Exhibit 1.1
TAIWAN SEMICONDUCTOR MANUFACTURING
COMPANY LIMITED
240,000,000 AMERICAN DEPOSITARY SHARES
REPRESENTING
1,200,000,000 COMMON SHARES
(PAR VALUE NT$10 PER SHARE)
UNDERWRITING AGREEMENT
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May , 2007
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Peterborough Court
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▇.▇. ▇▇▇▇▇▇ Securities Ltd.
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As the representatives (the "Representatives") of the several Underwriters
named in Schedule I hereto,
Ladies and Gentlemen:
Koninklijke Philips Electronics N.V. (the "Selling Shareholder" or
"Philips"), a shareholder of Taiwan Semiconductor Manufacturing Company Limited,
a company limited by shares (the "Company") and duly organized and existing
under the laws of the Republic of China (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 240,000,000 American
Depositary Shares representing 1,200,000,000 common shares, par value NT$10 per
share (the "Common Shares"), of the Company. The aggregate of 240,000,000
American Depositary Shares representing 1,200,000,000 Common Shares to be sold
by the Selling Shareholder are herein called the "ADSs". The Common Shares
represented by the ADSs are hereinafter called the "Shares".
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The ADSs are to be issued pursuant to an amended and restated deposit
agreement (the "Deposit Agreement") dated as of November 30, 2005, among the
Company, Citibank N.A., 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 the right to receive five Common Shares deposited pursuant
to the Deposit Agreement.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) An "automatic shelf registration statement" as defined under
Rule 405 under the Securities Act of 1933, as amended (the "Act"), on Form
F-3 (File No. 333- ) (the "Initial Registration Statement") in respect
of the Shares has been filed with the Securities and Exchange Commission
(the "Commission") not earlier than three years prior to the date hereof;
such registration statement, and any post-effective amendment thereto, each
in the form heretofore delivered to the Representatives and excluding
exhibits thereto but including all documents incorporated by reference in
the prospectus contained therein, became effective on filing; and no stop
order suspending the effectiveness of such registration statement or any
part thereof has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission, and no notice of objection of
the Commission to the use of such registration statement or any
post-effective amendment thereto pursuant to Rule 401(g)(2) under the Act
has been received by the Company; the various parts of such registration
statement, including all exhibits thereto, the documents incorporated by
reference in the prospectus contained in such registration statement and
any prospectus relating to the Shares or the ADSs that is filed with the
Commission and deemed by virtue of Rule 430B to be part of such
registration statement, each as amended at the time such part of the
registration statement became effective, are hereinafter collectively
called the "Registration Statement"; the preliminary form of prospectus
filed as part of the Initial Registration Statement (or any post-effective
amendment thereto) or any preliminary form of prospectus relating to the
Shares or the ADSs filed with the Commission pursuant to Rule 424(b) under
the Act is hereinafter called a "Preliminary Prospectus"; the Preliminary
Prospectus, as amended and supplemented immediately prior to the Applicable
Time (as defined in Section 1(a)(iii) hereof) is hereinafter called the
"Pricing Prospectus"; the form of the final prospectus, relating to the
Shares and the ADSs filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof is hereinafter called the
"Prospectus"; and any reference herein to any Preliminary Prospectus, the
Pricing Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 6
of Form F-3 under the Act, as of the date of such Preliminary Prospectus,
the Pricing Prospectus or the Prospectus, as the case may be; any reference
to any amendment or supplement to any Preliminary Prospectus, the Pricing
Prospectus or the Prospectus shall be deemed to refer to and include any
documents filed after the date of such Preliminary Prospectus, Pricing
Prospectus or Prospectus, as the case may be, under the U.S. Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by
reference in such Preliminary Prospectus, Pricing Prospectus or Prospectus,
as the case may be; any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any
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annual report of the Company filed pursuant to Section 13(a) or 15(d) of
the Exchange Act after the effective date of the Registration Statement
that is incorporated by reference in the Registration Statement; and any
"issuer free writing prospectus" as defined in Rule 433 under the Act
relating to the Shares is hereinafter called an "Issuer Free Writing
Prospectus";
(ii) No order preventing or suspending the use of any Preliminary
Prospectus or any Issuer Free Writing 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 each Preliminary
Prospectus 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 Representatives or by the Selling Shareholder
expressly for use therein;
(iii) For the purposes of this Agreement, the "Applicable Time" is
New York time on the date of this Agreement. The Pricing Prospectus
(considered together with the amount and price to the public of the ADSs as
listed on the front page of the Prospectus), as of the Applicable Time, did
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
each Issuer Free Writing Prospectus listed on Schedule II(a) hereto does
not conflict with the information contained in the Registration Statement,
the Pricing Prospectus or the Prospectus, and each such Issuer Free Writing
Prospectus, as supplemented by and taken together with the Pricing
Prospectus (considered together with the amount and price to the public of
the ADSs as listed on the front page of the Prospectus), as of the
Applicable Time, did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall
not apply to statements or omissions made in an Issuer Free Writing
Prospectus in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through the Representatives or by
the Selling Shareholder expressly for use therein;
(iv) The documents incorporated by reference in the Pricing Prospectus
and the Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder, and none of such documents
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; any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed with
the Commission, as the case may be, will conform in all material respects
to the requirements of the Act or the Exchange Act, as
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applicable, and the rules and regulations of the Commission thereunder and
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; 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 Representatives or by
the Selling Shareholder expressly for use therein; and no such documents
were filed with the Commission since the Commission's close of business on
the business day immediately prior to the date of this Agreement and prior
to the execution of this Agreement, except as set forth on Schedule II(b)
hereto;
(v) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement and 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 will not, as of the applicable
effective date as to each part of 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
the Representatives or by the Selling Shareholder expressly for use
therein;
(vi) (A)(i) At the time of filing the Registration Statement, (ii) at
the time of the most recent amendment thereto for the purposes of complying
with Section 10(a)(3) of the Act (whether such amendment was by
post-effective amendment, incorporated report filed pursuant to Section 13
or 15(d) of the Exchange Act or form of prospectus), and (iii) at the time
the Company or any person acting on its behalf (within the meaning, for
this clause only, of Rule 163(c) under the Act) made any offer relating to
the Shares in reliance on the exemption of Rule 163 under the Act, the
Company was a "well-known seasoned issuer" as defined in Rule 405 under the
Act; and (B) at the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2) under the Act) of the Shares,
the Company was not an "ineligible issuer" as defined in Rule 405 under the
Act;
(vii) Registration statements on Form F-6 (File Nos. 333-126397 and
333- ) in respect of the ADSs have been filed with the Commission; such
registration statements and any post-effective amendment thereto, each in
the form heretofore delivered to the Representatives and, excluding
exhibits, to the Representatives for each of the other Underwriters, have
been declared effective by the Commission in such form; no other document
with respect to such registration statements has heretofore been filed with
the Commission; no stop order suspending the effectiveness of such
registration statements has been issued and, to the knowledge of the
Company, no proceeding for that purpose has been initiated or threatened by
the Commission (the various parts of such registration statements,
including all exhibits thereto, each as amended at the time such part of
the registration statement(s) became effective, being hereinafter
collectively called the
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"ADR Registration Statement"); and the ADR Registration Statement when it
became effective conformed, and any further amendments thereto will
conform, in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder, and did not, as of the
applicable effective date, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading;
(viii) The Company has not sustained since the date of the latest
audited financial statements included or incorporated by reference in the
Pricing Prospectus any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Pricing
Prospectus, and, since the respective dates as of which information is
given in the Registration Statement and the Pricing Prospectus, there has
not been any change in the capital stock (other than through the exercise
of options under currently existing employee stock option plans), any
increase in the long-term debt of the Company in excess of US$1 billion 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 or results of operations of the
Company, otherwise than as set forth or contemplated in the Pricing
Prospectus; the Company has no subsidiary that as of the date of the
Registration Statement and Pricing Prospectus is a "significant subsidiary"
as defined in Regulation S-X under the Act;
(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 and defects except such as
are described in the Pricing 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;
(x) The Company has been duly incorporated and is validly existing
as a company limited by shares under the laws of the ROC, with corporate
power and authority to own its properties and conduct its business as
described in the Pricing Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification,
except where the failure to be so qualified would not, individually or in
the aggregate, have a material adverse effect on the general affairs,
management or current or future consolidated financial position,
shareholders' equity or results of the operations of the Company taken as a
whole (a "Material Adverse Effect");
(xi) The Company has an authorized capitalization as set forth in the
Pricing Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares) have been duly and validly authorized and
issued, are fully paid and non-
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assessable and all of the issued and outstanding Common Shares conform in
all material respects to the description of the Common Shares contained in
the Pricing Prospectus and the Prospectus; all of the issued and
outstanding Common Shares (including the Shares) have been duly listed and
admitted for trading on the Taiwan Stock Exchange of the ROC (the "TSE");
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
connection with the transactions contemplated hereby or otherwise; 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, Common Shares or any other class of capital stock of
the Company, except as set forth in the sections entitled "Item 6.
Directors, Senior Management and Employees", "Item 10. Additional
Information--Description of Common Shares" and "Item 10. Additional
Information--Foreign Investment in the ROC" in the Company's Annual Report
on Form 20-F for the year ended December 31, 2006 (the "Annual Report")
incorporated by reference in the Pricing Prospectus; 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 described in the Pricing Prospectus) the initial purchasers
thereof;
(xii) The Deposit Agreement has been duly authorized, executed and
delivered by the Company and, assuming it has been duly authorized,
executed and delivered by the Depositary, constitutes a valid and legally
binding agreement of the Company, 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; upon issuance
by the Depositary of ADRs evidencing ADSs against the deposit of the 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; the terms and conditions of
the Deposit Agreement and the ADRs conform in all material respects to the
descriptions thereof contained in the Pricing Prospectus and the Prospectus
as of the date hereof; and there are no restrictions on subsequent
transfers of the Shares or ADSs under the laws of the ROC and of the United
States except as described in the Pricing Prospectus under the caption
"Description of American Depositary Receipts" and in the sections entitled
"Item 10. Additional Information--Foreign Investment in the ROC" and "Item
10. Additional Information--Description of Common Shares" in the Annual
Report incorporated by reference in the Pricing Prospectus;
(xiii) This Agreement has been duly authorized, executed and delivered
by the Company;
(xiv) Other than as set forth or contemplated in the Pricing
Prospectus, no consent, approval, authorization, order of, or clearance by,
or registration or filing with any governmental agency or body or any court
or any stock exchange authorities (hereinafter referred to as a
"Governmental Agency") having jurisdiction over the Company is required for
the consummation of the transactions contemplated by the Deposit Agreement
and this Agreement, the deposit of the Shares with the Depositary by the
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Selling Shareholder, or the issuance and sale of ADRs evidencing the ADSs
representing the Shares at the Time of Delivery, except for (A)
registration of the Shares and ADSs under the Act, and any filings required
under Rule 424 of the Act, (B) the approval of the Central Bank of the
Republic of China (Taiwan) ("CBC") of foreign exchange settlements and
payments contemplated by the Deposit Agreement, (C) the filings and
approvals, if any, required under the Guidelines for Handling Issuance and
Offer of Overseas Securities by Issuers of the ROC (the "Overseas Offering
Rules"), the Securities and Exchange Law of the ROC and the Company Law of
the ROC and as required by the Financial Supervisory Commission of the ROC
(the "ROC FSC") and the CBC, (D) any governmental authorizations as may be
required under state securities or Blue Sky laws or any laws of
jurisdictions outside the ROC and the United States in connection with the
purchase and distribution of the ADSs by or for the account of the
Underwriters and (E) those approvals which have been obtained under the
laws of the ROC and are in full force and effect as of the date hereof,
including the approval of the Science-Park Administration ("SPA"), the CBC
and the ROC FSC;
(xv) Other than as set forth in the Pricing Prospectus, no
governmental approvals are currently required in the ROC in order for the
Company to pay dividends or other distributions declared by the Company to
holders of Common Shares, including the Depositary, or for the conversion
by the Depositary of any dividends paid in New Taiwan dollars ("NT
dollars") to U.S. dollars or the repatriation thereof out of the ROC and no
other withholding or other taxes under the current laws and regulations of
the ROC are imposed in connection with the declaration and payment by the
Company of dividends and other distributions in respect of shares of its
capital stock;
(xvi) The compliance by the Company with all of the provisions of this
Agreement and the Deposit Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other material 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 any 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 the articles of incorporation of the Company
or any statute or any order, rule or regulation of any Governmental Agency
having jurisdiction over the Company or any of its properties, including
the Company Law of the ROC and the Securities and Exchange Law of the ROC
and the regulations promulgated thereunder;
(xvii) Other than as set forth in the Pricing Prospectus, the Company is
not in violation of its constituent documents or in default in the
performance or observance of any material obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other material agreement or instrument to which it is a
party or by which it or any of its properties may be bound, except such
violations or defaults which, individually or in the aggregate, would not
have a Material Adverse Effect;
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(xviii) Neither the Company nor any of its subsidiaries has taken,
directly or indirectly, any action which was designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares and ADSs;
(xix) Other than as set forth in the Pricing 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; and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by any Governmental Agency
or threatened by others;
(xx) The Company is not and, after giving effect to the offering
and sale of the ADSs, will not be required to register as an "investment
company" under the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xxi) Except as otherwise disclosed in the Pricing Prospectus, the
Company has all licenses, franchises, permits, authorizations, approvals
