunder and under the Other
Underwriting Agreements, any Common Shares or ADSs or securities of the Company
that are substantially similar to the Common Shares or ADSs, including, but not
limited to, any securities that are convertible into or exchangeable or
exercisable for, or that represent the right to receive, Common Shares or ADSs
or any such substantially similar securities (other than pursuant to (1) a sale
to an entity which, in the sole judgment of the Joint Bookrunners, (y) is a
non-financial institution and (z) has as its principal line of business the
provision of [fixed-line]/[wireless]/[Internet] telecommunications services
[in the ROC], on the condition that such entity shall provide a lock-up
undertaking on substantially the same terms as set forth in this subsection (B)
20
for the unexpired portion of the Selling Shareholder's Second Lock-Up
Period; or (2) a sale of the Common Shares to the Company arising out of a
share repurchase conducted by the Company pursuant to ROC laws and
regulations and as set forth in the prospectus) without the prior written
consent of the Joint Bookrunners, provided, however, that the Selling
Shareholder's Second Lock-Up Period shall in no event extend beyond
December 31, 2004.
(ii) Prior to each Time of Delivery, to deposit, or cause to be
deposited on its behalf, the 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 Shares 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; and
(iv) To appoint and maintain to the Company's board of directors at
least two directors who do not have current or previous affiliation with
either the Selling Shareholder or the Company, and not to remove or
replace, except for cause, such directors during their terms of office.
6. (a) The Company and the Selling Shareholder, jointly and severally,
covenant and agree with one another and with the several Underwriters that the
Company and the Selling Shareholder will pay or cause to be paid their
respective portions, totalling 100% of the following: [(i) the fees,
disbursements and expenses of the Company's and the Selling Shareholder's
counsel and accountants in connection with the registration of the Shares and
ADSs under the Act and all other expenses in connection with the preparation and
filing of the Registration Statement, the ADS Registration Statement and the
Form 8-A Registration Statement and amendments and supplements thereto; (ii) all
expenses in connection with the qualification of the Shares and ADSs for
offering and sale under state securities laws, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky surveys; (iii) all fees and
expenses in connection with the listing of the Shares and ADSs on the NYSE; and
(iv) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of the
Shares and ADSs; (v) all expenses and taxes arising as a result of the deposit
by the Selling Shareholder of the Shares with the Depositary and the issuance
and delivery of the ADRs evidencing ADSs in exchange therefor by the Depositary
to the Selling Shareholder, of the sale and delivery of the ADS by the Selling
Shareholder to or for the account Underwriters, of the sale and delivery outside
of the ROC of the ADSs by the Underwriters to the initial purchasers thereof in
the manner contemplated under this Agreement, including, in any such case, any
ROC income, capital gains, withholding, transfer, stamp duty or other tax
asserted against an Underwriter or an Other Underwriter by reason of the
purchase and sale of an ADS pursuant to this Agreement or the Other Underwriting
Agreements or the Agreement among Syndicates (including income taxes as may be
imposed by any Governmental Agency on payments hereunder to any Underwriter
whose net income is subject to tax by the ROC or withholding, if any with
respect to
21
any such income tax); (vi) 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 or the Other Underwriters, in
connection with the initial purchase of ADSs); (vii) the fees and expenses of
the Authorized Agent (as defined in Section 15 hereof); (viii) the cost of
preparing ADRs; (ix) the cost and charges of any transfer agent or registrar;
(x) stock transfer taxes on resale of any of the ADSs by them; [(xi) all fees
and expenses in connection with the Japanese POWL;] and (xii) all other costs
and expenses to be agreed by the Company and the Selling Shareholder incident to
the performance of the obligations of the Company and the Selling Shareholder
hereunder which are not otherwise specifically provided for in this Section. (b)
It is understood, however, that except as provided in this Section, and Sections
8 and 12 hereof, the Underwriters will pay (i) the fees and disbursements of
their counsel; (ii) all expenses in connection with the printing of any
Preliminary Prospectus and the Prospectus and supplements thereto; (iii)
pre-marketing and roadshow expenses, including travel, lodging, conference
calls, car fare and other related expenses, (iv) promotional expenses, including
tombstone advertising, public relations consultants and other related expenses;
and (v) miscellaneous out-of-pocket expenses incurred by the Underwriters,
including travel, lodging, car fare, word processing, research, telephone and
teleconference.]
All payments to be made by the Company and the Selling Shareholder under
this Agreement and the Other Underwriting Agreements shall be paid free and
clear of and without deduction or withholding for or on account of, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature, imposed by any Governmental Agency, and all interests,
penalties or similar liabilities with respect thereto (collectively "Taxes"). If
any Taxes are required by law to be deducted or withheld in connection with such
payments, the Company and the Selling Shareholder will increase the amount paid
so that the full amount of such payment as agreed herein is received by the
Underwriters and the Other Underwriters.
