UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________

FORM 20-F

(Mark One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021.
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ____________   to   ____________
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report

Commission file number: 001-38237

Sea Limited
(Exact name of Registrant as specified in its charter)
 _______________________

N/A
(Translation of Registrant’s name into English)

Cayman Islands
(Jurisdiction of incorporation or organization)

1 Fusionopolis Place, #17-10, Galaxis
Singapore 138522
(Address of principal executive offices)

Yanjun Wang, Esq.
Sea Limited
1 Fusionopolis Place, #17-10, Galaxis
Singapore 138522
Tel: +65 6270-8100
E-mail: secnotice@sea.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol
Name of each exchange on which registered
American Depositary Shares, each representing one Class A ordinary share
 SE
 New York Stock Exchange 
Class A ordinary shares, par value US$0.0005 per share*
    
* Not for trading, but only in connection with the listing of American Depositary Shares on the New York Stock Exchange.
    

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
409,762,257 Class A ordinary shares and 147,975,703 Class B ordinary shares, par value US$0.0005 per share, as of December 31, 2021


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ☒    No  ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ☐    No   ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ☒
Accelerated filer   ☐
Non-accelerated filer  ☐
Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP   ☒    International Financial Reporting Standards as issued by the International Accounting Standards Board  ☐    Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☐    No  ☐
 ___________________________

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

TABLE OF CONTENTS

 
Page
3
   
5
   
 
5
     
 
5
     
 
5
     
 
44
     
 
87
     
 
87
     
 
108
     
 
119
     
 
119
     
 
120
     
 
121
     
 
133
     
 
134
     
135
   
 
135
     
 
135
     
 
136
     
 
136
     
 
137
     
 
137
     
 
137
     
 
137
     
 
137
     
 
138
     
 
138
     
 
138
     
138
   
 
138
     
 
138
     
 
139

2
CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F
 
Unless otherwise indicated and except where the context otherwise requires:
 

 •
“2023 convertible notes” refers to our 2.25% convertible senior notes due 2023, which were issued in June 2018;
 

 •
“2024 convertible notes” refers to our 1.00% convertible senior notes due 2024, which were issued in November 2019;
 

 •
“2025 convertible notes” refers to our 2.375% convertible senior notes due 2025, which were issued in May 2020;
 

 •
“2026 convertible notes” refers to our 0.25% convertible senior notes due 2026, which were issued in September 2021;
 

 •
“active users” in the context of digital entertainment refers to the number of unique accounts that interacted with our mobile and PC online games in a particular period. A single account that plays more than one online game or in more than one market is counted as more than one active user. “Game QAUs” refers to the aggregate number of active users during the quarterly period;
 

 •
“ADSs” refers to the American Depositary Shares, each of which represents one of our Class A ordinary shares, par value US$0.0005 per share;
 

 •
“China” or “PRC” refers to the People’s Republic of China excluding, for the purpose of this annual report only, Taiwan, Hong Kong and Macau;
 

 •
“gross merchandise value” or “GMV” refers to the value of orders of products and services on our Shopee marketplace. Our calculation of GMV for our e-commerce platform includes shipping and other charges;
 

 •
“orders” refers to each confirmed order from a transaction between a buyer and a seller for products and services on our e-commerce platform, even if such order includes multiple items, during the specified period, regardless of whether the transaction is settled or if the item is returned;
 

 •
“paying users” refers to the number of unique accounts through which a payment is made in our online games in a particular period. A unique account through which payments are made in more than one online game or in more than one market is counted as more than one paying user. “Game QPUs” refers to the aggregate number of paying users during the quarterly period;
 

 •
“SeaMoney QAUs” refers to users who had at least one financial transaction with SeaMoney products and services during the quarterly period. Transactions include payments or receipts with our mobile wallet, loan disbursements, maintenance of balance in our banks or purchase of insurance policies on the Shopee platform;
 

 •
“shares” or “ordinary shares” refer to our Class A ordinary shares, par value US$0.0005 per share, and our Class B ordinary shares, par value US$0.0005 per share;
 

 •
“Southeast Asia” refers to Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam; and
 

 •
“we,” “us,” “our company,” “our group,” “our” or “Sea” refers to Sea Limited, a Cayman Islands company, its consolidated subsidiaries and its consolidated affiliated entities, including its variable interest entities, or VIEs, and their subsidiaries and consolidated affiliated entities.
 
Our reporting and functional currency is the U.S. dollar. This annual report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations from Indonesian rupiah into U.S. dollars have been made at the rate of IDR14,278.00 to US$1.00, being the foreign exchange reference rate and the Jakarta interbank spot dollar rate published by the Bank Indonesia in effect as of December 31, 2021, all translations of New Taiwan dollars, Thai baht, Singapore dollars and Malaysia ringgit into U.S. dollars have been made at the rates of NT$27.7400 to US$1.00, THB33.3300 to US$1.00, S$1.3520 to US$1.00 and RM4.1750 to US$1.00, respectively, being the noon buying rates in The City of New York for cable transfers in New Taiwan dollars, Thai baht, Singapore dollars and Malaysia ringgit as certified for customs purposes by the Federal Reserve Bank of New York in effect as of December 30, 2021 set forth in the H.10 statistical release of the U.S. Federal Reserve Board for translation into U.S. dollars, and all translations from Vietnamese dong into U.S. dollars made at the rate of VND23,145 to US$1.00, being the central rate published by The State Bank of Vietnam in effect as of December 31, 2021. We make no representation that the Indonesian rupiah, New Taiwan dollar, Vietnamese dong, Thai baht, Singapore dollar or Malaysia ringgit amounts referred to in this annual report could have been or could be converted into U.S. dollars at any particular rate or at all. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars.” On April 5, 2022, the Jakarta interbank spot dollar rate for Indonesian rupiah was IDR14,348.00 to US$1.00, the noon buying rate for New Taiwan dollars was NT$28.67 to US$1.00, the central rate for Vietnamese dong was VND23,098 to US$1.00, the noon buying rate for Thai baht was THB33.5100 to US$1.00, the noon buying rate for Singapore dollars was S$1.3585 to US$1.00 and the noon buying rate for Malaysia ringgit was RM4.2072 to US$1.00.
 
3
FORWARD-LOOKING STATEMENTS
 
This annual report contains forward-looking statements that involve risks and uncertainties. All statements other than statements of current or historical facts are forward-looking statements. These forward-looking statements are made under the “safe harbor” provision under Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information—D. Risk Factors,” that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.
 
In some cases, you can identify these forward-looking statements by words or phrases such as “may,” “could,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to,” “potential” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements about:
 

 •
our goals and strategies;
 

 •
our future business development, financial condition, financial results, and results of operations;
 

 •
the expected growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in the markets where we operate, including segments within those industries;
 

 •
expected changes or guidance in our revenue, costs or expenditures;
 

 •
our ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content;
 

 •
the expected growth of our digital entertainment, e-commerce and digital financial services businesses;
 

 •
our expectations regarding growth in our user base, level of engagement and monetization;
 

 •
our ability to continue to develop new technologies and/or upgrade our existing technologies;
 

 •
our expectation regarding the use of proceeds from our financing activities, including our follow-on equity offerings and convertible notes offerings;
 

 •
growth and trends of our markets and competition in our industries;
 

 •
government policies and regulations relating to our industries, including the effects of any government orders or actions on our businesses;
 

 •
general economic, political, social and business conditions in our markets; and
 

 •
the impact of widespread health developments, including the COVID-19 pandemic, and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities, and the availability of effective vaccines or treatments) and the impact of economies reopening further to the COVID-19 pandemic.
 
4
You should read this annual report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
 
You should not rely on forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
 
This annual report also contains statistical data and estimates that we obtained from industry publications and reports generated by government or third-party providers of market intelligence. Although we have not independently verified the data, we believe that the publications and reports are reliable. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—Industry data, projections and estimates contained in this annual report are inherently uncertain and subject to interpretation.”
 
PART I
 
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
Not applicable.
 
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not applicable.
 
ITEM 3.
KEY INFORMATION
 
A.          [Reserved]
 
B.          Capitalization and Indebtedness
 
Not applicable.
 
C.          Reasons for the Offer and Use of Proceeds
 
Not applicable.
 
D.          Risk Factors
 
5
SUMMARY OF RISK FACTORS
 
We believe some of the major risks and uncertainties that may materially and adversely affect us include the following:
 
BUSINESS AND OPERATIONAL RELATED RISKS
 
Risks Applicable Across Multiple Businesses
 

 •
We may fail to maintain or grow the size of our user base or the level of engagement of our users.
 

 •
Changes in economic, political or social conditions or government policies, or government actions or restrictions, globally and in our markets could have a material adverse effect on our business and operations.
 

 •
We have a history of net losses and we may not achieve profitability in the future.
 

 •
Our results of operations are subject to fluctuations.
 

 •
We may fail to monetize our businesses effectively.
 

 •
The COVID-19 pandemic, including any lockdown and reopening of relevant markets, has affected our business activities and results. Any future occurrence of natural disasters, epidemics, pandemics or other outbreaks, or other catastrophic events could also adversely affect our business.
 

 •
We may not succeed in managing or expanding our business across the expansive and diverse markets in which we operate.
 

 •
We are subject to extensive and changing laws and government regulations across our business.
 

 •
We may fail to compete effectively.
 

 •
Existing or future investments or acquisitions may not be successful.
 

 •
We have a limited operating history for some of our businesses.
 

 •
Our businesses involve third parties over whose actions we have no control.
 

 •
Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars.
 

 •
We may be subject to intellectual property-related risks.
 

 •
We may be liable for security breaches and attacks against our or our third-party partners’ platforms and network, particularly with regard to confidential user information and personal or other data or any other privacy or data protection compliance issue, and our platforms and games may contain unforeseen “bugs” or errors.
 

 •
We collect, process, transmit, and store personal information in connection with the operation of our businesses and are subject to complex and evolving international laws and regulations regarding privacy and data protection.
 
6
Risks Related to Our Digital Entertainment Business
 

 •
We derive a significant portion of digital entertainment revenue and gross profit from a limited number of online games.


•
We have a limited track record in game development and global game distribution.
 

 •
We rely on third-party game developers for some of our digital entertainment content and also allow our users to contribute and interact with user generated content.
 

 •
Our games are subject to scrutiny regarding the appropriateness of their content.
 
Risks Related to Our E-Commerce Business
 

 •
We face uncertainties relating to the growth and profitability of the e-commerce industry in our markets and we may face challenges and uncertainties in implementing our e-commerce strategy.
 

 •
We may be held liable for actions by our marketplace participants.
 

 •
We may suffer losses relating to the products we sell on Shopee.
 
Risks Related to Our Digital Financial Services Business
 

 •
We face uncertainties and risks relating to our digital financial services business.
 

 •
We face risks related to our lending and consumer and merchant credit businesses.
 

 •
Our banking business may subject us to additional material business, operational, financial, legal and compliance requirements and risks.
 

 •
We could be held liable if our digital financial services and products are used for fraudulent, illegal or improper purposes.
 
Other Operational Risks
 

 •
We rely on technology and internet infrastructure, data center and cloud service providers and telecommunications networks in the markets where we operate.
 

 •
We may fail to attract, motivate and retain the key members of our management team or other experienced and capable employees.
 

 •
We may be subject to risks related to litigation and regulatory proceedings.
 

 •
We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to such structural arrangements.
 
7
BUSINESS AND OPERATIONAL RELATED RISKS
 
Risks Applicable Across Multiple Businesses

We may fail to maintain or grow the size of our user base or the level of engagement of our users.
 
The size and engagement level of our user base are critical to our success. Our business and financial performance have been and will continue to be significantly determined by our success in adding, retaining and engaging active users. We continue to invest significant resources to grow our user base and increase user engagement, whether through innovations, providing new or improved content or services, marketing efforts or other means. Our user base and engagement levels may not continue growing at satisfactory rates, or at all. Our user growth and engagement could be adversely affected if:
 

 •
we fail to maintain the popularity of our platforms among users;
 

 •
we are unable to maintain the quality of our existing content and services;
 

 •
we are unsuccessful in innovating or introducing new, best-in-class content and services;
 

 •
we fail to adapt to changes in user preferences, market trends or advancements in technology;
 

 •
technical, regulatory, governmental or other reasons prevent us from delivering our content or services in a timely and reliable manner, or at all, or otherwise affect the user experience;
 

 •
there are user concerns related to privacy, data protection, safety, fund security or other factors;
 

 •
monetization measures by us cause users to shift to other platforms;
 

 •
our new games cause players to shift from our existing games without growing the overall size of our user base or online games platform;
 

 •
there are adverse changes to our platforms or offerings that are mandated by, or that we elect to make, to address legislation, regulation, government orders, or litigation, including settlements or consent decrees;
 

 •
our users fail to accept or comply with our terms of service or the privacy policies that we have implemented or may implement, or we adopt terms, policies, or procedures that are perceived negatively by our users;
 

 •
our marketing campaigns or promotional strategies fail to achieve the intended effects among users – for example, users may develop negative perceptions towards our marketing campaigns or promotional strategies;
 

 •
we are unable to achieve the expected synergies among our businesses, we are unable to achieve synergies in a cost-effective manner, or we fail to balance the interests of all participants in our ecosystem;
 

 •
we fail to maintain the brand image of our platforms or our reputation is damaged or changes negatively; or
 

 •
there are unexpected changes to the demographic trends or economic development of or affecting our markets.
 
Our efforts to avoid or address any of these events could require us to incur substantial expenditure to modify or adapt our content, services or platforms. We may not be able to avoid or address such events in a timely or satisfactory manner or at all. If we fail to retain or continue growing our user base, or if our users reduce their engagement with our platforms, our business, financial condition and results of operations could be materially and adversely affected.
 
8
Changes in economic, political or social conditions or government policies, or government actions or restrictions, globally and in our markets could have a material adverse effect on our business and operations.
 
We have businesses in diverse global markets and are subject to risks associated with doing business internationally and in differing political and regulatory environments.
 
Our business, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions globally and in these markets. The economies in emerging markets generally differ from developed markets in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange, government policy on public order and allocation of resources. In some of our markets, governments continue to play a significant role in regulating industry development by imposing industrial policies. Some local governments also exercise significant control over the economic growth and public order in their respective jurisdictions through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policies, and providing preferential treatment to particular industries or companies. Governmental actions to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition and results of operations may be adversely affected by changes in government policies or regulations, such as exchange rates and exchange control policies, inflation rates, interest rates, tariff and inflation control policies, price control policies, import duties and restrictions, liquidity of domestic capital and lending markets, electricity rationing tax policies, including royalty, tax increases and retroactive tax claims, and other political, diplomatic, social and economic developments in or affecting the markets where we operate.
 
Growth of the economy of our various markets has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in our markets or neighboring regions, or in the policies of the governments or of the laws and regulations in each respective market could have a material adverse effect on the overall economic growth of our markets. Such developments could adversely affect our business, financial condition and results of operations, lead to reduction in demand for our products and services, and adversely affect our competitive position. Many of the governments in our markets have implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall economy, but may have a negative effect on us. For example, our business, financial condition and results of operations may be adversely affected by government control over foreign capital investments or changes in tax regulations. Some of our markets have historically experienced low growth in their gross domestic product, or GDP, significant inflation and/or shortages of foreign exchange. We are exposed to the risk of cost increases due to potential inflation in the markets in which we operate. In the past, governments in some of our markets have implemented interest rate adjustments, currency trading band adjustments, exchange rate controls and other measures to control the pace of economic growth. These measures, or the perception that any of them could occur, may cause decreased economic activity in the relevant markets, which may adversely affect our business, financial condition and results of operations.
 
Some of our markets have experienced, and may in the future experience, political, economic and social instability, including strikes, demonstrations, protests, marches, other types of civil disorder, war or armed conflict, refugee migration or other types of unrests. For example, most recently, the ongoing geopolitical tensions related to Russia’s actions in Ukraine, resulting sanctions imposed by the United States and other countries, retaliatory actions taken by Russia in response to such sanctions, bans and other measures taken by governments, organizations and companies including against Russia and certain Russia citizens and entities, are events that continue to evolve. It is possible that political, economic and social instability globally and in our markets may negatively impact economic growth, cause uncertainty and volatility in the financial markets, disrupt supply chains globally and in our markets, and may accordingly affect our business, results of operations and financial condition. We cannot predict the duration or outcome of these events and actions or whether future developments would have any material adverse impact on our business. These and other instabilities and any adverse changes in the political environment could increase our costs, increase our exposure to legal and business risks, disrupt our office operations or the business activities of our ecosystem participants, or affect our ability to expand or retain our user base.
 
In addition, governments or government agencies in any of our markets could censor, ban or block access to our services, mobile applications, platforms and/or the internet generally for various reasons, including political tensions and wars between countries, content restrictions, national security, data protection or regulatory concerns, or due to some misunderstanding. For example, we announced earlier this year that due to unanticipated government actions, Free Fire was currently unavailable in the Google Play and iOS app stores in India, and it currently remains unavailable. Users generally need to access the internet and/or app stores to access, download or use our services and mobile applications. If governments either directly or indirectly block, limit or otherwise restrict us from publishing or making available our products and services to users, block, limit or restrict our users from accessing our products, services or mobile applications, prevent us from onboarding new users, prevent data transfers to or from certain markets or services, or take similar actions against us, our business could be negatively impacted, and we could experience loss or slower growth of our user base, financial loss, and our reputation may be adversely affected. Further, any government actions taken against our service providers, partners or other third-party intermediaries on which our business relies could cause our products and services to become unavailable for extended periods of time or even indefinitely.
 
9
Governments or government agencies may take legislative, executive, administrative or other measures or implement policies to regulate foreign investments, including applying heightened scrutiny, imposing additional requirements, prohibitions and restrictions on investments by companies based on the place of incorporation or country of origin of such companies or their shareholders and/or beneficial owners or where companies have employees or service providers, store data or develop or provide their products and services. Any adverse implementation or changes in foreign investment restrictions or interpretations against us of such restrictions in our markets may affect our ability to operate and maintain our business in such markets. In the event of such restrictions, we may face additional legal and regulatory compliance costs and risks, lose investments we have made and/or exit such markets, our users may develop a negative perception of us, and our business, financial condition and results of operations could be negatively affected.
 
We have a history of net losses and we may not achieve profitability in the future.
 
We had net losses of US$1.5 billion, US$1.6 billion and US$2.0 billion in 2019, 2020 and 2021, respectively. Our net losses in 2021 were primarily due to our investments in expanding our businesses, in particular our e-commerce and digital financial services businesses. In 2019, 2020 and 2021, our sales and marketing expenses equaled 44.6%, 41.8% and 38.5% of our total revenue, respectively. Our operating expenses may continue to increase as we invest in expanding our businesses, including, among other things, offering user incentives, conducting marketing activities, providing new content and services, and hiring additional headcount. These efforts may be costlier than we expect and our revenue may not increase sufficiently to offset these expenses.
 
We may continue to take actions and make investments that do not generate immediate positive financial returns and may result in increased operating losses or other losses in the short term with no assurance that we will eventually achieve the intended long-term benefits or profitability. These factors, among others set out in this “Item 3. Key Information—D. Risk Factors” section, may negatively affect our ability to achieve profitability in the near term, if at all.
 
Our results of operations are subject to fluctuations.
 
We are subject to seasonality and other fluctuations in our business. Our revenue is also largely affected by our promotional and marketing activities, including the timing of promotions, and our revenue may fluctuate due to changes in user base, user engagement, user behavior and preferences, and other factors. In addition, our rapid growth in the past has masked certain fluctuations that otherwise may have been apparent in our results of operations. When our growth stabilizes, the seasonality in our business may become more pronounced. Rapid growth may also put strain on our existing resources due to increased capital expenditures and operating expenses related to our expansion, including sales and marketing expenses, staff hiring and procurement of infrastructure. See “—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—We may not succeed in managing or expanding our business across the expansive and diverse markets in which we operate.”
 
Our revenue and other operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are outside our control. Factors that may contribute to the fluctuations of our results include, among others, (i) fluctuations and changes in overall consumer demand for our products and services in certain markets or overall or during certain months and holidays, including calendar year-end holiday season, or due to certain short-lived consumer trends, hypes or other factors; (ii) timing of new products and services releases and monetization rates of our products and services or content enhancements in different markets; (iii) increases in sales and marketing and other operating expenses; (iv) timing of promotional and marketing activities; (v) macro-economic conditions and their effect on consumer spending; (vi) the impact of the COVID-19 pandemic; and (vii) other risk factors as described in this annual report. With many economies reopening further in the fourth quarter of 2021 and into 2022, we have observed some moderation in online activities and fluctuations in user engagement. For example, our digital entertainment segment bookings decreased in the fourth quarter of 2021 for the first time in the past three years, and we provided guidance for our digital entertainment segment bookings for the year 2022 that is lower than comparable bookings for the year 2021. Our businesses may not grow as fast as in the past years or at all. Should our businesses experience a slowdown in growth, there could be material fluctuations in our financial results, which could negatively affect our stock performance. In addition, changes in cash flow generated from our games may not match our revenue trends due to revenue recognition policies under U.S. GAAP, which require proceeds from our sales of in-game virtual items to be recorded as deferred revenue and recognized over a period of time based on estimated service periods. As deferred revenue contributes a significant amount of the revenue we report each quarter, a decrease in bookings in any one quarter may not significantly reduce our revenues for that quarter but could negatively affect our revenues in future quarters or periods. Accordingly, the effect of declines in our bookings are not fully reflected in our results of operations until future periods.
 
10
Our 2023 convertible notes, 2024 convertible notes, 2025 convertible notes, and 2026 convertible notes were each subject to cash conversion accounting through to December 31, 2021. The liability component of the 2023 convertible notes, the 2024 convertible notes, the 2025 convertible notes and the 2026 convertible notes was initially measured at fair value with the residual value recorded as additional paid-in capital within equity. The liability component would require a greater amount of non-cash interest expense to accrete the carrying value back to the face value over the term of the notes. From January 1, 2022, we adopted new accounting standards for our convertible notes, under which cash conversion accounting no longer applies. We have adopted the modified retrospective approach and cumulative effects will be adjusted via our retained earnings opening balance. Such adoption is expected to reduce the additional paid-in capital and accumulated deficit, and increase our convertible notes balances. Such adoption will also result in reduction in interest expense in subsequent years until the relevant convertible notes are settled. Because of these and other factors, it is difficult for us to accurately identify recurring seasonal trends in our business. Accordingly, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance.
 
We may fail to monetize our businesses effectively.
 
Our financial performance largely depends on our ability to monetize our businesses, and our failure to do so could materially and adversely affect our business, financial condition and results of operations.
 
In order to sustain revenue growth for our digital entertainment business, we must maintain paying users and convert active game players to paying users and increase their spending. Spending in our games is discretionary and our users may be price-sensitive, which may negatively affect our ability to monetize our business. It is crucial to balance creating sufficient in-game monetization opportunities on the one hand, and ensuring our games continue to attract a considerable number of users by offering them an enjoyable free-to-play experience on the other. To stimulate in-game spending, we need to continue to ensure that our games are engaging, the in-game items we offer are appealing, our monetization strategies comply with applicable laws and regulations, our prices are attractive and our marketing and promotional activities, such as esports events, are effective.
 
Our focus for our e-commerce business has been on building the ecosystem of sellers and buyers and improving the shopping experience. We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics. If our efforts to monetize our e-commerce business are not successful, revenue generated from monetizing our Shopee marketplace may not offset its significant operating costs, causing it to operate with losses. Moreover, monetization efforts could increase the costs of using our Shopee platform to users, which could negatively affect the number of users and the level of user engagement on our platform.
 
We mainly monetize our digital financial services business by charging commissions to third-party merchants with respect to our mobile wallet services, by charging fees to third-party financial institutions which offer financial products or lend to consumers on our platform, and by earning interest from borrowers with respect to our consumer and merchant credit business. Our ability to continue to successfully monetize our digital financial services business in the future will depend significantly on expanding our user base, the number of use cases available, strengths of our credit modeling, and the availability of funds for our consumer and merchant credit business, which may not be achieved at the level we anticipate. In addition, we may offer new digital financial services and products or offer existing services and products to new markets. Our monetization efforts or our expansion into new services, including credit, digital banking and insurtech, on our digital financial services platform may not succeed or generate revenue at levels we expect, or at all.
 
11
For all our businesses, we invest in better understanding our users and their preferences. This allows us to introduce content and services that are appealing to paying users on all our platforms and to properly deploy and price content and services to enhance our monetization. However, if we fail to properly interpret user preferences or convert our understanding into effective business strategies, our monetization may not be successful.
 
The COVID-19 pandemic, including any lockdown and reopening of relevant markets, has affected our business activities and results. Any future occurrence of natural disasters, epidemics, pandemics or other outbreaks, or other catastrophic events could also adversely affect our business.
 
The COVID-19 pandemic and the measures to contain its spread have from time to time resulted in business and manufacturing disruptions in our markets, impacted the business activities of our ecosystem participants, and disrupted the global supply chain including those of our sellers on our platform and merchant partners. For example, regional and global logistic costs had temporarily increased due to COVID-19 effects, and there have been disruptions or delays relating to delivery fulfilment and shipments in certain markets. Our users’ spending power may also be negatively affected if the global or local economies are negatively affected. We are unable to predict the continuing duration and scope of the COVID-19 pandemic, including any potential future waves of the pandemic due to existing or new variants of the virus, the availability and effectiveness of vaccines and treatments, and the actions that have been and continue to be taken by authorities and other parties in our ecosystem in response to COVID-19 developments.

COVID-19 has affected and may continue to affect our businesses and our users’ behaviors. With many economies reopening further in the fourth quarter of 2021 and into 2022, we have observed some moderation in online activities and fluctuations in user engagement in our businesses. The long-term effects of COVID-19 on our users and ecosystem participants remain uncertain. Relaxation of pandemic-related restrictions may decrease the inclination of users to remain at home, make physical stores or activities more attractive, and alter the usage and spending habits of our users. Accordingly, the trends we saw with respect to our revenues and other financial results and operating metrics during COVID-19 impacted periods may not be indicative of results for future periods.
 
Similarly, our business, financial condition and results of operations could be materially and adversely affected by severe weather conditions, natural disasters, geopolitical events, terrorist attacks, wars, sanctions, the occurrence or re-occurrence of other outbreaks, epidemics or pandemics, including avian influenza, severe acute respiratory syndrome, the influenza A (H1N1) or H7N9, and other catastrophic events that disrupt our operations, adversely affect our markets or the economy generally or adversely affect our employees, third-party service providers, business partners or a significant portion of our users.
 
We may not succeed in managing or expanding our business across the expansive and diverse markets in which we operate.
 
Our business has become increasingly complex as we have expanded the scale of our operations and the markets in which we operate. We have significantly expanded and expect to continue to expand our business operations, headcount, office facilities and infrastructure across more markets. Our game and e-commerce operations have expanded beyond our traditional markets in Southeast Asia and Taiwan. Free Fire is currently available in more than 130 markets, and has a large user base in Southeast Asia and Latin America. We have opened offices and hired local staff in Latin America to focus on Latin America’s local game operations and community engagement. In 2021, we expanded our Shopee business to new markets in Latin America such as Mexico, Chile and Colombia, and to Poland and Spain. When opportunities arise, we may further expand our geographic coverage and offer more products beyond our existing offerings. It is costly to establish, develop and maintain international operations, adapt our business model to new or diverse regulatory environments and to promote our brand internationally. Our international operations may not become profitable on a sustainable basis, if at all. As our operations continue to expand, our technology infrastructure systems and corporate, legal and compliance functions will need to be scaled to support our operations, and if they fail to do so, our business, financial condition and results of operations may be negatively affected.
 
12
The markets where we operate or expand to are diverse and unique, with varying levels of economic and infrastructure development and distinct legal and regulatory systems, and do not operate seamlessly across borders as a single or common market. Managing our growing businesses across these markets requires considerable management attention and resources. Our growing multi-market operations also require certain additional costs, including costs relating to staffing, logistics, intellectual property protection, regulatory and compliance, tariffs and other trade barriers and higher tax rates in certain markets. We may be less well-known or have fewer local resources and we may be unsuccessful in adapting our business practices, culture and operations. From time to time, we may test the waters in new markets where we believe there may be an opportunity to use our experience in highly diverse environments to reach underserved buyers and sellers. We may also cease our operations in certain markets as and when we deem appropriate.
 
Our operations and expansions in new markets may become subject to risks associated with:
 

 •
user acceptance of a digital economy, especially in the new markets to which we have expanded or may expand in the future;
 

 •
lack of experience operating in these new markets, including our ability to understand different user behaviors and/or culture in new markets and roll-out relevant products and services localized to each market’s needs or preferences;
 

 •
challenges in adapting our approach and strategies in existing markets to new markets;
 

 •
recruiting and retaining talented and capable management and employees in various markets;
 

 •
our ability to appropriately deploy resources and management attention that otherwise would be focused on the development of our existing markets and businesses;
 

 •
limited technology infrastructure and low levels of use of the internet;
 

 •
challenges caused by distance, language and cultural differences, and local and regional competitive landscapes;
 

 •
providing content and services that appeal to the tastes and preferences of users in a larger number of markets;
 

 •
implementing our businesses in a manner that complies with local laws and practices, which may differ significantly from market to market, including laws regarding data protection, privacy, network security, cybersecurity, encryption and payments;
 

 •
maintaining adequate internal and accounting control across various markets, each with its own accounting principles that must be reconciled to U.S. GAAP upon consolidation;
 

 •
compliance with privacy laws and data security laws, including the European Union General Data Protection Regulation, or GDPR, and compliance costs across different legal systems;
 

 •
currency exchange rate fluctuations;
 

 •
protectionist laws and business practices that could, among other things, hinder our ability to execute our business strategies and put us at a competitive disadvantage relative to domestic companies, including restrictions on foreign ownership;
 

 •
actions by governments or others to restrict access to our products and services, whether these actions are taken for political, security or other reasons, or that may cause us to discontinue our operations in a particular market;
 

 •
complex local tax regimes;
 
13

 •
differing, complex and potentially adverse customs, import/export laws, tax rules and regulations or other trade barriers or restrictions which may be applicable to transactions conducted through cross-border e-commerce business, related compliance obligations and consequences of non-compliance, and any new developments in these areas;
 

 •
establishing strategic partnerships to expand and grow our business, as well as maintaining our relationships with any of our existing or future strategic partners;
 

 •
potential political, economic and social instability, including the current tension between Russia and Ukraine and other future major geopolitical events, and related actions taken by other countries in response, or perceived, threatened or actual security concerns; and
 

 •
higher costs associated with doing business in a larger number of markets.
 
Any of the foregoing could negatively affect our business, financial condition and results of operations.
 
As the consumer internet business may be relatively new in certain markets, the relevant regulations are evolving and expanding, especially as we expand the scope of our businesses and enter into new markets. We may be regularly subject to formal and informal reviews, inquiries and investigations by governments and regulatory authorities. Unfavorable regulations, laws, decisions or enforcement actions could cause us to incur substantial costs, expose us to unanticipated civil and criminal liability or penalties (including substantial monetary fines), diminish the demand for, or availability of, our products and services, increase our cost of doing business, require us to change our business practices in a manner materially adverse to our business, damage our reputation, impede our growth, or otherwise have a material adverse effect on our operations.
 
We are subject to extensive and changing laws and government regulations across our business.
 
Our business is affected by laws and regulations across multiple jurisdictions that affect the industries in which we operate, and their scope has increased significantly in recent years. We are subject to a variety of regulations, including those relating to game operations, game ratings, e-commerce, social networking, internet applications or content services, digital platforms, marketing, advertising, privacy, personal information, data use, data transfer, data processing, data localization, data storage, data retention and data protection, live-streaming services, antitrust or competition laws, employment and labor laws, national language requirements, intellectual property, virtual items, user generated content, loot boxes, national security, nationalization, content restrictions, platform regulations, sale of regulated or prohibited items, protection of minors, consumer protection, pricing, product safety and product liability, prevention of money laundering and financing criminal activity and terrorism, anti-bribery and anti-corruption regulation, economic or other trade prohibitions or sanctions, electronic contracts and other communications, digital financial services regulation, electronic payment services regulation, foreign investment and currency control regulation. Because the industries in which we operate are relatively new in our markets, the relevant laws and regulations, as well as their interpretations, are often unclear and evolving. Some of these regulations also implicate licensing requirements, and the variety of potentially applicable laws and regulations can make it difficult to know or determine which licenses and approvals are necessary, or the processes for obtaining them. For these same reasons, we also cannot be certain that we will be able to maintain the licenses and approvals that we have previously obtained, or that once they expire, we will be able to renew them. We are also uncertain as to whether we will be able to obtain the licenses we apply for in a timely manner or at all. If we fail to obtain, maintain or renew any required licenses or approvals, comply with the licensing conditions or make any necessary filings, or are found to require licenses or approvals that we believed were not necessary or we were previously exempted from obtaining, we may be subject to various penalties, such as loss of the revenue or assets that were generated through the unlicensed business activities, imposition of fines, suspension or cancelation of the applicable license, written reprimands, termination of relevant businesses or offerings, criminal prosecution and the discontinuation or restriction of our operations, or other disputes. Any such penalties or disputes may disrupt our business operations and materially and adversely affect our business, financial condition and results of operations.
 
14
Laws and regulations vary from jurisdiction to jurisdiction and are often evolving, unclear or inconsistent with other applicable laws. At the same time, authorities may introduce protectionist measures or may observe regulatory developments in other jurisdictions and seek to implement similar measures, including measures to bring their respective jurisdictions in line with international standards that may be more stringent or restrictive, thus potentially subjecting us to more extensive regulation in each market. Future expansion in terms of our services and geographic coverage, including the expansion of our licensed or self-developed games, e-commerce platform and digital financial services and products to other parts of the world, could subject us to additional regulatory requirements and other risks that may be costly or difficult to comply with. As the digital economy of our markets develop and new regulations and compliance requirements are introduced, there may be ambiguity regarding the applicability and scope of new and existing regulations and compliance requirements, which may in turn cause uncertainty to our business operations, user engagements and investor confidence. We may require more time than expected to adapt to these new requirements, and may face delays during the implementation or transition period. Any failure to timely comply with such new requirements may disrupt our business operations, damage our reputation, cause us to lose users or reduce user engagement. News or rumors about potential introductions of new regulations, restrictions or compliance requirements may also result in significant uncertainties to our business operations and may negatively affect the market price of our ADSs.
 
In addition, data protection, privacy, content, competition, and other laws and regulations may impose different obligations or be more restrictive in certain of our markets or other parts of the world where we may expand our operations. For example, GDPR includes operational requirements for companies that receive or process personal data of residents of the European Union. There are a number of recently enacted data protection laws as well as legislative and regulatory proposals in various jurisdictions that could impose new obligations or limitations in areas affecting our business. There are also jurisdictions that are considering or have passed legislation implementing data transfer restrictions or requiring local storage and processing of data or similar requirements, which could affect our business operations. If we are required to make changes to or are otherwise restricted in the manner in which we transfer data between and among markets and regions or share data among our businesses, it could affect our ability to and the manner in which we provide our content, products and services, which could adversely affect our financial results. We may be required to implement different operating practices and protocols depending on the requirements of each local market, which may be costly, and increase the complexity of delivery of our content, products and services. Any antitrust or competition related lawsuit, regulatory investigations, or administrative proceedings against us could require us to terminate or change some of our business practices, or result in us being subject to regulatory actions.
 
Regulators may regularly re-examine and increase legislation, regulation and enforcement of compliance obligations, which may require us or our business partners to revise or expand compliance programs, including the procedures we use to verify the identity of our users and to monitor the transactions on our platforms. Such new legislation, government policies or compliance requirements may also make it more burdensome for us to operate our businesses, expand our offerings and for our users to use our services and products, which could potentially discourage users from using our services and products. We may also make changes to or expand our product offerings or services in a manner that subjects our businesses to additional legislation, regulations or other compliance obligations, which may result in similar burdens and risks to our businesses.
 
The provision of financial services such as mobile wallet services, payment processing, cross-border e-commerce transactions, consumer loan products, insurtech and banking services and products are typically more regulated and subject to a broad range of complex laws and regulations that are rapidly changing. The monetary, commercial or equivalent authorities in the markets in which we operate could impose new or additional licensing requirements, capital commitments, governance standards, reporting obligations or other regulatory requirements, requiring us to devote substantial operational and financial resources to comply with such requirements.
 
We may fail to compete effectively.
 
We face competition in each of our business lines and the failure to compete effectively in any of them could materially and adversely affect our business, financial condition and results of operations.
 
Our digital entertainment business competes globally on the basis of a number of factors, including user base, game portfolio, quality of user experience, brand awareness and reputation, relationships with game developers, access to developer talent, monetization strategies and access to distribution and payment channels. Our competitors for game publishing include companies with a presence in just one or several markets, as well as companies offering global publishing platforms. Our competitors for game development include global developers, who may have more experience, better reputation and more data obtained from developing games that target the same user pool. Outside of Southeast Asia and Taiwan, we have a limited operating history, and may be unsuccessful in monetizing or in continuing to attract and retain users for our games. Our competitors may capitalize on their significant financial, technical or know-how resources to develop, distribute and operate mobile, console and PC online games or acquire other game or developer studios. Some developers may choose to distribute games themselves through other channels such as the iOS App Store, the Google Play Store, Steam, or through consoles which may compete with games distributed and developed by us. In addition, we face competition from other games, platforms and entertainment formats for the time, attention and entertainment spending of our online game players. If other leisure time activities are perceived by our players to offer greater variety, affordability, interactivity and overall enjoyment, our digital entertainment business may be materially and adversely affected.
 
15
Our e-commerce business faces competition from regional players that operate across several markets, and from single-market players. Global e-commerce or internet companies are also making efforts to enter into our markets or e-commerce and may further expand their footprints in such markets. Such competitors may have longer operating history and greater access to financial, technological and marketing resources than we do. We compete to attract, engage, and retain buyers based on the variety and value of products and services listed on our marketplaces, overall user experience and convenience, online communication tools, social features, integration with mobile and networking applications and tools, mobile applications and availability, quality and costs of payment and logistics services. We also compete to attract and retain sellers based on the number and the engagement of buyers, the effectiveness and value of the services we offer to sellers, commission rates, and the availability of support services. As e-commerce is evolving in our markets, competition for market share is particularly intense. Our competitors may also consolidate or be acquired by other competitors, allowing them to obtain greater market share, gain access to greater resources and gain real advantages over us. In addition, we may face increasing competition from social media platforms, online and app-based search engines through which products and services may be researched and sold, and other content-providing market players. Social media platforms with high levels of user engagement may be able to leverage content and user connections and traffic on their platform to increase the visibility and attractiveness of a wide variety of brands and products.
 
Our digital financial services business faces competition from existing online and offline payment methods, including, among others, other mobile wallet services and other digital financial service providers. We expect competition to intensify as existing and new competitors introduce new services or enhance existing services. Some of our competitors may have more experience, greater financial resources or larger bases of customers than we have. In addition, certain competitors may have longstanding relationships with certain merchants to accept the payment services they offer, which may make it difficult or costly for us to establish partnerships with these merchants. New entrants tied to established brands may engender greater user confidence in the safety and efficacy of their services, along with greater liquidity. We may also face pricing pressures and other forms of competition from competitors. Some potential competitors may charge lower commissions to merchants or subsidize users through other services they offer. Such competition may result in the need for us to alter the pricing we offer which could reduce our gross profit and negatively affect our business, financial condition and results of operations. Competitors in the digital banking space such as banks and larger financial institutions may be able to offer more extensive or enhanced products and services, or offer such products and services at more attractive rates, credit or other terms, including more attractive rates on deposits and rates on loans. If such competitors appear more attractive to high quality customers or credit users, such customers or users may be less likely to use our products and services, and we may have a decreased pool of high quality customers or credit users. For our consumer and merchant credit business, other non-bank fintechs, neobanks, credit unions, multi-finance companies, off-card financing, private credit card and point-of-sale service providers, banks and larger financial institutions may also build solutions to compete in the consumer and merchant lending space.
 
As we continue to expand our business within our existing markets and globally, we may offer new products and services, develop new or enhance the features and functionality of our platforms, that may lead to increased or additional competition. We may also periodically change or remove new features and functionality, which may not be well received and decrease the time spent by users on our platforms. We may need to compete with existing service providers who have more experience and infrastructure than us. We may also face potential protectionist policies, political measures or regulatory challenges that are more supportive of local players in such markets, which may among other things, hinder our ability to compete effectively in such markets.
 
Existing or future investments or acquisitions may not be successful.
 
We have invested in or acquired, and will continue to invest in or acquire, teams, businesses, services, assets or technologies from time to time. We may fail to select appropriate investment or acquisition targets, or we may not be able to negotiate optimal arrangements, including arrangements to finance such investments or acquisitions. Investments and acquisitions entail uncertainties and risks, such as:
 
16

 •
we may fail to successfully achieve the intended objectives;
 

 •
our investment or acquisitions may be viewed negatively by customers, financial markets or investors;
 

 •
the costs of identifying and consummating these transactions may be significant;
 

 •
acquisitions and the subsequent integration of new assets and businesses into our own could require significant management attention and could divert resources from our existing businesses;
 

 •
we may have difficulty in transitioning and integrating the business, technologies, products, personnel or operations of the acquired businesses;
 

 •
we may face unforeseen operating challenges;
 

 •
our relationships with existing employees, customers and business partners of our group, or those of the target, may be impaired;
 

 •
we may assume pre-existing contractual relationships of an acquired company that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business;
 

 •
an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company;
 

 •
we may face challenges associated with managing additional and/or geographically remote businesses;
 

 •
investments and acquisitions could result in the use of substantial amounts of cash or significant capital contributions, which could limit other potential uses for our cash;
 

 •
investments and acquisitions could result in increased leverage, dilutive issuances of equity securities, adverse tax consequences, goodwill impairment charges or write-offs, amortization expenses for other intangible assets;
 

 •
if we incur debt to fund any investments or acquisitions, such debt may subject us to material restrictions on our ability to conduct our business, including financial maintenance covenants;
 

 •
we may need to issue new shares as acquisition consideration or to raise additional capital to fund the acquisition consideration, which may dilute our existing investors’ interest in us;
 

 •
we may assume unknown material liabilities of acquired companies, or may be exposed to claims and disputes by shareholders and third parties, including intellectual property claims and disputes;
 

 •
we may be unsuccessful in accurately projecting revenue, cost or other metrics of the invested or acquired entity in the due diligence process;
 

 •
the invested or acquired assets or businesses may not generate the financial results we expect; and
 

 •
the market value of our investments or acquisitions may fluctuate, particularly in volatile markets, or they may become obsolete.
 
These factors could adversely affect our financial results. In addition, we may fail to obtain any required approvals and licenses from relevant government authorities. We may become subject to new governmental regulations in connection with our investments and acquisitions, which could result in increased costs and new strategic risks. Any of these risks may materially and adversely affect our business, financial condition and results of operations.

17
We have a limited operating history for some of our businesses.
 
We have a limited operating history upon which to evaluate the viability and sustainability of our businesses, in particular our e-commerce business in newer markets that may be very different from Southeast Asia and Taiwan, our digital financial services business, and new game genres and markets for our digital entertainment business. Our history of operating all three of our businesses together is relatively short, as our SeaMoney and Shopee platforms were launched in April 2014 and June 2015, respectively, as we expanded service and product offerings under Garena, Shopee and SeaMoney and into new markets. Our historical results may not be indicative of our future performance and you should consider our future prospects in light of the risks and uncertainties of early-stage companies operating in fast evolving high-tech industries in certain markets.
 
Our businesses involve third parties over whose actions we have no control.
 
Each of our digital entertainment, e-commerce and digital financial services businesses involves the participation of third parties such as third-party game developers, owners of other third-party intellectual properties, users who generate content on our platforms, including livestreaming or other real-time content dissemination, sellers and merchants who own the content and services offered through our platforms, as well as intermediaries and other third-party service providers. We rely on a number of third-party channels to provide content and services to our users, as well as performing other functions of our platform. For example, we primarily rely on third-party application distribution channels, such as the iOS App Store and the Google Play Store, to allow users to download and access our applications and games. If our third-party distribution channels voluntarily or involuntarily suspend their services to us, including taking down or removing our applications in response to government actions or other legal action or pursuant to their own policies, and we are unable to arrange for alternative measures in a timely manner or at all, our users will have difficulties accessing our applications and games or making payments for our products and services. Consequently, we will lose users temporarily or permanently, and our financial results could be materially and adversely affected.

We may not be able to control the actions of these or other third parties and thus are subject to various risks associated with working with or relying on third parties in our businesses, including:


 •
risks relating to third-party sellers on our platform and merchant partners, including deficiencies in the quality of products, misrepresentation of products, listing of restricted or prohibited products, and potential intellectual property issues (see “—We may be subject to intellectual property-related risks”);
 

 •
risks relating to third-party publishing or distribution channels we use to make our applications available for download, such as the iOS App Store and the Google Play Store;
 

 •
risks relating to user generated content in our games (see “— We rely on third-party game developers for some of our digital entertainment content and also allow our users to contribute and interact with user generated content”), e-commerce platform, or other platforms, including livestreaming content or other content posted in real-time that may be illegal, obscene, defamatory, infringing or otherwise inappropriate or unlawful;
 

 •
risks relating to third-party payment service providers we depend on to provide users with various payment options or mobile wallet top-up options, such as the iOS App Store and the Google Play Store, payment on delivery, bank transfers, direct carrier billing, credit cards, debit cards, telecommunication card top-up and payment through other third-party payment services;
 

 •
risks relating to services by third-party logistics service providers;
 

 •
risks relating to users’ personal data that is received or used by third parties in connection with our services, such as when sellers or third-party logistics providers receive user information in connection with order fulfillment;
 

 •
risks relating to users of our services or platforms who engage in fraud or other conduct that violates our terms of service, other policies, or the law;
 
18

 •
risks relating to our business and/or banking partners or counterparties being sanctioned and/or otherwise being found to have violated our agreements, other policies, or the law;
 

 •
risks relating to third-party data center providers and cloud services for the storing of data from our users and operations, including any risks relating to users’ personal data hosted by such service providers. In addition, we do not control the operation of these facilities and rely on contracts to employ their use. The owners of the data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transfer our servers and other infrastructure to new data center facilities, or change to other service providers, and we may incur significant costs and possible lengthy service interruptions in connection with doing so; and
 

 •
damage to our reputation if third parties on our platforms or our other business partners do not properly perform their functions and negatively affect our users’ experience with our platforms.
 
Although we take efforts to prevent third parties from engaging in prohibited conduct via the content available on our platforms, we may not detect every unlawful, improper or fraudulent third-party action. In some of our markets, we may be liable for certain third-party conduct under local law, including if users commit fraud or cause other users of our services to incur losses. While we have agreements with some of these parties that obligate them to carry out their respective dealings in a lawful and professional manner and to indemnify us for losses subject to applicable laws, any legal protection we may have could be insufficient to compensate us for our losses or may not repair the damage to our reputation.
 
If any of our third-party service providers and channel providers delivers unsatisfactory service, engages in fraudulent or prohibited actions, or is unable or refuses to continue to provide its services to us and our users for any reason, our business, financial condition and results of operations may be materially and adversely affected.
 
Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars.
 
We operate in multiple markets, which exposes us to the effects of fluctuations in currency exchange rates as we report our financials and key operational metrics in U.S. dollars. We earn revenue denominated in local currencies of our markets in Southeast Asia, Taiwan and Brazil, among other currencies, while some of our costs and expenses are paid in other foreign currencies. We generally pay license fees to game developers in U.S. dollars, and incur expenses for employee compensation and other operating expenses in the local currencies in the markets in which we operate. From time to time, we may pay acquisition considerations in U.S. dollars. We do not rely on any single currency as we earn revenue in different local currencies across our markets and keep a significant cash position in U.S. dollars. However, fluctuations in the exchange rates among the various currencies that we use could cause fluctuations in our operational and financial results. Our expenses may become higher and our revenue and operating metrics may become lower than would be the case if exchange rates were stable or if we were operating and reporting in one currency. Movements in foreign currency exchange rates may have a material adverse effect on our results of operations, which may cause our financial and operational metrics reported in U.S. dollars to be not fully representative of our underlying business performance. A significant amount of our revenue and some of our operating metrics such as gross merchandise value are denominated in certain local currencies that have been subject to significant volatility in the past. Because fluctuations in the value of these local currencies are not necessarily correlated, our results of operations in any period may be adversely affected by such volatility. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Major Factors Affecting Our Results of Operations” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”
 
We may enter into foreign exchange derivatives transactions and incur relevant costs from time to time to manage our exposure to exchange rate risk. Such derivatives transactions while intended to be non-speculative, are designed to protect us against increases or decreases in exchange rates, but not both. If we have entered into derivatives transactions to protect against, for example, decreases in the value of a local currency and such local currency instead increases in value, we may incur financial losses. Such losses could materially and adversely affect our financial condition and results of operations.
 
19
We may be subject to intellectual property-related risks.
 
We rely on a wide portfolio of intellectual properties to operate our businesses. We may not be able to effectively protect these intellectual properties against infringement, or efforts to safeguard our intellectual properties may be costly.
 
We rely on a combination of trademark, patent, fair trade practice, copyright and trade secret protection laws, as well as confidentiality procedures and contractual provisions, to protect our intellectual properties. We also enter into confidentiality agreements with our employees and any third parties who may access our proprietary information, and we rigorously control access to our proprietary technology and information. Our intellectual property protection measures may not be sufficient, and confidentiality agreements may be breached by counterparties. There may not be adequate remedies available to us for any such infringement or breach. For example, in the event any third-party game developer, publisher or hacking group infringes the copyright of our self-developed game, our users may lose interest in our games. In addition, policing any unauthorized use of our intellectual properties is difficult, time-consuming and costly, and the steps we take may be inadequate to prevent the misappropriation of our intellectual properties. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We may not prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
 
From time to time we receive notices from third parties or are named in lawsuits by third parties alleging infringement of their proprietary intellectual property rights or in connection with claims relating to our content, products or marketing activities. For example, with respect to our e-commerce business, we receive complaints alleging that items offered on or sold through our Shopee platform infringe third-party copyrights, trademarks and patents or other intellectual property rights, or contain obscene, defamatory or libelous content. Although we have adopted measures to reduce infringements or offense by product listings on our Shopee platform before they appear on the marketplace, these efforts may not always be successful. In February 2022, the Office of the U.S. Trade Representative, or USTR, published its latest annual Out-of-Cycle Review of Notorious Markets for Counterfeiting and Piracy, which identified the Shopee platform in several of our markets as “notorious markets.” The USTR may continue to identify those Shopee markets as notorious markets, and the USTR may identify other Shopee markets as notorious markets in the future. In December 2020, the European Commission placed Shopee on its Counterfeit and Piracy Watch List. Any public perception that counterfeit, pirated, or otherwise inappropriate or illegal items are commonplace on Shopee, even if factually incorrect, or perceived delays in our removal of these items could damage our reputation and result in regulatory action against us and diminish the value of our brand name. We may be subject to allegations of civil or criminal liability for alleged intellectual property infringement, including based on allegedly unlawful activities carried out by third parties through our platforms. We may also be subject to fines or sanctions by local authorities for infringing products or improper contents offered on our marketplace, including requiring the removal of the infringing products or a temporary or permanent block of our platform.
 
We may implement further measures to protect users and ourselves against potential intellectual property liabilities, and these measures could cost us substantial additional resources or require us to discontinue certain service offerings. In addition, these measures may reduce the attractiveness of our platforms to users. For example, a seller whose listings are removed or suspended by us, regardless of our compliance with the applicable laws, rules and regulations, may dispute our actions and commence action against us for damages based on breach of contract or other causes of action or make public complaints or allegations. Any costs incurred as a result of such liability or asserted liability could also harm our business.
 
As the number of interactive games increases and the features and content of these games continue to overlap, software developers and distributors have increasingly become subject to infringement claims. Some of our game content is highly realistic and features materials that are based on real‑world objects or people, which may also be the subject of claims of infringement, including right of publicity, copyright, trademark and unfair competition claims. Despite any steps taken by us to avoid knowingly violating the intellectual property rights of others, third parties may still claim that content we develop or license from third parties infringes their intellectual property rights. We received intellectual property related claims in the past. In addition, as we begin to allow user generated content on our platforms, we may also become subject to third party claims relating to such content.
 
20
Any such claims, whether or not meritorious, that we need to defend or litigation we take to enforce our intellectual property rights may be time-consuming, distracting to management and costly, and we may not prevail in any such litigation. We may also be forced to stop distributing, cease using or redesign the relevant content or product, obtain a license from the claimant, which, if available at all, may not be available on commercially favorable terms.
 
We may be liable for security breaches and attacks against our or our third-party partners’ platforms and network, particularly with regard to confidential user information and personal or other data or any other privacy or data protection compliance issue, and our platforms and games may contain unforeseen “bugs” or errors.
 
Our business stores, generates and processes a large amount of data, including personal data and payment information from users, and any failure to prevent or mitigate security breaches and the improper access, use or disclosure of such data could impact our operations negatively and harm our reputation. We also maintain certain other proprietary and confidential data relating to our business and personal data of our consumers and personnel. Although we have employed significant resources to develop and implement security measures aimed at preventing breaches, our cybersecurity and data protection measures have not and may not detect or prevent all attempts to compromise our systems, including distributed denial-of-service attacks, viruses, malicious software, physical or electronic break-ins, phishing attacks, data leaks, social engineering, and security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in and transmitted by our systems or that we otherwise maintain. Any security breach, including personal data breaches or incidents, including cybersecurity incidents, could result in unauthorized access to our systems or a user’s system, misappropriation of our or a user’s information or data, loss, corruption or alteration of such data, financial loss, deletion or modification of user information, damage to our systems or those of our users, or a denial-of-service or other interruption to our business operations. Any such incidents could impact our operations and could expose us to claims, litigation, regulatory or other governmental investigations, administrative fines, and potential liability, as well as remediation costs and increased cybersecurity and/or data protection costs. We have in the past been and are likely again in the future to be subject to these types of attacks and security breaches. As techniques used to obtain unauthorized access to or otherwise breach or sabotage systems change frequently, we may not be aware that we have been attacked and we may be unable to anticipate or implement adequate measures to protect against these security breaches until they have been launched against us, our platforms or services, our users or our third-party service providers. We may not have the resources, technical sophistication, or ability to anticipate or prevent rapidly evolving or sophisticated types of cyber-attacks or other types of security breaches. In addition, our confidential or proprietary information or our users’ personal data or payment information may, in some instances, be stored or processed by certain third-party partners, which poses similar risks. If an actual or perceived breach of our or our third-party partners’ security occurs, public perception of the effectiveness of our security measures and brand could be harmed, demand for our platforms or services may be reduced, our operations may be disrupted, we may incur significant legal liabilities, financial loss, and remediation costs, and our business could be materially and adversely affected. While we take measures to require third-party service providers to adopt necessary security measures and to protect against data breaches in accordance with applicable laws and regulations, we also face similar risks to the extent any personal data is shared with third-party service providers. Any compromise of our or our third-party partners’ security or data could have a series of significant consequences, ranging from violation of applicable security, privacy or data protection, consumer and other laws, regulatory or other governmental investigations, enforcement actions, to other legal and financial exposure, including potential contractual liability, reputational damage, litigation risk and/or user loss.
 
Our platforms services, applications, websites and games have in the past contained and may in the future contain errors or “bugs” that are not detected until after the applications, products or services are published or released. Any such errors or a significant unavailability of our platforms, services or games or any breach of users’ data protection rights due to these errors or “bugs” could affect the overall user experience, which could cause users to reduce their time on or interest in our platforms, services or games, or not recommend our content and services to others. Such errors could also result in non-compliance with applicable laws, cause financial loss, or create legal liability for us. Resolving such errors could also disrupt our operations, cause us to divert resources from other matters, or materially harm our business, financial condition and results of operations. In addition, “cheating” programs or other unauthorized software tools and modifications that enable players to cheat in games harm the experience of players who play fairly and could negatively impact the volume of purchases of in-game items. Also, vulnerabilities in the design of our products, services and of the platforms on which they run could be discovered after their release and exploited by malicious actors before they are remedied. This may lead to loss of revenues or increased cost of developing technological measures to respond to these, either of which could negatively affect our business, financial condition and results of operations.
 
21
We collect, process, transmit, and store personal information in connection with the operation of our businesses and are subject to complex and evolving international laws and regulations regarding privacy and data protection.

Our businesses are subject to a number of data protection laws and requirements in the markets in which we operate and where our users, merchant partners, customers and other participants are located. We are also subject to agreements with third parties such as Apple, Google, Facebook and others that place conditions and requirements on the data collected via their services. As we further expand our operations internationally, we will be subject to additional data protection laws and requirements. The privacy and data protection related laws, rules and regulations of jurisdictions we expand to may be more comprehensive, restrictive or otherwise different as compared to such laws, rules and regulations in Southeast Asia and Taiwan. In addition, such laws, rules and regulations, including any penalties, may differ or be inconsistent from jurisdiction to jurisdiction. Complying with privacy and data protection related laws, rules and regulations for an increasing number of jurisdictions could require significant resources and costs. Such laws, rules and regulations may also restrict the transfer of data across jurisdictions, require data localization, require us to obtain user consent for the use and collection of their data, to delete or limit the processing of their data, and require us not to sell or engage in marketing data with respect to certain users, among other things, which may impose additional and substantial operational, administrative and compliance burdens on us, and may also restrict our operations and expansions in new markets. The costs to comply with, or our actual or perceived failure to comply with, new or changing laws, rules and regulations regarding privacy and data protection, privacy and data protection laws, rules and regulations in new markets, and/or contractual obligations related to privacy and data protection may adversely affect our business, financial condition and results of operation. We may also face potentially significant fines, reputational loss and customer loss, and may be subject to proceedings or actions against us by governmental entities, consumers or others relating to privacy and data protection.
 
Risks Related to Our Digital Entertainment Business
 
We derive a significant portion of digital entertainment revenue and gross profit from a limited number of online games.
 
In 2019, 2020 and 2021, our digital entertainment business contributed 52.2%, 46.1% and 43.4% of our total revenue, respectively. In addition, our gross profit in 2019, 2020 and 2021 was primarily attributable to the positive impact of our digital entertainment business. With many economies reopening further in the fourth quarter of 2021 and into 2022, we have observed some moderation in online activities and fluctuations in user engagement.
 
Among our online games, we substantially depend on a small number of popular games, including our first fully self-developed game, Free Fire, a global popular battle royale type of mobile game, which was launched in December 2017. In 2021, our top five games, comprising Free Fire and games licensed to us by third-party game developers, contributed 97.4% of our digital entertainment revenue, among which Free Fire contributed a significant portion. If we are unable to identify, source, develop and launch new games titles that gain widespread popularity and generate significant revenue, our revenue and revenue growth may continue to depend on the success of just a few game titles. If there are any negative developments or occurrences to any of our key revenue-earning games including Free Fire, such as decline in popularity, content quality issues, competing products, content restrictions, government actions, regulatory or legal changes that affect our ability to monetize our games, reductions in consumer spending and engagement levels, delay or failure in producing new engaging content, or real or perceived security risks, our revenues could experience material decline or slower growth. We may also select and invest significant financial and human resources in games that later prove unsuccessful. There may also be unforeseen delays in the launch of new games. If we are unable to source or launch new popular games in a timely manner, our game players may seek entertainment elsewhere. As the gross margin of self-developed game content tends to be higher than that of content licensed from third parties, any fluctuations in the mix of our revenue generated from self-developed game content and licensed game content may also affect our profitability.
 
22
We have a limited track record in game development and global game distribution.
 
While Free Fire has so far been well-received, we are still relatively new to game development. We may be unable to continue to identify market opportunities and develop new games, and subsequent self-developed games may not always have the same or comparable levels of success. Development of new games requires considerable resources, including research, testing, marketing, infrastructure and staff expenses. If the increased costs do not translate to higher revenues and cost efficiencies, our business could be negatively affected.
 
Free Fire is currently available in more than 130 markets. Any self-developed games we may develop in the future may also be offered in multiple jurisdictions. The expansion of our digital entertainment business into new markets, including through our self-developed games, may subject us to additional regulatory and compliance requirements and other new risks. We may have to adopt differing methods and processes to adhere to each jurisdiction’s laws and regulations, which could result in undue delays in launching such self-developed games or increased costs.
 
We rely on third-party game developers for some of our digital entertainment content and also allow our users to contribute and interact with user generated content.
 
We license many of our online games from third-party game developers. The term of our game license agreements with game developers typically ranges from two to seven years, renewable upon both parties’ consent. However, we may not be able to develop or procure new games or renew existing licenses on terms acceptable to us. Our game developer partners may terminate our agreements prior to their expiration if we are not in compliance with the relevant terms or conditions and we fail to remedy such non-compliance in time, or they may refuse to renew the agreements. Any failure on our part to effectively localize, operate, market or monetize their games, safeguard their intellectual properties, or otherwise perform our obligations under the license agreements may cause substantial harm to our relationships with game developers, who may then choose other game operators to distribute their games. Currently, some of our most popular games, including League of Legends, Arena of Valor, and Call of Duty: Mobile, are owned or developed by Tencent Holdings Limited and its affiliates, or Tencent, one of our shareholders. In November 2018, we obtained a right of first refusal from Tencent to publish its mobile and PC games in Indonesia, Taiwan, Thailand, the Philippines, Malaysia and Singapore, subject to certain terms and conditions. Although we have already launched certain games under such right of first refusal arrangement, there is no guarantee that we will continue to publish the existing games or publish more games under such right of first refusal arrangement on terms satisfactory to us or at all, or that any games published under such arrangement will yield a positive result.
 
As part of our continued efforts to encourage user participation and user content creation, we have recently introduced and begun to explore game features that enable users to contribute and interact with user generated content. While we believe the move towards having more user generated content is aligned with major emerging industry trends, we are unable to predict and cannot guarantee that such features in our existing or new games will contribute to the penetration or profitability of our games or achieve their desired or expected results.
 
In certain circumstances, the actions of our third-party game developers and content creators or contributors which are beyond our control could materially and adversely affect the success of our games, causing our games revenue to fluctuate or even be lower than expected. These actions by game developers could include software updates resulting in adverse changes in gameplay that are poorly received by our users, game or update releases with insufficient content to attract users or maintain the level of their engagement, or delays in any release of anticipated games in our pipeline or game updates. User-generated content features make it relatively easy for developers, content creators or contributors, and other users to upload and contribute content, which may result in content moderation challenges, including the possibility that infringing or inappropriate content is added to our games or platforms. There is no guarantee that we will be able to successfully implement policies or procedures to moderate user generated content or identity and block infringing or inappropriate content before it is uploaded and/or before other users view it, which could lead to legal or regulatory actions being taken against our games or platforms and/or user complaints and litigations.
 
23
Our games are subject to scrutiny regarding the appropriateness of their content.

Our games are subject to reviews, ratings, age restrictions or other restrictions on content, advertisement or distribution mandated by laws in some of our markets or ratings by third-party application distribution channels. For example, in Vietnam, online game publishers are required to obtain certain licenses, approval on game content, certificate and/or acknowledgement of announcement from the competent authority, depending on the classification of each game to be provided to the market. In Thailand, applications to publish online games need to be reviewed and approved by the Thailand Film and Video Censorship Committee. Apple uses its own proprietary app rating system and Google Play uses the International Age Rating Coalition (IARC) rating system. If we are unable to obtain the ratings we have targeted for our games, it could delay launch or upgrade of our games.
 
Legislation or regulations may be introduced in our markets to impose age, spending or playtime restrictions or to allow government censorship or to establish a system for protecting users from the potential influence of graphic violence, gaming addiction or other objectionable elements contained in various types of games. Some of our games may be subject to stricter regulations caused by government actions or legal proceedings, including those imposed against other developers’ games which are in the same genre as ours, and these restrictions may vary by jurisdiction. We may be required to modify our game content or features or alter our marketing or monetization strategies to comply with new governmental regulations or ratings assigned to our current or future games, which could delay or prohibit the release of new games or upgrades and reduce the existing and potential scope of our user base. We may also be required to modify or remove certain game features to react to government actions, court decisions such as injunctions or complaints from activist groups or organizations. If we are required or elect to do so, it could adversely affect our monetization, user base and financial results. If any of our key games, including Free Fire, is banned or temporarily suspended by any government, court or distribution channels, our business, financial condition and results of operations may be materially and adversely affected.
 
The WHO’s Eleventh Revision of the International Classification of Diseases (ICD-11) lists gaming addiction as a disorder. While the effects of gaming and whether gaming addiction is a disorder continues to be discussed and researched by health officials and others, the WHO and other governments may continue to take measures against gaming addiction, such as imposing gaming curfews or spending limits for minors and establishing treatment programs aimed at addressing gaming addiction.
 
There are increasing discussions in many jurisdictions globally regarding whether certain game mechanics, such as loot boxes, should be subject to a higher level or different type of regulation to protect consumers. Some jurisdictions have seen enforcement or actions initiated by activist groups or organizations to protect consumers, in particular minors and other susceptible persons. For example, in February 2021, the National Association of Centers for the Defense of the Rights of Children and Adolescents in Brazil, or ANCED Brazil, a youth rights group in Brazil, filed lawsuits against a number of electronic games companies and distribution platforms, including our gaming entity in Brazil, in a court dedicated to resolving matters concerning children and adolescents regarding alleged loot box mechanisms in the games. In addition, to the extent Apple, Google, or any of our other platform providers or game distribution channels restrict the use of loot boxes or similar mechanism in games, we may need to adjust our game content or monetization strategy in order to continue distribution on such platforms or channels, which may cause a decline in the revenues generated from these games and require us to incur additional costs. If new or amended legislations or regulations, which may vary significantly across jurisdictions and which we may be required to comply with, require certain game mechanics of our games to be modified or removed, such requirements would increase the costs of operating our games, impact player engagement and monetization, or may otherwise harm our business performance. In addition, the increased attention focused on potential liability issues or alleged harms as a result of any lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business.
 
As debate in the industry continues, we cannot predict the likelihood, timing, scope or terms of gaming related laws or regulations in our markets, or the extent to which implementation or public reactions of such laws or regulations (including lawsuits brought against game companies by alleged victims of gaming addiction or other issues relating to gaming content) may adversely affect our reputation and business. We may need to adjust our game content or monetization strategy to respond to local legal or regulatory requirements. Moreover, public dialogue concerning online games may have an adverse impact on our reputation and users’ willingness to play our games. Any costs incurred as a result of this potential liability or reputational concerns could harm our business, financial condition and results of operations.
 
24
Risks Related to Our E-Commerce Business
 
We face uncertainties relating to the growth and profitability of the e-commerce industry in our markets and we may face challenges and uncertainties in implementing our e-commerce strategy.
 
While e-commerce adoption continues to grow, our future results of operations will depend on numerous factors affecting the development of the e-commerce retail industry in our markets, which may be beyond our control. These factors include:
 

 •
the growth rate of internet, broadband, personal computer and smartphone penetration and usage in our markets, including any changes or fluctuations in growth rates and/or usage;
 

 •
the trust and confidence level of e-commerce consumers, as well as changes in customer demographics and consumer tastes and preferences;
 

 •
the selection, pricing and popularity of products that online sellers offer;
 

 •
whether alternative retail channels or business models that better address the needs or preferences of consumers emerge, including social commerce or multi-category service e-commerce platforms;
 

 •
the differing and quickly changing laws and regulations applicable to e-commerce businesses in our markets, including any required licenses or permits, exposure to additional liability, including for conduct by or content originating from third parties, and new labor legislation or changes to any employment or independent contractor classification frameworks; and
 

 •
the development of logistics (especially last-mile delivery and warehousing infrastructure), payment and other ancillary services associated with e-commerce, including any write-offs in connection with delivery expenses incurred when sellers provide us with inaccurate pick-up or delivery information.
 
Our e-commerce revenue is currently concentrated, with our top three markets accounting for a majority of our total e-commerce revenue. If we were to experience a material decline in Shopee’s major markets, especially those profitable or near profitable markets, or we are prohibited from operating or subject to restrictions limiting our operations in such markets, it could materially and adversely affect our financial results and the prospects and profitability of our e-commerce business. Our investments and future investments in new markets may not generate sufficient user engagement or revenues to justify continued investment. We may not gain market share in such new markets or turn profitable.
 
As we continue to develop our last-mile delivery and warehousing capacity to build up our fulfilment capabilities, as well as expand the categories of services we offer through our e-commerce platform such as food delivery, we expect these developments to potentially require significant capital expenditures or increase our operating expenses. In addition, we may acquire land or land use rights to build warehouses and to support such capabilities, which may expose us to risks relating to declining real estate prices and construction risks. If we fail to accurately predict demand for such services, or accurately adjust our operations in response to evolving business needs and economic and regulatory conditions, we may suffer increased costs or impairment charges. Any such adjustments may also not achieve their desired or expected results. The development of our fulfillment capabilities may also become increasingly complex and challenging to operate as it expands, and we may not be able to acquire land, land use rights, set up warehouses, or lease suitable facilities to directly handle delivery of products to our customers, on commercially acceptable terms or at all.
 
We may be held liable for actions by our marketplace participants.
 
With the increasing use of e-commerce marketplaces and development of legislation in different markets towards e-commerce marketplaces, proposed and newly enacted laws as well as recent court decisions in certain markets may increase our liability as a marketplace platform for the actions of, content created by, and/or products sold by third party sellers that use our Shopee platform. For example, the issuance of Decree 85/2021/ND-CP, or Decree 85, in Vietnam makes e-commerce platforms jointly liable to the buyer under certain circumstances if they fail to comply with the requirements of Decree 85 such as taking remedial measures upon detection or receipt of reports of goods or services that violate local laws, or to support the relevant authorities in Vietnam in investigating and handling illegal acts and settling disputes. We may also be held directly or secondarily liable for intellectual property infringement, product related claims or consumer protection deficiencies, privacy and data protection incidents, regulatory violations by sellers, or other similar conduct of sellers over which we have limited or no influence or control. As Shopee is readily identifiable, buyers may seek claims against us rather than the seller, which in the aggregate could be costly to defend. We also receive inquiries or demands from regulators and law enforcement regarding defective, unregistered, unlicensed or fraudulent products sold by sellers through our Shopee platform. We have developed robust consumer protection policies and procedures focused on requiring sellers to comply with applicable laws and creating a secure and reliable shopping environment for our buyers. When these policies and procedures are circumvented or fail to operate sufficiently, our business could be adversely impacted and our reputation could be harmed. In addition, we could face civil or criminal liability for unlawful activities by our sellers.
 
