Document:

Exhibit 4.28

 

EQUITY PLEDGE AGREEMENT

 

This Equity Pledge Agreement (this “Agreement”) is entered into in Hangzhou on April 15, 2009 by the following parties:

 

Pledgee:

 

Party A:                                                NetEase (Hangzhou) Network Co., Ltd.

Legal Address: Room 103-105, 1/F, Building 18, No.1 Jiaogong Road. Hangzhou, Zhejiang Province, P. R. China

 

Pledgor:

 

Party B:                                                Chen Gang

ID card No.: 330106197310300431

Legal Address: No.38 Zheda Road, West Lake District, Hangzhou, Zhejiang Province, P. R. China

 

In this Agreement, Party A and Party B are called collectively as the “Parties” and each of them is a “Party.”

 

WHEREAS,

 

1.                                      Party A (the “Pledgee”) is a wholly foreign-owned enterprise registered in Hangzhou, the People’s Republic of China (the “PRC”).

 

2.                                      Party B (the “Pledgor”) is a citizen of the PRC. The Pledgor owns 50% of the equity interest in Hangzhou Leihuo Network Co., Ltd., a limited liability company registered in Hangzhou (the “Company”).

 

3.                                      Party A made a loan in the amount of RMB 5,000,000 (hereinafter the “Loan”) to Party B and the parties executed a loan agreement (the “Loan Agreement”) on March 23, 2009. The term of the Loan is 20 years commencing from the date when Party B received the Loan.  Party A and Party B have also entered into other agreements on April 15, 2009 pursuant to which Party B has certain performance obligations, with such other agreements being: an exclusive purchase option agreement, a cooperation agreement, a proxy agreement and an operating agreement (the “Other Agreements”).

 

4.                                      In order to ensure that Party B will perform its obligations under the Loan Agreement and the Other Agreements, the Pledgor agrees to pledge all his/her equity interest in the Company as security for the performance of his/her obligations under the Loan Agreement and the Other Agreements.

 

NOW, THEREFORE, through negotiations, all parties to this Agreement hereby agree as follows:

 

1.                                      Definitions and Interpretation

 

Unless otherwise provided in this Agreement, the following terms shall have the following meanings:

 

1.1                               “Pledge”: refers to the full content of Article 2 hereunder.

 

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1.2                               “Equity Interest”: refers to all of the equity interest in the Company legally held by the Pledgor.

 

1.3                               “Term of Pledge”: refers to the period provided for under Article 3.2 hereunder.

 

1.4                               “Principal Agreements”: refers to the Loan Agreement and the Other Agreements.

 

1.5                               “Event of Default”: refers to any event listed in Article 7.1 hereunder.

 

1.6                               “Notice of Default”: refers to the notice of default issued by the Pledgee in accordance with this Agreement.

 

If there is any conflict or ambiguity between this Agreement and any other equity pledge agreement entered into by the Parties in connection with registration with governmental authorities, this Agreement shall govern.

 

2.                                      Pledge

 

The Pledgor agrees to pledge his/her Equity Interest in the Company to the Pledgee as security for his/her obligations under the Principal Agreements. The term “Pledge” under this Agreement refers to the right of the Pledgee to be entitled to priority in receiving payment in the form of the Equity Interest based on the conversion value thereof, or from the proceeds from the auction or sale of the Equity Interest pledged by the Pledgor to the Pledgee.

 

3.                                      Term of Pledge

 

3.1                               The Pledge shall take effect as of the date when the pledge of the Equity Interest is recorded in the Register of Shareholders of the Company and shall remain in effect until terminated under Article 11 hereunder. The parties agree that, if legally allowed, they will use their best efforts to register the Pledge with the Administration for Industry and Commerce at the place of registration of the Company. However, the parties confirm that the effectiveness of this Agreement is not subject to the registration unless the laws and regulations of the PRC provide otherwise.

 

3.2                               During the term of the Pledge, the Pledgee shall be entitled to dispose of the pledged assets in accordance with this Agreement in the event that the Pledgor does not perform his/her obligations under the Principal Agreement.

 

4.                                      Physical Possession of Documents

 

4.1                               During the term of the Pledge under this Agreement, the Pledgor shall deliver the physical possession of his/her Certificate of Capital Contribution and the Register of Shareholders of the Company to the Pledgee within one (1) week from the execution date of this Agreement.

 

4.2                               The Pledgee shall be entitled to collect the dividends for the Equity Interest.

 

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4.3                               The Pledge under this Agreement will be recorded in the Register of Shareholders of the Company.

 

5.                                      Representation and Warranty of the Pledgor

 

5.1                               The Pledgor is the legal owner of the Equity Interest pledged.

 

5.2                               Except for the benefit of the Pledgee, the Pledgor has not pledged the Equity Interest or created other encumbrance on the Equity Interest.

 

6.                                      Covenants of the Pledgor

 

6.1                               During the effective term of this Agreement, the Pledgor covenants to the Pledgee for its benefit that the Pledgor shall:

 

6.1.1                     Not transfer or assign the Equity Interest, create or permit the existence of any other pledges which may have an adverse effect on the rights or benefits of the Pledgee without prior written consent of the Pledgee;

 

6.1.2                     Comply with laws and regulations with respect to the pledge of rights; present to the Pledgee the notices, orders or suggestions with respect to the Pledge issued or made by relevant government authorities within five (5) days upon receiving such notices, orders or suggestions; comply with such notices, orders or suggestions or, alternatively, at the reasonable request of the Pledgee or with consent from the Pledgee, raise objection to such notices, orders or suggestions;

 

6.1.3                     Timely notify the Pledgee of any events or any notices received which may affect the Pledgor’s right to all or any part of the Equity Interest, and any events or any received notices which may change the Pledgor’s warranties and obligations under this Agreement or affect the Pledgor’s performance of its obligations under this Agreement.