7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and of the Selling Shareholder herein are, at and as
of such Time of Delivery, true and correct, the condition that the Company and
the Selling Shareholder shall have performed all of its and their obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to 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
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) Sullivan & Cromwell 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
22
matters;
(c) Lee and Li, ROC counsel for the Underwriters, shall have furnished
to you such written opinion, dated such Time of Delivery, with respect to the
matters covered in paragraphs (i), (ii), (iii), (iv), (vi), (vii), (viii), (x),
(xi), (xii), (xiii), (xiv), (xv), (xvi), (xvii), (xviii), (xix), (xx), (xxi),
(xxii), (xxiii), (xxiv), (xxv), (xxvi), (xxvii), (xxix) and (xxxi) 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) Simpson Thacher & Bartlett, United States counsel for the Company
and the Selling Shareholder, 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) Each of this Agreement and the Other Underwriting Agreements has
been duly executed and delivered by each of the Company and by the Selling
Shareholder in accordance with the laws of the State of New York;
(ii) The Deposit Agreement has been duly executed and delivered by the
Company in accordance with the laws of the State of New York and, assuming
that the Deposit Agreement has been duly authorized, executed and delivered
by the Depositary, constitutes a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms,
subject to (A) the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, (B) general equitable principles
(whether considered in a proceeding in equity or at law), (C) an implied
covenant of good faith and fair dealing and (D) the effects of the possible
judicial application of foreign laws or foreign governmental or judicial
action affecting creditors' rights;
(iii) Assuming the due authorization, execution, issuance and delivery
by the Depositary of ADRs evidencing the ADSs against the deposit of the
Shares in accordance with the provisions of the Deposit Agreement and
payment therefor in accordance with this Agreement, such ADRs will be duly
and validly issued and persons in whose names such ADRs are registered will
be entitled to the benefits specified therein and in the Deposit Agreement;
(iv) The sale of the Shares and ADSs by the Selling Shareholder and
the compliance by each of the Company and the Selling Shareholder with all
of the provisions of this Agreement and the Deposit Agreement will not
breach or result in a default under the agreements or instruments set forth
in Schedule I thereto, nor will such action violate any U.S. federal or New
York state statute or any rule or regulation that has been issued pursuant
to any U.S. federal or New York state statute or any order known to such
counsel issued pursuant to any U.S. federal or New York state statute by
any court or governmental agency or body or court having jurisdiction over
the Company or the Selling Shareholder or any of their respective
properties;
(v) No consent, approval, authorization, order, registration or
qualification of or with any U.S. federal or New York governmental agency
or body or, to such counsel's knowledge, any U.S. federal or New York state
court is required for the sale of the
23
Shares and ADSs by the Selling Shareholder and the compliance by the
Company and the Selling Shareholder with all of the provisions of this
Agreement or the Deposit Agreement, except for the registration under the
Act of the Shares and the ADSs, and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares and the ADSs by the Underwriters;
(vi) The ADSs have been approved for listing on the NYSE, subject to
notice of issuance.
(vii) The statements made in the Prospectus under the captions
"Description of American Depositary Shares", "Shares Eligible for Future
Sale" and "Underwriting", insofar as they purport to constitute summaries
of the terms of New York state or U.S. federal statutes, rules and
regulations thereunder or contracts and other documents, constitute
accurate summaries of the terms of such statutes, rules and regulations or
contracts and other documents in all material respects;
(viii) The statements made in the Prospectus under the caption
"Taxation - U.S. Federal Income Tax Considerations for U.S. Persons,"
insofar as they purport to constitute summaries of matters of U.S. federal
tax law and regulations or legal conclusions with respect thereto,
constitute accurate summaries of matters described therein in all material
respects;
(ix) Under the laws of the State of New York relating to submission to
jurisdiction, assuming validity and irrevocability in each case under the
laws of the ROC, the Company and the Selling Shareholder have, pursuant to
Section 15 of this Agreement and Section - of the Deposit Agreement, (A)
validly submitted to the jurisdiction of any state or federal court located
in the Borough of Manhattan, The City of New York (each a "New York
Court"), (B) validly waived, to the fullest extent each may effectively do
so, any objection each may now or hereafter have to the laying of venue in
the jurisdiction of a New York Court, and (C) validly appointed CT
Corporation System, 111 Eighth Avenue, New York, New York as its authorized
agent for the purpose described in Section 15 of this Agreement and Section
- of the Deposit Agreement, and service of process effected in the manner
set forth in Section 15 of this Agreement and Section - of the Deposit
Agreement will be effective to confer valid personal jurisdiction over the
Company and the Selling Shareholder; and the waiver by the Company and the
Selling Shareholder pursuant to this Agreement and the Deposit Agreement of
any immunity to jurisdiction to which it may otherwise be entitled
(including sovereign immunity and immunity from prejudgment attachment,
post-judgment attachment and execution) is legal, valid and binding under
New York and U.S. federal law, subject to the limitations imposed by the
United States Foreign Sovereign Immunities Acts of 1976;
(x) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of and subject
to regulation under the Investment Company Act;
(xi) The Registration Statement has become effective under the Act and
the Prospectus was filed on -, 2003 pursuant to Rule 424(b) of the rules
and regulations of the Commission under the Act; and, to our knowledge, no
stop order suspending the
24
effectiveness of the Registration Statement has been issued or proceeding
for that purpose has been instituted or threatened by the Commission;
(xii) (A) The Registration Statement, the ADS Registration Statement
and the Form 8-A Registration Statement, as of their respective effective
dates, and the Prospectus, as of -, 2003, complied as to form in all
material respects with the requirements of the Act or the Exchange Act, as
applicable, and the applicable rules and regulations of the Commission
thereunder, except that in each case such counsel expresses no opinion with
respect to the financial statements or other financial data contained in
the Registration Statement, the ADS Registration Statement or the
Prospectus, and (B) such counsel has no reason to believe that the