25
We may suffer losses relating to the products we sell on Shopee.
 
In connection with our direct sales and certain value-added services on our Shopee platform, we purchase certain products from manufacturers and third parties and subsequently sell such products on our Shopee platform. This subjects us to risks relating to such products and to managing our inventory turnover. We depend on our forecasts of demand and popularity for a variety of products to make decisions regarding product purchases. Our customers may not order products at the levels expected by us due to our failure to forecast accurately, unfavorable market conditions or change in consumer trends. In addition, if the supply of products from manufacturers and third parties deteriorates, we may be unable to obtain the products that buyers want to purchase. Manufacturers and third parties may discontinue selling products due to factors that may or may not be within our control. Our inability to secure timely and sufficient supplies of products would negatively affect inventory levels and our platform popularity.
 
We do not always have the right to return unsold items to sellers or suppliers. In addition, in order to secure more favorable commercial terms, we may need to purchase a higher volume of products. If we fail to efficiently manage our inventory, we may suffer losses, including losses due to inventory write-downs relating to decrease in estimated market value or damaged or obsolete inventory. In addition, if we are unable to sell products or if we deem it necessary to lower sale prices in order to attract buyers or reduce inventory level, our profitability will be negatively affected.
 
We may also be subject to legal claims in relation to such products or the conduct of our sellers from time to time. We cannot guarantee that all products we purchase for direct sale are of the quality expected by our buyers. If buyers have any disputes with us regarding the products we sell, including disputes relating to product quality or authenticity, we may suffer reputational loss or liability and may need to incur additional costs to address such disputes, which in turn may adversely affect our business and results of operations.
 
Risks Related to Our Digital Financial Services Business
 
We face uncertainties and risks relating to our digital financial services business.
 
Although there are trends of uptick of digital financial services and products across the globe, and countries such as Singapore are taking steps toward being a “cashless society,” there is no certainty that this will continue or will result in widespread market acceptance of our digital financial services and products across all or any of the markets in which we operate. We may be unable to achieve the required level of market acceptance in order for us to recoup the investment costs involved in developing and launching our digital financial services and products or to bear the associated risks involved in providing such services and products. Our ability to achieve or maintain market acceptance for our digital financial services and products are affected by a number of factors, such as the community’s lack of trust in digital financial services and products being provided by a company that is not a traditional financial institution, entrenched preferences in traditional payment methods, insufficient use cases for our digital payment services and lack of infrastructure support locally. Even if there is adequate acceptance of our digital financial services and products, we continue to be subject to a quickly changing regulatory environment for such services and to the changing needs and demands of users, which may change for a multitude of reasons such as availability of alternative payment methods that are more popular or widely accepted. If we are found or alleged to be non-compliant, we may suffer financial and reputational damage, and may be required to modify our operations or stop offering our products and services, among other things that could negatively impact our business. While we endeavor to consistently increase demand for our digital financial services and products by broadening and improving our use cases and product offerings, we cannot predict with certainty the reasons for the changes in user demands, and the consequential effects of such changes on our business.
 
26
In addition to other relevant risk factors described herein, our mobile wallet business is subject to other risks including: (i) changes to rules or practices applicable to payment systems that link to our mobile wallet, (ii) increasing costs, including fees charged by banks to process transactions through our mobile wallet, and (iii) failure to manage user funds accurately or loss of user funds, whether due to employee fraud, security breaches, technical errors or otherwise. Other payment card schemes that link to our mobile wallet may impose special assessments for transactions that are executed through a mobile wallet and these fees could significantly increase our costs.
 
We are a relatively new entrant in the digital financial services industry and may face intense competition with existing services providers and other new entrants. Our competitors may have greater experience in the financial services sector and greater resources than we have. To attract users, we may have to create differentiated product and services offerings or offer incentives. Our current or future digital financial products and services may not be successful or generate sufficient revenue to cover the costs and expenses of their launch and development.
 
We face risks related to our lending and consumer and merchant credit businesses.
 
As the amount of our loans increase and we further diversify our credit product offerings and services, we may require additional funds, explore alternative funding methods such as partnering with external funding providers or consider securitization of our credit portfolio. If our capital is insufficient to meet the demand or, in the case of our lending business, any applicable regulatory or capital requirements, due to lack of internal resources or alternative funding options, it may affect our credit product or loan offering capabilities, lead to loss of users, borrowers or slower growth, and constrain our working capital.
 
These services will also expose us to risks and liabilities, including credit risks relating to the borrowers who may be individuals or commercial customers, and counterparty risks in dealing with potential business partners. We rely on, among other things, the information and knowledge we gain from our existing businesses to build the strategy of our credit and loan products and assess the creditworthiness of potential borrowers. Our ability to assess creditworthiness may be impaired if the strategies or policies we use to manage our credit risks do not achieve their desired effect, which could lead to, for instance, loans being issued to users who may have higher default or delinquency risks. Even if our information collection, strategy and policy are all appropriate, other factors such as macro-economic or unexpected incidents may still affect our borrowers’ ability to repay. We aim to maintain low delinquency and default rates through an effective credit risk management process. However, high rates of delinquency or default may occur, which could negatively affect our business, financial condition and results of operations. Interest rates we charge may not be sufficient to cover our costs and expenses in providing the loans, including the costs associated with borrower defaults. Moreover, upon a borrower’s default, we may need to devote internal resources or engage third-party collection agencies to collect the receivables. If any collection personnel are involved with any misconduct or there are perceptions that our collection practices are considered to be aggressive or not compliant with relevant laws and regulations, our reputation and business may be harmed or may become subject to fines or other penalties.
 
 We currently have channeling and joint financing arrangements with our banking partners to fund some of our credit business and may securitize our consumer and merchant loans or enter into other arrangements to fund our credit business. Any changes to, or new interpretations of, the existing regulations relating to consumer and merchant credit business and these funding activities may discourage our financing or funding partners from funding loans through our platform. If our financing or funding partners cease to fund the loans (whether temporary or permanent), our consumer and merchant credit business may be adversely impacted. If fewer investors, financing or funding partners are willing to fund the loans, the increased competition for funding and the cost of funding may increase, which may adversely impact our results of operation.
 
In addition, as we expand various product offerings including credit services to consumers and merchants across more markets and roll out more digital financial products and services on our SeaMoney platform, including digital banking and insurtech, our limited operating history in these markets or with these products and service hinders our ability to forecast and maintain appropriate capital reserves for any losses that may arise.
 
27
Our banking and consumer and merchant credit businesses are subject to credit cycle volatility and risk of credit losses.
 
As our banking and consumer and merchant credit businesses grow, our business and financial results may also become increasingly subject to credit cycle volatility and the risk of credit losses, including deterioration of the credit profile of borrowers. Our provision matrix for credit losses is based on our historical credit loss experience, adjusted for forward-looking factors specific to the receivables and economic environment, and the allowance we make for credit losses are calculated on an aggregate basis for various customer segments that are considered to have similar credit characteristics and risk of loss. There are various factors used to help us assess the credit risks of our banking and consumer and merchant credit businesses. These factors may be based on limited history or be beyond our control, and we may be unable to accurately predict the creditworthiness of a borrower, merchant or consumer due to inaccurate assumptions. For example, credit risks may be affected by changes in the political, economic or social environment, volatility in the financial markets or credit cycles, rising interest rates, changes in consumer behavior, legal or regulatory changes, and other factors. If our assessment of, assumptions used or expectations concerning the above-mentioned factors differ from actual developments, if the quality of our total loan portfolio deteriorates, for any reason, or if future actual losses exceed our estimates of expected losses, we may be required to increase our provisions for credit losses and/or be subject to increased liquidity risks, which may adversely impact our results of operation and financial condition.
 
Our banking business may subject us to additional material business, operational, financial, legal and compliance requirements and risks.
 
In December 2020, the Monetary Authority of Singapore, or MAS, announced that our wholly-owned subsidiary in Singapore has been selected for the award of a digital full bank license. We must meet all relevant prudential requirements and licensing pre-conditions in the digital full bank license. These requirements and pre-conditions subject our Singapore digital bank to additional business, operational, financial and legal requirements. If we are unable to meet such requirements and pre-conditions, MAS may not grant us the digital full bank license. In addition, we expect to be required to meet the minimum paid-up capital requirement set by the MAS, eventually reaching S$1.5 billion (US$1.1 billion) once our digital bank is fully functioning.
 
We have in the past made, and may in the future, make investments in, acquire or partner with other parties in making investments in or acquiring licensed financial institutions and financial services technologies and providers, including commercial banks. For example, we acquired a controlling interest in a local commercial bank in Indonesia in 2020, and launched SeaBank in Indonesia in the latter half of 2021. We also obtained a bank license in the Philippines, and launched SeaBank in Philippines in March 2022.
 
Banking business, including digital banking business, is heavily regulated and subject to various laws, regulatory requirements and guidelines imposed by the relevant regulators. Such laws, regulations and guidelines may impose rules and/or restrictions on the type of banking products and services we offer, eligibility criteria of our customers, related party transactions, market entry, risk management, corporate governance, minimum capital requirements, capital adequacy, liquidity and/or regulatory ratios, and tax and accounting policies, among other things. Local authorities may have the authority to inspect our operations and conduct periodic and/or ad hoc audits of our operations to assess our compliance with the relevant regulatory requirements and guidelines. They may also have the authority to impose fines, sanctions or order remediations. As digital banking evolves as an industry, applicable laws, regulations and guidelines may change or increase, and we may not be able to adapt to new or revised laws, regulations and guidelines in a timely manner or at all. We are a new player in the digital bank industry, and have limited experience operating digital banks. If we fail to comply with new laws, regulations or guidelines, or our strategies to develop and grow our digital bank business, including products and services, fail to achieve their intended effects, our business, financial condition and results of operations, as well as our reputation, could be materially and adversely affected.
 
We could be held liable if our digital financial services and products are used for fraudulent, illegal or improper purposes.
 
Despite measures we have taken and continue to take, our digital financial services and products remain susceptible to potentially illegal or improper uses, which could damage our reputation and subject us to liability. These may include the use of our payment services in connection with fraudulent sales of goods or services, unauthorized purchases or transfers, software and other intellectual property piracy, money laundering, bank fraud and prohibited sales of restricted products. Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and to gain unauthorized access to other users’ accounts. We could be subject to fraud or related claims if confidential information obtained from our users is used for unauthorized purposes.
 
28
Our risk management policies and procedures may not be fully effective in identifying, monitoring and managing these risks. We are unable to monitor in each case the sources of funds from users of our digital financial services and products, or the ways in which they are used. An increase in fraudulent or unlawful transactions or publicity regarding payment disputes could harm our reputation and reduce consumer confidence in our services. The use of our products and services for illegitimate, fraudulent, unlawful or similar transactions can also expose us to governmental and regulatory sanctions, including U.S. anti-money laundering and economic sanctions violations.
 
Other Operational Risks
 
We rely on technology and internet infrastructure, data center and cloud service providers and telecommunications networks in the markets where we operate.
 
We are continuously upgrading our technology to provide improved performance, increased scale, security and better integration among our three businesses. If we experience problems with the functionality and effectiveness of our software or platforms, or are unable to maintain and constantly improve our technology infrastructure to handle our business needs and ensure a consistent and acceptable level of service for our users, our business, financial condition and results of operations, as well as our reputation, could be materially and adversely affected. In addition, our businesses depend on the performance and reliability of our internet ecosystem and infrastructure and contracted data center and cloud service providers in the markets where we operate. Adopting new technologies and upgrading our internet ecosystem and infrastructure require significant investments of time and resources, including adding new hardware, updating software and recruiting and training new engineers. Adverse consequences for the failure to do so may include unanticipated system disruptions, security breaches, computer virus attacks, slower response times, impaired quality of experiences for our users and delays in reporting accurate operating and financial information.
 
The internet infrastructure in some of the markets where we operate may not support the demands associated with continued growth in internet usage. We may not have access to alternative networks or data servers in the event of disruptions or failures of, or other problems with, the relevant internet infrastructure. Interruptions in our services may reduce our revenue and/or subject us to potential liability.
 
We also rely on major telecommunication operators and internet service providers in the markets where we operate to provide us with data communications capacity primarily through local telecommunications lines and data centers to host our servers. We and our users may not have access to alternative services in the event of disruptions or failures of, or other problems with, the fixed telecommunications networks of these telecommunications operators, or if such operators otherwise fail to provide such services. Some of these operators and providers may take measures that could degrade or disrupt, as well as restrict or prohibit the use of their lines for our businesses. Any unscheduled service interruption could disrupt our operations, damage our reputation and result in a decrease in our revenue. We have no control over the costs of the services provided by the telecommunications operators to us and our users. If the prices that we pay for telecommunications and internet services rise significantly, our gross margins could be significantly reduced. In addition, if internet access fees or other charges to internet users increase, our user traffic may decrease, which in turn may cause our revenue to decline.
 
We may fail to attract, motivate and retain the key members of our management team or other experienced and capable employees.
 
Our future success significantly depends on the continued service of our executives and other key employees. If we lose the services of any member of management or any key personnel, we may not be able to locate a suitable or qualified replacement and we may incur additional expenses to recruit and train a replacement, which could severely disrupt our business and growth. In addition, from time to time, there may be changes in our management team that may be disruptive to our business.

29
To maintain and grow our business, we will need to identify, hire, develop, motivate and retain highly skilled employees. Identifying, recruiting, training, integrating and retaining qualified individuals requires significant time, expense and attention. We may also be subject to local hiring restrictions in certain markets, particularly in connection with the hiring of foreign employees, which may affect the flexibility of our management team and workforce. If our management team, including any new hires that we make, fail to work together effectively and execute our plans and strategies, or if we are unable to recruit and retain employees effectively, our ability to achieve our strategic objectives will be adversely affected and our business and growth prospects will be harmed.
 
Competition for highly skilled personnel is intense. We may need to invest significant amounts of cash and equity to attract and retain new employees and we may not be able to realize returns on these investments.
 
We may need additional capital, but may be unable to obtain it on favorable terms or at all.
 
We may require additional cash capital resources in order to fund future growth and the development of our businesses, including expansion of our e-commerce and digital financial service businesses and any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to issue additional equity or debt securities, obtain new or expanded credit facilities or enter into securitization or channeling arrangements. Our ability to obtain external financing in the future is subject to a variety of uncertainties, including market conditions, our future financial condition, results of operations, cash flows, share price performance, liquidity of international capital and lending markets, governmental regulations over foreign investment and the digital entertainment, e-commerce and digital financial services industries in our various markets. In addition, incurring indebtedness would subject us to increased debt service obligations and could result in operating and financing covenants that would restrict our operations. There can be no assurance that financing will be available in a timely manner or in amounts or on terms acceptable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all, could severely restrict our liquidity as well as have a material adverse effect on our business, financial condition and results of operations. Moreover, any issuance of equity or equity-linked securities could result in significant dilution to our existing shareholders.
 
We may have exposure to greater than anticipated tax liabilities, and our financial position and results of operations may be adversely affected by the implementation of legislation or internationally accepted principles.
 
Tax legislation relating to the digital economy is still developing. Governments in our markets may promulgate or strengthen the implementation of tax regulations and impose more tax obligations on our services and product offerings, which could increase the costs to our users and merchants and make our services and product offerings less competitive.
 
Shopee as the marketplace operator could potentially be required to report transactions made by sellers and other service providers through the platform to the tax authorities in the future and may also be subject to additional tax or withholding obligations. Governments in some of our markets have discussed promulgating or promulgated laws to require e-commerce marketplace operators to assist in the enforcement of tax requirements on sellers and collection of taxes with respect to revenues or profits generated by sellers. If we are held responsible, whether financially or operationally for such taxes, our business, financial condition and results of operations may be materially and adversely affected. We may also be requested by government authorities to supply information about our sellers, such as transaction records and seller’s information, and assist in the enforcement of other tax regulations, which could affect our relationships with sellers.
 
Corporate tax reform, base-erosion efforts and tax transparency continue to be high priorities in many tax jurisdictions, including in our markets or in other jurisdictions we may expand to in the future. The Organization for Economic Cooperation and Development, or OECD, has published proposals to advance international negotiations to ensure large and highly profitable multinational enterprises, including digital companies, pay tax wherever they have significant consumer-facing activities and generate their profits. These actions aim to standardize and modernize global corporate tax policy, including cross-border taxes, transfer-pricing documentation rules and nexus-based tax incentive practices, and has heightened scrutiny of policies regarding corporate income and other taxes in many jurisdictions. Tax reform legislation has been enacted, implemented or are being proposed in many such jurisdictions. For example, certain jurisdictions in the Asia, Europe and Latin America have already enacted or are discussing new tax laws, rules and regulations directed at the digital economy and multi-national businesses. The European Commission has also proposed a series of measures aimed at ensuring fair and efficient taxation of digital businesses operating within the European Union. Such laws may increase our tax obligations in those markets or change the manner in which we operate our businesses locally, and may adversely affect our business, financial condition and results of operations.
 
30
In addition, a number of markets have been pursuing fundamental changes to the tax laws applicable to multinational companies like us, including developing global OECD guidelines and enacting taxes on digital services, including with respect to digital services tax, sales tax, value-added taxes, withholding taxes, revenue-based taxes or other similar taxes. If these developments lead to enacted policy changes, it may have an adverse impact on our income tax expense and negatively impact our business. Possible implications may include multiple levels of taxation, additional obligations, prospectively or retrospectively, as well as imposition of interest and penalties if non-compliance is determined. Potential heightened tax law enforcement against us could have a material adverse effect on our business, financial condition and results of operations.
 
We may not achieve the intended tax efficiencies of our corporate structure and intercompany arrangements, which could increase our worldwide effective tax rate.
 
Our corporate structure and intercompany arrangements, including the manner in which we conduct our intercompany and related party transactions, are intended to provide us with worldwide tax efficiencies while adhering to the arm’s length principle. The application of tax laws of various jurisdictions to our business activities is subject to interpretation and also depends on our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The tax authorities of jurisdictions where we operate may challenge our methodologies for intercompany and related party arrangements, including transfer pricing. We could face adverse tax consequences if local tax authorities determine that any transactional arrangements among our group entities were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under the applicable laws, rules and regulations, and adjust the income of such group entities in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by our group entities for tax purposes, which could in turn increase their tax liabilities. In addition, local tax authorities may impose late payment fees and other penalties on our entities for the adjusted but unpaid taxes according to the applicable regulations. If the manner in which we operate does not achieve the intended tax consequences, our financial condition and results of operations could be adversely affected.
 
A certain degree of judgment is required in evaluating our tax positions and determining our provision for income taxes. In the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rate could be adversely affected by lower than anticipated earnings in markets where we have lower statutory rates and higher than anticipated earnings in markets where we have higher statutory rates, by changes in foreign currency exchange rates or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. Any of these factors could materially and adversely affect our business, financial condition and results of operations.
 
We have limited business insurance coverage.
 
Insurance products available in the markets in which we operate currently are not as extensive as those offered in more developed regions. Consistent with customary industry practice in our markets, our business insurance is limited. While we have obtained insurance to cover certain potential risks and liabilities for certain businesses we operate, the coverage of any insurance we have may be insufficient to compensate for all losses that may occur. We do not carry business interruption insurance to cover our operations. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to carry such insurance. Any uninsured damage to our platforms, technology infrastructures or disruption of our business operations could require us to incur substantial costs and divert our resources, which could have an adverse effect on our business, financial condition and results of operations.
 
Industry data, projections and estimates contained in this annual report are inherently uncertain and subject to interpretation.
 
Certain facts, forecasts and other statistics relating to the industries in which we compete contained in this annual report have been derived from various sources, which may have used different assumptions and estimates to derive their published data. While we generally believe such sources to be reliable, we have not independently verified the accuracy or completeness of such information. Such sources may not be prepared on a comparable basis or may not be consistent with other sources.
 
31
Industry data, projections and estimates are inherently uncertain as they require certain assumptions and judgments. Moreover, geographic markets and the industries we operate in are not rigidly defined or subject to standard definitions, and are the result of subjective interpretation. Accordingly, our use of the terms referring to our geographic markets and industries such as digital entertainment, e-commerce and digital financial services markets may be subject to interpretation, and the resulting industry data, projections and estimates may not be reliable. Our industry and market data should be interpreted in light of the defined geographic markets and defined industries we operate in. Any discrepancy in interpretation could lead to different industry data, measurements, projections and estimates and result in errors and inaccuracies. For these reasons, you should not place undue reliance on such information.
 
Our user metrics and other estimates are subject to inherent challenges in measuring our operating performance.
 
We regularly review metrics, including our Game QAUs, Game QPUs, orders, GMV, SeaMoney QAUs, and total payment volume, to evaluate growth trends, measure our performance, and make strategic decisions. These metrics are calculated using internal company data and have not been validated by an independent third party. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring how our services are used across large populations throughout our markets. For example, we believe that we cannot distinguish individual users who have multiple accounts unless certain official individual identification information is provided to us. Our user metrics are also affected by technology on certain mobile devices that automatically runs in the background of our applications when another phone function is used, and this activity can cause our system to miscount the user metrics associated with such accounts. Our user metrics may also differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in assumptions, methodologies or data used.
 
Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to remedy an unfavorable trend. If partners or investors do not perceive our user, geographic or other operating metrics to accurately represent our user base, or if we discover material inaccuracies in our user, geographic or other operating metrics, our reputation may be seriously harmed.
 
If we fail to maintain an effective internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.
 
As a public company, we are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and determine the effectiveness of our internal control over financial reporting, report any material weaknesses in such internal controls and for our independent registered public accounting firm to issue an attestation report on management’s assessment on the effectiveness of internal control over financial reporting.
 
Our management has concluded that our internal control over financial reporting is effective as of December 31, 2021. See “Item 15. Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting.” Our independent registered public accounting firm has issued an attestation report on management’s assessment on the effectiveness of internal control over financial reporting. However, if we fail to maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which could cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, and investor confidence in us and the market price of our ADSs may decline. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the New York Stock Exchange, regulatory investigations and civil or criminal sanctions.
 
We may be subject to risks related to litigation and regulatory proceedings.
 
Our businesses and our directors and officers may be, and in some instances have been, subject to claims, lawsuits (including class actions and individual lawsuits), regulatory and government investigations, and other proceedings relating to alleged infringement or violation of third-party intellectual property rights, consumer protection, privacy and data protection, content restrictions, labor and employment, import and export practices, antitrust or competition, securities, tax, marketing and communications practices, contracts, commercial disputes, consumer complaints, and various other matters. The number and significance of our legal disputes and inquiries have increased as we have grown larger, as our business has expanded in scope and geographic reach, and as our services have increased in complexity.
 
32
As a fast-growing public company, our public profile has grown, which may result in increased litigation as well as increased public awareness of any such litigation. In addition, we may be the target of securities class action and derivative lawsuits, as well as other types of claims. We will need to defend against such lawsuits, including any appeals, and we may also initiate legal proceedings to protect our rights and interests. We may also be subject to regulatory and government investigations or actions in various jurisdictions. There is substantial uncertainty regarding the scope and application of many of the laws and regulations to which we are subject, which increases the risk that we will be subject to actions or claims alleging violations of those laws and regulations. Any adverse outcome could have a material adverse effect on our reputation, business, financial condition and results of operations.
 
In particular, we will need to defend against the putative shareholder class action lawsuit described in “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings,” including any appeals of such action. We are currently unable to ascertain the possible loss or possible range of loss, if any, associated with the resolution of this lawsuit. The litigation process may utilize our cash resources and divert management’s attention from the day-to-day operations of our company, all of which could materially harm our business. An adverse determination in this lawsuit, including an adverse determination on appeal in this lawsuit, may have a material adverse effect on our financial condition and results of operations.
 
Regardless of its outcome, any legal proceeding can have a material adverse effect on us due to costs, diversion of our resources, negative publicity and other factors. We may decide to settle legal disputes, including on terms that are unfavorable to us. If any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that we may not choose to appeal or that may not be reversed upon appeal. We may have to seek a license or settlement terms to continue practices alleged or found to be in violation of a third party’s rights. If we are required or choose to enter into royalty or licensing arrangements or other settlement terms, such arrangements may not be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As a result, we may also be required to develop or procure alternative technology or products or discontinue the use of certain allegedly infringing technology or products, and doing so could require significant effort and expense, or may not be feasible. In addition, the terms of any settlement or judgment in connection with any legal claims, lawsuits, or proceedings may require us to cease some or all of our operations, make changes to our business operations or other practices, terminate agreements, arrangements or transactions found to be violative of applicable laws or regulations, or pay fines or substantial amounts to the other party to those proceedings and could materially and adversely affect our business, financial condition and results of operations.
 
We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to such structural arrangements.
 
The laws and regulations in some of our markets place restrictions on foreign investment in and ownership of entities engaged in a number of business activities. To comply with the relevant laws and regulations, we and certain of our wholly-owned subsidiaries in the Cayman Islands and Singapore have entered into a series of contractual arrangements with certain local entities, or VIEs, and their shareholders who are local citizens, which enable us to (i) exercise effective control over such VIEs, (ii) receive substantially all of the economic benefits and absorb the losses of such VIEs, and (iii) have an exclusive call option to purchase all or part of the equity interests in and/or assets of such VIEs when and to the extent permitted under the relevant laws. Because of these contractual arrangements, we have control over and are the primary beneficiary of such VIEs and hence consolidate their financial results under U.S. GAAP. For the year ended December 31, 2021, revenue from all our VIEs (which excludes entities for which we have majority direct equity ownership) accounted for 6.9% of our total revenue. None of our VIEs is individually a significant subsidiary as defined in Rule 1-02(w) of Regulation S-X. See “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements among Our VIEs, Their Shareholders and Us.”
 
In Thailand, we conduct our business activities using a tiered shareholding structure in which direct foreign ownership in each Thai entity is less than 50%. See “Item 4. Information on the Company—C. Organizational Structure—Thailand Shareholding Structure.” As Thai laws only consider the immediate level of shareholding, no cumulative or look-through calculation is applied to determine the foreign ownership status of a company when it has several levels of foreign shareholding. Such shareholding structure has allowed us to consolidate our Thai operating entities as our subsidiaries.
 
33
While we believe the structural or contractual arrangements we use are in compliance with applicable local laws, the local or national authorities or regulatory agencies in such jurisdictions may reach a different conclusion, which could lead to an action being brought against us, the VIEs and their shareholders by administrative orders or in local courts. If local authorities find that our arrangements do not comply with their prohibition or restrictions on foreign investment in our lines of business, or if the relevant government otherwise finds that we or any of our subsidiaries, VIEs or their subsidiaries are in violation of the relevant laws or regulations or lack the necessary registrations, permits or licenses to operate our businesses in such jurisdictions, they would have broad discretion in dealing with such violations or failures, including:
 

 •
revoking the business licenses and/or operating licenses of such entities;
 

 •
discontinuing or placing restrictions or onerous conditions on the operations of our VIEs or Thai subsidiaries, or on our operations through any transactions between our company or our Cayman Islands or Singapore subsidiaries on the one hand and our VIEs, subsidiaries of such VIEs or our Thai subsidiaries on the other hand;
 

 •
imposing fines, prohibiting payments by our VIEs or their shareholders to us as contemplated in the contractual arrangements with our VIEs, confiscating income from us, our Cayman Islands or Singapore subsidiaries, VIEs or Thai subsidiaries, or imposing other requirements with which such entities may not be able to comply;
 

 •
imposing criminal penalties, including fines and imprisonment on our VIEs or Thai subsidiaries, their shareholders or directors;
 

 •
requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our VIEs and their shareholders, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over our VIEs or Thai subsidiaries; or
 

 •
restricting or prohibiting us from providing funding to our business and operations in Vietnam and Thailand.
 
Any of these actions could disrupt the business operations of such entity and may damage our reputation, which would in turn adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of our VIEs or Thai subsidiaries that most significantly impact such entity’s economic performance, or prevent us from receiving the economic benefits or absorbing losses from such entity, we may not be able to consolidate the entity in our consolidated financial statements in accordance with U.S. GAAP.
 
The shareholders of our VIEs are our local employees or other local citizens. None of these shareholders has a significant equity interest in our company and thus their interests may not be aligned with ours, or they may have other potential conflicts of interest with us. These shareholders of our VIEs may breach, or cause our VIEs to breach, the existing contractual arrangements we have with them and our VIEs, which would adversely affect our ability to effectively control our VIEs and receive economic benefits and absorb losses from them. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. If our VIEs or their shareholders fail to perform their respective obligations under any such contractual arrangements, fail to conduct their operations in an acceptable manner or take other actions that are detrimental to our interests, we may incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies, including seeking specific performance or injunctive relief, and claiming damages. Such legal remedies may differ between jurisdictions, and may be more difficult to pursue than those available in the United States. In addition, if any third parties claim any interest in the equity interests of our VIEs, our ability to exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements may be impaired. If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of the laws where our VIEs are located and through arbitration, litigation or other legal proceedings and therefore will be subject to uncertainties in the legal systems in the relevant jurisdiction. Our contractual arrangements with our VIEs may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.
 
34
As part of our structural arrangements with our VIEs, certain of our VIEs hold certain licenses and assets that are used in the operation of their business in the relevant jurisdictions. If any of our VIEs go bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of the business activities conducted by such VIEs. Under the structural arrangements, our VIEs may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If our VIEs undergo a voluntary or involuntary liquidation proceeding, their independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate the business the VIEs currently conduct, which could adversely affect our business, financial condition and results of operations.
 
There are risks relating to joint venture or partnership arrangements.
 
We may carry out operations through joint ventures, subsidiaries that are not wholly owned by us, or other partnerships with third parties in certain markets. Such arrangements may carry a higher risk than operating through wholly owned subsidiaries. If there are disagreements between us and the other shareholders of entities operating under such arrangements, we cannot assure you that we will be able to resolve them in a manner that will be in our best interests. We may also not be able to make decisions as quickly as compared to wholly owned operations. These other shareholders may have interests that are inconsistent with ours. All or any such factors could have an adverse effect on our business, prospects, financial condition and results of operations. There may also be heightened government scrutiny of shareholding arrangements in industries or sectors that have foreign ownership restrictions. If local or national authorities reach a different conclusion, they would have broad discretion including imposing penalties, and the business operations of such entity could be disrupted, and our reputation may be damaged.
 
MARKETS RELATED RISKS
 
Our businesses and operations in Taiwan may be materially and adversely impacted if we are deemed to be a PRC investor.

Although there have been significant economic and cultural interactions and relationships established between Taiwan and the PRC, there have been and remain tensions between the governments of Taiwan and the PRC regarding the international political status of Taiwan. Such tensions may affect the economic and social activities in Taiwan, which may in turn affect our businesses and operations in Taiwan. The Taiwan government has historically imposed prohibitions and restrictions on investments, directly and indirectly, by PRC investors. “PRC investors” refer to PRC individuals, juristic persons, organizations and other institutions, and PRC invested companies from other jurisdictions. “PRC invested companies from other jurisdictions” refer to those entities incorporated outside of the PRC and invested by PRC individuals, juristic persons, organizations and other institutions that: (i) directly or indirectly hold more than 30% of the shares or capital of such entities (each intermediate holding company shall be separately assessed based on this 30% test to determine whether it is deemed a PRC invested company from other jurisdictions), or (ii) have the ability to control such entities. Under the current policies on PRC investments in Taiwan, PRC investors are allowed to invest, upon prior approval, in Taiwan companies that operate business in the statutory business categories listed as permitted in the Positive Listings promulgated by the Taiwan authorities, and are prohibited or restricted from investing in all other businesses. In addition, if a PRC investor is a juristic person, organization, or other institution invested by (a) the “political party,” military, administrative or political agency of PRC, or (b) PRC invested companies from other jurisdictions (defined in “Item 4. Information on the Company—B. Business Overview—Regulation—Taiwan—Regulations on Foreign Investment”) invested by the agency listed in item (a) above, the Taiwan authorities may restrict or prohibit such PRC investor from investing in businesses in Taiwan.
 
Under Taiwan company law, a Taiwan company is required to select from a statutory list of business categories for inclusion in its corporate registration based on various aspects of its business operations. Some of the statutory categories currently listed in the corporate registration of our Taiwan operating entities include computer recreational activities, software publication, third-party payments, general advertising services and sales of certain medical or cosmetics related goods that are not within the Positive Listings. The other statutory business categories currently listed in the business scope of the corporate registration of our Taiwan operating entities are within the Positive Listings, including the data processing services listed in the corporate registration of our digital entertainment and e-commerce business entities, and the software design services currently listed in the corporate registration of our digital entertainment business entity.
 
35
We do not believe, based on advice from our Taiwan counsel, LCS & Partners, that we are a PRC investor under existing Taiwan law and court judgments. Therefore, we do not believe that we are prohibited from operating businesses that have statutory business categories not listed as permitted in the Positive Listings or that we need to seek prior PRC investment approval for operating businesses that have statutory business categories listed as permitted in the Positive Listings. We currently operate our digital entertainment and e-commerce businesses in Taiwan through our wholly-owned branch offices in Taiwan. Both of such entities were acquired or established upon approval by the relevant Taiwan government authorities. However, should the Taiwan authorities deem us to be a PRC investor, the Taiwan authorities may take a range of actions, including:
 

 •
imposing fines between NT$120,000 (US$4,326) to NT$25,000,000 (US$901,226) and further fines if the non-compliance is not rectified as ordered;
 

 •
ordering us to reduce any direct or indirect ownership or control by PRC investors in our company;
 

 •
requesting us to divest some or all of our ownership or control in our operating entities in Taiwan;
 

 •
suspending the rights of shareholders of our Taiwan operating entities; and
 

 •
discontinuing the operations and revoking the business licenses of our Taiwan operating entities.
 
If any such action is taken, our operations in Taiwan and our business, financial condition and results of operations may be materially and adversely affected.
 
Uncertainties with respect to the legal system in certain of our markets could adversely affect us.
 
The legal systems in many of our markets vary significantly from jurisdiction to jurisdiction. Some jurisdictions have a civil law system based on written statutes and others are based on common law. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value.
 
Many of the markets in which we operate have not developed a fully integrated legal system, and laws and regulations may not cover all aspects of economic activities in such markets with a high degree of certainty or predictability. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties, and the application of some of these laws and regulations to our businesses is not settled. Since local administrative and court authorities may have significant discretion in interpreting and implementing statutory provisions, legal principles and contractual terms, it may be difficult to evaluate or predict the outcome of administrative and court proceedings or the level of legal protection we have in many markets in which we operate. Local courts may have broad discretion to reject enforcement of foreign court decisions or arbitration awards. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or claims. In addition, the legal and regulatory uncertainties in such markets may be exploited by other parties through unmerited or frivolous legal actions, claims concerning the conduct of third parties, or threats in attempt to extract payments or benefits from us.
 
Many jurisdictions in our markets have enacted, and may enact or amend from time to time, laws and regulations governing the distribution of content and communications, including games, services, advertising, marketing, messages, applications, electronic documents and other information through the internet or on digital platforms. The relevant government authorities may prohibit the distribution of information through the internet that they deem to be objectionable on various grounds, such as public interest or public security, obscene, offensive or defamatory content, or to otherwise be in violation of local laws and regulations. If any information disseminated through our platforms were deemed by any relevant government authorities to violate content restrictions, we may not be able to continue to display such content and could be subject to penalties, including confiscation of the property used in the non-compliant acts, removal of the infringing content, temporary or permanent blocks, administrative fines, suspension of business, revocation of the registration to act as an electronic systems provider and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations.
 
36
Many of the legal and regulatory requirements in markets where we operate are based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. There are other circumstances where key regulatory definitions are unclear, imprecise or missing, or where interpretations that are adopted by regulators or governmental authorities are inconsistent with previous interpretations or interpretations adopted by courts in analogous cases. As a result, we may not be aware of our violation or alleged violation of certain policies and rules until sometime after the violation. In addition, any administrative and court proceedings in our markets may be protracted, resulting in substantial costs and diversion of resources and management attention.
 
It is possible that a number of laws and regulations may be adopted or construed to apply to us that could restrict or otherwise impact our industries. Scrutiny and regulation of the industries in which we operate may further increase, and we may be required to devote additional legal and other resources to addressing such regulation. For example, existing laws or new laws regarding the regulation of currency, money laundering, banking institutions, unclaimed property, e-commerce, consumer and data protection and intermediary payments may be interpreted to cover virtual items offered in our digital entertainment business and services offered on our e-commerce platform or through our mobile wallet networks. Changes in current laws or regulations or the imposition of new laws and regulations regarding our industries may slow the growth of our industries and adversely affect our financial condition and results of operations.
 
It is not certain if Sea Limited will be classified as a Singapore tax resident.
 
Under the Income Tax Act 1947 of Singapore, or the Singapore Income Tax Act, a company established outside Singapore but whose governing body, being the board of directors, usually exercises de facto control and management of its business in Singapore could be considered a tax resident in Singapore. However, such control and management of the business should not be deemed to be in Singapore if physical board meetings are mainly conducted outside of Singapore. Where board resolutions are passed in the form of written consent signed by the directors each acting in their own jurisdictions, or where the board meetings are held by teleconference or videoconference, it is possible that the place of de facto control and management will be considered to be where the majority of the board are located when they sign such consent or attend such conferences.
 
We believe that Sea Limited is not a Singapore tax resident for Singapore income tax purposes. However, the tax residence status of Sea Limited is subject to determination by the Inland Revenue Authority of Singapore, or IRAS, and uncertainties remain with respect to the interpretation of the term “control and management” for the purposes of the Singapore Income Tax Act. If IRAS determines that Sea Limited is a Singapore tax resident for Singapore income tax purposes, the portion of Sea Limited’s single company income on an unconsolidated basis that is received or deemed by the Singapore Income Tax Act to be received in Singapore, where applicable, may be subject to Singapore income tax at the prevailing tax rate of 17% before applicable income tax exemptions or relief. If Sea Limited is regarded as a Singapore tax resident, any dividends received or deemed received by Sea Limited in Singapore from subsidiaries located in a foreign jurisdiction with a rate of income tax or tax of a similar nature of no more than 15% may generally be subject to additional Singapore income tax where there is no other applicable tax treaty between such foreign jurisdiction and Singapore. Income is considered to have been received in Singapore when it is: (i) remitted to, transmitted or brought into Singapore; (ii) applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore; or (iii) applied to purchase any movable property that is brought into Singapore. In addition, as Singapore does not impose withholding tax on dividends declared by Singapore resident companies, if Sea Limited is considered a Singapore tax resident, dividends paid to the holders of our ordinary shares and ADSs will not be subject to withholding tax in Singapore. Regardless of whether or not Sea Limited is regarded as a Singapore tax resident, holders of our ordinary shares or the ADSs who are not Singapore tax residents would generally not be subject to Singapore income tax on gains derived from the disposal of our ordinary shares or the ADSs if such shareholders do not maintain a permanent establishment in Singapore, to which the disposition gains may be effectively connected, and the entire process (including the negotiation, deliberation, execution of the acquisition and sale, etc.) leading up to the actual acquisition and sale of the ADSs or our ordinary shares is performed outside of Singapore. For Singapore resident shareholders, if the gain from disposal of our ordinary shares or the ADSs is considered by IRAS as income in nature, such gain will generally be subject to Singapore income tax, and not taxable in Singapore if the gain is considered by IRAS as capital gains in nature. See “Item 10. Additional Information—E. Taxation—Singapore Taxation—Income Tax—Gains With Respect to Disposition of Our ADSs or Our Ordinary Shares.”
 
37
It will be difficult to acquire jurisdiction and enforce liabilities against our assets based in some of our markets.
 
Substantially all of our assets are located outside the United States. In addition, substantially all of our directors and executive officers are nationals or residents of jurisdictions other than the United States and substantially all of their assets are located outside the United States. As a result, it may be difficult or impossible for our shareholders to effect service of process within the United States upon us or these persons, or to enforce judgments obtained in the United States courts against us or them, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. It may also be difficult for you to enforce judgments obtained in the United States based on the civil liability provisions of the United States federal securities laws against us and our directors and executive officers. Even if our shareholders are successful in bringing an action of this kind, they may be unable or may find it difficult to enforce a judgment against our assets or the assets of our directors and executive officers due to the laws of the Cayman Islands and of the jurisdictions that comprise our markets. Management has been advised that Indonesia, Taiwan, Thailand, Vietnam and many of the other jurisdictions within Southeast Asia do not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States. It is unclear if extradition treaties now in effect between the United States and some of our markets, such as Indonesia, the Philippines and Malaysia, would permit effective enforcement of criminal or other penalties, including those under U.S. federal securities laws.
 
The ability of our subsidiaries to distribute dividends to us may be subject to restrictions under the laws of their respective jurisdictions.
 
We are a holding company, and have subsidiaries located globally. Part of our primary internal sources of funds to meet our cash needs is our share of the dividends, if any, paid by our subsidiaries. The distribution of dividends to us from the subsidiaries in the markets where we operate may be subject to restrictions imposed by the applicable laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulation.” In addition, although there are currently no foreign exchange control regulations which restrict the ability of our subsidiaries in most of our markets to distribute dividends to us, the relevant regulations may be changed and the ability of these subsidiaries to distribute dividends to us may be restricted in the future.
 
Restrictions on currency exchange may limit our ability to receive and use our cash effectively.
 
A significant portion of our revenue and expenses are denominated in currencies subject to exchange control. If revenue denominated in such currencies increase or expenses denominated in such currencies decrease in the future, we may need to convert a portion of our revenue into other currencies to meet our foreign currency obligations. Currently, in Taiwan, a single remittance by a company for an amount over US$1 million or its equivalent in foreign currency shall be reported and documents supporting the accuracy of such report shall be provided to the bank handling such remittance before the remittance is conducted. In addition, remittances by a company in annual aggregate amounts exceeding US$50 million or its equivalent in foreign currency may not be processed without the approval of the Central Bank of the Republic of China (Taiwan). In Vietnam, exchanging Vietnamese dong into foreign currency must be conducted at a licensed credit institution such as a licensed commercial bank. Conversion of Thai baht to another currency is subject to regulations promulgated by the Ministry of Finance and Bank of Thailand. Conversion of Indonesian rupiah into any foreign currency that exceeds certain specific threshold is required to have an underlying transaction and supported by underlying transaction documents. In Malaysia, the foreign exchange policy requires the approval of the Central Bank of Malaysia (BNM) for cross border remittances which are either set out in the foreign exchange notices or applied for on an ad hoc basis. BNM has the discretion whether to grant its approval, and to impose any condition on such approval so there is no assurance that its approval will be granted. We may be unable to convert such local currencies into U.S. dollars or other foreign currencies to pay dividends or for other purposes on a timely basis or at all.
 
RISKS RELATED TO THE ADSs
 
The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.
 
The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in the same markets as us that have listed their securities in the United States. The stock markets have recently experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following:
 
38

 •
variations in our quarterly or annual revenue, earnings and cash flow;
 

 •
guidance or other projections we may provide to the public, including any changes or failure to meet any guidance or other projections;
 

 •
announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;
 

 •
announcements of new content and services or plans of expansion by us or our competitors;
 

 •
changes in financial estimates by securities analysts, or our failure to meet these estimates or the expectations of investors;
 

 •
downgrades by industry or securities analysts that publish research or reports on us;
 

 •
detrimental adverse publicity about us, our businesses or our industries or investor sentiment with respect to our competitors, our shareholders and investors, and our industry in general;
 

 •
additions or departures of key personnel;
 

 •
release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities, including the perception that these sales could occur;
 

 •
dilution of the ownership interests of our ADS holders due to conversions of our 2023, 2024, 2025 and 2026 convertible notes, which we may choose to settle by issuing ADSs, or from the unwinding of capped call transactions in connection with our 2024 and 2025 convertible notes;
 

 •
current or potential litigation, government actions or regulatory investigations, including class actions;
 

 •
volatility in the stock market, including price and volume fluctuations in the overall stock market, changing trends in the economy, interest rate hikes or other interest rate-related decisions; and
 

 •
general political, economic, or market conditions, or other events or factors, including those resulting from war, incidents of terrorism, pandemics, and other disruptive external events, or responses to these events.
 
Any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade.
 
Shareholders of public companies have often brought securities class action suits against those companies following periods of volatility or decline in the market price of their securities. Sea Limited is currently a defendant in a putative securities class action. See “Item 8. Financial Information – A. Consolidated Statement and Other Financial Information - Legal and Administrative Proceedings.” Involvement in a securities class action lawsuit could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not meritorious, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully established against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
 
As we grow our presence and market position globally, we may receive an increasing degree of media coverage. We have been the subject of media coverage involving concerns around new markets, new products or services and business developments, and we continue to receive publicity relating to these concerns among others. Any publicity that is unfavorable or perceived to be unfavorable may affect our business, brand and reputation. For example, such publicity could have an adverse effect on the size, engagement, and loyalty of our user base as well as result in increased scrutiny of our business, including our business practices and policies.
 
39
Substantial future sales or perceived potential sales or issuances of our ADSs, Class A ordinary shares or other equity securities could cause the price of our ADSs to decline significantly. As of April 5, 2022, the aggregate principal amount outstanding of our 2023, 2024, 2025 and 2026 convertible notes was approximately US$31.3 million, US$152.0 million, US$1.1 billion and US$2.9 billion, respectively. The holders of our 2023, 2024, 2025 and 2026 convertible notes may convert their convertible notes in accordance with the instruments governing such convertible notes at the initial conversion rate of 50.5165 ADSs, 19.9475 ADSs, 11.0549 ADSs and 2.0964 ADSs per US$1,000 principal amount, respectively. For the current quarter, being April to June 2022, our 2023 and 2024 convertible notes are currently convertible in accordance with their terms. To the extent our convertible notes are convertible in a given period and converted and we issue ADSs to settle our obligations, the ownership interest of our ADS holders will be further diluted.
 
Our founder has control over key decision making as a result of his control of a majority of the voting power of our outstanding share capital and has substantial influence over our company.

We have adopted a dual-class voting structure such that our ordinary shares consist of Class A ordinary shares and Class B ordinary shares since our IPO. On February 14, 2022, our shareholders approved the amendment and restatement of our memorandum and articles of association at our annual general meeting. Upon the effectiveness of such amendment, the voting power of our Class B ordinary shares increased from three votes per share to 15 votes per share on all matters subject to vote at general meetings of our company and Forrest Xiaodong Li, our founder, chairman and Group Chief Executive Officer, is the sole beneficial owner of all our Class B ordinary shares. The voting power of our Class A ordinary shares of one vote per share remains unchanged. Due to the different voting powers associated with our two classes of ordinary shares, as of April 5, 2022, our founder beneficially owns an aggregate of approximately 59.9% of the total voting power of our issued and outstanding ordinary shares. As a result, our founder has substantial influence over our business, including significant corporate actions including mergers, consolidations, and election of directors. As a board member and officer, Mr. Li owes a fiduciary duty to our company and must act in good faith in a manner he reasonably believes to be in the best interests of our company. As a shareholder, even a controlling shareholder, Mr. Li is entitled to vote his shares in his own interests, which may not always be in the interests of our shareholders generally. Certain actions may be taken even if they are opposed by our other shareholders. This concentrated control could discourage, delay or prevent a change of control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our ADSs. It could also discourage a potential investor from acquiring our ADSs represented by our Class A ordinary shares, which has less voting power compared with our Class B ordinary shares, and may harm the trading price of our ADSs. In the event of his death, the Class B ordinary shares beneficially owned by Mr. Li will be automatically converted into an equal number of Class A ordinary shares.
 
The depositary for the ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying our ADSs at shareholders’ meetings if holders of ADSs do not give voting instructions to the depositary, except in limited circumstances, which could adversely affect the interests of such holders.
 
Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our Class A ordinary shares underlying our ADSs at shareholders’ meetings if holders of ADSs do not give voting instructions to the depositary, unless:
 

 •
we have failed to timely provide the depositary with our notice of meeting and related voting materials;
 

 •
we have instructed the depositary that we do not wish a discretionary proxy to be given;
 

 •
we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or
 

 •
a matter to be voted on at the meeting would have a material adverse impact on shareholders.
 
The effect of this discretionary proxy is that, if holders of ADSs fail to give voting instructions to the depositary, they cannot prevent our Class A ordinary shares underlying our ADSs from being voted, absent the situations described above, and it may make it more difficult for holders of our ADSs to influence our management.
 
40
We have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses and dilution to shareholders.
 
We adopted our 2009 Share Incentive Plan, last amended in July 2019, or the 2009 Plan, for the purpose of granting share-based compensation awards to officers, employees, directors and other eligible persons to incentivize their performance and align their interests with ours. The current maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2009 Plan is 176,775,641. In April 2022, our board of directors approved the amendment and restatement of the 2009 Plan to increase the maximum aggregate number of shares available under the 2009 Plan, pursuant to which on January 1 of each of 2023, 2024, 2025 and 2026, the maximum aggregate number of ordinary shares which may be issued under the 2009 Plan will increase by 3% of the total number of ordinary shares of all classes of the company outstanding on that day immediately before the increase. We are authorized to grant options, share appreciation rights, share awards of restricted shares and non-restricted shares, restricted share units and other types of awards the administrator of the 2009 Plan decides.
 
We account for compensation costs for all share options using a fair-value based method and recognize expenses in our consolidated statements of operations in accordance with U.S. GAAP. As of April 5, 2022, outstanding awards granted under the 2009 Plan consisted of (i) options to purchase 45,822,745 Class A ordinary shares, (ii) 9,054,694 restricted Class A ordinary share units, and (iii) 181,585 share appreciation rights. As a result of our grants of awards under the 2009 Plan, we incurred share-based compensation expense of US$117.1 million, US$290.2 million and US$470.3 million in 2019, 2020 and 2021, respectively. For more information on our share incentive plan, see “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.” We will incur additional share-based compensation expense in the future as we continue to grant share-based incentives. We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations.
 
Because we do not expect to pay dividends in the foreseeable future, holders of ADSs must rely on price appreciation of our ADSs for return on their investment.
 
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, holders of ADSs should not rely on an investment in ADSs as a source for any future dividend income.
 
Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on the investment in our ADSs will likely depend entirely on any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value or even maintain the price at which the holders purchased our ADSs. Holders of ADSs may not realize a return on their investment in our ADSs and may even lose their entire investment in our ADSs.
 
41
Our memorandum and articles of association contain anti-takeover provisions and a dual-class voting structure that could have a material adverse effect on the rights of holders of our Class A ordinary shares and our ADSs.

Our memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Our memorandum and articles of association contain a dual-class voting structure that gives disproportionate voting power to the Class B ordinary shares, all of which are held by Forrest Xiaodong Li, our founder, chairman and Group Chief Executive Officer. As of April 5, 2022, our founder beneficially owned an aggregate of approximately 59.9% of the total voting power of our outstanding ordinary shares. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” In addition, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our Class A ordinary shares and our ADSs may be materially and adversely affected.
 
Holders of ADSs may face difficulties in protecting their interests, and their ability to protect their rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.
 
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
 
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (save for the memorandum and articles of association, register of mortgages and charges, and special resolutions of shareholders) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for holders of ADSs to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
 
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. To the extent we choose to follow home country practice with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
 
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
 
The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and holders of ADSs may not be able to exercise their right to vote their Class A ordinary shares.
 
Holders of ADSs are only able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the provisions of the deposit agreement. Holders of ADSs may not have the same voting rights as the holders of our Class A ordinary shares and may not receive voting materials in time to be able to exercise the right to vote. Under the deposit agreement, holders of ADSs must vote by giving voting instructions to the depositary. If we ask for instructions from the holders of ADSs, upon receipt of voting instructions from the holders of ADSs, the depositary will try to vote the underlying Class A ordinary shares in accordance with these instructions. If we do not instruct the depositary to ask for instructions from the holders of ADSs, the depositary may still vote in accordance with instructions given by the holders of ADSs, but it is not required to do so. Holders of ADSs are not able to directly exercise the right to vote with respect to the underlying Class A ordinary shares unless holders of ADSs withdraw their Class A ordinary shares from the depositary and become a registered holder of such shares. When a general meeting is convened, holders of ADSs may not receive sufficient advance notice to withdraw their Class A ordinary shares to allow them to vote with respect to any specific matter. If we ask for instructions from holders of ADSs, the depositary will notify holders of ADSs of the upcoming vote and will arrange to deliver our voting materials to holders of ADSs. We have agreed to give the depositary prior notice of shareholder meetings as far in advance of the meeting date as practicable. Nevertheless, we cannot assure you that holders of ADSs will receive the voting materials in time to ensure that holders of ADSs can instruct the depositary to vote the Class A ordinary shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out voting instructions. This means that holders of ADSs may not be able to exercise the right to vote and may have no legal remedy if the Class A ordinary shares underlying our ADSs are not voted as they requested.
 
42
Holders of ADSs may be subject to limitations on the transfer of their ADSs.
 
Our ADSs are transferable on the books of the depositary. The depositary may refuse to deliver, transfer or register transfers of ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
 
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to domestic public companies in the United States.
 
As a foreign private issuer under the Exchange Act, we are exempt from certain disclosure and other requirements and obligations that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; (ii) the sections of the Exchange Act regulating the solicitation of proxies in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and “short swing” liability for insiders who profit from certain trades; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
 
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we publish our results on a quarterly basis through press releases. Press releases relating to financial results and material events are furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and may be less timely compared with that required to be filed with the SEC by U.S. domestic issuers. As a result, holders of ADSs may not be afforded the same protections or information, which would be made available to them, were they investing in a U.S. domestic issuer.
 
We are subject to the corporate governance requirements of the New York Stock Exchange. However, New York Stock Exchange rules permit a foreign private issuer like us to follow the corporate governance practices of our home country in lieu of certain New York Stock Exchange rules. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the New York Stock Exchange corporate governance requirements. To the extent we choose to follow home country practice, our shareholders may be afforded less protection than they would otherwise enjoy under the New York Stock Exchange corporate governance listing standards applicable to U.S. domestic issuers.
 
If we are a passive foreign investment company for United States federal income tax purposes for any taxable year, United States holders of ADSs or our ordinary shares could be subject to adverse United States federal income tax consequences.
 
Depending upon the value and the nature of our assets and the amount and nature of our income over time, we could be classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. We will be classified as a PFIC in any taxable year if either: (i) 75% or more of our gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such year produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. For this purpose, cash is generally categorized as a passive asset and the company’s unbooked intangibles associated with active business activity are taken into account as a non-passive asset. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own (or are deemed to own), directly or indirectly, 25% or more (by value) of the stock. In addition, although the law in this regard is not entirely clear, we treat our VIEs as being owned by us for U.S. federal income tax purposes. As a publicly traded foreign corporation we intend for this purpose to treat the aggregate fair market value of our gross assets as being equal to the aggregate value of our outstanding stock (“market capitalization”) plus the total amount of our liabilities and to treat the excess of the fair market value of our assets over their book value as a non-passive asset to the extent attributable to our non-passive income. Because we currently hold, and expect to continue to hold, a substantial amount of cash and cash equivalents and other passive assets used in our business, and because the value of our gross assets is likely to be determined in large part by reference to our market capitalization, we would likely become a PFIC for a given taxable year if the market price of the ADSs or Class A ordinary shares were to decrease significantly. The application of the PFIC rules is subject to uncertainty in several respects, and we must make a separate determination after the close of each taxable year as to whether we were a PFIC for such year. If we are a PFIC for any taxable year during which a U.S. investor held the ADSs or Class A ordinary shares, the U.S. investor might be subject to increased U.S. federal income tax liability and to additional reporting obligations. We do not intend to provide the information necessary for the U.S. investor to make a qualified electing fund election with respect to the ADSs or Class A ordinary shares. See “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”
 
43
Based on our income and assets, and the value of the ADSs, we do not believe that we were a PFIC, for U.S. federal income tax purposes, for the taxable year ended December 31, 2021, and do not anticipate becoming a PFIC for the current taxable year or for the foreseeable future. Nevertheless, because PFIC status is a factual determination made annually after the close of each taxable year on the basis of the composition of our income and assets, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.
 
ITEM 4.
INFORMATION ON THE COMPANY
 
A.          History and Development of the Company
 
On May 8, 2009, we incorporated Garena Interactive Holding Limited, our holding company, as a limited liability company in the Cayman Islands. On April 8, 2017, we changed our company name from Garena Interactive Holding Limited to Sea Limited.
 
Sea Limited is a holding company that does not have substantive operations. We conduct our businesses through our subsidiaries and consolidated affiliated entities.
 
We began our digital entertainment business at our inception in May 2009, and have since expanded our local game operations beyond Southeast Asia and Taiwan to Latin America and other markets. Our self-developed game Free Fire is also currently available in more than 130 markets globally.
 
We launched our e-commerce platform, Shopee, in Southeast Asia and Taiwan in June and early July 2015, and in Brazil in the fourth quarter of 2019. In 2021, we expanded our Shopee business to new markets in Latin America such as Mexico, Chile and Colombia, and to Poland and Spain.
 
We launched our digital financial services platform in Vietnam in April 2014 and in Thailand in June 2014. In the fourth quarter of 2019, we introduced SeaMoney as the overall brand for our digital financial services business. In 2021, we further expanded our digital financial service offerings across credit, insurtech and digital bank services, including launching SeaBank in Indonesia.
 
On October 20, 2017, we completed our initial public offering and listed our ADSs on the New York Stock Exchange under the symbol “SE.”
 
In September 2021, we issued 12,650,000 ADSs (including a full exercise by the underwriters of their over-allotment option) at US$318.00 per ADS for total gross proceeds of approximately US$4.0 billion and completed a registered offering of 0.25% convertible senior notes in an aggregate principal amount of US$2.875 billion.
 
44
At our annual general meeting on February 14, 2022, our shareholders approved as a special resolution the amendment and restatement of our memorandum and articles of association. Upon the effectiveness of such amendment, among other relevant changes, the voting power of our Class B ordinary shares increased from three votes per share to 15 votes per share on all matters subject to vote at general meetings of our company. Immediately upon the special resolution being approved by the shareholders, Tencent converted all the Class B ordinary shares beneficially owned by it to Class A ordinary shares. Upon effectiveness of such conversion by Tencent, all outstanding Class B ordinary shares are currently beneficially owned by Forrest Xiaodong Li, our founder, chairman and Group Chief Executive Officer. At the same time, the irrevocable proxy between Tencent and Mr. Li dated September 1, 2017 (the “Irrevocable Proxy”) was also terminated. In relation to such termination, the currently effective memorandum and articles of association no longer contain a requirement that the Class B ordinary shares beneficially owned by Mr. Li shall be subject to automatic conversion upon termination of the Irrevocable Proxy. See “Item 10. Additional Information—B. Memorandum and Articles of Association.”
 
Our principal executive offices are located at 1 Fusionopolis Place, #17-10, Galaxis, Singapore 138522. Our telephone number at this address is +65 6270-8100. Our registered office in the Cayman Islands is at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States in connection with the registration statement on Form F-1 for our initial public offering is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor New York, N.Y. 10168. Our agent for service of process in the United States in connection with the registration statement on Form F-3 is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711. Our website is www.sea.com.
 
B.
Business Overview
 
Our Mission
 
Our mission is to better the lives of the consumers and small businesses with technology.
 
Our Beliefs and Values
 
We have Three Core Beliefs:
 

 •
Our people define us.    Sea shall be a place where talented people thrive at scale, enjoy freedom of ideas and achieve the unimaginable. It shall be a magnet for the smartest, the most creative and the most driven.
 

 •
Our products and services differentiate us.    We aspire to better every life we touch and make the world an ever more connected community through innovative products and services.
 

 •
Our institution will outlast us.    We strive to build an institution that will last for generations and evolve with time, and that is founded upon our core values.
 
These Five Core Values are Sea’s foundation:
 

 •
We serve.    Our customers are the sole arbiter of the value of our products and services. We strive to meet unmet needs and serve the underserved.
 

 •
We adapt.    Rapid change is the only constant in the digital age of ours. We embrace change, celebrate it and always strive to be a thought leader that influences it.
 

 •
We run.    We are in a constant race to success while grappling with rapidly shifting forces. We move faster, better and with more urgency every day.
 

 •
We commit.    Our work is our commitment. We commit to our values, institution, customers and partners. We commit to each other. Above all, we commit to doing the best we can and being the best we are.
 

 •
We stay humble.    We have traveled a long way from our humble beginning and yet, we never lose our humility in our continual quest for greater heights.
 
45
Together, our Three Core Beliefs and Five Core Values form a consistent mindset which we believe is both a practical recipe for long-term organizational sustainability and also a deeper philosophy for how we want to live our lives. They are a guide for the kind of people we hire and develop, as well as a roadmap for how we interact with our customers, our business partners, and our broader stakeholders. Ultimately, they are our compass: whenever we are faced with a decision, we always ask ourselves which alternative is most authentic to these Beliefs and Values.
 
Overview
 
Sea has developed an integrated platform consisting of digital entertainment, e-commerce, and digital financial services, each localized to meet the unique characteristics of our markets. Our seven markets in Southeast Asia and Taiwan were estimated to have 613.6 million people and a GDP of US$4.0 trillion in 2021 according to the IMF World Economic Outlook Database. Southeast Asia and Taiwan region is also one of the world’s fastest growing regions based on per capita GDP. In addition, the Latin America region (including the Caribbean) was estimated to have 640.9 million people and a GDP of US$5.0 trillion in 2021 according to the IMF World Economic Outlook Database. Many of our global markets are experiencing a generational transition to the new digital economy, with digital inclusion bringing consumers ever more closely to each other and online services, by leading internet business models such as our own. Our culturally rich and diverse markets observe a rise in traditionally underserved digital consumers, who require dedicated focus, resources, and respective local market knowledge.

Sea operates three key businesses—Garena, Shopee, and SeaMoney:
 

 •
Our digital entertainment business, Garena, is a global game developer and publisher. Garena provides users with access to popular and engaging mobile and PC online games that we develop, curate and localize for each market. Garena also exclusively licenses and publishes games developed by third parties. In addition, Garena provides access to other entertainment content, such as livestreaming of online gameplay, as well as social features, such as user chat and online forums. We believe we are the leader in esports in Southeast Asia, Taiwan and Brazil, which strengthens our game ecosystem and increases user engagement.
 

 •
Our Shopee e-commerce platform was the largest e-commerce platform in Southeast Asia and Taiwan for the year of 2021. We are also gaining traction in Brazil and building a significant presence locally. Since its inception, Shopee has adopted a mobile-first approach and is a highly scalable marketplace platform that connects buyers and sellers. Shopee provides users with a convenient, safe and trusted shopping environment that is supported by integrated payment, logistics, fulfillment, and other value-added services. Our users enjoy the social nature of Shopee’s platform, where users can follow, rate and easily browse for discovery to enhance their retail experience. We also empower sellers with various tools and support such as livestreaming and other value-added services for them to better engage with their buyers. We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics. We also purchase products from manufacturers and third parties and sell them directly to buyers on our Shopee platform.
 

 •
Our SeaMoney business is a leading digital financial services provider in Southeast Asia. SeaMoney currently offers offline and online mobile wallet services, payment processing and other offerings across credit, insurtech and digital bank services. These services and products are offered in various markets in Southeast Asia under ShopeePay, SPayLater, SeaBank, and other digital financial services brands.
 
Each of our businesses provides a distinct and compelling value proposition to our users, and each also exhibits strong virtuous cycle dynamics, which we believe support our leadership position and provide a strong foundation for continued growth while creating barriers to entry for our competitors in our markets.
 
We have achieved significant scale and growth since our founding. Our total revenue increased from US$2.2 billion in 2019 to US$10.0 billion in 2021, a CAGR of 113.9%. We had gross profit of US$604.9 million, US$1.3 billion and US$3.9 billion in 2019, 2020 and 2021, respectively. We incurred net losses of US$1.5 billion, US$1.6 billion and US$2.0 billion in 2019, 2020 and 2021, respectively, primarily due to our investments in expanding our businesses, in particular our e-commerce and digital financial services businesses. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Segment Reporting” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Description of Certain Statement of Operations Items—Revenue” for a breakdown of our total revenues by category of activity and geographic market for each of the last three financial years.
 
46
Our Businesses
 
Garena Digital Entertainment Business
 
Garena, our digital entertainment business, primarily focuses on offering mobile and PC online games and developing mobile games for the global markets.
 
We began our digital entertainment business at our inception in 2009. We offer our users easy access to highly engaging and localized content online that we develop or license, as well as organize and sponsor exciting game activities online and offline. We focus on game development, curation, localization, operation, distribution, monetization, and payments, as well as user community building and esports activities. We also provide access to other entertainment content, such as livestreaming of gameplay as well as social features, such as user chat and online forums.
 
Our Games
 
Our games consist of self-developed game and games licensed from third party developers. We offer immersive games covering some of the most popular and engaging genres, such as battle royale games; multiplayer online battle arenas, or MOBAs; action role-playing games, or action RPGs; massively multiplayer online role-playing games, or MMORPGs; racing games and sports games. In most of these games, users play online in a virtual environment existing on network game servers that connect a large number of players simultaneously to interact with each other within the games.
 
Mobile games have gained popularity in our markets. In December 2017, we launched the first game that we developed entirely in-house, Free Fire, a mobile game of the battle royale genre. Free Fire has enabled us to grow globally beyond Southeast Asia and Taiwan where we initially launched our game business. It is currently available on the Google Play and iOS App Stores in more than 130 markets. We plan to continue to expand our game development capabilities and publishing business.
 
Game Players
 
We have a large and active user base for our online game business. The table below sets forth certain of our operating metrics for the periods indicated.
 
   
For the Three Months Ended
  
   
March 31, 2021
    
June 30, 2021
    
September 30, 2021
    
December 31, 2021
  
Bookings (US$ in billions)(1)
    
1.1
      
1.2
      
1.2
      
1.1
  
Game QAUs (in millions)
    
648.8
      
725.2
      
729.0
      
654.0
  
Game QPUs (in millions)
    
79.8
      
92.2
      
93.2
      
77.2
  



(1)
GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue. This operating metric is used as an approximation of cash spent by our users in the applicable period that is attributable to our digital entertainment segment.
 
Our large user base as well as the team and social aspects of our games keep our game players engaged and also creates powerful network effects that further attract users to our games, resulting in a high barrier to entry for our competitors.
 
In-House Game Development
 
We develop mobile games that cater to the demands of highly diverse markets across the globe. Our game development capabilities are particularly strengthened by our global experience in game publishing. Our in-house game development studios now have more than 2,000 global developers focused on enhancing Free Fire gameplay and building out our pipeline of self-developed games.
 
47
Third-Party Games Publishing
 
We also curate top third-party game content globally for publishing in our markets. Our market leadership and success in operating and customizing games for our local game players have helped us forge deep relationships with key international game developers in different parts of the world. Game developers choose us to operate their games in our markets because of our leading market position, strong reputation in the online game community, and successful track record of operating and popularizing games in our markets. We are therefore able to source high-quality games from world class developers, many of whom work with us as their exclusive partner in our markets. We rely on our local knowledge and years of game operating experience to select games that will match user needs and genre preferences. We also believe that our large user base contributes to a virtuous cycle. As we attract more high-quality game developers to partner with us, we are able to attract more users with a larger volume of high-quality content.
 
We provide our game developer-partners access to a large user base in highly diverse markets across the globe, enabling our games to quickly become popular. Our services to third party game developers include game launch and hosting, localization, marketing, distribution, monetization, integrated payment infrastructure, including access to our SeaMoney platform, and online and offline community building activities.
 
In particular, we localize licensed games to adapt to each market. We work with game developers to translate game content into local languages, revise game design to suit local preferences, and meet regulatory requirements for each jurisdiction. We also develop exclusive local content for particular markets to enhance game attractiveness to local audiences. Our content localization efforts entail continuing feedback loops with developers throughout the life of the games we operate.
 
Monetization and Payments
 
Our game monetization model is a “freemium” model that allows our users to download and play fully functional games for free. We generate revenue primarily by selling our game players in-game items, which include in-game virtual items such as digital representations of functional or decorative items, as well as season passes. Digital representation of functional or decorative items includes in-game clothing, pets, weaponry or equipment, which players can purchase and utilize within the game environment to enhance their gameplay experience. Players that purchase season passes can receive additional in-game virtual items upon satisfying certain conditions. Players who choose to purchase in-game items benefit from being able to accelerate progress, enhance social interactions, and enjoy a more personalized game playing experience.
 
We offer multiple methods for users to purchase in-game items, including through our SeaMoney platform, the Google Play Store and the iOS App Store payment gateways, other online payment gateways, bank transfers, credit cards, debit cards, mobile phone billing, and prepaid cards, including our own prepaid cards, which are sold through agents.
 
Esports and Community Building
 
We believe that Garena is a leading catalyst of the growth of esports in our markets as we organize hundreds of esports events annually and operate the largest mobile-game professional league in Southeast Asia, Taiwan and Brazil. We organize esports competitions that range in size from relatively small-scale local tournaments to widely publicized and promoted global esports events that rival the size of popular professional athletic events.
 
Some of our users have become full-time professional esports athletes that compete for prize money in tournaments and sponsorships from large corporations that often also sponsor professional sports. Free Fire’s large and growing esports and streaming community is another key pillar of our user engagement strategy. The game was also named the Esports Mobile Game of the Year at the Esports Awards 2021. As a result, we believe our esports operations generate strong user engagement for our games as well as promote user acquisition and retention.
 
Marketing
 
We devise and execute marketing plans tailored for each market. We market our games through a combination of online advertisement, outdoor and print advertisements, television commercials, influencer partnerships as well as social media platforms and other online forums.
 
48
Shopee E-commerce Platform
 
Our Shopee e-commerce platform is a mobile-centric, social-focused marketplace with integrated payment and logistics infrastructure and comprehensive services we offer to sellers. It is a highly scalable marketplace platform that provides users with a convenient, safe, and trusted shopping environment. Shopee was the largest e-commerce platform in Southeast Asia and Taiwan for the year of 2021. We are also gaining traction in Brazil and building a significant presence locally.
 
Shopee provides users with a convenient, safe, and trusted shopping environment that is supported by integrated payment, logistics, fulfilment, and other value-added services. We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics.
 