and orders and other concessions of and from all Governmental Agencies
having jurisdiction over the Company that are necessary to own or lease its
properties and conduct its businesses as described in the Pricing
Prospectus and the Prospectus other than any such licenses, franchises,
authorizations, approvals, orders or concessions the absence of which would
not individually or in the aggregate have a Material Adverse Effect;
(xxii) The Company is not a Passive Foreign Investment Company ("PFIC")
within the meaning of Section 1297 of the United States Internal Revenue
Code of 1986, as amended, and is not likely to become a PFIC;
(xxiii) Deloitte & Touche, who has certified certain financial statements
of the Company and its subsidiaries, and has audited the Company's internal
control over financial reporting and management's assessment thereof, is an
independent registered public accounting firm as required by the Act and
the rules and regulations of the Commission thereunder;
(xxiv) The audited consolidated financial statements (and the notes
thereto) (the "Consolidated Financial Statements") of the Company
incorporated by reference in the Pricing Prospectus and the Prospectus
present fairly the financial position of the Company as of the dates
indicated and the results of operations and changes in financial position
of the Company for the periods specified, and the Consolidated Financial
Statements have been prepared in conformity with generally accepted
accounting principles in the ROC ("ROC GAAP") applied on a consistent basis
throughout the periods presented (other than as described therein); the
interim consolidated financial information (the "Interim Consolidated
Financial Information") of the Company included or incorporated by
reference in the Pricing Prospectus and the Prospectus presents fairly the
financial position of the Company as of the dates indicated and the results
of operations and changes in financial position of the Company for the
periods specified, and the Interim Consolidated Financial Information has
been prepared in
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conformity with ROC GAAP applied on a consistent basis throughout the
periods presented (other than as described therein); the interim
unconsolidated financial information (the "Interim Unconsolidated Financial
Information") of the Company included or incorporated by reference in the
Pricing Prospectus and the Prospectus presents fairly the unconsolidated
financial position of the Company as of the dates indicated and the
unconsolidated results of operations and changes in unconsolidated
financial position of the Company for the periods specified, and the
Interim Unconsolidated Financial Information has been prepared in
conformity with ROC GAAP applied on a consistent basis throughout the
periods presented (other than as described therein); the summary and
selected financial data included in the Pricing Prospectus and the
Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the Consolidated Financial
Statements, the Interim Consolidated Financial Information and the Interim
Unconsolidated Financial Information, respectively, except as otherwise
indicated in the Pricing Prospectus;
(xxv) With the understanding among the Company and the Underwriters
that (a) the semiconductor industry is characterized by frequent litigation
regarding Intellectual Property (as defined below); (b) the Company has
received, from time-to-time, communications from third parties asserting
that the Company may infringe upon their Intellectual Property; and (c)
because of the complexity of the technologies used and the multitude and
overlapping of Intellectual Property, it is often difficult for
semiconductor companies such as the Company to determine infringement, the
Company reasonably believes that it owns or possesses the patents, patent
licenses, licenses, trademarks, service marks, trade names, service names,
copyrights and other intellectual property rights ("Intellectual Property")
necessary to conduct its business as presently conducted and as proposed to
be conducted; and the Company reasonably believes that it has not received
notice or claim of infringement of or conflict with asserted rights of
others with respect to any Intellectual Property, which notice or claim
remains in dispute and which is reasonably likely (and not merely remotely
possible) to have a Material Adverse Effect;
(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 described in the Pricing Prospectus or this Agreement,
all amounts payable by the Company in respect of the ADRs evidencing the
ADSs or the 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;
(xxviii) This Agreement and the Deposit Agreement are in proper form under
the laws of the ROC for the enforcement thereof against the Company under
the laws of the ROC; to ensure the legality, validity, enforceability and
admissibility into evidence in the ROC of the Deposit Agreement, it is not
necessary that the Deposit Agreement be filed or recorded with any court or
other authority in the ROC or that any stamp or similar tax be
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paid in the ROC or in respect of the Deposit Agreement or any other
document to be furnished thereunder, it being understood that in court
proceedings in the ROC a translation into the Chinese language may be
required; to ensure the legality, validity, enforceability and
admissibility into evidence in the ROC of this Agreement, it is not
necessary that any stamp or similar tax be paid in the ROC or in respect of
any other document to be furnished hereunder, so long as this Agreement or
any documents which are deemed "receipts" under the ROC stamp tax law are
executed by all parties outside the ROC;
(xxix) The section entitled "Item 5. Operating and Financial Reviews and
Prospects" in the Annual Report incorporated by reference in the Pricing
Prospectus and the Prospectus accurately and fully describes in all
material respects (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 reported under different conditions or using different
assumptions and an explanation thereof;
(xxx) The Company's Audit Committee and management have reviewed and
agreed with the selection, application and disclosure of critical
accounting policies and the management has consulted with its legal
advisors and independent accountants with regards to such disclosure;
(xxxi) (A) The sections entitled "Recent Developments" in the Pricing
Prospectus and the Prospectus and "Item 5. Operating and Financial Reviews
and Prospects--Liquidity and Capital Resources" in the Annual Report
incorporated by reference in the Pricing Prospectus and the Prospectus
accurately and fully describe in all material respects: 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 any of its subsidiaries is engaged in any transactions with, or
has 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 its subsidiaries, including, without limitation,
structured finance entities and special purpose entities, or is otherwise
engaged in, or has any obligations under, any off-balance sheet
transactions or arrangements. As used herein, the phrase "reasonably
likely" refers to a disclosure threshold lower than "more likely than not";
(xxxii) Except as set forth in the Pricing 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; and
(xxxiii) The Company has not, directly or indirectly, including through
any subsidiary, 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
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or for any family member or affiliate of any director or executive officer
of the Company.
(b) Philips represents and warrants to, and agrees with, each of the
Underwriters and the Company that:
(i) Philips has been duly incorporated and is validly existing as a
company with limited liability under the laws of The Netherlands;
(ii) Each of this Agreement and the Philips Custody Agreement (as
defined in subsection (b)(xvi) below) has been duly authorized, executed
and delivered by Philips and constitutes a valid and legally binding
agreement of Philips, 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;
(iii) No consent, approval, authorization, order of, clearance by or
registration or filing with any Governmental Agency having jurisdiction
over Philips is required for the deposit of the Shares with the Depositary
against issuance of the ADRs evidencing the ADSs to be delivered at the
Time of Delivery, for the sale and delivery of the ADSs to be sold by
Philips hereunder and for the execution, delivery and performance by
Philips of this Agreement and the Philips Custody Agreement, except for
such consents, approvals, authorizations, orders, clearances, filings or
registrations (A) as have been obtained or made prior to the date of this
Agreement and are in full force and effect, (B) as may be required under
the Act, the rules and regulations of the Commission and under state
securities or Blue Sky laws, (C) as may be required by the laws of or any
Governmental Agency in the ROC or (D) as may be required by the laws of or
any Governmental Agency in any jurisdiction outside The Netherlands, the
United States or the ROC in connection with equity offerings generally; and
Philips has full right, power and authority to enter into and perform under
this Agreement and the Philips Custody Agreement and to sell, assign,
transfer and deliver the Shares to the Depositary for deposit against
issuance of the ADRs evidencing the ADSs to be sold by Philips hereunder;
(iv) The sale of the ADSs to be sold by Philips hereunder, the deposit
of the Shares with the Depositary against issuance of the ADRs evidencing
the ADSs to be delivered at the Time of Delivery, the compliance by Philips
with all of the provisions of this Agreement, the Deposit Agreement and the
Philips Custody 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
material agreement or instrument to which Philips is a party or by which
Philips is bound, or to which any of the property or assets of Philips is
subject, other than any such conflict, breach or violation that would not
have a material adverse effect on the ability of Philips to perform its
obligations under this Agreement, the Deposit Agreement and the Philips
Custody Agreement, nor will such action result in any violation of any
statute or any order, rule or regulation of any Governmental Agency having
jurisdiction over Philips or
11
the property of Philips other than any such violation that would not have a
material adverse effect on the ability of Philips to perform its
obligations under this Agreement, the Deposit Agreement and the Philips
Custody Agreement;
(v) Philips has, and immediately prior to the Time of Delivery
Philips will have, good and valid title to the Shares to be deposited with
the Depositary against issuance of the ADRs evidencing the ADSs to be sold
by Philips hereunder, free and clear of all liens, encumbrances, equities
or claims;
(vi) Assuming the Deposit Agreement has been duly authorized and
delivered by the parties thereto, the ADSs delivered at the Time of
Delivery by Philips will be freely transferable by Philips to or for the
account of the several Underwriters and (to the extent described in the
Pricing Prospectus) the initial purchasers thereof; and there are no
restrictions on subsequent transfers of the Shares or ADSs under the laws
of the ROC and of the United States except as described in the Pricing
Prospectus under the caption "Description of American Depositary Receipts"
and the sections entitled "Item 10. Additional Information--Foreign
Investment in the ROC" or "Item 10. Additional Information--Description of
Common Shares" in the Annual Report incorporated by reference in the
Pricing Prospectus (or under such other captions as may be applicable in
any amendment or supplement to the Pricing Prospectus);
(vii) Philips has not 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;
(viii) To the extent that any statements made in the Registration
Statement, any Preliminary Prospectus, the Pricing Prospectus and the
Prospectus or any amendment or supplement thereto are made in reliance upon
and in conformity with specific written instructions furnished to the
Company by Philips expressly for use therein or any information is omitted
therefrom in reliance on and in conformity with specific written
instructions provided by Philips expressly for use therein (all such
written information provided pursuant to such specific written
instructions, "Philips Shareholder Information"), the Registration
Statement, any Preliminary Prospectus, the Pricing Prospectus and the
Prospectus and any further amendments or supplements thereto did not, do
not and will not, (a) as of the applicable effective date as to each part
of the Registration Statement, (b) as of the Applicable Time as to the
Pricing Prospectus, (c) as of the Applicable Time as to any Issuer Free
Writing Prospectus listed on Schedule II(a) hereto, as supplemented by and
taken together with the Pricing Prospectus and (d) as of the applicable
filing date as to any Preliminary Prospectus and 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 made in reliance upon and in
conformity with Philips Shareholder Information not misleading;
(ix) Other than as set forth in the Pricing Prospectus and so long as
this Agreement and the cross receipt or any other documents which are
deemed "receipts" under the
12
ROC Stamp Tax Law to be delivered hereunder are executed by all the parties
thereto outside the ROC, no stamp or other issuance or transfer taxes or
duties and no capital gains, income or other taxes (except a securities
transaction tax and income tax on stock dividends which have been deferred
pursuant to law (as applicable) to be payable by Philips and except such
income taxes as may be imposed by the ROC on payments hereunder to any
Underwriter or withholding, if any, with respect to any such income tax)
are payable by or on behalf of the Underwriters to the government of the
ROC or any political subdivision or taxing authority thereof or therein in
connection with: (A) the deposit with the Depositary of the Shares by
Philips against the issuance of ADRs evidencing ADSs or (B) the sale and
delivery by Philips of the ADSs to or for the respective accounts of the
Underwriters as contemplated in the Pricing Prospectus and the Prospectus
and pursuant to the terms of this Agreement or (C) the sale and delivery
outside the ROC by the Underwriters of the ADSs to the initial purchasers
thereof pursuant to the terms of this Agreement;
(x) Other than as set forth in the Pricing Prospectus, no stamp or
other issuance or transfer taxes or duties and no capital gains, income or
other taxes (except such income taxes as may be imposed by The Netherlands
on payments hereunder to any Underwriter whose net income is subject to
taxation by The Netherlands or withholding, if any, with respect to any
such income tax) are payable by or on behalf of the Underwriters to the
government of The Netherlands or any political subdivision or taxing
authority thereof or therein in connection with: (A) the deposit with the
Depositary of the Shares by Philips against the issuance of ADRs evidencing
ADSs or (B) the sale and delivery by Philips of the ADSs to or for the
respective accounts of the Underwriters as contemplated in the Pricing
Prospectus and the Prospectus and pursuant to the terms of this Agreement
or (C) the sale and delivery by the Underwriters of the ADSs to the initial
purchasers thereof pursuant to the terms of this Agreement;
(xi) All amounts payable by Philips under this Agreement shall be
made free and clear of and without deduction for or on account of any taxes
imposed, assessed or levied by the ROC or any authority thereof or therein;
(xii) No documentary tax, stamp duty or similar taxes are imposed in
the ROC on, or by virtue of the execution or delivery of, this Agreement,
provided that this Agreement is executed by all parties outside the ROC;
(xiii) All amounts payable by Philips under this Agreement shall be made
free and clear of and without deduction for or on account of any taxes
imposed, assessed or levied by The Netherlands (except such income taxes as
may be imposed by The Netherlands on payments hereunder to any Underwriter
whose net income is subject to tax by The Netherlands or withholding, if
any, with respect to any such income tax) or any authority thereof or
therein except as described in the Pricing Prospectus nor are any taxes
imposed in The Netherlands on, or by virtue of the execution or delivery
of, this Agreement;
(xiv) This Agreement is in proper legal form under the laws of The
Netherlands in order to bring a proceeding for the enforcement thereof
against Philips under the laws of
13
The Netherlands; and in connection with any such proceeding, it is not
necessary that this Agreement be filed or recorded with any court or other
authority in The Netherlands or that any stamp or similar tax be paid in
The Netherlands or in respect of this Agreement, it being understood that
in court proceedings in The Netherlands a translation into the Dutch
language by a sworn translator may be required and that normal document
production requirements will have to be complied with;
(xv) 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, Philips will deliver to the Representatives, prior to or at
the Time of Delivery (as defined in Section 4(a) below), a properly
completed and executed United States Treasury Department Form W-8BEN or W-9
(or other applicable form or statement specified by Treasury Department
regulations in lieu thereof); and
(xvi) Certificates in negotiable form representing all of the Shares
to be represented by ADSs to be sold by Philips hereunder will be placed in
custody under a Philips Custody Agreement (the "Philips Custody
Agreement"), in the form heretofore furnished to the Representatives, to be
duly executed and delivered by Philips to Citibank, N.A., Taipei Branch, as
custodian (the "Custodian").
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 per ADS of US$ , the number of
ADSs set forth opposite the name of such Underwriter in Schedule I hereto.
3. Upon the authorization by the Representatives of the release of
the ADSs, the several Underwriters propose to offer the ADSs for sale upon
the terms and conditions set forth in the Prospectus.