Registration Statement, the ADS Registration Statement and the Form 8-A
Registration Statement, as of their respective effective dates, contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading or that the Prospectus contained as of -,
2003 or contains as of the date such Time of Delivery any untrue statement
of a material fact or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstance under
which they were made, not misleading, except that in each case such counsel
expresses no belief with respect to the financial statements or other
financial data contained in the Registration Statement, the ADS
Registration Statement or the Prospectus;
(xiii) To such counsel's knowledge, there are no pending legal or
governmental proceedings against the Company required to be set forth in
the Prospectus which are not set forth as required, or any contracts or
documents of a character required to be set forth in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement which are not set forth and filed as required; and to such
counsel's knowledge, no legal or governmental proceedings against the
Company required to be set forth in the Prospectus which are not set forth
as required have been threatened or asserted by governmental authorities or
by others;
(xiv) Upon payment of the purchase price for the ADSs to the Selling
Shareholder by the Underwriters and the delivery by the Selling Shareholder
to DTC or its agent of the ADSs registered in the name of Cede & Co. or
such other nominee designated by DTC, both as provided for herein, and the
crediting of the ADSs to the Underwriters' accounts with DTC, Cede & Co. or
such other nominee designated by DTC will be a "protected purchaser" of the
ADSs (as defined in Section 8-303 of the Code), the Underwriters will
acquire a valid "security entitlement" (within the meaning of Section 8-501
of the Code) to the ADSs, and no action based on an "adverse claim" (as
defined in Section 8-102 of the Code) may be asserted against the
Underwriters with respect to such security entitlement (assuming that the
Underwriters are without notice of any such adverse claim); and
(xv) Under the laws of the United States and the State of New York,
neither the Company nor the Selling Shareholder is entitled to any immunity
on the basis of sovereignty or otherwise in respect of its obligations
under this Agreement, the Other Underwriting Agreements or the Deposit
Agreement and could not successfully interpose any such immunity as a
defense to any suit or action brought or maintained in respect of its
obligations under this Agreement, the Other Underwriting Agreements or
25
the Deposit Agreement; and, assuming that the waiver by the Company or the
Selling Shareholder of immunity to jurisdiction (including the waiver of
sovereign immunity to which the Company or the Selling Shareholder, as
applicable, may become entitled subsequent to the date of this Agreement,
the Other Underwriting Agreements or the Deposit Agreement) and immunity to
pre-judgment attachment, post-judgment attachment and execution in any
suit, action or proceeding against it arising out of or based on this
Agreement, the Other Underwriting Agreements or the Deposit Agreement is a
valid and binding obligation of the Company or the Selling Shareholder, as
applicable, under the laws of the ROC, the waiver by the Company or the
Selling Shareholder of immunity to jurisdiction (including the waiver of
sovereign immunity to which the Company or the Selling Shareholder may
become entitled subsequent to the date of this Agreement, the Other
Underwriting Agreements or the Deposit Agreement) and immunity to
pre-judgment attachment, post-judgment attachment and execution in any
suit, action or proceeding against it arising out of or based on this
Agreement, the Other Underwriting Agreements or the Deposit Agreement is a
valid and binding obligation of the Company or the Selling Shareholder, as
applicable, under New York law.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States;
(e) Baker & McKenzie, ROC counsel for the Company and the Selling
Shareholder 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 corporation limited by shares organized under the laws of the ROC with
power and authority (corporate and other) to own, use, lease and operate
its properties and conduct its business in the manner presently conducted
and as set forth in the Prospectus and to perform its obligations under
this Agreement and the Deposit Agreement; the Articles of Incorporation,
the business license and other constituent documents of the Company comply
with the requirements of applicable laws, statute and regulations of the
ROC and are in full force and effect;
(ii) 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 (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 and conform to the description of the Common Shares
contained in the Prospectus; all of the Common Shares (including the
Shares) have been duly listed and admitted for trading on the Taiwan Stock
Exchange; the holders of outstanding shares of capital stock of the Company
are not entitled to preemptive or other rights to acquire the Shares or the
ADSs in their capacity as shareholders; 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 the
Common Shares; the Shares to be deposited by the Selling Shareholder may be
freely deposited by the Selling Shareholder with the Depositary against
issuance of ADRs evidencing ADSs; the ADSs and the Shares are freely
transferable by the Selling Shareholder to or for the account of the
several Underwriters in the manner contemplated herein and in the Other
Underwriting
26
Agreements and the initial purchasers thereof;
(iii) All Governmental Authorizations of any Governmental Agency
required for (A) the deposit of Shares and the issuance of ADSs in respect
thereof, (B) the authorization, execution, delivery and performance by the
Company of this Agreement, the Other Underwriting Agreements and the
Deposit Agreement to be duly and validly authorized, (C) the authorization,
execution, delivery and performance by the Selling Shareholder of this
Agreement and the Other Underwriting Agreements to be duly and validly
authorized and (D) the consummation of the transactions contemplated by
this Agreement, the Other Underwriting Agreements and the Deposit Agreement
have been obtained or made and are in full force and effect and no such
Governmental Authorization has been withdrawn or is subject to any
condition precedent which has not been fulfilled or performed, except for
(A) such filings, if any, required by the ROC "Rules for Handling Issuance
and Offer of Overseas Securities by Issuers", (B) the approval of the ROC
Central Bank of China for foreign exchange settlements and payments
contemplated by the Deposit Agreement, (C) the approval of the Ministry of
Economic Affairs of the ROC for the Company's corporate amendment
registration with respect to the Shares, (D) the application to the Taiwan
Stock Exchange for listing of the Shares on the Taiwan Stock Exchange, and
(E) reports to the ROC Central Bank of China regarding (1) conversion from
New Taiwan dollars into United States dollars for payment of any dividends
or other amounts contemplated by the Deposit Agreement, and (2) the names
and telephone numbers of local agents in the ROC appointed by the holders