Shopee’s marketplace model allows it to scale rapidly. In addition, we introduce many social and gamification elements into Shopee which we believe enables us to increase organic user acquisition, user retention and user time spent on our platform. The table below sets forth certain of our operating metrics for the periods indicated.
 
   
For the Three Months Ended
  
   
March 31, 2021
    
June 30, 2021
    
September 30, 2021
    
December 31, 2021
  
   
(billions)
  
GMV (US$)
    
12.6
      
15.0
      
16.8
      
18.2
  
Orders
    
1.1
      
1.4
      
1.7
      
2.0
  

While we primarily operate as a marketplace, we also purchase some products from manufacturers or third parties directly and sell on our Shopee platform under our official store to meet buyers' demand. Bulk purchasing and direct product sales for specific product categories also enable us to offer better product assortment to our buyers.
 
Our Buyers and Sellers
 
Our buyers are individuals and households who mainly purchase from sellers that are within the same market.
 
Shopee sellers are primarily small and medium businesses, brands, large retailers as well as individuals, who view Shopee as an efficient and reliable way of managing the selling process while maximizing customer needs. On Shopee, each seller has an online storefront on which they list their products, communicate with buyers, and complete transactions. Our Shopee Mall hosts brands and large retailers prominently featuring their distinct logos, and offers a premium shopping experience to a broad base of buyers.
 
E-commerce Platform Operations
 
Product Category Focus
 
We use targeted seller engagement and product placement to attract sellers and bring products to our platform. We leverage our deep understanding of local market conditions and user preferences to prioritize product categories that we believe have higher realization rates and profitability for our sellers. We currently offer a general merchandise platform focused on long-tail high-margin categories, such as fashion, health and beauty, home and living, and baby products. Meanwhile, we continue to focus on expanding categories to include an increasingly diverse range of products.
 
Seller Support and Service by Shopee
 
We offer strong support to sellers on the Shopee platform through large on-the-ground teams with deep local knowledge. Our local teams also offer fast and localized operational and technological assistance in using business management tools. Moreover, an extensive network of logistics and payment solution providers are integrated into the platform to provide users with a one-stop solution. We also offer sellers integrated payment, logistics, fulfillment, and other value-added services.
 
49
Under “Service by Shopee,” we offer a range of value-added services to sellers, including inventory management, online store operations, and fulfillment services. Depending on sellers’ needs and preferences, we may help sellers manage inventory and fulfill orders from warehouses leased and operated by us, operate stores on our platform, or purchase products from sellers for reselling on our platform. “Service by Shopee” is currently available to sellers in our Southeast Asia and Taiwan markets.
 
We take the user experience beyond a traditional online marketplace environment, making online shopping truly seamless. We believe that these efforts help to streamline the whole online business operation from store setup to selling, inventory and revenue management, delivery and payment collection for our sellers, empowering them to achieve greater success in their commercial activities.
 
Buyer Protection
 
We focus on creating a secure and reliable shopping environment for our buyers and have developed robust consumer protection policies and procedures, including the following measures:
 

 •
Seller Verification.    Everyone that registers to become a seller on the Shopee platform is subject to our verification process and must agree to our standard terms of service before opening a seller account.
 

 •
Listing Screening.    Shopee has adopted a set of policies and procedures to prevent and remove listings of inappropriate or illegal goods and to screen out repeat offenders. All listings on the Shopee platform first undergo automated screenings against a list of illegal product names, categories and descriptions. We have developed this list based on local regulations and it is frequently updated by our local teams to reflect the latest regulatory requirements. Listings posted by sellers which are deemed to be of high risk based on our screening will not be visible on our platform until they are manually cleared by our operations and compliance teams. Listings that are not cleared due to regulatory violations or other violations of our terms of use will be permanently removed, and the seller will not be able to edit or re-submit the same product listing. We may suspend or remove accounts that repeatedly submit illegal or inappropriate listings. Moreover, users and other third parties may report listings that they believe to be illegal, inappropriate or offensive for our further review.
 

 •
Shopee Guarantee.    We provide “Shopee Guarantee,” a free service to facilitate transactions on the Shopee platform. Under Shopee Guarantee, we hold payments made by buyers in certain designated Shopee Guarantee account held by us until the ordered products are received or deemed to have been received by the buyer. After this, we release the payment to the seller. If the purchased products are never delivered to or received by the buyer, we will return the funds to them. Shopee Guarantee is available for all transactions executed through the Shopee platform. We believe that Shopee Guarantee reduces settlement risks and improves transaction efficiency and security.
 

 •
Dispute Resolution.    We have on-the-ground teams to help resolve disputes between buyers and sellers. In the case of a dispute, a buyer may submit supporting evidence through our dispute resolution system and seek compensation from the seller.
 
Shopee Communication Tool
 
The Shopee platform offers a live chat function enabling real-time communication between buyers and sellers. Buyers typically use the chat function to clarify product-related details, while sellers typically use the function to confirm payment and delivery information. We believe this communication tool has significantly improved the efficiency and security of transactions and the overall shopping experience.
 
Integrated Logistics Services
 
Logistics is critical for the development of e-commerce in our markets since many of them have terrain that is difficult to navigate and underdeveloped infrastructure. The logistics service providers which we cooperate with include some of the largest and most reliable service providers in our markets. Because of the large number of transactions from our platform, we are typically able to negotiate preferred terms with these service providers for our users. Although sellers are not required to use these service providers, they often choose to do so due to the reliable service quality and favorable pricing offered through us. We also provide last-mile delivery services, Shopee Xpress, to complement the existing capacities of the third-party logistics service providers in select metro areas of our markets. In certain markets, we have made strategic investments into local logistics partners in order to enhance our logistics services offerings to both buyers and sellers.
 
50
Moreover, on our Shopee platform, sellers and buyers can track the delivery status of their packages and provide feedback on logistics services. We evaluate and provide feedback to logistics service providers to improve the level of services provided to our users, including average delivery times.
 
Payment on Shopee
 
As transactions on Shopee are protected by Shopee Guarantee, buyers make payments to Shopee’s designated Shopee Guarantee account which are then released by Shopee to the sellers upon buyers’ receipt or deemed receipt of the goods. Depending on the market, sellers and buyers can choose from a number of payment options to complete transactions on Shopee, including our own mobile wallet services, credit cards, bank transfers through ATM or over the internet, and cash payments upon delivery or at designated convenience stores. Shopee has already integrated its payment processing system with SeaMoney’s payment infrastructure in almost all of our markets.
 
Marketing and Promotions
 
We undertake both online and offline marketing efforts to maximize our brand awareness and attract new users. Our online efforts mainly include online advertisements through major web portals, search engines, and social media. Our online advertisements focus on promoting campaigns such as Shopee 9.9 Super Shopping Day, 11.11 Big Sale, and 12.12 Birthday Sale as well as attracting new users by promoting awareness of the convenience, cost effectiveness, and reliability of e-commerce and Shopee. Our offline marketing efforts include display advertisements in locations with high traffic and are carried out by our local teams. Moreover, we conduct targeted promotional campaigns to incentivize buyers and sellers to use our platform. We believe that our investment in marketing and promotions has contributed to our GMV and market share growth, which in turn strengthens our pricing power and enables us to monetize at higher rates.
 
Social and Gamification Features
 
As part of our strategy to enhance user engagement and social activity on the Shopee platform, we have introduced a number of innovative social and gamification features on Shopee, such as “Shopee Coins,” “Shopee Live,” “Shopee Games” and “Shopee Feed.” We believe these features allows us to increase our organic user acquisition.
 
Users can win “Shopee Coins” from making purchases, playing mini-games and participating in campaign activities and then use Shopee Coins to offset the cost of purchase from eligible sellers. Users may also earn additional Shopee Coins by inviting their friends to participate, which we believe further encourages social activity on the platform. “Shopee Live” allows buyers to watch livestreaming by sellers from their mobile phones in which sellers may promote their goods or conduct real-time engagement with buyers for potential sales or brand-building. “Shopee Games” are a variety of mini games that promote in-app interactions between fellow users through achieving individual or group rewards. This feature increases user engagement, interactions, and promotes positive user experiences on the platform. “Shopee Feed” allows users to continuously scroll through a lively ecosystem of multimedia listings where they can “like” or “comment” on as they discover popular items based on platform trends, new inventory from “followed” sellers, and their previous browsing categories.
 
Monetization
 
We have been focusing on building the scale and liquidity of our marketplace, and will increasingly focus on monetization as our GMV and market share continue to grow. We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics.
 
51
Revenue from Shopee also include revenue of products sold by us. We purchase products from manufacturers or third parties directly and sell on our Shopee platform under our official store to meet buyers' demand for such products.
 
SeaMoney Digital Financial Services Business
 
SeaMoney, our digital financial services business, is a leading digital financial services provider in Southeast Asia. We began to offer digital financial services in 2014. In the fourth quarter of 2019, we introduced SeaMoney as the overall brand for our digital financial services business. SeaMoney currently offers offline and online mobile wallet services, payment processing and other offerings across credit, insurtech and digital bank services. These services and products are offered in various markets in Southeast Asia under ShopeePay, SPayLater, SeaBank, and other digital financial services brands.
 
The table below sets forth certain operating metrics of our digital financial services for the periods indicated.
 
   
For the Three Months Ended
  
   
March 31,
2021
    
June 30,
2021
    
September 30,
2021
    
December 31,
2021
  
Digital Financial Services
  
Mobile wallet total payment volume (US$ in billions)
    
3.4
      
4.2
      
4.6
      
5.0
  
SeaMoney QAUs (in millions)
    
―
      
―
      
―
      
45.8
  

We continued to work on further integrating the mobile wallet services of SeaMoney with our Shopee platform across different markets, to promote efficient growth of SeaMoney and to reduce payment friction for Shopee users. Moreover, we have been expanding the use cases of our mobile wallet services outside of Sea’s platforms to include other online and offline merchants, along with a variety of third-party use cases. Third-party merchants currently include telecommunications companies, online and offline entertainment service providers such as game operators or app stores, movie theaters, concert/event venues, utility service providers, food delivery service providers, credit card issuers, banks, insurance companies, and car leasing companies. As we increase the number and type of merchants on the SeaMoney platform, we are able to offer mobile payment solutions for a wider range of products and services to meet the daily needs of our users and attract more users to the platform.
 
In addition, SeaMoney provides payment processing services to Shopee in almost all of our markets, which, depending on the operational arrangement in each specific market, may include payments from buyers to Shopee accounts under Shopee Guarantee as well as outgoing payments from Shopee accounts to Shopee seller accounts that are operationally handled by SeaMoney.
 
Moreover, SeaMoney offers other digital financial services to its users through technology, such as credit, insurtech and digital bank services.
 
We mainly monetize our digital financial services business by charging commissions to third-party merchants with respect to our mobile wallet services, by charging fees to third-party financial institutions which offer financial products or lend to consumers on our platform, and by earning interest from borrowers with respect to our consumer and merchant credit business. Marketing of our SeaMoney products and services have been done through offline advertisements and in-app advertisements through our Shopee apps.
 
The financial services industry is heavily regulated and we are required to obtain and maintain certain licenses in the jurisdictions in which we provide financial services. As of the date of this annual report, we have obtained the licenses and governmental approvals necessary to provide electronic money services in Indonesia, Vietnam, Thailand, the Philippines, Malaysia, and Singapore, and to provide loans in Indonesia, Thailand, the Philippines and Malaysia. As we expand our digital financial services business to additional markets, we may need to obtain additional licenses and permits in order to comply with local laws. See “—Regulation” and “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—We are subject to extensive and changing laws and government regulations across our business.”
 
52
In December 2020, our wholly-owned subsidiary in Singapore was selected for the award of a digital full bank license in Singapore. We also acquired a controlling interest in a local commercial bank in Indonesia in 2020, and launched SeaBank in Indonesia in the latter half of 2021. We also obtained a bank license in the Philippines, and launched SeaBank in Philippines in March 2022. For further details, see “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Related to Our Digital Financial Services Business— Our banking business may subject us to additional material business, operational, financial, legal and compliance requirements and risks.”
 
Our Technology
 
Technology is key to our success as it enables us to operate our business more efficiently, improves the user experience and supports innovation.
 
Our network infrastructure utilizes our private data centers and cloud services that are linked with high-speed networks. We have established local servers and infrastructure in many of our key markets to ensure faster connections and a seamless user experience. We operate at a scale that routinely delivers massive amounts of content to tens of millions of users across our platforms. Our technology architecture has been designed to scale horizontally to accommodate the large amounts of data our network generates. As our user base grows and the level of engagement and activities on our platforms increase, we will continue to expand our technology infrastructure to maintain and improve the quality of our user experience. Our data science technology serves various types of data-intensive computational needs, including high-volume batch processing and multi-variable and multi-dimensional real-time analytics.
 
Customer Service
 
We have dedicated customer service teams. We believe our customer service team is well-trained in assisting our users with issues they encounter on our platforms, gathering feedback on how to improve our services and receiving user complaints and suggestions. Moreover, we have adopted systematic internal procedures to quickly respond to and resolve customer complaints.
 
Intellectual Property
 
Our business is based significantly on the acquisition, creation, use, and protection of intellectual property. Free Fire, our self-developed game, is one of our key intellectual properties. Other forms of this intellectual property include the technology and know-how that we developed and use to operate our e-commerce and payment products.
 
We believe the protection of our trademarks, copyrights, domain names, trade names, trade secrets, patents, and other proprietary rights is critical to our business and we protect our intellectual property rights in various jurisdictions by relying on local laws and contractual restrictions. More specifically, we rely on a combination of trademark, fair trade practice, copyright, patent and trade secret protection laws, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. Moreover, we enter into confidentiality, proprietary rights assignment, non-compete, and non-assignment agreements with our employees, and have confidentiality arrangements with our business partners. We also actively engage in monitoring and enforcement activities with respect to infringing uses of our intellectual property by third parties.
 
While we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of the intellectual property created by or licensed to us. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—We may be subject to intellectual property-related risks.” Also, we cannot be certain that the products and content on our platforms do not or will not infringe on the valid patents, copyrights or other intellectual property rights held by third parties. We may be subject to legal proceedings and claims from time to time relating to the intellectual property of others, as discussed in “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—We may be subject to risks related to litigation and regulatory proceedings.”
 
Competition
 
Each of the online game, e-commerce, and digital financial service industries in our markets is highly fragmented. We face competition in each of our lines of business in each market where we operate. Some of our competitors may have greater access to capital markets, more financial and other resources, and a longer operating history than we do. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—We may fail to compete effectively.”
 
53
Online Games
 
We compete on the basis of a number of factors, including user base, game portfolio, quality of user experience, brand awareness, and reputation, relationships with game developers and access to distribution and payment channels. Our competitors for publishing primarily include companies with a presence in just one or a few of our markets, as well as other global platforms and self-publishing game developers. Our competitors for game development include global developers.
 
E-commerce
 
We face competition principally from regional players that operate across several markets and global players that expand into our markets by building local platforms or making their existing platforms accessible to users in our markets. We also face competition from single-market players. We compete to attract, engage, and retain buyers based on the variety and value of products and services listed on our marketplaces, overall user experience and convenience, online communication tools, social features, integration with mobile and networking applications and tools, mobile applications and availability, quality and costs of payment and logistics services. We also compete to attract and retain sellers based on the number and the engagement of buyers, the effectiveness and value of the services we offer to sellers, commission rates, and the availability of support services. In addition, we may face increasing competition from social media platforms, online and app-based search engines through which products and services may be researched and sold, and other content-providing market players. Social media platforms with high levels of user engagement may be able to leverage content and user connections and traffic on their platform to increase the visibility and attractiveness of a wide variety of brands and products.
 
Digital Financial Services
 
SeaMoney competes primarily with existing online and offline payment service providers, including, among others, other mobile wallet service providers. SeaMoney competes with these companies primarily on the basis of network size, transaction processing speed, convenience, accessibility, reliability, and price. We believe that strengths across the e-commerce and digital entertainment businesses position us very well to grow our digital financial businesses and SeaMoney has a significant competitive advantage because of the strong demand in our markets for seamless convenient forms of mobile payments with the continued development of the digital economy in the region.
 
Seasonality
 
Our revenue and other operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are outside our control. For a discussion of the factors that may contribute to fluctuations of our quarterly results, see “Item 3. Key Information—D. Risk Factors—Business and Operational Risks—Risks Applicable Across Multiple Businesses—Our results of operations are subject to fluctuations.”
 
Regulation
 
This section sets forth a summary of the significant regulations or requirements in the jurisdictions where we conduct our material business operations, namely Indonesia, Taiwan, Vietnam, Thailand, Singapore and Malaysia. The primary laws and regulations to which we are subject relate to foreign investment, dividend distributions, foreign exchange controls, game operating, e-commerce, mobile wallet, payment processing, data protection, intellectual property rights, anti-money laundering and terrorism financing and employment and labor.
 
Indonesia
 
Regulations on Foreign Investment

The Law No. 25 of 2007 regarding Investment issued on April 26, 2007 as amended by Law No. 11 of 2020 regarding Job Creation, or the Indonesia Investment Law, states that all business sectors or business types are open to foreign investment, except certain lines of business that the Indonesian government has expressly prohibited or restricted from foreign investment. Under the Indonesia Investment Law, foreign investors can own up to 100% of the equity in game distribution and e-commerce marketplace businesses in Indonesia. We have obtained the investment in-principle license and the business license required for foreign investment companies engaging in game distribution and e-commerce marketplace businesses in Indonesia issued by the Indonesian Investment Coordinating Board. In addition, Indonesian investment laws render void any agreements containing statements by Indonesian shareholders that they hold shares in an Indonesian company for the benefit of a foreign beneficiary.

54
Regulations on the Use of Rupiah

On June 28, 2011, the government of Indonesia enacted Law No. 7 of 2011 on Currency, or the Indonesia Currency Law, which took immediate effect. Furthermore, on March 31, 2015, Bank Indonesia enacted Bank Indonesia Regulation No. 17/3/PBI/2015 on the Mandatory Use of Indonesian Rupiah within the Territory of the Republic of Indonesia, or the Indonesia Currency Law Implementation Regulations. Bank Indonesia also enacted Bank Indonesia Circular Letter No. 17/11/DKSP on June 1, 2015 as the implementing guideline to the Indonesia Currency Law Implementation Regulations. The implementation rules of the Indonesia Currency Law require the use of Indonesian Rupiah for all transactions conducted within Indonesia, including transactions for payment, settlement of obligations and other financial transactions, except for certain exemptions provided under the Indonesia Currency Law Implementation Regulations. Failures to comply with any provisions under the Indonesia Currency Law Implementation Regulations may subject the person to administrative, criminal or monetary sanctions of up to IDR1 billion (US$70,038).

Regulations on Dividend Distributions

Dividend distributions are regulated under Law No. 40 of 2007 on Limited Liability Companies as amended by Law No. 11 of 2020 regarding Job Creation, or the Indonesia Companies Law. A decision to distribute a dividend needs to be made by a resolution of the shareholders at the annual or general meeting of shareholders upon the recommendation of the board of directors of a limited liability company. A limited liability company may only declare dividends if it has positive retained earnings at the end of a fiscal year. Furthermore, the Indonesia Companies Law allows a limited liability company to distribute interim dividends prior to the end of a financial year so long as it is permitted by its articles of association and provided that the interim dividend does not result in the limited liability company’s net assets becoming less than the total issued and paid-up capital and the compulsory reserves fund. Such distribution shall be determined by the limited liability company’s board of directors after being first approved by the board of commissioners. If, after the end of the relevant financial year, the limited liability company has suffered a loss, any distributed interim dividends must be returned by the shareholders, and the board of directors and board of commissioners of the limited liability company will be jointly and severally responsible if the interim dividend is not returned. A limited liability company is required to reserve a certain amount from its net profit each year as a reserve fund until such fund amounts to at least 20% of its issued and paid-up capital.

Regulations on Foreign Exchange

Indonesia has limited foreign exchange controls. The Indonesian rupiah is generally freely convertible within or from Indonesia. The Indonesian Investment Law stipulates that foreign investors are allowed to make capital contributions and repatriate dividends, profits and other income in foreign currency without obtaining prior approvals from governmental authorities and/or Bank Indonesia, the central bank of Indonesia. The conversion of foreign currency into Indonesian rupiah for capital contribution purposes does not require any governmental approvals.

On September 5, 2016, Bank Indonesia issued Bank Indonesia Regulation No. 18/18/PBI/2016 on the Foreign Exchange Transactions against Rupiah between Banks and Domestic Parties and Bank Indonesia Regulation No. 18/19/PBI/2016 on Foreign Exchange Transactions against Rupiah between Banks and Foreign Parties, or the Indonesia Foreign Exchange Regulations. According to such regulations, a party wishing to convert Indonesian rupiah to foreign currency exceeding certain thresholds set forth in the Indonesia Foreign Exchange Regulations is required to submit certain supporting documents to the bank handling the foreign exchange conversion, including the underlying transaction documents and a duly stamped statement confirming that the underlying transaction documents are valid and that the foreign currency will only be used to settle the relevant payment obligations. For conversions not exceeding the threshold set forth in the Indonesia Foreign Exchange Regulations, the person only needs to declare in a duly stamped letter that its aggregate foreign currency purchases have not exceeded the monthly threshold set forth in the Indonesian banking system.

55
Regulations Relating to Game Business

If a game operating platform in Indonesia wishes to rate its games, it may refer to Regulation No. 11 of 2016 on Classifications of Electronic Interactive Games, or the Rating Regulation, promulgated by the Ministry of Communication, Information and Technology, or MOCIT. The Rating Regulation allows game developers, producers, or operators to self-rate the games that they have created, produced or published in Indonesia, regardless of whether such game has been rated in its country of origin. This self-rating will be evaluated by the Games Classifications Committee appointed by and reports to the MOCIT. The evaluation conducted by the Games Classifications Committee will be made based on reports from or information available to the public, periodically, or on a random basis.

The Rating Regulation classifies games into five categories which are intended to guide parents and other users to choose games that are appropriate for the age group of the users. Based on the amount of sensitive content, games are classified into the following age-groups: over three years old, over seven years old, over 13 years old, over 18 years old, and all ages. Games that have been rated by developers, producers or creators, will be included in the Recommended Games Register maintained by the Directorate General of Information Technologies Applications under MOCIT, or DGITA. On the other hand, if a game contains pornographic material, promotes gambling using real or virtual money, or contradicts prevailing laws, such game will not be rated and will not be included in the Recommended Games Register. DGITA may, based on a recommendation from the Games Classifications Committee, adjust the rating of a game if the operator of the game fails to give an appropriate rating. In addition, such operator could face claims from the public should its rating be deemed to mislead users or parents, and DGITA may adjust the rating accordingly. The games that have been classified are displayed on igrs.id, the official site maintained by DGITA.

Regulations on E-commerce

General Regulation on E-Commerce

On November 25, 2019, the Indonesian government enacted Government Regulation No. 80 of 2019 on Commerce through Electronic Systems, or the E-commerce Regulation. This regulation governs not only the restrictions and requirements for e-commerce sellers, but also e-commerce platform providers and intermediary service providers. See below for more details about the liability of platform providers and intermediary service providers under the E-commerce Regulation. Further, this regulation also regulates, among others, e-contracts, online advertisements and personal data protection in the e-commerce sector. This regulation governs local e-commerce sellers, as well as foreign e-commerce sellers if they actively provide their services to Indonesian consumers. The implementing regulation of the E-commerce Regulation, the Ministry of Trade Regulation No. 50 of 2020 on the Requirements for Business Licensing, Advertising, Development, and Supervision of Businesses in Electronic Commerce further provides that a domestic e-commerce platform must obtain an e-commerce trade business license or Surat Izin Usaha Perdagangan Melalui Sistem Elektronik, while a local merchant must obtain a business license that is relevant to their business activities. Applications for both licenses can be submitted online via the Online Single Submission portal. We believe we currently possess the necessary license to operate our Shopee business in Indonesia.

Governance of Electronic Information and/or Documents

General obligation of the government to prevent the dissemination of prohibited content is explicitly provided under Law No. 11 of 2008 on Electronic Information and Transaction as amended by Law No. 19 of 2016, or the Electronic Information and Transaction Law. Replacing the MOCIT Regulation No. 19 of 2014 on Controlling Internet Websites Containing Negative Content, on November 24, 2020, the Indonesian government enacted MOCIT Regulation No. 5 of 2020 on Private Electronic Systems, or the Private Electronic Systems Regulation, which revoked the previous MOCIT regulation on negative content. Under the new regulation, all digital platforms that fall within the private electronic system provider category, including platforms that provide offers and/or trade of goods and/or services, financial transaction services, and paid content to users’ devices, are required to ensure that its platform does not contain and facilitate the dissemination of prohibited content. Prohibited content includes those that violate the prevailing law, disturb members of the public and public order, and provide access to or information to access prohibited content. If prohibited content is found on a digital platform, the platform operator must take down the prohibited content identified in a written notice from MOCIT no later than 24 hours upon receiving such notice. If the content is related to terrorism, child pornography, or any other content that may disturb public order, the take down request will be considered as urgent and must be concluded within four hours upon receiving notice from MOCIT.

56
Failure to take down prohibited content within the specified time period would, amongst others, cause MOCIT to block the public’s access to the platform. Upon removal of the prohibited content, the digital platform operator or the relevant ministry or institution may submit a written request to MOCIT to lift the block on the platform.

Limitations and Liabilities of Platform Operators and E-commerce Merchants

The E-commerce Regulation provides for certain limitations of liability for e-commerce platform providers. E-commerce platform providers and intermediary service providers are discharged from liability for any illegal third-party content found on their platform if the relevant provider has acted expeditiously to remove or disable access to such content after being aware of its existence. However, the E-commerce Regulation does not provide any clear criteria of an expeditious response. As for an intermediary service provider, it will also be discharged from any liability for illegal content if such provider is acting as mere conduit, caching, hosting and search engine providers. More detailed guidelines are provided in the Private Electronic Systems Regulation, which specifically addresses the steps to be taken by user-generated-content platforms, or UGC platforms, to be discharged from liabilities arising from prohibited content uploaded by its users. First, the UGC platform operators must maintain a governance policy governing the rights and obligations of the users and the operator as well as the division of liability arising from the user’s content. Subsequently, the UGC platform must include a reporting feature which can be accessed by members of the public to file a claim or report on the existence of prohibited content on its platform. Further, UGC platform operators must provide the information relating to the uploader of the prohibited content to the relevant law enforcement agencies and comply with the mandatory take down timeline.

If UGC platforms like us fail to employ the abovementioned measures or to act in a timely or effective manner in response to user reports relating to listings or sales of prohibited content on the Shopee e-commerce marketplace, it may be subject to sanctions in the form of, amongst others, a temporary or permanent block.

Regulations on Personal Data Protection and Information Security

In December 2016, MOCIT enacted MOCIT Regulation No. 20 of 2016 on Personal Data Protection, or the Personal Data Protection Regulation. In October 2019, the Indonesian government enacted Government Regulation No. 71 of 2019 on the Provision of Electronic System and Transactions, or the Electronic System Regulation. Both regulations set out the rules governing the protection of personal data that are stored in electronic form. The regulations require any action taken in relation to personal data, including acquisition, processing, storage, transfer, disclosure and access, and erasure, to secure prior consent of the owner of such personal data. Further, under the Personal Data Protection Regulation, the electronic system providers are imposed with a comprehensive set of obligations, including: (i) certification of their electronic systems, (ii) adoption of internal data protection policies, (iii) provision of the option to the owner of personal data to choose whether or not such personal data may be used and/or revealed to third parties, (iv) using legal software, (v) designation of dedicated contact person for data protection matters, and (vi) pre and post notification to MOCIT for overseas transfer of personal data.

The Electronic System Regulation clarifies the data localization requirement by specifying that such requirement applies only to "public electronic systems providers" (i.e. central and regional executive, legislative, judicative bodies and any other bodies established pursuant to a statutory mandate, and entities appointed by the public bodies to operate electronic systems on their behalf). Meanwhile, a private provider can choose whether to process and/or host its electronic systems and data onshore or offshore. Regardless of the location, such provider must ensure that its electronic systems and data are accessible to the authority. However, this flexibility does not apply to a private operator in the banking and financial services sectors.

The Electronic System Regulation also elaborates the right of a data subject to request the removal of any data pertaining to them that are no longer relevant, which is popularly known as "the right to be forgotten." There are two types of the right to be forgotten, which is the right to erasure and the right to delisting. The latter can only be requested based on a court's order.

Electronic system providers are also required to notify the personal data owner in the case of any breach involving his/her personal data no later than 14 days subsequent to the occurrence of the breach. If we fail to comply with the Electronic System Regulation or Personal Data Protection Regulation, we may be subject to sanctions in the form of warnings or written reprimands, temporary suspensions, or may be blacklisted.

57
Regulations on Consumer Protection

Consumer protection in Indonesia is regulated under Law No. 8 of 1999 on Consumer Protection, or the Consumer Protection Law, which became effective on April 20, 2000. It is the first comprehensive law devoted to protecting the rights of and promoting the recourses available to, users of both goods and services. The law details activities and circumstances that are prohibited such as disclosing incorrect and unclear information regarding the services rendered or promoting false advertising. Violations of the Consumer Protection Law may result in an administrative and/or criminal sanction such as monetary compensation or an imprisonment sanction.

In addition to the above, the E-commerce Regulation also requires an e-commerce business operator to provide certain customer service mechanism for its consumers, including contact number and email address, and resolve any report of damages by its consumers to the Ministry of Trade. Merchants and e-commerce platform providers are also required to give their consumers at least two days to return the purchased goods and/or services or to carry out a cancellation, starting from the time when the goods and/or service is received by the consumer. However, the return of goods and/or services or cancellation may only be conducted if such return or cancellation fulfils certain criteria, among others, if the goods and/or service is damaged or has expired. E-commerce platform providers are also required to provide a refund mechanism for cancellation of a purchase. Failure to comply with the aforementioned requirements may result in administrative sanctions ranging from written reprimands to revocation of the business license.

Regulations on Electronic Money and Electronic Wallet

On July 1, 2021, Bank Indonesia enacted Bank Indonesia Regulation No. 23/6/PBI/2021 on Payment Service Providers, or the Payment Service Providers Regulation, which regulates the requirements and restrictions for all payment service providers in Indonesia, or PSPs. Previously, licenses for PSPs are determined based on whether a payment service provider provides their services on a front-end basis (e.g. e-money, e-wallet, and payment gateway providers) or a back-end basis (e.g. switching, clearing, and settlement providers). However, upon enactment of the Payment Service Providers Regulation, payment system service licenses are reclassified so that they are based on the specific activities provided by a payment service provider. The Payment Service Providers Regulation divides payment service providers licenses into three categories, i.e. category 1, category 2, and category 3. Category 1 license is required for PSPs that conduct the following activities: (i) administration of fund sources; (ii) provision of information on fund sources; (iii) payment initiation and/or acquiring services; and (iv) remittance services. Category 2 license is required for PSPs that conduct the activities under items (ii) and (iii) only, and category 3 license is required for PSPs that provide remittance services and/or other activities determined by Bank Indonesia.

Under the prevailing Indonesian laws and regulations, electronic money or e-money is defined as a payment instrument (i) issued on the basis of the source of funds being denominated in Rupiah that is deposited in advance to the e-money issuer, (ii) where the source of funds denominated in Rupiah is stored electronically in a server or a chip for purposes of transferring funds, and (iii) where the value of the e-money managed by the issuer will not be considered as savings under the banking regulations. The Payment Service Providers Regulation also recognizes two types of e-money systems: namely (i) closed loop systems, where the e-money can only be used as a payment instrument for goods and/or services provided by the e-money issuer, and (ii) open loop systems, where the e-money can be used as a payment instrument for goods and/or services provided by third party providers. A closed loop e-money provider which issues floating funds less than IDR1 billion (US$70,038) is exempted from the licensing requirement. An e-money provider may offer features such as user registration, deposit top-up and transaction and bills payment, while funds transfer, cash withdrawal and any additional features (upon approval from Bank Indonesia) are only available for open loop and licensed e-money providers. Unregistered users can deposit up to IDR2 million (US$140) in e-money value, whilst registered users may deposit and use up to IDR10 million (US$700). We currently have the e-money license in Indonesia.

With respect to reporting obligations, both e-money and e-wallet providers are obliged to submit periodical and incidental reports to Bank Indonesia. The periodical reports consist of daily, monthly and annual reports, as well as a report on the result of independent audit on information system and security testing. Incidental reports include report of data and information in documents submitted when applying for a license to Bank Indonesia, results of independent audit on information system in case of any significant changes, any problems in the payment transaction processing, change of capital, shareholding, control, and/or management, and force majeure events. Any failure to comply with the regulations governing payment service providers may result in reprimands and monetary fines; and, depending on the severity of the non-compliance, may also result in temporary suspension of activities and/or revocation of the relevant license.
 
58
Regulations on Payment Systems

In December 2020, Bank Indonesia issued Regulation No. 22/23/PBI/2020 of 2020 on Payment Systems, or Payment Systems Regulation, which became effective on July 1, 2021. The Payment Systems Regulation is intended to be an “umbrella” regulation that provides a regulatory framework for the Indonesian payment systems industry.

The Payment Systems Regulation categorizes non-bank payment institutions into two categories, namely PSP and payment infrastructure providers, or PIP. PSPs include most institutions providing front-end services to end-consumers such as e-money issuers, acquirers, payment gateway services providers, fund transfer/remittance services providers. PIPs are generally institutions which facilitate clearing and settlements or back-end services, between PSPs or between other PIPs.
 
PSPs and PIPs will be classified based on transaction size, interconnectivity, complexity, and whether it is replaceable, according to the regulation. Bank Indonesia will assess the existing licensed players to: (i) reclassify the licensee, and (ii) ensure the capability of the licensee to fulfil the new requirements, particularly on capital and financial, risk management, and IT system capability aspects. Based on the assessment, Bank Indonesia will convert the license into a new license. The licensee will need to make a statement of commitment to comply and afterwards, the licensee will be given a transition period of two years to fulfil with the requirements.
 
In addition, by issuing the Payment Systems Regulation, Bank Indonesia becomes the first regulator in Indonesia that adopts a new approach to regulating foreign direct investment by decoupling economic and voting rights, which could affect foreign investors in payment sectors. Bank Indonesia permits foreign investors in a PSP to hold up to 85% economic interests, from previously 49%, but at the same time, Bank Indonesia disregards economic interests in determining control. A shareholder in a PSP will be deemed to have control if it holds at least 51% voting rights in the provider, has the right to appoint members of management in the provider, and holds a veto right in the provider's general meeting of the shareholders. The regulation also adds that only domestic parties can hold these rights. This means that while a foreign investor can hold the majority economic interests in a service provider, a domestic shareholder must remain the controller of such provider. On the other hand, Bank Indonesia does not differentiate between economic interests and voting right in a PIP where a foreign investor can only hold up to 15% economic interests. These restrictions are also applicable to existing providers, if there is a change in the foreign shareholding in such provider after July 1, 2021.

The Payment Systems Regulation expressly prohibits PSPs from: (i) accepting cryptocurrency in a payment transaction processing, (ii) processing payment transactions with virtual currency as the source of funds, and/or (iii) linking virtual currency with payment transactions processing.

Regulations on Online Lending

Online lending in Indonesia is divided into two categories, namely off-balance sheet and on-balance sheet. Whilst online on-balance sheet lending businesses are still subject to the financing company regulations that are applicable to its offline counterparts, online off-balance sheet lending or peer-to-peer lending is regulated specifically under the Financial Services Authority (Otoritas Jasa Keuangan/OJK) Regulation No. 77/POJK.01/2016 of 2016 on Lending and Borrowing Services based on Information Technology or Peer-to-peer Lending Regulation. We have the requisite license to conduct the lending business we currently do in Indonesia.
 
Regulations on Banking

Banking in Indonesia is regulated under Law No. 7 of 1992 regarding Banking issued on March 25, 1992, as amended by Law No. 10 of 1998, or the Banking Law. The Banking Law governs banks’ types and businesses, licensing, legal form and ownership, management structure, and bank secrecy. In 2020, the Financial Services Authority issued Regulation No. 12/POJK.03/2020 TAHUN 2020 on Consolidation of Commercial Banks which requires all banks to fulfil a minimum core capital of at least IDR3 trillion (US$210 million) by December 31, 2022. Moreover, OJK revoked the Financial Services Authority Regulation No. 6/POJK.03/2016 TAHUN 2016 on Business Activities and Branch Offices Based on Core Capital of Banks and enacted the Financial Services Authority Regulation No. 12/POJK.03/2021 on Commercial Banks or the Commercial Banks Regulation on October 30, 2021. The Commercial Banks Regulation amends the four categories of banks called “Buku” to “Bank Categories Based on Core Capital (Kelompok Bank berdasarkan Modal Inti)” or “KBMI.” Banks are divided into four KBMI categories, namely: (i) KBMI 1 with core capital equal or less than IDR6 trillion (US$420 million), (ii) KBMI 2 with core capital between IDR6 trillion (US$420 million) and IDR14 trillion (US$981 million), (iii) KBMI 3 with core capital between IDR14 trillion (US$981 million) and IDR70 trillion (US$5 billion), and (iv) KBMI 4 banks with core capital of more than IDR70 trillion (US$5 billion).

59
Regulations on Intellectual Property Rights

Trademark and Geographical Indication Law

Before the end of 2016, the Indonesian House of Representatives enacted the Law No. 20 of 2016 on Trademark and Geographical Indication, or the Trademark and Geographical Indication Law. The new Trademark and Geographical Indication Law has expanded upon the scope of trademark protection and adopted the Madrid Protocol provisions for trademark registration in Indonesia.

As of the end of 2020, the enactment of Law No. 11 of 2020 concerning Job Creation shortens the trademark registration process and inserts an additional qualification/consideration for the trademark examiner in determining whether a trademark application can be registered. In addition, the Trademark and Geographical Indication Law recognizes two types of international trademark registration application under the framework of Madrid Protocol: an application originating from Indonesia to an International Bureau which is filed through the Directorate General of Intellectual Properties under the Minister of Law and Human Rights, or an application addressed to Indonesia as the receiving office from an International Bureau. To be able to file an application in Indonesia for the international registration of a trademark through the Madrid Protocol, the applicant either must have applied for registration of the trademark in Indonesia or already owns the trademark in Indonesia.

Regulations Relating to Copyrights

Copyrights in Indonesia are regulated under Law No. 28 of 2014 on Copyrights, or the Indonesia Copyright Law. Indonesia adopts the declarative system of copyright protection whereby a copyright is an exclusive right of a creator of content which arises automatically after a creation appears in a concrete form. The Indonesia Copyright Law protects creations in the field of science, arts and literature, which includes, among others, computer programs, video games, photography, songs or music with or without lyrics, and all forms of art.

Regulations on Anti-money Laundering and Prevention of Terrorism Financing

Prevention and Eradication of Money Laundering

Law No. 8 of 2010 on Prevention and Eradication of Money Laundering regulates the types of transactions which are required to be reported to the Indonesian Financial Transaction Reports and Analysis Center, or PPATK, and the entities responsible to report such transactions. Under this law, any party who conceals or disguises the origin, source, location, allocation, assignment, or actual ownership or assets known or reasonably suspected to be proceeds of crimes may subject to monetary sanction of up to IDR5 billion (US$350,189) imprisonment of up to 20 years. Financial service providers must comply with know-your-customer principles and report suspicious financial transactions that it believes is related to money laundering to the PPATK. The reporting party is required to report to PPATK any suspicious financial transactions, and any transaction entered into with its customers having a minimum amount of IDR500 million (US$35,019), or an equivalent value in other currencies, and/or any financial transaction involving the transfer of funds from and to other countries, no later than 14 business days after the transaction is conducted.

Failure to submit the report may subject the reporting party to administrative sanction(s) which will be imposed by the supervisory and regulatory body in the form of a warning letter, public announcement on the action or sanction and/or an administrative penalty.

60
Prevention and Eradication of Terrorism Financing

Law No. 9 of 2013 on the Prevention and Eradication of Terrorism Financing was enacted in order to prevent the funding of terrorists. Under this regulation, an act of terrorism financing is defined as direct and/or indirect acts in order to provide, collect, grant, or loan funds to persons that knowingly would use the funds to conduct terrorist acts. Companies that fund terrorism in Indonesia may face large monetary fines, have their assets seized and their permits revoked. Moreover, such companies may also be dismantled or expropriated by the government. Financial service providers must comply with know-your-customer principles and report suspicious financial transactions that it believes is related to terrorism to the PPATK. Failure to do so will result in fines of up to IDR1 billion (US$70,038). Financial service providers that provide fund transfer services must also request the sender of funds to present identification and information explaining the purpose of the fund transfer and must keep a record of all transactions for at least five years. Funds of the alleged financers of terrorism may be frozen upon the request of the PPATK, investigators, public prosecutors, a judge, and other legally designated parties.

Regulations on Labor

Under Law No. 13 of 2003 on Manpower as amended by Law No. 11 of 2020 on Job Creation, or the Indonesia Manpower Law, we are not allowed to pay our employee wages below the minimum wage stipulated annually by the relevant provincial government. In certain conditions, a governor may set the minimum wage for regencies or municipalities in their respective provinces. The minimum wage is set in accordance with the economy and employment situation of the relevant province. If we fail to abide by requisite minimum wage regulations in the Indonesia Manpower Law, our directors may be liable to a term of imprisonment of no less than one year and up to four years. Moreover, we may also be subject to a fine of no less than IDR100 million (US$7,004) and up to IDR400 million (US$28,015).

Indonesia has adopted social protection and social welfare programs for employees who are working in Indonesia under Law No. 24 of 2011 on the Social Security Agency as amended by Law No. 11 of 2020 on Job Creation, or the Indonesia Social Security Agency Law. The Indonesia Social Security Agency Law establishes two social welfare programs, namely, the healthcare social security insurance and employment social security. Employment social security covers occupational accident security program, death security program, old-age security program, pension security program, and job-loss security program. Under the Indonesia Social Security Agency Law, an employer is required to register itself and its employees as employment social security participants. If an employer fails to comply with this obligation, it will be subject to a written warning, fines and/or exclusion from certain public services, which relate to business-related licensing, license required to participate in project tenders, license to employ foreign workers, license to outsource company, and building permit. The Indonesia Social Security Agency Law further stipulates that an employer that violates its obligation to provide the requisite financial contributions to healthcare social security insurance and employment social security will be subject to up to eight years of imprisonment and fines of IDR1 billion (US$70,038). In addition, every person, including foreign nationals, who is employed for at least six months in Indonesia, must participate in the social security programs in Indonesia.
 
Taiwan
 
Regulations on Foreign Investment
 
Although there have been significant economic and cultural interactions and relationships established between Taiwan and the PRC, there have been and remain tensions between the governments of Taiwan and the PRC regarding the international political status of Taiwan. Due in large part to these tensions, Taiwan has imposed restrictions on investments by PRC investors.
 
61
Investment in Taiwan by PRC investors is governed by the Measures Governing Investment Permits to the People of the Mainland Area, or the Measures, which was last amended on December 30, 2020, and promulgated by the Ministry of Economic Affairs of Taiwan, or the MOEA. PRC investors refer to PRC individuals, juristic persons, organizations and other institutions and PRC invested companies from other jurisdictions, or collectively, PRC investors. “PRC invested companies from other jurisdictions” refer to those entities incorporated outside of the PRC and invested by PRC individuals, juristic persons, organizations and other institutions that (i) directly or indirectly hold more than 30% of the shares or capital of such entities (each intermediate holding company shall be separately assessed based on this 30% test to determine whether it is deemed a PRC invested company from other jurisdictions), or (ii) have the ability to control such entities. Under applicable regulatory guidance, “control” is defined to include: (i) having the ability to hold more than 50% of the voting shares under agreement with other investors; (ii) having the ability to control the financing, operation and personnel appointment and removal of the company according to laws or agreements; (iii) having the ability to appoint or remove more than half of the members of the board of directors or more than half of the key members of the other organization that is able to direct a company’s operation, and such company is controlled by the board of directors or such other organization mentioned above; (iv) having the ability to direct more than 50% of the voting power in the board of directors or more than 50% of the voting power in the other organizations that is able to direct a company’s operation, and such company is controlled by the board of directors or such other organization mentioned above; or (v) other indicia of control as set forth in the International Financial Reporting Standards or Enterprise Accounting Standards promulgated by the Financial Accounting Standards Committee of the Accounting Research and Development Foundation of the Republic of China. PRC investors are required to apply for an approval before engaging in the following investment activities: (i) holding the shares issued by or making capital contribution in a company, sole proprietorship, partnership or limited partnership in Taiwan, exclusive of a single or accumulated investment that is less than 10% of the shares in a company that is listed on a stock exchange or traded on an over-the-counter market or emerging stock market in Taiwan; (ii) setting up a branch office, sole proprietorship, partnership or limited partnership in Taiwan; (iii) providing loans to invested companies invested by (i) and (ii) for more than one year; (iv) having the ability to control a sole proprietorship, partnership, limited partnership or company in Taiwan that is not listed and traded on a Taiwanese stock exchange, an over-the-counter market or emerging stock market according to agreements or other methods; or (v) a PRC invested companies from other jurisdictions acquires business or assets of a Taiwanese company that is not list and traded on a Taiwanese stock exchange, an over-the-counter market or emerging stock market. In addition, if a PRC investor is a juristic person, organization, or other institution invested by (a) a “political party,” military, administrative or political agency of PRC, or (b) PRC invested companies from other jurisdictions invested by the agencies listed in item (a) above, the Taiwan authorities may restrict or prohibit such PRC investor from investing in businesses in Taiwan. Certain statutory business categories, such as computer recreational activities, software publication, third party payment and general advertising services, are not listed as permitted in the Positive Listings. PRC investors are not allowed to invest in a Taiwan company that operates businesses in such statutory business categories.

Before investing in Taiwan in accordance with the Measures, PRC investors investing in a Taiwan company that operates businesses in the statutory business categories listed as permitted in the Positive Listings are required to apply for prior approval from the MOEA.
 
In case of being deemed non-compliant with the above-mentioned laws and regulations, the Taiwan authorities may take a range of actions, including:
 

 •
imposing fines between NT$120,000 (US$4,326) to NT$25,000,000 (US$901,226) and further fines if the non-compliance is not rectified as ordered;
 

 •
ordering the violator to reduce any direct or indirect ownership or control by PRC investors;
 

 •
requesting the violator to divest some or all of its investment or control in its invested entities in Taiwan;
 

 •
suspending the rights of shareholders; and
 

 •
discontinuing the operations, and revoking the business licenses of its invested entities in Taiwan.
 
Foreign Investors
 
Foreign investments in Taiwan are governed by the Statute for Investment by Foreign Nationals, last amended on November 19, 1997. Foreign investors may invest by holding shares issued by a Taiwanese company, contributing to its registered capital, establishing a branch office, a proprietary business or a partnership in Taiwan, or providing loans to the invested business for a period exceeding one year, provided that the business items of the invested Taiwanese company are not in a negative list promulgated by the MOEA from time to time.
 
62
Financial Support Provided by Offshore Entities
 
According to the Statute for Investment by Foreign Nationals, last amended on November 19, 1997, offshore entities can provide loans for a period less than one year to any Taiwanese companies that such offshore entities do not hold any equity interest in without any approval from government authorities, subject to certain foreign exchange approval requirements in connection with the remittance of foreign currency in excess of certain amount by Taiwanese entities. There is no maximum limitation on the amount of loans a Taiwanese company may receive from an offshore entity. Moreover, based on current laws and regulations, there is generally no limitation on guarantees made by an offshore entity to a Taiwanese company.
 
Regulations on Foreign Exchange
 
Foreign exchange matters are generally governed by Taiwan’s Foreign Exchange Regulation Act, last amended on April 29, 2009, and regulated by the Ministry of Finance of Taiwan, and the Central Bank of the Republic of China (Taiwan). Authorized by the Foreign Exchange Regulation Act, the Central Bank of the Republic of China (Taiwan) has promulgated the Regulations Governing the Declaration of Foreign Exchange Receipts and Disbursements or Transactions, last amended on June 29, 2021, in order to deal with the declaration of foreign exchange receipts, disbursements or transactions involving NT$500,000 (US$18,025) or more or its equivalent in foreign currency.
 
Under existing laws and regulations, foreign exchange approvals must be obtained from the Central Bank of the Republic of China (Taiwan) on a payment-by-payment basis. A single remittance by a company with an amount over US$1 million or its equivalent in foreign currency shall be reported and documents supporting the accuracy of such report shall be provided to the bank handling such remittance before the remittance is conducted. In addition, remittances by a company whose annual aggregate amount exceeds US$50 million or its equivalent in foreign currency may not be processed without the approval of the Central Bank of the Republic of China (Taiwan). Although such approvals have been routinely granted in the past, there can be no assurance that in the future any such approvals will be obtained in a timely manner, or at all.
 
Regulations on Dividend Distributions
 
Dividend distributions by companies incorporated in Taiwan are governed by the Taiwan Company Act. Under the Taiwan Company Act, with respect to a corporate entity, dividends shall only be distributed after the 10% of annual net income (less prior years’ losses, if any, and applicable income taxes) is set aside as a legal reserve until the accumulated legal reserve equals the paid-in capital of such company. In addition, a foreign company’s Taiwan branch, such as our digital entertainment business entity in Taiwan, is not entitled to distribute dividends or make other distributions and can only remit the profits to its holding company in accordance with foreign exchange control regulations after satisfying the relevant income tax obligation in Taiwan.
 
Regulations on Information Technology and Intellectual Property Rights
 
Taiwan does not have a specific statute with respect to regulations governing information technology. The related regulations are mainly dispersed within the Electronic Signatures Act promulgated on November 14, 2001. The main purpose of the Electronic Signatures Act is to encourage the use of electronic transactions, ensure the security of electronic transactions, and facilitate the development of electronic commerce. According to the Electronic Signatures Act, documents may be maintained in electronic form, and an electronic signature may be used with the consent of the other party. In addition, a non-government agency shall not collect or process specific personal information unless it has a legitimate specific purpose and complies with all of the conditions provided in the relevant laws.
 
Intellectual property rights are protected primarily through the Copyright Act (last amended on May 1, 2019), the Patent Act (last amended on May 1, 2019), the Trademark Act (last amended on November 30, 2016) and the Trade Secrets Act (last amended on January 15, 2020) in Taiwan.
  
63
Regulations on Imported Games and Game Operations

Operations of online games are regulated by the Regulations on the Rating of Game Software, last amended on May 23, 2019. Game operating companies and agents of game software need to clearly label the rating and warning language on the packaging or webpages of the game according to the rating system under the regulations and register the rating level and plot of such game software in the database of the competent authority to allow for rating level searches prior to the earliest date on which the game is made available for public purchase. In the event the rating level of a game is not labeled properly according to the relevant regulations, the game operating company or agent may be subject to fines, and may be subject to repeated penalties if such non-compliance is not rectified within the stipulated periods.
 
In addition, according to the Recording of Matters in the Standard Contracts of Online Games promulgated by the Executive Yuan on December 13, 2007 and last amended on October 8, 2018, game operating companies need to label the following information on their (a) game websites, log-in page of the game or checkout page; and (b) the packaging of their games: (i) the rating level and the age groups that are prohibited or suitable for the game, (ii) the minimum system requirements for running the game, (iii) payment information for safety systems provided within the online games (if any) and whether such safety systems are free or not, and (iv) information and certain warning language regarding in-game activities, rewards and prizes.
 
Regulations on E-commerce
 
As there are no specific regulations in Taiwan governing e-commerce businesses, operation of e-commerce in Taiwan is regulated by a number of legislations, such as Personal Data Protection Act, the Act Governing Electronic Payment Institutions, and Consumer Protection Act. See “—Regulations on E-payment Services” and “—Regulations on Data Protection and Information Security” below. The regulation on e-commerce by Consumer Protection Act is generally implemented through the Recording of Matters in the Standard Contracts of Retail Business and Other Online Transactions. According to the Recording of Matters in the Standard Contracts of Retail Business and Other Online Transactions, last amended on July 15, 2016, online retail business is required to present certain information on their website, such as product information, delivery method and location, and mechanism for resolution of consumer disputes.

Regulations on E-payment Services
 
Under the Act Governing Electronic Payment Institutions promulgated on February 4, 2015, effective as of May 3, 2015 and last amended on January 27, 2021 (such amendments became effective as of July 1, 2021), an “electronic payment institution” means a company approved by the competent authority to operate the following businesses and certain ancillary or derivative businesses as prescribed under the Act Governing Electronic Payment Institutions: (i) collecting and making payments for real transactions as an agent, (ii) accepting deposits of funds as stored value funds, (iii) conduct small amount of foreign exchange, and (iv) conduct the purchase and sale of the foreign currencies and the currencies of PRC, Hong Kong or Macau. However, a company which (i) only engages in the business of collecting and making payments for real transactions as an agent; (ii) the total balance of funds it collects/pays and keeps does not exceed NT$2 billion (US$72 million) in the average daily amount of a year; and (iii) does not accept deposits of funds as stored value funds, or transfer funds between e-payment accounts is not considered an electronic payment institution. If the total balance of funds such company collects/pays exceed NT$2 billion (US$72 million) in the average daily amount of a year, or such company conducts either accepting deposits of funds as stored value funds, or transferring funds between e-payment accounts, then such company shall apply for certain license to qualify as an electronic payment institution.
 
Regulations on Data Protection and Information Security
 
The main regulation governing the protection of personal data in Taiwan is the Personal Data Protection Act, last amended on December 30, 2015. The Personal Data Protection Act governs the collection, processing and use of personal information in order to prevent abuse of personal data by other parties. Companies that seek to collect, process and use personal information need to disclose the name of the party collecting the personal information and the purpose of collecting the personal information subject to the user’s consent, as appropriate. Data subjects should also be informed of their rights under the Personal Data Protection Act and how they can exercise such rights. Our digital entertainment and e-commerce businesses are required to comply with the Personal Data Protection Act while collecting, processing, transferring, and using the personal information of our users. Failure to comply with the Personal Data Protection Act will give rise to fines and criminal liability.
 
64
Regulations on Anti-money Laundering and the Prevention of Terrorism Financing
 
According to the Money Laundering Control Act of Taiwan, which was last amended on November 7, 2018, the scope of the definition of money laundering includes the following behaviors: (i) knowingly disguises or conceals property or property interests obtained from a serious crime or transfers or changes the specific gain from criminal actions to assist others to escape from criminal indictment; (ii) covers or hides the nature, source, flowing, location, ownership, disposition and other interest of gains of a particular crime; and (iii) receives, possesses or uses the gain of a particular crime. We will continue to closely monitor regulatory developments in order to continue to comply with the anti-money laundering and prevention of terrorism financing regulations.
 
Regulations on Labor
 
According to the Labor Standards Act of Taiwan, last amended on June 10, 2020, employers are not allowed to terminate employment contracts without cause. Further, the mere transfer of ownership of a company is not sufficient grounds for laying-off employees. Only when the employer is to be dissolved due to transactions under the Business Mergers and Acquisitions Act can such employer terminate the employment agreements with the employees that are not offered employment by the surviving or assigned company. Under the Labor Standards Act and the Labor Pension Act of Taiwan, employers are required to contribute no less than 6% of an employee’s monthly salary into a specific account as part of the employee’s pension. Under the Labor Insurance Act of Taiwan, employers should withhold and pay for certain statutory percentages of the labor insurance premiums for employees aged between 15 and 65. In addition, under the National Health Insurance Act of Taiwan, employers are required to pay for a certain statutory percentage of the employees’ health insurance premium.
 
Vietnam
 
Regulations on Foreign Investment
 
Foreign investment into Vietnam is regulated by both domestic legislation and international agreements, with the primary regulations being the Law on Investment and Vietnam’s WTO commitments. Foreign investment is generally divided into three categories: unrestricted, restricted, and prohibited. With respect to the “restricted” category, restrictions can take the form of a specific foreign ownership ceiling in a foreign-invested company, a general requirement to enter into a joint venture with a Vietnamese party with no mandated maximum foreign ownership ceiling, or the requirement to obtain certain government approvals for foreign ownership with respect to the industries that the Vietnam government has not committed to opening to foreign investment. For example, foreign ownership in companies engaging in online game business may not exceed 49% following Vietnam’s WTO commitments (or 51% following the application of Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP), and companies with foreign ownership engaging in e-payment or e-commerce business have to obtain certain government approvals. We have obtained approvals from competent authorities of Vietnam for direct ownership of equity interests in our online game, e-commerce and e-payment businesses as a foreign investor, including approval for 100% direct ownership in our e-commerce business.
 
On June 17, 2020, the National Assembly of Vietnam adopted the Law on Investment 2020, which came into effect on January 1, 2021. Under the Law on Investment 2020, the investment registration authority of Vietnam could terminate an investment project in whole or in part if the investor conducted investment activities on the basis of a false civil transaction, which is a transaction falsely entered into by transacting parties for the purpose of concealing other transactions or evading responsibilities to a third person.
 
Financial Support Provided by Offshore Entities
 
Financial support in the form of loans, direct cash injections and guarantees provided by an offshore entity to a Vietnam entity is permitted under Vietnamese laws, including Vietnam’s foreign exchange control regime. Loans provided by offshore lenders to Vietnam entities with a term of more than 12 months must be registered with the State Bank of Vietnam and must satisfy certain conditions with respect to the term, type and purpose of the loan. There is no other restriction or dollar amount limitation imposed on any of the foregoing financial support mechanisms.
 
65
Regulations on Foreign Exchange
 
Vietnam does not possess a fully liberalized foreign exchange control regime, and the use, exchange and remittance of foreign currencies are regulated by the Ordinance on Foreign Exchange Control and its guiding instruments, along with miscellaneous regulations on inward investment.
 
The use of, and exchange of foreign currencies for, Vietnamese dong, is broadly dependent on whether such foreign currencies are used for capital investment purposes or general transactional purposes. Capital investment comprises both indirect investment and direct investment, with direct investment generally defined as any foreign investment where (i) foreign investor(s) establish a corporate entity and is required to obtain an investment registration certificate, (ii) foreign investor(s) hold 51% or more of the charter capital following a merger, acquisition or restructuring, (iii) foreign investor(s) establish a project company to implement public-private partnership project(s), or (iv) foreign investor(s) hold 51% or more of the charter capital following the establishment of a corporate entity pursuant to specialized laws without being required to obtain an investment registration certificate. Foreign currencies and Vietnamese dong are permitted to be used for direct investments and only Vietnamese dong may be used for indirect investments. All capital investments into Vietnam, whether direct or indirect, must be made through specialized investment capital bank accounts, and any dividend distributions and returns of capital from such investments must be made through the same accounts. There are no foreign exchange control or remittance restrictions imposed on amounts held in such investment capital bank accounts, except for the requirement for supporting documents evidencing valid remittances.
 
Vietnamese dong held in current accounts can generally be freely exchanged for foreign currency and subsequently remitted offshore, provided that the origin of such amounts and the reason for the exchange and remittance are legitimate and legal. Contracts for the supply of goods or services entered into between a Vietnamese individual or company and a foreign company are one of the valid bases for such foreign currency exchange transactions.
 
Regulations on Dividend Distributions
 
In Vietnam, a company is generally allowed to pay dividends or distribute profits after it has settled all of its outstanding tax or other financial obligations, and set off previous losses, provided that the payment of the dividends will not result in the company being unable to discharge its debts and other liabilities.
 
Additionally, the relevant distributed dividend or profit is allowed to be repatriated at the end of the financial year, after the audited financial statements and the corporate income tax clearance have been submitted to the tax authority.
 
Regulations on Imported Games and Game Operations
 
According to Circular No.34/2013/TT-BCT, games are permitted to be imported into Vietnam. With regard to the publication of games, including electronic games, Vietnam’s WTO commitments and/or Vietnam’s CPTPP commitments allow foreign investors to provide electronic games only through a business cooperation contract or a joint venture company with a Vietnamese partner which is licensed to provide electronic games. Foreign investment into the joint venture company generally shall not exceed 49% following Vietnam’s WTO commitments and/or 51% Vietnam’s CPTPP commitments. See “—Regulations on Foreign Investment” above.
 
The operation of electronic games is mainly governed by Decree No. 72/2013/ND-CP, which regulates the management, provision and use of internet services and online information, and Circular No. 24/2014/TT-BTTTT of which several provisions are amended and supplemented by Decree No. 27/2018/ND-CP and Decree No. 150/2018/ND-CP, which provide further guidance to Decree No.72/2013/ND-CP. These regulations divide electronic games into the following categories: G1 games (simultaneous interactions among various players via a game server), G2 games (simultaneous interactions only between players and a game server), G3 games (simultaneous interactions among various players but no interactions between players and a game server), and G4 games (those downloaded from a network with no interaction among players or between players and the game server). Companies may operate G1 games after obtaining a License to Provide Game Services and, for each game the company offers, it also needs to obtain a Decision to Approve Game Content issued by the Ministry of Information and Communications of Vietnam. Companies may operate G2, G3 and G4 games after obtaining a Certificate of Registration of Game Service Provision and, for each game the company offers, it also needs to obtain an Acknowledgement of Announcement of Service Provision issued by the Agency of Broadcasting and Electronic Information.
 
66
Regulations on E-commerce
 
E-commerce businesses are mainly governed by the Law on E-Transactions, Decree No.52/2013/ND-CP, or Decree 52 of which several provisions are amended and supplemented by Decree No.85/2021/ND-CP, or Decree 85, Circular 47/2014/TT-BCT, or Circular 47, and Circular No.59/2015/TT-BCT, or Circular 59 of which several provisions are jointly amended and supplemented by Circular No.01/2022/TT-BCT.
 
According to Decree 85, companies that own e-commerce direct sale websites must notify the Ministry of Industry and Trade, or MOIT, of Vietnam of their establishment if such websites have an online ordering function. Companies that own e-commerce service provision websites, including e-commerce marketplace, online auction websites, and online promotion websites, must register with the MOIT for the establishment of such e-commerce platforms.
 
According to Circular 59, e-commerce mobile applications include (i) applications used for direct sale of goods and (ii) applications for provision of e-commerce services. Accordingly, a company with an application used for sale of goods, which includes an online ordering function must notify the MOIT; while a company with an application for the provision of e-commerce services must register with the said Ministry. However, a company with an application for both sale of goods and provision of e-commerce services must register to establish an e-commerce service provision website and register the e-commerce service provision application with the MOIT.
 
Our e-commerce business in Vietnam has made the requisite applications and notifications and obtained the requisite approvals for the provision of e-commerce services.
 
According to Decree No. 09/2018/ND-CP, or Decree 09, foreign owned entities that provide e-commerce services are also required to obtain a specific business license from the Department of Industry and Trade, or DOIT, where the head office of the entity providing e-commerce services is located. The licensing authority must seek approval of the MOIT before granting the license. In addition, under Decree 85, an approval from the Ministry of Public Security, which examines any national security impacts, must also be obtained by any foreign investors who have “control” in a company under the MOIT’s list on the top five e-commerce companies in Vietnam. Such list has not been released by MOIT as of the date of this annual report. Our e-commerce business in Vietnam is currently in compliance with the business licensing requirements under Article 50.1 of Decree 09. As a continuing licensing requirement under Decree 09, to ensure that we continue to comply with the said Decree, we have submitted the relevant application with the DOIT of Hanoi in November 2021, which is now in progress.
 
Regulations on E-payment Services
 
According to Decree No.101/2012/ND-CP, intermediary payment services include the provision of electronic payment facilities (such as financial switch services, electronic clearing services and electronic payment gateway services), payment support services (such as cash collection and cash payment services, support services for wire transfers and digital wallet services), as well as other intermediary payment services prescribed by the State Bank of Vietnam. Non-financial companies that wish to provide intermediary payment services are required to obtain a license for intermediary payment services. To obtain this license, companies must satisfy certain conditions, such as meeting minimum equity capital thresholds (50 billion Vietnamese dong, or approximately US$2.2 million) as well as receiving prior approval for its plan to operate the intermediary payment services.
 
Our digital financial services business in Vietnam has obtained the license for intermediary payment services for electronic payment gateway services, cash collection and cash payment services and digital wallet services.
 
Regulations on Data Protection and Information Security
 
Vietnam does not have a comprehensive data protection law. Instead, data protection provisions are prescribed across various legislation, which include the Vietnam Civil Code, the Law on Protection of Consumers’ Rights, the Law on Information Technology, the Law on E-commerce, etc. which are all issued by the National Assembly of Vietnam. While there is no unified definition, personal data may generally be defined as information that is adequate to accurately identify a data subject, covering at least one of the following types of information: full name, date of birth, ID number/passport number, profession, title, contact address, e-mail address, and telephone number. A subject’s right to privacy is protected by laws. Any collection, publication, processing, transfer to a third party or any other use of a subject’s personal information may require the consent of such subject.
 
67
On November 19, 2015, the Vietnam National Assembly issued the Law on Cyber Information Security, which sets forth regulations on cyber information security. Accordingly, individuals and companies must implement measures to assure the security of cyber information. For example, entities providing information technology services must comply with regulations on the storage and use of personal information, apply blocking and handling measures upon receipt of a notice that sending such information is illegal, and implement measures to allow recipients to refuse the receipt of information.
 
Regulations on Intellectual Property Rights
 
Intellectual property rights in Vietnam are governed by the Law on Intellectual Property, together with certain international agreements to which Vietnam is a signatory (such as Vietnam’s WTO commitments on Trade-Related Aspects of Intellectual Property, and the Madrid Agreement Concerning the International Registration of Marks).
 
In order for certain intellectual property rights to be recognized and enforceable in Vietnam, intellectual property owners must register those rights. Copyrights may be registered with the Department of Copyright of Vietnam (COV) but the registration is not compulsory. As a member of the Berne Convention, all copyrights will be protected automatically. Industrial property, such as patents, trademarks (except for well-known trademarks) and industrial design, must be registered with the National Office of Intellectual Property of Vietnam (NOIP) in order to be protected in Vietnam, although unregistered rights may be protectable under the laws of unfair competition or passing off. A well-known trademark may be protected based on the use without registration. From November 1, 2019, a trademark license is not required to be registered with NOIP in order to have validity against a third party.
 
Regulations on Anti-money Laundering and Prevention of Terrorism Financing
 
Vietnam’s Law on the Prevention of Money Laundering contains the primary anti-money laundering and prevention of terrorism financing regulations in Vietnam. It applies to all financial institutions and certain non-financial institutions engaged in specific business activities, which include offering games for prizes and payment services, such as those operated by our Vietnam VIEs.
 
The Department of Anti-Money Laundering established under the State Bank of Vietnam monitors and regulates Vietnam’s anti-money laundering regime. Entities subject to the anti-money laundering regime must report certain transactions to the Department of Anti-Money Laundering, including high-value transactions of no less than 300 million Vietnamese dong (US$12,962), suspicious transactions, and transactions involving companies or individuals in the countries and territories on the “black list” published by the Ministry of Public Security. Moreover, apart from the know-your-customer procedures required by Vietnamese law, entities subject to the anti-money laundering regime must perform an enhanced due diligence investigation on high-risk parties, which includes foreign individuals on the list of “politically influenced persons” provided by the State Bank of Vietnam or individuals or entities conducting transactions using new technologies that enable such persons to conduct transactions without meeting in person with a member or staff of the reporting subjects.
 
Regulations on Labor
 
Vietnam’s Labor Code, along with a number of guiding instruments, regulates the relationship between employers and employees in Vietnam, including both Vietnamese nationals and expatriates. It specifies that an employment contract must generally be made in writing. Pursuant to Labor Code 2012, there are broadly three types of labor contracts: indefinite term contracts, fixed term contracts, and temporary or seasonal contracts. However, in accordance with the new Labor Code 2019, effective January 1, 2021, there will be only two types of labor contracts, namely indefinite term and definite term contracts. An employer is only permitted to offer two consecutive fixed term contracts, subsequent to which the employment contract must be an indefinite term contract.
 
Vietnam has a particularly employee friendly labor law regime. Employees are entitled to statutory benefits payable by the employer, including health, social and unemployment insurance. Since 2009, unemployment insurance replaced the employer’s compensation of severance to an employee upon the termination of employment. Moreover, non-compete, non-solicitation and any other labor contract clauses which may be deemed to interfere in a person’s right to seek employment are difficult, if not impossible, to enforce.
 
68
Thailand
 
Regulations on Foreign Investment
 
Foreign investment in Thailand is regulated under the Thai Foreign Business Act, B.E. 2542 (1999), as amended, which states that a foreigner is restricted from engaging in certain businesses in Thailand as described in the Thai Foreign Business Act, such as advertising business, sale of food and beverage, and other service businesses which include e-payment services, unless an approval is granted by the Cabinet of Thailand or a foreign business license or a foreign business certificate is granted by the Ministry of Commerce of Thailand, depending on the type of business specified under the Annexes to the Thai Foreign Business Act, or there is an exemption under other specific laws.
 
The term “foreigner” under the Thai Foreign Business Act covers the following definitions:
 

 (i)
a natural person who is not a citizen of Thailand;
 

 (ii)
a juristic person not established in Thailand;
 

 (iii)
a juristic person established in Thailand with half or more of the shares constituting its capital held by (i) or (ii) or half or more of the total capital of such juristic person invested by (i) or (ii); and
 

 (iv)
a juristic person established in Thailand with half or more of the shares constituting its capital held by (i), (ii) or (iii), or half or more of the total capital of such juristic person invested by (i), (ii) or (iii).
 
Under the Thai Foreign Business Act, the definition of “foreigner” does not include references to relative voting arrangements, control of the management of a company or the economic interests of Thai and foreign nationals. The Thai Foreign Business Act only considers the immediate level of shareholding. As a result, no cumulative or look-through calculation is applied to determine the foreign status of a company when it has several levels of foreign shareholding. See “—C. Organizational Structure—Thailand Shareholding Structure” for more details about our shareholding structures in Thailand and “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to such structural arrangements.”
 
Regulations on Foreign Exchange
 
The legal basis for foreign exchange control in Thailand is derived from the Exchange Control Act, B.E. 2485 (1942), as amended, and the Ministerial Regulation No. 13 (B.E. 2497 (1954)).
 