4. (a) ADRs evidencing the ADSs to be purchased by each
Underwriter hereunder, in definitive form, and in such authorized
denominations and registered in such names as the Representatives or their
United States selling agents may request upon at least forty-eight hours'
notice to the Company and the Selling Shareholder prior to the Time of
Delivery (the "Notification Time"), shall be delivered by or on behalf of
the Selling Shareholder to the Representatives or their United States
selling agents, through the facilities of the Depositary or 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 to the account designated by the Selling Shareholder, payable to
the order of the Selling Shareholder in Federal (same day) funds. The
Selling Shareholder will cause the certificates representing ADRs
evidencing the ADSs to be made available for checking at least twenty-four
hours prior to the Time of Delivery at the office of the Depositary or DTC,
as applicable, or its designated custodian.
The time and date of such delivery and payment shall be , New York time,
on May , 2007 or such other time and date as the Representatives and the
Selling Shareholder may
14
agree upon in writing. Such time and date for delivery of the ADSs is herein
called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 8 hereof, including the cross
receipt for the Shares and ADSs and any 'additional documents requested by the
Underwriters pursuant to Section 8(o) hereof will be delivered at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, Bank of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ (the "Closing Location"), and the ADSs will be delivered as
specified in subsection (a) above, all at the Time of Delivery. A meeting will
be held at the Closing Location at [10:00] a.m., Hong Kong time, on the business
day next preceding the Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this Section 4,
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, Taiwan or The
Netherlands 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 the
Representatives 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 New
York business day following the execution and delivery of this Agreement;
to make no further amendment or any supplement to the Registration
Statement or Prospectus prior to the last Time of Delivery which shall be
disapproved by the Representatives promptly after reasonable notice
thereof; to advise the Representatives, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement has
been filed or becomes effective or any amendment or supplement to the
Prospectus has been filed and to furnish the Representatives with copies
thereof; to file promptly all other material required to be filed by the
Company with the Commission pursuant to Rule 433(d) under the Act; 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 (or in lieu thereof, the notice referred to in Rule 173(a)
under the Act) is required in connection with the offering or sale of the
ADSs; to advise the Representatives, 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
other prospectus in respect of the Shares, of any notice of objection of
the Commission to the use of the Registration Statement or any
post-effective amendment thereto pursuant to Rule 401(g)(2) under the Act,
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
other prospectus or suspending any such qualification, promptly to use its
best efforts to obtain the withdrawal of such order; and in the event of
any such issuance of a notice of objection, promptly to take such steps
including, without
15
limitation, amending the Registration Statement or filing a new
registration statement, at its own expense, as may be necessary to permit
offers and sales of the ADSs by the Underwriters (references herein to the
Registration Statement shall include any such amendment or new registration
statement);
(ii) If required by Rule 430B(h) under the Act, to prepare a form of
prospectus in a form approved by the Representatives and to file such form
of prospectus pursuant to Rule 424(b) under the Act not later than may be
required by Rule 424(b) under the Act; and to make no further amendment or
supplement to such form of prospectus which shall be disapproved by you
promptly after reasonable notice thereof;
(iii) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the ADSs for offering and
sale under the securities laws of such jurisdictions as the Representatives
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;
(iv) Prior to [12:00] noon, 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 or such other place as the Representatives may
specify in such quantities as the Representatives may reasonably request,
and, if the delivery of a prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Act) 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 (or in lieu thereof, the notice referred to in
Rule 173(a) under the Act) is delivered, not misleading, or, if for any
other reason it shall be necessary during such period to amend or
supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the Act
or the Exchange Act, to notify the Representatives and upon their request
to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many written and electronic
copies as the Representatives 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 (or in lieu thereof, the
notice referred to in Rule 173(a) under the Act) 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 the Representatives' request but at the expense of
such Underwriter, to prepare and deliver to such Underwriter as many
written and electronic copies as the Representatives may request of an
amended or supplemented Prospectus complying with Section 10(a)(3) of the
Act;
16
(v) To make generally available to its security holders 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 and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(vi) To file with the Commission on a timely basis for each year an
annual report on Form 20-F that includes a reconciliation of net income,
total shareholders' equity and other financial statement items as required
by the rules and regulations of the Commission to generally accepted
accounting principles in the United States ("U.S. GAAP") and to comply with
Section 203.01 of the New York Stock Exchange Listed Company Manual, which
provides for the posting and making available of the Company's annual
report;
(vii) During a period of two years from the effective date of the
Registration Statement, to furnish to the Representatives as soon as they
are available copies of any reports and financial statements furnished to
or filed with the Commission or any securities exchange on which any class
of securities of the Company is listed and which are not otherwise publicly
available directly on the Company's or the Commission's website;
(viii) Until the distribution of the ADSs has been completed, not to
(and to cause its subsidiaries 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 to facilitate the sale or resale of
the Shares and the ADSs; and
(ix) To use its best efforts to list, subject to notice of issuance,
the ADSs on the New York Stock Exchange (the "Exchange").
(b) Philips agrees with each of the Underwriters:
(i) Until the distribution of the ADSs has been completed, not to
(and to cause its affiliates, if any, 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 to facilitate the sale or
resale of the Shares or the ADSs;
(ii) To indemnify and hold the Underwriters harmless against any
documentary, stamp or similar issuance or transfer taxes, duties or fees
and any transaction levies, commissions or brokerage charges, including any
interest and penalties, payable in the ROC or The Netherlands, which are or
may be required to be paid in connection with the creation, allotment,
issuance, offer and distribution of the ADSs to be sold by Philips and the
execution and delivery of this Agreement and the Deposit Agreement;
provided, however, that Philips shall not be responsible for any such
taxes, duties, fees, levies or charges that arise as a result of the
distribution of the ADSs by the Underwriters in a
17
manner other than that as is customary in such transactions; and hold the
Underwriters harmless against any TSE transaction levy that may be required
to be paid in connection with the Shares to be sold by Philips; and
(iii) Prior to the Time of Delivery, to deposit, or cause to be
deposited on its behalf pursuant to the Philips Custody Agreement, 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 to be sold by Philips will be executed (and, if applicable,
countersigned) and issued by the Depositary against receipt of such Shares
and delivered to the Underwriters at the Time of Delivery.
6. (a) Each of the Company and the Selling Shareholder
represents and agrees, severally and not jointly, that, without the prior
consent of the Representatives, it has not made and will not make any offer
relating to the Shares that would constitute a "free writing prospectus" as
defined in Rule 405 under the Act; each Underwriter represents and agrees,
severally and not jointly, that, without the prior consent of the Company and
the Representatives, it has not made and will not make any offer relating to the
Shares that would constitute a free writing prospectus; any such free writing
prospectus the use of which has been consented to by the Company and the
Representatives is listed on Schedule II(a) hereto;
(b) The Company has complied and will comply with the requirements
of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus,
including timely filing with the Commission or retention where required and
legending; and
(c) The Company agrees that if at any time following issuance of an
Issuer Free Writing Prospectus any event occurred or occurs as a result of which
such Issuer Free Writing Prospectus would conflict with the information in the
Registration Statement, the Pricing Prospectus or the Prospectus or 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 then prevailing, not misleading, the Company will give prompt
notice thereof to the Representatives and, if requested by the Representatives,
will prepare and furnish without charge to each Underwriter an Issuer Free
Writing Prospectus or other document which will correct such conflict, statement
or omission; provided, however, that this covenant shall not apply to any
statements or omissions in an Issuer Free Writing Prospectus made in reliance
upon and in conformity with information furnished in writing to the Company by
an Underwriter through the Representatives or by the Selling Shareholder
expressly for use therein.
7. The Selling Shareholder and the several Underwriters agree to
bear, reimburse and pay such fees, disbursements, expenses and costs in
connection with the offering and sale of the ADSs as may be separately agreed
among them and the Company.
8. The obligations of the Underwriters hereunder as to the ADSs to
be delivered at the Time of Delivery shall be subject 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 the Time of Delivery, true and
correct, the condition that the Company and the Selling Shareholder shall have
performed in all material respects all of their respective obligations hereunder
theretofore
18
to be performed, and the following additional conditions (which condition or
conditions may be waived by the Underwriters in their discretion):
(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; all material required to be filed by the Company pursuant to Rule
433(d) under the Act shall have been filed with the Commission within the
applicable time period prescribed for such filings by Rule 433; 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 no notice of objection of the
Commission to the use of the Registration Statement or any post-effective
amendment thereto pursuant to Rule 401(g)(2) under the Act shall have been
received; no stop order suspending or preventing the use of the Prospectus or
any Issuer Free Writing Prospectus 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 the Representatives' reasonable
satisfaction;
(b) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, United States counsel for
the Underwriters, shall have furnished to the Representatives such opinion or
opinions, dated the Time of Delivery, with respect to the matters covered in
paragraphs (c)(i), (c)(ii) and (c)(iii) below (as qualified by sub-paragraphs
(1) and (2) thereunder) and the paragraph immediately following sub-paragraph
(2) under subsection (c) below, as well as such other related matters as the
Representatives may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them to
pass upon such matters;
(c) Weil, Gotshal & ▇▇▇▇▇▇ LLP, special United States counsel for
the Company, shall have furnished to the Representatives their written opinion,
dated the Time of Delivery, in form and substance satisfactory to the
Representatives, to the effect that:
(i) Under the law of New York, this Agreement has been duly executed
and delivered by the Company;
(ii) The Deposit Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity) and
except that rights to indemnification thereunder (including, without
limitation, Section 5.10 of the Deposit Agreement) may be limited by
federal or state securities laws or public policy relating thereto;
(iii) Upon due issuance by the Depositary of ADRs evidencing the ADSs
being delivered at the Time of Delivery against the deposit of the
underlying Shares to be deposited by Philips in respect thereof in
accordance with the provisions of the Deposit Agreement, such ADRs
evidencing the ADSs will be duly and validly issued and the
19
holders thereof will be entitled to the rights specified therein and in the
Deposit Agreement;
(iv) The performance by the Company of its obligations under this
Agreement will not violate New York state or federal law; provided,
however, that for the purposes of this clause (iv), such counsel need not
express any opinion with respect to federal and state securities or blue
sky laws;
(v) No regulatory consent, approval, waiver, license or
authorization or other action by or filing with any New York state or U.S.
federal governmental authority is required in connection with the issuance
of the ADRs evidencing the ADSs and the deposit with the Depositary of the
Shares against the issuance of ADSs pursuant to the Deposit Agreement,
except for those already obtained; provided, however, that for the purposes
of this clause (v), such counsel need not express any opinion with respect
to federal and state securities or blue sky laws;
(vi) The Registration Statement has become effective under the Act
and to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time period
required by such Rule. To such counsel's knowledge, no proceedings therefor
have been initiated or overtly threatened by the Commission;
(vii) Under the laws of the State of New York relating to submission to
jurisdiction, the Company has validly and irrevocably submitted to the
non-exclusive jurisdiction of any federal or state court located in the
Borough of Manhattan in the City and State of New York (each a "New York
Court") in connection with any action arising out of or based on this
Agreement or the transactions contemplated hereby brought by any
Underwriter or any person who controls an Underwriter, the Company has
validly and irrevocably waived (to the fullest extent it may effectively do
so) objection to the venue of any such action in any such court, and the
Company has validly appointed the Authorized Agent (as defined in Section
15 hereof) as its authorized agent for service of process for the purpose
described in Section 15 hereof; and service of process on the Authorized
Agent effected in the manner set forth in Section 15 hereof will be
effective to confer valid personal jurisdiction over the Company in any
such action in any such court, in each case assuming the validity of such
actions with respect to the Company under the laws under which it is
organized and existing; provided, however, that for the purposes of this
clause (vii), such counsel need not express any opinion with respect to the
subject matter jurisdiction of any U.S. federal court to adjudicate any
action relating to this Agreement or the transactions contemplated hereby
where jurisdiction based on diversity of citizenship under 28 U.S.C.
Section 1332 does not exist;
(viii) Under the laws of the State of New York relating to submission to
jurisdiction, the Company has validly and irrevocably submitted to the
non-exclusive jurisdiction of any New York Court in any action arising out
of or in connection with the Deposit Agreement, the Company has validly and
irrevocably waived (to the fullest extent it may effectively do so)
objection to the venue of any such action in any such court, and the
20
Company has validly appointed the Authorized Agent as its authorized agent
for service of process for the purpose described in Section 7.06 of the
Deposit Agreement; and service of process on the Authorized Agent effected
in the manner in the manner set forth in Section 7.06 of the Deposit
Agreement will be effective to confer valid personal jurisdiction over the
Company in any such action in any such court, in each case assuming the
validity of such actions with respect to the Company under the laws under
which it is organized and existing; provided, however, that for the
purposes of this clause (viii), such counsel need not express any opinion
with respect to the subject matter jurisdiction of any U.S. federal court
to adjudicate any action relating to the Deposit Agreement or the
transactions contemplated thereby where jurisdiction based on diversity of
citizenship under 28 U.S.C. Section 1332 does not exist;
(ix) As of the date of such counsel's written opinion, the Company is
not required to be registered as an "investment company" as such term is
defined in the Investment Company Act; and
(x) The statements in the Pricing Prospectus and the Prospectus
under the captions "Description of American Depositary Receipts" and
"Taxation -- United States Federal Income Taxation", including those
incorporated by reference from the Annual Report under the caption
"Item 10. Additional Information--Taxation--United States Federal Income
Taxation", in each case insofar as such statements constitute summaries of
the legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters referred to
therein in all material respects.