of the ADSs upon their withdrawal of the Shares represented by the ADSs
from the Company's American Depositary Shares facility;
(iv) 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;
(v) The Company has good and marketable title to all real property
owned by it, in each case free and clear of all liens, encumbrances,
charges, claims, third party rights or interests, defects and any other
restrictions except such as are set forth 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 the Company; and
any real property and buildings held under lease by the Company 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 the Company;
(vi) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company is a party or of which any property of the
Company is the subject which, if determined adversely to the Company, would
individually or in the aggregate have a material adverse effect on the
current or future financial position, shareholders' equity or results of
operations of the Company, and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by any Governmental Agency
or
27
threatened by others;
(vii) This Agreement and the Other Underwriting Agreements have been
duly authorized, executed and delivered by each of the Company and the
Selling Shareholder, and constitutes a valid and legally binding agreement
of each of the Company and the Selling Shareholder under laws and
regulations of the ROC, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(viii) The deposit of the Shares being deposited with the Depositary
against issuance of the ADRs evidencing the ADSs, the compliance by each of
the Company and the Selling Shareholder with all of the provisions of this
Agreement, the Other Underwriting Agreements 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 the Selling Shareholder are a party or by
which the Company or the Selling Shareholder are bound or to which any of
the property or assets of the Company is subject, nor will such action
result in any violation of the provisions of the Articles of Incorporation,
business licenses or other constituent documents of the Company or the
Selling Shareholder or any law or statute or any order, rule or regulation
known to such counsel of any Governmental Agency having jurisdiction over
the Company or the Selling Shareholder or any of their respective
properties, including the Telecommunication Acts of the ROC, the Statute of
Chunghwa Telecom Co., Ltd., the Statute Governing Privatization of State
Owned Enterprises, the Law Governing Administration of State Owned
Enterprises, the Audit Law of the ROC and the Budget Law of the ROC;
(ix) The Selling Shareholder has, and immediately prior to each Time
of Delivery the Selling Shareholder will have, good and valid title to the
Shares and ADSs to be sold by the Selling Shareholder hereunder and under
the Other Underwriting Agreements, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such Shares and
ADSs and payment therefor pursuant hereto and thereto, good and valid title
to such Shares and ADSs, free and clear of all liens, encumbrances,
equities or claims, will pass to the several Underwriters and the Other
Underwriters, as the case may be;
(x) The statements in the Prospectus under the caption "Prospectus
Summary", "Risk Factors", "Use of Proceeds, "Dividend Policy",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business", "Management", "The Taiwan Telecommunications
Industry", "Regulation", "Relationship with the Government of the Republic
of China", "Shares Eligible for Future Sale", "Related Party Transactions"
and "Enforceability of Civil Liabilities", and in "The Securities Markets
of Taiwan" and "Foreign Investment and Exchange Controls in Taiwan", to the
extent such statements relate to matters of law or regulation of the ROC,
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;
28
(xi) The opinions of such counsel set forth in the Prospectus under
"Validity of Securities" are confirmed as of such Time of Delivery;
(xii) Other than as set forth in the Prospectus, so long as this
Agreement, the Other Underwriting Agreement or any documents which are
deemed "receipts" under ROC Stamp Tax Law are executed outside the ROC, 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 or the Other Underwriters to the government of the ROC or to
any political subdivision or taxing authority thereof or therein in
connection with (A) the deposit with the Depositary of Shares by the
Selling Shareholder against the issuance of ADRs evidencing ADSs, (B) the
sale and delivery by the Selling Shareholder of the ADSs representing the
Shares to or for the respective accounts of the Underwriters, (C) the sale
and delivery outside the ROC by the Underwriters of the ADSs representing
the Shares to the initial purchasers thereof or (D) the execution, delivery
and performance of, or the consummation of any other transaction
contemplated under, this Agreement, the Other Underwriting Agreements and
the Deposit Agreement (other than any income tax that may be levied on the
income of the Underwriters or the Other Underwriters whose income may
otherwise be subject to ROC tax or withholding, if any, with respect to
such income tax);
(xiii) Insofar as matters of ROC law are concerned, the Registration
Statement, the Prospectus, the ADS Registration Statement, the Form 8-A
Registration Statement, the Japanese Registration Statement and the
Japanese Prospectus and the filing of the Registration Statement, the
Prospectus and the ADS Registration Statement with the Commission and the
filing of the Japanese Registration Statement and the Japanese Prospectus
with the KLFB have been duly authorized by and on behalf of the Company;
and the Registration Statement, the ADS Registration Statement, the Form
8-A Registration Statement and the Japanese Registration Statement have
been duly executed pursuant to such authorization by and on behalf of the
Company;
(xiv) The agreement of each of the Company and the Selling Shareholder
to the choice of law provisions set forth in Section 15 hereof and in
Section - of the Deposit Agreement will be recognized by the courts of the
ROC; each of the Company and the Selling Shareholder can sue and be sued in
its own name under the laws of the ROC; the irrevocable submission of each
of the Company and the Selling Shareholder to the exclusive jurisdiction of
a New York Court, the waiver by each of the Company and the Selling
Shareholder of any objection to the venue of a proceeding of a New York
Court and the agreement of each of the Company and the Selling Shareholder
that this Agreement and the Deposit 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 15 hereof and in Section - of the Deposit Agreement will be
effective, insofar as the law of the ROC is concerned, to confer valid
personal jurisdiction over each of the Company and the Selling Shareholder;
and judgment obtained in a New York Court arising out of or in relation to
the obligations of each of the Company and the Selling Shareholder under
this Agreement, the Other Underwriting Agreements and the Deposit Agreement
would be enforceable against the Company in the courts of the ROC;
(xv) The indemnification and contribution provisions set forth in
Section 8
29
hereof and in Section - of the Deposit Agreement do not contravene the