 

6.2                               The Pledgor agrees that the Pledgee’s right to the Pledge obtained from this Agreement shall not be suspended or inhibited by any legal procedure initiated by the Pledgor or any successors of the Pledgor or any person authorized by the Pledgor or any other person.

 

6.3                               The Pledgor promises to the Pledgee that in order to protect or perfect the security for the payment of the Loan, the Pledgor shall execute in good faith and cause other parties who have interests in the Pledge to execute, all title certificates and contracts, and/or perform any other actions (and cause other parties who have interests to take actions) as required by the Pledgee and facilitate the exercise of the rights and authority granted to the Pledgee under this Agreement.  The Pledgor also promises to execute (i) a power of attorney in the form of Exhibit A to appoint any party designated by Party A as the Pledgor’s proxy for executing legal documents that are necessary or useful for effecting this Agreement and (ii) a transfer agreement in the form of Exhibit B to transfer his/her Equity Interest.

 

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6.4                               The Pledgor promises to the Pledgee that he/she will execute all amendment documents (if applicable and necessary) in connection with the certificate of the Equity Interest with the Pledgee or its designated person (being a natural person or a legal entity) and, within a reasonable period, provide to the Pledgee all notices, orders and decisions about the Pledge as the Pledgee deems necessary.

 

6.5                               The Pledgor promises to the Pledgee that he/she will comply with and perform all the guarantees, covenants, warranties, representations and conditions for the benefit of the Pledgee. The Pledgor shall compensate the Pledgee for all losses suffered by the Pledgee because of the Pledgor’s failure to perform in whole or in part its guarantees, covenants, warranties, representations and conditions.

 

7.                                      Event of Default

 

7.1                               The following events shall be regarded as events of default:

 

7.1.1                     Pledgor fails to perform his/her obligations under any of the Principal Agreements;

 

7.1.2                     Any representation or warranty made by the Pledgor in Article 5 hereof contains material misleading statements or errors and/or the Pledgor breaches any warranty in Article 5 hereof;

 

7.1.3                     The Pledgor breaches the covenants under Article 6 hereof;

 

7.1.4                     The Pledgor breaches another provision of this Agreement;

 

7.1.5                     The Pledgor waives the pledged Equity Interest or transfers or assigns the pledged Equity Interest without prior written consent from the Pledgee;

 

7.1.6                     Any of the Pledgor’s external loans, guaranties, compensations, undertakings or other obligations (1) is required to be repaid or performed prior to the scheduled due date because of a default; or (2) is due but cannot be repaid or performed as scheduled, causing the Pledgee to believe that the Pledgor’s ability to perform the obligations hereunder has been affected;

 

7.1.7                     The Company is incapable of repaying its general debts or other debts;

 

7.1.8                     This Agreement becomes illegal or the Pledgor is not capable of continuing to perform the obligations hereunder due to any reason other than force majeure;

 

7.1.9                     There have been adverse changes to the properties owned by the Pledgor, causing the Pledgee to believe that the capability of the Pledgor to perform the obligations hereunder has been affected; or

 

7.1.10              The breach of the other provisions of this Agreement by the Pledgor due to his/her act or omission.

 

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7.2                               The Pledgor shall immediately give a written notice to the Pledgee if the Pledgor knows or discovers that any event specified under Article 7.1 hereof or any event that may result in the foregoing events has occurred.

 

7.3                               Unless an event of default under Article 7.1 hereof has been solved to the Pledgee’s satisfaction, the Pledgee, at any time when the event of default occurs or at anytime thereafter, may give a written notice of default to the Pledgor either (i) requiring the Pledgor to immediately cause payment into a bank account designated by the Pledgee of the full outstanding amount under the Loan Agreement and/or make any other payments required under any other Principal Agreement or (ii) requesting to exercise the Pledge in accordance with Article 8 hereof.

 

8.                                      Exercise of the Pledge

 

8.1                               The Pledgor shall not transfer or assign the Equity Interest without prior written approval from the Pledgee prior to the full performance of his/her obligations under the Principal Agreements.

 

8.2                               The Pledgee shall give a notice of default to the Pledgor when the Pledgee exercises the Pledge.

 

8.3                               Subject to Article 7.3, the Pledgee may exercise the Pledge when the Pledgee gives a notice of default in accordance with Article 7.3 or at anytime thereafter.

 

8.4                               The Pledgee is entitled to priority in receiving payment in the form of all or part of the Equity Interest based on the conversion value thereof, or from the proceeds from the auction or sale of all or part of the Equity Interest in accordance with legal procedure, until the outstanding debt and all other payables of the Pledgor under Loan Agreement and any other Principal Agreement are repaid.

 

8.5                               The Pledgor shall not hinder the Pledgee from exercising the Pledge in accordance with this Agreement and shall give necessary assistance so that the Pledgee can fully exercise its Pledge.

 

9.                                      Assignment

 

9.1                               The Pledgor shall not assign or transfer its rights and obligations hereunder without prior consent from the Pledgee.

 

9.2                               This Agreement shall be binding upon the Pledgor and his/her successors and be binding on the Pledgee and each of its successors and permitted assigns.  In the event of Party B’s death or incapacity, the terms of this Agreement shall be binding upon the executors, administrators, heirs and successors of Party B.  Any Equity Interest held by Party B shall not be part of Party B’s estate upon death or incapacity and shall not pass to Party B’s heirs or successors.  Upon Party B’s death or incapacity, any Equity Interest held by Party B shall be transferred to Party A or its Designated Persons.

 

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9.3                               To the extent permitted by law, the Pledgee may transfer or assign any or all of its rights and obligations under the Principal Agreements to any person (natural person or legal entity) designated by it at any time. In that case, the assignee shall have the same rights and obligations as those of the Pledgee as if the assignee was an original party hereto. When the Pledgee transfers or assigns the rights and obligations under the Principal Agreements, it is only required to provide a written notice to the Pledgor, and at the request of the Pledgee, the Pledgor shall execute the relevant agreements and/or documents with respect to such transfer or assignment.