Such counsel may also state in such opinion to the effect that:
(1) the foregoing opinion is limited to the laws of the State of New
York and the federal laws of the United States, and that such counsel expresses
no opinion as to the effect on the matters covered by such opinion of the laws
of any other jurisdiction, and with respect to all matters of the laws of the
ROC, such counsel understands that the Representatives are relying on the
opinions of ▇▇▇ and Li and Tsar & Tsai delivered to them pursuant to Sections
8(e) and 8(h) of this Agreement, respectively, and to the extent that the laws
of the Kingdom of the Netherlands would apply to any of the transactions
contemplated by this Agreement, such counsel understands that the
Representatives are relying on the opinions of Prof. Dr. A.F. Verdam and ▇▇▇▇▇ &
▇▇▇▇▇ LLP delivered to them pursuant to Sections 8(f) and 8(i) of this
Agreement, respectively; and
(2) such counsel has assumed the genuineness of all signatures, the
legal capacity of all natural persons, the authenticity of all documents
submitted to them as originals, the conformity to original documents of all
documents submitted to them as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents; as to all questions
of fact material to the foregoing opinion that have not been independently
established, such counsel has relied upon certificates or comparable documents
of officers and representatives of the Company and upon the representations and
warranties of the Company contained in this Agreement; such counsel has also
assumed (A) the valid existence of the
21
Company, (B) that the Company has the requisite corporate power and authority to
enter into and perform this Agreement and the Deposit Agreement, (C) the due
authorization of the Agreement by the Company, (D) the due authorization,
execution and delivery of the Deposit Agreement by the Company, (E) that the
Depositary has the requisite corporate power and authority to enter into and
perform the Deposit Agreement, (F) the due authorization, execution and delivery
of the Deposit Agreement by the Depositary, (G) the ADRs conform to the
specimens thereof examined by such counsel, have been duly executed by one of
the Depositary's authorized officers and have been duly issued by the Depositary
in accordance with the provisions of the Deposit Agreement and (H) the Shares
underlying the ADSs have been duly authorized and validly issued; and as used
therein, "to our knowledge" and "of which we are aware" mean the conscious
awareness of facts or other information by any lawyer in such counsel's firm
actively involved in the transactions contemplated by this Agreement and after
consultation with such other lawyers in such counsel's firm as each such
actively involved lawyer deemed appropriate; that such counsel has assumed that
the Deposit Agreement, including the choice of law provisions therein, is valid
and binding under the law of the Republic of China.
In addition, the following shall be included in a separate letter to be
delivered by Weil, Gotshal & ▇▇▇▇▇▇ LLP to the Representatives at the same time
as the foregoing opinion is required to be delivered by such counsel pursuant to
this Agreement. The letter shall state that such counsel has reviewed the
Registration Statement, the Pricing Prospectus, the Prospectus and the ADR
Registration Statement, participated in conferences with representatives of the
Company, its Taiwanese counsel, its independent public accountants, Philips and
its United States and ROC counsels, the Representatives' representatives and
their counsel, at which conferences the contents of the Registration Statement,
the Pricing Prospectus, the Prospectus and the ADR Registration Statement, and
the documents incorporated by reference therein, and related matters were
discussed. On the basis of the information that such counsel gained in the
course of performing the services referred to above, they confirm to the
Representatives that the ADR Registration Statement, as of its effective date,
the Registration Statement (including the documents incorporated by reference
therein), as of its effective date, and the Prospectus (including the documents
incorporated by reference therein), as of its date, and any further amendments
and supplements thereto, as applicable, made by the Company prior to the Time of
Delivery, appeared on their face to be appropriately responsive in all material
respects, to the applicable requirements of the Act and the applicable rules and
regulations thereunder and such counsel does not know of any contracts or other
documents of a character required to be filed as exhibits to the Registration
Statement or required to be described in the Registration Statement or the
Prospectus that are not filed or described as required; and no facts have come
to such counsel's attention which cause such counsel to believe that the ADR
Registration Statement, as of its effective date, or any part of the
Registration Statement (including the documents incorporated by reference
therein), as of its effective date, and any further amendments and supplements
thereto, as applicable, made by the Company prior to the Time of Delivery, when
such part or amendment became effective, 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 contained therein not misleading, the
Pricing Prospectus (considered together with the amount and price to the public
of the ADSs as listed on the front page of the Prospectus) (including the
documents incorporated by reference therein), as of the Applicable Time,
contained any untrue
22
statement of a material fact or omitted to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or the Prospectus (including the documents
incorporated by reference therein), as of its date or as of the Time of
Delivery, and any further amendments and supplements thereto, as applicable,
made by the Company prior to the Time of Delivery, contained or contains any
untrue statement of a material fact or omitted or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Such counsel may state
that the primary purpose of their professional engagement was not to establish
or confirm factual matters or financial or quantitative information, and many
determinations involved in the preparation of the Registration Statement, the
Pricing Prospectus, the Prospectus and the ADR Registration Statement are of a
non-legal character; and such counsel has not undertaken any obligation to
verify independently any of the factual matters set forth in the Registration
Statement, the Pricing Prospectus, the Prospectus and the ADR Registration
Statement or in the documents incorporated by reference therein; and
consequently, in such letter such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained or incorporated by reference in the Registration Statement,
the Pricing Prospectus, the Prospectus and the ADR Registration Statement; also,
such counsel does not make any statement therein with respect to any of the
financial statements and related notes thereto, the financial statement
schedules or the financial or accounting data contained or incorporated by
reference in the Registration Statement, the Pricing Prospectus, the Prospectus
and the ADR Registration Statement; and the statements in such letter are set
forth solely for the benefit of the Underwriters in their capacity as such, and
are addressed to the Representatives solely in their capacity as the
Underwriters of the ADSs; and neither such letter nor any of such statements may
be used or relied upon by, or assigned to, any other person (including any
subsequent purchaser or transferee of the ADSs), and neither such letter nor any
copies thereof may be furnished to any other person, filed with a governmental
agency, quoted, cited or otherwise referred to without such counsel's prior
written consent.
(d) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, special United States counsel for
Philips, shall have furnished to the Representatives their written opinion,
dated the Time of Delivery, in form and substance satisfactory to the
Representatives, to the effect that:
(i) This Agreement has been duly executed and delivered by Philips;
(ii) Upon due issuance by the Depositary of ADRs evidencing the ADSs
being delivered at the Time of Delivery against the deposit of the Shares
to be deposited by Philips in respect thereof in accordance with the
provisions of the Deposit Agreement, such ADRs evidencing the ADSs will be
duly and validly issued and the holders thereof will be entitled to the
rights specified therein and in the Deposit Agreement;
(iii) The Philips Custody Agreement has been duly executed and
delivered by Philips and constitutes a valid and legally binding obligation
of Philips, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights generally and to general principles of equity;
23
(iv) Under the laws of the State of New York relating to the
submission to jurisdiction, Philips has, pursuant to Section 15 of this
Agreement, validly and irrevocably submitted to the non-exclusive personal
jurisdiction of a New York Court in any action arising out of or relating
to this Agreement or the transactions contemplated hereby brought by any
Underwriter or any person who controls an Underwriter, has validly and
irrevocably waived any objection to the venue of a proceeding in any such
court, and has effectively appointed the Authorized Agent (as defined in
Section 15 hereof) as its authorized agent for the purpose described in
Section 15 hereof; and service of process effected on such agent in the
manner set forth in Section 15 hereof will be effective to confer valid
personal jurisdiction over Philips in the New York Courts;
(v) Each of (A) the sale of the Shares being delivered at the Time of
Delivery to be sold in the form of ADSs by Philips, (B) the deposit of the
Shares by Philips with the Depositary against the issuance of ADSs pursuant
to the Deposit Agreement, and (C) the performance by Philips of its
obligations under this Agreement and the Philips Custody Agreement will not
violate any existing Federal law of the United States or law of the State
of New York applicable to Philips; provided, however, that for the purposes
of this clause (v), such counsel need not express any opinion with respect
to Federal or state securities laws, other antifraud laws, fraudulent
transfer laws and laws that restrict transactions between United States
persons and citizens or residents of certain foreign countries or specially
designated nationals and organizations; provided, further, that insofar as
performance by Philips of its obligations under this Agreement is
concerned, such counsel need not express any opinion as to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights; and
(vi) All regulatory consents, authorizations, approvals and filings
required to be obtained or made by Philips under the Federal laws of the
United States and the laws of the State of New York for the issuance of the
ADRs evidencing the ADSs, the deposit with the Depositary of the Shares
against the issuance of ADSs pursuant to the Deposit Agreement and the sale
and delivery of the ADSs by Philips to the Underwriters under this
Agreement and have been obtained or made.
Such counsel may also state in such opinion to the effect that:
(1) the foregoing opinion is limited to the Federal laws of the
United States and the laws of the State of New York, that such counsel is
expressing no opinion as to the effect of the laws of any other jurisdiction,
and with respect to all matters of the laws of the ROC, such counsel understands
that the Representatives are relying on the opinions of ▇▇▇ and Li and Tsar &
Tsai delivered to it pursuant to Sections 8(e) and 8(h) of this Agreement,
respectively, and with respect to all matters of the laws of The Netherlands,
such counsel understands that the Representatives are relying on the opinion of
Prof. Dr. A.F. Verdam and ▇▇▇▇▇ & ▇▇▇▇▇ LLP delivered to it pursuant to Sections
8(f) and 8(i) of this Agreement; and
(2) with the Representatives' approval, such counsel has relied as
to certain matters on information obtained from public officials, officers of
the Company and Philips and other
24
sources believed by such counsel to be responsible, and such counsel has assumed
that: (A) the Deposit Agreement has been duly authorized, executed and delivered
by the Company and the Depositary, (B) this Agreement has been duly authorized
by the Company and the Selling Shareholder, (C) the Philips Custody Agreement
has been duly authorized, executed and delivered by the Custodian and has been
duly authorized by Philips, (D) the Deposit Agreement has been duly authorized
by the Company, (E) insofar as the laws of the ROC are concerned, this Agreement
and the Deposit Agreement have been duly executed and delivered by the Company
and the Selling Shareholder, (F) insofar as the laws of the ROC are concerned,
the Philips Custody Agreement has been duly executed and delivered by Philips,
(G) insofar as the laws of The Netherlands are concerned, this Agreement has
been duly executed and delivered by Philips, (H) the Deposit Agreement is a
valid and legally binding obligation of the Company insofar as the laws of the
ROC are concerned, (I) the ADRs conform to the specimens thereof examined by
such counsel, have been duly executed by one of the Depositary's authorized
officers and have been duly issued by the Depositary in accordance with the
provisions of the Deposit Agreement, (J) the Shares have been duly authorized
and validly issued by the Company, and (K) the signatures on all documents
examined by such counsel are genuine, assumptions which such counsel has not
independently verified.
(e) ▇▇▇ and Li special ROC counsel for the Company and Philips,
shall have furnished to the Representatives their written opinion, dated the
Time of Delivery, in form and substance satisfactory to the Representatives, to
the effect that:
(i) The Company has been duly incorporated and is validly existing
under the laws of the ROC, with corporate power and authority to own or
lease its properties and conduct its business as described in the Pricing
Prospectus and the Prospectus and to perform its obligations under this
Agreement and the Deposit Agreement;
(ii) The Company has an authorized capitalization as set forth in the
Pricing Prospectus and the Prospectus which conforms as to legal matters to
the description thereof contained in the Pricing Prospectus and the
Prospectus; the outstanding Common Shares of the Company (including the
Shares) have been duly authorized and validly issued, and no holder thereof
is, or will be, subject to personal liability by reason of being such
holder; 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 connection with the transactions contemplated hereby or otherwise;
the Shares to be deposited by Philips may be freely deposited with the
Depositary against issuance of ADRs evidencing ADSs; the ADSs are freely
transferable by Philips to or for the account of the Underwriters; and
there are no restrictions on subsequent transfers of the Shares, except as
described in the Pricing Prospectus under the captions "Description of
American Depositary Receipts" or "Item 10. Additional
Information--Description of Common Shares" and "Item 10. Additional
Information--Foreign Investment in the ROC" in the Annual Report
incorporated by reference in the Pricing Prospectus (or under such other
captions as may be applicable in any amendment or supplement to the Pricing
Prospectus); the Shares and the ADSs conform to the description of the
Common Shares and the ADSs (as to matters of ROC law), respectively,
contained in the Pricing Prospectus and the Prospectus; the authorized,
issued and outstanding capital stock of the
25
Company is as set forth in the Pricing Prospectus and the Prospectus under
the heading "Capitalization";
(iii) To the best of such counsel's knowledge after making an inquiry
which they have deemed reasonable and based on a certificate of the
Company, there is no pending or threatened action, suit or proceeding
before any court or governmental agency, authority or body or any
arbitrator involving the Company that, if determined adversely to the
Company, would individually or in the aggregate have a material adverse
effect on the consolidated financial position, shareholders' equity or
results of operations of the Company or would materially adversely affect
the ability of the Company to perform its obligations under this Agreement
or the Deposit Agreement; and, to the best of such counsel's knowledge
after making an inquiry which they have deemed reasonable and based on a
certificate of the Company, no such proceedings are threatened or
contemplated by any governmental agency or threatened by others;
(iv) This Agreement and the Deposit Agreement have been duly
authorized, executed and delivered by the Company and each 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, reorganization, moratorium and other laws
of general applicability relating to or affecting creditors' rights; this
Agreement constitutes a valid and legally binding agreement of Philips,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors'
rights; the voting arrangement set forth in the Deposit Agreement is valid,
binding and enforceable against owners and beneficial owners of the ADSs
under ROC laws; the Depositary will not be deemed under ROC law to be
authorized to exercise any discretion when voting in accordance with the
Deposit Agreement and such voting arrangement does not violate any
applicable ROC law. For the purpose of this paragraph, such counsel may
assume that Philips has duly executed and delivered this Agreement and this
Agreement constitutes a valid and legally binding agreement of Philips and
is enforceable against Philips in accordance with its terms under the
governing law of this Agreement and the laws of the place of its
incorporation;
(v) Neither the execution and delivery of this Agreement or the
Deposit Agreement, the deposit of the Shares with the Depositary by Philips
as contemplated herein, the issue and sale of the ADSs being delivered at
the Time of Delivery to be sold by Philips, nor, to the best of such
counsel's knowledge, the consummation of any other transaction contemplated
by this Agreement will conflict with, result in a breach of, or constitute
a default under the articles of incorporation of the Company or any
applicable ROC law, rule or regulation or, to the best of such counsel's
knowledge after making any inquiry which they have deemed reasonable and
based on a certificate of the Company as to matters of fact, the terms of
any indenture, trust deed, mortgage or other agreement or instrument to
which the Company is a party or by which the Company is bound, or to which
any of the properties or assets of the Company is subject, other than any
such conflicts, breaches, violations or defaults which, individually or in
the aggregate, would not have a Material Adverse Effect, or any order or
regulation applicable to the Company of any ROC court or government agency,
authority or body or any arbitrator;
26
(vi) Except as disclosed in the Pricing Prospectus, no consent,
approval, authorization, order, filing, registration or qualification of or
with any court or governmental agency or body in the ROC is required for
the consummation of the transactions contemplated by the Deposit Agreement
or this Agreement, for the deposit of the Shares with the Depositary
against issuance of the ADRs evidencing the ADSs to be delivered at the
Time of Delivery, for the sale and delivery of Shares and ADSs to be sold
by Philips hereunder and for the execution, delivery and performance by
each of the Company and Philips of this Agreement and the Deposit Agreement
to be duly and validly authorized, except such as have been obtained and
copies of which have been furnished to the Representatives, including those
approvals which have been obtained under the laws of the ROC and are in
full force and effect as of the date hereof, such as the approval of the
SPA, the CBC and the ROC FSC, and except for: (A) the approval of CBC of
foreign exchange settlements and payments contemplated by the Deposit
Agreement and (B) the filings and approvals, if any, required under the
Overseas Offering Rules, the Securities and Exchange Law of the ROC and the
Company Law of the ROC and as required by the ROC FSC and the CBC; provided
that the failure to comply with sub-clauses (A) and (B) will not affect the
enforceability or validity of the ADSs, the Deposit Agreement or this
Agreement;
(vii) To the best of such counsel's knowledge after making an inquiry
which such counsel deemed reasonable and based on a certificate of the
Company, the Company is not in violation of its articles of incorporation
or in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage, deed
of trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound except
such violations or default which, individually or in the aggregate, would
not have a Material Adverse Effect;
(viii) The statements in the Pricing Prospectus and the Prospectus under
"Enforceability of Civil Liabilities", "Risk Factors-- Risks Relating to
Ownership of ADSs" and "Risk Factors-- Our global manufacturing, design and
sales activities subject us to risks associated with legal, political,
economic or other conditions or developments in various jurisdictions,
including in particular the Republic of China, which could negatively
affect our business and financial status and therefore the market value of
your investment", "Description of American Depositary Receipts" and
"Underwriting" and under "Item 8. Financial Information--Dividends and
Dividend Policy", "Item 10. Additional Information--Description of Common
Shares", "Item 10. Additional Information--Foreign Investment in the ROC",
"Item 10. Additional Information--Taxation-- ROC Taxation", "Item 10.