public policy or laws of the ROC, and insofar as matters of ROC law are
concerned, constitute the legal, valid and binding obligations of each of
the Company and the Selling Shareholder, enforceable in accordance with the
terms therein, subject, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization and other laws of general
applicability relating to or affecting creditors' rights;
(xvi) Other than as set forth in the Prospectus, all dividends and
other distributions declared and payable in respect of the capital stock of
the Company may under the current laws and regulations of the ROC be paid
in New Taiwan dollars (including any such dividends or distributions to be
paid to the Depositary), that may be converted into foreign currency that
may be freely transferred out of the ROC, and all such dividends and other
distributions will not be subject to withholding or other taxes under the
laws and regulations of the ROC and are otherwise free and clear of any
other tax, withholding or deduction in the ROC and without the necessity of
obtaining any Governmental Authorization in the ROC;
(xvii) Neither the Company nor the Selling Shareholder is (A) in
violation of its constituent documents, (B) in default, or with the giving
of notice or lapse of time or both would be 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 or instrument to which it is a party or
by which it or any of its properties may be bound, except such defaults
which individually or in the aggregate would not have a Material Adverse
Effect, or (C) in violation or contravention of any law or statute or any
order, rule or regulation of any Governmental Agency having jurisdiction
over the Company or any of its properties or the Selling Shareholder; and
the payments by the Company to the ROC government in anticipation of
dividends expected to be approved at subsequent annual shareholders
meetings set forth in the Prospectus under the caption "Dividends",
including the payment of NT$13.0 billion in January 2000 in anticipation of
dividends in respect of the period beginning on July 1, 1999 and ending on
December 31, 2000, were made in accordance with applicable law and
regulations;
(xviii) The statements set forth in the Prospectus under the caption
"Description of Share Capital" and "Description of American Depositary
Shares", insofar as they purport to constitute a summary of the terms of
the Common Shares and ADSs, respectively, under the heading of "Legal
Proceedings" under the caption "Business" and under the caption "Taxation
-- Republic of China Taxation" and "Underwriting", insofar as they purport
to describe the provisions of the laws of the ROC, are accurate, complete
and fair;
(xix) The ADSs delivered at each Time of Delivery by the Selling
Shareholder will be freely transferable by the Selling Shareholder to or
for the account of the several Underwriters and (to the extent set forth in
the Prospectus) the initial purchasers thereof; and there are no
restrictions on subsequent transfers of the Shares or ADSs under the laws
of the ROC except as set forth in the Prospectus under the captions
"Description of Share Capital", "Description of American Depositary
Shares", and "Foreign Investment and Exchange Controls in Taiwan";
30
(xx) Although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to in the opinion in
subsections (x) and (xviii) of this Section 7(d), they have no reason to
believe that, as of its effective date, the Registration Statement or any
further amendment 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
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, either the Registration Statement or 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;
(xxi) The entering into, performance and enforcement of this Agreement
and the Other Underwriting Agreements in accordance with its terms will not
subject the Underwriters or the Other Underwriters to a requirement to be
licensed or otherwise qualified to do business in the ROC, nor will any
Underwriter or Other Underwriter be deemed to be resident, domiciled,
carrying on business through an establishment or place in the ROC or in
breach of any laws or regulations of the ROC by reason of entering into,
performance or enforcement of this Agreement or the Other Underwriting
Agreements;
(xxii) The Company has all licenses, consents, franchises, permits,
authorizations, approvals, certificates and orders and other concessions of
and from, and has made all necessary declaration and filings with, all
Governmental Agencies that are necessary to own, lease, license and use its
properties and conduct its businesses in the manner as set forth in the
Prospectus and such licenses, consents, franchises, permits,
authorizations, approvals, certificates, orders or concessions contain no
materially burdensome restrictions or conditions not set forth in the
Registration Statement or the Prospectus; and such counsel has no reason to
believe that the Ministry of Transportation and Communications, the
Directorate General of Telecommunications or any other Governmental Agency
is considering modifying, suspending or revoking any such licenses,
consents, franchises, permits, authorizations, approvals, certificates,
orders or concessions;
(xxiii) Other than as set forth in the Prospectus, the Company has no
obligation to provide retirement, death or disability benefits to any of
the present or past employees of the Company or the Subsidiary, or to any
other person that would, individually or in the aggregate, have a Material
Adverse Effect;
(xxiv) Each of this Agreement, the Other Underwriting Agreements and
the
31
Deposit Agreement is in proper form to be enforceable against each of the
Company and the Selling Shareholder in the ROC in accordance with its
terms; to ensure the legality, validity, enforceability or admissibility
into evidence in the ROC of each of this Agreement, the Other Underwriting
Agreements and the Deposit Agreement, it is not necessary that this
Agreement, the Other Underwriting Agreement or the Deposit Agreement be
filed or recorded with any court or other authority in the ROC or that any
stamp or similar tax in the ROC be paid on or in respect of this Agreement,
the Other Underwriting Agreements, the Deposit Agreement or any other
documents to be furnished hereunder, it being understood that in court
proceedings in the ROC, a translation into the Chinese language may be
required;
(xxv) No holder of any of the Shares or the ADSs after the
consummation of the transactions contemplated by this Agreement, the Other
Underwriting Agreements or the Deposit Agreement is or will be subject to
any liability in respect of any liability 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;
(xxvi) Under the laws of the ROC, 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;
(xxvii) 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
ROC or any authority thereof or therein nor are any taxes imposed in the
ROC on, or by virtue of the execution or delivery of, such documents; and
(xxviii) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no contracts, agreements or
understandings between or among the Company and/or the Selling Shareholder
on the hand, and any person on the other hand, that would give rise to a
valid claim against the Company, the Selling Shareholder, any Underwriter