In order to control the volume of foreign currency in Thailand and promote the stability of the Thai baht, foreign exchange regulations in Thailand state that all foreign exchange transactions, including those involving purchases, sales, exchanges and transfers, shall be conducted through commercial banks and through authorized non-banks, namely authorized money changers, money transfer agents, and companies, that are granted foreign exchange licenses from the Minister of Finance of Thailand. There is no limit on the remittance of foreign currency into Thailand; nevertheless, remittance of foreign currency to outside of Thailand is primarily limited to the value of the underlying transaction. Prior approval from the Bank of Thailand may be necessary if the transaction is beyond what is allowed under the regulations. Failure to comply with the laws and regulations will lead to a fine and/or imprisonment. We only remit foreign currency out of our Thailand operations through commercial banks and authorized non-banks with the requisite licenses and obtain separate approval from the Bank of Thailand for such transactions (if required).
 
69
Regulations on Dividend Distributions
 
Dividend distributions by private companies incorporated in Thailand are governed by the Civil Commercial Code and the Thai Revenue Code. Dividends shall only be distributed out of a company’s retained earnings. A company looking to distribute dividend is required to set aside at least 5% of its retained earnings into a legal reserve fund at the time the dividend is paid until and unless the legal reserve fund reaches 10% of the company’s registered capital.
 
The dividend distributed to a company’s shareholders is subject to a 10% withholding tax. The withholding tax may be exempt or reduced depending on the rules and regulations of the Thai Revenue Code and the double taxation agreements that Thailand has entered into with other countries.
 
Regulations on Game Businesses
 
Digital game and game distributing businesses, either for personal computers or mobile phones, are governed by the Film and Video Act B.E. 2551 (2008), as amended, or the Film and Video Act. Digital games are treated as videos under the Film and Video Act. Digital games to be exhibited, exchanged or distributed in Thailand shall be reviewed and approved by the Thailand Film and Video Censorship Committee. Updates and amendments to previously approved digital games will be regarded as new games and subject to the review and approval by the Film and Video Censorship Committee. Companies engaging in the game distributing business are required to obtain a game distributing license under the Film and Video Act unless the games are offered for free. We have arranged for obtaining the approvals of the games we exhibit and their updated versions from the Film and Video Censorship Committee regularly.
 
Regulations on E-commerce
 
Pursuant to the Commercial Registration Act, B.E. 2499 (1956), as amended, or the Commercial Registration Act, and the Notification Regarding Requiring Business Operators to Register their Businesses No. 11, issued by the Ministry of Commerce in 2010, or Notification No. 11, an e-commerce business operators, including the companies engaging in the sale and purchase of goods or services using electronic devices via the internet and e-marketplace, are required to register its business with the Ministry of Commerce of Thailand. We have registered our Shopee e-commerce marketplace business with the Ministry of Commerce.
 
Pursuant to the Direct Sale and Direct Marketing Act B.E. 2545 (2002), as amended, or the Direct Sale and Direct Marketing Act, companies engaging in direct sales or direct marketing are required to register its business with the Secretariat General of the Office of Consumer Protection or the officer appointed by the Secretariat General of the Office of Consumer Protection. We have made the required registration for our Shopee e-commerce marketplace in Thailand. Under the Direct Sale and Direct Marketing Act, companies that operate an online marketplace are direct marketing companies and are required to ensure that documentation evidencing sales and purchases of goods and services on its online marketplace are provided and delivered to consumers. Such documentation shall be in the Thai language and contain information including due date, place and method of payment, place and method of delivery of goods or services, termination of contract, product return method, product warranty and exchange policy in case of damage or defect. Moreover, consumers have the right to cancel their purchases made on an online marketplace within seven days from the date of receipt of the purchased goods or services.
 
In addition, direct marketing companies must comply with the relevant ministerial regulations and any applicable laws on consumer protection regarding their advertisements.
 
Regulations on Consumer Protection
 
Thailand’s consumer protection laws include the Consumer Protection Act B.E. 2522 (1979), as amended, the Unfair Contract Terms Act, B.E. 2540 (1997), the Product Liability Act B.E. 2551 (2008) and the Consumer Case Procedure Act B.E. 2551 (2008). Such laws aim to promote greater transparency and more accurate disclosures regarding products and services, adequate compensation if consumers are harmed by a product or service and fair transaction terms between sellers and buyers.
 
70
Regulations on E-payment Services
 
In Thailand, electronic transactions and e-payment services are governed by several governmental authorities and regulations including, the Electronic Transaction Commission, or the ETC, the Governor of the Bank of Thailand or his or her designee, the Electronic Transactions Act, B.E. 2544 (2011), as amended, and the Payment Systems Act, B.E. 2560 (2017).
 
Regulated e-payment services businesses include: (i) credit card, debit card, or ATM card services; (ii) electronic money services; (iii) service of receiving electronic payment for and on behalf of sellers, service providers or creditors; (iv) service of transferring money by an electronic means; and (v) other payment services which may affect financial system or public interest.
 
Our digital financial services business in Thailand has obtained e-payment service business licenses for (i) electronic money services, (ii) payment facilitating services, (iii) receiving electronic payments for and on behalf of sellers, service providers or creditors, and (iv) services for transferring money by electronic means.
 
Under the Payment Systems Act, an operator seeking to operate a regulated payment system or regulated payment service, which includes e-payment services, is required to have a license before operating such business. Under the Payment Systems Act, a business operator who has been granted e-payment business licenses under prior regulations must have filed its application for license or the application for registration with the Bank of Thailand before August 13, 2018. Upon filing such applications within the prescribed period, the operator is entitled to operate the businesses indefinitely until the Minister of the Ministry of Finance or the Bank of Thailand instruct otherwise. In this regard, the Bank of Thailand has issued several regulations regulating businesses operating regulated payment systems and services. As an existing license holder, we filed our application within the prescribed period and have obtained the new license under the Payment Systems Act to operate e-payment services.
 
Any non-compliance with the regulations regarding the regulated payment system or the regulated payment services will be subject to penalties, including monetary fines and criminal liabilities (imprisonment), and, depending on the severity of the non-compliance, may result in the suspension or revocation of the relevant licenses obtained under such regulations.
 
In addition, on January 18, 2021, the Bank of Thailand issued the Notification of the Bank of Thailand No. SorNorChor 1/2564 (2021) Regarding the Guideline on Supervision of Information Technology Risk in accordance with the Laws on Payment System requiring the designated payment services providers to arrange appropriate IT governance, IT security controls, and IT risk management. Under the Notification, the provisions regarding cyber hygiene became effective on April 29, 2021 and provisions regarding IT risk management became effective on January 29, 2022.
 
Regulations on Nano Financing
 
The Ministry of Finance promulgated the Notification Regarding Businesses that Require a Permit According to Section 5 of the Notification of the Revolution Council No. 58 (Nano Finance), or the Nano Finance Notification, which requires a nano finance business operator to obtain an approval from the Minister of Finance through the Bank of Thailand. The Nano Finance Notification also stipulates that loan proceeds from nano financing may only be used for business-related purposes in order to boost opportunities to small business owners. Our subsidiary engaging in digital financial services business in Thailand has obtained the nano finance license from the Ministry of Finance in accordance with the Nano Finance Notification.
 
We have approval to operate nano finance business in Thailand, which allows us to provide nano financing to Shopee buyers and sellers in Thailand. Our nano finance business is subject to certain restrictions imposed by the Bank of Thailand, the government authority overseeing nano finance businesses. The Bank of Thailand promulgated the Notification No. SorNorSor 13/2563 (2020) Regarding the Rules, Procedures and Conditions for the Operation of Nano Finance Businesses. Under such notification, operators of nano finance businesses should take into account the borrower’s ability to repay the loan (which is unsecured) and consider a credit limit for each borrower. The maximum credit limit shall not exceed THB100,000 (US$3,000), and the interest rate, together with fees and penalties, shall not exceed 33% per annum. In addition, the nano finance business operator shall maintain a debt-to-equity ratio of seven times or less throughout its operation.
 
71
Regulations on Personal Loans
 
Personal loan operators are subject to the Notification regarding Businesses that Require a Permit According to Section 5 of the Notification of the Revolution Council No. 58 (Supervised Personal Loan), as amended, and its implementation rules promulgated by the Bank of Thailand, or collectively, the Supervised Personal Loan Notification. According to the Supervised Personal Loan Notification, a company providing uncollateralized personal loans for no specific purpose to individuals is required to obtain a supervised personal loan business license. Our subsidiary engaging in the digital financial services business in Thailand has obtained a supervised personal loan business license from the Ministry of Finance in accordance with the Supervised Personal Loan Notification.
 
According to the Notification of the Bank of Thailand No. SorNorSor 12/2563 (2020), the Bank of Thailand, as the competent authority under the Supervised Personal Loan Notification, requires that the credit limit for personal loans should not exceed one and a half or five times the average monthly income of the borrower or the average monthly balance in the borrower’s deposit account, in the case where the average income is below or over THB30,000 (US$900) a month, respectively, at a financial institution for the six month period immediately before the date on which the personal loan is granted. The Bank of Thailand (Guidelines regarding the provision of financial assistance to the debtors affected by the COVID-19) has temporarily relaxed the loan limit of personal loans for customers until December 31, 2022 by up to two times in cases where the average monthly income of the borrower or the average monthly balance in the borrower’s deposit account is below THB30,000 (US$900) a month. Moreover, the interest rate for personal loans, together with fees and penalties, shall not exceed 25% per annum.
 
Regulations on Digital Lending
 
Any personal loan operators under the Supervised Personal Loan Notification, who use digital technology and alternative data to facilitate provision of loans in regards to the assessment of the ability or willingness to repay the loan, disbursement and repayment, and disclosure of information, are subject to the Notification of the Bank of Thailand No. TorPorTor.ForGorSor.(01)Vor. 977/2563 (2020) Regarding the Rules, Procedures and Conditions for the Undertaking of Digital Personal Loan Business, or the Digital Personal Loan Notification. Pursuant to the Digital Personal Loan Notification, the personal loan operators intending to undertake the digital personal loan business must notify the Bank of Thailand before commencing its business. The maximum credit limit for digital personal loans granted to each borrower shall not exceed THB20,000 (US$600) with the repayment period not exceeding six months, regardless of financial condition, income or balance in the deposit account of the borrower. The Bank of Thailand (Guidelines regarding the provision of financial assistance to the debtors affected by the COVID-19) has temporarily relaxed the loan limit of digital personal loans to borrowers until December 31, 2022 to an amount not exceeding THB40,000 (US$1,200) with the repayment period not exceeding 12 months from the end of the month in which the first drawdown was made.
 
Regulations on Intellectual Property Rights
 
Intellectual property laws in Thailand are comprised of the Copyrights Act, B.E. 2537 (1994), as amended, Trademark Act B.E. 2534 (1991), as amended, Patent Act B.E. 2522 (1979), as amended, Trade Secret Act, B.E. 2545 (2002), as amended, and Optical Disc Production Act, B.E. 2548 (2005).
 
Trademarks registered outside of Thailand are not automatically protected under Thai laws. Protection will be granted to trademarks registered with the Department of Intellectual Property of the Ministry of Commerce of Thailand. In contrast, original works of authorship will receive copyright protection the moment they are created. Computer software will be protected under the Thailand Copyright Act. An infringement of intellectual property rights may lead to civil and/or criminal liabilities.
 
The Copyrights Act, B.E. 2537 (1994), has been amended and was published in the Government Gazette on February 24, 2022, and will become effective on August 23, 2022. This amended Act is to comply with the World Intellectual Property Organization’s Copyright Treaty (WCT) and update practices in combating online infringement. Notable changes introduced are (i) an extension of the term of protection for photographic works to be the author’s lifetime plus an additional 50 years after the author’s death; (ii) general and specific requirements for service providers relating to computer data as defined therein to be exempted from liability for copyright infringement; and (iii) Notice-and-Takedown mechanism.
 
72
Regulations on Anti-money Laundering and Prevention of Terrorism Financing
 
The key regulation for anti-money laundering and counter-terrorist financing is the Money Laundering Prevention and Suppression Act, B.E. 2542 (1999), as amended, which imposes reporting obligations on certain types of business operations for (i) any transactions that reach certain thresholds which vary depending on the type of transactions involved; and (ii) suspicious transactions. Personal loan business operators and e-payment business operators are required to apply the know-your-client measures when the value of transaction(s) is (i) THB500,000 (US$15,002) or more for any single bill payment; (ii) THB50,000 (US$1,500) or more for any e-money or electronic money transfer; or (iii) THB100,000 (US$3,000) or more for other single or cumulative transactions. In addition, personal loan operators and e-payment service business operators need to have procedures relating to customer due diligence in place to ensure that its services are not being used by members of groups identified as terrorists by the United Nations Security Council Resolutions.
 
Regulations on Labor
 
Labor matters are mainly governed by the Thai Civil and Commercial Code and the Thai Labor Protection Act, B.E. 2541 (1998), as amended, and its subsequent notifications. The laws stipulate relationship between the employer and the employees in essential aspects, including working hours, leaves, wages, employment termination and severance payment, etc. The employment arrangement can be made verbally and is not required in writing.
 
Under the Thai Labor Protection Act, it’s mandatory for employers to establish work rules when 10 or more employees are hired and it shall cover the following issues: (i) working days, normal working hours and rest period; (ii) holidays and rules governing the taking of holidays; (iii) rules governing overtime and holiday work; (iv) the day and place where wages, overtime pay, holiday pay and holiday overtime pay are to be made; (v) leave and rules governing the taking of leave; (vi) discipline and disciplinary measures; (vii) lodging of grievances; and (viii) termination of employment, severance pay and special severance pay.
 
Regulations on Personal Data Protection
 
On May 28, 2019, the Personal Data Protection Act B.E. 2562 (2019) became effective, except that Chapter 2 (Personal Data Protection), Chapter 3 (Rights of the Data Subject), Chapter 5 (Complaints), Chapter 6 (Civil Liability) and Chapter 8 (Penalties) of such law, collectively, the Delayed Provisions, took effect from May 27, 2020. Due to a general lack of readiness by both public and private sectors to comply with the Personal Data Protection Act, a majority of businesses will not be subject to the Delayed Provisions until May 31, 2022 pursuant to the Royal Decree on Agencies and Businesses Not Subject to the Personal Data Protection Act, B.E. 2562 (2019) (No. 2), B.E. 2564 (2021). Personal data collected from our conduct of businesses fall within the scope of the Personal Data Protection Act.
 
The Personal Data Protection Act applies to the collection and processing of personal data, including but not limited to the collection, use, disclosure or transfer by a data controller or a data processor. As the law has extraterritorial enforcement, data controllers and data processors both in and outside of Thailand may be subject to this regulation.
 
In addition, data controllers are required to inform data subjects of the purpose of their collection and subsequent processing of the personal data collected, and obtain consents for such collection or processing, unless otherwise provided in the Personal Data Protection Act.
 
Singapore
 
Regulations on Dividend Distributions
 
The governing legislation for the distribution of dividends in Singapore is the Companies Act 1967 of Singapore, or the Companies Act. Under Section 403 of the Companies Act, a Singapore company is only allowed to pay dividends out of profits and there are certain restrictions on the use of profits for the purposes of dividend declaration. Firstly, any profits of a company applied towards the purchase of its shares pursuant to the share buyback provisions under the Companies Act cannot be payable as dividends to the shareholders. However, the foregoing restriction does not apply to any part of the proceeds received by the company from a sale or disposal of its treasury shares where the sums that were utilized to purchase those treasury shares initially came out of profits in the first place. Finally, any gains derived from the sale of treasury shares cannot be payable as dividends to the shareholders of the company.
 
73
In addition to complying with the Companies Act, the payment of dividends must also be in accordance with the company’s constitution and the generally acceptable accounting principles in Singapore.
 
Regulations on Information Technology
 
Regulation of Internet Content
 
The Broadcasting Act 1994 of Singapore prohibits the provision of certain broadcasting services, including internet content, in or from Singapore without a license issued by the Infocomm Media Development Authority. The Infocomm Media Development Authority is the regulator of the information, communications and media sectors in Singapore. The Broadcasting Act 1994 sets out an automatic class licensing scheme for computer online services provided by internet content providers. An internet content provider includes a corporation which provides any program for business purposes on the internet.
 
Internet content providers are in general mandated to be automatically class licensed without any need to make specific applications to the Infocomm Media Development Authority, and are required to comply with the conditions of the class license and the Internet Code of Practice. As an internet content provider, we are obliged to use our best efforts to ensure that prohibited material (which refers to material that is objectionable on the grounds of public interest, public morality, public security, national harmony, offends good taste or decency, or is otherwise prohibited by applicable Singapore laws) is not broadcast via the internet to users in Singapore, and we are also required to deny access to any prohibited material if directed to do so by the Infocomm Media Development Authority. If we contravene the class license conditions or the Internet Code of Practice, we may face administrative sanctions such as suspension or cancelation of our license, or fines.
 
In addition, to the extent that our platforms or services enable our users to transmit online content to each other or access third party online content, we would be an internet intermediary under the Protection from Online Falsehoods and Manipulation Act 2019 of Singapore, or POFMA. POFMA empowers any Singapore government minister to direct the POFMA Office to issue certain directions to internet intermediaries whose internet intermediary service had been used to communicate a false statement of fact in Singapore, if the minister is of the opinion that it would be in the public interest to do so. Such directions would include: (a) targeted correction directions, which require the internet intermediary to communicate a correction notice on its service to all end-users in Singapore who accessed the offending false statement of fact after a specified time; and (b) disabling directions, which require the internet intermediary to disable access by end-users in Singapore to the offending false statement of fact being communicated on or through its service. Companies may be fined if they fail to comply with directions issued under POFMA without reasonable excuse.
 
Regulations on Imported Games and Game Operating
 
Video Game Classification
 
Pursuant to the Films Act 1981 of Singapore, the Infocomm Media Development Authority is responsible for classifying films, videos and video games distributed in Singapore. In particular, it administers the video game classification system under the Films Act 1981, which requires businesses importing or distributing physical copies of video games in Singapore to submit the video games to the Infocomm Media Development Authority for rating and classification. However, the video game classification system does not apply to games which are only available via internet download. Since the online games that we offer are available only through online platforms, we in general are not subject to the video game classification system. However, the Infocomm Media Development Authority retains the right to issue a rating and/or classification of any of the online games we offer, should it choose to do so.
 
Films Regulation
 
The Films Act 1981 imposes a regulatory requirement for an organization to hold a license for carrying on the business of importing, making, distributing or exhibiting films. A film is defined to include a video recording for use as a game. The Films (Video Games Exemption) Notification 2008 exempts a video game distributor from having to comply with the abovementioned requirement to obtain a license. There remains some uncertainty with respect to whether the exemption covers an online game operator as the words ‘video games’ are neither defined in the Films Act nor in the aforesaid exemption. This is due to the contents of the Films Act and its related regulations not being drafted specifically for the digital age of online games. Further, due to the latter reason, there is uncertainty on whether an online game needs to be submitted to the Board of Film Censors for censorship evaluation prior to distribution. In the opinion of Rajah & Tann Singapore LLP, our counsel as to Singapore law, it is consistent with market practice that we treat our online games as video games and do not apply for the film license or submit our online games for censorship evaluation.
 
74
Gambling Regulation
 
Currently, the Remote Gambling Act 2014 of Singapore prohibits the offering of online games where (i) players play to win money, or (ii) players play to win virtual currency/tokens/credits/items that can be exchanged via in-game facilities for real-world money or merchandise. Online games with chance-based loot boxes do not fall within the ambit of the Remote Gambling Act 2014 if the virtual rewards from such loot boxes cannot be exchanged via in-game facilities for real-world money or merchandise. The Gambling Control Bill, which was passed by the Singapore Parliament on March 11, 2022 and will replace the Remote Gambling Act 2014 once it formally comes into effect, adopts a similar treatment of online games with chance-based loot boxes. Accordingly, as we do not offer any online games which have an in-game facility to convert game credits or tokens or enhancement features (e.g. weapons, skins) to real-world money or merchandise, we do not anticipate that the Singapore laws governing online gambling will apply to our gaming business.
 
Regulations on E-commerce
 
Consumer Protection
 
There are various general consumer protection laws in place in Singapore, which apply generally to all relevant transactions including electronic transactions, but are not specifically targeted at regulating e-commerce operations. One or more of these laws would be relevant in the context of online game operations or e-commerce operations.
 
The Consumer Protection (Fair Trading) Act 2003 of Singapore sets out a legislative framework to allow consumers aggrieved by unfair practices to have recourse to civil remedies before the Singapore courts. The definition of supplier under the Consumer Protection (Fair Trading) Act 2003 includes persons who promote the use or purchase of goods or services which we do through our digital entertainment and e-commerce platforms. Suppliers may be held liable for engaging in unfair practices in relation to consumer transactions. Unfair practices include, among other things: (i) doing or saying anything which would reasonably deceive or mislead consumers, (ii) making a false claim, (iii) taking unreasonable advantage of a consumer, or (iv) making various forms of misrepresentations to the consumer.
 
The Consumer Protection (Trade Descriptions and Safety Requirements) Act 1975 of Singapore prohibits the use of false trade descriptions on goods supplied in the course of trade. Trade descriptions include any description, statement or indication that directly or indirectly relates to the fitness for purpose, strength, performance, behavior or accuracy of any goods. This prohibition applies to all persons in the course of business and would be applicable in an e-commerce marketplace. Violations of the Consumer Protection (Trade Descriptions and Safety Requirements) Act 1975 are subject to criminal liability.
 
While we have, among other things, policies in place which require users of our e-commerce platform not to promote or sell any products which are illegal or prohibited for sale under Singapore law, there remains a residual risk that we may be liable for abetting the sale and distribution of such illegal products in breach of Singapore law if we knew of or had reason to suspect the listing and sale of illegal products on our e-commerce platform but failed to take action to remove such listings.
 
Regulations on E-payment
 
The Monetary Authority of Singapore, or MAS, regulates payment service providers and payment systems in Singapore under the Payment Services Act 2019 of Singapore which came into effect on January 28, 2020. Under the Payment Services Act 2019, a license from the MAS is required for providing any type of payment service in Singapore unless such service is exempted under the law. The payment services regulated under the Payment Services Act 2019 are “account issuance service,” “domestic money transfer service,” “cross-border money transfer service,” “merchant acquisition service,” “e-money issuance service,” “digital payment token service” and “money-changing service.” In particular, “e-money issuance service” means the service of issuing e-money to any person for the purpose of allowing a person to make payment transactions and “account issuance service” includes the service of issuing a payment account to any person in Singapore. Pursuant to the Payment Services (Exemption for Specified Period) Regulations 2019, certain entities who satisfied the relevant criteria and submitted a notification to the MAS within the specified timeframe were exempt from holding a license under the Payment Services Act 2019 for the specific payment service(s) for a specified period. For entities that submitted a notification to the MAS within the specified timeframe, the exemption ceased on July 28, 2020 (for digital payment token services) or January 28, 2021 (for all other newly regulated payment services), unless the entity submitted a license application under the Payment Services Act 2019 to carry on business of providing the relevant payment service(s) before that date, in which case the exemption with respect to those payment service(s) will cease on the date that the application is approved by the MAS, rejected by the MAS, or withdrawn by the entity. Our subsidiary engaging in providing various payment services obtained its major payment institution license in April 2022.
 
75
A licensee under the Payment Services Act 2019 is required to comply with the requirements under the Act and its subsidiary legislations, as well as all applicable notices and guidelines issued by the MAS (including but not limited to Notice PSN01 Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Payment Services Licence (Specified Payment Services) and/or Notice PSN02 Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Payment Service Licence (Digital Payment Token Service)). One such requirement imposed upon a licensee under the Payment Services Act 2019 is to provide the MAS with all such information relating to its business of providing any payment service as the MAS may specify by notice in writing. Further, pursuant to Notice PSN01 Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Payment Services Licence (Specified Payment Services), unless otherwise exempted, the holder of a license under the Payment Services Act 2019 to provide a specified payment service (i.e. “account issuance service,” “domestic money transfer service,” “cross-border money transfer service” or “money-changing service”) must, amongst various things, perform due diligence measures to establish and verify the identity of each customer; maintain data, documents and information relating to transactions; submit reports on suspicious transactions to the Suspicious Transactions Reporting Office; and implement internal policies, procedures and controls to help prevent money laundering and terrorism financing. A licensee under the Payment Services Act 2019 will also need to comply with the directions and/or regulations issued by the MAS under Section 27A of the Monetary Authority of Singapore Act 1970 in relation to dealing with assets of and/or imposing sanctions on designated persons.
 
In addition to the above, the Payment Services (Amendment) Bill was passed in parliament in 2021 but has not come into operation. It will come into operation on a date that the Minister appoints by notification in the Gazette. The Payment Services (Amendment) Bill makes amendments to the Payment Services Act 2019. The amendments include but are not limited to widening the definition of “cross border money transfer service” to include transmission of money between two countries, arranged by a payment service provider in Singapore and widening the definition of “domestic money transfer service” such that the definition applies except where both the payer and payee of a transaction executed under the service are financial institutions.
 
Regulations on Digital Banking
 
Our wholly-owned subsidiary in Singapore, or Singapore DFB, has been selected for the award of a digital full bank, or DFB, license in Singapore. The Singapore DFB is required to meet all relevant prudential requirements and licensing pre-conditions imposed on it by the MAS for the grant of the DFB license. These requirements and pre-conditions also subject the Singapore DFB to additional conduct of business, operational, financial and legal requirements. After the Singapore DFB obtains its DFB license and is fully functioning, the Singapore DFB will be allowed to conduct banking business in Singapore, which may include the taking of deposits from, the making of advances to and providing banking services to retail and non-retail customer segments.
 
The MAS will regulate DFBs under the Banking Act 1970 of Singapore and its subsidiary legislation as well as all applicable notices and other instruments issued by the MAS, subject to certain modifications (as set out in the publication “Eligibility Criteria and Requirements for Digital Banks” issued by the MAS). Generally, a fully functioning DFB will be able to conduct all banking business as existing qualifying full banks and will be subject to the full range of laws, regulations and prudential rules that apply to such banks. This includes complying with the notices and regulations surrounding ongoing risk-based capital and liquidity requirements, unsecured lending, anti-money laundering and countering the financing of terrorism, economic sanctions, corporate governance, risk management, technology risk and the conduct of non-financial businesses. However, it should be noted that DFBs are (i) only allowed to operate one physical “place of business” (being a place where a bank conducts banking business or other regulated businesses), (ii) not allowed to access the automatic teller machine or cash deposit machine network, but will be able to offer cashback services through EFTPOS terminals at retail merchants, and (iii) will be required to comply with same risk based capital requirements applicable to domestic systemically important banks.

76
A DFB will commence operations as a restricted DFB before becoming a fully functioning DFB. Whilst a DFB will eventually be expected to comply with the minimum paid-up capital requirement set by the MAS of S$1.5 billion (US$1.1 billion) which is applicable to all existing qualifying full banks, prior to it becoming a fully functioning DFB, the minimum paid up capital requirement applicable to a restricted DFB will initially be reduced to S$15,000,000 (US$11.1 million). This minimum paid up capital requirement will progressively increase as the restricted DFB grows. A restricted DFB will also be subject to various restrictions on its business, including but not limited to (i) deposit caps of S$75,000 (US$55,473) per individual depositor and S$50,000,000 (US$37.0 million) in aggregate deposits, (ii) restrictions on who the DFB may take deposits from, (iii) restrictions on unsecured lending, (iv) restrictions on the safeguarding of “relevant money” as defined under the Payment Services Act 2019, and (v) restrictions on the types of investment products the DFB may offer, as well as (vi) restrictions on proprietary trading. These restrictions will progressively be lifted as the DFB grows. The pace of growth of a restricted DFB will depend on its ability to meet its commitments as well as MAS’ supervisory considerations. Once a restricted DFB has met all relevant milestones and has been assessed by the MAS to pose no significant supervisory concerns, the MAS will lift all restrictions and the restricted DFB will become a fully functioning DFB. The MAS generally expects a DFB to be fully functioning and to meet the minimum paid-up capital requirement of S$1.5 billion (US$1.1 billion) within three to five years from commencement of business.
 
Regulations on Data Protection and Information Security
 
Personal Data Protection
 
The Personal Data Protection Act 2012 of Singapore governs the collection, use and disclosure of the personal data of individuals by organizations, and is administered and enforced by the regulator, the Personal Data Protection Commission. It sets out data protection obligations which all organizations are required to comply with in undertaking activities relating to the collection, use or disclosure of personal data. A failure to comply with any of the above can subject an organization to a fine per breach of up to S$1 million (US$739,645) or 10% of the organization’s annual turnover in Singapore, whichever is higher.
 
An online game operator or e-commerce company is required to comply with the Personal Data Protection Act. Among other things, such company is required to obtain consent from its customers and inform them of the applicable purposes before collecting, using or disclosing their personal data. Moreover, it is also required to put in place sufficient measures to protect the personal data in its possession or control from unauthorized access, loss or damage.
 
Pursuant to the Personal Data Protection Commission’s Advisory Guidelines on the Personal Data Protection Act for NRIC and other National Identification Numbers that was issued in August 2018, an organization such as an online game operator or e-commerce company is not permitted to collect, use or disclose an individual’s identification number unless under certain exceptions. The Personal Data Protection Commission has commenced enforcement of these Guidelines from September 2019.
 
In the event of a data breach involving any personal data in an organization’s possession or control, the Personal Data Protection Act 2012 requires the organization to reasonably and expeditiously assess the data breach, and notify the Personal Data Protection Commission of the data breach if it is assessed to be one that: (a) is likely to result in significant harm or impact to the individuals to whom the information relates, or (b) involves personal data of 500 or more individuals. In addition to notifying the Personal Data Protection Commission, organizations are also required to notify the affected individuals if the data breach is one that is likely to result in significant harm or impact to the affected individuals.
 
Regulations on Intellectual Property Rights
 
The Intellectual Property Office of Singapore administers the intellectual property legislative framework in Singapore, which includes copyrights, trademarks and patents. Singapore is a member of the main international conventions regulating intellectual property matters, and the WTO’s Agreement on Trade Related Aspects of Intellectual Property Rights.
 
77
Copyright
 
Pursuant to the Copyright Act 2021 of Singapore, authors of protected works enjoy various exclusive rights, including the rights of reproduction and communication to the public. Generally, an author will automatically enjoy copyright protection as soon as he creates and expresses an original work in a tangible form. Authors and performers also have a distinct right to be identified whenever their works or performances are used in public unless exceptions apply. For commissioned works, the copyright will be owned by the author by default, unless otherwise agreed by contract. On the other hand, employers by default own the copyright in all content created by their employees in the course of the employees’ employment, unless otherwise agreed by contract.
 
There is no need to file for registration to obtain copyright protection. Copyright works sent over the internet or stored on web servers are treated in the same manner as copyright material in other media. Online games and computer programs would qualify for such copyright protection, for example, as literary works, artistic works and/or cinematograph films.
 
Trademarks
 
Singapore operates a first-to-file system in respect of registered trademarks under the Trade Marks Act 1988 of Singapore, and the registered proprietor is granted a statutory monopoly of the trademark in Singapore in relation to the product or service for which it is registered. In the event of any trademark infringement, the registered proprietor will be able to rely on the registered trademark as proof of his right to the mark, and the infringement of a trademark may give rise to civil and criminal liabilities. Statutory protection of a registered trademark can last indefinitely, as long as the registration is renewed every 10 years.
 
Patents
 
The Patents Act 1994 of Singapore confers protection on patentable inventions on a first-to-file basis in Singapore, provided that the invention satisfies the requirements of novelty, having an inventive step and industrial applicability. Patents are valid for 20 years from the date of filing, subject to the payment of annual renewal fees. During the life of the patent, the owner will have the exclusive right to exploit the invention that is the subject of the patent.
 
Regulations on Anti-money Laundering and Prevention of Terrorism Financing
 
The primary anti-money laundering legislation in Singapore is the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 of Singapore, or CDSA, provides for the confiscation of benefits derived from, and to combat, corruption, drug dealing and other serious crimes. Generally, the CDSA criminalizes the concealment or transfer of the benefits of criminal conduct as well as the knowing assistance of the concealment, transfer or retention of such benefits.
 
The Terrorism (Suppression of Financing) Act 2002 of Singapore, or TSOFA, is the primary legislation for the combating of terrorism financing. It was enacted to give effect to the International Convention for the Suppression of the Financing of Terrorism. Besides criminalizing the laundering of proceeds derived from drug dealing and other serious crimes and terrorism financing, the CDSA also requires suspicious transaction reports to be lodged with the Suspicious Transaction Reporting Office and the TSOFA requires information about any property belonging to any terrorist or terrorist entity to be reported to the Commissioner of Police. If any person fails to lodge the requisite reports under the CDSA and the TSOFA, it may be subject to criminal liability.
 
Regulations on Labor
 
The Employment Act 1968 of Singapore generally extends to all employees regardless of their designation, salary level or type of work performed, with the exception of certain groups of employees. It provides employees falling within its ambit certain protections such as minimum notice periods, maximum working hours, maximum amount of deductions from wages, minimum holidays and rest days, maternity/paternity leave, paid childcare leave, sick leave, etc. The Singapore Employment Act also applies to employees who are foreigners so long as they fall within the definition of “employee” under the Employment Act. In addition, the employment of foreign manpower in Singapore is also governed by the Employment of Foreign Manpower Act 1990 of Singapore. Aside from minimum benefits in respect of the aforesaid terms of employment in the Employment Act and CDCSA, employees in Singapore are entitled to contributions to the central provident fund by the employer as prescribed under the Singapore Central Provident Fund Act 1953, or the Singapore Central Provident Fund Act. The specific contribution rate to be made by employers varies depending on whether the employee is a Singapore citizen or permanent resident in the private or public sector and the age group and wage band of the employee. Generally, for employees who are Singapore citizens in the private sector or non-pensionable employees in the public sector, 55 years old or below and that earn more than S$750 (approximately US$555) a month, the employer’s contribution rate is 17% of the employee’s wages.
 
78
Malaysia
 
Regulations on Foreign Investment
 
There are no overarching foreign investment laws in Malaysia, but there may be restrictions on the direct and/or indirect foreign shareholding in a company depending on the types of licenses or permits that the company may hold to carry out its business activities in Malaysia.
 
Regulations on Dividend Distributions
 
The governing legislation for the distribution of dividends in Malaysia is the Companies Act 2016. Under Section 131 of the Companies Act 2016, a Malaysian company may only distribute dividends out of profits available if the company is solvent. Under the Companies Act 2016, the company is regarded as solvent if it is able to pay its debts as and when they become due within 12 months immediately after the distribution is made. Further, the distribution of dividend must be in compliance with the relevant provisions of the Companies Act 2016 (e.g. where any distribution of dividend must be authorized by the directors of the company before such distribution is made) and the company’s constitution.
 
Regulations on Foreign Exchange
 
Ringgit is the lawful currency of Malaysia. Payments between persons in Malaysia should be in ringgit, unless foreign currency is permitted under the foreign exchange policy, or the FEP. The Central Bank of Malaysia, or BNM, has a policy against the internationalization of ringgit, therefore ringgit exchange rates must be determined onshore in Malaysia, and there are restrictions on the outflow of ringgit under the FEP.
 
Malaysia has FEP restrictions based on provisions in the Financial Services Act 2013, or FSA. Pursuant thereto, a wide range of transactions (these include payments and receipts, exchange of currency) set out in Schedule 14 to the FSA are subject to the prior written approval of BNM. BNM issues FEP Notices setting out its general approval on the terms therein. Where a transaction comprises different aspects which require BNM approval under Schedule 14 to the FSA, BNM approval has to be obtained (either a general approval granted in the FEP Notices or approval applied for on an ad hoc basis) for each such aspect requiring approval, and BNM has discretion whether to grant or not to grant the ad hoc approval subject to conditions.
 
The FEP restrictions principally apply to transactions between “residents” and “non-residents” as defined in the FSA. Foreign investors are generally permitted to invest in ringgit denominated assets and repatriate dividends, profits and other income in foreign currency with certain limited exceptions. Under the FEP, the conversion of ringgit into foreign currency may be freely effected onshore with licensed banks or money-changers with certain limited exceptions.
 
Regulations Relating to Game Business
 
Content moderation
 
Multimedia and communications activities are under the purview of the Malaysian Communications and Multimedia Commission, a statutory body established under the Malaysian Communications and Multimedia Commission Act 1998.
 
Section 211 of the Communications and Multimedia Act 1998, or CMA provides that no content applications service provider, or other person using a content applications service, shall provide content which is indecent, obscene, false, menacing, or offensive in character with intent to annoy, abuse, threaten or harass any person. To the extent an online game falls within the definition of “content” and that the provision thereof through the Internet can be considered as “Internet content applications service,” such provision will apply. Pursuant to the CMA, the Malaysian Communications and Multimedia Content Code (2nd edition, 2020), or Content Code, was passed to set out the guidelines and procedures for good practice and standards of content disseminated to audiences. This Content Code is enforced by the Malaysian Communications and Multimedia Content Forum and it sets out the guidelines and procedures for good practice and standards of content disseminated to audiences over the electronic network medium by service providers in the communications and multimedia industry. Compliance with the Content Code is voluntary but can be relied upon as a defense against any prosecution, action or proceeding of any nature whether in court or otherwise. Under the Content Code, the material disseminated must not include anything which offends good taste or decency, is offensive to public feeling, is likely to encourage crime or lead to disorder, or is abusive or threatening in nature.
 
79
Regulations on E-commerce
 
The relevant laws governing Malaysia’s e-commerce include, Electronic Commerce Act 2006, or ECA, Digital Signature Act 1997, or DSA, Consumer Protection Act 1999, or CPA, Consumer Protection (Electronic Trade Transactions) Regulations 2012, or CPR 2012, Sale of Goods Act 1957, Contracts Act 1950, and Personal Data Protection Act 2010, or PDPA.
 
Limitations and Liabilities of Platform Operators and E-commerce Merchants
 
There is no specific Malaysian legislative framework setting out the limitations and liabilities of online platform operators and e-commerce merchants. Consumer rights are protected under the CPA, which requires sellers offering goods and services by electronic means to comply with certain standards. The CPA implies warranties as to reasonable care and skill, fitness for a particular purpose, reasonable time of completion and reasonable price, and prohibits misleading and deceptive conduct, the making of false or misleading representations and the imposition of unfair contract terms. Sellers are prohibited from applying false trade description under the Trade Descriptions Act 2011. Specific products such as sale of price-controlled products, drugs, medical devices, food and cosmetic products are subject to additional regulatory requirements.
 
E-commerce merchants are required to provide appropriate means to enable the buyer to rectify any errors prior to the confirmation of the order and shall acknowledge receipt of the order to the buyer without undue delay under CPR 2012. E-commerce merchants are also required to disclose the following information on the website or online marketplace: (i) the name, (ii) registration number of businesses or company, (iii) email address and phone number, (iv) a description of the main characteristics of the goods supplied, (v) full price of the goods, (vi) method of payment, (vii) terms and conditions and (viii) the estimated time of delivery of the goods to the buyer. Online marketplace operators, on the other hand, are required to take reasonable steps to keep and maintain a record of the names, telephone numbers and the address of the person who supplies goods or services in the online marketplace, for a period of two years.
 
With respect to user generated content, or UGC, the concept of innocent carrier embedded in the Content Code provides that any services providers providing access to any content but have neither control over the composition of such content nor any knowledge of such content is deemed an innocent carrier for the purpose of the Content Code. An innocent carrier is generally not responsible for the content provided. UGC platforms must have a clear notice and take-down policy implemented to ensure that potentially infringing UGC can be reported by platform users and that rights holders can request the withdrawal of specific content with ease. Further, UGC platform operators should have a filtering system to remove offensive or defamatory content because there is a presumption that the platform or portal provider must assume responsibility for taking the risk of facilitating a platform.
 
Regulations on Personal Data Protection and Information Security
 
The PDPA regulates the processing of personal data in commercial transactions. The PDPA applies insofar as personal data of customer is processed (for example, name, identification card number, address, phone number, email address). The definition of “personal data” under the PDPA includes any information in respect of commercial transactions, which relates directly or indirectly to a data subject, who is identified or identifiable from that information or from that and other information in the possession of a data user, including any sensitive personal data and expression of opinion about the data subject. The PDPA sets out seven personal data protection principles to be complied with: General Principle, Notice and Choice Principle, Disclosure Principle, Security Principle, Retention Principle, Data Integrity Principle, and Access Principle. Additionally, the Personal Data Protection Regulations 2013 and the Personal Data Protection Standard 2015 set out in detail the requirements to be complied with in respect of the seven principles.
 
80
Regulations on Electronic Money
 
Electronic money (e-money) is a designated payment instrument under the FSA. It is defined as a payment instrument, whether tangible or intangible that stores funds electronically in exchange of funds paid to the issuer, and can be used as a means of making payment to any person other than the issuer.
 
The approval of BNM under the FSA is required before a person may carry on an issuance of e-money business. An issuer of e-money must comply with obligations in the FSA and subsidiary legislation issued thereunder on approved persons which include, without limitation, maintaining minimum capital funds at all times, complying with applicable standards issued by BNM and submission of information to BNM.
 
The Guidelines on E-money prescribes broad principles (relating to, among others, having adequate governance and operational requirements, proper risk management, transparency of terms, timely refund of stored value, and prevention of the use of e-money for financial crimes) and minimum standards to be observed by an issuer. A large e-money scheme operator must place users’ funds in a trust account with a licensed institution and apply them in the manner prescribed. As a financial services provider, an issuer of e-money may not engage in prohibited business conduct set out in Schedule 7 of the FSA, as supplemented by policy documents of BNM and must maintain secrecy of customer information unless an exemption applies.
 
BNM may revoke its approval of an approved person on the grounds set out in section 20 of the FSA, which include, without limitation, it has provided BNM with false, misleading or incomplete information in its application for approval, it ceases to carry on its approved business, it has breached the FSA, the Central Bank of Malaysia Act 2009 or any standard or directive under those Acts applicable to it, BNM is of the opinion that it has ceased to be viable, it is in the interests of consumers of financial services to do so or it is wound-up or dissolved.
 
Regulations on Merchant Acquiring Services
 
BNM regulates an operator of a payment system that enters into a contract with a merchant for the purpose of accepting payment instruments for payment of goods and services as conducting merchant acquiring services under the FSA. Each such operator must be registered with BNM and is a registered operator of a payment system. A registered person must comply with standards for registered persons and on its payment system specified by BNM at all times. As a financial services provider, a merchant acquirer may not engage in prohibited business conduct set out in Schedule 7 of the FSA, as supplemented by policy documents of BNM.
 
Regulations on Lending
 
Moneylending is regulated under the Moneylenders Act 1951 in Malaysia (unless any of the limited exceptions apply) principally by the requirement that any person who carries on or advertise itself or hold itself in any way as carrying on the business of moneylending (defined as the lending of money at interest, with or without security to a borrower) must be licensed and the moneylending agreement must be in the prescribed form. The Malaysian Ministry of Housing and Local Government is the regulator administering the provisions of the Moneylenders Act 1951 and have also issued guidelines in connection with the Moneylenders Act 1951 including its Guidelines on Online Moneylending applicable to licensed moneylenders.
 
Compounding of interest is prohibited and the moneylending agreement must be attested by any of the specified persons who must explain the terms thereof to the borrower. Any moneylending agreement entered into by an unlicensed moneylender is unenforceable. A licensed moneylender must apply for an advertisement permit to advertise its moneylending business, and also observe the operational requirements set out in the Moneylenders Act.
 
Regulations on Intellectual Property Rights
 
The intellectual property laws of Malaysia comprise the following main legislation: the Patents Act 1983, Copyright Act 1987, Industrial Designs Act 1996, Layout-Designs of Integrated Circuits Act 2000, Trademarks Act 2019, and Geographical Indications Act 2022. The administration and practice of these laws come under the purview of the Intellectual Property Corporation of Malaysia (“MyIPO”). There are other areas of intellectual property law that may be governed by common law rights including the tort of passing off and the law of confidence. Malaysia is a signatory to the main international conventions regulating intellectual property matters, the Agreement on Trade Related Aspects of Intellectual Property Rights, and has acceded to the Madrid Protocol.
 
81
Trademark
 
Trademarks in Malaysia are governed by the Trademarks Act 2019, or TMA, and the Trademarks Regulations 2019. Once a trademark is registered, the registered proprietor of trademark has the exclusive rights to use the trademark and authorize other persons to use the trademark, in relation to the goods or services for which the trademark is registered. Upon registration, the registered trademark is valid for 10 years from the date of filing of the application and is renewable for further periods of 10 years each thereafter. Subject to limited exceptions, no person or enterprise other than the registered proprietor or persons authorized by the registered proprietor may use the trademark, otherwise infringement actions may be taken against such person or enterprise.
 
Copyrights
 
The main governing legislation for copyright law in Malaysia is the Copyright Act 1987. Pursuant to the Copyright Act 1987, authors of protected works enjoy various exclusive rights, including the rights of reproduction in any material form of the works, communication to the public, performance, showing or playing to the public of the works, and distribution of copies to the public by sale or other transfer of ownership. Literary works, musical works and artistic works will be eligible for copyright if sufficient effort has been made to make the works original in character; and the works have been written down, recorded or otherwise reduced to a material form. There is no system for registration of copyright in Malaysia. Copyright is conferred on a work once all the statutory requirements for eligibility and qualification are met. The ownership of copyright in Malaysia can however be recorded formally with the Director General of MyIPO through the Copyright Voluntary Notification System or evidenced by way of a statutory declaration under section 42 of the Copyright Act 1987. Online games and computer programs would qualify for such copyright protection.
 
Patents
 
In Malaysia, the Patents Act 1983, or PA, and the Patents Regulations 1986 govern the protection of an invention that is new, involves an inventive step and is industrially applicable. An invention may relate to a product or process, but specifically does not include, amongst others, discoveries, rules or methods for doing business, playing games, etc. Subject to yearly renewal, the period of patent protection (for patent applications filed on or after 1 August 2001) is a maximum of 20 years from the date of filing. The PA grants the owner of a patent the exclusive rights to exploit the patented invention, assign or transmit the patent, conclude licensee contracts, and to deal with the patent as the subject of a security interest. Any person seeking to deal with a patent where the rights are exclusive to the owner will need to get prior consent from the latter. A patent is infringed when, without authorization of the owner, a person performs any of the acts under the exclusive control of the patent owner, including the manufacture, importation, offer for sale, sale, or use of the patented product or process.
 
Regulations on Anti-money Laundering and Prevention of Terrorism Financing
 
Prevention and Eradication of Money Laundering
 
Malaysia is a member of the Financial Action Task Force, or FATF. The Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001, or AMLA is the statute that imposes obligations on prevention of money-laundering and terrorism financing based on the FATF’s 40 recommendations. BNM is the competent authority under the AMLA.
 
Entities conducting any activity listed in the First Schedule to the AMLA, including amongst others issuer of e-money, are designated as reporting institutions which have specific obligations set out in Part IV of the AMLA to, among others, conduct customer due diligence, maintain records thereof, appoint a compliance officer, conduct audit on its compliance with the AMLA and guidelines issued by BNM and submit suspicious transaction reports to BNM. The requirements for cash threshold reports on certain reporting institutions are applicable to customers and person conducting the transaction in single or multiple cash transactions within the same account in a day for the amount equivalent to RM25,000 (US$5,988) and above. Such reports must be filed within the time prescribed by BNM and are in addition to the obligation to file a suspicious transaction report where applicable.
 
82
Prevention and Eradication of Terrorism Financing and Proliferation Financing
 
The prevention of terrorism financing in the AMLA is through the obligations in Part VIA thereof to maintain and update a sanctions database based on United Nations Security Council Resolutions (UNSCR) list and domestic list by the Minister of Home Affairs, and to screen the names of customers and any beneficial owners, beneficiaries (new, existing and potential) and related parties against the sanctions lists. A person on a sanctions list is referred to as a specified entity. Periodic reporting of positive name matches must be made to BNM.
 
Regulations on Labor
 
The Employment Act 1955, or EA, of Malaysia extends to a limited category of employees as stipulated under the First Schedule of the Act. These categories can be broadly categorized as those earning a monthly salary of RM2,000 (US$479) and below, those whom regardless of their designation or salary are engaged in the performance of manual labor or those whom regardless of salary or designation are engaged in the supervision of those performing manual labor in and throughout their course of employment, employees engaged in the operation or maintenance of any mechanically propelled vehicle operated in Malaysia and employees engaged in any capacity in any vessel registered in Malaysia. The EA provides for the minimum terms and conditions of employment and the National Wages Council Act 2011 and Minimum Wage Orders provide for the minimum salary to be paid to employees. The EA also applies to employees who are foreigners so long as they fall within the definition of “employee” under the Employment Act. Aside from minimum benefits under the EA, both employees and employers in Malaysia are required to contribute towards: the Employees Provident Fund, the Employment Insurance System as well as the Employees Social Security Fund. The contributions are premised on the statutorily prescribed rates under the Employees Provident Fund Act 1969, Employment Insurance System Act 2017 and Employees Social Security Fund Act 1969.
 
C.          Organizational Structure
 
Sea Limited is a holding company that does not have substantive operations. We conduct our business operations through our subsidiaries, branch offices, and consolidated affiliated entities. Our significant subsidiaries, as that term is defined in Rule 1-02(w) of Regulation S-X, include the following entities (in chronological order based on their dates of incorporation):
 

 •
Garena Online Private Limited, our wholly-owned subsidiary established in Singapore operating our digital entertainment business;
 

 •
Shopee Limited, our wholly-owned subsidiary established in the Cayman Islands holding certain of our e-commerce subsidiaries;
 

 •
Shopee Singapore Private Limited, our wholly-owned subsidiary established in Singapore operating our e-commerce business in Singapore; and
 

 •
PT Shopee International Indonesia, our wholly-owned subsidiary established in Indonesia operating our e-commerce business in Indonesia.
 
Contractual Arrangements among Our VIEs, Their Shareholders and Us
 
The laws and regulations in some of our markets place restrictions on foreign investment in and ownership of entities engaged in a number of business activities. To comply with the relevant laws and regulations, we and certain of our wholly-owned subsidiaries in the Cayman Islands and Singapore have entered into a series of contractual arrangements with certain VIEs and their shareholders who are local citizens. For the year ended December 31, 2021, revenue from all our VIEs (which excludes entities for which we have majority direct equity ownership) accounted for 6.9% of our total revenue. None of our VIEs is individually a significant subsidiary as defined in Rule 1-02(w) of Regulation S-X.
 
83
The contractual arrangements allow us to:
 

 •
exercise effective control over our VIEs, including the ability to direct the VIE shareholders to vote at our direction and have the ability to replace each of them as a VIE shareholder;


•
receive substantially all of the economic benefits and absorb losses of our VIEs; and
 

 •
have an exclusive call option to purchase all or part of the equity interests in and/or assets of our VIEs when and to the extent permitted by the relevant laws.
 
As a result of these contractual arrangements, we are the primary beneficiary of these VIEs and have consolidated their financial results in our consolidated financial statements in accordance with U.S. GAAP. However, these contractual arrangements may not be as effective in providing operational control as direct ownership and the use of the contractual arrangements in some jurisdictions where we operate exposes us to certain risks. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to such structural arrangements.”
 
The following is a summary of the currently effective contractual arrangements by and among us, our VIEs and their respective shareholders.
 
Contracts that Give Us Effective Control of the VIEs
 
Loan Agreements
 
In order to ensure that the shareholders of our VIEs are able to provide capital to each of these entities in order to develop its business, we have entered into loan agreements with each shareholder. Pursuant to the loan agreements, we have granted loans to the shareholders that may only be used for the purpose of acquiring equity interests in or contributing to the registered capital of these entities. The time and manner for repayment of the loans are at the sole discretion of our lending entity. The loans may be repaid only by the shareholders transferring all of their equity interests in the VIE to us or our designee upon our exercise of the options under the exclusive option agreements. The loan agreements also prohibit the shareholders from assigning or transferring to any third party, or from creating or causing any security interest to be created on, any part of their equity interests in these entities. In the event that the shareholders sell their equity interests to us or our designee at a price which is equal to or lower than the principal amount of the loan, the loan will be interest-free. If the price is higher than the principal amount of the loans, the excess amount will be deemed to be interest on the loans payable by the shareholders to us.
 
Exclusive Option Agreements
 
In order to ensure that we are able to acquire all of the equity interests in our VIEs at our discretion, we have entered into exclusive option agreements with the respective shareholders of these VIEs. Each option is exercisable by us at any time, provided that doing so is not prohibited by law. The exercise price under each option is the minimum amount required by law and any proceeds obtained by the respective shareholders through the transfer of their equity interests in these entities shall be used for the repayment of the loan provided by us in accordance with the loan agreements. During the terms of the exclusive option agreements, the shareholders will not grant a similar right or transfer any of the equity interests in these entities to any party other than us or our designee, nor will such shareholder pledge, create or permit any security interest or similar encumbrance to be created on any of the equity interests. According to the exclusive option agreements, the VIEs cannot declare any profit distributions or grant loans in any form without our prior consent. The shareholders must remit to us in full any funds such shareholders receive from the VIEs in the event any distributions are made by the VIEs. The exclusive option agreements will remain in effect until the respective shareholder has transferred all of such shareholder’s equity interests in the VIE entity to us or our designee.
 
Powers of Attorney
 
In order to ensure that we are able to make all of the decisions concerning our VIEs, we have entered into powers of attorney with the shareholders of these VIEs. Pursuant to the powers of attorney, each shareholder of our VIEs has irrevocably appointed us as such shareholder’s attorney-in-fact to act for all matters pertaining to such shareholder’s shareholding in the VIE entities and to exercise all of their rights as shareholders, including but not limited to attending shareholders’ meetings and designating and appointing directors, supervisors, the chief executive officer and other senior management members of these entities, and selling, transferring, pledging or disposing the shares of these entities. We may authorize or assign our rights under this appointment to any other person or entity at our sole discretion without prior notice to or prior consent from the shareholders of these entities. Each power of attorney will remain in effect until these shareholder ceases to hold any equity interest in the relevant VIE.
 
84
Equity Interest Pledge Agreements
 
In order to secure the performance of our VIEs and their shareholders under the contractual arrangements, each of the shareholders of our VIEs have pledged all of their shares to us. These pledges secure the contractual obligations and indebtedness of such VIE shareholders, including all penalties, damages and expenses incurred by us in connection with the contractual arrangements, and all other payments due and payable to us by the relevant VIE under the exclusive business cooperation agreements, and by the VIE shareholders under the loan agreements, exclusive option agreements, and powers of attorney. Should the VIE or the VIE shareholder breach or default under any of the contractual arrangements, we have the right to require the transfer of such VIE shareholders’ pledged equity interests in the relevant VIE to us or our designee, to the extent permitted by laws, or require a sale of the pledged equity interest and have priority in any proceeds from the auction or sale of such pledged interests. Moreover, we have the right to collect any and all dividends in respect of the pledged equity interests during the term of the pledge. Unless the relevant VIEs have fully performed all of their obligations in accordance with the exclusive business cooperation agreements and the pledged equity interests have been fully transferred to us or our designee in accordance with the exclusive option agreements and the loan agreements, the equity interest pledge agreements will continue to remain in effect.
 
Spousal Consent Letters
 
Under the spousal consent letters, each spouse of the married shareholders of our VIEs unconditionally and irrevocably agreed that the equity interest in the relevant entity held by and registered in the name of their spouse will be disposed of pursuant to the contractual arrangements. Each spouse agreed not to assert any rights over the equity interest in these entities held by their spouse. In addition, in the event that the spouses obtain any equity interest in these entities held by their spouse for any reason, they agreed to be bound by the contractual arrangements.
 
All of the contractual arrangements as described above will be terminated once the respective shareholder has transferred all of such shareholder’s equity interests in the VIE entity to us or our designee.
 
Contracts that Enable Us to Receive Economic Benefits or Absorb Losses from the VIEs
 
Exclusive Business Cooperation Agreement
 
In order to ensure that we receive the economic benefits of our VIEs, we have entered into exclusive business cooperation agreements with these entities under which we have the exclusive right to provide or to designate any third party to provide, among other things, technical support, consulting services, intellectual property licenses and other services to these entities, and these entities agree to accept all the services provided by us or our designee. Without our prior written consent, our VIEs are prohibited from directly or indirectly engaging any third party to provide the same or any similar services under these agreements or establishing similar cooperative relationships with any third party regarding the matters contemplated by these agreements. In addition, we have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created during the performance of these agreements.
 
Our VIEs agree to pay a monthly fee to us at an amount determined at our sole discretion after taking into account factors including the complexity and difficulty of the services provided, the level of and time consumed by our employees or our designee for providing the services, the content and value of services and licenses provided and the market price of the same type of services or licenses. These agreements will remain effective unless terminated in accordance with their provisions or terminated in writing by us. Unless otherwise required by applicable laws, these entities do not have any right to terminate these agreements in any event. We have the right to terminate the exclusive business cooperation agreements and/or require these entities to indemnify all damages in the event of any material breach of any term of these agreements by them. These entities agree to indemnify and hold us harmless from any losses, injuries, obligations or expenses caused by any lawsuits, claims or other demands against us arising from or caused by the services that we provide to these entities pursuant to the exclusive business cooperation agreements, except where such losses, injuries, obligations or expenses arise from our own gross negligence or willful misconduct.
 
85
Financial Support Confirmation Letters
 
In order to ensure that our VIEs have sufficient cash flow to fund their daily operations and/or to set off any losses incurred in such operations, we have entered into financial support confirmation letters with each of these entities. Under the financial support confirmation letters, we pledge to provide continuous financial support to these entities by ourselves or through our designees and agreed to forego our right to seek repayment in the event these entities are unable to repay such financial support or we become liable for the liabilities of these entities. These entities agree to accept such financial support and pledge to only use such support to develop their respective businesses. To the extent permitted by law, the financial support we provide to these entities may take the form of loans, borrowings or guarantees.
 
Based on opinions from our external legal counsels, we believe the ownership structure of our VIEs are generally in compliance with the local laws or regulations that are currently in effect, and each of the agreements among us, our VIEs and/or the local shareholders is valid, binding and enforceable, and do not and will not result in any violation of such laws or regulations that are currently in effect.
 
However, uncertainties in the relevant legal system could cause the relevant regulatory authorities to find the current contractual arrangements and businesses to be in violation of any existing or future relevant laws or regulations. In addition, if the VIEs or the shareholders of the VIEs fail to perform their obligations under the contractual arrangements, we may have to incur substantial costs and expend resources to enforce our rights as the primary beneficiary under the contracts. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to such structural arrangements.”
 
Thailand Shareholding Structure
 
Each of our operating entities in Thailand is established using a tiered structure that maximizes our equity interests in the entity while also complying with the Thai law requirement that each Thai company has at least three shareholders and, without approval from Thai authorities, direct foreign ownership of share capital of each entity operating the restricted business under the Thai Foreign Business Act is limited to less than 50%. As Thai laws only consider the immediate level of shareholding, no cumulative or look-through calculation is applied to determine the foreign ownership status of a company when it has several levels of foreign shareholding. Under this shareholding structure, our Thai operating entities are each owned by (i) a Thai entity, or Thai Holdco 1, holding slightly more than half of the shares, (ii) one of our employees holding one share, and (iii) one of our Cayman Islands or Singapore subsidiaries holding slightly less than half of the shares. Thai Holdco 1 is then owned by (i) another Thai entity, or Thai Holdco 2, (ii) the employee who holds one share in the Thai operating entity, and (iii) our Cayman Islands or Singapore subsidiary in the same shareholding proportions that our Thai operating entities are held. Thai Holdco 2 is in turn held by (i) one of our employees, who is a Thai citizen, holding preference shares equivalent to slightly more than half of the total number of shares, (ii) the employee who holds one share in the Thai operating entity, holding one share, and (iii) our Cayman Islands or Singapore subsidiary holding ordinary shares equivalent to slightly less than half of the total number of shares. The preference shares have limited voting rights and the right to receive a fixed, non-cumulative dividend of an immaterial amount in the event a dividend is declared. This structure allows us to effectively control nearly 100% of our Thai operating entities.
 
In the opinion of Kudun and Partners Company Limited, our counsel as to Thai law, the shareholding structure of our Thai operating entities is in compliance with applicable Thai law. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to such structural arrangements.”
 
D.          Property, Plants and Equipment
 
Our headquarters and our principal technical development facilities are located in Singapore, where we have leased approximately 54,400 square meters of office space, as of December 31, 2021. We also have local offices in other parts of Asia, Latin America, Europe and North America. In Indonesia, we have rights to build (Hak Guna Bangunan) on land of approximately 124,000 square meters, among which we are in the process of building a warehouse expected to have a construction floor area of approximately 77,000 square meters. We also have transportation assets used for Shopee logistics services as well as general administrative and operational purposes.
 
86
The servers we currently use are hosted in leased data centers in different areas across our markets, as well as on cloud services. The data centers in our network are owned and maintained for us by major domestic and international data center providers. We generally enter into leasing and hosting service agreements with renewal terms. We believe that our existing facilities are sufficient for our current needs and we may need to obtain, usually by lease, adequate facilities to accommodate any future expansion plans.
 
ITEM 4A.
UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report.
 
A.          Operating Results
 
Overview
 
Sea operates three key businesses—Garena, Shopee, and SeaMoney. Each of our businesses provides a distinct and compelling value proposition to our users, and we believe each exhibits strong virtuous cycle dynamics. We believe these distinct characteristics support our leadership position and provide a strong foundation for continued growth while creating barriers to entry for our competitors. We develop, curate and localize the content and services on our platforms to serve a highly diverse population across multiple markets and regulatory regimes.
 
We have achieved significant scale and growth since our founding. Our total revenue increased from US$2.2 billion in 2019 to US$10.0 billion in 2021, a CAGR of 113.9%. We had gross profit of US$604.9 million, US$1.3 billion and US$3.9 billion in 2019, 2020 and 2021, respectively. We incurred net losses of US$1.5 billion, US$1.6 billion and US$2.0 billion in 2019, 2020 and 2021, respectively, primarily due to our investments in expanding our businesses, in particular our e-commerce and digital financial services businesses.
 
Major Factors Affecting Our Results of Operations
 
Our results of operations and financial condition are affected by general factors driving the digital entertainment, e-commerce, digital financial services and other industries in our markets, including demographic and macro-economic growth, technology adoption trends, and the digital transformation of industries.
 
Our results of operations are also directly affected by certain factors specific to us, including the following:
 
Size of Our User Base
 
Our revenue is largely driven by the number of users and the level of user engagement across our three businesses. In our digital entertainment business, due to our freemium business model, the higher the number of active users in our games, the larger the number of users likely to make in-game purchases. Likewise, in our e-commerce business, the larger the number of sellers and buyers on the platform, the larger the number and value of transactions which over time will drive advertising and transaction-based fee revenue for us. In our mobile wallet business, the larger the number of mobile wallet active users and the larger the number of merchants accepting SeaMoney’s payment options, the greater the potential transaction volumes that drive our commission revenue.
 
87
User Engagement and Monetization
 
As our level of user engagement increases, the potential for user spending and consequently our revenue also increases. A critical component of maximizing the monetization potential of each of our businesses is providing high-quality content and services and pricing our content and services correctly. Monetization is also dependent upon our ability to convert active users into paying users, and then increase revenue per paying user. For example:
 

 •
In our digital entertainment business, our primary source of revenue is the sale of in-game items. We focus on developing and curating the best content and localizing that content to cater to the tastes and preferences of each of our unique markets. We maximize the in-game user experience to keep our users highly engaged and increase the likelihood of in-game spending so as to maximize revenue. To do so, we provide a high-quality entertainment experience, adopt effective pricing strategies for each market and game, and leverage our platform’s cross-selling tools to support long-term user engagement with our games.
 

 •
In our e-commerce business, we closely monitor the number of transactions per active buyer. We optimize the assortment of our product categories on our marketplace and build convenient tools to attract sellers. We monetize our e-commerce business mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics. As our e-commerce marketplace grows, we may consider other monetization methods in order to capture additional revenue streams. We also purchase products from manufacturers and third parties and sell them directly to buyers on our Shopee platform.
 

 •
In our digital financial services business, we mainly monetize by charging commissions to third-party merchants with respect to our mobile wallet services, by charging fees to third-party financial institutions which offer financial products or lend to consumers on our platform, and by earning interest from borrowers with respect to our consumer and merchant credit business. We continually expand the number of use cases that accept our mobile wallet services to create greater convenience for our users. We believe that increasing the variety of use cases, together with our efforts to increase our mobile wallet user numbers and engagement, will lead to increases in the number of transactions through our mobile wallet business, and in turn the gross transaction value and commission income.
 
COVID-19 has affected and may continue to affect our businesses and our users’ behaviors. With many economies reopening further in the fourth quarter of 2021 and into 2022, we have observed some moderation in online activities and fluctuations in user engagement. The long-term effects of COVID-19 on our users and ecosystem participants remain uncertain. Relaxation of pandemic-related restrictions may decrease the inclination of users to remain at home, make physical stores or activities more attractive, and alter the usage and spending habits of our users. Accordingly, the trends we saw with respect to our revenues and other financial results and operating metrics during COVID-19 impacted periods may not be indicative of results for future periods. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—The COVID-19 pandemic, including any lockdown and reopening of relevant markets, has affected our business activities and results. Any future occurrence of natural disasters, epidemics, pandemics or other outbreaks, or other catastrophic events could also adversely affect our business” for more details. As the COVID-19 situation remains fluid and continues to evolve, our business, financial condition and results of operations may continue to be affected in the short- or long-term future.
 
Benefits of Our Platforms
 
Our platforms benefit from internal dynamics that allow us to increase our scale and user engagement quickly and in a cost-effective manner. Our businesses enjoy network effects, virtuous cycles and synergies across our platforms.
 
We benefit from the network effects resulting from the significant social aspects of our digital entertainment and e-commerce platforms. For example, because game players find it highly beneficial to join a platform with a large number of other game players, each new player that joins creates value for the existing community. This encourages current users to invite new users to our platform, which allows us to grow our user base with moderate acquisition cost and increases the likelihood that users will remain active and engaged and therefore spend on our platform.
 
88
Each of our three businesses is a multi-sided platform which benefits from virtuous cycle dynamics. Thus, as our platforms grow, they become more valuable to each of our users and this increases their potential spending opportunities. For example, as the number of buyers on our Shopee platform increases, Shopee attracts an increasing number of sellers, resulting in increases in the volume and variety of products available on the platform, which increases the purchasing opportunities for each of those buyers. This results in greater monetization potential as the size of each platform grows.
 
Finally, synergies among our digital financial services business and each of our digital entertainment and e-commerce businesses allow us to increase our user base and monetization quickly and cost-effectively. For example, as our Garena game players and Shopee buyers increasingly complete transactions using our mobile wallet services, our mobile wallet user base grows, which in turn attracts more merchants to join the mobile wallet network. As more third-party merchants join SeaMoney’s network, our users become increasingly engaged with our platforms. At the same time, these users may also increasingly explore other services and product offerings available on our digital financial services platform.
 
Optimization of Our Cost and Expense Structure
 
Our cost and expense structure has several broad components: payment channel costs, royalties, amortized license fees and hosting costs for our digital entertainment business; sales and marketing expenses, consisting primarily of customer acquisition and retention expenses for all our business segments; costs of logistics, including expenses for warehousing, for our e-commerce business; funding costs as well as credit and default costs, for our consumer and merchant credit business; employee compensation and welfare costs and expenses, which are spread among different functions; research and development expenses; and other costs and expenses across our businesses that are mainly fixed in nature. By offering our own mobile wallet and payment processing services, we strive to effectively reduce our payment channel costs and capture value that may otherwise go to third-party payment service providers. Our scale in our digital entertainment business has enabled us to optimize our variable costs, as has our operating scale for e-commerce and digital financial services.
 
We have made a strategic decision to invest in the growth of our Shopee marketplace by incurring sales and marketing expenses in advance of our monetization efforts. In addition, we are also investing in user acquisition in our SeaMoney business. We believe that taking a thoughtful approach to monetization by building our user base and increasing engagement first will allow us to maximize our monetization in the future.
 
Foreign Exchange Rates
 
Our reporting currency is the U.S. dollar and changes in currency exchange rates may materially affect our reported results and consolidated trends. We earn revenue denominated in local currencies of Southeast Asia and Taiwan and Brazil, among other currencies, while some of our costs and expenses are paid in other foreign currencies. We do not rely on any single currency as we earn revenue in different local currencies across our markets and keep a significant cash position in U.S. dollars.
 
Our expenses may become higher and our revenue and operating metrics may become lower than would be the case if exchange rates were stable or if we were operating and reporting in one currency. For example, if the U.S. dollar weakens relative to currencies in our local markets, our revenue, operating expenses and GMV will be higher than if currencies had remained constant. Likewise, if the U.S. dollar strengthens relative to currencies in our local markets, our revenue, operating expenses and GMV will be lower than if currencies had remained constant. Movements in foreign currency exchange rates may have a material adverse effect on our results of operations, which may cause our financial and operational metrics reported in the U.S. dollar to be not fully representative of the underlying business performance. We believe that our diversification in geographic coverage benefits our shareholders over the long-term. We may also enter into foreign currency derivative transactions to hedge potential foreign exchange risks. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars.”
 
89
Description of Certain Statement of Operations Items
 
Revenue
 
We currently generate revenue primarily from our digital entertainment business and e-commerce business. The table below sets forth our revenue breakdown.
 
   
For the Year Ended December 31,
  
   
2019
    
2020
    
2021
  
   
US$
    
Percentage
of Total
Revenue
    
US$
    
Percentage
of Total
Revenue
    
US$
    
Percentage
of Total
Revenue
  
   
(thousands, except for percentages)
  
Service revenue
                                    
Digital Entertainment
    
1,136,017
      
52.2
      
2,015,972
      
46.1
      
4,320,013
      
43.4
  
E-commerce and other services
    
822,659
      
37.8
      
1,777,330
      
40.6
      
4,564,617
      
45.8
  
Sales of goods
    
216,702
      
10.0
      
582,362
      
13.3
      
1,070,560
      
10.8
  
Total revenue
    
2,175,378
      
100.0
      
4,375,664
      
100.0
      
9,955,190
      
100.0
  

The table below sets forth the revenue from external customers based on the geographical locations where the services were provided or goods were sold, both in absolute amount and as a percentage of total revenue for the periods indicated.
 