Additional Information--Exchange Controls in the ROC" and "Item 10.
Additional Information--Voting of Deposited Securities" in the Annual
Report incorporated by reference in the Pricing Prospectus and the
Prospectus, to the extent such statements constitute summaries of law or
regulation of the ROC or relate to the provisions of documents therein
describing the laws and regulations of the ROC or articles of incorporation
of the Company, are true and accurate in all material respects;
(ix) No facts have come to the attention of such counsel, based upon
their participation in the preparation of the Registration Statement, the
Pricing Prospectus and
27
the Prospectus and their review and discussion of the contents thereof, and
participation in conferences with officers and other representatives and
counsel of the Company and the Representatives' representatives and the
Representatives' counsel in connection with the preparation thereof, but
without any independent check or verification except with respect to the
matters to which their opinion relates, that cause them to believe (a)
that, as of its effective date, any part of the Registration Statement
(including the documents incorporated by reference therein), or any further
amendment thereto made by the Company prior to the Time of Delivery (other
than the financial statements and related schedules therein and other
financial data contained therein, as to which such counsel need not express
any opinion), when such part or amendment became effective, contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements therein not misleading; (b) that the
Pricing Prospectus (including the documents incorporated by reference
therein) (other than the financial statements and related schedules therein
and other financial data contained therein, as to which such counsel need
not express any opinion), as of the Applicable Time, 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 (c) that either the Registration
Statement, as of the Time of Delivery, or that the Prospectus (including
the documents incorporated by reference therein), or any further amendment
or supplement thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules therein and
other financial data contained therein, as to which such counsel need not
express any opinion), as of its date and as of the Time of Delivery,
contained or contains an untrue statement of a material fact or omitted 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;
however, such counsel does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement, the Pricing Prospectus, the Prospectus or any further amendment
or supplement thereto made by the Company prior to the Time of Delivery,
except for the opinion stated in paragraph (viii) above;
(x) Other than as set forth in the Pricing Prospectus and so long as
this Agreement, the cross receipt, if any, or any other documents which are
deemed "receipts" under the ROC Stamp Tax Law are executed by all parties
thereto outside the ROC, no stamp or other issuance or transfer taxes or
duties and no capital gains, income, withholding or other taxes (except a
securities transaction tax and income tax on stock dividends which has been
deferred pursuant to law (as applicable) to be payable by Philips and
except such income taxes as may be imposed by the ROC on payments hereunder
to any Underwriter or withholding, if any, with respect to any such income
tax) are payable by or on behalf of the Underwriters to the ROC government
or to any political subdivision or taxing authority thereof or therein in
connection with: (A) the deposit with the Depositary of Shares by Philips
against the issuance of ADRs evidencing the ADSs, (B) the sale and delivery
by Philips of the ADSs to or for the respective accounts of the
Underwriters pursuant to the terms of this Agreement or (C) the sale and
delivery outside the ROC by the Underwriters of the ADSs to the initial
purchasers thereof in the manner contemplated herein pursuant to the terms
of this Agreement;
28
(xi) The agreement of the Company to the choice of law provisions set
forth in Section 21 of this Agreement and Section 7.06 of the Deposit
Agreement will be recognized by the courts of the ROC provided that the
relevant provisions of the laws of the State of New York will not be
applied to the extent such courts hold that such provisions of the laws of
the State of New York are contrary to the public order or good morals of
the ROC; the Company can ▇▇▇ and be sued in its own name under the laws of
the ROC; the irrevocable submission by the Company to the non-exclusive
personal jurisdiction of a New York Court as set forth in Section 15 hereof
and Section 7.06 of the Deposit Agreement and the irrevocable waiver by the
Company of any objection to the laying of venue of a proceeding in a New
York Court are legal, valid and binding; and the irrevocable appointment of
TSMC North America as its Authorized Agent for service of process for the
purposes described in Section 15 hereof and Section 7.06 of the Deposit
Agreement is legal, valid and binding (according to a letter of the
Ministry of Foreign Affairs dated February 1979); and a judgment obtained
in a New York Court arising out of or in relation to the obligations of the
Company under this Agreement or the Deposit Agreement would be enforceable
against the Company in the courts of the ROC without review of the merits;
provided that the court of the ROC in which the enforcement is sought is
satisfied that (A) the court rendering the judgment has jurisdiction over
the subject matter according to the laws of the ROC, (B) the judgment and
the court procedures resulting in the judgment are not contrary to the
public order or good morals of the ROC, (C) if the judgment was rendered by
default by the court rendering the judgment, (i) the Company was duly
served within a reasonable period of time within the jurisdiction of such
court in accordance with the laws and regulations of such jurisdiction, or
(ii) process was served on the Company with judicial assistance of the ROC;
and (D) judgments of the courts of the ROC are recognized and enforceable
in the jurisdiction of the court rendering the judgment on a reciprocal
basis. Such counsel should state that it is not aware of (i) any ROC
treaties, statutes or regulations that would indicate the recognition and
enforcement in the ROC of such a judgment would be contrary to the public
order or good morals of the ROC, or of any reported cases in the ROC of a
court refusing to recognize or enforce such a judgment, (ii) any
interpretations of any statutes in the ROC that would indicate that the
recognition and enforcement in the ROC of such a judgment would be contrary
to the public order or good morals of the ROC (other than a judgment
relating to rights exercised by a party under the relevant agreements in
bad faith or contradictory to the public interest of the ROC) and (iii) any
reason why any of the aforementioned courts in the State of New York
(assuming that such courts have jurisdiction over the subject matter under
New York law) would not have jurisdiction over the subject matter according
to the laws of the ROC;
(xii) To the best of such counsel's knowledge after making due inquiry
and based on a certificate of the Company, the Company owns or possesses
the Intellectual Property necessary to conduct its business as presently
conducted and as proposed to be conducted; and the Company has not received
notice or claim of infringement of or conflict with asserted rights of
others with respect to any Intellectual Property, which notice or claim
remains in dispute, and which is reasonably likely (and not merely remotely
possible) to have a material adverse effect on the current or future
consolidated financial position, shareholders' equity or results of
operations of the Company; and, to the best of such counsel's knowledge
after making due inquiry and based on a certificate
29
of the Company, the Company has good and marketable title to all real
property owned by it, in each case free and clear of any liens,
encumbrances or defects except such as are described in the Pricing
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, to the best of such counsel's knowledge after
making due inquiry and based on a certificate of the Company, 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;
(xiii) The signing and filing of each of the Registration Statement, the
Pricing Prospectus, the Prospectus and the ADS Registration Statement have
been duly authorized by and on behalf of the Company;
(xiv) The Company is not entitled to any immunity on the basis of
sovereignty or otherwise in respect of its obligations under this Agreement
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 or the Deposit Agreement;
(xv) This Agreement and the Deposit Agreement are in proper form
under the laws of the ROC for the enforcement thereof against the Company
under the laws of the ROC; and to ensure the legality, validity,
enforceability and admissibility into evidence in the ROC of each of this
Agreement and the Deposit Agreement, it is not necessary that such
agreement be filed or recorded with any court or other authority in the ROC
or that any stamp or similar tax be paid in the ROC or in respect thereof
so long as this Agreement is executed by all parties outside the ROC, it
being understood that in court proceedings in the ROC a translation into
the Chinese language may be required;
(xvi) 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 as legal owner of the
Shares underlying the ADSs 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;
(xvii) Other than as set forth in the Pricing Prospectus, there are no
limitations under ROC law on the rights of holders of Shares, ADSs or ADRs
evidencing ADSs to hold or vote or transfer their respective securities;
and no other governmental approvals are currently required in the ROC in
order for the Company to pay dividends or other distributions declared by
the Company to holders of Common Shares, including the Depositary, or for
the conversion by the Depositary of any dividends paid in NT dollars to
U.S. dollars or the repatriation thereof out of the ROC and no other
withholding or other taxes under the laws and regulations of the ROC will
be imposed in connection with the declaration and payment by the Company of
dividends and other distributions in respect of shares of its capital
stock;
30
(xviii) Immediately prior to the Time of Delivery, Philips had good and
valid title to the Common Shares represented by the ADSs to be sold by
Philips under this Agreement, free and clear of all liens, encumbrances or
claims; and upon delivery of such Common Shares to the Custodian, properly
endorsed for transfer, registration of such transfer with the Company, and
payment therefor pursuant hereto, good and valid title to such Common
Shares, free and clear of all liens, encumbrances or claims, will pass to
the Depositary or its nominee (if applicable);
(xix) The indemnification and contribution provisions set forth in
Section 9 of this Agreement and Section 5.10 of the Deposit Agreement do
not contravene the laws of the ROC;
(xx) The deposit of the Shares with the Depositary under the Deposit
Agreement as contemplated herein, the sale by Philips to the Underwriters
of the ADSs hereunder and the performance by Philips of its obligations
under the provisions of this Agreement will not result in any violation of
the provisions of any statute, order, rule or regulation known to such
counsel of any court or governmental agency or body in the ROC having
jurisdiction over Philips or the property of Philips other than any such
violation that would not have a material adverse effect on the ability of
Philips to perform its obligations under this Agreement;
(xxi) It is not necessary in order to enable any Underwriter to
exercise its rights under this Agreement in the ROC that all or any of the
Underwriters should be licensed, qualified or entitled to do business in
the ROC;
(xxii) This Agreement is in proper form under the laws of the ROC for
the enforcement thereof against Philips; and to ensure the legality,
validity, enforceability and admissibility into evidence in the ROC of this
Agreement, it is not necessary that this Agreement be filed or recorded
with any court or other authority in the ROC or that any stamp or similar
tax be paid in the ROC or in respect thereof so long as the Agreement is
executed by all parties outside the ROC, it being understood that in court
proceedings in the ROC a translation into the Chinese language may be
required; and
(xxiii) There are no reporting obligations under ROC law on any ADS
holder (assuming such ADS holder does not hold ADSs or the Common Shares,
in the aggregate, exceeding 10% of the issued share capital of the Company)
that have not been disclosed in the Deposit Agreement and in the Pricing
Prospectus and the Prospectus and the form of ADR attached to the Deposit
Agreement.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the ROC.