or any Other Underwriter for a brokerage commission, finder's fee or other
like payment;
(xxix) Inasmuch as the Prospectus states that under the existing ROC
laws and regulations relating to foreign exchange controls, the Company
will be required to obtain foreign exchange control approval from the
Central Bank of China for the conversion into foreign currencies and the
remittance out of the ROC of dividends and certain other amounts, on a
payment-by-payment basis, such counsel has no reason to believe that such
exchange control approvals will not be routinely available on a timely
basis to the Company;
(xxx) The Company owns or has the legal right to use, or can acquire
on reasonable terms, all patents, patent licenses, inventions, copyrights,
trademarks, service marks, trade names, domain names and know-how
(including trade secrets and
32
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), information, proprietary rights and
processes necessary to conduct its business as currently conducted and as
proposed to be conducted, and to the best knowledge of such counsel, the
Company has not received any notice or claim of infringement of or conflict
with asserted rights of others with respect to any of the foregoing which,
individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in any Material Adverse Effect;
to the best knowledge of such counsel, the Company has not in conducting
its business activities infringed any patent, copyright, title, trademark,
service mark, trade name, domain name or other intellectual property rights
already registered by a third party in the ROC or other jurisdiction; and
(xxxi) Under the laws of the ROC, the Company is not entitled to any
immunity on the basis of sovereignty or otherwise in respect of its
obligations under this Agreement, the Other Underwriting Agreements or the
Deposit Agreement and could not successfully interpose any such immunity as
a defense to any suit or action brought or maintained in respect of its
obligations under this Agreement, the Other Underwriting Agreements or the
Deposit Agreement; and, assuming that the waiver by the Company of immunity
to jurisdiction (including the waiver of sovereign immunity to which the
Company may become entitled subsequent to the date of this Agreement, the
Other Underwriting Agreements or the Deposit Agreement) and immunity to
pre-judgment attachment, post-judgment attachment and execution in any
suit, action or proceeding against it arising out of or based on this
Agreement, the Other Underwriting Agreements or the Deposit Agreement is a
valid and binding obligation of the Company under ROC law, the waiver by
the Company of immunity to jurisdiction (including the waiver of sovereign
immunity to which the Company may become entitled subsequent to the date of
this Agreement, the Other Agreements or the Deposit Agreement) and immunity
to pre-judgment attachment, post-judgment attachment and execution in any
suit, action or proceeding against it arising out of or based on this
Agreement, the Other Underwriting Agreements or the Deposit Agreement is a
valid and binding obligation of the Company under ROC law.
In giving such opinion, such counsel may state that 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;
(f) Emmet, Marvin & Martin 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, assuming due authorization, execution and
delivery of the Deposit Agreement by the Company, constitutes a valid and
legally binding obligation of the Depositary, enforceable in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization moratorium or similar laws
of general applicability relating to or affecting creditors' rights and to
general principles of equity;
(ii) Upon execution and delivery by the Depositary of ADRs evidencing
ADSs
33
against the deposit of Shares in accordance with the provisions of the
Deposit Agreement (assuming such Shares were, at the time of such deposit,
(A) duly authorized and validly issued, fully paid and non-assessable and
(B) registered in compliance with the Act), such ADRs will be duly and
validly issued and will entitle the holder thereof to the rights specified
therein and in the Deposit Agreement;
(iii) The execution and delivery of the Deposit Agreement by the
Depositary and the compliance by the Depositary with all the provisions
thereof does not and will not result in the violation of any statute, rule
or regulation applicable to the Depositary or the organizational
certificate or bylaws of the Depositary;
(iv) No approval, authorization or other action by, or filing with,
any governmental authority or regulatory body is required for the due
execution, delivery and performance by the Depositary of the Deposit
Agreement; and
(v) The ADS Registration Statement, as amended, has been declared
effective under the Act and, to the best of such counsel's 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 thereof, as of their
respective dates, complied as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder;
(g) On the date of the Preliminary Prospectus, 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 amendment to the
Registration Statement filed subsequent to the date of this Agreement and also
at each Time of Delivery, T.N. Soong & Co. 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 letters delivered prior to the execution of this Agreement
is attached as Annex I(a) hereto);
(h) (i) The Company shall not 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, earthquake 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 (ii) 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, otherwise
than as set forth or contemplated in the Prospectus, the effect of which, in any
such case described in this clause (i) or (ii), is in the judgment of the Joint
Bookrunners so material and adverse as to make it impracticable or inadvisable
to proceed with the public offering or the delivery of the Shares and ADSs on
the terms and in the manner contemplated in the Prospectus;
(i) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;
34
(j) The ADSs to be sold by the Selling Shareholder at such Time of
Delivery shall have been duly listed, subject to notice of issuance, on the
NYSE;
(k) The Depositary shall have furnished or caused to be furnished to
you at 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 Selling Shareholder at such Time of
Delivery, and the execution, countersignature (if applicable), issuance and
delivery of ADRs evidencing such ADSs pursuant to the Deposit Agreement;
(l) 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;
(m) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company satisfactory to
you as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the Company
of all of its 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 (h) of this Section, and as to such
other matters as you may reasonably request; and
(n) The Selling Shareholder shall have furnished or caused to be
furnished to you at such Time of Delivery certificates of an officer of the
Selling Shareholder satisfactory to you as to the accuracy of the
representations and warranties of the Selling Shareholder herein at and as of
such Time of Delivery, as to the performance by the Selling Shareholder of all
of its obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as you may reasonably request.