   
For the Year Ended December 31,
  
   
2019
    
2020
    
2021
  
   
US$
    
Percentage
of Total
Revenue
    
US$
    
Percentage
of Total
Revenue
    
US$
    
Percentage
of Total
Revenue
  
   
(thousands, except for percentages)
  
Southeast Asia
    
1,378,141
      
63.4
      
2,791,894
      
63.8
      
6,316,782
      
63.5
  
Rest of Asia
    
489,291
      
22.5
      
655,007
      
15.0
      
1,394,342
      
14.0
  
Latin America
    
282,618
      
13.0
      
790,308
      
18.1
      
1,850,861
      
18.6
  
Rest of the world
    
25,328
      
1.1
      
138,455
      
3.1
      
393,205
      
3.9
  
Total revenue
    
2,175,378
      
100.0
      
4,375,664
      
100.0
      
9,955,190
      
100.0
  

Digital Entertainment
 
We generate revenue from our digital entertainment business primarily by selling in-game items to our game players. We recognize revenue ratably over the estimated service period. Our revenue generated from digital entertainment accounted for 52.2%, 46.1% and 43.4% of our total revenue in 2019, 2020 and 2021, respectively.
 
The primary driver for revenue in our digital entertainment business is the size of our active user base and the level of user engagement. Due to the freemium business model of our immersive games, the higher the number of active users on our games, the greater the likelihood of such users to make in-game purchases. Therefore, we believe Game QAU is a key metric to help us understand both the active user base and user engagement on our games. For example, our Game QAUs increased from 354.7 million to 610.6 million and 654.0 million from the fourth quarter of 2019 to the fourth quarters of 2020 and 2021, respectively, which led to an increase in the number of paying users, which in turn contributed to our revenue growth during those periods. User base growth and engagement in 2021 were primarily driven by the launch of new games, the expansion of existing games into new markets, and the improvement and launch of new content in our existing games. See “Item 4. Information on the Company—B. Business Overview—Our Businesses—Garena Digital Entertainment Business—Game Players.”
 
90
E-commerce and Other Services
 
E-commerce and other services revenue consist of revenue generated from our e-commerce marketplace services, digital financial services, and other services on our platforms. Revenue from products owned and sold by us on our Shopee platform was recorded under sales of goods revenue as discussed below. Our e-commerce and other services revenue constituted 37.8%, 40.6% and 45.8% of our total revenue during 2019, 2020 and 2021, respectively.
 
We monetize Shopee’s marketplace model mainly by offering sellers paid advertisement services, charging transaction-based fees, and charging for certain value-added services, including logistics. We may also roll out other means of generating revenue to broaden our monetization avenues in the future.
 
We generate revenue from our digital financial services business primarily from interest and fees from loans granted to commercial and consumer customers, and commissions charged to third-party merchants. We generally recognize our interest and fees, and commission from the transactions as revenue. Typically the commission charged is either a fixed rate or a certain percentage of the transaction value flowing through the platform.
 
Sales of Goods
 
Sales of goods revenue mainly comes from our e-commerce business. While we primarily operate as a marketplace, we also purchase products from manufacturers or third parties directly and sell on our Shopee platform under our official store to meet buyers' demand for such products. Bulk purchasing and direct product sales for specific product categories also enable us to offer better product assortment and more competitive prices to our buyers.
 
Cost of Revenue
 
Our cost of revenue primarily consists of direct expenses in generating revenue from our businesses.
 
Digital Entertainment
 
For our cost of revenue for digital entertainment, the largest portion relates to channel cost which is generally paid as a percentage of gross billings, and recognized as expenses over the performance obligation period, and a significant portion also relates to royalties, which are generally paid as a percentage of gross billings from our licensed games, and other fees relating to our use of various third-party intellectual properties. Other costs include server and hosting costs, upfront licensing fees, which are fixed and amortized over the shorter of estimated useful life or game licensing period, staff compensation and welfare costs, which include the share-based compensation, and other miscellaneous costs.
 
E-commerce and Other Services
 
Our cost of revenue for e-commerce services primarily consists of expenses associated with our logistics and other value-added services, bank transaction fees for transactions conducted through our Shopee platform, server and hosting costs, staff compensation and welfare costs, which include share-based compensation, and other miscellaneous costs.
 
Our cost of revenue for digital financial services primarily consists of server and hosting costs, interest expenses for deposits payable, bank transaction fees for transactions conducted through our SeaMoney platform, commissions we pay to counter operators, staff compensation and welfare costs, which include share-based compensation, and other miscellaneous costs.
 
Sales of Goods
 
Our cost of revenue for sales of goods is mainly attributable to the goods we purchase from manufacturers and third parties and sell directly to buyers on our Shopee platform.
 
91
Operating Income and Expenses
 
Our operating expenses consist of sales and marketing expenses, general and administrative expenses and research and development expenses, net of other operating income. The table below sets forth our operating expenses, both in absolute amount and as a percentage of total revenue, for the periods indicated.
 
   
For the Year Ended December 31,
  
   
2019
    
2020
    
2021
  
   
US$
    
Percentage
of Total
Revenue
    
US$
    
Percentage
of Total
Revenue
    
US$
    
Percentage
of Total
Revenue
  
   
(thousands, except for percentages)
  
Other operating income
    
(15,890
)
    
(0.7
)
    
(189,645
)
    
(4.3
)
    
(287,946
)
    
(2.9
)
Sales and marketing expenses
    
969,543
      
44.6
      
1,830,875
      
41.8
      
3,829,743
      
38.5
  
General and administrative expenses
    
385,865
      
17.7
      
657,215
      
15.0
      
1,105,295
      
11.1
  
Research and development expenses
    
156,634
      
7.2
      
353,785
      
8.1
      
831,703
      
8.4
  
Total operating expenses
    
1,496,152
      
68.8
      
2,652,230
      
60.6
      
5,478,795
      
55.1
  

Other Operating Income
 
Our other operating income consists primarily of rebates from e-commerce related logistic services provided by third parties.
 
Sales and Marketing Expenses
 
Our sales and marketing expenses consist primarily of online and offline advertising expenses, promotion expenses, and staff compensation and welfare expenses, which include share-based compensation for our employees engaged in sales and marketing functions. We expect to continue to incur significant sales and marketing expenses as we grow our user base and increase user engagement on our platforms and games, and continue building brand awareness.
 
General and Administrative Expenses
 
Our general and administrative expenses consist primarily of facilities and other overhead expenses, depreciation and amortization expenses, impairment losses, provision for credit losses for our digital financial services businesses, external professional service expenses, and staff compensation and welfare expenses, which include share-based compensation for our employees engaged in general and administrative functions. We expect our general and administrative expenses to increase for the foreseeable future as we grow our businesses.
 
Research and Development Expenses
 
Our research and development expenses consist primarily of staff compensation and welfare expenses, which include share-based compensation for our employees engaged in product development functions. We believe continued investment in developing our platforms and content is extremely important to achieving our strategic objectives. As a result, we expect our research and development expenses to increase for the foreseeable future as we grow our business.
 
Results of Operations
 
The table below sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages of our total revenue. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
 
92
   
For the Year Ended December 31,
  
   
2019
    
2020
    
2021
  
   
US$
    
Percentage
of Total Revenue
    
US$
    
Percentage
of Total Revenue
    
US$
    
Percentage
of Total Revenue
  
   
(thousands, except for percentages)
  
Selected Consolidated Statements of Operations Data:
  
Revenue:
                                    
Service revenue
                                    
Digital Entertainment
    
1,136,017
      
52.2
      
2,015,972
      
46.1
      
4,320,013
      
43.4
  
E-commerce and other services
    
822,659
      
37.8
      
1,777,330
      
40.6
      
4,564,617
      
45.8
  
Sales of goods
    
216,702
      
10.0
      
582,362
      
13.3
      
1,070,560
      
10.8
  
Total revenue
    
2,175,378
      
100.0
      
4,375,664
      
100.0
      
9,955,190
      
100.0
  
Cost of revenue:
                                                
Cost of service
                                                
Digital Entertainment
    
(435,905
)
    
(20.0
)
    
(702,329
)
    
(16.1
)
    
(1,230,082
)
    
(12.4
)
E-commerce and other services
    
(907,518
)
    
(41.7
)
    
(1,743,773
)
    
(39.9
)
    
(3,825,826
)
    
(38.4
)
Cost of goods sold
    
(227,035
)
    
(10.4
)
    
(580,657
)
    
(13.3
)
    
(1,003,547
)
    
(10.1
)
Total cost of revenue
    
(1,570,458
)
    
(72.2
)
    
(3,026,759
)
    
(69.2
)
    
(6,059,455
)
    
(60.9
)
Gross profit
    
604,920
      
27.8
      
1,348,905
      
30.8
      
3,895,735
      
39.1
  
Operating income (expenses):
                                                
Other operating income
    
15,890
      
0.7
      
189,645
      
4.3
      
287,946
      
2.9
  
Sales and marketing expenses
    
(969,543
)
    
(44.6
)
    
(1,830,875
)
    
(41.8
)
    
(3,829,743
)
    
(38.5
)
General and administrative expenses
    
(385,865
)
    
(17.7
)
    
(657,215
)
    
(15.0
)
    
(1,105,295
)
    
(11.1
)
Research and development expenses
    
(156,634
)
    
(7.2
)
    
(353,785
)
    
(8.1
)
    
(831,703
)
    
(8.4
)
Total operating expenses
    
(1,496,152
)
    
(68.8
)
    
(2,652,230
)
    
(60.6
)
    
(5,478,795
)
    
(55.1
)
Operating loss
    
(891,232
)
    
(41.0
)
    
(1,303,325
)
    
(29.8
)
    
(1,583,060
)
    
(15.9
)
Interest income
    
33,935
      
1.6
      
24,804
      
0.6
      
36,082
      
0.4
  
Interest expense
    
(48,208
)
    
(2.2
)
    
(148,243
)
    
(3.4
)
    
(138,945
)
    
(1.4
)
Net investment gain (loss)
    
11,794
      
0.5
      
(17,820
)
    
(0.4
)
    
(43,502
)
    
(0.4
)
Changes in fair value of convertible notes
    
(472,877
)
    
(21.7
)
    
(87
)
    
(0.0
)
    
–
      
–
  
Foreign exchange (loss) gain
    
(2,031
)
    
(0.1
)
    
(38,567
)
    
(0.9
)
    
14,241
      
0.1
  
Loss before income tax and share of results of equity investees
    
(1,368,619
)
    
(62.9
)
    
(1,483,238
)
    
(33.9
)
    
(1,715,184
)
    
(17.2
)
Income tax expense
    
(85,864
)
    
(3.9
)
    
(141,640
)
    
(3.2
)
    
(332,865
)
    
(3.3
)
Share of results of equity investees
    
(3,239
)
    
(0.1
)
    
721
      
0.0
      
5,019
      
0.1
  
Net loss
    
(1,457,722
)
    
(67.0
)
    
(1,624,157
)
    
(37.1
)
    
(2,043,030
)
    
(20.5
)
Non-GAAP Financial Measure:
                                                
Net loss excluding share-based compensation(1)
    
(1,340,653
)
    
(61.6
)
    
(1,333,911
)
    
(30.5
)
    
(1,572,706
)
    
(15.8
)


(1)
To see how we define and calculate “net loss excluding share-based compensation,” a reconciliation between such item and net loss (the most directly comparable U.S. GAAP financial measure) and a discussion of the limitations of non-GAAP financial measures, see “—Non-GAAP Financial Measures” below.
 
93
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
 
Revenue
 
Our total revenue increased by 127.5% from US$4.4 billion in 2020 to US$10.0 billion in 2021. The increase was mainly driven by the growth in each of the segments detailed as follows:
 

 •
Digital Entertainment: Our digital entertainment revenue increased by 114.3% from US$2.0 billion in 2020 to US$4.3 billion in 2021. This increase was primarily due to the increase in our active user base as well as the deepened paying user penetration.
 

 •
E-commerce and other services: Our e-commerce and other services revenue increased by 156.8% from US$1.8 billion in 2020 to US$4.6 billion in 2021. This increase was primarily driven by the growing adoption of products and services across our e-commerce and digital financial services businesses.
 

 •
Sales of goods: Revenue increased by 83.8% from US$582.4 million in 2020 to US$1.1 billion in 2021, primarily due to the increase in our product offerings.
 
Cost of Revenue
 
Our total cost of revenue increased by 100.2% from US$3.0 billion in 2020 to US$6.1 billion in 2021. This increase was in line with the overall growth of our businesses:
 

 •
Digital Entertainment: Cost of revenue increased by 75.1% from US$702.3 million in 2020 to US$1.2 billion in 2021. The increase was largely in line with the increase in our digital entertainment revenue.
 

 •
E-commerce and other services: Cost of revenue for our e-commerce and other services combined increased by 119.4% from US$1.7 billion in 2020 to US$3.8 billion in 2021. The increase was primarily due to higher costs of logistics from order growth, and other costs driven by the growth of our e-commerce marketplace.
 

 •
Cost of goods sold: Cost of goods sold increased by 72.8% from US$580.7 million in 2020 to US$1.0 billion in 2021. The increase was largely in line with the increase in our revenue from sales of goods.
 
94
Gross Profit
 
As a result of the foregoing, our gross profit was US$1.3 billion in 2020 and US$3.9 billion in 2021. We had gross margins of 30.8% and 39.1% in 2020 and 2021, respectively, and our digital entertainment business had gross margins of 65.2% and 71.5% in 2020 and 2021, respectively.
 
Other Operating Income
 
Our other operating income increased by 51.8% from US$189.6 million in 2020 to US$287.9 million in 2021. The increase in our other operating income was mainly due to the rebates from e-commerce related logistics services providers.
 
Sales and Marketing Expenses
 
Our sales and marketing expenses increased by 109.2% from US$1.8 billion in 2020 to US$3.8 billion in 2021. The increase in sales and marketing expenses in 2021 was mainly from our e-commerce and digital financial services businesses. The increase in marketing expenses for our e-commerce business was primarily attributable to the ramping up of marketing incentives and online marketing efforts, as we continue investing in capturing market opportunities and expanding across markets. The increase in marketing expenses for our digital financial services business was mainly due to our efforts to promote adoption of our mobile wallet services.
 
General and Administrative Expenses
 
Our general and administrative expenses increased by 68.2% from US$657.2 million in 2020 to US$1.1 billion in 2021. This increase was primarily due to higher staff compensation and benefit costs from increased staff to support the business growth, office facilities and related expenses, as well as credit losses for our digital financial services business.
 
Research and Development Expenses
 
Our research and development expenses increased by 135.1% from US$353.8 million in 2020 to US$831.7 million in 2021, primarily due to the increase in research and development staff force.
 
Other Income, Expenses, Gains and Losses
 
Our interest income, interest expense, net investment gain (loss), fair value change for convertible notes and foreign exchange (loss) gain was a net loss of US$179.9 million in 2020 compared to a net loss of US$132.1 million in 2021. Our net non-operating loss in 2020 and 2021 were primarily due to interest expense on our convertible notes.
 
Loss before Income Tax and Share of Results of Equity Investees
 
As a result of the foregoing, we had loss before income tax and share of results of equity investees of US$1.5 billion in 2020, compared to loss before income tax and share of results of equity investees of US$1.7 billion in 2021.
 
Income Tax Expense
 
We had an income tax expense of US$141.6 million in 2020 and US$332.9 million in 2021. This was primarily due to corporate income tax and withholding tax expenses incurred by our digital entertainment segment.
 
Share of Results of Equity Investees
 
We had share of profit of equity investees of US$0.7 million in 2020 and US$5.0 million in 2021.
 
95
Net Loss
 
As a result of the foregoing, we had net loss of US$1.6 billion in 2020 and US$2.0 billion in 2021.
 
Net Loss Excluding Share-based Compensation
 
Net loss excluding share-based compensation was US$1.3 billion in 2020 and US$1.6 billion in 2021.
 
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
 
Revenue
 
Our total revenue increased by 101.1% from US$2.2 billion in 2019 to US$4.4 billion in 2020. This increase was primarily due to increases in revenue from our e-commerce business and digital entertainment business.
 

 •
Digital Entertainment: Our digital entertainment revenue increased by 77.5% from US$1.1 billion in 2019 to US$2.0 billion in 2020. This increase was primarily due to the increase in our active user base as well as the deepened paying user penetration, and in particular, the continued success of our self-developed game Free Fire.
 

 •
E-commerce and other services: Our e-commerce and other services revenue increased by 116.0% from US$822.7 million in 2019 to US$1.8 billion in 2020. This increase was primarily driven by the growth of our e-commerce marketplace, and positive developments in each of our marketplace revenue streams – transaction-based fees, value-added services, and advertising. It is a result of our commitment to continuously enhance our service offerings as we seek to create greater value for our platform users.
 

 •
Sales of goods: Revenue increased by 168.7% from US$216.7 million in 2019 to US$582.4 million in 2020, primarily due to the increase in our product offerings.
 
Cost of Revenue
 
Our total cost of revenue increased by 92.7% from US$1.6 billion in 2019 to US$3.0 billion in 2020. This increase was in line with the overall growth of our businesses:
 

 •
Digital Entertainment: Cost of revenue increased by 61.1% from US$435.9 million in 2019 to US$702.3 million in 2020. The increase was largely in line with revenue growth in our digital entertainment business. Improvement in gross profit margins was largely due to higher revenue contribution from our self-developed game.
 

 •
E-commerce and other services: Cost of revenue for our e-commerce and other services combined increased by 92.1% from US$907.5 million in 2019 to US$1.7 billion in 2020. The increase was primarily due to higher expenses associated with our logistics and other value-added services, and other costs incurred in line with the growth of our e-commerce marketplace. Improvement in gross profit margins was mainly due to take-rate growth as we continue to roll out tools to better serve our users’ needs.
 

 •
Cost of goods sold: Cost of goods sold increased by 155.8% from US$227.0 million in 2019 to US$580.7 million in 2020. The increase was largely in line with the increase in our product offerings.
 
Gross Profit
 
As a result of the foregoing, our gross profit was US$604.9 million in 2019 and US$1.3 billion in 2020. We had gross margins of 27.8% and 30.8% in 2019 and 2020, respectively, and our digital entertainment business had gross margins of 61.6% and 65.2% in 2019 and 2020, respectively.
 
96
Other Operating Income
 
Our other operating income increased by 1,093.5% from US$15.9 million in 2019 to US$189.6 million in 2020. The increase was primarily due to the rebates from e-commerce related logistic services provided by third parties.
 
Sales and Marketing Expenses
 
Our sales and marketing expenses increased by 88.8% from US$969.5 million in 2019 to US$1.8 billion in 2020. The increase in sales and marketing expenses in 2020 was mainly from our e-commerce and digital financial services businesses. The increase in marketing expenses for our e-commerce business was primarily attributable to the ramping up of marketing incentives and brand marketing efforts, as we continue our investments to fully capture the opportunities in our markets. The increase in marketing expenses for our digital financial services business was mainly due to our efforts to drive adoption of our mobile wallet services.
 
General and Administrative Expenses
 
Our general and administrative expenses increased by 70.3% from US$385.9 million in 2019 to US$657.2 million in 2020. This increase was primarily due to higher staff compensation and benefit costs as well as provision for credit losses for our digital financial services business.
 
Research and Development Expenses
 
Our research and development expenses increased by 125.9% from US$156.6 million in 2019 to US$353.8 million in 2020, primarily due to an increase in research and development staff force.
 
Other Income, Expenses, Gains and Losses
 
Our interest income, interest expense, investment gain (loss), fair value change for convertible notes and foreign exchange gain (loss) was a net loss of US$477.4 million in 2019 compared to a net loss of US$179.9 million in 2020. Our net non-operating loss in 2019 was primarily due to a fair value loss of US$472.9 million arising from the fair value accounting treatment for the convertible promissory notes we issued in 2017 while our net non-operating loss in 2020 was primarily due to interest expense on our convertible notes.
 
Loss before Income Tax and Share of Results of Equity Investees
 
As a result of the foregoing, we had loss before income tax and share of results of equity investees of US$1.4 billion in 2019, compared to loss before income tax and share of results of equity investees of US$1.5 billion in 2020.
 
Income Tax Expense
 
We had an income tax expense of US$85.9 million in 2019 and US$141.6 million in 2020. This was primarily due to corporate income tax and withholding tax expenses incurred by our digital entertainment segment.
 
Share of Results of Equity Investees
 
We had share of loss of equity investees of US$3.2 million in 2019 and share of profit of equity investees of US$0.7 million in 2020.
 
Net Loss
 
As a result of the foregoing, we had net loss of US$1.5 billion in 2019 and US$1.6 billion in 2020.
 
Net Loss Excluding Share-based Compensation
 
Net loss excluding share-based compensation was US$1.3 billion in 2019 and US$1.3 billion in 2020.
 
97
Non-GAAP Financial Measures
 
To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use net loss excluding share-based compensation, a non-GAAP financial measure, as described below, to understand and evaluate our core operating performance. This non-GAAP financial measure, which may differ from similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP.
 
We believe that this non-GAAP financial measure provides useful information to investors and others in understanding and evaluating our operating results. This non-GAAP financial measure eliminates the impact of items that we do not consider indicative of the performance of our business. While we believe that this non-GAAP financial measure is useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the related financial information prepared in accordance with U.S. GAAP.
 
The use of net loss excluding share-based compensation has material limitations as an analytical tool, as it does not include all items that impact our net loss or income for the period and share-based compensation and changes in fair value of convertible notes are significant expenses. In addition, because this non-GAAP financial measure may not be calculated in the same manner by all companies, it may not be comparable to other similar titled measures used by other companies.
 
The table below presents reconciliation of net loss excluding share-based compensation to net loss, the most directly comparable U.S. GAAP financial measure, for the periods indicated.
 
   
For the Year Ended December 31,
  
   
2019
    
2020
    
2021
  
   
(US$ thousands)
  
Net loss
    
(1,457,722
)
    
(1,624,157
)
    
(2,043,030
)
Add: Share-based compensation
    
117,069
      
290,246
      
470,324
  
Net loss excluding share-based compensation
    
(1,340,653
)
    
(1,333,911
)
    
(1,572,706
)

Segment Reporting
 
We have three reportable segments, namely, digital entertainment, e-commerce and digital financial services. The chief operating decision maker reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating the financial performance of each segment.
 
Information about segments during the years ended December 31, 2019, 2020 and 2021 presented were as follows:
 
   
For the Year ended December 31, 2021
  
   
Digital
Entertainment
    
E-commerce
    
Digital Financial
Services
    
Other
Services(1)
    
Unallocated
expenses(2)
    
Consolidated
  
   
(US$ thousands)
  
Revenue
    
4,320,013
      
5,122,959
      
469,774
      
42,444
      
–
      
9,955,190
  
Operating income (loss)
    
2,500,081
      
(2,766,566
)
    
(640,422
)
    
(177,633
)
    
(498,520
)
    
(1,583,060
)
Non-operating loss, net
                                            
(132,124
)
Income tax expense
                                            
(332,865
)
Share of results of equity investees
                                            
5,019
  
Net loss
                                            
(2,043,030
)

98
   
For the Year ended December 31, 2020
  
   
Digital
Entertainment
    
E-commerce
    
Digital Financial
Services
    
Other
Services(1)
    
Unallocated
expenses(2)
    
Consolidated
  
   
(US$ thousands)
  
Revenue
    
2,015,972
      
2,167,149
      
60,785
      
131,758
      
–
      
4,375,664
  
Operating income (loss)
    
1,016,793
      
(1,442,593
)
    
(520,075
)
    
(49,006
)
    
(308,444
)
    
(1,303,325
)
Non-operating loss, net
                                            
(179,913
)
Income tax expense
                                            
(141,640
)
Share of results of equity investees
                                            
721
  
Net loss
                                            
(1,624,157
)

   
For the Year ended December 31, 2019
  
   
Digital
Entertainment
    
E-commerce
    
Digital Financial
Services
    
Other
Services(1)
    
Unallocated
expenses(2)
    
Consolidated
  
   
(US$ thousands)
  
Revenue
    
1,136,017
      
834,295
      
9,223
      
195,843
      
–
      
2,175,378
  
Operating income (loss)
    
529,524
      
(1,131,771
)
    
(116,309
)
    
(39,864
)
    
(132,812
)
    
(891,232
)
Non-operating loss, net
                                            
(477,387
)
Income tax expense
                                            
(85,864
)
Share of results of equity investees
                                            
(3,239
)
Net loss
                                            
(1,457,722
)



(1)
A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services.”
 

 (2)
Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the chief operating decision maker as part of segment performance.
 
Taxation
 
Cayman Islands
 
We are incorporated in the Cayman Islands and our primary business operations are conducted through our subsidiaries, branch offices and consolidated affiliated entities. Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains.
 
Singapore
 
Our subsidiaries incorporated in Singapore are subject to the Singapore corporate tax of 17% in 2019, 2020 and 2021. Garena Online Private Limited was granted an additional five-year development and expansion incentive by the Singapore Economic Development Board, or the EDB, commencing from January 1, 2017, with another five-year extension commencing from January 1, 2022, which grant a concessionary tax rate of 10% from January 1, 2017 to December 31, 2021 and 10.5% from January 1, 2022 to December 31, 2026 on qualifying income, subject to certain terms and conditions imposed by the EDB.
 
99
Others
 
Subsidiaries incorporated in other jurisdictions are subject to the respective statutory corporate income tax rates of the jurisdictions where they are resident.
 
Domestic statutory corporate income tax rate in Indonesia was reduced from 25% to 22% with effect from the financial year 2020.
 
In March 2021, the Philippines reduced its corporate income tax rate from 30% to 25%, effective retroactively from July 1, 2020.
 
B.          Liquidity and Capital Resources
 
Cash Flows and Working Capital
 
Our principal sources of liquidity have been cash generated from operating activities and proceeds from our follow-on offerings and convertible notes offerings.
 
As of December 31, 2019, 2020 and 2021, we had US$3.6 billion, US$7.1 billion and US$10.8 billion, respectively, in cash, cash equivalents and restricted cash. Cash and cash equivalents consist of cash on hand and demand deposits and funds placed with banks and other financial institutions which are unrestricted as to withdrawal and use and have original maturities of three months or less. Restricted cash mainly comprise monies received that are held in escrow in connection to our e-commerce business and advances received from customers in connection with our digital financial services business. Our cash, cash equivalents and restricted cash are primarily denominated in U.S. dollars as well as in local currencies of the markets where we operate. We intend to finance our future working capital requirements and capital expenditures from cash generated from operating activities and funds raised from financing activities. We believe that our current available cash and cash equivalents will be sufficient to meet our working capital requirements and material cash requirements in the ordinary course of business for the next 12 months.

As of December 31, 2021, we had revolving credit facilities for general working capital purposes of up to US$200 million, of which we had drawn down an aggregate of US$100 million as of December 31, 2021, and repaid in January 2022.
 
Our working capital position (which is the difference between current assets and current liabilities) was US$2.0 billion, US$4.3 billion and US$8.0 billion as of December 31, 2019, 2020 and 2021, respectively, mainly due to increases in cash from our financing activities, including the net proceeds from the issuance of convertible notes in 2019, 2020 and 2021, and the follow-on offerings in 2019, 2020 and 2021.
 
The following table sets forth a summary of our cash flows for the periods indicated:
 
    For the Year Ended December 31,  
     2019      2020      2021  
   
(US$ thousands)
  
Net cash generated from operating activities          
    
69,865
      
555,868
      
208,649
  
Net cash used in investing activities          
    
(363,219
)
    
(886,912
)
    
(3,767,273
)
Net cash generated from financing activities          
    
2,579,595
      
3,733,132
      
7,401,589
  
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
    
25,025
      
80,727
      
(58,218
)
Net increase in cash, cash equivalents and restricted cash
    
2,311,266
      
3,482,815
      
3,784,747
  
Cash, cash equivalents and restricted cash at beginning of year
    
1,259,312
      
3,570,578
      
7,053,393
  
Cash, cash equivalents and restricted cash at the end of the year
    
3,570,578
      
7,053,393
      
10,838,140
  

100
Operating Activities
 
Net cash generated from operating activities decreased by US$347.2 million to US$208.6 million for the year ended December 31, 2021, compared to US$555.9 million for the year ended December 31, 2020. The principal driver of our operating cash flows is cash received from sales of our products and services, including proceeds from our sales of in-game virtual items in our digital entertainment business, fees collected from customers in our e-commerce business, interest received from our loan business, commissions from merchants in our digital financial services business, and proceeds from direct sales of products. The decrease in operating cash flows was primarily attributable to increase in net loss (after adjusting for non-cash items) by US$97.3 million and a decrease in the change in deferred revenue by US$848.4 million. Despite higher cash generated from sales of in-game virtual items in our digital entertainment business in 2021, the decrease in the change in deferred revenue was mainly due to higher revenue being recognized in our digital entertainment business as compared to 2020. The decrease in operating cash flows was partially offset by an increase in the change in accrued expenses and other payables by US$162.8 million mainly due to higher accrued sales and marketing expenses, business and other taxes payables, accrued payroll and welfare expenses, and escrow payables. The decrease in operating cash flows was further offset by the decrease in the change in accounts receivable by US$137.7 million, primarily driven by lower receivables from our game distribution channels. The decrease in operating cash flows was also further offset by a decrease in the change in prepaid expenses and other assets by US$131.3 million, which was primarily attributable to higher channel cost being recognized in our digital entertainment business in 2021 and lower receivables due from our logistics providers in our e-commerce business.
 
Net cash generated from operating activities increased by US$486.0 million to US$555.9 million for the year ended December 31, 2020, compared to US$69.9 million for the year ended December 31, 2019. The principal driver of our operating cash flows is cash received from sales of our products and services, including proceeds from our sales of in-game virtual items in our digital entertainment business, fees collected from customers in our e-commerce business, interest received from our loan business, commissions from merchants in our digital financial services business, and proceeds from direct sales of products. The increase in operating cash flows was primarily driven by an increase in the change in deferred revenue of US$525.2 million, mainly due to cash generated from sales of in-game virtual items in our digital entertainment business, which was largely attributable to our self-developed game Free Fire, and an increase in the change in accrued expenses and other payables by US$589.4 million, which was primarily attributable to higher escrow payables and accrued cost of revenue and sales and marketing expenses. The increase in operating cash flows was partially offset by an increase in net loss (after adjusting for non-cash items) by US$258.1 million, an increase in the change in prepaid expenses and other assets, which was primarily attributable to higher receivables due from our logistics providers and payment collection channels in our e-commerce business, and higher deferred channel costs in our digital entertainment business, and an increase in the change in accounts receivables, which was primarily attributable to higher receivables from our game distribution channels.
 
Investing Activities
 
Net cash used in investing activities amounted to US$3.8 billion in 2021. This was primarily attributable to our time deposits and long-term investments such as equity investments of US$2.5 billion, an increase in loans receivable of US$1.2 billion and purchase of property and equipment of US$772.2 million. These were partially offset by proceeds from maturity and disposal of investments of US$798.2 million.
 
Net cash used in investing activities amounted to US$886.9 million in 2020. This was primarily attributable to the purchase of property and equipment of US$336.3 million, purchase of investments of US$219.5 million and an increase in loans receivable of US$255.7 million.
 
Net cash used in investing activities amounted to US$363.2 million in 2019. This was primarily attributable to the purchase of property and equipment of US$239.8 million and purchase of investments of US$118.5 million.
 
Financing Activities
 
Net cash generated from financing activities amounted to US$7.4 billion in 2021, primarily attributable to net proceeds from issuance of convertible notes of US$2.8 billion and net proceeds from issuance of ordinary shares of US$4.1 billion.
 
101
Net cash generated from financing activities amounted to US$3.7 billion in 2020, primarily attributable to net proceeds from issuance of convertible notes of US$1.1 billion and net proceeds from issuance of ordinary shares of US$3.0 billion.
 
Net cash generated from financing activities amounted to US$2.6 billion in 2019, primarily attributable to net proceeds from issuance of convertible notes of US$1.1 billion and net proceeds from issuance of ordinary shares of US$1.5 billion.
 
Convertible Notes
 
In June 2018, we completed an offering of 2.25% convertible senior notes in an aggregate principal amount of US$575 million, or the 2023 convertible notes. These 2023 convertible notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons in compliance with Regulation S under the Securities Act. The notes will mature in July 2023. Note holders have the right, at their option, to convert the outstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the close of business on the business day immediately preceding January 1, 2023; or (ii) anytime on or after January 1, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date. Unless otherwise converted or redeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSs at an initial conversion rate of 50.5165 ADSs per US$1,000 principal amount (equivalent to approximately US$19.80 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to converting holders. Between May and October 2020, we entered into separate privately negotiated agreements with certain holders of our 2023 convertible notes to exchange approximately US$378.5 million principal amount of our then outstanding 2023 convertible notes for a combination of approximately US$50.0 million (plus accrued and unpaid interest to the exchange date, if any) in cash and approximately 18.5 million ADSs as consideration. As of April 5, 2022, holders of an aggregate of US$165.2 million principal amount of our 2023 convertible notes have elected to convert, and after taking into account the 2023 convertible notes exchanged, approximately US$31.3 million principal amount of our 2023 convertible notes remained outstanding.
 
In November 2019, we completed an offering of 1.00% convertible senior notes in an aggregate principal amount of US$1.15 billion, or the 2024 convertible notes. These 2024 convertible notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons in compliance with Regulation S under the Securities Act. The notes will mature in December 2024. Note holders have the right, at their option, to convert the outstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the close of business on the business day immediately preceding June 1, 2024; or (ii) anytime on or after June 1, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date. On or after December 2, 2022, we may redeem for cash all or any part of the notes, if certain conditions are met, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. We may also redeem for cash all but not part of the notes at any time if less than US$75 million aggregate principal amount of notes remains outstanding at such time. Unless otherwise converted or redeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSs at an initial conversion rate of 19.9475 ADSs per US$1,000 principal amount (equivalent to approximately US$50.13 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to converting holders. As of April 5, 2022, holders of an aggregate of US$998.0 million principal amount of our 2024 convertible notes have elected to convert, and approximately US$152.0 million principal amount of our 2024 convertible notes remained outstanding.
 
In connection with the pricing of the 2024 convertible notes, we have entered into capped call transactions with certain financial institutions. These capped call transactions are generally expected to reduce the potential dilution with respect to our ADSs and Class A ordinary shares upon conversion of the 2024 convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, upon any conversion of the notes, with such reduction of potential dilution or offset of cash payments, as the case may be, subject to a cap based on the cap price of the capped call transactions. The cap price of the capped call transactions will initially be US$70.36 per ADS, and is subject to certain adjustments under the terms of the capped call transactions.
 
102
In May 2020, we completed an offering of 2.375% convertible senior notes in an aggregate principal amount of US$1.15 billion, or the 2025 convertible notes. These 2025 convertible notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons in compliance with Regulation S under the Securities Act. The notes will mature in December 2025. Note holders have the right, at their option, to convert the outstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the close of business on the business day immediately preceding September 1, 2025; or (ii) anytime on or after September 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date. On or after May 19, 2023, we may redeem for cash all or any part of the notes, if certain conditions are met, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. We may also redeem for cash all but not part of the notes at any time if less than US$100 million aggregate principal amount of notes remains outstanding at such time. Unless otherwise converted or redeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSs at an initial conversion rate of 11.0549 ADSs per US$1,000 principal amount (equivalent to approximately US$90.46 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to converting holders. As of April 5, 2022, holders of an aggregate of US$0.5 million principal amount of our 2025 convertible notes have elected to convert, and US$1.1 billion principal amount of our 2025 convertible notes remained outstanding.
 
In connection with the pricing of the 2025 convertible notes, we have entered into capped call transactions with certain financial institutions. These capped call transactions are generally expected to reduce the potential dilution with respect to our ADSs and Class A ordinary shares upon conversion of the 2025 convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, upon any conversion of the notes, with such reduction of potential dilution or offset of cash payments, as the case may be, subject to a cap based on the cap price of the capped call transactions. The cap price of the capped call transactions will initially be US$136.54 per ADS, and is subject to certain adjustments under the terms of the capped call transactions.
 
In September 2021, we completed a registered offering of 0.25% convertible senior notes in an aggregate principal amount of US$2.875 billion, or the 2026 convertible notes. The notes will mature in September 2026. Note holders have the right, at their option, to convert the outstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the close of business on the business day immediately preceding June 15, 2026; or (ii) anytime on or after June 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date. On or after September 15, 2024, we may redeem for cash all or any part of the notes, if certain conditions are met, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. We may also redeem for cash all but not part of the notes at any time if less than US$250 million aggregate principal amount of notes remains outstanding at such time. Unless otherwise converted or redeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSs at an initial conversion rate of 2.0964 ADSs per US$1,000 principal amount (equivalent to approximately US$477.01 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to converting holders. As of April 5, 2022, all of our 2026 convertible notes remained outstanding.
 
For the years ended December 31, 2019, 2020 and 2021, we recognized total interest expense for coupon interest of US$14.3 million, US$35.5 million and US$36.2 million and amortization of discount on the liability component of US$33.3 million, US$88.2 million, and US$100.1 million, respectively, on our then outstanding convertible notes.
 
Due to the exchanges and conversions completed during the years ended December 31, 2019, 2020 and 2021, we recognized a net loss on debt extinguishment of nil, US$24.4 million and US$2.1 million, respectively, in our consolidated statements of operations.

103
Our material cash requirements in 2022 and the foreseeable long-term mainly include our capital expenditures, contractual obligations, staff and administrative expenses and investments to expand our businesses. We are monitoring our cash resources and cash requirements, and if our cash resources are insufficient to satisfy our cash requirements, we may seek and/or obtain other financing or funding arrangements.

Capital Expenditures
 
Our capital expenditures amounted to US$247.1 million, US$357.1 million and US$807.2 million in 2019, 2020 and 2021, respectively. Capital expenditure was incurred for purchases of property and equipment and software, and costs for developing software for internal use. The increase in our capital expenditure in 2021 was mainly attributable to the additional investment in servers, computer hardware, transportation assets, land use rights acquisitions and leasehold improvements due to the growth of our businesses, as well as software due to the expansion of our digital financial services business. We will continue to make capital expenditures to meet the expected growth of our business and expect that cash generated from our operating activities and financing activities will meet our capital expenditure needs in the foreseeable future.
 
Contractual Obligations
 
The following table sets forth our contractual obligations as of December 31, 2021.
 
         
Payment Due by Period
  
     Total    
Less Than
1 Year
      1-3 Years      3-5 Years    
More Than
5 Years
  
   
(US$ thousands)
  
Operating lease obligations, including imputed interest(1)
    
822,327
      
193,322
      
331,732
      
190,932
      
106,341
  
Obligations for leases that have not yet commenced, including imputed interest(1)
    
803,770
      
41,500
      
171,792
      
184,758
      
405,720
  
Finance lease obligations, including imputed interest
    
9,496
      
1,851
      
3,665
      
2,924
      
1,056
  
Debt, including scheduled interest(2)
    
4,358,984
      
36,733
      
256,075
      
4,066,176
      
—
  
Purchase commitments(3)          
    
559,825
      
481,788
      
61,401
      
12,419
      
4,217
  
Minimum guarantee commitments(4)
    
62,300
      
44,431
      
5,869
      
12,000
      
—
  
Total
    6,612,702
      799,625
      830,534
      4,469,209
      517,334
 


(1)
For further information, refer to Note 10 – Leases in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”
 
(2)
The principal balances of the 2023, 2024, 2025 and 2026 convertible notes are reflected in the payment period in the table above based on the contractual maturity assuming no exchange or conversion subsequent to December 31, 2021.
 
(3)
For further information, refer to Note 24 – Commitments and Contingencies in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”
 
(4)
We have commitments to pay minimum royalty fees to game developers for certain online games we have licensed.
 
Other than the contractual obligations and commercial commitments set forth above, we did not have any long-term debt obligations, finance lease obligations, operating lease obligations, purchase obligations or other long-term liabilities as of December 31, 2021.
 
Holding Company Structure
 
Sea Limited is a holding company that does not have substantive operations. We conduct our operations primarily through our subsidiaries, branch offices and our consolidated affiliated entities. As a result, our ability to pay dividends depends upon, among others, dividends paid by our subsidiaries. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.
 
104
In addition, as determined in accordance with local regulations, our subsidiaries and VIEs in certain of our markets may be restricted from paying us dividends offshore or from transferring a portion of their assets to us, either in the form of dividends, loans or advances, unless certain requirements are met, and regulatory approvals are obtained. See “Item 3. Key Information—D. Risk Factors—Markets Related Risks—The ability of our subsidiaries to distribute dividends to us may be subject to restrictions under the laws of their respective jurisdictions.” Even though we currently do not require any such dividends, loans or advances from our entities for working capital and other funding purposes, we may in the future require additional cash resources from them due to changes in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to our shareholders.
 
Certain of the markets in which we have significant subsidiaries or principal operating entities, including Indonesia, Thailand and Taiwan, require those subsidiaries to establish and fund statutory reserves. Indonesian laws require a limited liability company to reserve a certain amount from its net profit each year as a reserve fund until such fund amounts to at least 20% of its issued and paid-up capital. Thailand regulations require a private limited liability company to allocate at least 5% of its retained earnings into a legal reserve fund at the time the dividend is paid until and unless the legal reserve fund reaches 10% of the company’s registered capital. The legal reserve is not available for dividend distribution. Taiwan laws require a limited liability company to set aside 10% of annual net income (less prior years’ losses, if any, and applicable income taxes) as legal reserve until the accumulated legal reserve equals the paid-in capital of such company before such company can distribute any dividend.
 
C.          Research and Development, Patents and Licenses, etc.
 
Research and Development
 
Costs incurred in connection with the planning and implementation phases of the development of software for internal use are expensed. Costs incurred in the development phase are capitalized. Capitalization ceases and the costs are amortized over the software’s estimated useful life when the software is ready for its intended use.

Costs incurred internally in researching and developing a software product are charged to expense as research and development costs prior to technological feasibility being established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Technological feasibility is established upon completion of all the activities that are necessary to substantiate that the software product can be produced in accordance with its design specifications, including functions, features, and technical performance requirements. None of such costs were capitalized for any of periods presented.

Intellectual Property
 
See “Item 4. Information on the Company—B. Business Overview—Intellectual Property.”
 
D.          Trend Information
 
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2021 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial conditions.
 
E.          Critical Accounting Estimates
 
We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect our reporting of, among other things, assets and liabilities, disclosure of contingent assets and liabilities and revenue and expenses. We regularly evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and other factors that we believe to be relevant under the circumstances. Since our financial reporting process inherently relies on the use of estimates and assumptions, our actual results could differ from what we expect.
 
105
We believe that the following accounting policies reflect the significant judgments, estimates and assumptions used in the preparation of our consolidated financial statements. For additional information, see the disclosure included in Note 2 – Summary of Significant Accounting Policies in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”
 
Recognition of Digital Entertainment revenue
 
We distribute online games, including self-developed games and licensed online games from game developers, through our PC and mobile based applications and certain app stores. We offer many ways for users to purchase virtual goods (consisting of virtual currencies and virtual items), including the ShopeePay and Shopee platform, other online payment gateways, bank transfers, credit cards, mobile phone billing and prepaid cards, including its own prepaid cards, which are sold through agents. As we control the service of providing games to the users and have a direct contractual arrangement with our paying users and have the right to determine the price to be paid by such users, the gross proceeds collected from these channels represent revenue to be recognized, and the amounts retained by these channels based on a predetermined percentage represent our cost of revenue to be recognized.
 
Revenue is recognized over the performance obligation period. For purposes of determining the performance obligation period, we have determined that an implied obligation exists to the paying users to continue providing hosting services and access to the purchased virtual goods within the online games over an estimated service period. Such service period is determined in accordance with the estimated average lifespan of the virtual items sold or estimated average lifespan of the paying users of the said games or similar games.
 

 •
Item-based revenue model. Virtual items have different lifespan patterns: time-based, consumable and durable. Time-based virtual items are items with a stated expiration time, for which revenue is recognized ratably over the period based on the time unit of the virtual items. Consumable virtual items are items that can be consumed by a specific user action and have limitations on repeated use. Revenue attributable to consumable virtual items is recognized upon consumption. Durable virtual items are items that provide the user with continuing benefits over an extended period of time. Revenue attributable to durable virtual items is recognized ratably over their average lifespan, which are estimated based on the users’ historical usage patterns and playing behaviors for the virtual items. We assess the estimated average lifespan of durable virtual items on a quarterly basis.
 

 •
User-based revenue model. We track paying users’ activeness within each game where the user-based revenue model is used to estimate paying users’ average lifespan. Paying users are defined as inactive when they have reached a period of inactivity for which it is reasonable to believe that these users will not return to a specific game. We determine the inactive rate of these paying users and revise the estimated paying users’ average lifespan on a quarterly basis.
 
We believe the current revenue recognition provides reasonable depiction of the service transferred patterns to the customers and represents the best estimation of the time period the customers are likely to play the respective games. Determining the estimated service period is subjective and requires management’s judgment. Future users’ usage patterns and playing behavior may change and differ from the historical usage patterns and playing behavior, and therefore the estimated service period may change accordingly in the future.
 
Fair Value Measurements of Convertible Notes
 
We have issued the 2023 convertible notes, 2024 convertible notes, 2025 convertible notes and 2026 convertible notes. Fair value of the liability component of the convertible notes are estimated using the discounted cash flow method. This valuation requires judgment as it requires the estimation of the present value of expected future cash flows from coupon interest and redemption amount, discounted by the implied credit yield or with reference to similar instruments that did not have associated convertible features.
 
Investment in Equity Securities
 
Investment in non-marketable equity securities that are measured at fair value uses a combination of valuation methodologies, including market and income approaches based on our best estimate, which is determined by using information including but not limited to the pricing of recent rounds of financing of the investees, future cash flow forecasts, liquidity factors and multiples of a selection of comparable companies.
 
106
Investment in equity securities which we have elected to measure at cost are reviewed regularly for impairment. Impairment evaluation requires significant judgment and includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and current and future financing needs.
 
Share-based Compensation
 
Share options, restricted share awards, restricted share units or share appreciation rights are granted to our officers, employees, directors and other eligible persons (collectively known as “Eligible Persons”). Share-based compensation are measured at fair value and recognized as compensation expense over the requisite service period (which is generally the vesting period) in the consolidated statements of operations. Forfeitures are accounted for as they occur.
 
The Black-Scholes option pricing model was applied in determining the estimated fair value of the share options granted to Eligible Persons. The model requires the input of highly subjective assumptions including the estimated expected stock price volatility and the expected term of the option for which employees are likely to exercise their share options. The risk-free rate for periods within the contractual life of the option is based on the US Treasury Yields at the time of grant. We have used the simplified method to determine the expected term due to insufficient historical exercise data to provide a reasonable basis to estimate expected term. Changes in these assumptions could significantly affect the estimated fair value of our share options and hence the amount of compensation expense that we recognize in our consolidated financial statements. Our management is ultimately responsible for the determination of the estimated fair value of its ordinary shares. The weighted-average grant-date fair value of share options granted during the years of December 31, 2019, 2020 and 2021 were US$12.05, US$37.86, and US$75.83, respectively.
 
Share-based compensation costs for restricted share awards and restricted share units are measured based on the fair value of our ordinary shares on the date of grant. Fair value of the share appreciation rights is measured based on the fair value of our ordinary shares at the end of each reporting period.
 
Income Taxes
 
Deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. Significant judgment is required in evaluating our uncertain tax positions and determining the likelihood that our net deferred tax assets will be realized from future taxable income. We record a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.
 
Measurement of long-lived assets in E-commerce (“EC”) segment
 
We evaluate our long-lived assets for impairment when there are events or changes in circumstances which indicate that the carrying amounts of the long-lived assets may not be recoverable. Due to the continued losses incurred by the EC segment, we evaluate the related long-lived assets for impairment at the asset group level by comparing the carrying amount of the asset group to the recoverable value determined by forecasted undiscounted cash flows expected to be generated by this asset group.

The accounting estimates related to impairment of long-lived estimate is critical due to the magnitude of the carrying amount of long-lived assets and management’s judgement is required in estimating the recoverable value (undiscounted cash flows) of the asset group, which are sensitive to key assumptions such as projected revenue and sales and marketing expenses.

Goodwill impairment
 
Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. In testing goodwill for impairment, we evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, we apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a goodwill allocated to the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

107
Allowance for credit losses
 
We established allowances for credit losses for accounts receivable, loans receivable, off-balance sheet loan commitments and available-for-sale investments. For accounts receivable, loans receivable and off-balance sheet loan commitments, we establish a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the receivable and economic environment. It reflects the probability-weighted outcome, time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. The allowances for credit losses are calculated on an aggregate basis for various customer segments that are considered to have similar credit characteristics and risk of loss. For collateral-dependent financial assets, the fair value of collateral is used instead in our estimates when the borrower is experiencing financial difficulty based on our assessment as of the reporting date. For available-for-sale investments, we compare the present value of cash flows expected to be collected from the investment with the amortized cost basis of the security to determine if a credit loss exists. If the present value of cash flows expected to be collected is less than the amortized cost basis of the investment, a credit loss exists and an allowance for credit losses are recorded for the credit loss, limited by the amount that the fair value is less than amortized cost basis. Accounts receivable, loans receivable and available-for-sale investment are written off in the period the receivable or investment is deemed uncollectible.
 
Recent Accounting Pronouncements
 
Please refer to “Note 2 – Summary of Significant Accounting Policies – Recent accounting pronouncements” in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”

 
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 

 A.
Directors and Senior Management
 
The following table provides information regarding our directors and executive officers as of the date of this annual report.
 
 Directors and Executive Officers    Age    Position/Title
Forrest Xiaodong Li
  
44
  
Chairman and Group Chief Executive Officer
Gang Ye
  
41
  
Director and Group Chief Operating Officer
Yuxin Ren
  
46
  
Director
Tony Tianyu Hou
  
43
  
Director and Group Chief Financial Officer
David Heng Chen Seng
  
55
  
Director
Khoon Hua Kuok
  
43
  
Director
Chris Zhimin Feng
  
39
  
Group President
Terry Feng Zhao
  
38
  
President of Garena
Yanjun Wang
  
41
  
Group Chief Corporate Officer, Group General Counsel and Company Secretary
David Jingye Chen
  
41
  
Chief Product Officer of Shopee
David Y Ma
  
41
  
Chief Investment Officer of Sea Capital

Forrest Xiaodong Li is our founder and has served as the chairman of Sea Limited and our group chief executive officer since our inception in May 2009. He is a member of the board of directors of the Singapore Economic Development Board, and serves as an independent non-executive director of Shangri-La Asia Limited. He also serves on the board of trustees for the National University of Singapore, and on the advisory council of Stanford University’s Graduate School of Business. Forrest holds an M.B.A. degree from Stanford University’s Graduate School of Business and a bachelor’s degree in Engineering from Shanghai Jiaotong University.
 
Gang Ye is our co-founder and has been a member of the board of directors of Sea Limited since March 2010. Gang has served as our group chief operating officer since January 2017 and served as our group chief technology officer between March 2010 and December 2016. He previously worked at Wilmar International and the Economic Development Board of Singapore. Gang holds B.S. degrees in Computer Science and Economics from Carnegie Mellon University.
 
108
Yuxin Ren has been a member of the board of directors of Sea Limited since September 2013. Yuxin is the chief operating officer at Tencent Holdings Limited and is currently leading the development of the Platform & Content Group and the Interactive Entertainment Group. Yuxin also currently serves as a director or officer of certain subsidiaries of Tencent Holdings Limited. Prior to joining Tencent, Yuxin worked at Huawei Technologies Co., Ltd. He holds an EMBA degree from China Europe International Business School (CEIBS) and a Bachelor of Science degree in Computer Science and Engineering from the University of Electronic Science and Technology of China.
 
Tony Tianyu Hou has served as our director since February 2018. Tony joined our company in September 2010 and has served as our group chief financial officer since January 2013. He previously served as our financial controller. Before joining us, Tony was an audit senior manager at Ernst & Young, where he worked from October 2000 to September 2010 in both China and the U.S. Tony is a non-practicing U.S. Certified Public Accountant and a non-practicing member of the Chinese Institute of Certified Public Accountants. He holds an M.B.A. degree from the University of Chicago’s Booth School of Business and a bachelor’s degree in Accounting from Fudan University.
 
David Heng Chen Seng has served as our director since October 2017. David has been the chief executive officer of ABC World Pte. Ltd., a private equity fund, since February 2019. He had held several senior positions at Temasek from 2003 to 2018, including joint head of consumer, head of real estate investment, joint head of China and head of Japan and Korea, and left Temasek as a senior advisory director in January 2019. Prior to joining Temasek in 2003, he was with Deutsche Bank AG as a vice president in its telecom, media and technology investment banking division from 2000 to 2003 and was a vice president of merger and acquisition advisory for Hong Kong and Singapore at Deutsche Bank from 1998 to 2000. Prior to joining Deutsche Bank, David worked at Standard Chartered Merchant Bank. He currently serves as a director at Singapore Art Museum, among other companies. David holds an M.B.A. degree from the University of Hull and a Bachelor of Engineering degree from the University of Canterbury.
 
Khoon Hua Kuok has served as our director since October 2017. Khoon Hua is the chairman of Kerry Holdings Limited, the main investment holding company of the Kuok Group in Hong Kong. He is also a director of Kerry Group Limited and Kuok (Singapore) Limited, the vice chairman and chief executive officer of Kerry Properties Limited and the non-executive vice chairman of Kerry Logistics Network Limited, both of which are companies listed on the Hong Kong Stock Exchange, and a non-executive director of Wilmar International Limited, a company listed on the Singapore Stock Exchange. Khoon Hua holds a B.A. degree in Economics from Harvard University.
 
Chris Zhimin Feng joined our company in March 2014 and has served as Group President since January 2022. Prior to this role, he served as the chief executive officer of Shopee from July 2015, and as the chief executive officer of SeaMoney from March 2020. Previously he served as our head of mobile business. Before joining our company, Chris worked at Rocket Internet SE, where he served in management roles at Zalora and Lazada, and at McKinsey & Company. Chris holds a bachelor's degree in Computer Science with first class honors from the National University of Singapore.
 
Terry Feng Zhao has been with our company since our inception in 2009 and has served as the president of Garena since November 2018. Prior to assuming his current role, Terry has also served in a number of senior roles in our digital entertainment business across several key markets. Terry holds a bachelor’s degree in Computer Engineering with first class honors from Nanyang Technological University.

Yanjun Wang is our group chief corporate officer, group general counsel and company secretary. Yanjun has served as our group chief corporate officer since May 2019, company secretary since November 2017 and group general counsel since March 2014. Prior to joining our company, Yanjun was an attorney at Skadden, Arps, Slate, Meagher & Flom LLP and Kirkland & Ellis. She is qualified to practice law in the State of New York. She holds a J.D. degree from Harvard Law School and a B.A. degree in Economics from Harvard University.
 
David Jingye Chen is our co-founder and serves as the chief product officer of Shopee. He was formerly group chief of staff, a position he held from January 2017 to December 2019. Prior to that, David served as our group chief operating officer from our inception in May 2009 to December 2016. He previously held positions at PSA Corporation Limited. David holds a bachelor’s degree in Computer Engineering with first class honors from the National University of Singapore.

109
David Y Ma joined our company in March 2021 and serves as the Chief Investment Officer of Sea Capital. Before joining our company, he was the founder and Managing Partner of Composite Capital, a global investment management firm. Previously he served as a partner at Hillhouse Capital, and worked at Bain Capital and Boston Consulting Group. David holds a bachelor's degree in Economics, Finance, and Management from the Wharton School of the University of Pennsylvania.

Employment Agreements and Indemnification Agreements
 
We have entered into employment agreements with our executive officers. Each of our executive officers is employed for a continuous term unless either we or the executive officer gives prior notice to terminate such employment. We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, including but not limited to the commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of a criminal offense other than one which in the opinion of the board does not affect the executive’s position, willful, disobedience of a lawful and reasonable order, misconduct being inconsistent with the due and faithful discharge of the executive officer’s material duties, fraud or dishonesty, or habitual neglect of his or her duties. An executive officer may terminate his or her employment at any time with a three- to six-month prior written notice.
 
Each executive officer has agreed to hold, both during and after the employment agreement expires or is earlier terminated, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information or trade secrets. Each executive officer has also agreed to disclose in confidence to us all inventions, intellectual and industry property rights and trade secrets which they made, discover, conceive, develop or reduce to practice during the executive officer’s employment with us and to assign to our company all of his or her associated titles, interests, patents, patent rights, copyrights, trade secret rights, trademarks, trademark rights, mask work rights and other intellectual property and rights anywhere in the world which the executive officer may solely or jointly conceive, invent, discover, reduce to practice, create, drive, develop or make, or cause to be conceived, invented, discovered, reduced to practice, created, driven, developed or made, during the period of the executive officer’s employment with us that are either related to our business, actual or demonstrably anticipated research or development or any of our products or services being developed, manufactured, marketed, sold, or are related to the scope of the employment or make use of our resources. In addition, all executive officers have agreed to be bound by non-competition and non-solicitation restrictions set forth in their agreements. Each executive officer has agreed to devote all his or her working time and attention to our business and use best efforts to develop our business and interests. Moreover, each executive officer has agreed not to, for a certain period following termination of his or her employment or expiration of the employment agreement: (i) carry on or be engaged, concerned or interested directly or indirectly whether as shareholder, director, employee, partner, agent or otherwise carry on any business in direct competition with us, (ii) solicit or entice away any of our customer, client, representative or agent, or (iii) employ, solicit or entice away or attempt to employ, solicit or entice away any of our officers, managers, consultants or employees.
 
We have entered into indemnification agreements with our directors and executive officers, pursuant to which we will agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or executive officer.
 
B.          Compensation
 
Compensation of Directors and Executive Officers
 
For the year ended December 31, 2021, we paid and accrued fees and compensation (excluding equity-based awards) of approximately US$6.4 million to our directors and executive officers as a group. In 2021, we also granted an aggregate of 20,000 restricted share units to some of our directors and executive officers. For more information on share incentive grants to our directors and executive officers, see “—Share Incentive Plan.”
 
Our Singapore subsidiaries are required by the laws and regulations of Singapore to make contributions, as employers, to the Central Provident Fund for our executive officers who are employed by our Singapore subsidiaries and are Singapore citizens or permanent residents as prescribed under the Singapore Central Provident Fund Act. The contribution rates vary, depending on the age of the executive officers, and whether such executive officer is a Singapore citizen or permanent resident.
 
110
Share Incentive Plan
 
We maintain a share incentive plan in order to attract, motivate, retain and reward talent, provide additional incentives to our officers, employees, directors and other eligible persons, and promote the success of our business and the interests of our shareholders.
 
2009 Share Incentive Plan
 
We adopted the 2009 Plan to promote the success of our business and the interests of our shareholders by providing additional incentives to attract, motivate, retain and reward our officers, employees, directors and other eligible persons and to link the interests of the award recipients with our shareholders. In February 2018, our board of directors approved automatic increases on January 1 of each of 2019, 2020, 2021 and 2022 of the maximum aggregate number of ordinary shares which may be issued under the 2009 Plan by 5% of the total number of ordinary shares of all classes of the company outstanding on that day immediately before the increase. In addition, in July 2019, our board of directors approved a one-time increase of the maximum aggregate number of shares which may be issued pursuant to the 2009 Plan by three million, and at the same time reduced three million shares from the scheduled automatic increase of shares pursuant to the aforesaid automatic annual increase mechanism on January 1, 2020. Currently, the maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2009 Plan is 176,775,641. In April 2022, our board of directors approved the amendment and restatement of the 2009 Plan to increase the maximum aggregate number of shares available under the 2009 Plan, pursuant to which on January 1 of each of 2023, 2024, 2025 and 2026, the maximum aggregate number of ordinary shares which may be issued under the 2009 Plan will increase by 3% of the total number of ordinary shares of all classes of the company outstanding on that day immediately before the increase. The awards expire 10 years after the date of the grant.
 
As of April 5, 2022, outstanding awards granted under the 2009 Plan consisted of (i) options to purchase 45,822,745 Class A ordinary shares, (ii) 9,054,694 restricted Class A ordinary share units, and (iii) 181,585 share appreciation rights.
 
The following paragraphs summarize the terms of the 2009 Plan.
 
Plan Administration.    Our board of directors or one or more committees appointed by the board act as the plan administrator.
 
Types of Awards.    The 2009 Plan permits grants of (i) options to purchase Class A ordinary shares, (ii) awards of share appreciation rights to receive a payment in cash, or, at the discretion of the plan administrator, in Class A ordinary shares, equal to the excess of the fair market value of a Class A ordinary share on the date the share appreciate right is exercised over the base price of the share appreciate right, (iii) awards of restricted Class A ordinary shares or unrestricted Class A ordinary shares, or (iv) awards of restricted share units, which are contractual rights to receive Class A ordinary shares of our company. Any Class A ordinary shares issuable pursuant to the awards under the 2009 Plan may be represented by ADSs.
 
Eligibility.    Only our employees, officers, directors and individual consultants or advisors who render or have rendered bona fide services to us are eligible to receive awards or grants under the 2009 Plan.
 
Term of Awards.    Each award under the 2009 Plan will (in the case of options and share appreciation rights) expire, or (in the case of share awards) vest or be repurchased by us not more than 10 years after the date of grant which term be extended by the plan administrator to a maximum of 10 years. An award is only exercisable or distributable before the eligible individual’s termination of service with us, unless determined otherwise by the plan administrator or set forth in the award agreement.
 
Vesting Schedule and Other Restrictions.    The plan administrator has discretion in determining and making adjustment in the individual vesting schedules and other restrictions applicable to the awards granted under the 2009 Plan. The vesting schedule is set forth in each award agreement.
 
Exercise Price and Purchase Price.    The plan administrator has discretion in determining the price of the awards, subject to a number of limitations, and has discretion in making adjustments in the exercise price of the options or the base price of the share appreciation rights.
 
111
Acceleration of Vesting upon Corporate Transaction.    Upon the occurrence of a change in control event, the plan administrator may make provision for a cash payment in settlement of, or for the assumption, substitution or exchange of any or all outstanding awards (or the cash, securities or other property deliverable to the holder(s) of any or all outstanding awards) based upon, to the extent relevant in the circumstances, the distribution or consideration payable to holders of the Class A ordinary shares upon or in respect of such event.
 
Termination.    The plan will terminate in 2027. Our board of directors may terminate the plan at any time, in whole or in part.
 
Amendment, Suspension or Termination.    The administrator may waive conditions of or limitations on awards to award recipients that the administrator in the prior exercise of its discretion has imposed, without the consent of award recipients, and may make other changes to the terms and conditions of awards. However, no amendments, suspension or termination of the 2009 Plan or amendments of any outstanding award may, without written consent of the award recipients, materially and adversely affect any rights or benefits of the award recipient or obligations of us under any award granted under the plan prior to the effective date of such change. Subject to the above, our board of directors may, at any time, terminate or, from time to time amend, modify or suspend the 2009 Plan, in whole or in part. No awards may be granted during any period that the board of directors suspends the 2009 Plan. To the extent set forth in the 2009 Plan and where required by the applicable laws, rules or regulations, any amendments to the 2009 Plan shall be subject to shareholders’ approval.
 
Transfer Restrictions.    All awards are non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge except in certain situations.
 
Power of Attorney on Voting.   Under the award agreements, with respect to the Class A ordinary shares issued upon exercise of options or vesting of restricted shares or restricted share units, almost all of our award recipients appoint Mr. Forrest Xiaodong Li, our chairman and group chief executive officer, as his or her irrevocable proxy to vote all such Class A ordinary shares on all matters on which such Class A ordinary shares are entitled to vote.
 
112
The table below sets forth certain information as of December 31, 2021 concerning the outstanding awards we have granted to our directors and executive officers by the time on an individual basis.
 
Name    
Class A Ordinary Shares
Underlying
Outstanding Awards
Granted
   
Price
(US$/Share)
   Date of Grant   Date of Expiration  
Forrest Xiaodong Li          
    
2,600,000
 (1)(4)
    
15.0
  
April 30, 2018
  
April 30, 2028
  
     
10,000,000
(1)(4)
    
15.0
  
April 30, 2019
  
April 30, 2029
  
     
5,000,000
(1)(4) 
    
15.0
  
April 30, 2020
  
April 30, 2030
  
     
135
(3) 
    
—
  
January 31, 2018
    
—
  
Gang Ye          
    
4,650,000
(1) 
    
15.0
  
February 28, 2018
  
February 28, 2028
  
     
108
(3) 
    
—
  
January 31, 2018
    
—
  
     
5,000
(3) 
    
—
  
February 28, 2018
    
—
  
Tony Tianyu Hou          
    
*
(1) 
    
4.5
  
January 26, 2015
  
January 26, 2025
  
     
*
(1) 
    
15.0
  
February 28, 2018
  
February 28, 2028
  
     
*
(3) 
    
—
  
January 31, 2018
    
—
  
     
*
(3) 
    
—
  
February 28, 2018
    
—
  
David Heng Chen Seng          
    
*
(3) 
    
—
  
October 19, 2021
    
—
  
Khoon Hua Kuok          
    
10,000
(3) 
    
—
  
October 19, 2021
    
—
  
Chris Zhimin Feng
    
*
(1) 
    
4.5
  
January 26, 2015
  
January 26, 2025
  
     
*
(1) 
    
15.0
  
February 28, 2018
  
February 28, 2028
  
     
*
(1) 
    
15.0
  
February 28, 2019
  
February 28, 2029
  
     
*
(3) 
    
—
  
January 31, 2018
    
—
  
Terry Feng Zhao          
    
*
(1) 
    
4.5
  
January 26, 2015
  
January 26, 2025
  
     
*
(1) 
    
15.0
  
January 31, 2019
  
January 31, 2029
  
     
*
(3) 
    
—
  
January 31, 2018
    
—
  
     
*
(3) 
    
—
  
February 28, 2018
    
—
  
Yanjun Wang          
    
*
(1) 
    
15.0
  
February 28, 2018
  
February 28, 2028
  
     
*
(3) 
    
—
  
January 31, 2018
    
—
  
     
*
(3) 
    
—
  
February 28, 2018
    
—
  
David Jingye Chen          
    
802,140
(1) 
    
1.8
  
January 11, 2014
  
January 11, 2024
  

   
220,000
(1) 
    
4.5
  
January 26, 2015
  
January 26, 2025
  
     
2,000,000
(1) 
    
15.0
  
February 28, 2018
  
February 28, 2028
  
     
108
(3) 
    
—
  
January 31, 2018
    
—
  
     
5,000
(3) 
    
—
  
February 28, 2018
    
—
  
All directors and executive officers as a group
    
39,785,451
                    

 
*
Each of these directors and executive officers beneficially owns less than 1% of our total outstanding shares as of December 31, 2021.
(1)
Represents options to purchase Class A ordinary shares.
(2)
Represents unvested restricted Class A ordinary shares.
(3)
Represents unvested restricted shares units for Class A ordinary shares.
(4)
Granted pursuant to the previously disclosed authorization by our board of directors on April 8, 2018 of options to purchase a total of twenty million Class A ordinary shares, which were granted to Mr. Li between April 2018 and April 2020 and to vest between April 2019 and April 2022.

As previously disclosed in our annual reports on Form 20-F for the years ended December 31, 2019 and 2020, in May 2019, the board of directors of the company generally authorized grants to Forrest and certain other employees of options to purchase 20 million and 30 million Class A ordinary shares of the company, respectively, at US$22.50 per share, with the actual grants of such awards conditioned on the availability of such shares under our 2009 Plan (the “May 2019 Authorization”). The awards, when granted, were to have a four-year vesting period commencing no earlier than January 1, 2022. These awards have not been granted.
 
On April 17, 2022, the board of directors of the company canceled the May 2019 Authorization and, in substitution of the May 2019 Authorization, awarded the executive officers of the company options to purchase up to a total of 30 million Class A ordinary shares at US$120 per share, including options to purchase five million Class A ordinary shares to Forrest (the “April 2022 Grants”). The options will vest every three months over a period of five years commencing April 30, 2022 and will expire 10 years after the grant date. To date, these awards have been granted to the executive officers. Accordingly, no grants may be made pursuant to the May 2019 Authorization.
 
C.          Board Practice
 
Our board of directors consists of six directors. A director is not required to hold any shares in our company to qualify to serve as a director. A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with our company is required to declare the nature of his interest at a meeting of our directors. A general notice given to the directors by any director to the effect that he is a member of any specified company or firm and is to be regarded as interested in any contract or transaction which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in regard to any contract so made or transaction so consummated. Subject to applicable New York Stock Exchange listing rules and disqualification by the chairman of the relevant board meeting, a director may vote in respect of any contract or transaction or proposed contract or transaction notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of the directors at which any such contract or transaction or proposed contract or transaction is considered. Our board of directors may exercise all of the powers of our company to borrow money, to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock or other securities whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third-party. None of our directors has a service contract with us that provides for benefits upon termination of service, or an appropriate negative statement.
 
113
Committees of the Board of Directors
 
We have established an audit committee, a compensation committee and a nominating committee under the board of directors. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.
 
Audit Committee.    Our audit committee consists of Mr. David Heng Chen Seng and Mr. Khoon Hua Kuok, and is chaired by Mr. David Heng Chen Seng. Both of Mr. David Heng Chen Seng and Mr. Khoon Hua Kuok satisfy the “independence” requirements of Section 303A of the New York Stock Exchange Listed Company Manual and meet the independence standards under Rule 10A-3 under the Exchange Act. Our board of directors has also determined that Mr. David Heng Chen Seng qualifies as an “audit committee financial expert” within the meaning of the SEC rules and that both members of the audit committee are financially literate within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:
 

 •
selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm;
 

 •
reviewing with our independent registered public accounting firm any audit problems or difficulties and management’s response;
 

 •
reviewing and approving related party transactions;
 

 •
discussing the annual audited financial statements with management and our independent registered public accounting firm;
 

 •
meeting periodically with the management and our internal auditor and our independent registered public accounting firm; and
 

 •
reviewing and discussing our accounting and control policies and procedures and any steps taken to monitor and control major financial risk exposure.
 