(f) Prof. Dr. A.F. Verdam, legal advisor for Philips, shall have
furnished to the Representatives his written opinion, dated the Time of
Delivery, in form and substance satisfactory to the Representatives, to the
effect that:
(i) Philips has been duly incorporated and is validly existing as a
company with limited liability under the laws of The Netherlands;
31
(ii) This Agreement has been duly authorized, executed and delivered
by Philips and constitutes a valid and legally binding agreement of
Philips, enforceable against Philips in accordance with its terms;
(iii) No consent, approval, authorization, order, filing, registration
or qualification of or with any court or governmental agency or body in The
Netherlands is required for the consummation of the transactions by Philips
contemplated by this Agreement, for the deposit of the Shares with the
Depositary against issuance of the ADRs evidencing the ADSs to be delivered
at the Time of Delivery, for the sale and delivery of Shares and ADSs to be
sold by Philips hereunder and for the execution, delivery and performance
by Philips of its obligations under this Agreement to be duly and validly
authorized;
(iv) Immediately prior to the Time of Delivery, Philips had good and
valid title to the Shares, free and clear of all liens, encumbrances,
equities or claims; and upon delivery of the Shares in accordance with this
Agreement, the Deposit Agreement and the Philips Custody Agreement,
properly endorsed for transfer, registration of such transfer with the
Company, and payment therefor pursuant hereto, good and valid title to the
Shares, free and clear of all liens, encumbrances, equities or claims, will
pass to the Depositary or its nominee (if applicable) for the benefit of
the several Underwriters;
(v) The Philips Custody Agreement has been duly authorized, executed
and delivered by Philips and constitutes a valid and binding agreement of
Philips, enforceable in accordance with its terms;
(vi) The deposit of the Shares with the Depositary as contemplated
herein, the sale by Philips to the Underwriters of the ADSs in the manner
contemplated hereunder and the performance by Philips of its obligations
under the provisions of this Agreement and the performance by Philips of
its obligations under the Philips Custody Agreement do, to the best of such
counsel's knowledge after making an inquiry which such counsel deemed
reasonable and based on the certificates of Philips, not conflict with or
result in a breach or violation of any terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument known to such counsel
to which Philips is a party or by which it is bound, or to which any of the
property or assets of Philips is subject, other than any such conflict,
breach or violation that would not have a material adverse effect on the
ability of Philips to perform its obligations under this Agreement or the
ability of Philips to perform its obligations under the Philips Custody
Agreement, nor will such action result in any violation of the provisions
of the Articles of Association of Philips or any statute, order, rule or
regulation known to such counsel of any court or governmental agency or
body in The Netherlands having jurisdiction over Philips or the property of
Philips other than any such violation that would not have a material
adverse effect on the ability of Philips to perform its obligations under
this Agreement or under the Philips Custody Agreement;
(vii) Immediately prior to the Time of Delivery, Philips had full
right, power and authority to deposit the Shares with the Depositary as
contemplated hereby and to sell, assign, transfer and deliver the ADSs to
be sold by Philips hereunder;
32
(viii) Each of this Agreement and the Philips Custody Agreement is in
proper legal form under the laws of The Netherlands in order to bring a
proceeding for the enforcement thereof against Philips under the laws of
The Netherlands; and in connection with such proceeding, it is not
necessary that such agreements be filed or recorded with any court or other
authority in The Netherlands or that any stamp or similar tax be paid in
The Netherlands or in respect thereof; it being understood that in court
proceedings in The Netherlands a translation into the Dutch language by a
sworn translator may be required and that normal document production
requirements will have to be complied with;
(ix) The agreement by Philips that this Agreement shall be governed by
and construed in accordance with the laws of the State of New York as set
forth in Section 21 hereof is legal, valid and binding and will be
recognized by the courts of The Netherlands subject to possible application
of mandatory rules (if any) as referred to in Article 7 of the Convention
on the Law applicable to contractual obligations (Rome, 1980); Philips can
▇▇▇ and be sued in its own name under the laws of The Netherlands; the
irrevocable submission of Philips to the non-exclusive personal
jurisdiction of a New York Court and the waiver by Philips of any objection
to the venue of a proceeding of a New York Court is legal, valid and
binding; and the irrevocable appointment of Philips Electronics North
America Corporation as the Authorized Agent for service of process for
Philips for the purpose described in Section 15 hereof is legal, valid and
binding; and
(x) The United States and The Netherlands do not currently have a
treaty providing for reciprocal recognition and enforcement of judgments
(other than arbitration awards) in civil and commercial matters. Therefore,
a final judgment for payment of money rendered by any federal or state
court in the United States based on civil liability, whether or not
predicated solely upon the federal securities laws of the United States,
would not be directly enforceable in The Netherlands. However, if the party
in whose favor such final judgment is rendered brings a new suit in a
competent court in The Netherlands, such party may submit to The
Netherlands court the final judgment that has been rendered in the United
States. If The Netherlands court finds that the jurisdiction of the federal
or state court in the United States has been based on grounds that are
internationally acceptable and that proper legal procedures have been
observed, the court in The Netherlands would under current practice give
binding effect to the final judgment that has been rendered in the United
States unless such judgment contravenes The Netherlands' public policy.
The opinion expressed above is 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, such as the principle of "reasonableness and fairness"
("redelijkheid en billijkheid").
In rendering such opinion, Prof. Dr. A.F. Verdam may state that he
expresses no opinion as to the laws of any jurisdiction outside The Netherlands
and that he relies on certificates from public officials, officers of Philips or
other sources as to factual matters.
33
(g) Patterson, Belknap, ▇▇▇▇ & ▇▇▇▇▇ LLP, counsel for the
Depositary, shall have furnished to the Representatives their written opinion,
dated the Time of Delivery, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and constitutes the valid and legally binding
agreement of the Depositary, enforceable against the Depositary in
accordance with its terms except to the extent that (a) enforcement thereof
may be limited by (1) bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws now or hereafter in effect relating to or
affecting creditors' rights generally, and (2) general principles of equity
(regardless of whether enforceability is considered in a proceeding in law
or in equity), and (b) rights to indemnity and contribution may be limited
by United States federal or state securities laws or public policy; and
(ii) ADRs issued in accordance with the terms and conditions of the
Deposit Agreement and the Registration Statement to evidence ADSs issued
upon deposit of Shares in connection with the sale of ADSs described under
this Agreement will be duly and validly issued and will entitle the holders
thereof to the rights specified therein and in the Deposit Agreement,
assuming that (a) the Shares represented by the ADSs (which are in turn
evidenced by the ADRs) have been duly authorized and validly issued and are
fully paid and non-assessable, and that any preemptive rights with respect
to such Shares have been validly waived or exercised, and (b) such Shares
have been duly deposited with the Custodian (as defined in the Deposit
Agreement), in each case in accordance with all applicable laws and
regulations.
(h) Tsar & Tsai, ROC counsel for the Underwriters, shall have
furnished to the Representatives such opinion or opinions, dated the Time of
Delivery, with respect to such matters as the Representatives 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;
(i) ▇▇▇▇▇ & ▇▇▇▇▇ LLP, Dutch counsel for the Underwriters, shall
have furnished to the Representatives their written opinion, dated the Time of
Delivery, in form and substance satisfactory to the Representatives, to the
effect that:
(i) No capital gains, income, withholding, stamp or other issuance or
transfer taxes (overdrachtsbelasting) or duties or other taxes are payable
by or on behalf of the Underwriters to the Kingdom of the Netherlands or
any political subdivision thereof or therein in connection with: (A) the
deposit with the Depositary of the Shares by Philips against the issuance
of ADRs evidencing ADSs or (B) the sale and delivery by Philips of the ADSs
to or for the respective accounts of the Underwriters as contemplated in
the Pricing Prospectus and the Prospectus and pursuant to the terms of this
Agreement or (C) the sale and delivery by the Underwriters of the ADSs to
the initial purchasers thereof pursuant to the terms of this Agreement;
provided, however, that for capital gains, income or withholding taxes,
such counsel has assumed that the Underwriters (i) are not
34
resident or deemed to be resident in The Netherlands for Netherlands tax
purposes or (ii) do not have an enterprise or an interest in an enterprise
that is, in whole or in part, carried on through a permanent establishment
or a permanent representative in The Netherlands to which enterprise or
part of enterprise, as the case may be, its activities in connection with
this Agreement are attributable; and
(ii) It is not necessary in order to enable any Underwriter to
exercise its rights under this Agreement in The Netherlands that all or any
of the Underwriters should be licensed, qualified or entitled to do
business in The Netherlands; provided that any Underwriter wishing to offer
ADSs in the Netherlands must either be licensed or exempt under Section
2.2.12 of the Financial Supervision Act (Wet op het financieel toezicht or
WFT).
(j) On the date of the Prospectus at a time prior to the execution
of this Agreement, at [9:30] a.m. New York 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 the Time of Delivery, Deloitte & Touche shall
have furnished to the Representatives a letter or letters, dated the respective
dates of delivery thereof, in form and substance satisfactory to the
Representatives, to the effect set forth in Annex I hereto;
(k) The Company shall not have sustained since the date of the
latest audited financial statements included or incorporated by reference in the
Pricing Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, other than
as set forth or contemplated in the Pricing Prospectus that would have or would
reasonably be expected to have a Material Adverse Effect, and since the
respective dates as of which information is given in the Pricing Prospectus
there shall not have been any decrease in the capital stock (other than through
the exercise of options under currently existing stock option plans), any
increase in the long-term debt of the Company in excess of US$1 billion or any
change, or any development involving a prospective change, in or affecting the
general affairs, management, financial position, shareholders' equity or results
of operations of the Company, other than as set forth or contemplated in the
Pricing Prospectus, the effect of which, in any such case is in the reasonable
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the ADSs being delivered at the Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(l) On or after the Applicable Time there shall not have occurred
any of the following: (i) a suspension or material limitation in trading in
securities generally on the Exchange or the TSE; (ii) a suspension or material
limitation in trading in the Company's securities or the ADSs on the Exchange or
the TSE; (iii) a general moratorium on commercial banking activities in New
York, the ROC or the United Kingdom, declared by the relevant authorities, or a
material disruption in commercial banking or securities settlement or clearance
services in the United States; (iv) a change or development involving a
prospective change (except as set forth in the Pricing Prospectus) in the ROC
taxation materially adversely affecting the Company, the ADSs or the transfer
thereof or the imposition of exchange controls by the United States or the ROC
affecting the Company or its shareholders; (v) the outbreak or escalation of
hostilities involving the United States or the ROC or the declaration by the
United
35
States or the ROC of a national emergency or war, if the effect of any such
event specified in this clause (v), in the reasonable judgment of the
Representatives, makes it impracticable or inadvisable to proceed with the
offering or the delivery of the ADSs on the terms and in the manner contemplated
in the Prospectus or (vi) the occurrence of any material adverse change in the
existing financial, political or economic conditions in the United States or the
ROC which, in the reasonable judgment of the Representatives, would materially
and adversely affect the market for the ADSs;
(m) The ADSs to be sold by the Selling Shareholder at the Time of
Delivery shall have been duly listed, subject to official notice of issuance, on
the Exchange;
(n) The Depositary shall have furnished or caused to be furnished to
the Representatives at the Time of Delivery a certificate satisfactory to the
Representatives 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 the Time of Delivery, and the execution, countersignature (if
applicable), issuance and delivery of ADRs evidencing such ADSs pursuant to the
Deposit Agreement;
(o) The Company and the Selling Shareholder shall have furnished or
caused to be furnished to the Representatives at the Time of Delivery
certificates of officers of the Company and of the Selling Shareholder,
respectively, satisfactory to the Representatives as to the accuracy in all
material respects, of the representations and warranties of the Company and the
Selling Shareholder, respectively, herein at and as of the Time of Delivery, as
to the performance in all material respects, by the Company and the Selling
Shareholder of all of their respective obligations hereunder to be performed at
or prior to the Time of Delivery, and as to such other matters as the
Representatives 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 (k) of this Section, and as to such other matters as the Representatives
may reasonably request; and
(p) (i) The Philips Custody Agreement shall have been executed by
Philips and (ii) certificates in negotiable form representing all of the Shares
to be represented by ADSs to be sold at the Time of Delivery by Philips shall
have been placed in custody under the Philips Custody Agreement, duly executed
and delivered by Philips to the Custodian, at or prior to the date at least one
business day prior to the Time of Delivery.
9. (a) (i) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the Pricing Prospectus, the Prospectus or the ADR
Registration Statement, or any amendment or supplement thereto, or any Issuer
Free Writing Prospectus or any "issuer information" filed or required to be
filed pursuant to Rule 433(d) under the Act, 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
36
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement, the Pricing Prospectus, the Prospectus or the ADR
Registration Statement or any amendment or supplement thereto, or any Issuer
Free Writing Prospectus, in reliance upon and in conformity with Philips
Shareholder Information or written information furnished to the Company by any
Underwriter through the Representatives or their agents expressly for use
therein.
(ii) The Selling Shareholder will indemnify and hold harmless the
Underwriters against any losses, claims, damages or liabilities to which each
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement, the Pricing Prospectus, the Prospectus or the ADR Registration
Statement, or any amendment or supplement thereto, or any Issuer Free Writing
Prospectus, 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 Pricing Prospectus, the Prospectus or the ADR
Registration Statement or any such amendment or supplement thereto, or any
Issuer Free Writing Prospectus, in reliance upon and in conformity with Philips
Shareholder Information provided by the Selling Shareholder.
(b) Each Underwriter will indemnify and hold harmless the Company
and the Selling Shareholder against any losses, claims, damages or liabilities
to which the Company or the Selling Shareholder may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement, the Pricing Prospectus, the Prospectus
or the ADR Registration Statement, or any amendment or supplement thereto, or
any Issuer Free Writing Prospectus, 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 Pricing Prospectus, the
Prospectus or the ADR Registration Statement, or any amendment or supplement
thereto, or any Issuer Free Writing Prospectus, in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives or their agents 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) Philips will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof)
37
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 Pricing Prospectus, the Prospectus or the ADR Registration
Statement, or any amendment or supplement thereto, or any Issuer Free Writing
Prospectus, 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 Pricing Prospectus, the Prospectus or the ADR
Registration Statement, or any amendment or supplement thereto, or any Issuer
Free Writing Prospectus, in reliance upon and in conformity with Philips
Shareholder Information.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) 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 to so 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 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 to so 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 a
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.