8. (a) The Company and the Selling Shareholder, jointly and severally, will
indemnify and hold harmless each Underwriter against any losses, claims,
damages, expenses or liabilities, joint or several, to which such Underwriter
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages, expenses 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, the Prospectus, the Form 8-A Registration Statement,
the Japanese Registration Statement or the Japanese 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 action or
claim as such expenses are incurred; provided, however, that the Company and the
Selling Shareholder shall not be liable in any such case to the extent that any
such loss, claim, damage, expenses 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, the Prospectus, the Form 8-A Registration Statement, the
Japanese Registration Statement or the Japanese Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the
35
Company by any Underwriter through the Joint Bookrunners expressly for use
therein.
(b) Each Underwriter will indemnify and hold harmless the Company and
the Selling Shareholder against any losses, claims, damages, expenses or
liabilities to which the Company or the Selling Shareholder may become subject,
under the Act or otherwise, insofar as such losses, claims, damages, expenses 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, the Prospectus, the Form 8-A Registration Statement, the Japanese
Registration Statement or the Japanese 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, the
Prospectus, the Form 8-A Registration Statement, the Japanese Registration
Statement or the Japanese Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Joint Bookrunners expressly for use
therein; and will reimburse the Company and the Selling Shareholder for any
legal or other expenses reasonably incurred by the Company or the 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 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 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 (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) 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.
(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, expenses
or liabilities (or actions in respect thereof) referred to
36
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,
expenses or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholder on the one hand (it being understood that for purposes of
this subsection (d), any benefit received by the Selling Shareholder shall also
be deemed to have been received by the Company) 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 and the
Selling Shareholder on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Shareholder 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 and the Selling Shareholder
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 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
or the Selling Shareholder 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, the Selling
Shareholder 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, expenses 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 and the Selling Shareholder under
this Section 8 shall be in addition to any liability which the Company and the
Selling Shareholder may otherwise have and shall extend, upon the same terms and
conditions, to the respective affiliates and selling agents of each 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
37
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) or the Selling Shareholder, as the case may be, and to each person, if
any, who controls the Company or the Selling Shareholder, as the case may be,
within the meaning of the Act.
9. (a) If any Underwriter or any of the Other Underwriters, as applicable,
shall default in its obligation to purchase the American Depositary Shares which
it has agreed to purchase under this Agreement or the Other Underwriting
Agreements, as applicable, at a Time of Delivery, you may in your discretion
arrange for you or another party or other parties to purchase such American
Depositary Shares on the terms contained herein or therein, as applicable. If
within thirty-six hours after such default by any Underwriter or any of the
Other Underwriters, as applicable, you do not arrange for the purchase of such
American Depositary Shares, then the Company and the Selling Shareholder 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 American
Depositary Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company and the Selling Shareholder that you
have so arranged for the purchase of such American Depositary Shares, or the
Company and the Selling Shareholder notifies you that they have so arranged for
the purchase of such American Depositary Shares, you or the Company and the
Selling Shareholder 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, and the term "Other
Underwriter" as used in this Agreement shall include any person substituted
under the relevant section of the corresponding Other Underwriting Agreement
with like effect as if such person had originally been a party to such Other
Underwriting Agreement.
(b) If, after giving effect to any arrangements for: (i) the purchase
of the ADSs of a defaulting Underwriter or Underwriters by you or the Company
and the Selling Shareholder as provided in subsection (a) above, and (ii) the
purchase of American Depositary Shares of a defaulting Other Underwriter or
Underwriters by you or the Company and the Selling Shareholder as provided in
the relevant section of the corresponding Other Underwriting Agreement, the
aggregate number of American Depositary Shares which remains unpurchased does
not exceed one-eleventh of the aggregate number of all of the American
Depositary Shares at such Time of Delivery, then the Selling Shareholder 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: (i) the purchase
of the ADSs of a defaulting Underwriter or Underwriters by you or the Company
and the Selling Shareholder as provided in subsection (a) above, and (ii) the
purchase of American Depositary Shares of a
38
defaulting Other Underwriter or Underwriters by you or the Company and the
Selling Shareholder as provided in the relevant section of the corresponding
Other Underwriting Agreement, the aggregate number of American Depositary Shares
which remains unpurchased exceeds one-eleventh of the aggregate number of all of
the American Depositary Shares at such Time of Delivery, or if the Company and
the Selling Shareholder 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
Selling Shareholder to sell the Optional ADSs) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
or the Selling Shareholder, except for the expenses to be borne by the Company
and the Selling Shareholder and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Sections 8 and 16 hereof; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Shareholder 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 officer or director or controlling person of
the Company, the Selling Shareholder, or any controlling person of the Selling
Shareholder, and shall survive delivery of and payment for the ADSs.