 

9.4                               After the Pledgee has been changed as a result of a transfer or an assignment, the new parties to the Pledge shall execute a new pledge contract.

 

10.                               Effectiveness

 

This Agreement is effective as of the date first set forth above and from the date when the pledge is recorded on the Company’s Register of Shareholders.

 

11.                               Termination

 

This Agreement shall terminate when the Pledgee confirms in writing that the loan under the Loan Agreement has been fully repaid and the Pledgor no longer has any outstanding obligations under the Principal Agreements. Thereafter, the Pledgee shall cancel or terminate this Agreement as soon as reasonably practicable.

 

12.                               Fees and Other Charges

 

12.1                        The Pledgor shall be responsible for all of the fees and actual expenses in relation to this Agreement including, but not limited to, legal fees, production costs, stamp tax and any other taxes and charges. If the Pledgee pays the relevant taxes in accordance with the laws, the Pledgor shall fully indemnify the Pledgee for such taxes paid by the Pledgee.

 

12.2                        In the event that the Pledgee has to make a claim against the Pledgor by any means as a result of the Pledgor’s failure to pay any tax or expense payable by the Pledgor under this Agreement, the Pledgor shall be responsible for all the expenses arising from such claim (including but not limited to any taxes, handling fees, management fees, litigation fees, attorney’s fees, and various insurance premiums in connection with the disposition of the Pledge).

 

13.                               Force Majeure

 

13.1                        Force Majeure, which includes but is not limited to acts of governments, acts of nature, fires, explosions, typhoons, floods, earthquakes, tides, lightning or war, means any unforeseen event that is beyond the party’s reasonable control and cannot be prevented with reasonable care of the affected party. However, any insufficiency of creditworthiness, capital or financing shall not be regarded as an event beyond the party’s reasonable control. The party affected by Force Majeure and seeking exemption from performing the obligations under this Agreement shall inform the other party of such exemption and any action taken by it for performing this Agreement.

 

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13.2                        In the event that the affected party is delayed in or prevented from performing its obligations under this Agreement by Force Majeure, and only to the extent of such delay or prevention, the affected party shall not be liable for the obligations under this Agreement. The affected party shall take appropriate measures to minimize or remove the effects of Force Majeure and attempt to resume the performance of the obligations delayed or prevented by the event of Force Majeure. Once the event of Force Majeure is removed, both parties agree to resume the performance of this Agreement using their best efforts.

 

14.                               Confidentiality

 

14.1                        Both parties acknowledge and confirm that any oral or written materials exchanged pursuant to this Agreement are confidential. Each party shall keep confidential all such materials and not disclose any such materials to any third party without the prior written consent from the other party except in the following situations: (a) such materials are or will become known by the public (through no fault of the receiving party); (b) any materials as required to be disclosed by the applicable laws or rules of any stock exchange or governmental entity; and (c) any materials disclosed by each party to its legal or financial advisors relating to the transactions contemplated by this Agreement, and such legal or financial advisors shall comply with the confidentiality provisions set forth in this Article 14. Any disclosure of confidential information by the personnel of any party or by the institutions engaged by such party shall be deemed as a disclosure by such party, and such party shall be liable for the breach under this Agreement.

 

14.2                        Both parties agree that this Article 14 shall survive the invalidity, cancellation, termination or unenforceability of this Agreement.

 

15.                               Applicable Laws and Dispute Resolution

 

15.1                        The formation, validity, interpretation and performance of and settlement of disputes under this Agreement shall be governed by the laws of the PRC.

 

15.2                        Any dispute, conflict, or claim arising in connection with the interpretation and performance of the provisions of this Agreement (including any issue relating to the existence, validity, and termination of this Agreement) shall be resolved by the Parties in good faith through negotiations. In case no resolution can be reached by the Parties within thirty (30) days after a Party makes a request for dispute resolution through negotiations, any Party may refer such dispute to a competent court having legal jurisdiction over Hangzhou, PRC.  The Parties agree to submit to the jurisdiction of such court.

 

16.                               Notice

 

Any notice which is given by the parties hereto for the purpose of performing the rights and obligations hereunder shall be in writing. Where such notice is delivered personally, the time of notice is the time when such notice actually reaches the addressee; where such notice is transmitted by telex or facsimile, the notice time is the time when such notice is transmitted. If such notice does not reach the addressee on a business day or reaches the addressee after business hours, the next business day  following such day is the date of notice. The delivery place is the address first written above for each of the parties hereto or the address advised by such party in writing, including facsimile and telex, from time to time.

 

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17.                               Entire Contract

 

The parties agree that this Agreement and the Principal Agreements referenced herein constitute the entire agreement of the parties hereto with respect to the subject matters herein upon its effectiveness and supersedes and replaces all prior oral and/or written agreements and understandings relating to the subject matters of this Agreement.

 

18.                               Severability

 

Should any provision of this Agreement be held invalid or unenforceable because of inconsistency with applicable laws, such provision shall be invalid or unenforceable only to the extent of such applicable laws without affecting the validity or enforceability of the remainder of this Agreement.

 

19.                               Appendices

 

The appendices to this Agreement shall constitute an integral part of this Agreement.

 

20.                               Amendment or Supplement

 

20.1                        The parties may amend or supplement this Agreement by written agreement. The amendments or supplements to this Agreement duly executed by both parties shall form an integral part of this Agreement and shall have the same legal effect as this Agreement.

 

20.2                        This Agreement and any amendments, modifications, supplements, additions or changes hereto shall be in writing and shall be effective upon being executed and sealed by the parties hereto.

 

21.                               Counterparts

 

This Agreement is executed in English in duplicate, with each party hereto holding one copy. Both originals have the same legal effect.