(e) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Shareholder on the one
hand and the Underwriters on the other from the offering of the ADSs. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) 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
38
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company 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
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 (e) 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 (e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (e) 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 (e), (i) 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 and (ii) the Selling Shareholder shall not be
required to contribute any amount in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) unless, and in such case only to the
extent that, such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of an untrue statement or alleged untrue statement of
material fact or omission or alleged omission to state a material fact required
to be stated or necessary to make the statements not misleading that was made or
omitted in reliance upon and in conformity with Philips Shareholder Information
in any Preliminary Prospectus, the Registration Statement, the Pricing
Prospectus, the Prospectus or the ADR Registration Statement, or any amendment
or supplement thereto, or any Issuer Free Writing Prospectus. 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
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) (i) The obligations of the Company or the Selling Shareholder,
respectively, under this Section 9 shall be in addition to any liability which
the Company or the Selling Shareholder, respectively, may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act;
(ii) The obligations of the Underwriters under this Section 9 shall
be in addition to any liability which the respective Underwriters may otherwise
have and shall extend, upon the same
39
terms and conditions, to each officer and director of the Company and of the
Selling Shareholder (if applicable) and to each person, if any, who controls the
Company or the Selling Shareholder within the meaning of the Act; and
(iii) The obligations of Philips under this Section 9 shall be in
addition to any liability which Philips may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
and to each person, if any, who controls the Company within the meaning of the
Act.
10. (a) If any Underwriter shall default in its obligation to
purchase ADSs which it has agreed to purchase hereunder, the Representatives may
in their discretion arrange for themselves or, subject to the approval of the
Company in the case of any party or parties other than the Underwriters (which
approval shall not be unreasonably delayed or withheld), another party or other
parties to purchase such ADSs on the terms contained herein. If within
thirty-six hours after such default by any Underwriter the Representatives do
not arrange for the purchase of such ADSs, then 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 the Representatives to purchase such ADSs
on such terms. In the event that, within the respective prescribed periods, the
Representatives notify the Company and the Selling Shareholder that the
Representatives have so arranged for the purchase of such ADSs, or the Selling
Shareholder notifies the Representatives that it has so arranged for the
purchase of such ADSs, the Representatives or the Selling Shareholder shall have
the right to postpone the 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 ADR Registration Statement, the Prospectus, or in
any other documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement, the ADR Registration Statement or the
Prospectus which in the Representatives' opinion or in the opinion of the
Selling Shareholder may thereby be made necessary. The term "Underwriter" as
used in this Agreement shall include any person substituted under this Section
10(a) with like effect as if such person had originally been a party to this
Agreement with respect to such ADSs.
(b) If, after giving effect to any arrangements for the purchase of
the ADSs of a defaulting Underwriter or Underwriters by the Representatives and
the Selling Shareholder as provided in subsection (a) above, the aggregate
number of such ADSs which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the ADSs to be purchased, 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
and, in addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the number of ADSs which such Underwriter agreed to
purchase hereunder) of the ADSs of such defaulting Underwriter or Underwriters
for which such arrangements have not been made; but nothing herein shall relieve
a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
ADSs of a defaulting Underwriter or Underwriters by the Representatives and the
Selling Shareholder as provided in subsection (a) above, the aggregate number of
such ADSs which remains unpurchased exceeds one-eleventh of the aggregate number
of all of the ADSs to be purchased,
40
or if 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 shall thereupon
terminate, without liability on the part of any non-defaulting Underwriter, the
Company or the Selling Shareholder, except for the expenses to be borne by the
Company, the Selling Shareholder and the Underwriters as provided in Section 7
hereof and the indemnity and contribution agreements in Section 9 hereof; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
11. 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 the Selling Shareholder, or any officer or
director or controlling person of the Company or the Selling Shareholder, and
shall survive delivery of and payment for the ADSs.
12. If this Agreement shall be terminated pursuant to Section 10
hereof, neither the Company nor the Selling Shareholder shall then be under any
liability to any Underwriter except as provided in Sections 7 and 9 hereof; but
if for any other reason any ADSs are not delivered by or on behalf of the
Selling Shareholder as provided herein, the Selling Shareholder will reimburse
the Underwriters through the Representatives for all reasonable out-of-pocket
expenses approved in writing by the Representatives, including fees and
disbursements of counsel, 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 7 and 9 hereof.
13. In all dealings hereunder, the Representatives 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 the Representatives; and in all dealings with the
Selling Shareholder hereunder, the Representatives and the Company shall be
entitled to act and rely upon any statement, request, notice or agreement on
behalf of the Selling Shareholder made or given by the Selling Shareholder. 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 the Representatives at c/o Goldman ▇▇▇▇▇ (Asia) L.L.C., 68th
Floor, ▇▇▇▇▇▇ Kong Center, ▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇: ▇▇▇▇
▇▇▇, fax number: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ and ▇.▇. ▇▇▇▇▇▇ Securities Ltd., ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, Attention: Equity Syndicate Desk, fax number:
▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇; if to Philips shall be delivered or sent by mail, telex or
facsimile transmission to ▇▇. ▇.▇. ▇▇▇▇▇▇▇▇, General Secretary, Koninklijke
Philips Electronics N.V., ▇▇▇▇▇▇▇▇ Center, Amstelplein 2, ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, fax number: (▇▇) ▇▇ ▇▇▇▇▇▇▇; 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:
▇▇▇▇ ▇▇; provided, however, that any notice to an Underwriter pursuant to
Section 9(d) 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
41
Company or the Selling Shareholder by the Representatives 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 9 and 11 hereof, the officers and directors of
the Company and each person who controls the Company, the Selling Shareholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the ADSs from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
15. Each of the parties hereto irrevocably (i) agrees that any legal
suit, action or proceeding against the Company or the Selling Shareholder
brought by any Underwriter or by any person who controls any Underwriter, or
against any Underwriter brought by the Selling Shareholder or the Company,
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in any New York Court, (ii) 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 such proceeding and (iii) submits to the
non-exclusive personal jurisdiction of such courts in any such suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby. The Company has appointed, for a duration of six years,
TSMC North America as its authorized agent and Philips has appointed Philips
Electronics North America Corporation as its authorized agent (each, an
"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
not be revoked without the prior written consent of the Representatives. Each of
the Company and the Selling Shareholder represents and warrants that its
respective 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 party that has
appointed it shall be deemed, in every respect, effective service of process
upon such party, as the case may be.
16. Each reference in this Agreement to U.S. dollars (the "relevant
currency") is of the essence. To the fullest extent permitted by law, the
obligation of the Company and the Selling Shareholder in respect of any amount
due under this Agreement will, notwithstanding any payment in any other currency
(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in the relevant currency that the party entitled to receive such
payment may, in accordance with its normal procedures, purchase with the sum
paid in such other currency (after any premium and costs of exchange) on the
business day immediately following the day on which such party receives such
payment. If the amount in the relevant currency that may be so purchased for any
reason falls short of the amount originally due, the Company and the Selling
Shareholder, as the case may be, will pay such additional amounts, in the
relevant currency, as may be necessary to compensate for the shortfall. Any
obligation of the Company and the Selling Shareholder not discharged by such
payment will, to the fullest
42
extent permitted by applicable law, be due as a separate and independent
obligation and, until discharged as provided herein, will continue in full force
and effect.
17. Each of the Company and the Selling Shareholder acknowledges and
agrees that in connection with all aspects of the purchase and sale of Shares
and ADSs pursuant to this Agreement or the process leading thereto, including
the pricing of this offering and advice, if any, provided by the Underwriters:
(i) it is contracting with the Underwriters on an arm's-length basis to provide
the services described herein, (ii) the Underwriters are not acting as agents or
as fiduciaries of, and owe no fiduciary duty to, the Company or the Selling
Shareholder, and (iii) the Underwriters are not assuming any duties or
obligations under this Agreement to the Company or the Selling Shareholder other
than those expressly set forth in this Agreement. Further, it is not the
intention of the parties to create a fiduciary relationship between them. Each
of the Company and the Selling Shareholder waives to the full extent permitted
by applicable law any claims it may have against the Underwriters for any breach
or alleged breach of fiduciary duty arising in any way from this offering or the
process leading thereto.
18. This Agreement supersedes all prior agreements and
understandings (whether written or oral) between the Company and the Selling
Shareholder, on the one hand, and the Underwriters, or any of them, on the
other, with respect to the subject matter hereof; provided, however, that this
Agreement does not supersede or amend the standstill agreement dated the date
hereof between the Representatives and the Company.
19. Each of the Company, the Selling Shareholder and the
Underwriters hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.
20. 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.
21. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
22. 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.
43
If the foregoing is in accordance with the Representatives' understanding,
please sign and return to us one original or counterpart hereof for each of the
Company, the Selling Shareholder and the representative of the Underwriters plus
one for each counsel and the Depositary, and upon the acceptance hereof by the
Representatives, 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 the
Representatives' 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 the
Representatives' part as to the authority of the signers thereof.
Very truly yours,
Taiwan Semiconductor Manufacturing Company Limited
By:
---------------------------
Name: ▇▇▇▇ ▇▇
Title: Vice President and Chief Financial Officer
Koninklijke Philips Electronics N.V.
By:
---------------------------
Name:
Title:
44
Accepted as of the date hereof:
▇▇▇▇▇▇▇ Sachs International
By:
---------------------------
Name:
Title:
▇.▇. ▇▇▇▇▇▇ Securities Ltd.
By:
---------------------------
Name:
Title:
On behalf of each of the Underwriters
named in Schedule I hereto
45
SCHEDULE I
TOTAL NUMBER OF ADSS
TO BE PURCHASED
UNDERWRITER
▇▇▇▇▇▇▇ Sachs International
▇.▇. ▇▇▇▇▇▇ Securities Ltd.
Total: 240,000,000
===========
46
SCHEDULE II(a)
Issuer Free Writing Prospectuses
[None]
47
SCHEDULE II(b)
Additional Documents Incorporated by Reference
[None]
48
ANNEX I
FORM OF COMFORT LETTER
49
THIS DRAFT IS FURNISHED SOLELY FOR THE PURPOSE OF INDICATING THE FORM OF LETTER
THAT WE WOULD EXPECT TO BE ABLE TO FURNISH ▇▇▇▇▇▇▇ SACHS INTERNATIONAL AND ▇.▇.
▇▇▇▇▇▇ SECURITIES LTD. IN RESPONSE TO THEIR REQUEST, THE MATTERS EXPECTED TO BE
COVERED IN THE LETTER, AND THE NATURE OF THE PROCEDURES THAT WE WOULD EXPECT TO
CARRY OUT WITH RESPECT TO SUCH MATTERS. BASED ON OUR DISCUSSIONS WITH ▇▇▇▇▇▇▇
SACHS INTERNATIONAL AND ▇.▇. ▇▇▇▇▇▇ SECURITIES LTD., IT IS OUR UNDERSTANDING
THAT THE PROCEDURES OUTLINED IN THIS DRAFT LETTER ARE THOSE THEY WISH US TO
FOLLOW. UNLESS ▇▇▇▇▇▇▇ SACHS INTERNATIONAL AND ▇.▇. ▇▇▇▇▇▇ SECURITIES LTD.
INFORM US OTHERWISE, WE SHALL ASSUME THAT THERE ARE NO ADDITIONAL PROCEDURES
THEY WISH US TO FOLLOW. THE TEXT OF THE LETTER ITSELF WILL DEPEND, OF COURSE, ON
THE RESULTS OF THE PROCEDURES, WHICH WE WOULD NOT EXPECT TO COMPLETE UNTIL
SHORTLY BEFORE THE LETTER IS GIVEN AND IN NO EVENT BEFORE THE CUTOFF DATE
INDICATED THEREIN.
[May xx, 2007]
▇▇▇▇▇▇▇ Sachs International
Petersborough Court
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇ Securities Ltd.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
As Representatives of the Underwriters for the offering of American Depositary
Shares representing common shares of Taiwan Semiconductor Manufacturing Company
Limited and
The Board of Directors
Taiwan Semiconductor Manufacturing Company Limited
▇▇. ▇, ▇▇-▇▇▇▇ ▇▇▇▇ 6
Science-Based Industrial Park
Hsinchu, Taiwan, R.O.C.
Dear Sirs:
We have audited the consolidated balance sheets of Taiwan Semiconductor
Manufacturing Company Ltd. and subsidiaries (the "Company") as of December 31,
2005 and 2006, and the
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 2006, and
management's report on the effectiveness of internal control over financial
reporting as of December 31, 2006, all included in the Company's annual report
on Form 20-F for the year ended December 31, 2006 and incorporated by reference
in the registration statement (No. 333-xxxxxx) on Form F-3 filed by the Company
under the Securities Act of 1933, as amended (the "Act"); our reports with
respect thereto (which reports express (1) an unqualified opinion on the
consolidated financial statements and includes explanatory paragraphs relating
to the reconciliation to accounting principles generally accepted in the United
States of America and the convenience translation of New Taiwan dollar amounts
into U.S. dollar amounts, (2) an unqualified opinion on management's assessment
regarding the effectiveness of internal control over financial reporting, and
(3) an unqualified opinion on the effectiveness of internal control over
financial reporting) are also incorporated by reference in that registration
statement. The registration statement, as amended on [ ] is herein referred to
as the registration statement.
In connection with the registration statement:
1. We are an independent registered public accounting firm with respect to the
Company within the meaning of the Code of Professional Ethics of the
Republic of China National Federation of Certified Public Accountants and
within the meaning of the Act and the applicable rules and regulations
thereunder adopted by the United States Securities and Exchange Commission
("SEC") and the Public Company Accounting Oversight Board (United States)
("PCAOB").
2. In our opinion, the consolidated financial statements audited by us and
incorporated by reference in the registration statement comply as to form
in all material respects with (i) the applicable accounting requirements of
the Republic of China and the rules and regulations adopted by the
Securities and Futures Bureau of the Republic of China ("SFB"), and (ii)
the applicable accounting requirements of the Act and the United States
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
related rules and regulations adopted by the SEC.
3. We have not audited any consolidated or unconsolidated financial statements
of the Company as of any date or for any period subsequent to December 31,
2006; although we have conducted an audit on the Company's consolidated
financial statements for the year ended December 31, 2006, the purpose (and
therefore the scope) of the audit was to enable us to express our opinion
on the consolidated financial statements as of December 31, 2006, and for
the year then ended, but not on the consolidated or unconsolidated
financial statements for any interim period within that year. Therefore, we
are unable to and do not express any opinion on the unaudited
unconsolidated balance sheet as of March 31, 2007 and the unaudited
unconsolidated statements of income, and cash flows for the three-month
periods ended
March 31, 2006 and 2007, incorporated by reference in the registration
statement, or on the unaudited consolidated balance sheet as of March 31,
2007 and the unaudited consolidated statements of income, and cash flows
for the three-month periods ended March 31, 2006 and 2007, not included or
incorporated by reference in the registration statement and attached as
Attachment I to this letter, or on the financial position, results of
operations, or cash flows of the Company as of any date or for any period
subsequent to December 31, 2006.