Compensation Committee.    Our compensation committee consists of Mr. Forrest Xiaodong Li and Mr. Khoon Hua Kuok, and is chaired by Mr. Forrest Xiaodong Li. Mr. Khoon Hua Kuok satisfies the “independence” requirements for compensation committee members of Section 303A of the New York Stock Exchange Listed Company Manual. Our compensation committee assists the board in reviewing and evaluating the compensation structure, including compensation plans relating to our directors and executive officers. The compensation committee is responsible for, among other things:
 

 •
reviewing and approving the compensation package for our chief executive officer;
 

 •
reviewing the annual bonus, long-term incentive compensation, stock option, employee pension and welfare benefit plans of our company;
 

 •
reviewing annually and administering all long-term incentive compensation or equity plans; and
 

 •
selecting and receiving advice from compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management.
 
Corporate Governance and Nominating Committee.    Our corporate governance and nominating committee consists of Mr. Forrest Xiaodong Li and Mr. Khoon Hua Kuok, and is chaired by Mr. Forrest Xiaodong Li. Mr. Khoon Hua Kuok satisfies the “independence” requirements of Section 303A of the New York Stock Exchange Listed Company Manual. The corporate governance and nominating committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board of directors. The corporate governance and nominating committee is responsible for, among other things:
 
114

 •
identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy;
 

 •
reviewing annually with our board of directors its current composition in light of the characteristics of independence, qualification, experience and availability of service to us;
 

 •
review the performance of our board of directors and management and will make appropriate recommendations for improving performance; and
 

 •
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
 
Duties of Directors
 
Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time. Our company has the right to seek damages if a duty owed by our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.
 
The functions and powers of our board of directors include, among others:
 

 •
convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;
 

 •
declaring dividends and distributions;
 

 •
appointing officers and determining the term of office of officers;
 

 •
exercising the borrowing powers of our company and mortgaging the property of our company; and
 

 •
approving the transfer of shares of our company, including the registering of such shares in our share register.
 
Terms of Directors and Executive Officers
 
Each of our directors holds office until the expiration of his or her term, as may be provided in a written agreement with our company, and his or her successor has been elected and qualified, until his or her resignation or until his or her office is otherwise vacated in accordance with our articles of association. All of our executive officers are appointed by and serve at the discretion of our board of directors. Our directors may be appointed or removed from office by an ordinary resolution of shareholders. A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found to be or becomes of unsound mind; (iii) resigns by notice in writing to our company; (iv) without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; or (v) is removed pursuant to our amended and restated memorandum and articles of association. The compensation of our directors is determined by the board of directors. There is no mandatory retirement age for directors.
 
115
D.          Employees
 
Our human capital has scaled alongside the growth of our business. We had a total of approximately 29,800, 33,800 and 67,300 employees as of December 31, 2019, 2020 and 2021, respectively. The following table indicates the distribution of our employees by function as of December 31, 2021:
 
 
Function
   Number of Employees  
General operation
    
34,600
  
Sales and marketing
    
15,800
  
General and administrative
    
6,000
  
Research and development
     10,900
 
Total
     67,300
 

We generally enter into standard confidentiality and employment agreements with our management and other employees. These contracts include a standard non-compete covenant that prohibits the employee from competing with us, directly or indirectly, during his or her employment and for one year after the termination of his or her employment.
 
We believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes as of the date of this annual report.
 
E.          Share Ownership
 
The following table sets forth information concerning the beneficial ownership of our ordinary shares as of April 5, 2022:
 

 •
each of our directors and executive officers; and
 

 •
each person known to us to beneficially own more than 5% of our ordinary shares.
 
The calculations in the table below are based on 559,737,960 ordinary shares issued and outstanding as of April 5, 2022, comprising 514,210,167 Class A ordinary shares and 45,527,793 Class B ordinary shares.
 
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant, or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
 
116
    Class A Ordinary Shares     Class B Ordinary Shares     Percentage of Total Class A and Class B Ordinary Shares†     Percentage of Total Voting Power Held ††  
Directors and Executive Officers:(1)
                        
Forrest Xiaodong Li(2)
    
56,500,963
      
45,527,793
      
17.1
      
59.9
  
Gang Ye(3)
    
34,618,937
      
—
      
6.1
      
1.9
  
Yuxin Ren
    
*
      
—
      
*
      
*
  
Tony Tianyu Hou
    
*
      
—
      
*
      
*
  
David Heng Chen Seng
    
*
      
—
      
*
      
*
  
Khoon Hua Kuok(4)
    
16,376,090
      
—
      
2.9
      
1.4
  
Chris Zhimin Feng
    
*
      
—
      
*
      
*
  
Terry Feng Zhao
    
*
      
—
      
*
      
*
  
Yanjun Wang
    
*
      
—
      
*
      
*
  
David Jingye Chen(5)
    
11,311,241
      
—
      
2.0
      
0.7
  
David Y Ma
    
*
      
—
      
*
      
*
  
All directors and executive officers as a group
    
153,923,152
      
45,527,793
      
25.6
      
63.9
  
Principal Shareholders:
                                
Tencent entities(6)
    
104,264,743
      
—
      
18.6
      
8.7
  
Blue Dolphins Venture Inc(7)
    
—
      
45,527,793
      
8.1
      
57.0
  
T. Rowe Price Associates, Inc.(8)
    
28,126,291
      
—
      
5.0
      
2.3
  

 
*
Less than 1% of our total outstanding shares on an as converted basis.
 
†
For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group, including shares that such person or group has the right to acquire within 60 days after April 5, 2022, by the sum of Class A and Class B ordinary shares, and the number of Class A ordinary shares that such person or group has the right to acquire beneficial ownership within 60 days after April 5, 2022.
 
††
For each person and group included in this column, percentage of total voting power represents voting power based on both Class A and Class B ordinary shares beneficially owned by such person or group with respect to all of our outstanding Class A and Class B ordinary shares as one single class. Holders of Class A ordinary shares are entitled to one vote per share and holders of Class B ordinary shares are entitled to 15 votes per share on all matters subject to a shareholders’ vote.
 
(1)
Unless otherwise indicated, the business address of our directors and executive officers is c/o 1 Fusionopolis Place, #17-10, Galaxis, Singapore 138522.
 
(2)
Represents (i) 45,527,793 Class B ordinary shares held by Blue Dolphins Venture Inc, a British Virgin Islands company wholly-owned by Mr. Li, (ii) 648,831 Class A ordinary shares beneficially owned by Mr. Li (including through an entity solely owned and controlled by Mr. Li), (iii) 17,600,000 Class A Ordinary Shares issuable upon exercise of options held by Mr. Li within 60 days from April 5, 2022, (iv) an aggregate of 38,252,132 Class A Ordinary Shares over which Mr. Li has received irrevocable voting proxies from the respective owners of such shares (namely, certain directors and employees, certain affiliates of our employees, Garena ESOP Program (PTC) Limited and a family member of Mr. Li), including 19,606,468 Class A Ordinary Shares issuable upon exercise of options within 60 days from April 5, 2022 and 741,181 Class A Ordinary Shares issuable upon vesting of restricted share units within 60 days from April 5, 2022.
 
(3)
Represents (i) 29,968,937 Class A ordinary shares held or beneficially owned by Mr. Ye, and (ii) 4,650,000 Class A ordinary shares issuable upon exercise of options or vesting of restricted share units held by Mr. Ye within 60 days from April 5, 2022. With respect to 11,603,431 Class A ordinary shares, Forrest Xiaodong Li has been given an irrevocable proxy with regard to all matters that are subject to the vote of shareholders, and such numbers are excluded from the total voting power of Mr. Ye.
 
(4)
Includes (i) 1,061,950 Class A ordinary shares held or beneficially owned by Bright Magic Investments Limited, a British Virgin Islands company, (ii) 1,270,000 Class A ordinary shares beneficially owned by Crystal White Limited, a Hong Kong company, (iii) 2,926,071 Class A ordinary shares held by Fexos Limited, a British Virgin Islands company, (iv) 5,048,233 Class A ordinary shares beneficially owned by Velmar Company Limited, a Hong Kong company, (v) 3,696,695 Class A ordinary shares beneficially owned by Macromind Investments Limited, a British Virgin Islands company, including 1,363,945 Class A ordinary shares underlying US$27 million principal amount of our 2023 convertible notes and 1,994,750 Class A ordinary shares underlying US$100 million principal amount of our 2024 convertible notes, both of which are currently convertible, (vi) 1,955,184 Class A ordinary shares held by City Jet Limited, a British Virgin Islands company, (vii) 104,616 Class A ordinary shares beneficially owned by Joyce M. Kuok Foundation, a Hong Kong company, (viii) 104,616 Class A ordinary shares beneficially owned by Zheng Ge Ru Foundation, a Hong Kong company, and (ix) 188,725 Class A ordinary shares held by Peacebright Assets Limited, a British Virgin Islands company. Bright Magic Investments Limited, Crystal White Limited, Fexos Limited, Macromind Investments Limited, and Velmar Company Limited are all wholly-owned subsidiaries of Kerry Group Limited. Mr. Kuok is a director of Kerry Group Limited and has indirect minority interests in these entities. Mr. Kuok may be deemed to have beneficial interests in the shares beneficially owned by these entities. City Jet Limited’s shareholders are Joyce M. Kuok Foundation and Zheng Ge Ru Foundation. As Mr. Kuok is a governor of these two foundations, he may be deemed to have or share investment power which includes the power to dispose, or to direct the disposition of, the shares beneficially owned by City Jet Limited and these two foundations. Peacebright Assets Limited is an investment company of a discretionary trust in which Mr. Kuok is one of the discretionary beneficiaries. Mr. Kuok disclaims beneficial ownership of Shares held or beneficially owned by all of the aforesaid entities for all other purposes. The business address of Kerry Group Limited is 32/F, Kerry Centre, 683 King’s Road, Quarry Bay, Hong Kong. The business address of all the other aforesaid entities is 31/F, Kerry Centre, 683 King’s Road, Quarry Bay, Hong Kong. Shares beneficially owned by Mr. Kuok do not include the shares issuable upon conversion of the US$10 million principal amount of our 2025 convertible notes currently held by Velmar Company Limited subject to the terms and conditions of such notes. It also does not include shares issuable upon conversion of the US$35 million principal amount of our 2026 convertible notes currently held by Merrywood Investments Limited, a British Virgin Islands company, wholly owned by Kerry Group Limited, subject to the terms and conditions of such notes.
 
117
(5)
Represents (i) 8,289,101 Class A ordinary shares held or beneficially owned by Mr. Chen, and (ii) 3,022,140 Class A ordinary shares issuable upon exercise of options or vesting of restricted share units held by Mr. Chen within 60 days from April 5, 2022. With respect to 3,153,869 Class A ordinary shares, Forrest Xiaodong Li has been given an irrevocable proxy with regard to all matters that are subject to the vote of shareholders, and such numbers are excluded from the total voting power of Mr. Chen.
 
(6)
Represents (i) 1,816,833 Class A ordinary shares beneficially owned by Tencent Holdings Limited through Huang River Investment Limited, (ii) 98,510,410 Class A ordinary shares held by Tencent Limited, and (iii) 3,937,500 Class A ordinary shares by Tencent Growthfund Limited, a wholly-owned subsidiary of Tencent Holdings Limited. Tencent Holdings Limited is a limited liability company organized and existing under the laws of the Cayman Islands and is currently listed on Hong Kong Stock Exchange. The registered office of Tencent Holdings Limited is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
 
(7)
Represents 45,527,793 Class B ordinary shares held by Blue Dolphins Venture Inc, a company wholly owned by Forrest Xiaodong Li. The registered address of Blue Dolphins Venture Inc is Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands.
 
(8)
Information is based on a Schedule 13G filed with the SEC on February 14, 2022 by T. Rowe Price Associates, Inc. ("Price Associates"). Price Associates reported sole voting power over 11,285,078 ADSs, each representing one Class A ordinary share, and sole dispositive power over 28,126,291 ADSs. The address of Price Associates is 100 E. Pratt Street, Baltimore, Maryland 21202, U.S.A.
 
Our ADSs are traded on the New York Stock Exchange and brokers or other nominees may hold ADSs in “street name” for customers who are the beneficial owners of our ADSs. As a result, we may not be aware of each person or group of affiliated persons who beneficially own more than 5.0% of our ordinary shares.
 
Our issued and outstanding share capital consists of Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights and certain approval rights. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to 15 votes and is convertible into one Class A ordinary share. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. See “Item 10. Additional Information—B. Memorandum and Articles of Association” for a more detailed description of our Class A ordinary shares and Class B ordinary shares.
 
As of April 5, 2022, 369,527,863 of our Class A ordinary shares were held as ADSs by the depositary for our ADS holders. Other than the depositary and certain shareholders holding approximately 30,000 Class A ordinary shares, we are not aware of any record shareholder being a United States citizen or an entity incorporated in the United States as of April 5, 2022.
 
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
 
For certain information as of December 31, 2021 concerning the outstanding awards we have granted to our directors and executive officers individually pursuant to our share incentive plan, see “—B. Compensation—Share Incentive Plan.” Other than under the 2009 Plan, there are no arrangements for involving the employees in the capital of the company, including any arrangement that involves the issue or grant of options or shares or securities of the company.
 
118
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
A.          Major Shareholders
 
See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”
 
B.          Related Party Transactions
 
Contractual Arrangements with Our VIEs, Their Shareholders and Us
 
See “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements among Our VIEs, Their Shareholders and Us.”
 
Transactions with Certain Shareholder
 
In 2021, we paid Tencent US$164.9 million in royalties and license fees as well as for other miscellaneous services.
 
Share Incentive Plan
 
See “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.”
 
Employment Agreements and Indemnification Agreements
 
See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements and Indemnification Agreements.”
 
C.          Interest of Experts and Counsel
 
Not applicable.
 
ITEM 8.
FINANCIAL INFORMATION
 
A.          Consolidated Statement and Other Financial Information
 
We have appended consolidated financial statements filed as part of this annual report.
 
Legal and Administrative Proceedings
 
From time to time, we are and may become involved in legal proceedings, claims, investigations, and other disputes incidental to the ordinary conduct of our business including, among other things, contract or licensing disputes, copyright, trademark and other intellectual property infringement claims, consumer protection claims, employment related cases, disputes between consumers and third-party sellers or merchants, and disputes concerning other matters incidental to the ordinary course of our business. We may also initiate legal proceedings to protect our rights and interests. We are not a party to, nor are we aware of, any legal proceeding, investigation or claim which, in the opinion of our management, is likely to have any material adverse effect on our business, financial condition or results of operations, and our management believes that the risk of material loss in connection with the action discussed below is currently remote. However, in light of the inherent uncertainties involved in these matters, some of which are beyond our control, the risk of loss may become more likely and an adverse outcome of one or more of these matters could be material to our results of operations or cash flows for any particular reporting period.
 
119
Class Action Litigation
 
On November 1, 2018, a putative class action captioned Plutte v. Sea Limited, et al., No. 655436/2018, was filed in New York state court against our Company, certain of our officers and directors, and the underwriters arising out of our October 2017 initial public offering. On January 25, 2019, the plaintiffs filed an amended complaint alleging that the prospectus and registration statements for our initial public offering contained material misstatements or omissions in violation of the U.S. securities laws. In March 2019, we moved to dismiss the action in its entirety. In July 2020, the parties reached agreement in principle to settle this class action at US$10.75 million. In April 2021, the court held a hearing where it gave its final approval to the settlement.
 
On February 11, 2022, a putative class action captioned City of Taylor Police and Fire Retirement System v. Sea Limited, et al., No. 151344/2022, was filed in New York state court against our Company, directors, one of our shareholders, registered agent, and the underwriters of our ADS offering in September 2021. The plaintiff’s complaint alleges that the registration statement for our ADS offering contained material misstatements or omissions in violation of the U.S. securities laws. The action remains at its preliminary stages. We believe the case is without merit and intend to vigorously defend the action.
 
For risks and uncertainties relating to the pending cases against us, please see “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—We may be subject to risks related to litigation and regulatory proceedings.”
 
Dividend Policy
 
We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
 
Our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the Class A ordinary shares underlying the ADSs to the depositary, as the registered holder of such Class A ordinary shares, and the depositary then will pay such amounts to our ADS holders who will receive payment to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.
 
B.          Significant Changes
 
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
 
ITEM 9.
THE OFFER AND LISTING
 
A.          Offer and Listing Details
 
 Our ADSs have been listed on the New York Stock Exchange since October 20, 2017 and traded under the symbol “SE.” Each ADS represents one Class A ordinary share.
 
B.          Plan of Distribution
 
Not applicable.
 
120
C.          Markets
 
Our ADSs have been listed on the New York Stock Exchange since October 20, 2017 under the symbol “SE.”
 
D.          Selling Shareholders
 
Not applicable.
 
E.          Dilution
 
Not applicable.
 
F.          Expenses of the Issue
 
Not applicable.
 
ITEM 10.
ADDITIONAL INFORMATION
 
A.          Share Capital
 
Not applicable.
 
B.          Memorandum and Articles of Association
 
We are a Cayman Islands exempted company and our affairs are governed by our amended and restated memorandum and articles of association and the Companies Act (As Revised) of the Cayman Islands, or Companies Act, and the common law of the Cayman Islands.
 
We incorporate by reference into this annual report our Ninth Amended and Restated Memorandum and Articles of Association, the form of which was included as Exhibit 3.1 to the Form 6-K (File No. 001-38237) we furnished to the Securities and Exchange Commission on February 14, 2022. Our shareholders adopted our Ninth Amended and Restated Memorandum and Articles of Association by a special resolution on February 14, 2022.
 
The following are summaries of material provisions of our Ninth Amended and Restated Memorandum and Articles of Association and the Companies Act as they relate to the material terms of our ordinary shares.
 
Registered Office and Objects
 
Our registered office in the Cayman Islands is at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
 
According to Clause 3 of our Ninth Amended and Restated Memorandum of Association, the objects for which we are established are unrestricted and we have full power and authority to carry out any object not prohibited by the Companies Act or any other law of the Cayman Islands.
 
Board of Directors
 
See “Item 6. Directors, Senior Management and Employees.”
 
Exempted Company
 
We are an exempted company incorporated with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary resident company except for the exemptions and privileges listed below:
 
121

 •
an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies;
 

 •
an exempted company is not required to open its register of members for inspection;
 

 •
an exempted company does not have to hold an annual general meeting;
 

 •
an exempted company may issue no par value, negotiable or bearer shares;
 

 •
an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);
 

 •
an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
 

 •
an exempted company may register as a limited duration company; and
 

 •
an exempted company may register as a segregated portfolio company.
 
Ordinary Shares
 
General
 
All of our issued and outstanding ordinary shares are fully paid and non-assessable. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their ordinary shares. Our Ninth Amended and Restated Memorandum and Articles of Association prohibit us from issuing bearer shares. Our company will issue only shares in registered form, which will be issued when registered in our register of members.
 
Dividends
 
The holders of our ordinary shares are entitled to receive such dividends as may be declared by our board of directors subject to our Ninth Amended and Restated Memorandum and Articles of Association and the Companies Act. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, dividends may be paid only out of profits, which include net earnings and retained earnings undistributed in prior years, and out of share premium, a concept analogous to paid-in surplus in the United States. No dividend may be declared and paid unless our directors determine that, immediately after the payment, we will be able to pay our debts as they fall due in the ordinary course of business and we have funds lawfully available for such purpose.
 
Register of Members
 
Under Cayman Islands law, we must keep a register of members and there must be entered therein:
 

 •
the names and addresses of the members, together with a statement of the shares held by each member, and such statement shall confirm (i) of the amount paid or agreed to be considered as paid, on the shares of each member, (ii) the number and category of shares held by each member, and (iii) whether each relevant category of shares held by a member carries voting rights under the articles of association of the company, and if so, whether such voting rights are conditional;
 

 •
the date on which the name of any person was entered on the register as a member; and
 

 •
the date on which any person ceased to be a member.
 
Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e. the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members will be deemed as a matter of Cayman Islands law to have legal title to the shares as set against its name in the register of members.
 
122
If the name of any person is, without sufficient cause, entered in or omitted from the register of members, or if default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member, the person or member aggrieved or any member or the company itself may apply to the Grand Court of the Cayman Islands for an order that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justice of the case, make an order for the rectification of the register.
 
Classes of Ordinary Shares; Conversion
 
Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Except for conversion rights and voting rights, the Class A ordinary shares and Class B ordinary shares carry equal rights and rank pari passu with one another, including the rights to dividends and other capital distributions. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. In addition, upon any direct or indirect sale, transfer, assignment or disposition of any number of Class B ordinary shares by a holder thereof or the direct or indirect transfer or assignment of the voting power attached to such Class B ordinary shares through voting proxy or otherwise to any person or entity which is not a permitted transferee, such Class B ordinary shares will automatically convert into an equal number of Class A ordinary shares. Permitted transferees of our founder, who currently beneficially owns all issued and outstanding Class B ordinary shares, include certain of his relatives so long as our founder retains control of the voting power over the Class B ordinary shares held by such permitted transferees.  Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances and no Class B ordinary shares will be issued after our initial public offering.
 
Voting Rights
 
Holders of our ordinary shares have the right to receive notice of, attend, speak and vote at general meetings of our company. Holders of Class A ordinary shares and Class B ordinary shares shall at all times vote together as one class on all resolutions submitted to a vote for shareholders’ approval or authorization, except for certain class consents required under our memorandum and articles of association. Each Class A ordinary share shall be entitled to one vote, and each Class B ordinary share shall be entitled to 15 votes, on all matters subject to the vote at general meetings of our company. At any general meeting a resolution put to the vote of the meeting shall be decided on a poll. An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes cast in a general meeting. A special resolution requires the affirmative vote of two-thirds of the votes cast in a general meeting. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Act and our Ninth Amended and Restated Memorandum and Articles of Association. A special resolution will be required for important matters such as making changes to our memorandum and articles of association.
 
General Meetings and Shareholder Proposals
 
As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our Ninth Amended and Restated Memorandum and Articles of Association provide that we may (but are not obliged to) in each year hold a general meeting as our annual general meeting in which case we will specify the meeting as such in the notices calling it, and the annual general meeting will be held at such time and place as may be determined by our directors.
 
Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our Ninth Amended and Restated Memorandum and Articles of Association allow shareholders holding shares representing in aggregate not less than one-third of all votes attaching to the issued and outstanding shares of our company entitled to vote at general meetings to requisition an extraordinary general meeting of the shareholders, in which case the directors are obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting; however, our Ninth Amended and Restated Memorandum and Articles of Association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.
 
A quorum required for a meeting of shareholders consists of one or more shareholders holding, in aggregate, not less than 40% of the votes attaching to all issued and outstanding shares of our company present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Advance notice of at least seven calendar days (exclusive of the day on which it is given or deemed to be given and of the day for which it is given) is required for the convening of our annual general meeting and other shareholders meetings.
 
123
Transfer of Ordinary Shares
 
Subject to the restrictions in our Ninth Amended and Restated Memorandum and Articles of Association as set out below, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.
 
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also, but is not required to, decline to register any transfer of any ordinary share unless:
 

 •
the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;
 

 •
the instrument of transfer is in respect of only one class of shares;
 

 •
the instrument of transfer is properly stamped, if required;
 

 •
in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; or
 

 •
the ordinary shares transferred are free of any lien in favor of us; or
 

 •
a fee of such maximum sum as the designated stock exchange may determine to be payable, or such lesser sum as the board of directors may from time to time require, is paid to us in respect thereof.
 
If our directors refuse to register a transfer they are obligated to, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers of shares or of any class of shares may, after compliance with any notice requirement of the designated stock exchange, be suspended at such times and for such periods (not exceeding in the whole thirty (30) days in any year) as our board of directors may determine.
 
Issuance of Additional Shares
 
Our Ninth Amended and Restated Memorandum and Articles of Association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares. Our Ninth Amended and Restated Memorandum and Articles of Association also authorize our board of directors to establish from time to time one or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including:
 

 •
the designation of the series;
 

 •
the number of shares of the series;
 

 •
the dividend rights, dividend rates, conversion rights, voting rights; and
 

 •
the rights and terms of redemption and liquidation preferences.
 
Our board of directors may issue preference shares without further action by our shareholders to the extent authorized but unissued. Issuance of these shares may dilute the voting power of holders of ordinary shares.
 
124
Liquidation
 
On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders in proportion to the par value of the shares held by them. We are an exempted company with “limited liability” incorporated under the Companies Act, and under the Companies Act, the liability of our members is limited to the amount, if any, unpaid on the shares respectively held by them. Our Ninth Amended and Restated Memorandum of Association contains a declaration that the liability of our members is so limited.
 
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
 
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 calendar days prior to the specified time and place of payment. The ordinary shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.
 
Redemption, Repurchase and Surrender of Ordinary Shares
 
We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors. Our company may also repurchase any of our shares provided that the manner and terms of such purchase have been approved by our board of directors or are otherwise authorized by our Ninth Amended and Restated Memorandum and Articles of Association. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of a fresh issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if the company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding, or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.
 
Variations of Rights of Shares
 
The rights attached to any class of shares may, unless otherwise provided by the terms of issue of the shares of or the rights attaching to that class, be materially adversely varied only with the written consent of the holders of a majority of the issued shares of that class or with the sanction of an ordinary resolution passed at a separate meeting of the holders of the shares of that class.
 
Inspection of Books and Records
 
Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records (save for our memorandum and articles of association, register of mortgages and charges, and special resolutions of our shareholders). However, we will provide our shareholders with annual audited financial statements. See “—H. Documents on Display.”
 
Changes in Capital
 
Our shareholders may from time to time by ordinary resolutions:
 

 •
increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution prescribes;
 

 •
consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
 
125

 •
convert all or any of its paid-up shares into stock and reconvert the stock into paid-up shares of any denomination;
 

 •
sub-divide our existing shares, or any of them into shares of a smaller amount than that fixed by our Ninth Amended and Restated Memorandum of Association; provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share will be the same as it was in case of the share from which the reduced share is derived; and
 

 •
cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so canceled.
 
Our shareholders may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application by our company for an order confirming such reduction, reduce our share capital and any capital redemption reserve in any manner authorized by law.
 
C.          Material Contracts
 
We have not entered into any material contracts other than in the ordinary course of business and other than those described in this annual report.
 
D.          Exchange Controls
 
The Cayman Islands currently has no exchange control regulations or currency restrictions. See “Item 4. Information on the Company—B. Business Overview—Regulation” for exchange control and currency restrictions in Indonesia, Taiwan, Vietnam, Thailand, Singapore and Malaysia.
 
E.          Taxation
 
The following discussion is a summary of Cayman Islands, Singapore and U.S. federal income tax considerations of an investment in our ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This summary does not deal with all possible tax considerations relating to an investment in our ADSs or ordinary shares, such as the tax considerations under state, local and other tax laws, or tax laws of jurisdictions other than the Cayman Islands, Singapore and the United States. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Maples and Calder (Hong Kong) LLP, our counsel as to Cayman Islands law. To the extent that the discussion relates to matters of Singapore tax law, it represents the opinion of Rajah & Tann Singapore LLP, our counsel as to Singapore law.
 
Cayman Islands Taxation
 
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties which are applicable to any payments made by or to our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
 
Payments of dividends and capital in respect of our ordinary shares or our ADSs will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ordinary shares or our ADSs, nor will gains derived from the disposal of our ordinary shares or our ADSs be subject to Cayman Islands income or corporation tax.
 
No stamp duty is payable in respect of the issue of our ordinary shares or on an instrument of transfer in respect of our ordinary shares.
 
126
Singapore Taxation
 
The following discussion is a summary of Singapore income tax, goods and services tax and stamp duty considerations relevant to the acquisition, ownership and disposition of ADSs or our ordinary shares. The statements made herein regarding taxation are general in nature and based upon certain aspects of the current tax laws of Singapore and administrative guidelines issued by the relevant authorities in force as of the date hereof and are subject to any changes in such laws or administrative guidelines or the interpretation of such laws or guidelines occurring after such date, which changes could be made on a retrospective basis. The statements made herein do not purport to be a comprehensive or exhaustive description of all of the tax considerations that may be relevant to a decision to acquire, own or dispose of our ADSs or our ordinary shares and do not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities) may be subject to special rules. Prospective shareholders are advised to consult their own tax advisers as to the Singapore or other tax consequences of the acquisition, ownership of or disposal of our ADSs and our ordinary shares, taking into account their own particular circumstances. It is emphasized that neither we, our counsels, nor any other persons involved in this annual report accept responsibility for any tax effects or liabilities resulting from the acquisition, holding or disposal of our ADSs or our ordinary shares.
 
Income Tax
 
Under the Singapore Income Tax Act, a company established outside Singapore but whose governing body, being the board of directors, usually exercises de facto control and management of its business in Singapore could be considered tax residents in Singapore. However, such control and management of the business should not be deemed to be in Singapore if physical board meetings are mainly conducted outside Singapore. Where board resolutions are passed in the form of written consent signed by the directors each acting in their own jurisdictions, or where the board meetings are held by teleconference or videoconference, it is possible that the place of de facto control and management will be considered to be where the majority of the board are located when they sign such consent or attend such conferences.
 
We believe that Sea Limited is not a Singapore tax resident for Singapore income tax purposes. However, the tax resident status of Sea Limited is subject to determination by the IRAS and uncertainties remain with respect to our tax residence status. It is not certain if Sea Limited will be classified as a Singapore tax resident. See “Item 3. Key Information—D. Risk Factors—Markets Related Risks” for a discussion of the Singapore tax consequences to non-resident investors if Sea Limited is deemed to be a Singapore tax resident. The statements below are based on the assumption that Sea Limited is not a tax resident in Singapore for Singapore income tax purposes.
 
Dividends With Respect to Our ADSs or Our Ordinary Shares
 
Where Sea Limited is not considered a tax resident in Singapore for Singapore income tax purposes, the dividend payments made by Sea Limited would be considered sourced outside Singapore (unless our ADSs or our ordinary shares are held as part of a trade or business carried out in Singapore, in which case the holders of our ADSs or our ordinary shares may be taxed on the dividends distributed to them). Foreign-sourced dividends received or deemed to be received in Singapore by non-resident individuals are exempt from Singapore income tax. This exemption also applies to Singapore tax resident individuals who have received or, are deemed to have received his foreign-sourced income in Singapore on or after January 1, 2004 (except where such income is received through a partnership in Singapore).
 
Foreign-sourced dividends received or deemed to be received in Singapore by corporate investors who do not have a business presence in Singapore, are not tax resident in Singapore, and who do not have a permanent establishment or tax presence in Singapore, will generally not be subject to income tax in Singapore. Foreign-sourced dividends received or deemed to be received in Singapore by corporate investors who are tax residents in Singapore will generally be subject to Singapore income tax. Since Sea Limited is a company incorporated in the Cayman Islands, and the prevailing rate of tax in the Cayman Islands, being a tax of a similar character to the Singapore income tax, is 0%, dividends received in Singapore by resident corporate investors should be subject to Singapore income tax at the prevailing rate of 17%.
 
Dividends received in respect of our ADSs or our ordinary shares whether by a Singapore tax resident or a non-Singapore tax resident as a shareholder are not subject to any withholding tax in Singapore.
 
127
Gains With Respect to Disposition of Our ADSs or Our Ordinary Shares
 
There is no capital gain tax in Singapore and there is no specific law or regulation in Singapore dealing with the characterization of a gain as income or capital in nature. Gains arising from disposition of our ADSs or our ordinary shares may be construed as income and subject to Singapore income tax if they arise from or are otherwise connected with a trade or business activity in Singapore. Factors that determine the existence of a trade include, inter alia, the length of ownership, the frequency of similar transactions, and the motive of acquisition.
 
Such gains may also be considered income in nature, even if they do not arise from an activity in the ordinary course of trade or business or an ordinary incident of some other business activity, if our ADSs or our ordinary shares were purchased with the intention or purpose of making a profit by sale rather than holding for long-term investment purposes in Singapore. Conversely, gains from disposition of our ADSs or our ordinary shares in Singapore, if considered as capital gains rather than income by the Inland Revenue Authority of Singapore, are not taxable in Singapore.
 
For corporate shareholders who are subject to Singapore income tax treatment under Section 34A or 34AA of the Singapore Income Tax Act in relation to the adoption of Singapore Financial Reporting Standard 39—Financial Instruments: Recognition and Measurement (FRS 39) or Singapore Financial Reporting Standard 109—Financial Instruments (FRS 109), for accounting purposes, they may be required to recognize gains or losses (not being gains or losses in the nature of capital) even though no sale or disposal of our ADSs or our ordinary shares has been made. Our corporate shareholders who may be subject to such provisions should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, ownership and disposition of our ADSs and our ordinary shares arising from the adoption of FRS 39 or FRS 109.
 
Notwithstanding the above, foreign investors may claim that the gains from disposition of their ADSs or ordinary shares are not sourced or received in Singapore (so that such gains will not be subject to Singapore income tax) if (i) the foreign investor is not a tax resident in Singapore, (ii) the foreign investor does not maintain a permanent establishment in Singapore, to which the disposition gains may be effectively connected, and (iii) the entire process (including the negotiation, deliberation, execution of the acquisition and sale, etc.) leading up to the actual acquisition and sale of our ADSs or our ordinary shares is performed outside of Singapore.
 
Goods and Services Tax
 
The issuance of our ADSs or our ordinary shares is not subject to Singapore goods and services tax (GST).
 
The sale of our ADS or our ordinary shares by a GST-registered investor in Singapore to another person belonging in Singapore is an exempt supply (i.e. not subject to GST). Any input GST (for example, GST on brokerage) incurred by the GST-registered investor in connection with the making of this exempt supply is generally not recoverable and will become an additional cost to the investor unless the investor satisfies certain conditions prescribed under the GST legislation or satisfies certain GST concessions.
 
Where our ADS or our ordinary shares are sold by a GST-registered investor in the course or furtherance of a business carried on by such an investor to a person belonging outside Singapore (and who is outside Singapore at the time of supply), the sale is a taxable supply subject to GST at a zero rate (i.e. 0%). Any input GST (for example, GST on brokerage) incurred by the GST-registered investor in making this zero-rated supply for the purpose of his business will, subject to the conditions prescribed under the GST legislation, be recoverable from the Comptroller of GST.
 
Investors should seek their own tax advice on the recoverability of GST incurred on expenses in connection with the purchase and sale of our ADSs or our ordinary shares.
 
Services such as brokerage and handling services rendered by a GST-registered person to an investor belonging in Singapore in connection with the investor’s purchase or sale of our ADSs or our ordinary shares will be subject to GST at the prevailing rate (currently at 7%). Similar services rendered contractually to an investor belonging outside Singapore should, subject to certain conditions prescribed under the GST legislation, qualify for GST at zero rate (i.e. 0%).
 
128
Stamp Duty
 
No stamp duty is payable on the subscription and issuance of our ADSs or our ordinary shares. As Sea Limited is incorporated in the Cayman Islands and our ADSs and our ordinary shares are not registered in any register kept in Singapore, no stamp duty is payable in Singapore on any instrument of transfer upon a sale or gift of our ADSs or our ordinary shares. This position would remain as long as Sea Limited is not considered a residential property-holding entity.
 
United States Federal Income Tax Considerations
 
The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of the ADSs owned by U.S. Holders (as defined below) and to the underlying ordinary shares. This discussion applies only to U.S. Holders that hold the ADSs or ordinary shares as capital assets (generally, property held for investment). This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations promulgated thereunder (“Regulations”), published positions of the Internal Revenue Service (the “IRS”), court decisions and other applicable authorities, all as of the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect).

This discussion does not address all U.S. federal income tax considerations that may be applicable to U.S. Holders in light of their particular circumstances or U.S. Holders subject to special treatment under U.S. federal income tax law, such as:


 •
banks, insurance companies and other financial institutions;


•
entities treated as partnerships for U.S. federal income tax purposes, S corporations or other pass-through entities;


•
tax-exempt entities;


•
real estate investment trusts;


•
regulated investment companies;


•
brokers, dealers, or traders in securities that elect to use a mark-to-market method of accounting;


•
certain former citizens or residents of the United States;


•
persons that elect to mark their securities to market;


•
persons who hold ADSs or ordinary shares as part of a hedging, integrated, straddle, conversion or constructive sale transaction for U.S. federal income tax purposes;


•
persons that have a functional currency other than the U.S. dollar; and


•
persons that actually or constructively own 10% or more of our stock by vote or value.

This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift, alternative minimum tax or Medicare contribution tax considerations.

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of the ADSs or ordinary shares that is for U.S. federal income tax purposes:


 •
an individual who is a citizen or resident of the United States;


•
a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

129

 •
an estate whose income is subject to U.S. federal income taxation regardless of its source; or


•
a trust, (i) the administration of which is subject to the primary supervision of a court within the United States and for which one or more U.S. persons have the authority to control all substantial decisions, or (ii) that has a valid election in effect under applicable Regulations to be treated as a U.S. person.

If a partnership or other entity treated as a partnership for U.S. federal income tax purposes holds the ADSs or ordinary shares, the tax treatment of a partner will generally depend on the status and the activities of the partnership. Partners in a partnership holding the ADSs or ordinary shares should consult their tax advisors regarding the tax considerations of an investment in the ADSs or ordinary shares.

The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement have been and will be complied with in accordance with their terms.

If a U.S. Holder holds ADSs, such holder will generally be treated as owning the underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes.

Dividends

Subject to the discussion below under “—Passive Foreign Investment Company Rules,” the gross amount of any distribution to a U.S. Holder with respect to the ADSs or ordinary shares will generally be included in such holder’s gross income as ordinary dividend income on the date actually or constructively received by such holder, in the case of ordinary shares, or by the depositary, in the case of ADSs, to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, U.S. Holders should expect that any distribution from us will generally be reported as a dividend. The amount of such dividend will include amounts withheld by us or our paying agent in respect of any foreign taxes. Any dividend from us will not be eligible for the dividends-received deduction generally allowed to corporations in respect of dividends received from U.S. corporations.

The amount of any dividend paid in foreign currency will equal the U.S. dollar value of the foreign currency received calculated by reference to the exchange rate in effect on the date the dividend is received by a U.S. Holder, in the case of ordinary shares, or by the depositary in the case of ADSs, regardless of whether the foreign currency is converted into U.S. dollars. If the foreign currency received as a dividend is converted into U.S. dollars on the date it is received, a U.S. Holder will generally not be required to recognize foreign currency gain or loss in respect of the dividend income. If the foreign currency received as a dividend is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the foreign currency will be treated as U.S. source ordinary income or loss.

With respect to individuals and certain other non-corporate U.S. Holders, dividends may constitute “qualified dividend income” that is subject to tax at the lower applicable capital gains rates provided that (1) the ADSs or ordinary shares on which the dividends are paid are readily tradable on an established securities market in the United States, (2) we are not a PFIC for either our taxable year in which the dividend was paid or the preceding taxable year, and (3) certain holding period and other requirements are met. The ADSs, but not our ordinary shares, are listed on the NYSE so we anticipate that the ADSs should qualify as readily tradable on an established securities market in the United States, although there can be no assurances in this regard. U.S. Holders should consult their tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for dividends paid with respect to the ADSs.

Dividends from us will generally constitute non-U.S. source income and be treated as “passive category income” for foreign tax credit limitation purposes. U.S. Holders may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any nonrefundable foreign withholding tax imposed on dividends received on the ADSs or ordinary shares. If a U.S. Holder does not elect to claim a foreign tax credit for foreign taxes withheld, such holder may instead claim a deduction for U.S. federal income tax purposes in respect of such taxes, but only for a year in which such holder elects to do so for all creditable foreign income taxes. U.S. Holders should consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

130
Sale or Other Disposition of ADSs or Ordinary Shares

Subject to the discussion below under “—Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize gain or loss on any sale or other disposition of the ADSs or ordinary shares equal to the difference between the amount realized with respect to such ADSs or ordinary shares and such holder’s tax basis in such ADSs or ordinary shares. Such gain or loss will generally be capital gain or loss. Individuals and certain other non-corporate U.S. Holders who have held such ADSs or ordinary shares for more than one year will generally be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss recognized by a U.S. Holder will generally be treated as U.S.-source gain or loss for foreign tax credit limitation purposes.

Passive Foreign Investment Company Rules

A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) during such year produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. For this purpose, cash is generally categorized as a passive asset and the company’s unbooked intangibles associated with active business activity are taken into account as a non-passive asset. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own (or are deemed to own), directly, indirectly or constructively, 25% or more (by value) of the stock.

Although the law in this regard is not entirely clear, we treat our VIEs as being owned by us for U.S. federal income tax purposes.

Based on our income and assets, and the value of the ADSs, we do not believe that we were a PFIC, for U.S. federal income tax purposes, for the taxable year ended December 31, 2021, and do not anticipate becoming a PFIC for the current taxable year or for the foreseeable future. Nevertheless, because PFIC status is a factual determination made annually after the close of each taxable year on the basis of the composition of our income and assets, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year. Under circumstances where revenues from activities that produce passive income significantly increase relative to our revenues from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash, our risk of becoming classified as a PFIC may substantially increase. In addition, because we have valued our goodwill based on the market value of the ADSs, a decrease in the market value of the ADSs may also result in our becoming a PFIC.

If we are a PFIC for any taxable year during which a U.S. Holder holds the ADSs or ordinary shares, such holder will be subject to special tax rules with respect to any “excess distribution” that such holder receives on the ADSs or ordinary shares and any gain such holder realizes from a sale or other disposition (including a pledge) of the ADSs or ordinary shares, unless such holder makes a “mark-to-market” election as discussed below. Distributions received by a U.S. Holder in a taxable year that are greater than 125% of the average annual distributions such holder received during the shorter of the three preceding taxable years or such holder’s holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these special tax rules:


 •
the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary shares;


•
amounts allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC (a “pre-PFIC year”) will be subject to tax as ordinary income; and


•
amounts allocated to each prior taxable year, other than the current taxable year or a pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable to the U.S. Holder for that year, and such amounts will be increased by an additional tax equal to interest on the resulting tax deemed deferred with respect to such years.

131
If we are a PFIC for any taxable year during which a U.S. Holder holds ADSs or ordinary shares and any of our non-U.S. affiliated entities are also PFICs, such holder will be treated as owning a proportionate amount (by value) of the shares of each such non-U.S. affiliate classified as a PFIC for purposes of the application of these rules.
 
Alternatively, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock of a PFIC to elect out of the tax treatment discussed in the second preceding paragraph. If a U.S. Holder makes a valid mark-to-market election for the ADSs, the U.S. Holder will include in income each year an amount equal to the excess, if any, of the fair market value of the ADSs as of the close of such holder’s taxable year over such holder’s adjusted basis in such ADSs. The U.S. Holder is allowed a deduction for the excess, if any, of such holder’s adjusted basis in the ADSs over their fair market value as of the close of the taxable year. Deductions are allowable however, only to the extent of any net mark-to-market gains on the ADSs included in the U.S. Holder’s income for prior taxable years. Amounts included in the U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ADSs, as well as to any loss realized on the actual sale or disposition of the ADSs, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included in income with respect to such ADSs. The U.S. Holder’s basis in the ADSs will be adjusted to reflect any such income or loss amounts. If a U.S. Holder makes such a mark-to-market election, tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us (except that the lower applicable capital gains rate for qualified dividend income would not apply). If a U.S. Holder makes a valid mark-to-market election, and we subsequently cease to be classified as a PFIC, such U.S. Holder will not be required to take into account the mark-to-market income or loss described above during any period that we are not classified as a PFIC.
 
The mark-to-market election is available only for “marketable stock” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined in applicable Regulations. We expect that the ADSs will continue to be listed on the NYSE, which is a qualified exchange for these purposes, and, consequently, assuming that the ADSs are regularly traded, if a U.S. Holder holds the ADSs, it is expected that the mark-to-market election would be available to such holder were we to become a PFIC. A mark-to-market election may not, however, be made with respect to the ordinary shares, as they are not marketable stock. Accordingly, if we are a PFIC during any year in which a U.S. Holder holds ordinary shares, such holder will generally be subject to the special tax rules discussed above.
 
In addition, because, as a technical matter, a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with respect to such holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.
 
We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.
 
If a U.S. Holder owns the ADSs or ordinary shares during any taxable year that we are a PFIC, such holder must generally file an annual report with the IRS regarding their ownership of the ADSs or ordinary shares. U.S. Holders should consult their tax advisors concerning the U.S. federal income tax considerations of holding and disposing of the ADSs or ordinary shares if we are or become a PFIC, including the availability and possibility of making a mark-to-market election.
 
THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS INTENDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE TAX ADVICE. U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSIDERATIONS TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE ADSs AND ORDINARY SHARES IN THEIR PARTICULAR CIRCUMSTANCES.
 
132
F.          Dividends and Paying Agents
 
Not applicable.
 
G.          Statement by Experts
 
Not applicable.
 
H.          Documents on Display
 
We previously filed with the SEC registration statement on Form F-1 (File No. 333-220571), as amended, including the prospectus contained therein, together with the post-effective registration statement on Form F-1 (File No. 333-221029) to register additional securities that become effective immediately upon filing, to register our Class A ordinary shares in relation to our initial public offering. We also filed with the SEC related registration statement on Form F-6 (File No. 333-220861) to register our ADSs and registration statements on Form S-8 (File No. 333-222071, No. 333-223551, No. 333-229137, No. 333-232859, No. 333-235799, No. 333-251873 and File No. 333-261969) to register our securities to be issued under our 2009 Plan.
 
We are subject to the periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year. Copies of reports and other information, when so filed with the SEC, can be obtained from the SEC’s website at www.sec.gov. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
 
We will furnish The Bank of New York Mellon, the depositary of our ADSs, with our annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.
 
I.          Subsidiary Information
 
Not applicable.
 
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Foreign Exchange Risk
 
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to our operating activities when revenue or expense is denominated in a foreign currency and our net investments in foreign subsidiaries. We have transactional currency exposures arising from sales or cost of revenue that are denominated in a currency other than the respective functional currencies of our subsidiaries, primarily Indonesian rupiah, New Taiwan dollar, Thai baht, Singapore dollar, Malaysian ringgit, Vietnamese dong, Philippines peso, and Brazil real. The foreign currencies in which these transactions are denominated are mainly U.S. dollar. Our sales and costs are denominated in the respective functional currencies of our subsidiaries. Our trade receivable and trade payable balances at the end of the reporting period have similar exposures. Such amounts include balances within the subsidiaries which, although eliminated from the consolidated balance sheets, will continue to contribute to foreign exchange risk exposures in the consolidated statements of operations and consolidated statements of comprehensive loss.

Foreign currency exchange rates for currencies in some of our markets have experienced substantial volatility. It is difficult to predict how market forces or the government policies in those markets may impact the exchange rates against the U.S. dollar in the future. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars.”

133
As of December 31, 2021, we had cash, cash equivalents and restricted cash of US$10,838.1 million. We had U.S. dollar-denominated cash, cash equivalents and restricted cash of US$7,676.8 million, Singapore dollar-denominated cash, cash equivalents and restricted cash of US$899.0 million, Indonesian rupiah-denominated cash, cash equivalents and restricted cash of US$630.0 million, Thailand baht-denominated cash, cash equivalents and restricted cash of US$377.2 million, and cash, cash equivalents and restricted cash denominated in other currencies of US$1,255.1 million. If the U.S. dollar had strengthened or weakened by 100 basis points against Singapore dollar, our cash, cash equivalents and restricted cash would have decreased or increased by US$9.0 million. If the U.S. dollar had strengthened or weakened by 100 basis points against Indonesian rupiah, our cash, cash equivalents and restricted cash would have decreased or increased by US$6.3 million. If the U.S. dollar had strengthened or weakened by 100 basis points against Thailand baht, our cash, cash equivalents and restricted cash would have decreased or increased by US$3.8 million. If the U.S. dollar had strengthened or weakened by 100 basis points against each of the other currencies in which we held cash, cash equivalents and restricted cash, our cash, cash equivalents and restricted cash would have decreased or increased by US$12.5 million.
 
Credit Risk
 
We are exposed to credit risk from our operating activities (primarily from trade and other receivables) and from our investing activities, including loans receivable, deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Our objective is to seek continual revenue growth while minimizing losses incurred due to increased credit risk exposure. Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, other receivables, loans receivable, held to maturity investments, available-for-sale investments, and amounts due from related parties. As of December 31, 2021, substantially all of our cash and cash equivalents were held at major financial institutions in their respective locations. We believe that these financial institutions are of high credit quality and continually monitor the credit worthiness of these financial institutions.
 
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
A.          Debt Securities
 
Not applicable.
 
B.          Warrants and Rights
 
Not applicable.
 
C.          Other Securities
 
Not applicable.
 
D.          American Depositary Shares
 
Fees and Charges Our ADS Holders May Have to Pay
 
Our ADSs, each of which represents one Class A ordinary share, are listed on the New York Stock Exchange. The Bank of New York Mellon is the depositary of our ADS program. A holder of ADSs may have to pay certain fees of The Bank of New York Mellon, as depositary, and certain taxes, registration and transfer charges and fees and governmental charges and fees. The depositary collects fees for delivery and surrender of ADSs directly from holders depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to holders by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing holders or by charging the book-entry system accounts of participants acting for them. The depositary may collect any fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to deliver ADSs or deposited shares or to forward any distributions until its fees for those services are paid.
 
134
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.
 
Persons depositing or withdrawing shares
or holders of ADSs must pay:
  
For:
     
US$5.00 (or less) per 100 ADSs (or portion thereof)
  
Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
Cancelation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
     
US$.05 (or less) per ADS (or portion thereof)
  
Any cash distribution to ADS holders
     
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs
  
Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders
     
US$.05 (or less) per ADS (or portion thereof) per annum
  
Depositary services
     
Registration or transfer fees
  
Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
     
Expenses of the depositary
  
Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
 
Converting foreign currency to U.S. dollars
     
Taxes and other governmental charges the depositary or the custodian has to pay on any ADS or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes
  
As necessary
     
Any charges incurred by the depositary or its agents for servicing the deposited securities
  
As necessary

PART II
 
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
None.
 
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
See “Item 10. Additional Information” for a description of the rights of shareholders.
 
135
ITEM 15.
CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
 
The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that required information is recorded, processed, summarized and reported within the required timeframe, as specified in the rules set forth by the Securities and Exchange Commission (“SEC”). Our disclosure controls and procedures are also designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Group Chief Executive Officer and Group Chief Financial Officer, to allow timely decisions regarding required disclosures.
 
Our management, with the participation of our Group Chief Executive Officer and Group Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. While there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures, the Company’s disclosure controls, and procedure are designed to provide reasonable assurance of achieving their objectives. Based on this evaluation, our Group Chief Executive Officer and Group Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2021.
 
Management’s Annual Report on Internal Control over Financial Reporting
 
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
 
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
 
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth in the “Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
 
Based on the results of this assessment and on those criteria, management concluded that our internal control over financial reporting was effective as of December 31, 2021.
 
Attestation Report of the Registered Public Accounting Firm
 
The effectiveness of the company’s internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report.
 
Changes in Internal Control over Financial Reporting
 
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
 
Our board of directors has also determined that Mr. David Heng Chen Seng, an independent director and a member of our audit committee, qualifies as an “audit committee financial expert” within the meaning of the SEC rules and possesses financial sophistication within the meaning of the New York Stock Exchange Listed Company Manual. Mr. David Heng Chen Seng satisfies the “independence” requirements of Section 303A of the New York Stock Exchange Listed Company Manual and meets the independence standards under Rule 10A-3 under the Exchange Act.
 
136
ITEM 16B.
CODE OF ETHICS
 
Our board of directors has adopted a code of business conduct and ethics that applies to all of our directors, officers, employees, including certain provisions that specifically apply to our principal executive officer, principal financial officer, principal accounting officer or controller and any other persons who perform similar functions for us. We have filed our code of business conduct and ethics as Exhibit 99.1 of our registration statement on Form F-1 (File No. 333-220571) filed with the SEC on September 22, 2017. A copy of our code of business conduct and ethics is available on our website at www.sea.com.
 
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Ernst & Young LLP, our independent registered public accounting firm, for the periods indicated. We did not pay any other fees to our independent registered public accounting firm during the periods indicated below.
 
    For the Year Ended December 31,  
    2020     2021  
   
(US$ thousands)
  
Audit fees(1)
    
3,676
      
4,505
  
Tax fees(2)
    
59
      
97
  
Audit related fees(3)
    
58
      
7
  
Other fees(4)
    
803
      
579
  

 
(1)
“Audit fees” means the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements. This category also included professional services rendered by our independent registered public accounting firm for statutory audits required by non-U.S. jurisdictions. In 2021, the audit refers to financial audit and audit pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.
 
(2)
“Tax fees” means the aggregate fees billed for the tax services provided with respect to tax consulting and tax audit assistance.
 
(3)
“Audit-related fees” means the aggregate fees billed in each fiscal year listed for professional services rendered by our principal auditors related to the audit of our financial statements that are not reported under “audit fees.”
 
(4)
“Other fees” means the aggregate fees billed for transaction advisory services with respect to the review of our sustainability, regulatory compliance and transaction due diligence.
 
The policy of our audit committee is to pre-approve all audit and non-audit services provided by Ernst & Young LLP, our independent registered public accounting firm, including audit services, audit-related services and tax services as described above, other than those for de minimis services which are approved by the audit committee prior to the completion of the audit.
 
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
 
Not applicable.
 
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 
None.
 
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
 
Not applicable.
 
137
ITEM 16G.
CORPORATE GOVERNANCE
 
We are subject to the New York Stock Exchange corporate governance listing standards. However, New York Stock Exchange rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the New York Stock Exchange corporate governance listing standards.
 
Section 303A.08 of the New York Stock Exchange Listed Company Manual requires a listed company to give shareholders an opportunity to vote on all equity-compensation plans and material revisions thereto. We are a Cayman Islands company, and there are no shareholder approval requirements for such matter. Pursuant to the exemption granted to foreign private issuers under Section 303A.00 of the New York Stock Exchange Listed Company Manual, we have followed our home country practice in lieu of the requirements of Sections 303A.08. In November 2017 and February 2018, we obtained approvals from our board of directors to increase the maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2009 Plan. Most recently, in April 2022, our board of directors approved the amendment and restatement of the 2009 Plan to increase the maximum aggregate number of shares available under the 2009 Plan, pursuant to which on January 1 of each of 2023, 2024, 2025 and 2026, the maximum aggregate number of ordinary shares which may be issued under the 2009 Plan will increase by 3% of the total number of ordinary shares of all classes of the company outstanding on that day immediately before the increase. For additional information, see “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.”
 
Section 303A.01 of the New York Stock Exchange Listed Company Manual requires a listed company to have a majority of independent directors, which is not required under the Companies Act of the Cayman Islands. Currently, our board of directors is composed of six members, two of whom are independent directors as described under “Item 6. Directors, Senior Management and Employees—C. Board Practice.”
 
We follow home country practice that permits our Audit Committee to consist of less than three members, in lieu of complying with Section 303A.07 of the New York Stock Exchange Listed Company Manual which requires each company to have an audit committee of at least three members. Our Audit Committee currently consists of two members.
 
Pursuant to Sections 303A.04 and 303A.05 of the New York Stock Exchange Listed Company Manual, a listed U.S. company is required to have a nominating/corporate governance committee and a compensation committee, each composed entirely of independent directors. We follow home country practice and the compensation committee and corporate governance and nominating committee of our board of directors are not comprised entirely of independent directors.
 
Other than the home country practice described above, we are not aware of any significant ways in which our corporate governance practices differ from those followed by U.S. domestic companies under the New York Stock Exchange listing rules. See “Item 3. Key Information—D. Risk Factors—Risks Related to the ADS—We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to domestic public companies in the United States.”
 
ITEM 16H.
MINE SAFETY DISCLOSURE
 
Not applicable.
 
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
 
Not applicable.
 
PART III
 
ITEM 17.
FINANCIAL STATEMENTS
 
We have elected to provide financial statements pursuant to Item 18.
 
ITEM 18.
FINANCIAL STATEMENTS
 
The consolidated financial statements of Sea Limited are included at the end of this annual report.
 
138
ITEM 19.
EXHIBITS
 
Exhibit
Number
    Description of Document
     
1.1
  
     
2.1
  
     
2.2
  
     
2.3
  
     
2.4*
  
     
4.1*
  
     
4.2
  
     
4.3
  
     
4.4†
  
     
4.5†
  
     
4.6
  
     
4.7†
  
     
4.8
  
     
4.9
  
     
4.10*
  

139
Exhibit
Number
  
Description of Document          
4.11*
  
     
8.1*
  
     
11.1
  
     
12.1*
  
     
12.2*
  
     
13.1**
  
     
13.2**
  
     
15.1*
  
     
15.2*
  
     
15.3*
  
     
15.4*
  
     
15.5*
  
     
101.INS
  
Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
     
101.SCH
  
Inline XBRL Taxonomy Extension Schema Document
     
101.CAL
  
Inline XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF
  
Inline XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB
  
Inline XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE
  
Inline XBRL Taxonomy Extension Presentation Linkbase Document
     
104
  
Cover Page Interactive Data File (embedded within the Exhibit 101 Inline XBRL document)


*
Filed with this annual report on Form 20-F.
 
**
Furnished with this annual report on Form 20-F.
 
†
Confidential treatment has been granted by the U.S. Securities and Exchange Commission with respect to portions of the exhibit that have been redacted.
 
140
SIGNATURES
 
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
 
 
Sea Limited
 
By:
/s/ Forrest Xiaodong Li
  
 
Name:
Forrest Xiaodong Li
 
Title:
Chairman and Group Chief Executive Officer
     
Date: April 22, 2022
    
SEA LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
Page
F-2
F-7
F-11
F-13
F-14
F-17
F-20

Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Sea Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sea Limited (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, cash flows, and shareholders’ equity (deficit) for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated April 22, 2022 expressed an unqualified opinion thereon.

Adoption of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

As discussed in Note 2(g) to the consolidated financial statements, the Company has changed its method for accounting for accounts receivable, loans receivable and allowance for credit losses in 2020 due to the adoption of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Sea Limited

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Recognition of Digital Entertainment (“DE”) Revenue

Description of the Matter
  
For the year ended December 31, 2021, the Company’s revenue arising from DE was $4,320.0 million.
 
As outlined in Note 2(o) of the consolidated financial statements, DE revenue is recognized over the performance obligation period. The Company has determined that an implied obligation exists to the paying users to continue providing hosting services and access to the purchased virtual goods within the online games over an estimated service period. Such service period is largely determined in accordance with the estimated average lifespan of the paying users of the said games or similar games.
 
Auditing the DE revenue recognition process was complex and involved judgement to determine the historical paying users’ inactive rate and playing behavior, in estimating the average lifespan of the paying users of the said games or similar games. In addition, the Company utilized various operating systems to process user data and transactions and relied on automated processes and controls over the completeness and accuracy of the historical user and game data, which were key inputs to the above-mentioned estimates.
     
How We Addressed the Matter in Our Audit
  
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s DE revenue recognition process.  For example, we tested the automated controls of the related operating systems. We also tested the effectiveness of management’s review controls over assessing the completeness and accuracy of the historical user and game data and the appropriateness of the judgements regarding the most relevant historical user and game data to be applied in their estimates.
 
To test the recognition of DE revenue, our audit procedures included, among others, testing the completeness and accuracy of the above-mentioned underlying historical user and game data and assessing the reasonableness of the historical data applied in estimating the average lifespan of the paying users of the said games or similar games. We also recalculated the amount of revenue to be deferred based on management’s estimated service periods and compared those amounts with the amounts recorded by the Company.

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Sea Limited

Critical Audit Matters (continued)

Measurement of long-lived assets in E-commerce (“EC”) segment

Description of the Matter
  
As at December 31, 2021, the Company’s long-lived assets in EC segment amounted to approximately 75.7% of the Company’s long-lived assets. The long-lived assets include property and equipment, operating lease right-of-use assets and intangible assets.
 
As outlined in Note 2(m) to the consolidated financial statements, the Company evaluates its long-lived assets for impairment when there are events or changes in circumstances which indicate that the carrying amounts of the long-lived assets may not be recoverable. Due to the continued losses incurred by EC segment, the Company evaluated the related long-lived assets for impairment at the asset group level by comparing the carrying amount of the asset group to the recoverable value determined by forecasted undiscounted cash flows expected to be generated by this asset group.
 
Auditing management’s long-lived assets impairment test was highly judgmental due to the magnitude of the carrying amount of long-lived assets and management’s judgement in estimating the recoverable value (undiscounted cash flows) of the asset group, which were sensitive to key assumptions such as projected revenue and sales and marketing expenses.
     
How We Addressed the Matter in Our Audit
  
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s long-lived asset impairment process to determine the recoverable value of the asset group. For example, we tested controls over management’s review of the key assumptions used in estimating the recoverable value.
 
To test the impairment of long-lived assets, our audit procedures included, among others, obtaining an understanding from management regarding the basis of which the undiscounted cash flows were prepared and assessing the reasonableness of the forecasted undiscounted cash flows by comparing them against the Company’s business strategies and underlying key assumptions over the forecast periods, taking into consideration current industry and economic trends. We performed sensitivity analyses over the key assumptions described above to evaluate the changes to the estimated recoverable value for the asset group that would result from changes in the assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2010.

Singapore
April 22, 2022

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Sea Limited

Opinion on Internal Control Over Financial Reporting

We have audited Sea Limited’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Sea Limited (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, cash flows, and shareholders’ equity (deficit) for each of the three years in the period ended December 31, 2021, and the related notes and our report dated April 22, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Singapore
April 22, 2022

F-6
SEA LIMITED

CONSOLIDATED BALANCE SHEETS
(Amounts expressed in thousands of US dollars (“$”))

       
As of December 31,
  
   
Note
    
2020
$
    
2021
$
  
ASSETS
                  
Current assets
                  
Cash and cash equivalents
          
6,166,880
      
9,247,762
  
Restricted cash
          
859,192
      
1,551,635
  
Accounts receivable, net of allowance for credit losses of $7,978 and $5,772, as of December 31, 2020 and December 31, 2021 respectively
    
5
      
362,999
      
388,308
  
Prepaid expenses and other assets
    
6
      
1,054,229
      
1,401,863
  
Loans receivable, net of allowance for credit losses of $20,872 and $91,504, as of December 31, 2020 and December 31, 2021 respectively
    
7
      
285,937
      
1,500,954
  
Inventories, net
            
64,219
      
117,499
  
Short-term investments
     8      
126,099
      
911,281
  
Amounts due from related parties
            
19,449
      
16,095
  
Total current assets
            
8,939,004
      
15,135,397
  
                         
Non-current assets
                        
Property and equipment, net
     9
      
386,401
      
1,029,963
  
Operating lease right-of-use assets, net
    
10
      
234,555
      
649,680
  
Intangible assets, net
    
11
      
39,773
      
52,517
  
Long-term investments
    
8
      
190,482
      
1,052,861
  
Prepaid expenses and other assets
    
6
      
204,804
      
124,521
  
Loans receivable, net of allowance for credit losses of $19,612 and $6,172, as of December 31, 2020 and December 31, 2021 respectively
    
7
      
117,149
      
28,964
  
Restricted cash
            
27,321
      
38,743
  
Deferred tax assets
    
19
      
99,904
      
103,755
  
Goodwill
    
4
      
216,278
      
539,624
  
Total non-current assets
            
1,516,667
      
3,620,628
  
Total assets
            
10,455,671
      
18,756,025
  

The accompanying notes are an integral part of these consolidated financial statements.

F-7
Table of Contents
SEA LIMITED

CONSOLIDATED BALANCE SHEETS (continued)
(Amounts expressed in thousands of US dollars (“$”))

       
As of December 31,
  
   
Note
    
2020
$
    
2021
$
  
                   
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities
                  
Accounts payable (including accounts payable of the Consolidated VIEs without recourse to the primary beneficiaries of $19,290 and $17,632 as of December 31, 2020 and 2021, respectively)
          
121,637
      
213,580
  
Accrued expenses and other payables (including accrued expenses and other payables of the Consolidated VIEs without recourse to the primary beneficiaries of $107,512 and $132,687 as of December 31, 2020 and 2021, respectively)
    
12
      
2,033,461
      
3,531,187
  
Advances from customers (including advances from customers of the Consolidated VIEs without recourse to the primary beneficiaries of $11,014 and $18,591 as of December 31, 2020 and 2021, respectively)
            
161,379
      
244,574
  
Amounts due to related parties (including amounts due to related parties of the Consolidated VIEs without recourse to the primary beneficiaries of $2,347 and $435 as of December 31, 2020 and 2021, respectively)
            
42,613
      
74,738
  
Bank borrowings (including bank borrowings of the Consolidated VIEs without recourse to the primary beneficiaries of nil and nil as of December 31, 2020 and 2021, respectively)
    
13
      
–
      
100,000
  
Operating lease liabilities (including operating lease liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of $10,122 and $8,051 as of December 31, 2020 and 2021, respectively)
    
9
      
74,506
      
186,494
  
Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primary beneficiaries of $212,377 and $203,382 as of December 31, 2020 and 2021, respectively)
            
2,150,165
      
2,644,463
  
Income tax payable (including income tax payable of the Consolidated VIEs without recourse to the primary beneficiaries of $566 and $537 as of December 31, 2020 and 2021, respectively)
            
52,306
      
181,400
  
Total current liabilities
            
4,636,067
      
7,176,436
  

The accompanying notes are an integral part of these consolidated financial statements.

F-8
Table of Contents
SEA LIMITED

CONSOLIDATED BALANCE SHEETS (continued)
(Amounts expressed in thousands of US dollars (“$”))

       
As of December 31,
  
   
Note
    
2020
$
    
2021
$
  
Non-current liabilities
                  
Accrued expenses and other payables (including accrued expenses and other payables of the Consolidated VIEs without recourse to the primary beneficiaries of $1,907 and $4,038 as of December 31, 2020 and 2021, respectively)
    
12
      
36,159
      
76,234
  
Operating lease liabilities (including operating lease liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of $16,916 and $12,527 as of December 31, 2020 and 2021, respectively)
    
9
      
177,870
      
491,313
  
Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primary beneficiaries of $55,200 and $36,189 as of December 31, 2020 and 2021, respectively)
            
343,297
      
104,826
  
Convertible notes (including convertible notes of the Consolidated VIEs without recourse to the primary beneficiaries of nil and nil as of December 31, 2020 and 2021, respectively)
    
14
      
1,840,406
      
3,475,708
  
Deferred tax liabilities (including deferred tax liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of nil and nil as of December 31, 2020 and 2021, respectively)
    
19
      
1,526
      
6,992
  
Unrecognized tax benefits (including unrecognized tax benefits of the Consolidated VIEs without recourse to the primary beneficiaries of $107 and $107 as of December 31, 2020 and 2021, respectively)
            
107
      
107
  
Total non-current liabilities
            
2,399,365
      
4,155,180
  
Total liabilities
            
7,035,432
      
11,331,616
  
Commitments and contingencies
    
24
      
     
 

The accompanying notes are an integral part of these consolidated financial statements.

F-9
Table of Contents
SEA LIMITED

CONSOLIDATED BALANCE SHEETS (continued)
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and par value)

       
As of December 31,
  
   
Note
    
2020
$
    
2021
$
  
Shareholders’ equity
                  
Class A Ordinary shares (Par value of US$0.0005 per share; Authorized: 14,800,000,000 and 14,800,000,000 shares as of December 31, 2020 and 2021, respectively; Issued and outstanding: 359,755,767 and 409,762,257 shares as of December 31, 2020 and 2021, respectively)
    
16
      
179
      
204
  
Class B Ordinary shares (Par value of US$0.0005 per share; Authorized: 200,000,000 and 200,000,000 shares as of December 31, 2020 and 2021, respectively; Issued and outstanding: 152,175,703 and 147,975,703 shares as of December 31, 2020 and 2021, respectively)
    
16
      
76
      
74
  
Additional paid-in capital
            
8,526,571
      
14,622,292
  
Accumulated other comprehensive income (loss)
    
17
      
4,681
      
(28,519
)
Statutory reserves
    
18
      
2,363
      
6,144
  
Accumulated deficit
            
(5,150,958
)
    
(7,201,498
)
Total Sea Limited shareholders’ equity
            
3,382,912
      
7,398,697
  
Non-controlling interests
            
37,327
      
25,712
  
Total shareholders’ equity
            
3,420,239
      
7,424,409
  
Total liabilities and shareholders’ equity
            
10,455,671
      
18,756,025
  

The accompanying notes are an integral part of these consolidated financial statements.

F-10
Table of Contents
SEA LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts expressed in thousands of US dollars (“$”))

   
Year ended December 31,
  
 
  Note
  
2019
$
    
2020
$
    
2021
$
  
                     
Revenue
                    
Service revenue
                    
Digital entertainment
      
1,136,017
      
2,015,972
      
4,320,013
  
E-commerce and other services
      
822,659
      
1,777,330
      
4,564,617
  
                           
Sales of goods
      
216,702
      
582,362
      
1,070,560
  
Total revenue
      
2,175,378
      
4,375,664
      
9,955,190
  
                           
Cost of revenue
                          
Cost of service
                          
Digital entertainment
      
(435,905
)
    
(702,329
)
    
(1,230,082
)
E-commerce and other services
      
(907,518
)
    
(1,743,773
)
    
(3,825,826
)
                           
Cost of goods sold
      
(227,035
)
    
(580,657
)
    
(1,003,547
)
Total cost of revenue
      
(1,570,458
)
    
(3,026,759
)
    
(6,059,455
)
Gross profit
      
604,920
      
1,348,905
      
3,895,735
                           
Operating income (expenses)
                          
Other operating income
      
15,890
      
189,645
      
287,946
  
Sales and marketing expenses
      
(969,543
)
    
(1,830,875
)
    
(3,829,743
)
General and administrative expenses
      
(385,865
)
    
(657,215
)
    
(1,105,295
)
Research and development expenses
      
(156,634
)
    
(353,785
)
    
(831,703
)
Total operating expenses
      
(1,496,152
)
    
(2,652,230
)
    
(5,478,795
)
                           
Operating loss
      
(891,232
)
    
(1,303,325
)
    
(1,583,060
)
Interest income
      
33,935
      
24,804
      
36,082
  
Interest expense
      
(48,208
)
    
(148,243
)
    
(138,945
)
Net investment gain (loss)
      
11,794
      
(17,820
)
    
(43,502
)
Changes in fair value of convertible notes
   
(472,877
)
    
(87
)
    
–
  
Foreign exchange (loss) gain
     
(2,031
)
    
(38,567
)
    
14,241
  
Loss before income tax and share of results of equity investees
      
(1,368,619
)
    
(1,483,238
)
    
(1,715,184
)
                           
Income tax expense
19
    
(85,864
)
    
(141,640
)
    
(332,865
)
Share of results of equity investees

   
(3,239
)
    
721
      
5,019
  
Net loss
      
(1,457,722
)
    
(1,624,157
)
    
(2,043,030
)
                           
Net (profit) loss attributable to non-controlling interests
      
(5,077
)
    
6,101
      
(3,729
)
Net loss attributable to Sea Limited’s ordinary shareholders
      
(1,462,799
)
    
(1,618,056
)
    
(2,046,759
)

The accompanying notes are an integral part of these consolidated financial statements.