 

[No text below on this page]

 

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[Signature Page]

 

Pledgee:

 

NetEase (Hangzhou) Network Co., Ltd. (seal)

 

	
Legal   Representative/Authorized Representative:
    	
/s/ William Lei   Ding
    	
 
    

 

Pledgor:

 

Chen Gang

 

	
Signature:
    	
/s/ Chen Gang
    	
 
    

 

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Exhibit A
 Form of Power of Attorney

 

[I] hereby irrevocably appoint _______________________________, holder of [passport / PRC identification] number : _____________, as [my] proxy, to sign and deliver any and all legal documents that are necessary or useful to enforce or effect the purpose of the Equity Pledge Agreement between [NetEase (Hangzhou) Network Co., Ltd.] and [me] executed on [date of agreement].

 

 

	
 
    	
[Chen Gang]
    
	
 
    	
 
    
	
 
    	
[Date]
    

 

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Exhibit B
 Form of Transfer Agreement

 

 

This Transfer Agreement (this “Agreement”) is jointly signed by the Parties on ___________ at the offices of [Hangzhou Leihuo Network Co., Ltd.] (the “Company”).

 

	
Transferor:
    	
 
    	
[Pledgor — Chen Gang] (“Party   A”)
    
	
Transferee:
    	
 
    	
[Pledgee - NetEase (Hangzhou   Network Co., Ltd. or designated person] (“Party B”)
    

 

In this Agreement, Party A and Party B are called collectively as the “Parties” and each of them is a “Party.”

 

The registered capital of the Company is [RMB ____________], of which Party A contributed [RMB ____________], representing [_____%] of the registered capital of the Company.  According to the relevant laws, rules and regulations, upon friendly negotiations between the Parties, and pursuant to the Equity Pledge Agreement entered into between the Parties on [April 15, 2009] (the “Equity Pledge Agreement”), the Parties agree to the following:

 

Article 1. Subject of Transfer

 

Party A shall transfer to _____________________________ all of Party A’s equity interest in the Company (the “Transferred Interest”) pursuant to the terms of the Equity Pledge Agreement.

 

Article 2. Undertakings and Guarantee

 

Party A guarantees that the Transferred Interest is legally owned by Party A and that Party A owns the complete, effective right of disposal.  Party A guarantees that the Transferred Interest is free of any mortgage or other security and not the subject of claims of any third party.  Otherwise, Party A shall undertake all legal liabilities incurred therefrom.  Party A undertakes and guarantees that after this Agreement has become effective, Party B shall have all of Party A’s previous rights in the Transferred Assets.

 

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Article 3. Liabilities for Breach of Contract

 

If any Party to this Agreement fails to, according to the provisions of this Agreement, appropriately and fully perform its obligations, such Party shall be liable for breach of contract.  Any damages and costs incurred by the non-breaching Party, due to a breach of contract by the breaching Party, shall be paid by the breaching Party to the non-breaching Party.

 

Article 4. Method of Dispute Resolutions

 

This Agreement shall be subject to the relevant laws of the People’s Republic of China and the interpretations thereof.  Any dispute arising from or in connection with this Agreement shall be resolved by the dispute resolution mechanism in the Equity Pledge Agreement.

 

Article 5. Others

 

Both Parties guarantee that the above agreed contents are the real expression of intention of the Parties, and the legal liabilities for all consequences caused by misstatement shall be borne by the Parties correspondingly.  This Agreement shall become effective upon execution by Party A and Party B.

 

This Agreement shall be executed in triplicate, one for each of the Parties and one for the Company for use in completing the relevant formalities.

 

 

	
Party A
    	
 
    
	
Chen Gang   (signature):
    	
[signed]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Party B   (signature):
    	
[signed]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Dated:                         ,
    
				

 

12Exhibit 4.29

 

EXCLUSIVE PURCHASE OPTION AGREEMENT

 

This Exclusive Purchase Option Agreement (this “Agreement”) is entered into as of April 15, 2009 among the following parties in Hangzhou:

 

Party A:                                                                        NetEase (Hangzhou) Network Co., Ltd.

 

Legal Address:                                   Room 103-105, 1/F, Building 18, No.1 Jiaogong Road, Hangzhou, Zhejiang Province, P. R. China

 

Party B:                                                                        Chen Gang

ID Number:                                                     330106197310300431

Legal Address:                                   No.38 Zheda Road, West Lake District, Hangzhou, Zhejiang Province, P. R. China

 

Party C:                                                                        Hangzhou Leihuo Network Co., Ltd.

 

Legal Address:                                   Room 601-603, 6/F, Building 18, No.1 Jiaogong Road, West Lake District, Hangzhou, Zhejiang Province, P. R. China

 

In this Agreement, Party A, Party B and Party C are called collectively as the “Parties” and each of them is a “Party.”

 

WHEREAS:

 

1.                                      Party A is a wholly foreign-owned enterprise incorporated under the laws of the People’s Republic of China (the “PRC”);

 

2.                                      Party C a limited liability company incorporated in the PRC;

 

3.                                      Party B is a shareholder of Party C. Party B has ownership of 50% of the equity interest in Party C (the “Equity Interest”).

 

4.                                      Party A and Party B entered into a loan agreement (the “Loan Agreement”) on March 23, 2009, pursuant to which Party A made a loan to Party B (the “Loan”), so that Party B could invest the proceeds from the Loan in Party C as a capital contribution; and

 

5.                                      Party A and Party B entered into an equity pledge agreement (the “Equity Pledge Agreement”) on April 15, 2009.

 

NOW, THEREFORE, through negotiations, all parties to this Agreement hereby agree as follows:

 

1.                                      Purchase and Sale of Interest

 

1.1                               Granting of Rights

 

1.1.1                     Equity Option

 

Party B hereby irrevocably grants to Party A an option (exercisable one or more times) to purchase or cause any one or more persons designated by Party  A (“Designated Persons”) to purchase, to the extent permitted under PRC law, according to the steps determined by Party A, at the price specified in Article 1.3 of this Agreement, and at any time from Party B, a portion of, or all of, the Equity Interest (the “Equity Option”).  No Equity Option shall be granted to any third party other than Party A and/or the Designated Persons. Party C hereby agrees to the granting of the Equity Option by Party B to Party A and/or the Designated Persons.  The term “person” in this Agreement means an individual person, corporation, joint venture, partnership, enterprise, trust or a non-corporation organization.