11. This Agreement shall be subject to termination in the absolute
discretion of the Joint Bookrunners, by written notice given to the Company
prior to a Time of Delivery, if at any time prior to such Time of Delivery, any
of the following events shall have occurred: (a) a suspension or material
limitation in trading in securities generally by the Commission or the ROC
Securities and Futures Commission on the NYSE or Taiwan Stock Exchange, as
applicable, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of such exchanges or any
Governmental Agency; (b) a suspension or material limitation in trading in the
Company's securities on the NYSE or Taiwan Stock Exchange; (c) a general
moratorium on commercial banking activities in New York, London or the ROC
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 or the ROC; (d) a change or development involving a prospective
change in the ROC taxation affecting the Company, the Shares or the ADSs or the
transfer thereof; (e) the outbreak or escalation of hostilities involving the
United States, North Korea or the ROC or the declaration by the United States,
North Korea or the ROC of a national emergency or war, if the effect of any such
event specified in this clause (e), in the judgment of the Joint Bookrunners,
makes it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares and ADSs being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus; (f) since the respective
dates as of which information is given in the Prospectus, 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, otherwise than as set forth in the Prospectus, if the effect of any
such event specified in this clause (f) in the judgment of the Joint Bookrunners
so material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares and ADSs being delivered
at such Time of Delivery on the terms and in the manner contemplated in the
Prospectus; or (g) the occurrence of any calamity or crises or any material
adverse change
39
in the existing financial, political or economic conditions or currency exchange
rates or controls in the United States, the United Kingdom and the ROC or
elsewhere which, in the judgment of the Joint Bookrunners would materially and
adversely affect the financial markets or the market for the Shares and ADSs.
12. If this Agreement shall be terminated pursuant to Sections 9 or 11
hereof, neither the Company nor the Selling Shareholder shall then be under any
liability to any Underwriter except as provided in Sections 6, 8 and 16 hereof;
but, if for any other reason any ADSs are not delivered by or on behalf of the
Selling Shareholder as provided herein, the Company and the Selling Shareholder
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
Shareholder shall then be under no further liability to any Underwriter in
respect of the ADSs not so delivered except as provided in Sections 6, 8 or 16
hereof.
13. 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; and in all dealings with the Company or the Selling Shareholder
hereunder, as the case may be, you and the Company shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of the Company
or the Selling Shareholder, as the case may be.
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 at [Insert Address, Fax
Number and Contact Department]; if to the Selling Shareholder shall be delivered
or sent by mail, telex or facsimile transmission to counsel for such Selling
Shareholder at [Insert Address, Fax Number and Contact Department]; and if to
the Company shall be delivered or sent by mail, telex or facsimile transmission
to the address of the Company set forth in the Registration Statement,
Attention: Secretary; 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 in its
Underwriters' Questionnaire or telex constituting such Questionnaire, which
address will be supplied to the Company or the Selling Shareholder by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Shareholder 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, including any affiliates and selling agents of an 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.
15. Each of the parties hereto irrevocably (a) agrees that any legal suit,
action or proceeding 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 fullest extent it may effectively do so, any objection which it
may now or hereafter have to the laying of venue of any
40
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
Shareholder irrevocably waives any immunity to jurisdiction to which it may
otherwise be entitled or become entitled (including sovereign immunity, immunity
to pre-judgment attachment, post-judgment attachment and execution) in any legal
suit, action or proceeding against it arising out of or based on this Agreement
or the transactions contemplated hereby which is instituted in any New York
Court or in any competent court in the ROC. Each of the Company and the Selling
Shareholder has appointed C.T. Corporation System, 111 Eighth Avenue, New York,
New York, 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 Shareholder 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 and the Selling Shareholder, as the case may be,
shall be deemed, in every respect, effective service of process upon the Company
and the Selling Shareholder, as the case may be.
16. 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 Shareholder, 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 Shareholder 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.
17. 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.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
19. 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.
20. This Agreement and the Other Underwriting Agreements constitute the
entire agreement among the parties and supersede all prior agreements and
understandings, oral or written, with respect to the matters set forth herein.
41
If the foregoing is in accordance with your understanding, please sign and
return to us eight 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
and the Selling Shareholder. 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 and the Selling Shareholder for examination upon
request, but without warranty on your part as to the authority of the signers
thereof.
Very truly yours,
Chunghwa Telecom Co., Ltd.
By:
-----------------------------------------
Name:
Title:
Ministry of Transportation and Communications
By:
-----------------------------------------
Name:
Title:
Accepted as of the date hereof
on behalf of each of the Underwriters
[Name of Representative]
By:
---------------------------------
Name:
Title:
42
SCHEDULE I
Number of Optional
ADSs
to be
Total Number of Purchased if
ADSs Maximum Option
Underwriter to be Purchased Exercised
- ----------- --------------- ------------------
[Name of Representative]
[Name(s) of Co-Representative(s)]
[Names of other Underwriters]
--------------- ------------------
Total
=============== ==================
I-1
ANNEX I
FORM OF COMFORT LETTER
Pursuant to Section 7(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
1. (i) They are independent certified public accountants with respect to
the Company and its 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 "Representatives");
(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
Representatives; 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) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years which were included
or incorporated by reference in the Company's Annual Reports on Form 20-F for
such fiscal years;
(v) They have compared the information in the Prospectus under
selected
A-1
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;
(vi) 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) 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 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
A-2
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 Shareholder' equity or
other items specified by the Representatives, or any increases in any items
specified by the Representatives, 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
(vii) 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 to in paragraphs (iii) and (vi)
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 Representatives, which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement; and
2. (i) They have performed procedures agreed upon between themselves and
the Underwriters, with such procedures set forth in a report that is issued
separately from the comfort letter. Such report shall contain, among other
things as agreed between the accountants and the Underwriters, a schedule for
each of the four years from 1999 to 2002, setting forth selected financial data
prepared in accordance with (x) ROC GAAP, (y) ROC GAAP after adjustments by the
Government of the ROC and (z) US GAAP. The procedures involved shall include:
(A) Tracing the number to the selected financial data table included
in the Prospectus, noting agreement;
(B) Clerically re-footing the amount across, noting agreement; and
A-3
(C) Recomputing percentages/ratios, noting agreement.
A-4