F-11
Table of Contents
SEA LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

   
Year ended December 31,
  
 
Note
  
2019
$
    
2020
$
    
2021
$
  
Loss per share:
                    
Basic and diluted
20
    
(3.35
)
    
(3.39
)
    
(3.84
)
Weighted average shares used in loss per share computation:
                          
Basic and diluted
      
436,601,801
      
477,264,888
      
532,705,796
  

The accompanying notes are an integral part of these consolidated financial statements.

F-12
Table of Contents
SEA LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts expressed in thousands of US dollars (“$”))

 
Year ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
                   
Net loss
    
(1,457,722
)
    
(1,624,157
)
    
(2,043,030
)
Other comprehensive income (loss), net of tax:
                        
Foreign currency translation adjustments:
                        
Translation gain (loss)
    
3,230
      
2,532
      
(32,972
)
Net change
    
3,230
      
2,532
      
(32,972
)
Available-for-sale investments:
                        
Change in unrealized loss
    
(12,869
)
    
(4,393
)
    
(1,386
)
Reclassification adjustment to net loss
     –
       –
       236
  
Net change
    
(12,869
)
    
(4,393
)
    
(1,150
)
Total other comprehensive loss, net of tax
    
(9,639
)
    
(1,861
)
    
(34,122
)
                         
Total comprehensive (income) loss attributable to non-controlling interests
    
(5,188
)
    
7,146
      
(3,148
)
Total comprehensive loss attributable to Sea Limited’s ordinary shareholders
    
(1,472,549
)
    
(1,618,872
)
    
(2,080,300
)

The accompanying notes are an integral part of these consolidated financial statements.

F-13
Table of Contents
SEA LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts expressed in thousands of US dollars (“$”))

 
Year ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
                   
Cash flows from operating activities
                  
Net loss
    
(1,457,722
)
    
(1,624,157
)
    
(2,043,030
)
Adjustments to reconcile net loss to net cash generated from operating activities:
                        
Allowance for credit losses
    
3,581
      
57,509
      
117,427
  
Amortization of discount on convertible notes
    
33,334
      
88,198
      
100,141
  
Amortization of intangible assets
    
4,849
      
11,694
      
18,350
  
Changes in fair value of convertible notes
    
472,877
      
87
      
–
  
Deferred income tax
    
(4,333
)
    
(27,451
)
    
(975
)
Depreciation of property and equipment
    
116,783
      
169,067
      
260,682
  
Gain on disposal of subsidiaries
    
–
      
(62,115
)
    
(1,598
)
Gain on re-measurement of equity interests
    
(4,500
)
    
(3,003
)
    
–
  
Impairment loss on intangible assets
    
–
      
5,713
      
–
  
Impairment loss on inventories
     2,184       4,714       6,203  
Impairment loss on investments
    
1,155
      
61,238
      
–
  
Net (gain) loss on disposal of investments
     (129 )     (84 )     12,212  
Net foreign exchange differences
    
(292
)
    
11,298
      
(45,214
)
Net loss on debt extinguishment
     –       24,400       2,069  
Net unrealized loss on equity securities
     –       24,150       30,449  
Share-based compensation
    
117,069
      
290,246
      
470,324
  
Share of results of equity investees
    
3,239
      
(721
)
    
(5,019
)
Others
    
(293
)
    
(1,080
)
    
10,408
  
Operating cash flows before changes in working capital:
    
(712,198
)
    
(970,297
)
    
(1,067,571
)
                         
Inventories
    
11,762
      
(38,528
)
    
(62,735
)
Accounts receivable
    
(86,546
)
    
(174,767
)
    
(37,066
)
Prepaid expenses and other assets
    
(214,926
)
    
(527,139
)
    
(395,803
)
Amounts due from related parties
    
538
      
(10,897
)
    
2,185
  
Operating lease right-of-use assets
    
(62,140
)
    
(45,203
)
    
(418,846
)
Accounts payable
    
31,381
      
50,860
      
99,639
  
Accrued expenses and other payables
    
354,151
      
943,586
      
1,106,376
  
Advances from customers
    
34,263
      
92,851
      
93,572
  
Operating lease liabilities
    
70,901
      
46,352
      
429,366
  
Deferred revenue
    
637,214
      
1,162,399
      
314,048
  
Income tax payable
    
17,207
      
25,505
      
105,927
  
Amounts due to related parties
    
(11,742
)
    
1,146
      
39,557
  
Net cash generated from operating activities
    
69,865
      
555,868
      
208,649
  

The accompanying notes are an integral part of these consolidated financial statements.

F-14
Table of Contents
SEA LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Amounts expressed in thousands of US dollars (“$”))

 
Year ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
                   
Cash flows from investing activities
                  
Purchase of property and equipment
    
(239,844
)
    
(336,274
)
    
(772,177
)
Purchase of intangible assets and capitalized software costs
    
(7,254
)
    
(20,780
)
    
(34,999
)
Purchase of investments
    
(118,462
)
    
(219,548
)
    
(2,505,358
)
Proceeds from disposal of property and equipment
    
1,236
      
1,732
      
620
  
Proceeds from sale and maturity of investments
    
640
      
19,541
      
798,178
  
Distributions from investments
    
465
      
1,294
      
1,632
  
Acquisition of businesses, net of cash acquired
    
–
      
(92,190
)
    
(22,763
)
Disposal of subsidiaries, net of cash disposed
    
–
      
15,008
      
(11,775
)
Change in loans receivable
    
–
      
(255,695
)
    
(1,220,631
)
Net cash used in investing activities
    
(363,219
)
    
(886,912
)
    
(3,767,273
)
                         
Cash flows from financing activities
                        
Repayment of borrowings and finance lease obligations
    
(2,871
)
    
(31,833
)
    
(1,247
)
Proceeds from borrowings
    
868
      
1,224
      
115,282
  
Proceeds from issuance of convertible notes, net
    
1,138,500
      
1,141,362
      
2,846,250
  
Transaction with non-controlling interests
    
–
      
(20,736
)
    
–
  
Purchase of capped call     (97,060 )     (135,700 )     –  
Contribution by non-controlling interest
    
1,356
      
4,631
      
339
  
Payments for exchange and conversion of convertible notes     –       (50,009 )     (1,935 )
Proceeds from issuance of ordinary shares, net
    
1,538,802
      
2,970,248
      
4,050,055
  
Change in deposits payable
    
–
      
(146,055
)
    
392,845
  
Net cash generated from financing activities
    
2,579,595
      
3,733,132
      
7,401,589
  
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
    
25,025
      
80,727
      
(58,218
)
Net increase in cash, cash equivalents and restricted cash
    
2,311,266
      
3,482,815
      
3,784,747
  
Cash, cash equivalents and restricted cash at beginning of the year
    
1,259,312
      
3,570,578
      
7,053,393
  
Cash, cash equivalents and restricted cash at end of the year
    
3,570,578
      
7,053,393
      
10,838,140
  

The accompanying notes are an integral part of these consolidated financial statements.

F-15
Table of Contents
SEA LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Amounts expressed in thousands of US dollars (“$”))

 
Year ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
                   
Supplement disclosures of cash flow information:
                  
Income taxes paid
    
(74,349
)
    
(144,874
)
    
(207,381
)
Interest paid
    
(13,501
)
    
(42,003
)
    
(44,981
)
                         
Supplement disclosures of non-cash activities:
                        
Purchase of property and equipment included in accrued expenses and other payables
    
(9,804
)
    
1,834
      
38,742
  
Purchase of property and equipment included in prepayments
    
3,851
      
(83,782
)
    
58,249
  
Purchase of property and equipment by exercise of exchangeable loan
    
–
      
–
      
(20,722
)
Purchase of intangible assets included in accrued expenses and other payables     (422 )     484       183  
Purchase of intangible assets included in prepayments
    
51
      
(6,638
)
    
(3,875
)
Conversion and exchange of convertible notes into ordinary shares
    
(1,080,112
)
    
(464,930
)
    
(826,124
)
Acquisition of subsidiaries by conversion of convertible notes or issuance of shares
    
–
      
72,000
      
270,733
  
Proceeds from disposal of a subsidiary included in prepaid expenses and other assets
    
–
      
12,870
      
–
  
Transfers of loans receivable to prepaid expenses and other assets
    
–
      
8,830
      
186
  

The accompanying notes are an integral part of these consolidated financial statements.

F-16
Table of Contents
SEA LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(Amounts expressed in thousands of US dollars (“$”) except for number of shares)


  
Note
    
No of
ordinary
shares
    
Ordinary
shares
    
Additional
paid-in
capital
    
Accumulated
other
comprehensive
income (loss)
    
Statutory
reserves
    
Accumulated
deficit
    
Total Sea
Limited
shareholders’
(deficit) equity
    
Non-
controlling
interests
    
Total
Shareholders’
(deficit) equity
  
                 $      $      $      $      $      $      $      $  
                                                             
Balance as of January 1, 2019
          
342,598,768
      
170
      
1,809,232
      
15,199
      
46
      
(2,067,786
)
    
(243,139
)
    
3,684
      
(239,455
)
                                                                               
Net loss for the year
          
–
      
–
      
–
      
–
      
–
      
(1,462,799
)
    
(1,462,799
)
    
5,077
      
(1,457,722
)
Other comprehensive (loss) income
           −       –       –       (9,750 )     –       –       (9,750 )     111       (9,639 )
Conversion of convertible notes into Class A ordinary shares
    


   
45,645,884
      
23
      
1,080,089
      
–
      
–
      
–
      
1,080,112
      
–
      
1,080,112
  
Issuance of Class A ordinary shares, net of issuance costs
             69,000,000       35       1,517,923       –       –       –       1,517,958       –       1,517,958  
Capital contributed by non-controlling interest
             –       –       –       –       –       –       –       1,356       1,356  
Equity component of convertible notes
    
14

   
–
      
–
      
240,582
      
–
      
–
      
–
      
240,582
      
–
      
240,582
  
Purchase of capped calls related to issuance of convertible notes
     14
      –       –       (97,060 )     –       –       –       (97,060 )     –       (97,060 )
Shares issued to depositary bank
            
6,000,000
      
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Exercise of share options
            
3,736,976
      
2
      
20,843
      
–
      
–
      
–
      
20,845
      
–
      
20,845
  
Restricted share awards and restricted share units issued
            
1,983,639
      
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Share-based compensation
            
–
      
–
      
115,675
      
–
      
–
      
–
      
115,675
      
–
      
115,675
  
Settlement of share incentives with shares held by depositary bank
            
(5,720,615
)
    
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Balance as of December 31, 2019
            
463,244,652
      
230
      
4,687,284
      
5,449
      
46
      
(3,530,585
)
    
1,162,424
      
10,228
      
1,172,652
  

The accompanying notes are an integral part of these consolidated financial statements.

F-17
Table of Contents
SEA LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (continued)
(Amounts expressed in thousands of US dollars (“$”) except for number of shares)

 
Note
    
No of
ordinary
shares
    
Ordinary
shares
    
Additional
paid-in
capital
    
Accumulated
other
comprehensive
income (loss)
    
Statutory
reserves
    
Accumulated
deficit
    
Total
Sea Limited
shareholders’
equity
    
Non-
controlling
interests
    
Total
Shareholders’
equity
  
                 $      $      $      $      $      $      $      $  
                                                             
Balance as of January 1, 2020
          
463,244,652
      
230
      
4,687,284
      
5,449
      
46
      
(3,530,585
)
    
1,162,424
      
10,228
      
1,172,652
  
 
                                                                              
Net loss for the year
          
–
      
–
      
–
      
–
      
–
      
(1,618,056
)
    
(1,618,056
)
    
(6,101
)
    
(1,624,157
)
Other comprehensive loss
           –       –       –       (816 )     –       –       (816 )     (1,045 )     (1,861 )
Acquisition of subsidiaries
           –       –       –       –       –       –       –       39,594       39,594  
Appropriation of statutory reserves
           –       –       –       –       2,317       (2,317 )     –       –       –  
Equity component of convertible notes
   14
      –       –       284,727       –       –       –       284,727       –       284,727  
Purchase of capped calls related to issuance of convertible notes
   14
      –       –       (135,700 )     –       –       –       (135,700 )     –       (135,700 )
Conversion of convertible notes into Class A ordinary shares
           27,406,818       14       464,916       –       –       –       464,930       –       464,930  
Issuance of Class A ordinary shares, net of issuance costs
    
16
      
15,180,000
      
8
      
2,908,291
      
–
      
–
      
–
      
2,908,299
      
–
      
2,908,299
  
Capital contributed by non-controlling interest
            
–
      
–
      
–
      
–
      
–
      
–
      
–
      
4,631
      
4,631
  
Transactions with non-controlling interests
             –       –       (20,294 )     48       –       –       (20,246 )     (490 )     (20,736 )
Disposal of interest in a subsidiary
             –       –       –       –       –       –       –       (11,971 )     (11,971 )
Shares issued to depositary bank
            
6,000,000
      
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Exercise of share options
            
2,861,169
      
1
      
61,948
      
–
      
–
      
–
      
61,949
      
–
      
61,949
  
Restricted share awards and restricted share units issued
            
3,247,992
      
2
      
(2
)
    
–
      
–
      
–
      
–
      
–
      
–
  
Share-based compensation
            
–
      
–
      
275,401
      
–
      
–
      
–
      
275,401
      
2,481
      
277,882
  
Settlement of share incentives with shares held by depositary bank
            
(6,009,161
)
    
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Balance as of December 31, 2020
            
511,931,470
      
255
      
8,526,571
      
4,681
      
2,363
      
(5,150,958
)
    
3,382,912
      
37,327
      
3,420,239
  

The accompanying notes are an integral part of these consolidated financial statements.

F-18
Table of Contents
SEA LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (continued)
(Amounts expressed in thousands of US dollars (“$”) except for number of shares)

 
Note
    
No of
ordinary
shares
    
Ordinary
shares
    
Additional
paid-in
capital
    
Accumulated
other
comprehensive
income (loss)
    
Statutory
reserves
    
Accumulated
deficit
    
Total
Sea Limited
shareholders’
equity
    
Non-
controlling
interests
    
Total
Shareholders’
equity
  
                 $      $      $      $      $      $      $      $  
                                                             
Balance as of January 1, 2021
          
511,931,470
      
255
      
8,526,571
      
4,681
      
2,363
      
(5,150,958
)
    
3,382,912
      
37,327
      
3,420,239
  
                                                                               
Net loss for the year
          
–
      
–
      
–
      
–
      
–
      
(2,046,759
)
    
(2,046,759
)
    
3,729
      
(2,043,030
)
Other comprehensive loss
           –       –       –       (33,541 )     –       –       (33,541 )     (581 )     (34,122 )
Acquisition of subsidiaries
          
1,051,731
      
1
      
270,732
      
–
      
–
      
–
      
270,733
      
–
      
270,733
  
Appropriation of statutory reserves
           –       –       –      
–
      
3,781
      
(3,781
)
    
–
      
–
      
–
  
Equity component of convertible notes
    
14
      
–
       –       486,758       –       –       –       486,758       –       486,758  
Issuance of Class A ordinary shares, net of issuance costs
    
16
      
12,650,000
      
6
      
3,972,410
      
–
      
–
      
–
      
3,972,416
      
–
      
3,972,416
  
Conversion of convertible notes into Class A ordinary shares
             20,039,849       10       826,114       –       –       –       826,124       –       826,124  
Capital contributed by non-controlling interest
            
–
      
–
      
–
      
–
      
–
      
–
      
–
      
339
      
339
  
Transactions with non-controlling interests
            
–
      
–
      
6,761
      
341
      
–
      
–
      
7,102
      
(15,102
)
    
(8,000
)
Shares issued to depositary bank
            
12,000,000
      
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Exercise of share options
            
8,027,170
      
4
      
77,635
      
–
      
–
      
–
      
77,639
      
–
      
77,639
  
Restricted share awards and restricted share units issued
            
4,125,722
      
2
      
(2
)
    
–
      
–
      
–
      
–
      
–
      
–
  
Share-based compensation
            
–
      
–
      
455,313
      
–
      
–
      
–
      
455,313
      
–
      
455,313
  
Settlement of share incentives with shares held by depositary bank
            
(12,087,982
)
    
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Balance as of December 31, 2021
            
557,737,960
      
278
      
14,622,292
      
(28,519
)
    
6,144
      
(7,201,498
)
    
7,398,697
      
25,712
      
7,424,409
  

The accompanying notes are an integral part of these consolidated financial statements.

F-19
Table of Contents
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)


1.
ORGANIZATION

Sea Limited (the “Company”) is a limited liability company incorporated in the Cayman Islands on May 8, 2009 and conducts its business primarily through its subsidiaries and variable interest entities (“VIEs”) in markets including Southeast Asia, Taiwan and Latin America. The Company is principally engaged in the digital entertainment, e-commerce and digital financial service businesses.
(a)
As of December 31, 2021, significant subsidiaries of the Company include the following entities:

Entity
Date of
Incorporation/
Acquisition
Place of
incorporation
  
Percentage of
direct ownership
by the Company
  
Principal activities
       
2020
    
2021
    
                        
Garena Online Private Limited (“Garena Online”)
 May 8, 2009 Singapore   100     100  
Game operations and software development
                          
Shopee Limited
January 16, 2015
Cayman Islands
   100     100   Investment holding company
                          
Shopee Singapore Private Limited
February 5, 2015
Singapore
   100     100   Online platform
                          
PT Shopee International Indonesia
August 5, 2015
Indonesia
   100     100  
Online platform

F-20
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

1.
ORGANIZATION (continued)

(b)
VIE structure

The Company operates in various markets that have certain restrictions on foreign ownership of local companies. To comply with these foreign ownership restrictions, the Company conducts certain businesses through VIEs using contractual agreements (the “VIE Agreements”).

The following is a summary of the key terms of the VIE Agreements that were signed amongst the primary beneficiary and the respective shareholders of the VIEs (collectively the “VIE Shareholders”):


Loan Agreements

In order to ensure that the VIE Shareholders are able to provide capital to each of these VIEs in order to develop its business, the primary beneficiary has entered into loan agreements with each VIE Shareholder.

Pursuant to the loan agreements, the primary beneficiary has granted loans to the VIE Shareholders that may only be used for the purpose of acquiring equity interests in or contributing to the registered capital of these VIEs. The loans may be repaid only by transferring all of the VIE Shareholders’ equity interests in the VIE to the primary beneficiary or their respective designee upon exercise of the option under the exclusive option agreement. The loan agreements also prohibit the VIE Shareholders from assigning or transferring to any third party, or from creating or causing any security interest to be created on, any part of their equity interests in these entities. In the event that the respective VIE Shareholders sell their equity interests to the primary beneficiary or their respective designee at a price which is equal to or lower than the principal amount of the loan, the loan will be interest-free. If the price is higher than the principal amount of the loans, the excess amount will be deemed to be interest on the loans payable by the VIE Shareholders to the primary beneficiary.


Exclusive Option Agreements

In order to ensure that the Company is able to acquire all of the equity interests in the VIEs at its discretion, the primary beneficiary has entered into exclusive option agreements with the respective VIE Shareholders. Each option is exercisable by the primary beneficiary at any time, provided that doing so is not prohibited by law. The exercise price under each option is the minimum amount required by law and any proceeds obtained by the respective VIE Shareholders through the transfer of their equity interests in these VIEs shall be used for the repayment of the loan provided in accordance with the loan agreements.


During the terms of the exclusive option agreements, the VIE Shareholders will not grant a similar right or transfer any of the equity interests in these VIEs to any party other than the primary beneficiary or their respective designee, nor will it pledge, create or permit any security interest or similar encumbrance to be created on any of the equity interests. The VIEs cannot declare any profit distributions or grant loans in any form without the prior consent of the primary beneficiary. The VIE Shareholders must remit in full any funds received from the VIEs to the primary beneficiary or their respective designee in the event any distributions are made by the VIEs.

F-21
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

1.
ORGANIZATION (continued)

(b)
VIE structure (continued)

Exclusive Option Agreements (continued)

The exclusive option agreements will remain in effect until the respective VIE Shareholder has transferred such shareholder’s equity interests in the VIEs to the primary beneficiary or their respective designee.


Powers of Attorney

In order to ensure that the Company is able to make all of the decisions concerning the VIEs, the primary beneficiary has entered into powers of attorney with the shareholders of these VIEs. Pursuant to the powers of attorney, each VIE Shareholder has irrevocably appointed the primary beneficiary as their attorney-in-fact to act for all matters pertaining to such shareholding in these VIEs and to exercise all of their rights as shareholders, including but not limited to attending shareholders’ meetings and designating and appointing directors, supervisors, the chief executive officer and other senior management members of these entities, and selling, transferring, pledging or disposing the shares of these entities. The primary beneficiary may authorize or assign its rights to any other person or entity at its sole discretion without prior notice to or prior consent from the VIE Shareholders of these VIEs.

Each power of attorney remains in effect until the VIE Shareholder ceases to hold any equity interest in the respective VIE.


Equity Interest Pledge Agreements

In order to secure the performance of the VIEs and the VIE Shareholders under the contractual arrangements, each of the VIE Shareholders of the VIEs has pledged all of their shares to the primary beneficiary. These pledges secure the contractual obligations and indebtedness of the VIE Shareholders, including all penalties, damages and expenses incurred by the primary beneficiary in connection with the contractual arrangements, and all other payments due and payable to the primary beneficiary by the respective VIEs under the exclusive business cooperation agreements and by the VIE Shareholders under the loan agreements, exclusive option agreements, and powers of attorney. Should the VIEs or their respective VIE Shareholders breach or default under any of the contractual arrangements, the primary beneficiary has the right to require the transfer of the respective VIE Shareholders’ pledged equity interests in the VIEs to the primary beneficiary or their respective designee, to the extent permitted by laws, or require a sale of the pledged equity interests and has priority in any proceeds from the auction or sale of such pledged interests. Moreover, the primary beneficiary has the right to collect any and all dividends in respect of the pledged equity interests during the term of the pledge.

F-22
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

1.
ORGANIZATION (continued)

(b)
VIE structure (continued)

Equity Interest Pledge Agreements (continued)

Unless the respective VIEs have fully performed all of their obligations in accordance with the exclusive business cooperation agreements and the pledged equity interests have been fully transferred to the primary beneficiary or their respective designee in accordance with the exclusive option agreements and the loan agreements, the equity interest pledge agreements will continue to remain in effect.


Spousal Consent Letters

Under the spousal consent letters, each spouse of the married VIE Shareholders of the VIEs unconditionally and irrevocably agreed that the equity interest in the respective VIE held by and registered in the name of their spouse will be disposed of pursuant to the contractual arrangements. Each spouse agreed not to assert any rights over the equity interest in these VIEs held by their spouse. In addition, in the event that the spouses obtain any equity interest in these VIEs held by their spouse for any reason, they agreed to be bound by the contractual arrangements.


Exclusive Business Cooperation Agreements

In order to ensure that the Company receives the economic benefits of the VIEs, the primary beneficiary has entered into exclusive business cooperation agreements with these VIEs under which the primary beneficiary has the exclusive right to provide or to designate any third party to provide, among other things, technical support, consulting services, intellectual property licenses and other services to these VIEs, and these VIEs agree to accept all services provided by the primary beneficiary or their respective designee. Without the primary beneficiary’s prior written consent, the VIEs are prohibited from directly or indirectly engaging any third party to provide the same or any similar services under these agreements or establishing similar cooperative relationships with any third party regarding the matters contemplated by these agreements. In addition, the primary beneficiary shall have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created during the performance of the exclusive business cooperation agreements.


The VIEs agree to pay a monthly fee to the primary beneficiary at an amount determined at the primary beneficiary’s sole discretion after taking into account factors including the complexity and difficulty of the services provided, the level of and time consumed by its employees or third-party service providers designated by the primary beneficiary providing the services, the content and value of services and licenses provided and the market price of the similar type of services or licenses.


The exclusive business cooperation agreements will remain effective unless terminated in accordance with their provisions or terminated in writing by the primary beneficiary. Unless otherwise required by applicable laws, these VIEs do not have any right to terminate the exclusive business cooperation agreements in any event.

F-23
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

1.
ORGANIZATION (continued)

(b)
VIE structure (continued)


Financial Support Confirmation Letters

In order to ensure that the VIEs have sufficient cash flow to fund their daily operations and/or to set off any losses incurred in such operations, the primary beneficiary has entered into financial support confirmation letters with each of these VIEs. Under the financial support confirmation letters, the primary beneficiary pledges to provide continuous financial support to these VIEs by itself or their respective designee and agreed to forego its right to seek repayment in the event these entities are unable to repay such financial support or the primary beneficiary becomes liable for the liabilities of these VIEs. These VIEs agree to accept such financial support and pledge to only use such support to develop their respective businesses. To the extent permitted by law, the financial support the primary beneficiary provides to these VIEs may take the form of loans, borrowings or guarantees.


Despite the lack of technical majority ownership, there exists a parent-subsidiary relationship between the primary beneficiary and their respective VIEs, through the irrevocable power of attorney agreements, whereby the VIE Shareholders effectively assigned all of the voting rights underlying their equity interest in the respective VIEs to the primary beneficiary. Furthermore, pursuant to the loan agreements, exclusive option agreements and equity interest pledge agreements, the primary beneficiary obtained effective control over the respective VIEs, through the ability to exercise all the rights of the VIE Shareholders and therefore the power to govern the activities that most significantly impact the economic performance of the VIEs. The primary beneficiary demonstrates its ability and intention to continue to absorb substantially all the expected losses through the financial support confirmation letters. The primary beneficiary also demonstrates its ability to receive substantially all of the economic benefits of the VIEs through the exclusive business cooperation agreements. Thus, the Company consolidates these VIEs and their subsidiaries under SEC Regulation SX-3A-02 and ASC 810-10, Consolidation: Overall.

In the opinion of the Company’s management and external legal counsels, the ownership structure of our VIEs are generally in compliance with the local laws or regulations that are currently in effect, and each of the agreements among the primary beneficiary, the VIEs and/or the VIE Shareholders is valid, binding and enforceable, and do not and will not result in any violation of such laws or regulations that are currently in effect.

F-24
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

1.
ORGANIZATION (continued)

(b)
VIE structure (continued)

Financial Support Confirmation Letters (continued)

However, there are substantial uncertainties regarding the interpretation and application of current and future local laws and regulations. Accordingly, the Company cannot be assured that the local regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Company and its contractual arrangements with the VIEs are found to be in violation of any existing or future local laws and regulations, the Company may be required to restructure its ownership structure and operations in certain countries to comply with the changing and new local laws and regulations. To the extent that changes and new local laws and regulations prohibit the Company’s VIE arrangements from complying with the principles of consolidation, the Company would have to deconsolidate the financial position and results of operations of its VIEs. In the opinion of management, the likelihood of loss in respect of the Company’s current ownership structure or the contractual arrangements with the VIEs is remote based on current facts and circumstances.

(c)
VIE disclosures

There were no pledges or collateralization of the VIEs’ assets. Creditors of the VIEs have no recourse to the general credit of the primary beneficiaries of the VIEs, and such amounts have been parenthetically presented on the face of the consolidated balance sheets. The Company has not provided any financial or other support that it was not previously contractually required to provide to the VIEs during the periods presented.

F-25
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

1.
ORGANIZATION (continued)


(c)
VIE disclosures (continued)

The following tables represent the financial information of the VIEs whom the Company does not have majority voting interest as of December 31, 2020 and 2021 and for the years ended December 31, 2019, 2020 and 2021 before eliminating the intercompany balances and transactions between the VIEs and other entities within the group:

 
As of December 31,
  
    2020
     2021
  
    $
     $
  
ASSETS:
                
Current assets:
                
Cash and cash equivalents
    
94,502
      
141,985
  
Amounts due from intercompanies(1)
    
44,928
      
159,349
  
Others
     79,484
       69,746
  
Total current assets
    
218,914
      
371,080
  
                 
Non-current assets:
                
Property and equipment, net
    
35,453
      
40,246
  
Long-term investments
    
16,080
      
14,141
  
Deferred tax assets
    
47,948
      
43,961
  
Others     37,662
       23,611
  
Total non-current assets
    
137,143
      
121,959
  
Total assets
    
356,057
      
493,039
  

               

               
LIABILITIES:                
Current liabilities:                
Accrued expenses and other payables     91,186
       104,186
  
Deferred revenue     212,377
       203,382
  
Amounts due to intercompanies(1)     70,019       157,251  
Others     31,104       20,076  
Total current liabilities     404,686
       484,895
  

               
Non-current liabilities:                
Deferred revenue     55,200       36,189  
Amounts due to intercompanies(1)     15,710       27,596  
Others     18,418       7,910  
Total non-current liabilities     89,328
       71,695
  
Total liabilities     494,014
       556,590
  


(1)
Amounts due from or to intercompanies consist of intercompany receivables or payables to the other companies within the group arising from intercompany transactions, and funds advanced for working capital purpose.

F-26
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

1.
ORGANIZATION (continued)

(c)
VIE disclosures (continued)

 
Year ended December 31,
  
    2019
     2020
    
2021
  
    $      $      $   
Revenue
                        
- Third party customers
    
443,401
      
562,347
      
690,383
  
- Intercompanies
    
118,833
      
145,848
      
195,639
  
Net (loss) profit
    
(2,108
)
    
(30,435
)
    
22,390
  

 
Year ended December 31,
  
    2019
     2020
     2021
  
    $
     $
     $
  
Net cash (used in) generated from operating activities
    
(77,708
)
    
134,060
      
61,875
  
Net cash used in investing activities
    
(69,181
)
    
(27,399
)
    
(14,847
)
Net cash generated from (used in) financing activities
    
199,406
      
(13,023
)
    
15,030
  

F-27
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


(a)
Basis of preparation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

(b)
Principles of consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries and the VIEs for which the Company or a subsidiary of the Company is the primary beneficiary. All significant intercompany transactions and balances between the Company, its subsidiaries and the VIEs are eliminated upon consolidation.

(c)
Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Areas where management uses subjective judgment include, but are not limited to, revenue recognition, estimating the useful lives and impairment assessment of long-lived assets and goodwill, accounting for and impairment assessment of investments, impairment assessment of accounts receivable and loans receivable, accounting for deferred income taxes, accounting for share-based compensation arrangements and accounting for the Company’s financial instruments where the Company is the issuer. Changes in facts and circumstances may result in revised estimates. Given the global economic climate and unforeseen effects from COVID-19 pandemic, the process of estimation has become more challenging. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.

(d)
Foreign currency

The functional currency of the Company is the United States dollar (“$” or “USD”), whereas the functional currency of the Company’s subsidiaries and its VIEs are the respective local currencies as determined based on the criteria of ASC 830, Foreign Currency Matters. The Company uses the USD as its reporting currency. Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. Exchange gains and losses are included in foreign exchange gains and losses in the consolidated statements of operations.

Assets and liabilities of the Company’s subsidiaries and its VIEs that has functional currencies other than USD are translated into USD at fiscal year-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal year. The resulting translation adjustments are recorded in other comprehensive income, a component of shareholders’ equity.

F-28
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d)
Foreign currency (continued)

Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operations are recognized initially in other comprehensive income and accumulated under accumulated other comprehensive income (loss) in equity. The other comprehensive gain or loss arising from exchange differences is reclassified from equity to profit or loss of the Company on disposal of the foreign operation.

(e)
Cash and cash equivalents

The Company considers cash equivalents to be short-term, highly-liquid investments that are both readily convertible to cash and have a maturity of three months or less at the time of purchase. Cash and cash equivalents consist of cash on hand, demand deposits and funds placed with banks and other financial institutions which are unrestricted as to withdrawal and use.

(f)
Restricted cash

Restricted cash mainly comprise monies received held in escrow in connection with the Company’s e-commerce business and advances received from customers in connection with the Company’s digital financial services business that are restricted and not available for the Company’s use.

(g)
Accounts receivable, loans receivable and allowance for credit losses

Accounts receivable and loans receivable are carried at net realizable value. Loans principal and interest receivables are placed on non-accrual status when payments are 90 days past due contractually. When a loan principal and interest receivable is placed on non-accrual status, interest accrual ceases. If the loan is non-accrual, the cost recovery method is used and cash collected is applied to first reduce the carrying value of the loan. Otherwise, interest income may be recognized to the extent cash is received. Loans principal and interest receivables may be returned to accrual status when all of the borrower’s delinquent balances of loans principal and interest have been settled and the borrower continue to perform in accordance with the loan terms.

F-29
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(g)
Accounts receivable, loans receivable and allowance for credit losses (continued)

The Company has established a provision matrix that based on its historical credit loss experience, adjusted for forward-looking factors specific to the receivable and economic environment. It reflects the probability-weighted outcome, time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. The allowances for credit losses are calculated on an aggregate basis for various customer segments that are considered to have similar credit characteristics and risk of loss. The above-mentioned provision matrix has also been used to determine allowances for credit losses for off-balance sheet loan commitments. An account receivable and loan receivable is written off in the period the receivable is deemed uncollectible.

The Company has also elected the practical expedients, which amongst other things, allowed the use of fair value of collateral at the reporting date when recording the net carrying amount of the receivables and determining the allowance for credit losses for a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty based on the Company’s assessment as of the reporting date (collateral-dependent financial asset).

(h)
Inventories

Inventories which comprise mainly of merchandise products sold through the Company’s e-commerce business platform are valued at the lower of cost and net realizable value.

Costs incurred in bringing each product to its present location and condition are accounted at purchase cost on first-in-first-out basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

F-30
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i)
Property and equipment

Property and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

- Computers
3 to 5 years
- Office equipment, furniture and fittings
3 years
- Leasehold improvements
Over the shorter of lease term or the estimated useful lives of the assets
- Transportation assets
4 to 10 years
- Warehouse equipment
3 to 8 years
- Land use right
15 to 30 years
- Building
15 to 20 years

Freehold land has unlimited useful life and therefore is not depreciated. The useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

Repair and maintenance costs are charged to expense as incurred, whereas the costs of betterments that extend the useful lives of property and equipment are capitalized as additions to the related assets. Retirements, sale and disposals of assets are recorded by removing the cost and accumulated depreciation with any resulting gain or loss reflected in the consolidated statements of operations.

Property and equipment that are purchased or constructed which require a period of time before the property and equipment are ready for their intended use are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including installation costs. Construction-in-progress is transferred to specific property and equipment accounts and commences depreciation when these property and equipment are ready for their intended use.

F-31
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


(j)
Goodwill

Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired entity as a result of the Company's acquisitions of interests in its subsidiary and consolidated VIEs. During the measurement period, which does not exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon conclusion of the measurement period, any adjustments are recorded in the consolidated statements of operations.

Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. In testing goodwill for impairment, the Company evaluates whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company applies a one-step quantitative test and record the amount of goodwill impairment as the excess of a goodwill allocated to the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

No impairment of goodwill was recorded in the years ended December 31, 2020 and 2021.


 (k)
Intangible assets

Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets arising from business combinations are measured at fair value upon acquisition. Other intangible assets are carried at cost less accumulated amortization and any recorded impairment.

Costs incurred in connection with the planning and implementation phases of the development of software for internal use are expensed. Costs incurred in the development phase are capitalized. Capitalization ceases and the costs are amortized over the software’s estimated useful life when the software is ready for its intended use.

F-32
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(k)
Intangible assets (continued)

Costs incurred internally in researching and developing a software product are charged to expense as research and development costs prior to technological feasibility being established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Technological feasibility is established upon completion of all the activities that are necessary to substantiate that the software product can be produced in accordance with its design specifications, including functions, features, and technical performance requirements. None of such costs were capitalized for any of the periods presented.
 
Intangible assets with finite useful lives are amortized over the estimated economic lives of the intangible assets as follows:
 
- Licensing fee
Over the shorter of licensing period or the estimated useful lives of the intangible assets
- IP right
1 to 6 years
- Trademarks
7 to 10 years
- Technology
6 years
- Software
3 to 6 years
- Customer relationships
3 to 8 years
 
The useful lives and methods of amortization of intangible assets are reviewed at each financial year end and adjusted prospectively, if appropriate.

F-33
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


(l)
Investments

The Company’s investments consist of available-for-sale investments, held-to-maturity investments, equity security investments, investments carried at fair value and equity method investments.

In accordance with ASC 320, Investments - Debt Securities, the Company classifies the investments in debt securities as “held-to-maturity”, “trading” or “available-for-sale”, whose classification determines the respective accounting methods stipulated by ASC 320. Dividend and interest income for all categories of investments in securities are included in earnings. Any realized gains or losses, if any, on the sale of the investments are determined on a specific identification method, and such gains and losses are reflected in earnings during the period in which gains or losses are realized. The debt securities that the Company has positive intent and ability to hold to maturity are classified as held-to-maturity securities and stated at amortized cost. The securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and measured at fair value. Unrealized holding gains and losses for trading securities are included in earnings. Investments not classified as trading or as held-to-maturity are classified as available-for-sale investments. Available-for-sale investment is reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Realized gains or losses are included in earnings during the period in which the gain or loss is realized.

Credit losses related to available-for-sale investments to be recorded through an allowance for credit losses. The Company compares the present value of cash flows expected to be collected from the investment with the amortized cost basis of the security to determine if a credit loss exists. If the present value of cash flows expected to be collected is less than the amortized cost basis of the investment, a credit loss exists and an allowance for credit losses are recorded for the credit loss, limited by the amount that the fair value is less than amortized cost basis. An available-for-sale investment is written off in the period the investment is deemed uncollectible. The Company has the ability and intent to hold these investments with unrealized losses for a reasonable period of time sufficient for the recovery of their amortized cost bases. An impairment loss of $1,087, $51,000 and nil had been recognized during the years ended December 31, 2019, 2020 and 2021 respectively.

In accordance with ASC 946-320, Financial Services—Investment Companies, Investments—Debt and Equity Securities, the Company accounts for non-marketable equity securities held by consolidated investment company at fair value. These non-marketable equity securities were initially recorded at their transaction price net of transaction costs, if any.

F-34
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(l)
Investments (continued)

In accordance with ASC 321, Investments – Equity Securities, for investments in an investee over which the Company does not have significant influence, the Company carries the investment at fair value with unrealized gains and losses included in earnings. In accordance with ASC 820, Fair Value Measurements, for investments that do not have readily determinable fair value, the Company has elected to measure its equity security investments at net asset value (or its equivalent), if it qualifies for the NAV practical expedient or at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same investee. The Company’s management regularly evaluates the impairment of its equity security investments based on the performance and financial position of the investee as well as other evidence of estimated market values. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and current and future financing needs. An impairment loss is recognized in the consolidated statements of operations equal to the excess of the investment’s cost over its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value would then become the new cost basis of investment. An impairment loss of nil, $6,845 and nil had been recognized during the years ended December 31, 2019, 2020 and 2021, respectively.

Investments in equity investees represent investments in (a) entities in which the Company can exercise significant influence but does not own a majority equity interest or control and (b) limited partnership in which the Company holds a five percent or greater interest. Such investments are accounted for using the equity method of accounting in accordance with ASC 323-10, Investments – Equity Method and Joint Ventures: Overall. Under the equity method, the Company initially records its investment at cost and prospectively recognizes its proportionate share of each equity investee’s net profit or loss into its consolidated statements of operations. The difference between the cost of the equity investee and the amount of the underlying equity in the net assets of the equity investee is recognized as equity method goodwill included in equity method investment on the consolidated balance sheets. The Company evaluates its equity method investments for impairment under ASC 323-10. An impairment loss on the equity method investments is recognized in the consolidated statements of operations when the decline in value is determined to be other-than-temporary. An impairment loss of $68, $3,393 and nil had been recognized during the years ended December 31, 2019, 2020 and 2021, respectively.

The Company discontinues applying equity method if an investment (and additional financial supports to the investee, if any) has been reduced to zero. When the Company has other investments in the investee that have liquidation preferences more senior than the ordinary shares and the equity-method investment in the ordinary shares is reduced to zero, the Company continues to report its share of equity losses in the consolidated statement of operations, to the extent of and as an adjustment to the adjusted basis of the other investments in the investee. The order in which the equity losses are applied to the other investments follows the seniority of the other investments in the same investee.

F-35
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(m)
Impairment of long-lived assets

The Company evaluates its long-lived assets or asset groups, including intangible assets with finite lives, for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount of an asset or a company of long-lived assets may not be recoverable. When these events occur, the Company evaluates for impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the forecasted undiscounted cash flows is less than the carrying amount of the assets, the Company would recognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available for the long-lived assets.

(n)
Fair value of financial instruments

Available-for-sale investments are initially recognized at acquisition cost and subsequently remeasured at the end of each reporting period with the change in fair value recognized in accumulated other comprehensive income (loss). Marketable equity securities, investments carried at fair value, certain other assets and share appreciation rights are measured at fair value with corresponding changes in the assets and liabilities’ fair values reflected in consolidated statements of operations. Convertible notes consist of 2023 Convertible Notes, 2024 Convertible Notes, 2025 Convertible Notes and 2026 Convertible Notes (collectively referred to as “Convertible Notes”) as defined in Note 14 of the consolidated financial statements. For the Convertible Notes, the liability component of the convertible notes was initially measured at fair value and subsequently amortized to its redemption amount using the effective interest rate method.

(o)
Revenue recognition

Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to for those goods or services. Revenue is measured based on the amount of consideration that the Company expects to receive reduced by discounts, incentives and rebates. Revenue also excludes any amounts collected on behalf of third parties, including sales taxes and indirect taxes.

The Company evaluates revenue from services and sales of goods to determine if it controls such services and goods to be the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). The key indicators that the Company evaluates in determining gross versus net treatment include, but are not limited to, (i) which party is primarily responsible for fulfilling the promise to provide the specified good or service; (ii) which party bears inventory risks before the specified good or service has been transferred to a customer; and (iii) which party has discretion in establishing the price for the specified good or service.

F-36
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o)
Revenue recognition (continued)


(i)
Digital entertainment revenue

The Company distributes online games, including self-developed games and licensed games from game developers, through its PC and mobile based applications and certain app stores.

The Company offers many ways for users to purchase virtual goods (consisting of virtual currencies and virtual items), including the ShopeePay and Shopee platform, other online payment gateways, bank transfers, credit cards, mobile phone billing and prepaid cards, including its own prepaid cards, which are sold through agents. As the Company controls the service of providing games to the users, and it has a direct contractual arrangement with the paying users and has the right to determine the price to be paid by such users, the gross proceeds collected from these channels represent revenue to be recognized by the Company and the amounts retained by these channels based on a predetermined percentage represent cost of revenue to be recognized by the Company.

Proceeds from these sales are initially recognized as “Advances from customers” and subsequently reclassified to “Deferred revenue” when the users make in-game purchases of the virtual goods within the games operated by the Company and such purchases are no longer refundable. Deferred revenue recognized as revenue during the respective years ended December 31, 2020 and December 31, 2021 was $998,956 and $2,296,486.

For the licensed games, the Company records revenue inclusive of the royalties payable to game developers, which are based on revenue-sharing ratios, as it controls the service of providing the games to the users, and is primarily responsible to the customers and has latitude in establishing the pricing of the virtual goods.

Revenue is recognized over the performance obligation period. For purposes of determining the performance obligation period, the Company has determined that an implied obligation exists to the paying users to continue providing hosting services and access to the purchased virtual goods within the online games over an estimated service period. Such service period is determined in accordance with the estimated average lifespan of the virtual items sold or the estimated average lifespan of the paying users of the said games or similar games.

F-37
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o)
Revenue recognition (continued)

(i)
Digital entertainment revenue (continued)


(a)
Item-based revenue model

Virtual items have different lifespan patterns: time-based, consumable and durable. Time-based virtual items are items with a stated expiration time, for which revenue is recognized ratably over the period based on the time unit of the virtual items. Consumable virtual items are items that can be consumed by a specific user action, and have limitations on repeated use. Revenue attributable to consumable virtual items is recognized upon consumption. Durable virtual items are items that provide the user with continuing benefits over an extended period of time. Revenue attributable to durable virtual items is recognized ratably over their average lifespan, which are estimated based on the users’ historical usage pattern and playing behaviors for the virtual items. The Company assesses the estimated average lifespan of the durable virtual items on a quarterly basis.
(b)
User-based revenue model

The Company tracks paying users’ activeness within each game where the user-based revenue model is used to estimate paying users’ average lifespan. Paying users are defined as inactive when they have reached a period of inactivity for which it is reasonable to believe that these users will not return to a specific game. The Company determines the inactive rate of these paying users and revises the estimated paying users’ average lifespan on a quarterly basis.

The Company believes the current revenue recognition provides reasonable depiction of the service transferred patterns to the customers and represents the best estimation of the time period the customers are likely to play the respective games. Determining the estimated service period is subjective and requires management's judgment. Future users’ usage patterns and playing behavior may change and differ from the historical usage patterns and playing behavior, and therefore the estimated service period may change accordingly in the future.

F-38
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o)
Revenue recognition (continued)

(ii)
E-commerce

The Company’s e-commerce business (“Shopee”) charges its sellers on its marketplace a fixed rate commission fee based on gross merchandise value in selected markets. Fees are charged when the transactions are completed and settled. Such commission fees charged are recognized on a net basis.

The Company also provides logistic services to end customers. Revenue from logistic services are recognized over time as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as it performs.

Shopee operates a customer loyalty program, where end users who purchase merchandises and participate in activities through Shopee’s platform are given Shopee coins which entitle them to offset future purchases, participate in activities and redeem vouchers through Shopee’s platform. A portion of the revenue attributable to Shopee coins is deferred until they are redeemed, used or expired.

The Company charges its sellers advertising fees through its paid ads service on Shopee platform. The paid ads service allows the sellers to bid for keywords that match their product or service listing appearing in search or browser results on Shopee marketplace. Their product or service listing will show higher in search rankings when users search for their bid keywords.  Sellers prepay for paid ads services and the advertising income is recognized based on the number of clicks on the product or service listings during the service period.

(iii)
Digital financial services

The Company earns interest and fees from loans granted to customers. Interest and fees earned are recognized over the period of the loan based on the effective interest method.

The Company also earns commission from merchants when transactions are completed and settled through its digital financial services platform. Such commission are generally determined as a percentage based on the value of the merchandise being sold by the merchants. Commission is recognized in the consolidated statements of operations at the time when the underlying transaction is completed.

(iv)
Rendering of services

The Company also recognizes revenue from other services when the services are rendered.

F-39
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o)
Revenue recognition (continued)

(v)
Sales of goods

The Company recognizes revenue from sales of goods at the point in time that the customer obtains control of the goods, which generally occurs upon delivery to the customer.

(p)
Cost of revenue

Cost of revenue consists primarily of purchase price of inventories, depreciation expenses, amortization expenses, channel costs, royalty expenses, hosting charges, payroll related costs, bank transaction fees, cost of logistics and the other overhead expenses.

(q)
Advertising expenditure

Advertising expenditures are expensed as incurred and are included in sales and marketing expenses. As part of the advertising expenditure, sales incentives given to end users as a result of a concurrent sale are recognized as reductions of the corresponding consideration that the Company expects to receive. To the extent the sales incentives exceed the corresponding consideration that the Company expects to receive, the excess will be recorded in sales and marketing expenses.

(r)
Research and development expenses

Research and development expenses consist primarily of payroll and related personnel costs related to product development. Research and development expenses are expensed as incurred, except for qualifying costs relating to the development of software for internal use as described in Note 2(k).

(s)
Leases

Leases are classified at the inception date as either a finance lease or an operating lease. As the lessee, a lease is a finance lease if any of the following conditions exists: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the asset’s estimated remaining economic life, or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased asset to the lessor at the inception date.

Finance lease assets are included in property and equipment, net, and finance lease liabilities are included in accrued expenses and other payables, current and non-current.

F-40
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(s)
Leases (continued)

All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of their respective leases. Operating leases (with an initial term of more than 12 months) are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities (current), and operating lease liabilities (non-current) in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company utilizes a market-based approach to estimate the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease prepayments, reduced by lease incentives and accrued rent. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

The Company has lease agreements with lease and non-lease components. The Company has elected to account for lease and non-lease components as a single lease component for data center leases only. In addition, leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Certain lease agreements contain rent holidays and escalating rent are considered when determining the straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initial possession of the lease property for purposes of recognizing lease incentives.


 (t)
Income taxes

The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company applies ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes. ASC 740 prescribes a recognition threshold a tax position is required to meet before being recognized in the financial statements.

The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of “income tax” in the consolidated statements of operations.

F-41
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(u)
Share-based compensation

All share-based compensation, including share options, restricted share awards, restricted share units and share appreciation rights under share incentive plan are accounted for under ASC 718, Compensation - Stock Compensation, which requires that share-based awards granted to employees to be measured at fair value and recognized as compensation expense over the requisite service period (which is generally the vesting period) in the consolidated statements of operations. The Company has elected to recognize compensation expense using the straight-line method for equity-classified share-based awards granted with service conditions that have a graded vesting schedule. Forfeitures are accounted for as they occur.

The Company, with the assistance of an independent third party valuation firm, determined the estimated fair value of the share options using the Black-Scholes pricing model (Note 15).


 (v)
Loss per share


In accordance with ASC 260, Earnings per Share, basic loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of unrestricted ordinary shares outstanding during the year using the two-class method. Under the two-class method, net loss is allocated between ordinary shares and other participating securities based on their participating rights. Partially paid shares are included in the computation of basic loss per share to the extent that these shares are entitled to dividends in proportion to the amount paid.

Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of the ordinary shares issuable upon the conversion of the convertible notes using the if-converted method and outstanding share based awards, using the treasury stock method, when the impact is dilutive. Ordinary share equivalents are excluded from the computation of diluted loss per share if their effects would be anti-dilutive.

F-42
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(w)
Segment reporting

The Company identifies a business as an operating segment if: i) it engages in business activities from which it may earn revenues and incur expenses; ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance; and iii) it has available discrete financial information. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment.

The Company has three operating and reportable segments: digital entertainment, e-commerce and digital financial services. Accordingly, the financial statements include segment information which reflects the current composition of the reportable segments in accordance with ASC 280, Segment Reporting.


 (x)
Employee benefits


(i)
Defined contribution plan

The Company participates in the national pension schemes as defined by the laws of the jurisdictions in which it has operations. Contributions to defined contribution pension schemes are recognized as an expense in the period in which the related service is performed.


 (ii)
Employee leave entitlement


Employee entitlements to annual leave are recognized as a liability when they are accrued to the employees. The undiscounted liability for leave expected to be settled wholly before twelve months after the end of the reporting period is recognized for services rendered by employees up to the end of the reporting period.


 (y)
Recent accounting pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) - Accounting For Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"), which simplifies the accounting and disclosures for convertible instruments and contracts in an entity's own equity.

The Company will adopt ASU 2020-06 on January 1, 2022 using the modified retrospective method. Upon the adoption, it is expected to reduce the additional paid-in capital and accumulated deficit, and increases the Convertible Notes balances. The adoption of the ASU 2020-06 will also result in the reduction of interest expense in the subsequent years until the Convertible Notes have been settled.

F-43
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

3.
CONCENTRATION OF RISKS

(a)
Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, other receivables, loans receivable, held to maturity investments, available-for-sale investments, and amounts due from related parties. As of December 31, 2020 and 2021, substantially all of the Company’s cash and cash equivalents were held at major financial institutions in their respective locations. Management believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial institutions.

(b)
Business, supplier, customer and economic risk

The Company participates in a relatively dynamic and competitive industries that are heavily reliant on operational excellence. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, result of operations or cash flows:


(i)
Business risk - The Company derives a significant portion of its net revenues from its digital entertainment and e-commerce operations. If competitors introduce new online games or new marketplace platform that compete with, or surpass the online games or marketplace platform operated by the Company, the Company’s operating performance in its digital entertainment or e-commerce operations will be affected.


(ii)
Supplier risk - The Company’s digital entertainment business license certain games from third-party game developers. The term of the game license agreements with the game developers ranges from two to seven years and is renewable upon both parties’ consent. The Company may not be able to develop or procure new games or renew existing licenses on terms acceptable to both parties. The Company’s game developer partners may terminate our agreements prior to their expiration if the Company is not in compliance with the relevant terms or conditions and the Company may fail to remedy such non-compliance in time, or the game developer partners may refuse to renew the agreements. The Company’s ecommerce and digital financial service businesses engages third-party logistics service providers, payment channels and other third-parties as its service providers. No individual third-party game developer,  third-party logistics services provider or other third-party business partner accounted for more than 10% of the Company’s net cost of revenue for the years ended December 31, 2019, 2020 and 2021.


(iii)
Customer risk - No individual customer accounted for more than 10% of net revenues for the years ended December 31, 2019, 2020 and 2021. The Company relied on several distribution channels to publish our mobile games. Revenue generated through one of the distribution channel accounted for approximately 21%, 22% and 19% of the Company’s net revenues for the years ended December 31, 2019, 2020, and 2021 respectively.

F-44
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

3. CONCENTRATION OF RISKS (continued)

(b) Business, supplier, customer and economic risk (continued)


(iv)
Political, economic, social, legal and regulatory uncertainties - The Company’s businesses could be adversely affected by the varying political, economic, social, legal and regulatory uncertainties in the diverse markets that it operates in. In addition, the Company may be unsuccessful in adapting its business practices, culture and operations.


(v)
Regulatory restrictions - Certain laws, rules and regulations currently prohibit foreign ownership of companies in some of the markets where the Company operates. As a result, this may hinder the Company’s expansions in new markets.

(c)
Currency convertibility risk

A significant portion of the Company’s revenue and expenses are denominated in currencies subject to exchange control. If revenue denominated in such currencies increase or expenses denominated in such currencies decrease in the future, the Company may need to convert a portion of our revenue into other currencies to meet our foreign currency obligations. Currently, in Taiwan, a single remittance by a company for an amount over $1 million or its equivalent in foreign currency shall be reported and documents supporting the accuracy of such report shall be provided to the bank handling such remittance before the remittance is conducted. In addition, remittances by a company in annual aggregate amount exceeding $50 million or its equivalent in foreign currency may not be processed without the approval of the Central Bank of the Republic of China (Taiwan). In Vietnam, exchanging Vietnamese dong into foreign currency must be conducted at a licensed credit institution such as a licensed commercial bank. Conversion of Thai baht to another currency is subject to regulations promulgated by the Ministry of Finance and Bank of Thailand. Conversion of Indonesian rupiah into any foreign currency that exceeds certain specific threshold is required to have an underlying transaction and supported by underlying transaction documents. In Malaysia, the foreign exchange policy requires the approval of the Central Bank of Malaysia (“BNM”) for cross border remittances which are either set out in the foreign exchange notices or applied for on an ad hoc basis. BNM has the discretion whether to grant its approval, and to impose any condition on such approval so there is no assurance that its approval will be granted. The Company may be unable to convert such local currencies into U.S. dollars or other foreign currencies to pay dividends or for other purposes on a timely basis or at all.

(d)
Foreign currency risk

The Company operates in multiple markets, which exposes it to the effects of fluctuations in currency exchange rates as it reports its financials and key operational metrics in USD. The Company earns revenue denominated in local currencies of Southeast Asia, Taiwan and Brazil, among other currencies, while some of its costs and expenses are paid in other foreign currencies. The Company generally pays license fees to game developers in USD and incur expenses for employee compensation and other operating expenses in the local currencies in the markets in which it operates. Fluctuations in the exchange rates among the various currencies that the Company uses could cause fluctuations in its operational and financial results.

F-45
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

4.
GOODWILL AND ACQUISITIONS

The changes in the carrying amount of goodwill are as follows:

   
As of December 31,
  
   
2020
    
2021
  
    $
     $
  
                 
At the beginning of the financial year
    
30,952
      
216,278
  
Acquisition
    
200,573
      
327,026
  
Disposals
    
(15,247
)
    
–
  
Foreign currency translation
    
–
      
(3,680
)
At the end of the financial year
    
216,278
      
539,624
  

During the year ended December 31, 2021, the Company acquired five companies and its underlying subsidiaries for an aggregate consideration of $356,721. As a result, these companies were consolidated as subsidiaries of the Company from the date of acquisition. These acquisitions support the growth of the Company.

The allocation of the purchase price as of the date of acquisition is summarized as follows:

    $
  
Cash and cash equivalent
    
53,757
  
Others
    
6,383
  
Total assets acquired
    
60,140
  
     
 
Income tax payable
    
(25,682
)
Others
    
(4,763
)
Total liabilities assumed
    
(30,445
)
Net assets acquired
    
29,695
  
         
Fulfilled by:
        
Share consideration(1)
    
270,733
  
Cash consideration
    
85,988
  
Goodwill
    
327,026
  


(1)
Measured based on the fair value of the Company’s ordinary shares on the date of acquisition.

The goodwill, which is not tax deductible, is mainly attributable to synergies expected to be achieved from the acquisition. The goodwill is allocated within the Digital Entertainment, Digital Financial Services and Other services segments.

The revenue and results since the acquisition date included in the consolidated statement of comprehensive loss for the year ended December 31, 2021 were insignificant. The Company’s revenue and results for the period would not be materially different should the acquisition has otherwise occurred on January 1, 2021.

The related transaction costs of the acquisition were not material to the Company’s consolidated financial statements.

F-46
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

5.
ACCOUNTS RECEIVABLE, NET

Accounts receivable and allowance for credit losses consist of the following:


  
As of December 31,
  
   
2020
$
    
2021
$
  
             
Accounts receivable
     370,977
       394,080
  
Allowance for credit losses
    
(7,978
)
    
(5,772
)
      362,999
       388,308
  

As of December 31, 2020 and 2021, all accounts receivable were due from third party customers.

An analysis of the allowance for credit losses is as follows:

 
$
  
Balance as of January 1, 2019
    
2,400
  
Provision for credit losses
    
3,256
  
Write-off of accounts receivable
    
(1,537
)
Exchange differences
    
(36
)
Balance as of December 31, 2019
    
4,083
  
Provision for credit losses
    
5,155
  
Write-off of accounts receivable
    
(1,415
)
Exchange differences
    
155
  
Balance as of December 31, 2020
    
7,978
  
Provision for credit losses
    
(975
)
Write-off of accounts receivable
    
(998
)
Exchange differences
    
(233
)
Balance as of December 31, 2021
    
5,772
  

Additions to the Company’s allowance for credit losses were recorded within general and administrative expenses.

F-47
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

6.
PREPAID EXPENSES AND OTHER ASSETS


 
As of December 31,
  
   
2020
$
    
2021
$
  
Current:
            
Deferred channel costs
    
441,873
      
517,545
  
Other receivables
    
459,478
      
570,176
  
Prepaid cost of revenue, sales and marketing expense and others
    
69,658
      
120,753
  
Security deposits
    
7,008
      
18,725
  
Tax receivable
    
53,962
      
145,401
  
Others
    
22,250
      
29,263
  
     
1,054,229
      
1,401,863
  
                 
Non-current:
                
Deferred channel costs
    
65,446
      
14,367
  
Other receivables
    
1,421
      
3,303
  
Prepayment of intangible asset
    
6,642
      
10,517
  
Prepayment for purchase of property and equipment (including renovation-in-progress)
    
91,788
      
33,539
  
Security deposits
    
33,476
      
48,770
  
Others
    
6,031
      
14,025
  
     
204,804
      
124,521
  

7.
LOANS RECEIVABLE, NET

Loans receivable represents loans granted to commercial and consumer customers. The Company monitors credit quality for all loans receivable on a recurring basis by evaluating the customer’s prior repayment history available internally and external sources information, where applicable. The Company uses delinquency status and trends to assist in making new and ongoing credit decisions, and to plan our collection practices and strategies. The following table presents the loans receivable by each of the loan portfolio:

The following table presents the loans receivable by each of the category:

 
As of December 31,
  
   
2020
$
    
2021
$
  
             
Commercial
    
183,710
      
107,357
  
Consumer
    
259,860
      
1,520,237
  
     
443,570
      
1,627,594
  
Allowance for credit losses
    
(40,484
)
    
(97,676
)
     
403,086
      
1,529,918
  
 
F-48
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

7.
LOANS RECEIVABLE, NET (continued)

The following table is a summary of the delinquency status of the loans receivable by year of origination:


  
As of December 31, 2020
  
   
Year of origination
  
Commercial
  
2020
$
    
2019
$
    
2018
$
    
2017
$
    
2016
$
    
Prior
$
    
Total
$
  
Delinquency:
                                          
Current
    
121,586
      
22,746
      
11,949
      
11,354
      
2,554
      
361
      
170,550
  
Past due
                                                        
- 1 to 30 days
    
4,188
      
358
      
243
      
263
      
11
      
1
      
5,064
  
- 31 to 60 days
    
2,420
      
399
      
112
      
77
      
39
      
2
      
3,049
  
- 61 to 90 days
    
1,363
      
–
      
250
      
175
      
12
      
–
      
1,800
  
- More than 90 days
    
2,024
      
356
      
429
      
144
      
96
      
198
      
3,247
  
     
131,581
      
23,859
      
12,983
      
12,013
      
2,712
      
562
      
183,710
  
                                                         
Consumer
                                                        
Delinquency:
                                                        
Current
    
208,380
      
16,812
      
12,792
      
7,554
      
1,883
      
60
      
247,481
  
Past due
                                                        
- 1 to 30 days
    
2,609
      
638
      
896
      
140
      
62
      
–
      
4,345
  
- 31 to 60 days
    
986
      
1,019
      
1,890
      
759
      
179
      
–
      
4,833
  
- 61 to 90 days
    
901
      
206
      
237
      
74
      
40
      
–
      
1,458
  
- More than 90 days
    
1,088
      
261
      
111
      
47
      
69
      
167
      
1,743
  
     
213,964
      
18,936
      
15,926
      
8,574
      
2,233
      
227
      
259,860
  
 
F-49
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

7.
LOANS RECEIVABLE, NET (continued)

 
As of December 31, 2021
  
   
Year of origination
  
Commercial
  
2021
$
    
2020
$
    
2019
$
    
2018
$
    
2017
$
    
Prior
$
    
Total
$
  
Delinquency:
                                          
Current
    
18,642
      
66,088
      
10,332
      
3,744
      
1,985
      
1,127
      
101,918
  
Past due
                                                        
- 1 to 30 days
    
11
      
143
      
277
      
102
      
96
      
–
      
629
  
- 31 to 60 days
    
36
      
1,187
      
2
      
–
      
73
      
–
      
1,298
  
- 61 to 90 days
    
11
      
215
      
155
      
38
      
11
      
–
      
430
  
- More than 90 days
    
71
      
616
      
1,685
      
627
      
38
      
45
      
3,082
  
     
18,771
      
68,249
      
12,451
      
4,511
      
2,203
      
1,172
      
107,357
  
                                                         
Consumer
                                                        
Delinquency:
                                                        
Current
    
1,414,709
      
1,091
      
6,501
      
4,551
      
2,098
      
96
      
1,429,046
  
Past due
                                                        
- 1 to 30 days
    
28,758
      
418
      
263
      
265
      
76
      
32
      
29,812
  
- 31 to 60 days
    
17,632
      
105
      
1,017
      
1,290
      
475
      
85
      
20,604
  
- 61 to 90 days
    
11,956
      
38
      
183
      
100
      
8
      
1
      
12,286
  
- More than 90 days
    
27,008
      
1,158
      
58
      
122
      
88
      
55
      
28,489
  
     
1,500,063
      
2,810
      
8,022
      
6,328
      
2,745
      
269
      
1,520,237
  
 
F-50
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

7.
LOANS RECEIVABLE, NET (continued)

An analysis of the loans receivable’s allowance for credit losses by portfolio segment is as follows:

 
Commercial
$
    
Consumer
$
    
Total
$
  
Balance as of January 1, 2019 and December 31, 2019
    
–
      
–
      
–
  
Acquisition of subsidiaries
    
17,056
      
9,354
      
26,410
  
Provision for credit losses
    
26,063
      
25,005
      
51,068
  
Write-off of loans receivable
    
(14,801
)
    
(22,575
)
    
(37,376
)
Exchange differences
    
6
      
376
      
382
  
Balance as of December 31, 2020
    
28,324
      
12,160
      
40,484
  
                         
Provision for credit losses
    7,343       107,722       115,065  
Write-off of loans receivable
    (27,311 )     (29,497 )     (56,808 )
Exchange differences
    (657 )     (408 )     (1,065 )
 Balance as of December 31,2021
     7,699       89,977       97,676  

Additions to the Company’s allowance for credit losses were recorded within general and administrative expenses.

F-51
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)


8.
INVESTMENTS



The following table sets forth a breakdown of the categories of short-term and long-term investments held by the Company:


   
As of December 31,
  
   
2020
    
2021
  
    $
     $
  
Short-term investments
                
                 
Debt securities:
                
   Held to maturity
    
28,330
      
869,931
  
   Available-for-sale
    
21,769
      
28,166
  
Equity securities
    
76,000
      
13,184
  
     
126,099
      
911,281
  
Long-term investments
                
                 
Debt securities:
                
   Held to maturity
    
68,854
      
66,071
  
   Available-for-sale
    
5,276
      
192,139
  
Equity securities
    
21,419
      
463,934
  
Equity method investments
    
94,933
      
152,419
  
Investments carried at fair value
    
–
      
178,298
  
     
190,482
      
1,052,861
  



Held to maturity investments includes time deposits placed with financial institutions and sovereign bonds. Available-for-sale securities includes sovereign bonds, exchangeable loan, convertible loan, corporate bonds and redeemable preference shares of investees.



The net unrealized fair value loss of nil, $24,150 and $63,434 related to the marketable equity securities had been recognized in the consolidated statements of operations as "Net investment gain (loss)" during the years ended December 31, 2019, 2020 and 2021, respectively.

   
F-52
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

8.
INVESTMENTS (continued)


The following table summarizes the cost or amortized cost, gross unrecognized gains and losses, gross unrealized gains and losses, and fair value of the Company’s debt securities and investments carried at fair value as of December 31, 2020 and 2021:
   
As of December 31, 2020
        
   
Cost or
Amortized
cost
    
Gross
unrecognized
gains
    
Gross
unrecognized
losses
    
Gross
unrealized
gains
    
Gross
unrealized
losses
    
Fair value
  
    $
     $
     $
     $
     $
     $
  
Short-term investments
                                                
Debt securities:
                                                
   Held to maturity
    
28,330
      
–
      
(1
)
    
–
      
–
      
28,329
  
   Available-for-sale
    
20,859
      
–
      
–
      
910
      
–
      
21,769
  
                                                 
Long-term investments
                                                
Debt securities:
                                                
   Held to maturity
    
68,854
      
3,197
      
(23
)
    
–
      
–
      
72,028
  
   Available-for-sale
    
5,174
      
–
      
–
      
102
      
–
      
5,276
  
     
123,217
      
3,197
      
(24
)
    
1,012
      
–
      
127,402
  


   
As of December 31, 2021
        
   
Cost or
Amortized
cost
    
Gross
unrecognized
gains
    
Gross
unrecognized
losses
    
Gross
unrealized
gains
    
Gross
unrealized
losses
    
Fair value
  
    $
    $
    $
    $
    $
    $
 
Short-term investments
                                                
Debt securities:
                                                
   Held to maturity
    
869,931
      
26
      
(10
)
    
–
      
–
      
869,947
  
   Available-for-sale
    
28,190
      
–
      
–
      
40
      
(64
)
    
28,166
  
                                                 
Long-term investments
                                                
Debt securities:
                                                
   Held to maturity
    
66,071
      
2,354
      
(181
)
    
–
      
–
      
68,244
  
   Available-for-sale
    
192,257
      
–
      
–
      
1,287
      
(1,405
)
    
192,139
  
Investments carried at fair value
    
151,227
      
–
      
–
      
27,071
      
–
      
178,298
  
     
1,307,676
      
2,380
      
(191
)
    
28,398
      
(1,469
)
    
1,336,794
  

F-53
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

9.
PROPERTY AND EQUIPMENT, NET


 
As of December 31,
  
   
2020
$
    
2021
$
  
             
Computers
    
522,108
      
883,249
  
Office equipment, furniture and fittings
    
31,613
      
43,060
  
Leasehold improvements
    
162,032
      
252,778
  
Transportation assets
    
6,184
      
208,701
  
Warehouse equipment
    
7,296
      
20,796
  
Land
    
22,708
      
196,421
  
Building
    
2,093
      
1,956
  
Construction-in-progress
    
973
      
22,952
  
     
755,007
      
1,629,913
  
Less: accumulated depreciation
    
(368,606
)
    
(599,950
)
     
386,401
      
1,029,963
  

Depreciation expenses recognized for each of the years ended December 31, 2019, 2020 and 2021 were included in the following captions:

 
Year ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
                   
Cost of revenue
    
80,245
      
118,691
      
180,140
  
Sales and marketing expenses
    
3,200
      
4,965
      
7,960
  
General and administrative expenses
    
31,282
      
41,384
      
64,187
  
Research and development expenses
    
2,056
      
4,027
      
8,395
  
     
116,783
      
169,067
      
260,682
  


No impairment loss had been recognized during the years ended December 31, 2019, 2020 and 2021, respectively.

F-54
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

10.
LEASES

The Company has entered into commercial operating leases for the use of offices, warehouses and data centers as lessee. These leases have original terms not exceeding 10 years. These leases have varying terms, escalation clauses and renewal rights.