 

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1.1.2                     Asset Option

 

Party C hereby irrevocably grants to Party A an option (exercisable one or more times) to purchase or cause any Designated Persons to purchase, to the extent permitted under PRC law, according to the steps determined by Party A, at the price specified in Article 1.3 of this Agreement, and at any time from the Party C or its subsidiaries, a portion of, or all of, the assets of Party C held by Party C or its subsidiaries (the “Asset Option”).  No Asset Option shall be granted to any third party other than Party A and/or the Designated Persons.  Upon exercise of the Asset Option, Party B and Party C hereby agree to take all actions (including execution and delivery of documents), and to cause Party C to take all actions (including execution and delivery of documents), that are necessary or advisable for Party C to transfer any assets to be transferred by the Asset Option.  The term “Option” in this Agreement means either the Equity Option or the Asset Option.  The term “Transferor” in this Agreement means (i) Party B, in reference to the Equity Option and (ii) Party C, in reference to the Asset Option.

 

1.2                               Exercise Steps

 

1.2.1                     Option Exercise

 

Subject to PRC law and regulations, Party A and/or the Designated Persons may exercise either Option, one or more times to the extent the relevant Transferor still owns any Equity Interest or assets subject to an Option, by issuing a written notice in the form attached hereto as Exhibit A (the “Notice”) (i) in the case of the Equity Option, to Party B as the Transferor, specifying the Equity Interest and (ii) in the case of the Asset Option, to Party C as the Transferor, specifying the assets to be purchased (such Equity Interest or assets, as the case may be, the “Purchased Interest”) and the manner of such purchase.

 

1.2.2                     Transferor Obligations

 

Before or upon execution of this Agreement, each of Party B and Party C shall execute a power of attorney in the form attached hereto as Exhibit B, which may be relied upon by Party A upon exercise of either Option, to execute any documents necessary or advisable to effect the transfer of the Purchased Interest.  Upon receipt of the Notice by a Transferor, Party B and Party C agree to promptly take any other required actions (including assisting in obtaining governmental approvals or execution of an updated document in the  form of Exhibit B) to effect the transfer of the Purchased Interest to Party A and/or the Designated Persons.

 

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1.3                               Purchase Price

 

1.3.1                     If Party A exercises either Option, the purchase price of the Purchased Interest (“Purchase Price”) shall be: (i) in the case of the Equity Option, equal to the original paid-in capital paid by the Transferor for such Equity Interest, and (ii) in the case of the Asset Option, equal to the net book value of the assets as shown in Party C’s financial statements, unless, in either case (i) or (ii), the then applicable PRC laws and regulations require appraisal of the Purchased Interest or stipulate other restrictions on the Purchase Price.

 

1.3.2                     If the applicable PRC laws require appraisal of the Purchased Interest or stipulate other restrictions on the Purchase Price at the time that Party A exercises the Option, the Parties agree that the Purchase Price shall be set at the lowest price permissible under applicable law.

 

1.4                               Transfer of the Purchased Interest

 

At each exercise of either Option:

 

1.4.1                     Party C shall (and Party B shall cause Party C to) convene a shareholders’ meeting. During the meeting, resolutions approving the transfer of the Purchased Interest from the Transferor to Party A and/or the Designated Persons shall be adopted;

 

1.4.2                     The Transferor shall, in accordance with the terms and conditions of this Agreement and the Notice in connection with the Purchased Interest, enter into a transfer agreement with Party A and/or the Designated Persons (as applicable) for each transfer in the form attached hereto as Exhibit C (“Transfer Agreement”);

 

1.4.3                     The relevant parties shall execute all other requisite contracts, agreements or documents, obtain all requisite government approvals and consents, and take all necessary actions to transfer the valid ownership of the Purchased Interest to Party A and/or the Designated Persons free of any Security Interest, and cause Party A and/or the Designated Persons to be the registered owner(s) of the Purchased Interest. In this clause and this Agreement, “Security Interest” means guaranty, mortgage, pledge, third-party right or interest, any share option, right of acquisition, right of first refusal, right of set-off, ownership, detainment or other security arrangements. However, it does not include any security interest arising under the Equity Pledge Agreement.

 

1.5                               Payment

 

The manner of payment of the Purchase Price shall be determined as set forth in this Article 1.5, unless otherwise determined through agreement among  Party A and/or the Designated Persons and the Transferor or otherwise required by the applicable laws at the time of the exercise of the Option.

 

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1.5.1                     Offset Payment for Equity Option

 

Each time Party A exercises the Equity Option, the Purchase Price that is payable by Party A and/or the Designated Persons to the Transferor in connection with the Purchased Interest shall be used, pursuant to Article 5(a) of the Loan Agreement, to offset the amount outstanding on the Loan (with such offset applied to the principal, interest and capital utilization costs for the Loan as set forth in Article 6 of the Loan Agreement), provided that if there is any tax paid or payable by Party B in connection with the transfer of the Purchased Interest in accordance with this Agreement, then a portion of the Purchase Price equal to the amount of such tax shall be paid to Party B in cash and not applied as an offset to the amount outstanding on the Loan.

 

1.5.2                     Cash Payment for Asset Option

 

Each time Party A exercises the Asset Option, the Purchase Price that is payable by Party A and/or the Designated Persons to the Transferor in connection with the Purchased Interest shall be paid in cash to any bank account or person designated by mutual agreement between the Transferor and Party A.