4. For purposes of this letter, we have read the 2006 and 2007 minutes of
meetings of the shareholders, the board of directors and committees of the
board of directors of the Company and its subsidiaries as set forth in the
minutes books at [May xx, 2007], officials of the Company having advised us
that the minutes of all such meetings through that date were set forth
therein; we have carried out other procedures to May xx, 2007 as follows
(our work did not extend to the period from May xx, 2007 to May ▇▇, ▇▇▇▇,
inclusive):
a. With respect to the three-month periods ended March 31, 2006 and 2007,
respectively, we have
1) Performed the procedures specified by the PCAOB for a review of
interim financial information as described in SAS No. 100,
Interim Financial Information, on the unaudited unconsolidated
balance sheet as of March 31, 2007 and the unaudited
unconsolidated statements of income, and cash flows for the
three-month periods ended March 31, 2006 and 2007, incorporated
by reference in the registration statement, and on the unaudited
consolidated balance sheet as of March 31, 2007 and the unaudited
consolidated statements of income, and cash flows for the
three-month periods ended March 31, 2006 and 2007, not included
or incorporated by reference in the registration statement and
attached as Attachment I to this letter. Such financial
information is incomplete in that it omits the statements of
changes in shareholders' equity and other disclosures. The
Company did not prepare a reconciliation of the net income or
shareholders' equity using accounting principles generally
accepted in the Republic of China ("ROC GAAP") to accounting
principles generally accepted in the United States ("US GAAP")
for the three-month periods ended March 31, 2006 and 2007.
2) Inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether the
unaudited unconsolidated and consolidated financial statements
referred to in 4.a.1) comply as to form in all material respects
with the applicable accounting requirements of the Republic of
China and the related rules and regulations adopted by the
Securities and Futures Bureau ("SFB") of the Republic of China.
b. With respect to the period from April 1, 2007 to April 30, 2007, we
have --
1) Read the unaudited unconsolidated ROC GAAP financial statements
of the Company for the period from April 1 to April 30 of both
2006 and 2007 furnished us by the Company attached as Attachment
II hereto, and compared the amounts contained therein to the
Company's accounting records and found them to be in agreement.
Such financial information is incomplete in that it omits the
statements of changes in shareholders' equity, statements of cash
flows and other disclosures. Officials of the Company have
advised us that no such financial statements as of any date or
for any period subsequent to April 30, 2007 were available. The
Company did not prepare a reconciliation of net income or
shareholders' equity under ROC GAAP to US GAAP for the one-month
periods from April 1 to April 30 of both 2006 and 2007.
2) Inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether (1)
at April 30, 2007 there was any change in the capital stock of
the unconsolidated company as compared with amounts shown in the
December 31, 2006 audited consolidated ROC GAAP balance sheet
incorporated by reference in the registration statement, and (2)
for the period from April 1, 2007 to April 30, 2007, there were
any decreases, as compared to the corresponding period in the
preceding year, in unconsolidated net revenues or unconsolidated
total or per-share amounts of net income.
3) Inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether (1)
the unaudited unconsolidated financial statements referred to in
4.b.1) are stated on a basis substantially consistent with that
of the Company's unaudited unconsolidated ROC GAAP financial
statements as of and for the three-month periods ended March 31,
2006 and 2007, incorporated by reference in the registration
statement, and (2) at April 30, 2007, there was any change in the
capital stock, increase in long-term debt or decrease in
unconsolidated net current assets or shareholders' equity of the
unconsolidated company as compared with amounts shown in the
March 31, 2007 unaudited unconsolidated ROC GAAP balance sheet
incorporated by reference in the registration statement.
Those officials stated that (1) the unaudited unconsolidated ROC
GAAP financial statements referred to in 4.b.1) are stated on a
basis substantially consistent with that of the unaudited
unconsolidated ROC GAAP financial statements as of and for the
three-month periods ended March 31, 2006 and 2007, incorporated
by reference in the registration statement, and (2) at April 30,
2007, there was no change in the capital
stock, no increase in long-term debt and no decrease in
unconsolidated net current assets or shareholders' equity of the
unconsolidated company as compared with amounts shown in the
March 31, 2007 unaudited unconsolidated ROC GAAP balance sheet
incorporated by reference in the registration statement, except
that the unaudited unconsolidated balance sheet as of April 30,
2007, which were furnished by the Company, showed changes from
March 31, 2007 as follows (in millions of NT dollars):
Capital
Stock
-------
March 31, 2007
April 30, 2007
The foregoing procedures do not constitute an audit conducted in accordance with
auditing standards generally accepted in the Republic of China or the standards
of the PCAOB. Also, they would not necessarily reveal matters of significance
with respect to the comments in the following paragraph. Accordingly, we make no
representations regarding the sufficiency of the foregoing procedures for your
purposes.
5. Nothing came to our attention as a result of the foregoing procedures,
however, that caused us to believe that --
a. 1) Any material modifications should be made to the unaudited
unconsolidated financial statements referred to in 4.a.1),
incorporated by reference in the registration statement, for them
to be in conformity with ROC GAAP.
2) Any material modifications should be made to the unaudited
consolidated financial statements referred to in 4.a.1), not
included or incorporated by reference in the registration
statement and attached as Attachment I to this letter, for them
to be in conformity with ROC GAAP.
3) The unaudited unconsolidated and consolidated financial
statements referred to in 4.a.1) do not comply as to form in all
material respects with the applicable accounting requirements of
the Republic of China and the related rules and regulations
adopted by the SFB.
b. 1) At April 30, 2007, on a ROC GAAP basis, there was any change in
the
unconsolidated capital stock of the unconsolidated company as
compared with amounts shown in the audited consolidated ROC GAAP
balance sheet as of December 31, 2006, incorporated by reference
in the registration statement or
2) For the period from April 1 to April 30, 2007, on a ROC GAAP
basis, there were any decreases, as compared to the same period
in the preceding year, in unconsolidated net revenues or
unconsolidated total or per-share amounts of net income, except
that the unaudited unconsolidated balance sheet as of April 30,
2007 and unaudited unconsolidated statement of income for the
period from April 1 to April 30, 2007, which we were furnished by
the Company and attached as Attachment II hereto, showed changes
as follows (in million of NT dollars):
Capital Shareholders
Stock Equity
--------------- --------------
December 31, 2006
April 30, 2007
Earnings
Net revenues Net income Per share
----------- ---------- -----------
April 1 to April 30, 2006 *
April 1 to April 30, 2007
* Adjusted retroactively for stock dividends and stock bonuses issued in 2006.
6. As mentioned in 4.b.1), Company officials have advised us that no financial
statements as of any date or for any period subsequent to April 30, 2007,
are available; accordingly, the procedures carried out by us with respect
to changes in financial statement items after April 30, 2007, have, of
necessity, been even more limited than those with respect to the periods
referred to in 4.
a. We have inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether at [May
xx, 2007], there was any change in the capital stock of the
unconsolidated company as compared with amounts shown on the December
31, 2006 audited consolidated balance sheet incorporated by reference
in the registration statement. On the basis of these inquiries and our
reading of the minutes as described in 4., nothing came to our
attention that caused us to believe that there was any such change or
decrease, except that capital stock changed as follows (in millions of
NT dollars):
Capital
Stock
-------
December 31, 2007
May xx, 2007
b. We have inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether 1) at [May
xx, 2007], there was any change in capital stock, decrease in cash and
cash equivalents or increase in long-term debt of the unconsolidated
company as compared with amounts shown in the March 31, 2007 unaudited
unconsolidated ROC GAAP balance sheet incorporated by reference in the
registration statement, or 2) for the period from April 1, 2007 to May
xx, 2007, there were any decreases, as compared with the corresponding
period in the preceding year, in unconsolidated net revenue. Those
officials stated that (1) at May xx, 2007, there was no change in the
capital stock, no decrease in cash and cash equivalents and no
increase in long-term debt of the unconsolidated company as compared
with amounts shown in the March 31, 2007 unaudited unconsolidated ROC
GAAP balance sheet incorporated by reference in the registration
statement and attached as Attachment I to this letter and (2) there
were no decreases for the period from April 1, 2007 to May xx, 2007,
as compared with the corresponding period in the preceding year, in
unconsolidated net revenue, except changes as follows (in millions of
NT dollars):
Capital Cash and Cash
Stock Equivalent
------- -------------
March 31, 2007
May xx, 2007
Net revenue
-------------
April 1 to May xx, 2006
April 1 to May xx, 2007
8. For purposes of this letter, we have also read the items identified by you
on the attached copy of the registration statement including the documents
incorporated by reference therein, and have performed the procedures with
respect to the symbols listed in Attachment III hereto.
9. Our audit of the financial statements for the periods referred to in the
introductory paragraph of this letter comprised of audit tests and
procedures deemed necessary for the purpose of expressing an opinion on
such financial statements taken as a whole. For none of the periods
referred to therein, or any other period, did we perform audit tests for
the purpose of expressing an opinion on individual balances of accounts or
summaries of selected transactions such as those enumerated in Attachment
III hereto, and, accordingly, we express no opinion thereon.
10. It should be understood that we make no representation regarding questions
of legal interpretation or regarding the sufficiency for your purposes of
the procedures enumerated in Attachment III hereto; also, such procedures
would not necessarily reveal any material misstatement of the amounts or
percentages discussed in such Attachment hereto. Further, we have addressed
ourselves solely to the foregoing data as set forth in the registration
statement and make no representations regarding the adequacy of disclosure
or whether any material facts have been omitted.
11. This letter is solely for the information of the addressees and to assist
the underwriters in conducting and documenting their investigation of the
affairs of the Company in connection with the offering of the securities
covered by the registration statement, and it is not to be used,
circulated, quoted, or otherwise referred to within or without the
underwriting group for any other purpose, including but not limited to the
registration, purchase, or sale of securities, nor is it to be filed with
or referred to in whole or in part in the registration statement or any
other document, except that reference may be made to it in the
underwriting
agreement or in any list of closing documents pertaining to the offering of
the securities covered by the registration statement.
Very truly yours,
Deloitte & Touche
Taipei, Taiwan,
The Republic of China
ATTACHMENT III
A. Compared the dollar amounts, descriptions of amounts, numbers or
percentages with corresponding information shown for the respective periods
in the Company's audited consolidated financial statements incorporated by
reference in the registration statement and found them to be in agreement
(after giving effect to rounding where applicable).
B. Proved the arithmetic accuracy of the dollar amounts, numbers or
percentages, based on information included in or derived from the Company's
audited consolidated financial statements incorporated by reference in the
registration statement (after giving effect to rounding where applicable).
C. Compared the dollar amounts, descriptions of amounts, numbers or
percentages with corresponding information shown for the respective periods
in the Company's audited consolidated financial statements not included in
or incorporated by reference in the registration statement and found them
to be in agreement (after giving effect to rounding where applicable).
D. Proved the arithmetic accuracy of the dollar amounts, numbers or
percentages based on information included in the Company's audited
consolidated financial statements not included in or incorporated by
reference in the registration statement (after giving effect to rounding
where applicable).
E. Compared the dollar amounts, descriptions of amounts, numbers or
percentages with corresponding information shown for the respective periods
in the Company's unaudited interim consolidated financial statements not
included or incorporated by reference in the registration statement and
attached as Attachment I hereto and found them to be in agreement (after
giving effect to rounding where applicable).
F. Proved the arithmetic accuracy of the dollar amounts, numbers or
percentages based on information included in the Company's unaudited
interim consolidated financial statements not included or incorporated by
reference in the registration statement and attached as Attachment I hereto
(after giving effect to rounding where applicable).
G. Compared the dollar amounts, descriptions of amounts, numbers or
percentages with corresponding information shown for the respective periods
in the Company's unaudited interim unconsolidated financial statements
incorporated by reference in the registration statement and found them to
be in agreement (after giving effect to rounding where applicable).
H. Proved the arithmetic accuracy of the dollar amounts, numbers or
percentages based on information included in the Company's unaudited
interim unconsolidated financial statements incorporated by reference in
the registration statement (after giving effect to rounding where
applicable).
I. Compared the amount with a schedule or analysis prepared by employees in
the Company's accounting department and found them to be in agreement.
Proved the arithmetic accuracy of the schedule or analysis. Traced the
amounts in the schedule to the Company's audited accounting records.
J. Compared the amount with a schedule or analysis prepared by employees in
the Company's accounting department and found them to be in agreement.
Proved the arithmetic accuracy of the schedule or analysis. Traced the
amounts in the schedule to the Company's unaudited accounting records.
K. Compared the amount or percentage with schedules prepared by employees in
the Company's accounting department and found them to be in agreement.
Proved the arithmetic accuracy of the schedule.
L. Proved the arithmetic accuracy of the dollar amount based on the exchange
rate for the United States dollar from the US Federal Reserve bank noon
buying rate as of December 31, 2006 or March 31, 2007. We make no comment
as to the exchange rate used.
M. Proved the arithmetic accuracy of the "as adjusted" dollar and share
amounts (after giving effect to rounding where applicable) by giving effect
to the corresponding "actual" dollar and share amounts, as applicable, for
(i) the appropriation from the earnings of 2006, including the stock
dividend of x.xxxx common shares per 100 common shares, representing
xxxxxxx common shares, cash dividend of NT$x.xxxx per common shares,
employee bonus and remuneration to directors and supervisors Compared the
amount of earnings appropriation with corresponding information as shown in
the minutes of the shareholders' meeting on May x, 2007 and found them to
be in agreement.