 

2.                                      Covenants Relating to the Purchased Interest

 

2.1                               Covenants Relating to Party B and Party C

 

Each of Party B and Party C hereby covenants:

 

2.1.1                     Not to supplement, amend or modify Party C’s articles of association in any way, or to increase or decrease its registered capital, or to change its registered capital structure in any way without Party A’s prior written consent;

 

2.1.2                     To maintain the corporate existence of Party C and operate its business and deal with matters prudently and effectively according to good financial and business rules and practices;

 

2.1.3                     Not to sell, transfer, mortgage or otherwise dispose of, or permit any other Security Interest to be created on, any of Party C’s assets, business or legal or beneficial interests in its revenue at any time after the signing of this Agreement without Party A’s prior written consent;

 

2.1.4                     Not to create, succeed to, guarantee or permit any liability, without Party A’s prior written consent, except (i) liabilities arising from the normal course of business, but not arising from loans; and (ii) liabilities disclosed to Party A and approved by Party A in writing;

 

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2.1.5                     To operate all the business in the normal course of business to maintain the value of Party C’s assets, and not to commit any act or omission that would adversely affect Party C’s operations and asset value;

 

2.1.6                     Without prior written consent by Party A, not to enter into any material agreement, other than agreements entered into in Party C’s normal course of business (for purpose of this paragraph, an agreement will be deemed material if its value exceeds RMB100,000);

 

2.1.7                     Not to provide loans or credit to any person (other than in the normal course of business) without Party A’s prior written consent;

 

2.1.8                     To provide all information relating to Party C’s operations and financial conditions upon the request of Party A;

 

2.1.9                     To purchase and maintain insurance from insurance companies accepted by Party A. The amount and category of the insurance shall be the same as those of the insurance normally procured by companies engaged in similar businesses and possessing similar properties or assets in the area where Party C is located;

 

2.1.10              Not to merge or consolidate with, or acquire or invest in, any person without Party A’s prior written consent;

 

2.1.11              To promptly notify Party A of any pending or threatened suit, arbitration or administrative proceedings concerning Party C’s assets, business or revenue;

 

2.1.12              To execute all necessary or appropriate documents, to take all necessary or appropriate actions and to bring all necessary or appropriate claims or to make all necessary and appropriate defenses against all claims in order for Party C to maintain the ownership over all its assets;

 

2.1.13              Not to distribute dividends to Party C’s shareholders in any way without Party A’s prior written consent. However, Party C shall promptly distribute all or part of its distributable profits to its shareholders upon Party A’s request; and

 

2.1.14              At the request of Party A, to appoint persons nominated by Party A to be the directors of Party C.

 

2.2                               Covenants Relating to Party B

 

Party B hereby covenants:

 

2.2.1                     Not to sell, transfer, mortgage or otherwise dispose of, or allow any other Security Interest to be created on, the legal or beneficial interest in the Equity Interest at any time after the signing of this Agreement without Party A’s prior written consent, other than the pledge created on Party B’s Equity Interest in accordance with the Equity Pledge Agreement;

 

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2.2.2                     Without Party A’s prior written consent, not to vote for or sign any shareholders’ resolution at Party C’s shareholders’ meetings to approve the sale, transfer, mortgage or disposition in any other manner of, or the creation of any other Security Interest on, any legal or beneficial interest in the Equity Interest or Party C’s assets, except to or for the benefit of Party A or its designated persons;

 

2.2.3                     Without Party A’s prior written consent, not to vote for or sign any shareholders’ resolution at Party C’s shareholders’ meetings to approve Party C’s merger or consolidation with, acquisition of or investment in, any person;

 

2.2.4                     To promptly notify Party A of any pending or threatened suit, arbitration or administrative proceedings concerning the Equity Interest owned by it;

 

2.2.5                     To cause any relevant shareholders’ meeting to approve the transfer of any Purchased Interest under this Agreement;

 

2.2.6                     To execute all necessary or appropriate documents, to take all necessary or appropriate actions and to bring all necessary or appropriate claims or to make all necessary and appropriate defenses against all claims in order to maintain his/her ownership over the Equity Interest;

 

2.2.7                     At the request of Party A, to appoint persons nominated by Party A to be the directors of Party C;

 

2.2.8                     At any time, upon the request of Party A, to transfer its Purchased Interest immediately and unconditionally to the representative designated by Party A, and, in the case of a purchase of any Equity Interest, waive its preemptive right with respect to the transfer of such Equity Interest by any other shareholder of Party C; and

 

2.2.9                     To fully comply with the provisions of this Agreement and the other agreements entered into jointly or respectively by and among Party A, Party B and Party C, perform all obligations under such agreements and not commit any act or omission that would affect the validity and enforceability of these agreements.

 

3.                                      Representations and Warranties

 

As of the execution date of this Agreement and every transfer date, each of Party B and Party C hereby represents and warrants to Party A as follows:

 

3.1                               It has the power and authority to execute and deliver this Agreement, and any Transfer Agreement, to which it is party for each transfer of the Purchased Interest under this Agreement and to perform its obligations under this Agreement and any Transfer Agreement. Once executed, this Agreement and any Transfer Agreement to which it is party will constitute a legal, valid and binding obligation of it enforceable against it in accordance with its terms;

 

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3.2                               The execution, delivery and performance of this Agreement or any Transfer Agreement by it will not: (i) violate any relevant PRC laws and regulations; (ii) conflict with its articles of association or other organizational documents; (iii) violate or constitute a default under any contract or instrument to which it is party or that binds upon it; (iv) violate any condition for the grant and/or continued effectiveness of any permit or approval granted to it; or (v) cause any permit or approval granted to it to be suspended, cancelled or attached with additional conditions;

 

3.3                               Party C has good and marketable ownership interest in all of its assets and has not created any Security Interest on the said assets;

 

3.4                               Party C has no outstanding liabilities, except (i) liabilities arising in its normal course of business; and (ii) liabilities disclosed to Party A and approved by Party A in writing;

 

3.5                               Party C complies with all PRC laws and regulations applicable to the acquisition of assets;

 

3.6                               There are currently no existing, pending or threatened litigation, arbitration or administrative proceedings related to the Equity Interest, Party C’s assets or Party C; and

 

3.7                               Party B has good and marketable ownership interest in the Equity Interest and has not created any Security Interest on such Equity Interest, other than the Security Interest pursuant to the Equity Pledge Agreement.

 

4.                                      Assignment of Agreement

 

4.1                               Party B and Party C shall not assign their rights and obligations under this Agreement to any third party without the prior written consent of Party A.

 

4.2                               Party B and Party C hereby agree that Party A may assign all its rights and obligations under this Agreement to a third party without the consent of Party B and Party C, but such assignment shall be notified in writing to Party B and Party C.

 

5.                                      Effective Date and Term

 

5.1                               This Agreement shall be effective as of the date first set forth above.

 

5.2                               The term of this Agreement is twenty (20) years unless terminated earlier in accordance with the provisions of this Agreement or related agreements entered into by the Parties. This Agreement may be extended with the written consent of Party A before its expiration. The term of the extension shall be decided by the Parties through negotiation.

 

5.3                               If the duration of operation (including any extension thereof) of Party A or Party C is expired or terminated for other reasons within the term set forth in Article 5.2, this Agreement shall be terminated simultaneously, except in the situation where Party A has assigned its rights and obligations in accordance with Article 4.2 hereof.

 

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6.                                      Applicable Laws and Dispute Resolution

 

6.1                               Applicable Law

 

The formation, validity, interpretation and performance of and settlement of disputes under this Agreement shall be governed by the laws of the PRC.

 

6.2                               Dispute Resolution

 

Any dispute, conflict, or claim arising in connection with the interpretation and performance of the provisions of this Agreement (including any issue relating to the existence, validity, and termination of this Agreement) shall be resolved by the Parties in good faith through negotiations. In case no resolution can be reached by the Parties within thirty (30) days after a Party makes a request for dispute resolution through negotiations, any Party may refer such dispute to a competent court having legal jurisdiction over Hangzhou, PRC.  The Parties agree to submit to the jurisdiction of such court.

 

7.                                      Taxes and Expenses

 

Except for the portion of the Purchase Price payable in cash to Party B for taxes, as set forth in Article 1.5.1 of this Agreement, every Party shall, in accordance with PRC laws, bear any and all transfer and registration taxes, expenses and charges incurred by or levied on it with respect to the preparation and execution of this Agreement and each Transfer Agreement and the consummation of the transactions contemplated under this Agreement and each Transfer Agreement.

 

8.                                      Confidentiality

 

8.1                               All parties acknowledge and confirm that any oral or written materials exchanged pursuant to this Agreement are confidential. Each party shall keep confidential all such materials and not disclose any such materials to any third party without the prior written consent from the other parties except in the following situations: (a) such materials are or will become known by the public (through no fault of the receiving party); (b) any materials as required to be disclosed by the applicable laws or rules of any stock exchange or governmental entity; and (c) any materials disclosed by each party to its legal or financial advisors relating to the transactions contemplated by this Agreement, and such legal or financial advisors shall comply with the confidentiality provisions set forth in this Article 8. Any disclosure of confidential information by the personnel of any party or by the institutions engaged by such party shall be deemed as a disclosure by such party, and such party shall be liable for the breach under this Agreement.

 

8.2                               All parties agree that this Article 8 shall survive the invalidity, cancellation, termination or unenforceability of this Agreement.

 

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9.                                      Further Assurances

 

The Parties agree to promptly execute documents and take further actions that are reasonably required for, or beneficial to, the purpose of performing the provisions and carrying out the intent of this Agreement.

 

10.                               Miscellaneous

 

10.1                        Amendment, Modification or Supplement

 

Any amendment or supplement to this Agreement shall be made by the Parties in writing. The amendments or supplements duly executed by each Party shall be deemed as a part of this Agreement and shall have the same legal effect as this Agreement.

 

10.2                        Entire Agreement

 

The Parties acknowledge that once this Agreement becomes effective, it shall constitute the entire agreement of the Parties with respect to the subject matters hereof and shall supersede all prior oral and/or written agreements and understandings by the Parties with respect to the subject matters hereof.

 

10.3                        Severability

 

If any provision of this Agreement is judged to be invalid, illegal or unenforceable in any respect according to any applicable law or regulation, the validity, legality and enforceability of the other provisions hereof shall not be affected or impaired in any way. The Parties shall, through good-faith negotiations, replace those invalid, illegal or unenforceable provisions with valid provisions that may bring about economic effects as similar as possible to those from such invalid, illegal or unenforceable provisions.

 

10.4                        Headings

 

The headings contained in this Agreement are for the convenience of reference only and shall not be used for the interpretation or explanation or otherwise affect the meaning of the provisions of this Agreement.

 

10.5                        Language and Copies

 

This Agreement is executed in English in three copies; each Party holds one copy and each copy has the same legal effect.

 

10.6                        Successor

 

This Agreement shall bind upon and inure to the benefit of the successors and permitted assigns of each Party.  In the event of Party B’s death or incapacity, the terms of this Agreement shall be binding upon the executors, administrators, heirs and successors of Party B.  Any Equity Interest held by Party B shall not be part of Party B’s estate upon death or incapacity and shall not pass to Party B’s heirs or successors.  Upon Party B’s death or incapacity,  any Equity Interest held by Party B shall be transferred to Party A or its Designated Persons.

 

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10.7                        Survival

 

Any obligation arising from or becoming due under this Agreement before its expiration or premature termination shall survive such expiration or premature termination. Articles 6, 8 and 9 and this Article 10.7 shall survive the termination of this Agreement.

 

10.8                        Waiver

 

Any Party may waive the terms and conditions of this Agreement by a written instrument signed by the Parties. Any waiver by a Party to a breach by the other Parties in a specific situation shall not be construed as a waiver to any similar breach by the other Parties in other situations.

 

IN WITNESS WHEREOF, each Party has caused this Agreement to be executed by himself/herself, its legal representative or its duly authorized representative as of the date first written above.

 

[No text below on this page]

 

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[Signature Page]

 

	
Party A: NetEase (Hangzhou) Network   Co., Ltd. (seal)
    	
 
    
	
 
    	
 
    
	
Legal Representative/Authorized   Representative:
    	
/s/ William Lei Ding
    	
 
    
	
 
    
	
 
    	
 
    
	
Party B: Chen Gang
    	
 
    
	
 
    	
 
    	
 
    
	
Signature:
    	
/s/ Chen Gang
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
Party C: Hangzhou Leihuo Network Co., Ltd.   (seal)
    	
 
    
	
 
    	
 
    	
 
    
	
Legal   Representative/Authorized Representative:
    	
/s/ William Lei Ding
    	
 
    
					

 

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Exhibit A
 Form of Notice

 

	
 
    	
[Date]
    

 

Dear [(Transferor)],

 

Pursuant to the Exclusive Purchase Option Agreement between us executed on [April 15, 2009] (the “Option Agreement”), you agreed to transfer to us or our Designated Person(s) certain equity interests or assets upon notice from us.

 

This letter serves as our notice to you under Article 1.2.1 of the Option Agreement, and we hereby notify you that we wish to purchase from you the following [equity interests / assets], which constitute the Purchased Interest under Article 1.2.1 of the Option Agreement:

 

[All / __% of the shares in [Hangzhou Leihuo Network Co., Ltd.]]

 

[All the assets of [Hangzhou Leihuo Network Co., Ltd.] / The following assets of [Hangzhou Leihuo Network Co., Ltd.]:  

 

____________________________________________________________________________________________________]

In consideration for the Purchased Interest, the Purchase Price (as defined in Article 1.3 of the Option Agreement) of the Purchased Interest will be [RMB _____________].  We shall handle payment of the Purchase Price pursuant to Article 1.5 of the Option Agreement.

 

Please assist us in arranging for the transfer of the Purchased Interest to [us / our Designated Person(s), which is/are ________________________________].   Such transfer should occur no later than forty-five (45) business days after the date hereof

 

 

	
 
    	
Sincerely,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[NetEase   (Hangzhou) Network Co., Ltd.]
    

 

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Exhibit B
 Form of Power of Attorney

 

[I / We] hereby irrevocably appoint _______________________________________, holder of [passport / PRC identification] number : ________________, as [my / our] proxy, to sign and deliver any and all legal documents that are necessary or useful to effect any exercise of an option to purchase any equity interests or assets pursuant to the Exclusive Purchase Option Agreement between [NetEase (Hangzhou) Network Co., Ltd.], [Chen Gang] and [Hangzhou Leihuo Network Co., Ltd.] executed on [April 15, 2009].

 

 

	
 
    	
 
    
	
 
    	
[(Transferor]]
    
	
 
    	
 
    
	
 
    	
[Date]
    

 

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Exhibit C
  Form of Transfer Agreement

 

This Transfer Agreement (this “Agreement”) is jointly signed by the Parties on _____ at the offices of [Hangzhou Leihuo Network Co., Ltd.] (the “Company”).

 

	
Transferor:
    	
[Chen Gang / Hangzhou Leihuo Network Co., Ltd.] (“Party A”)
    
	
Transferee:
    	
[NetEase (Hangzhou) Network Co. Ltd. or designated person(s)]   (“Party B”)
    

 

In this Agreement, Party A and Party B are called collectively as the “Parties” and each of them is a “Party.”

 

The registered capital of the Company is [RMB _________], of which Party A contributed [RMB __________], representing [____%] of the registered capital of the Company.  According to the relevant laws, rules and regulations, upon friendly negotiations between the Parties, and pursuant to the Exclusive Purchase Option Agreement entered into by the Parties on [April 15, 2009] (the “Exclusive Purchase Option Agreement”), the Parties agree to the following:

 

Article 1. Subject of Transfer and Purchase Price

 

Party A shall transfer to [Party B / Party B’s designated person(s): ____________________] [____% equity interest of the Company / the following assets: _________________________________________________________] (the “Transferred Interest”) for the total purchase price of [RMB _____________________].

 

Article 2. Undertakings and Guarantee

 

Party A guarantees that the Transferred Interest is legally owned by Party A and that Party A owns the complete, effective right of disposal.  Party A guarantees that the Transferred Interest is free of any mortgage or other security and not the subject of claims of any third party.  Otherwise, Party A shall undertake all legal liabilities incurred therefrom.  Party A undertakes and guarantees that after this Agreement has become effective, Party B shall have all of Party A’s previous rights in the Transferred Assets.

 

Article 3. Liabilities for Breach of Contract

 

If any Party to this Agreement fails to, according to the provisions of this Agreement, appropriately and fully perform its obligations, such Party shall be liable for breach of contract.  Any damages and costs incurred by the non-breaching Party, due to a breach of contract by the breaching Party, shall be paid by the breaching Party to the non-breaching Party.

 

Article 4. Method of Dispute Resolutions

 

This Agreement shall be subject to the relevant laws of the People’s Republic of China and the interpretations thereof.  Any dispute arising from or in connection with this Agreement shall be resolved by the dispute resolution mechanism in Article 6.2 of the Exclusive Purchase Option Agreement.

 

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Article 5. Others

 

Both Parties guarantee that the above agreed contents are the real expression of intention of the Parties, and the legal liabilities for all consequences caused by misstatement  shall be borne by the Parties correspondingly.  This Agreement shall become effective upon execution by Party A and Party B.

 

This Agreement shall be executed in triplicate, one for each of the Parties and one for the Company for use in completing the relevant formalities.

 

 

	
Party A   (signature):
    	
[signed]
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Party B   (signature):
    	
[signed]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Dated:                  ,
    

 

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