Information pertaining to lease amounts recognized in our consolidated financial statements is summarized as follows:

 
Year ended December 31,
  
   
2020
$
    
2021
$
  
Operating lease cost:
            
Operating lease cost
    
73,273
      
138,766
  
Short-term lease cost
    
6,451
      
14,831
  
     
79,724
      
153,597
  

Supplemental cash flow information
            
Operating cash flows from operating leases
    
72,756
      
128,751
  
Right-of-use obtained in exchange for new operating lease liabilities
    
95,020
      
520,354
  

Weighted-average remaining lease term (years)
            
Operating leases
    
3.91
      
4.99
  

As of December 31, 2020 and 2021, the weighted-average discount rate for operating leases was 8.4% and 7.5%, respectively.

 
Operating leases
  
As of December 31, 2021:
   $
  
Maturities of lease liabilities
        
2022
    
193,322
  
2023
    
190,814
  
2024
    
140,918
  
2025
    
112,416
  
2026
    
78,516
  
Thereafter
    
106,341
  
Total lease payments
    
822,327
  
Less: Imputed interest
    
(144,520
)
Present value of lease liabilities
    
677,807
  

The Company has additional operating leases, primarily for offices, warehouses and data centers that have not yet commenced of $30,404 with lease term not exceeding 5 years and $803,770 with lease terms not exceeding 12 years, as of December 31, 2020 and 2021, respectively.

F-55
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

11.
INTANGIBLE ASSETS, NET

    As of December 31,  
   
2020
$
    
2021
$
  
Licensing fee
     36,914       36,654  
IP right
     41,602       45,918  
Trademarks
     10,679       10,679  
Technology
     15,200       15,200  
Software, including internal use software under development
     6,512       30,202  
Others
     5,568       5,269  
Total intangible assets, gross
     116,475       143,922  
                 
Accumulated amortization:
                
Licensing fee
     (32,968 )     (33,704 )
IP right
     (32,460 )     (39,357 )
Trademarks
     (3,738 )     (4,806 )
Technology
     (2,322 )     (4,856 )
Software
     (3,982 )     (7,060 )
Others
     (1,232 )     (1,622 )
Total accumulated amortization
     (76,702 )     (91,405 )
Total intangible assets, net
     39,773       52,517  

The estimated aggregate amortization expenses of intangible assets, excluding internal use software under development, for each of the five succeeding fiscal years and thereafter are as follows:

    $
  
2022
    
14,356
  
2023
    
10,409
  
2024
    
7,149
  
2025
    
5,072
  
2026
    
1,858
  
Thereafter
    
1,162
  
     
40,006
  

Amortization expense related to intangible assets was $4,849, $11,694, and $18,350 for the years ended December 31, 2019, 2020 and 2021, respectively.

During the years ended December 31, 2019, 2020 and 2021, the Company determined that the carrying amount related to an intellectual property right (“IP right”) was not recoverable due to changes in market environment and therefore, impairment loss of nil, $5,160 and nil, respectively had been recognized in the consolidated statements of operations as “General and administrative expenses”.

F-56
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

12.
ACCRUED EXPENSES AND OTHER PAYABLES

The components of accrued expenses and other payables are as follows:

 
As of December 31,
  
   
2020
$
    
2021
$
  
Current:
            
Accrued cost of revenue and sales and marketing expenses
    
598,133
      
810,010
  
Accrued interest for convertible notes
    
3,203
      
4,540
  
Accrued office-related operating expenses
    
2,506
      
6,509
  
Business and other taxes payables
    
52,568
      
118,237
  
Other payables
    
60,911
      
177,293
  
Escrow payables
    
1,028,542
      
1,545,399
  
Accrued payroll and welfare expenses
    
156,725
      
277,774
  
Payables and accruals for purchases of property and equipment
    
14,889
      
56,874
  
Deposits payable
    
75,012
      
465,850
  
Finance lease liabilities
    
52
      
1,516
  
Others
    
40,920
      
67,185
  
     
2,033,461
      
3,531,187
  
                 
Non-current:
                
Finance lease liabilities
    
85
      
7,022
  
Others
    
36,074
      
69,212
  
     
36,159
      
76,234
  

13.
BANK BORROWINGS

During the year ended December 31, 2021, the Company entered into revolving credit facilities that allows the Company to borrow up to $200,000. As at December 31, 2021, the Company had $100,000 outstanding balance and $100,000 of undrawn revolving credit facilities. The amount drawn down bears a weighted average interest of 0.9345% per annum.

F-57
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

14.
CONVERTIBLE NOTES

    As of December 31,   
 

 
2020
$
    
2021
$
  
             
2023 Convertible Notes
    
41,263
      
28,207
  
2024 Convertible Notes
    
916,560
      
131,528
  
2025 Convertible Notes
    
882,583
      
928,683
  
2026 Convertible Notes
     –      
2,387,290
  
      1,840,406       3,475,708  

The Company issued the following convertible notes and the terms are as follow:

2023 Convertible Notes
2024 Convertible Notes
2025 Convertible Notes
2026 Convertible Notes
Issuance date
June 18, 2018
November 18, 2019
May 22, 2020
 September 14, 2021
Maturity date
July 1, 2023
December 1, 2024
December 1, 2025
 September 15, 2026
Principal amount
$575,000
$1,150,000
$1,150,000
 $2,875,000
Interest rate
2.25%
1.00%
2.375%
 0.25%
Initial conversion rate
50.5165 American Depositary Shares (“ADSs”)
per $1 principal amount, equivalent
to $19.80 per ADS
19.9475 ADSs per $1 principal amount, equivalent
to $50.13 per ADS
11.0549 ADSs per $1 principal amount, equivalent
to $90.46 per ADS
2.0964 ADSs per $1 principal amount, equivalent
to $477.01 per ADS
Agreed conversion date
January 1, 2023
June 1, 2024
September 1, 2025
 June 15, 2026

The Convertible Notes holders (the ‘Holders’) have the right, at their option, to convert the outstanding principal amount of the convertible notes, in whole or in part in integral multiples of $1 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the close of business day immediately preceding the agreed conversion date; or (ii) anytime on or after the agreed conversion date until the close of business on the second scheduled trading day immediately preceding the maturity date (the “Conversion Option”).

F-58
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

14.
CONVERTIBLE NOTES (continued)

The conversion is subject to the anti-dilution and make-whole fundamental change adjustments. Upon conversion, the Company has the right, at its option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to the Holders.

If certain events of default, changes in tax laws of the relevant taxing jurisdiction or fundamental change, optional redemption or clean up redemption as defined in the indenture were to occur, of which the optional redemption and clean up redemption only applies to the 2024 Convertible Notes, 2025 Convertible Notes and 2026 Convertible Notes, the outstanding obligations under the respective convertible notes could be immediately due and payable (the “Contingent Redemption Options”).

The Company evaluated the Conversion Option and Contingent Redemption Options in accordance with ASC 815 to determine if these features require bifurcation. The Conversion Option was not required to be bifurcated because it was indexed to the Company’s ADSs and meets all additional conditions for equity classification. The Contingent Redemption Options were not required to be bifurcated because they were considered to be clearly and closely related to the debt host, as the convertible notes were not issued at a substantial discount and are redeemable at par.

The Convertible Notes were accounted for under ASC 470-20 Cash Conversion Subsections as follow:

 
2023 Convertible
Notes
    
2024 Convertible
Notes
    
2025 Convertible
Notes
     2026 Convertible
Notes
  
                                 
Liability component
  
$
410,926
    
$
897,918
    
$
856,635
     $
2,359,492  
Effective interest rate
    
9.38
%
    
6.03
%
    
8.21
%
     4.27 %
Equity component
  
$
152,714
    
$
240,582
    
$
284,727
     $
 486,758  
Debt issuance cost, allocated in proportion to the allocation of proceeds
  
$
11,360
    
$
11,500
    
$
8,638
     $
28,750  

F-59
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

14.
CONVERTIBLE NOTES (continued)

The liability component was initially measured at fair value and subsequently amortized to its redemption amount using the effective interest method. The residual value was allocated to the equity component, classified within “Additional Paid-in Capital” and not subsequently remeasured. The following table presents the carrying amount of the liability components of the Convertible Notes:

 
As of December 31, 2020
    
As of December 31, 2021
  
   
2023
Convertible
Notes
$
    
2024
Convertible
Notes
$
    
2025
Convertible
Notes
$
    
Total
$
    
2023
Convertible
Notes
$
    
2024
Convertible
Notes
$
    
2025
Convertible
Notes
$
    
2026
Convertible
Notes
$
    
Total
$
  
Principal
    
49,000
      
1,112,320
      
1,149,500
      
2,310,820
      
31,305
      
152,048
      
1,149,500
       2,875,000
      
4,207,853
  
Less: unamortized issuance cost and debt discount
    
(7,737
)
    
(195,760
)
    
(266,917
)
    
(470,414
)
    
(3,098
)
    
(20,520
)
    
(220,817
)
     (487,710 )    
(732,145
)
Net carrying amount
    
41,263
      
916,560
      
882,583
      
1,840,406
      
28,207
      
131,528
      
928,683
       2,387,290
      
3,475,708
  

During the years ended December 31, 2019, 2020 and 2021, the Company recognized total interest expense for coupon interest of $14,312, $35,527 and $36,191, respectively and amortization of discount on the liability component amounted to $33,334, $88,198 and $100,141, respectively.

The if-converted value of 2023, 2024, and 2025 Convertible Notes exceeded the principal amount by $443,710, $3,304,202 and $1,379,949 and $322,474, $526,459 and $1,693,319 as of December 31, 2020 and 2021, respectively.

F-60
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

14.
CONVERTIBLE NOTES (continued)

Capped call transactions

In connection with the offering of 2024 Convertible Notes and 2025 Convertible Notes, the Company entered into separately negotiated capped call transactions with certain counterparties (collectively, the “Capped Calls”). The details of the Capped Calls are as follows:

 
2024 Convertible
Notes
    
2025 Convertible
Notes
  
Initial strike price per share
  
$
50.13
    
$
90.46
  
Initial cap price per share
  
$
70.36
    
$
136.54
  

The Capped Calls are generally intended to reduce or offset the potential economic dilution to our Class A ordinary shares upon any conversion of the 2024 Convertible Notes and 2025 Convertible Notes, respectively, with such reduction or offset, as the case may be, subject to a cap based on the cap price. As the Capped Calls are considered indexed to the Company’s own stock and are equity classified, they are recorded in shareholders’ equity and are not accounted for as derivative. The costs of $97,060 and $135,700 incurred in connection with the Capped Calls of the 2024 Convertible Notes and 2025 Convertible Notes, respectively, were recorded as reductions to additional paid-in capital. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive under treasury stock method.

Conversion of convertible notes

During the year ended December 31, 2021, a total principal amount of $977,967 convertible notes were converted by certain Holders. These conversions were satisfied through Class A ordinary shares or a combination of cash and Class A ordinary shares settlement.

The conversion completed during the year ended December 31, 2021 resulted in a net loss on debt extinguishment of $2,069 recorded in the consolidated statements of operations as “Interest expense”, representing the difference between the carrying amount and the fair value of the extinguished debt.

F-61
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

15.
SHARE BASED COMPENSATION

The Company amended its 2009 share incentive plan (the “Plan”) in July 2019. Under the Plan, the Company may grant options, restricted share award (“RSA”), restricted share unit (“RSU”) or share appreciation right (“SAR”) to its officers, employees, directors and other eligible persons (collectively known as “Eligible Persons”) of up to 83,000,000 Class A ordinary shares. The Plan is administered by an authorized administrator appointed by the Board of Directors of the Company set forth in the Plan (the “Plan Administrator”).

The maximum number of shares which may be issued pursuant to all awards under the Plan will increase on January 1 of each of 2019, 2020, 2021 and 2022 by 5% of the total number of ordinary shares of all classes of the Company outstanding on that day immediately before such annual increase pursuant to the Plan. With effect on January 1, 2019, July 25, 2019, January 1, 2020, January 1, 2021 and January 1, 2022, the maximum number of shares which may be issued pursuant to all awards under the Plan increased to 100,129,938, 103,129,938, 123,292,170, 148,888,743 and 176,775,641 Class A ordinary shares.

During the years ended December 31, 2020 and 2021, the Company granted 5,809,024 options, 5,034,735 RSUs and 86,149 SARs and 4,162,121 options, 3,572,121 RSUs and 51,464 SARs, respectively to the Eligible Persons. All options granted have a contractual term of ten years. The options vest according to the stated vesting period in the grantee’s option agreement. The RSUs and SARs generally vest 25% on the first anniversary year from the stated vesting commencement date and the remaining 75% will vest in 12 substantially equal quarterly instalments.

F-62
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

15.
SHARE BASED COMPENSATION (continued)

(a)
Option granted to Eligible Persons

The following table summarizes the Company’s share option activity under the Plan:

 
Number of
options
    
Weighted
average
exercise
price
    
Weighted
average
remaining
contractual
term
    
Aggregate
intrinsic value
  
         
$
    
Years
    
$
  
Outstanding, January 1, 2019
    
35,706,882
      
12.54
              
Granted
    
15,327,884
      
15.00
              
Exercised
    
(3,736,976
)
    
5.58
              
Forfeited
    
(109,236
)
    
14.24
              
Outstanding, December 31, 2019
    
47,188,554
      
13.89
      
8.18
      
1,242,496
  
Vested and expected to vest at December 31, 2019
    
47,188,554
      
13.89
                  
Exercisable as of December 31, 2019
    
19,664,736
      
12.35
      
7.35
      
548,035
  
Outstanding, January 1, 2020
    
47,188,554
      
13.89
                  
Granted
    
5,809,024
      
18.59
                  
Exercised
    
(5,486,180
)
    
11.29
                  
Forfeited
    
(45,678
)
    
14.09
                  
Outstanding, December 31, 2020
    
47,465,720
      
14.76
      
7.57
      
8,747,373
  
Vested and expected to vest at December 31, 2020
    
47,465,720
      
14.76
                  
Exercisable as of December 31, 2020
    
25,298,368
      
13.73
      
7.03
      
4,688,260
  
Outstanding, January 1, 2021
    
47,465,720
      
14.76
                  
Granted
    
4,162,121
      
269.09
                  
Exercised
    
(5,405,228
)
    
14.44
                  
Forfeited
    
–
   

                 
Outstanding, December 31, 2021
    
46,222,613
      
37.70
      
6.89
      
8,822,987
  
Vested and expected to vest at December 31, 2021
    
46,222,613
      
37.70
                  
Exercisable as of December 31, 2021
    
30,707,210
      
14.13
      
6.32
      
6,435,641
  

The aggregate intrinsic value is calculated to be the difference between the exercise price of the underlying awards and the fair value of the underlying stock at each reporting date, for those awards that have an exercise price below the estimated fair value of the Company’s ordinary shares.

F-63
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

15.
SHARE BASED COMPENSATION (continued)

(a)
Option granted to Eligible Persons (continued)

The Company calculated the estimated fair value of the options on the respective grant dates using the Black-Scholes option pricing model with the following assumptions.

 
Granted in 2019
  
Granted in 2020
  
Granted in 2021
             
Risk-free interest rates
  
2.34% – 2.68%
  
0.39% – 1.66%
  
0.74% – 1.07%
Expected term
  
5.5 – 8.5 years
  
5.5 – 7.5 years
  
5.6 – 7.5 years
Expected volatility
  
33.0% – 35.0%
  
32.4% – 33.7%
  
32.1% – 33.0%
Expected dividend yield
  
–
  
–
  
–
Fair value of share options
  
$4.58 – $13.59
  
$13.81 – $50.58
  
$71.70 – $84.14

The Black-Scholes option pricing model was applied in determining the estimated fair value of the share options granted to Eligible Persons. The model requires the input of highly subjective assumptions including the estimated expected stock price volatility and the expected term of the option for which employees are likely to exercise their share options. The risk-free rate for periods within the contractual life of the option is based on the US Treasury Yields at the time of grant. The Company has used the simplified method to determine the expected term due to insufficient historical exercise data to provide a reasonable basis to estimate expected term. The Company’s management is ultimately responsible for the determination of the estimated fair value of its ordinary shares.

The weighted-average grant-date fair value of share options granted during the years of December 31, 2019, 2020 and 2021 were $12.05, $37.86 and $75.83, respectively. The total fair value of share options vested during the years ended December 31, 2019, 2020 and 2021 was $44,688, $88,114 and $88,507, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2019, 2020 and 2021 was $64,097, $767,203 and $1,361,800 respectively.

As of December 31, 2021, there were $585,256 total unrecognized share-based compensation cost related to unvested options which is expected to be recognized over a weighted-average period of 3.68 years. Total unrecognized compensation cost may be adjusted for future changes in actual forfeitures.

F-64
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

15.
SHARE BASED COMPENSATION (continued)


(b)
RSAs/RSUs granted to Eligible Persons

The following table summarizes the Company’s RSAs/RSUs activity under the Plan:

 
Number of
RSAs/RSUs
    
Weighted
average grant
date fair value
    
Weighted
average
remaining
contractual life
    
Aggregate
intrinsic value
  
         
$
    
Years
    
$
  
                         
Unvested, January 1, 2019
    
4,754,972
      
12.34
      
9.17
      
53,826
  
Granted
    
6,249,313
      
20.50
                  
Vested
    
(2,131,415
)
    
13.67
                  
Forfeited
    
(791,433
)
    
15.22
                  
Unvested, December 31, 2019 and January 1, 2020
    
8,081,437
      
18.02
      
8.93
      
325,035
  
Granted
    
5,034,735
      
72.37
                  
Vested
    
(3,332,063
)
    
19.25
                  
Forfeited
    
(442,181
)
    
28.74
                  
Unvested, December 31, 2020 and January 1, 2021
    
9,341,928
      
46.36
      
8.64
      
1,859,511
  
Granted
    
3,551,491
      
258.97
                  
Vested
    
(4,127,006
)
    
40.59
                  
Forfeited
    
(637,193
)
    
102.92
                  
Unvested, December 31, 2021
    
8,129,220
      
137.76
      
8.47
      
1,818,588
  

Share-based compensation cost for RSAs and RSUs is measured based on the fair value of the Company’s ordinary shares on the date of grant.

The weighted-average grant-date fair value of RSAs and RSUs granted during the years ended December 31, 2019, 2020 and 2021 was $20.50, $72.37 and $258.97, respectively. The total fair value of RSAs and RSUs vested during the years ended December 31, 2019, 2020 and 2021 was $29,133, $64,153 and $167,507, respectively.

As of December 31, 2021, there was $1,119,856 of unrecognized share-based compensation cost related to RSAs and RSUs which is expected to be recognized over a weighted-average vesting period of 3.21 years. Total unrecognized compensation may be adjusted for future changes in actual forfeitures.

F-65
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

15.
SHARE BASED COMPENSATION (continued)


(c)
SARs granted to Eligible Persons

Fair value of the SARs is measured based on the fair value of the Company’s ordinary shares at the end of each reporting period.

Total compensation expense relating to share options, RSAs, RSUs and SARs granted to employees after deducting forfeitures recognized for the years ended December 31, 2019, 2020 and 2021 is as follows:

 
Year ended December 31,
  
   
2019
    
2020
    
2021
  
   
$
    
$
     $
  
Share options:
                        
                         
Cost of revenue
    
244
      
130
      
390
  
Sales and marketing expenses
    
156
      
69
      
5
  
General and administrative expenses
    
71,787
      
179,544
      
207,204
  
Research and development expenses
    
567
      
401
      
33
  
     
72,754
      
180,144
      
207,632
  
                         
Cash received for the exercise in the respective years
    
20,867
      
61,949
      
77,639
  
                         
RSAs/ RSUs:
                        
                         
Cost of revenue
    
1,714
      
4,385
      
8,318
  
Sales and marketing expenses
    
3,017
      
10,100
      
23,350
  
General and administrative expenses
    
26,761
      
37,433
      
67,421
  
Research and development expenses
    
11,429
      
45,820
      
148,592
  
     
42,921
      
97,738
      
247,681
  
                         
SARs:
                        
                         
Cost of revenue
    
319
      
2,867
      
3,389
  
Sales and marketing expenses
    
749
      
5,462
      
6,850
  
General and administrative expenses
    
313
      
3,534
      
3,658
  
Research and development expenses
    
13
      
501
      
1,114
  
     
1,394
      
12,364
      
15,011
  

F-66
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

16.
ORDINARY SHARES

The Company has $7,500,000 authorized share capital which divided into (i) 14,800,000,000 Class A ordinary shares with a par value of $0.0005 each and (ii) 200,000,000 Class B ordinary shares with par value of $0.0005 each. Holders of Class A ordinary shares and Class B ordinary shares shall at all times vote together as one class on all resolutions submitted to a vote for shareholders’ approval or authorization, except for certain class consents required under the Memorandum and Articles of Association. Each Class A ordinary share shall be entitled to one vote, and each Class B ordinary share shall be entitled to three votes, on all matters subject to the vote at general meetings of the Company. During the year, 4,200,000 outstanding Class B ordinary shares were converted to 4,200,000 Class A ordinary shares.

The Company completed the follow-on offering in December 2020 and September 2021, and issued an aggregate of 15,180,000 and 12,650,000 ADSs, respectively, representing 15,180,000 and 12,650,000 Class A ordinary shares for total proceeds, net of issuance costs of $2,908,299 and $3,972,416, respectively.

Subsequent to December 31, 2021, the Company’s shareholders approved as a special resolution to increase the voting power of each Class B ordinary share from three votes to fifteen votes on all matters subject to vote at general meetings of the Company.

17.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component, net of tax of nil, are as follows:

 
Unrealized
fair value
gain (loss)
on available-
for-sale
investments
    
Foreign
currency
translation
    
Total
  
    $
     $
     $
  
                         
Balance as of January 1, 2019
    
18,269
      
(3,070
)
    
15,199
  
Current year other comprehensive (loss) income
    
(12,869
)
    
3,119
      
(9,750
)
Balance as of December 31, 2019
     5,400      
49
      
5,449
  
Current year other comprehensive (loss) income
    
(4,419
)
    
3,603
      
(816
)
Transactions with non-controlling interest     –       48       48  
Balance as of December 31, 2020
     981      
3,700
      
4,681
  
Current year other comprehensive loss
    
(1,278
)
    
(32,263
)
     (33,541 )
Transactions with non-controlling interest     –       341       341  
Balance as of December 31, 2021
    
(297
)
    
(28,222
)
    
(28,519
)

F-67
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

18.
RESTRICTED NET ASSETS

Certain of the Company’s subsidiaries and VIEs are restricted in their ability to transfer a portion of their net assets to the Company in accordance with the local laws and regulations.

Certain jurisdictions where the Company has subsidiaries or VIEs require those subsidiaries or VIEs to establish and fund statutory reserves, details of which are listed below:

Statutory reserve

The movement of statutory reserve during the years ended December 31, are as follows:

 
As of December 31,
  
   
2020
$
    
2021
$
  
             
At the beginning of the financial year
    
46
      
2,363
  
Transferred from retained earnings
    
2,317
      
3,781
  
At the end of the financial year
    
2,363
      
6,144
  

Taiwan

The subsidiary in Taiwan is required to set aside 10% of its profit after tax to legal reserve in accordance with Taiwanese regulations until the legal reserve amount equals to its total paid-up capital. In the event that the subsidiary incurred no loss, the portion of legal reserve exceeding 25% of the paid-up capital can be used for distribution to shareholders in the form of new shares or cash. As of December 31, 2019, 2020 and 2021, the subsidiary in Taiwan had an accumulated reserve of $33, $99 and $76, respectively.

Thailand

The Thailand regulations require that a private limited liability company shall allocate not less than 5% of its retained earnings to a legal reserve, until this account reaches an amount not less than 10% of the registered authorized capital. The legal reserve is not available for dividend distribution. As of December 31, 2019, 2020 and 2021, the subsidiary in Thailand had an accumulated reserve of $13, $13 and $13, respectively.

The PRC

The PRC subsidiaries of the Company are required to provide for certain statutory reserves, namely a general reserve, an enterprise expansion fund and a staff welfare and bonus fund. As of December 31, 2019, 2020 and 2021, the Company’s PRC subsidiaries had an accumulated reserve of nil, $2,251 and $6,055, respectively.

Indonesia

The Indonesian regulations require a limited liability company to reserve a certain amount from its net profit each year as a reserve fund until such fund amounts to at least 20% of its issued and paid-up capital. As of December 31, 2019, 2020 and 2021, the Company’s Indonesia subsidiaries have not appropriated any funds into the statutory reserve account.

F-68
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

19.
TAXATION

Enterprise income tax

Cayman Islands

The Company is a company incorporated in the Cayman Islands and conducts its primary business operations through its subsidiaries and its consolidated VIEs. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains.

Singapore

Subsidiaries incorporated in Singapore are subject to the Singapore Corporate Tax rate of 17% for the years ended December 31, 2019, 2020 and 2021. Garena Online was granted an additional five-year Development and Expansion Incentive (“DEI”) by the Singapore Economic Development Board (the “EDB”) commencing from January 1, 2017, with another five-year extension commencing from January 1, 2022, which grant a concessionary tax rate of 10% from January 1, 2017 to December 31, 2021 and 10.5% from January 1, 2022 to December 31, 2026 on qualifying income, subject to certain terms and conditions imposed by the EDB.

Others

Subsidiaries incorporated in other countries are subject to the respective statutory corporate income tax rates of the countries where they are resident.

Domestic statutory corporate income tax rate in Indonesia was reduced from 25% to 22% with effect from the financial year 2020.


In March 2021, the Philippines reduced its corporate income tax rate from 30% to 25%, effective retroactively from July 1, 2020.

Income tax expense comprises:

 
Year ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
                   
Current income tax
    
56,296
      
117,649
      
289,998
  
Deferred tax
    
(4,333
)
    
(27,451
)
    
(975
)
Withholding tax expense
    
33,901
      
51,442
      
43,842
  
     
85,864
      
141,640
      
332,865
  

F-69
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

19.
TAXATION (continued)

Enterprise income tax (continued)

The reconciliation of tax computed by applying the tax rate of 17% which is also the statutory corporate income tax rate for its Singapore’s corporate office for the years ended December 31, 2019, 2020 and 2021 is as follows:

 
Year ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
                   
Loss before income tax and share of results of equity investees
    
(1,368,619
)
    
(1,483,238
)
    
(1,715,184
)
                         
Tax expense computed at tax rate of 17%
    
(232,665
)
    
(252,150
)
    
(291,581
)
Changes in valuation allowance
    
265,776
      
403,329
      
828,141
  
Non-deductible expenses
    
4,207
      
9,554
      
19,569
  
Effect of concessionary tax rate and tax reliefs
    
(42,404
)
    
(82,951
)
    
(183,962
)
Withholding tax expense
    
33,901
      
51,442
      
43,842
  
Foreign earnings at different tax rates
    
60,721
      
15,103
      
(82,388
)
Others
    
(3,672
)
    
(2,687
)
    
(756
)
     
85,864
      
141,640
      
332,865
  

Deferred tax

The significant components of deferred taxes are as follows:

 
As of December 31,
  
   
2020
$
    
2021
$
  
Deferred tax assets:
            
Property and equipment
    
2,904
      
3,290
  
Deferred revenue
    
141,356
      
145,003
  
Unutilized tax losses and unused capital allowances
    
960,998
      
1,690,773
  
Provision and accrued expenses
    
21,170
      
28,807
  
Allowance for credit losses
     6,346       13,012  
Others
    
3,137
      
7,811
  
Valuation allowance
    
(1,016,676
)
    
(1,768,957
)
Total deferred tax assets
    
119,235
      
119,739
  
                 
Deferred tax liabilities:
                
Property and equipment
    
(2,001
)
    
(6,949
)
Intangible assets
    
(433
)
    
(1,174
)
Deferred channel costs
    
(13,750
)
    
(13,783
)
Others
    
(4,673
)
    
(1,070
)
Total deferred tax liabilities
    
(20,857
)
    
(22,976
)
Net deferred tax assets
    
98,378
      
96,763
  

F-70
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

19.
TAXATION (continued)

Deferred tax (continued)

The use of these tax losses and capital allowances is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the jurisdiction in which the entity operates. These tax losses have no expiry date except tax losses approximating to $1,773,877, $1,671,044 and $3,473,098 as of December 31, 2019, 2020 and 2021, respectively. The tax losses of $3,473,098 as of December 31, 2021 will expire from 2022 to 2035.

The utilization of deferred tax assets recognized by the Group is dependent upon future taxable income in excess of income arising from the reversal of existing taxable temporary differences.

As of December 31, 2021, no deferred tax liability has been recognised on the undistributed earnings of its foreign subsidiaries as the Company either intends to permanently reinvest the undistributed earnings to fund its future operations or no withholding tax is imposed on the remittance of undistributed earnings in certain jurisdiction.

20.
LOSS PER SHARE

Basic and diluted loss per share for each of the periods presented is calculated as follows:

 
Year ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
Numerator:
                  
Net loss attributable to ordinary shareholders
    
(1,462,799
)
    
(1,618,056
)
    
(2,046,759
)
                         
Denominator:
                        
Weighted-average number of shares outstanding—basic and diluted
    
436,601,801
      
477,264,888
      
532,705,796
  
                         
Basic and diluted loss per share:
    
(3.35
)
    
(3.39
)
    
(3.84
)

The following potential common shares were excluded from calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:

 
Year ended December 31,
  
   
2019
    
2020
    
2021
  
                   
Share options
    
52,188,554
      
50,090,731
      
46,225,613
  
RSAs/RSUs
    
8,081,437
      
9,341,928
      
8,129,220
  
Convertible notes
    
52,718,141
      
37,370,919
      
23,349,154
  
     
112,988,132
      
96,803,578
      
77,703,987
  

F-71
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

20.
LOSS PER SHARE (continued)

The denominator for diluted loss per share for the years ended December 31, 2019, 2020 and 2021 does not include any effect from the Capped Calls (Note 14) because it would be anti-dilutive. In the event of conversion of any or all of the 2024 Convertible Notes and 2025 Convertible Notes, the shares that would be delivered to the Company under the Capped Calls are designed to neutralize the dilutive effect of the shares that the Company would issue under the convertible notes.

During the years ended December 31, 2020 and 2021, respectively, the Company issued 6,000,000 and 12,000,000 Class A ordinary shares to its share depositary bank which will be used to settle share incentive awards. No consideration was received by the Company for this issuance of Class A ordinary shares. These Class A ordinary shares are legally issued and outstanding but are treated as escrowed shares for accounting purposes and therefore, have been excluded from the computation of loss per share. Any Class A ordinary shares not used in the settlement of share incentive awards will be returned to the Company.

F-72
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

21.
RELATED PARTY TRANSACTIONS


(a)
Related parties(1)

Name of related parties
Relationship with the Company
    
Tencent Limited and its affiliates (“Tencent”)
A shareholder of the Company

(1)
These are the related parties that have engaged in significant transactions with the Company for the years ended December 31, 2019, 2020 and 2021.


(b)
The Company had the following significant related party transactions for the years ended December 31, 2019, 2020 and 2021:

    Year ended December 31,
  
 
2019
$
    
2020
$
    
2021
$
  
 Royalty fee and license fee to:
                  
- Tencent
    
122,234
      
110,686
      
139,930
  
                         
 Services provided by:
                        
- Tencent
    
19,005
      
23,352
      
24,981
  
                         
 Conversion of convertible notes (principal amount) by:
                        
- Tencent
    
100,000
      
–
      
–
  

(c)
The Company had the following significant related party balances for the years ended December 31, 2020 and 2021:

 
As of December 31,
  
   
2020
$
    
2021
$
  
Amounts due to related parties:
            
- Tencent
    
38,416
      
73,244
  

F-73
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

22.
SEGMENT REPORTING

The Company has three reportable segments, namely digital entertainment, e-commerce and digital financial services. The CODM reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating financial performance of each segment.

Description of Reportable Segments

Digital entertainment – Garena’s platform offers mobile and PC online games and develops mobile games for the global market. Garena is the global leader in eSports, it also provides access to other entertainment content and social features, such as live streaming of gameplay, user chat and online forums.

E-commerce – Shopee’s platform is a mobile-centric, social-focused marketplace. It provides users with a convenient, safe, and trusted shopping environment with integrated payment, logistics infrastructure and comprehensive seller services. Products from manufacturers and third parties are also purchased and sold directly to buyers on Shopee platform.

Digital financial services – SeaMoney provides a variety of payment services and loans to individuals and businesses. It is an important payment infrastructure supporting the Company’s digital entertainment and e-commerce businesses. In addition, SeaMoney also integrates with third party merchant partners and covers a broad set of consumption use cases.

A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other services”.

F-74
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

22.
SEGMENT REPORTING (continued)

Information about segments for the years ended December 31, 2019, 2020 and 2021 presented were as follows:

 
Year ended December 31, 2019
  
   
Digital
Entertainment
$
    
E-Commerce
$
    
Digital Financial
Services
$
    
Other
Services
$
    
Unallocated
expenses(1)
$
    
Consolidated
$
  
                                     
Revenue
    
1,136,017
      
834,295
      
9,223
      
195,843
      
–
      
2,175,378
  
Operating income (loss)
    
529,524
      
(1,131,771
)
    
(116,309
)
    
(39,864
)
    
(132,812
)
    
(891,232
)
Non-operating loss, net
                                            
(477,387
)
Income tax expense
                                            
(85,864
)
Share of results of equity investees
                                            
(3,239
)
Net loss
                                            
(1,457,722
)

 
Year ended December 31, 2020
  
   
Digital
Entertainment
$
    
E-Commerce
$
    
Digital Financial
Services
$
    
Other
Services
$
    
Unallocated
expenses(1)
$
    
Consolidated
$
  
                                     
Revenue
    
2,015,972
      
2,167,149
      
60,785
      
131,758
      
–
      
4,375,664
  
Operating income (loss)
    
1,016,793
      
(1,442,593
)
    
(520,075
)
    
(49,006
)
    
(308,444
)
    
(1,303,325
)
Non-operating loss, net
                                            
(179,913
)
Income tax expense
                                            
(141,640
)
Share of results of equity investees
                                            
721
  
Net loss
                                            
(1,624,157
)

F-75
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

22.
SEGMENT REPORTING (continued)

 
Year ended December 31, 2021
  
   
Digital
Entertainment
$
    
E-Commerce
$
    
Digital Financial
Services
$
    
Other
Services
$
    
Unallocated
expenses(1)
$
    
Consolidated
$
  
                                     
Revenue
    
4,320,013
      
5,122,959
      
469,774
      
42,444
      
–
      
9,955,190
  
Operating income (loss)
    
2,500,081
      
(2,766,566
)
    
(640,422
)
    
(177,633
)
    
(498,520
)
    
(1,583,060
)
Non-operating loss, net
                                            
(132,124
)
Income tax expense
                                            
(332,865
)
Share of results of equity investees
                                            
5,019
  
Net loss
                                            
(2,043,030
)

(1)
Unallocated expenses are mainly relating to share-based compensation, general and corporate administrative costs, such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segments results as they are not reviewed by the CODM as part of segment performance.

F-76
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

22.
SEGMENT REPORTING (continued)

Revenue from external customers is classified based on the geographical locations where the services were provided.

 
Year Ended December 31,
  
   
2019
$
    
2020
$
    
2021
$
  
Revenue
                  
Southeast Asia
    
1,378,141
      
2,791,894
      
6,316,782
  
Latin America
    
282,618
      
790,308
      
1,850,861
  
Rest of Asia
    
489,291
      
655,007
      
1,394,342
  
Rest of the world
    
25,328
      
138,455
      
393,205
  
Consolidated revenue
    
2,175,378
      
4,375,664
      
9,955,190
  

Long-lived assets consist of property and equipment, operating lease right-of-use assets and intangible assets.

 
As of December 31,
  
   
2020
$
    
2021
$
  
Long-lived assets
            
Southeast Asia
    
509,922
      
1,412,748
  
Rest of Asia
    
128,285
      
262,978
  
Rest of the world
    
22,522
      
56,434
  
     
660,729
      
1,732,160
  


23.
FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2 – Inputs that are based on quoted prices and market observable data of similar instruments in active markets

Level 3 – Unobservable inputs that are supported by little or no market activities

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 

F-77
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

23.
FAIR VALUE MEASUREMENTS (continued)

Derivative instruments are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.

As of December 31, 2020 and 2021, Level 3 assets and liabilities of the Company included investments in exchangeable and convertible loan, investments in sovereign bonds, investments carried at fair value and redeemable preference shares of investees and other assets.

Investments in debt securities – the carrying amount approximates fair value due to its short-term nature.

Other assets – the Company used Market approach to determine the fair value of certain assets by comparing to the sale and purchase transactions of comparable assets in the market, adjusted with differences such as size, physical condition, location and etc.

Investments carried at fair value – the Company used a combination of valuation methodologies, including market and income approaches based on the Company’s best estimate, which is determined by using information including but not limited to the pricing of recent rounds of financing of the investees, future cash flow forecasts, liquidity factors and multiples of a selection of comparable companies.

Convertible Notes – the Company used discounted cash flow method to determine the fair value of the liability component (non-recurring, Level 3). The discounted cash flow takes into account the present value of expected future cash flows from coupon interest and redemption amount, discounted by the implied credit yield as at issuance date or with reference to similar instruments that did not have associated convertible features.

F-78
Table of Contents
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
23.
FAIR VALUE MEASUREMENTS (continued)

Assets and liabilities measured or reported at fair value on a recurring basis are summarized below:

 
Fair value measurement as of December 31, 2020
    
 
   
Quoted prices in
active markets for
identical assets
(Level 1)
$
    
Significant other
observable inputs
(Level 2)
$
    
Unobservable
inputs
(Level 3)
$
    
Total
$
  
                         
Held to maturity investments
    
100,071
      
–
      
286
      
100,357
  
Available-for-sale investments
    
5,688
      
–
      
21,357
      
27,045
  
Equity securities
    
76,000
      
–
      
–
      
76,000
  
Other assets     –       –       19,024       19,024  
Share appreciation rights
    
(11,640
)
    
–
      
–
      
(11,640
)
      170,119       –       40,667       210,786  


 
Fair value measurement as of December 31, 2021
    
 
   
Quoted prices in
active markets for
identical assets
(Level 1)
$
    
Significant other
observable inputs
(Level 2)
$
    
Unobservable
inputs
(Level 3)
$
    
Total
$
  
                         
Held to maturity investments
     937,741       –       450       938,191  
Available-for-sale investments
     185,929       –       34,376       220,305  
Equity securities
     13,184       –       –       13,184  
Investments carried at fair value
     –       –       178,298       178,298  
Other assets     –       –       11,711       11,711  
Derivative assets(1)     –       694       –       694  
Share appreciation rights
     (15,401 )     –       –       (15,401 )
      1,121,453       694       224,835       1,346,982  

(1)
Included in accrued expenses and other assets in the consolidated balance sheets and not designated as hedges.

F-79
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

23.
FAIR VALUE MEASUREMENTS (continued)

Reconciliations of assets and liabilities categorized within Level 3 under the fair value hierarchy are as follow:

 
 
$
 
Available-for-sale investments
 
 
 
 
Balance as of January 1, 2019
 
 
70,374
 
Addition
 
 
72,000
 
Net investment loss included in earnings
 
 
(1,087
)
Net unrealized loss included in other comprehensive income
 
 
(12,869
)
Balance as of December 31, 2019
 
 
128,418
 
Addition
 
 
20,429
 
Conversion into ordinary shares of investees
 
 
(72,000
)
Net investment loss included in earnings
 
 
(51,000
)
Net unrealized loss included in other comprehensive income
 
 
(4,490
)
Balance as of December 31, 2020
 
 
21,357
 
Addition
 
 
35,298
 
Conversion into ordinary shares of investee
 
 
(21,340
)
Net unrealized loss included in other comprehensive income
 
 
(958
)
Translation gain included in other comprehensive income
 
 
19
 
Balance as of December 31, 2021
 
 
34,376
 

Investments carried at fair value
 
 
 
Balance as of January 1, 2019, January 1, 2020 and December 31, 2020
 
 
–
 
Addition
 
 
151,227
 
Net investment gain included in earnings
 
 
27,071
 
Balance as of December 31, 2021
 
 
178,298
 

Other assets
 
 
 
Balance as of January 1, 2019 and January 1, 2020
 
 
–
 
Acquisition of subsidiaries
 
 
8,860
 
Additions
 
 
13,340
Disposals
 
 
(363
)
Write-down included in earnings
 
 
(3,713
)
Foreign exchange gain included in earnings
 
 
900
 
Balance as of December 31, 2020
 
 
19,024
 
Additions
 
 
186
 
Disposals
 
 
(3,513
)
Write-down included in earnings
 
 
(3,627
)
Foreign exchange loss included in earnings
 
 
(359
)
Balance as of December 31, 2021
 
 
11,711
 

F-80
 
SEA LIMITED
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

24.
COMMITMENTS AND CONTINGENCIES

Purchase commitments

The Company has commitments to purchase property and equipment and hosting services of $165,717 and $362,592, committed licensing fee payable for the licensing of game titles of $2,799 and $13,671 and commitment to invest in certain companies of $30,136 and $183,562 as of December 31, 2020 and 2021, respectively.

Minimum guarantee commitments

The Company has commitments to pay minimum guarantee of royalty fee to game developers for certain online games it licensed from those game developers. As of December 31, 2020 and 2021, the minimum guarantee commitment amounted to $24,473 and $62,300, respectively, for its launched games as well as licensed but yet to be launched games.

Others

The Company has commitments to extend credit to customers on demand and interest receivables on non-performing assets which is not accrued. As of December 31, 2020 and 2021, the undrawn credit facilities and interest receivables on non-performing assets amounted to $6,533 and $4,212 and $2,295 and $5,042, respectively.

F-81
Exhibit 2.4
 
DESCRIPTION OF SECURITIES
 
REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT
 
As of December 31, 2021, Sea Limited (“we” or “us”) had the following series of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:
 
Title of each class
  
Trading Symbol(s)
  
Name of each exchange on
which registered
American depositary shares, each representing one Class A ordinary share, par value US$0.0005 per share
 
Class A ordinary shares, par value US$0.0005 per share*
 
*Not for trading, but only in connection with the listing of American depositary shares on the New York Stock Exchange.
  
SE
  
New York Stock Exchange
 
Ordinary Shares
 
General
 
All of our issued and outstanding ordinary shares are fully paid and non-assessable. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their ordinary shares. Our ninth amended and restated memorandum and articles of association prohibit us from issuing bearer shares. We will issue only shares in registered form, which will be issued when registered in our register of members.
 
Dividends
 
The holders of our ordinary shares are entitled to receive such dividends as may be declared by our board of directors subject to our memorandum and articles of association and the Companies Act (As Revised) of the Cayman Islands (“Companies Act”).
 
In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, dividends may be paid only out of profits, which include net earnings and retained earnings undistributed in prior years, and out of share premium, a concept analogous to paid-in surplus in the United States. No dividend may be declared and paid unless our directors determine that, immediately after the payment, we will be able to pay our debts as they fall due in the ordinary course of business and we have funds lawfully available for such purpose.
 
Register of Members
 
Under Cayman Islands law, we must keep a register of members and there must be entered therein:
 

 •
the names and addresses of the members, together with a statement of the shares held by each member, and such statement shall confirm (i) of the amount paid or agreed to be considered as paid, on the shares of each member, (ii) the number and category of shares held by each member, and (iii) whether each relevant category of shares held by a member carries voting rights under the articles of association of the company, and if so, whether such voting rights are conditional;
 

 •
the date on which the name of any person was entered on the register as a member; and


•
the date on which any person ceased to be a member.
 
Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e., the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members will be deemed as a matter of Cayman Islands law to have legal title to the shares as set against its name in the register of members. Our register of members has been, and will be, updated to record and give effect to the issue of Class A ordinary shares by us to The Bank of New York Mellon, as the depositary (or its custodian or nominee). Once our register of members has been updated, the shareholders recorded in the register of members shall be deemed to have legal title to the shares set against their name.
 
If the name of any person is, without sufficient cause, entered in or omitted from the register of members, or if default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member, the person or member aggrieved or any member or the company itself may apply to the Grand Court of the Cayman Islands for an order that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justice of the case, make an order for the rectification of the register.
 
Classes of Ordinary Shares; Conversion
 
Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Except for conversion rights and voting rights, the Class A ordinary shares and Class B ordinary shares carry equal rights and rank pari passu with one another, including the rights to dividends and other capital distributions. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. In addition, upon any direct or indirect sale, transfer, assignment or disposition of any number of Class B ordinary shares by a holder thereof or the direct or indirect transfer or assignment of the voting power attached to such Class B ordinary shares through voting proxy or otherwise to any person or entity which is not a permitted transferee, such Class B ordinary shares will automatically convert into an equal number of Class A ordinary shares. Permitted transferees of our founder, who currently beneficially owns all issued and outstanding Class B ordinary shares, include certain of his relatives so long as our founder retains control of the voting power over the Class B ordinary shares held by such permitted transferees. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances and no Class B ordinary shares are to be issued after our initial public offering.
 
Voting Rights
 
Holders of our ordinary shares have the right to receive notice of, attend, speak and vote at general meetings of our company. Holders of Class A ordinary shares and Class B ordinary shares shall at all times vote together as one class on all resolutions submitted to a vote for shareholders’ approval or authorization, except for certain class consents required under our memorandum and articles of association. Each Class A ordinary share shall be entitled to one vote, and each Class B ordinary share shall be entitled to 15 votes, on all matters subject to the vote at general meetings of our company. At any general meeting a resolution put to the vote of the meeting shall be decided on a poll. An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes cast in a general meeting. A special resolution requires the affirmative vote of two-thirds of the votes cast in a general meeting. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Act and our memorandum and articles of association. A special resolution will be required for important matters such as making changes to our memorandum and articles of association.
 
General Meetings and Shareholder Proposals
 
As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our memorandum and articles of association provide that we may (but are not obliged to) in each year hold a general meeting as our annual general meeting in which case we will specify the meeting as such in the notices calling it, and the annual general meeting will be held at such time and place as may be determined by our directors.
 
Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our memorandum and articles of association allow our shareholders holding shares representing in aggregate not less than one-third of all votes attaching to the issued and outstanding shares of our company entitled to vote at general meetings to requisition an extraordinary general meeting of the shareholders, in which case the directors are obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting; however, our memorandum and articles of association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.
 
A quorum required for a meeting of shareholders consists of one or more shareholders holding, in aggregate, not less than 40% of the votes attaching to all issued and outstanding shares of our company present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Advance notice of at least seven calendar days (exclusive of the day on which it is given or deemed to be given and of the day for which it is given) is required for the convening of our annual general meeting and other shareholders meetings.
 
Transfer of Ordinary Shares
 
Subject to the restrictions in our memorandum and articles of association as set out below, any of our shareholders may transfer all or any of such shareholder’s ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.
 
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also, but is not required to, decline register any transfer of any ordinary share unless:
 

 •
the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;
 

 •
the instrument of transfer is in respect of only one class of shares;
 

 •
the instrument of transfer is properly stamped, if required;
 

 •
in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four;
 

 •
the ordinary shares transferred are free of any lien in favor of us; or
 

 •
a fee of such maximum sum as the New York Stock Exchange may determine to be payable, or such lesser sum as the board of directors may from time to time require, is paid to us in respect thereof.
 
If our directors refuse to register a transfer they are obligated to, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers of shares or of any class of shares may, after compliance with any notice requirement of the New York Stock Exchange, be suspended at such times and for such periods (not exceeding in the whole thirty (30) days in any year) as our board of directors may determine.
 
Issuance of Additional Shares
 
Our memorandum and articles of association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares. Our memorandum and articles of association also authorize our board of directors to establish from time to time one or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including:
 

 •
the designation of the series;
 

 •
the number of shares of the series;


•
the dividend rights, dividend rates, conversion rights, voting rights; and
 

 •
the rights and terms of redemption and liquidation preferences.
 
Our board of directors may issue preference shares without further action by our shareholders to the extent authorized but unissued. Issuance of these shares may dilute the voting power of holders of ordinary shares.
 
Liquidation
 
On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders in proportion to the par value of the shares held by them. We are an exempted company with “limited liability” incorporated under the Companies Act, and under the Companies Act, the liability of our members is limited to the amount, if any, unpaid on the shares respectively held by them. Our memorandum and articles of association contains a declaration that the liability of our members is so limited.
 
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
 
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 calendar days prior to the specified time and place of payment. The ordinary shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.
 
Redemption, Repurchase and Surrender of Ordinary Shares
 
We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors. Our company may also repurchase any of our shares provided that the manner and terms of such purchase have been approved by our board of directors or are otherwise authorized by our memorandum and articles of association. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of a fresh issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if the company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding, or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.
 
Variations of Rights of Shares
 
The rights attached to any class of shares may, unless otherwise provided by the terms of issue of the shares of or the rights attaching to that class, be materially adversely varied only with the written consent of the holders of a majority of the issued shares of that class or with the sanction of an ordinary resolution passed at a separate meeting of the holders of the shares of that class.
 
Inspection of Books and Records
 
Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records (save for our memorandum and articles of association, register of mortgages and charges, and special resolutions of our shareholders). However, we will file our annual audited financial statements with the SEC.
 
Changes in Capital
 
Our shareholders may from time to time by ordinary resolutions:
 

 •
increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution prescribes;
 

 •
consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
 

 •
convert all or any of its paid-up shares into stock and reconvert the stock into paid-up shares of any denomination;
 

 •
sub-divide our existing shares, or any of them into shares of a smaller amount than that fixed by our ninth amended and restated memorandum of association; provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share will be the same as it was in case of the share from which the reduced share is derived; and
 

 •
cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so canceled.
 
Our shareholders may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application by our company for an order confirming such reduction, reduce our share capital and any capital redemption reserve in any manner authorized by law.
 
Differences in Corporate Law
 
The Companies Act is derived, to a large extent, from the older Companies Acts of England, but does not follow recent English law statutory enactments, and accordingly there are significant differences between the Companies Act and the current Companies Act of England. In addition, the Companies Act differs from laws applicable to Delaware corporations and their shareholders. Set forth below is a summary of certain significant differences between the provisions of the Companies Act applicable to us and the laws applicable to Delaware corporations and their shareholders.
 
Mergers and Similar Arrangements
 
The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertakings, property and liabilities in one of such companies as the surviving company and (b) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertakings, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a declaration as to the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she may otherwise be entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
 
A merger between a Cayman Islands parent company and its Cayman Islands subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman Islands subsidiary if a copy of the plan of merger is given to every member of that Cayman Islands subsidiary to be merged unless that member agrees otherwise. For this purpose, a company is a “parent” of a subsidiary if it holds issued shares that together represent at least ninety percent (90%) of the votes at a general meeting of the subsidiary.
 
The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.
 
Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
 

 •
the statutory provisions as to the required majority vote have been met;
 

 •
the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;
 

 •
the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
 

 •
the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.
 
The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentient minority shareholders upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected (within four months), the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands, but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
 
If the arrangement and reconstruction is thus approved, or a tender offer is made and accepted, a dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
 
Shareholders’ Suits
 
In principle, we will normally be the proper plaintiff in any action or proceedings to be brought in respect of a wrong committed against us, and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands court can be expected to apply and follow the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) which permit a minority shareholder to commence a class action against, or a derivative action in the name of, a company to challenge the following acts in the following circumstances:
 

 •
a company acts or proposes to act illegally or ultra vires;
 

 •
the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and
 

 •
those who control the company are perpetrating a “fraud on the minority.”

Directors’ Fiduciary Duties
 
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components, the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director must act in a manner he or she reasonably believes to be in the best interests of the corporation.
 
A director must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interests of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.
 
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company, and therefore he or she owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a personal profit out of his or her position as director (unless the company permits him or her to do so), a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interests or his or her duty to a third-party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, there are indications that the English and commonwealth courts are moving towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.
 
Under our memorandum and articles of association, directors who are in any way, whether directly or indirectly, interested in a contract or proposed contract or transaction with our company must declare the nature of their interest at a meeting of the board of directors. Subject to the New York Stock Exchange listing rules and disqualification by the chairman of the relevant board meeting, a director may vote in respect of any contract or proposed contract notwithstanding his interest.
 
Shareholder Action by Written Resolution
 
Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. The Companies Act and our memorandum and articles of association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.
 
Shareholder Proposals
 
Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.
 
Cayman Islands law does not provide shareholders any right to put proposal before a general meeting and provides limited rights for shareholders to requisition a general meeting. However, these rights may be provided in a company’s articles of association. Our memorandum and articles of association allow our shareholders holding shares representing in aggregate not less than one-third of all votes attaching to the issued and outstanding shares of our company entitled to vote at general meetings to requisition a shareholders’ meeting. Other than this right to requisition a shareholders’ meeting, our memorandum and articles of association do not provide our shareholders with any right to put any proposals before a meeting. As an exempted Cayman Islands company, we may, but are not obliged by law to call shareholders’ annual general meetings.
 
Cumulative Voting
 
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled for a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands but our memorandum and articles of association do not provide for cumulative voting.
 
Removal of Directors
 
Under the Delaware General Corporation Law, a director of a corporation may be removed with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our memorandum and articles of association, directors can be removed by an ordinary resolution. Further, pursuant to our memorandum and articles of association, a director’s office shall be vacated if the director (i) becomes bankrupt or makes any arrangement or composition with his creditors generally; (ii) dies or is found to be of unsound mind; (iii) resigns his office by notice in writing to our company; (iv) without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; or (v) is removed pursuant to any other provisions of our memorandum and articles of association.
 
Transactions with Interested Shareholders
 
The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date on which such person becomes an interested shareholder. An interested shareholder generally is one which owns or owned 15% or more of the target’s outstanding voting shares within the past three years. This has the effect of limiting the ability of a potential acquiror to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction that resulted in the person becoming an interested shareholder. This encourages any potential acquiror of a Delaware public corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.
 
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, the directors of a company are required to comply with the fiduciary duties which they owe to the company under Cayman Islands law, including the duty to ensure that, in their opinion, any such transactions entered into must be bona fide in the best interests of the company, for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.
 
Dissolution and Winding Up
 
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. The Delaware General Corporation Law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board of directors. Under the Companies Act, our company may be dissolved, liquidated or wound up by a special resolution, or by an ordinary resolution on the basis that our company is unable to pay its debts as they fall due. Under Cayman Islands law, the court also has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.
 
Variation of Rights of Shares
 
If at any time, our share capital is divided into different classes of shares, under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our memorandum and articles of association and as permitted by the Companies Act, the rights attached to any class of shares may, unless otherwise provided by the terms of issue of the shares of or the rights attaching to that class, be materially adversely varied only with the written consent of the holders of a majority of the issued shares of that class or with the sanction of an ordinary resolution passed at a separate meeting of the holders of the shares of that class.
 
Amendment of Governing Documents
 
Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As required by the Companies Act, our restated memorandum and articles of association may only be amended by a special resolution of our shareholders.
 
Inspection of Books and Records
 
Under the Delaware General Corporation Law, any shareholder of a corporation may for any proper purpose inspect or make copies of the corporation’s stock ledger, list of shareholders and other books and records.
 
Holders of our shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records (save for our memorandum and articles of association, register of mortgages and charges, and special resolutions of our shareholders). However, we intend to continue to provide our shareholders with our annual audited financial statements.
 
Anti-takeover Provisions
 
Some provisions of our memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including a provision that authorizes our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders.
 
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
 
Rights of Non-resident or Foreign Shareholders
 
There are no limitations imposed by foreign law or by our memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our ordinary shares. In addition, there are no provisions in our ninth amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.
 
Registration Rights
 
We have granted certain registration rights to holders of our registrable securities, which include: (i) any ordinary shares or ordinary shares issued or issuable upon conversion of preference shares or pursuant to pre-emptive right of participation, (ii) any ordinary shares issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, any preference shares or ordinary shares described in (i), (iii) any other ordinary shares owned or thereafter acquired by holders, including ordinary shares issued in respect of the ordinary shares described above, upon any share split, share dividend, recapitalization or a similar event; and (iv) any depositary receipts issued by an institutional depositary upon deposit of any of the foregoing. Set forth below is a description of the registration rights.
 
Demand Registration Rights
 
Holders of at least 25% of the registrable securities outstanding have the right to demand that we file a registration statement covering the registration of the registrable securities. We, however, are not obliged to effect a demand registration if we have within the six-month period preceding the date of such request, already effected a demand registration or F-3 registration, or in which the holders had an opportunity to participate in the piggyback registration. We shall have no obligation to effect more than two demand registrations and such registrations have been declared or ordered effective. We also have the right to postpone the filing of a registration statement for a period of not more than 120 days if our board of directors determines in the good faith that it would be materially detrimental to us and our shareholders for such registration to be effected at such time. We may not utilize this right more than once during any 12-month period and we may not register any other of our securities during such 12-month period.
 
Piggyback Registration Rights
 
If we propose to register any of our shares under the Securities Act for purposes of effecting a public offering of our securities (including, but not limited to, registration statements relating to secondary offerings of our securities, but excluding registration statements relating to any registration pursuant to demand registration rights or Form F-3 registration rights or to any employee benefit plan or a corporate reorganization), we must afford holders of registrable securities an opportunity to include in the registration all or any part of their registrable securities then held by them.
 
Form F-3 Registration Rights
 
Holders of at least 10% of the registrable securities then outstanding have the right to request that we file a registration statement under Form F-3 and any related qualification or compliance with respect to all or a part of the registrable securities then owned by such holders. There will be no limit on the number of times the holders may request registration of registrable securities. However, we are not obligated to effect such registration, qualification or compliance if: (i) Form F-3 is not available for such offering by such holders; (ii) if the anticipated gross proceeds from such offering are less than US$50 million; or (iii) if we have, within the six-month period preceding the date of such request, already effected a Form F-3 registration.
 
We also have the right to postpone the filing of the Form F-3 registration statement for a period of not more than 120 days if our board of directors determines in the good faith that it would be materially detrimental to us and our shareholders for such Form F-3 registration to be effected at such time. We may not utilize this right more than once during any 12-month period and we may not register any other of our securities during such 120-day period.
 
Expenses of Registration
 
We will pay all expenses (other than underwriting discounts and commissions relating to the registrable securities sold by the holders), subject to a cap of expenses to be agreed with us prior to the completion of the sale of the registrable securities, in connection with the demand registration, piggyback registration and Form F-3 registration. In the demand registration, we are not required to pay for any expenses of any registration proceeding begun in response to holders’ exercise of their demand registration rights if the registration request is subsequently withdrawn at the request of the holders of at least a majority of the registrable securities to be registered, subject to a few exceptions. In connection with the piggyback registration and the F-3 registration, we will pay all expenses incurred notwithstanding the cancelation or delay of the registration proceeding for any reason.
 
Termination of Our Obligations on the Registration Rights
 
Notwithstanding the foregoing, we will have no obligations on the demand registration, piggyback registration and Form F-3 registration of any registrable securities (i) three years after the completion of our initial public offering, or (ii) if all such registrable securities proposed to be sold by a holder (and any of its affiliate with whom such holder must aggregate its sales under Rule 144) may then be sold without restrictions pursuant to Rule 144 under the Securities Act.
 
No Registration Rights to Third Parties
 
We covenant and agree that, without the prior written consent of the holders of at least a majority of the registrable securities then outstanding, we will not grant, or cause or permit to be created, for the benefit of any person or entity any registration rights of any kind, whether similar to the demand, piggyback or Form F-3 registration rights, relating to any of our shares or other securities, other than the rights that are subordinate to the rights of the holders.
 
American Depositary Shares
 
The Bank of New York Mellon, as depositary, registers and delivers the American Depositary Shares (ADSs). Each ADS represents one Class A ordinary share (or a right to receive one Class A ordinary share) deposited with The Hong Kong and Shanghai Banking Corporation Limited, as custodian for the depositary. Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The depositary’s office at which the ADSs will be administered and its principal executive office are located at 240 Greenwich Street, New York, New York 10286.
 
A holder may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in such holder’s name, or (ii) by having uncertificated ADSs registered in such holder’s name, or (B) indirectly by holding a security entitlement in ADSs through such holder’s broker or other financial institution that is a direct or indirect participant in The Depository Trust Company, also called DTC. If a holder holds ADSs directly, such holder is a registered ADS holder, also referred to as an ADS holder. This description assumes a holder holds ADSs directly. If a holder holds the ADSs indirectly, such holder must rely on the procedures of such holder’s broker or other financial institution to assert the rights of ADS holders described in this section and should consult with such holder’s broker or financial institution to find out what those procedures are.
 
We will not treat an ADS holder as one of our shareholders and an ADS holder will not have shareholder rights. Cayman Islands law governs shareholder rights. The depositary will be the holder of the Class A ordinary shares underlying the ADSs. A registered holder of ADSs will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
 
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR.
 
Dividends and Other Distributions
 
How will ADS holders receive dividends and other distributions on the shares?
 
The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, upon payment or deduction of its fees and expenses. ADS holders receive these distributions in proportion to the number of shares their ADSs represent.
 
Cash. The depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. Dollars, if it can do so on a reasonable basis and can transfer the U.S. Dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.
 
Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. The depositary will distribute only whole U.S. Dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, ADS holders may lose some or all of the value of the distribution.
 
Shares. The depositary may, and shall if we so request in writing, distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will try to sell shares which would require it to deliver a fraction of an ADS (or ADSs representing those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that distribution.
 
Rights to Purchase Additional Shares. If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case, ADS holders will receive no value for them. The depositary will exercise or distribute rights only if we ask it to and provide satisfactory assurances to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.
 
Other Distributions. The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.
 
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that ADS holders may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to the ADS holders.
 
Deposit, Withdrawal and Cancelation
 
How are ADSs issued?
 
The depositary will deliver ADSs if a holder or a holder’s broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names such holder requests and will deliver the ADSs to or upon the order of the person or persons that made the deposit.
 
How can ADS holders withdraw the deposited securities?
 
ADS holders may surrender their ADSs, for the purpose of withdrawal, at the depositary’s office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at the holder’s request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible. The depositary may charge the holder a fee and its expenses for instructing the custodian regarding delivery of deposited securities.
 
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
 
ADS holders may surrender their ADR to the depositary for the purpose of exchanging their ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.
 
Voting Rights
 
How do ADS holders vote?
 
ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. See “Ordinary Shares” for more information on the voting rights of our Class A ordinary shares underlying the ADSs. If we request the depositary to solicit the holders’ voting instructions (and we are not required to do so), the depositary will notify the holders of a shareholders’ meeting and send or make voting materials available to them. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to the laws of the Cayman Islands and the provisions of our memorandum and articles of association or similar documents, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If we do not request the depositary to solicit a holder’s voting instructions, such holder can still send voting instructions, and, in that case, the depositary may try to vote as such holder instructs, but it is not required to do so.
 
Except by instructing the depositary as described above, ADS holders won’t be able to exercise voting rights unless they surrender their ADSs and withdraw the shares. However, the holders may not know about the meeting enough in advance to withdraw the shares.
 
If we timely asked the depositary to solicit ADS holders’ instructions at least 30 days before the meeting date but the depositary does not receive voting instructions from an ADS holder by the specified date, the depositary will consider such ADS holder to have authorized and directed the depositary to give a discretionary proxy to a person designated by us to vote the number of deposited securities represented by their ADSs. The depositary will give a discretionary proxy in those circumstances to vote on all questions to be voted upon unless we notify the depositary that:
 

 •
we do not wish to receive a discretionary proxy;
 

 •
there is substantial shareholder opposition to the particular question; or
 

 •
the particular question would have an adverse impact on our shareholders.
 
We are required to notify the depositary if one of the conditions specified above exists.
 
We cannot assure ADS holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that the holders may not be able to exercise voting rights and there may be nothing they can do if their shares are not voted as they requested.
 
In order to give ADS holders a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if we request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to be voted upon as far in advance of the meeting date as practicable. Under our memorandum and articles of association, the minimum notice period required to convene a general meeting is seven days.
 
Fees and Expenses
 
Persons depositing or withdrawing shares or ADS
holders must pay:
  
For:
US$5.00 (or less) per 100 ADSs (or portion thereof)
  
Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
     
   
Cancelation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
     
US$0.05 (or less) per ADS (or portion thereof)
  
Any cash distribution to ADS holders
     
A fee equivalent to the fee that would be payable if securities distributed to ADS holders had been shares and the shares had been deposited for issuance of ADSs
  
Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders
     
US$0.05 (or less) per ADS (or portion thereof) per annum
  
Depositary services
     
Registration or transfer fees
  
Transfer and registration of shares on our share register to or from the name of the depositary or its agent when ADS holders deposit or withdraw shares
     
Expenses of the depositary
  
Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)
     
   
Converting foreign currency to U.S. dollars
     
Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes
  
As necessary
     
Any charges incurred by the depositary or its agents for servicing the deposited securities
  
As necessary
 
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
 
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.
 
The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.
 
Payment of Taxes
 
ADS holders will be responsible for any taxes or other governmental charges payable on such holders’ ADSs or on the deposited securities represented by any of such holders’ ADSs. The depositary may refuse to register any transfer of holders’ ADSs or allow such holders to withdraw the deposited securities represented by their ADSs until those taxes or other charges are paid. It may apply payments owed to such holders or sell deposited securities represented by such holders’ ADSs to pay any taxes owed and they will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.
 
Tender and Exchange Offers; Redemption, Replacement or Cancelation of Deposited Securities
 
The depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do so by an ADS holder surrendering ADSs and subject to any conditions or procedures the depositary may establish.
 
If deposited securities are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.
 
If there is any change in the deposited securities such as change in nominal value, a sub-division, combination or other reclassification, or any merger, consolidation, recapitalization or reorganization affecting the issuer of deposited securities in which the depositary receives new securities in exchange for or in lieu of the old deposited securities, the depositary will hold those replacement securities as deposited securities under the deposit agreement. However, if the depositary decides it would not be lawful or practical to hold the replacement securities because those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.
 
If there is a replacement of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute new ADSs representing the new deposited securities or ask ADS holders to surrender their outstanding ADRs in exchange for new ADRs identifying the new deposited securities.
 
If there are no deposited securities underlying ADSs, including if the deposited securities are canceled, or if the deposited securities underlying ADSs have become apparently worthless, the depositary may call for surrender of those ADSs or cancel those ADSs upon notice to the ADS holders.
 
Amendment and Termination
 
How may the deposit agreement be amended?
 
We may agree with the depositary to amend the deposit agreement and the ADRs without the holders’ consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, a holder is considered, by continuing to hold the ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.
 
How may the deposit agreement be terminated?
 
The depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the deposit agreement if:
 

 •
60 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment;
 

 •
we delist the ADSs from an exchange on which they were listed and do not list the ADSs on another exchange;
 

 •
we appear to be insolvent or enter insolvency proceedings;
 

 •
all or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities;
 

 •
there are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or
 

 •
there has been a replacement of deposited securities.
 
If the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the termination date.
 
After the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities if it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities, but, after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any other duties under the deposit agreement except as described in this paragraph.
 
After termination, our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
 
Limitations on Obligations and Liability
 
Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
 
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:
 

 •
are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
 

 •
are not liable if we are or it is prevented or delayed by law or by events or circumstances beyond our or its ability to prevent or counteract with reasonable care or effort from performing our or its obligations under the deposit agreement;
 

 •
are not liable if we or it exercises discretion permitted under the deposit agreement;
 

 •
are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
 

 •
have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on an ADS holder’s behalf or on behalf of any other person;
 

 •
are not liable for the acts or omissions of any securities depository, clearing agency or settlement system;
 

 •
may rely on any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person; and
 

 •
the depositary has no duty to make any determination or provide any information as to our tax status, or any liability for any tax consequences that may be incurred by ADS holders as a result of owning or holding ADSs.
 
In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
 
Requirements for Depositary Actions
 
Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:
 

 •
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities;
 

 •
satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
 

 •
compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.
 
The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.
 
ADS Holders’ Right to Receive the Shares Underlying Such Holders’ ADSs
 
ADS holders have the right to cancel their ADSs and withdraw the underlying shares at any time except:
 

 •
when temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our shares;
 

 •
when such holders owe money to pay fees, taxes and similar charges; or
 

 •
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.
 
This right of withdrawal may not be limited by any other provision of the deposit agreement.
 
Direct Registration System
 
In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is a system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.
 
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.
 
Shareholder Communications; Inspection of Register of Holders of ADSs
 
The depositary will make available for ADS holders’ inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send such holders copies of those communications or otherwise make those communications available to such holders if we ask it to. ADS Holders have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.
 
Exhibit 4.1

SEA LIMITED
 
SECOND AMENDED AND RESTATED SHARE INCENTIVE PLAN
 
PREFACE
 
This Plan contains  separate equity programs: (1) the option and share appreciation rights grant program set forth in Section 5 under which Eligible Persons (as defined in Section 3) may, at the discretion of the Administrator, be granted Options and/or SARs, (2) the share award program set forth in Section 6 under which Eligible Persons may, at the discretion of the Administrator, be awarded restricted or unrestricted Ordinary Shares, and (3) the RSU award program set forth in Section 7 under which Eligible Persons may, at the discretion of the Administrator, be awarded an RSU to be settled in Ordinary Shares or cash per the terms set forth herein.  Section 2 of this Plan contains the general rules regarding the administration of this Plan.  Section 3 sets forth the requirements for eligibility to receive an Award grant under this Plan.  Section 4 describes the authorized shares of the Company that may be subject to Awards granted under this Plan.  Section 8 contains other provisions applicable to all Awards granted under this Plan.  Section 9 provides definitions for certain capitalized terms used in this Plan and not otherwise defined herein.
 
1.          PURPOSE OF THE PLAN.
 
The purpose of this Plan is to promote the success of the Company and the interests of its shareholders by providing a means through which the Company may grant equity-based incentives to attract, motivate, retain and reward certain officers, employees, directors and other eligible persons and to further link the interests of Award recipients with those of the Company’s shareholders generally.
 
2.          ADMINISTRATION.
 
2.1          Administrator.  This Plan shall be administered by and all Awards under this Plan shall be authorized by the Administrator.  The “Administrator” means the Board, one or more committees appointed by the Board (such as the compensation committee of the Board), or one or more persons designated by such committee or committees to administer all or certain aspects of this Plan.  Any such committee appointed by the Board shall be comprised solely of one or more directors or such number of directors as may be required under applicable law.  The Board or a committee comprised solely of directors may also delegate, to the extent permitted by the Companies Law of the Cayman Islands and any other applicable law, to one or more officers of the Company, its powers under this Plan.  The Board may also delegate different levels of authority to different committees with administrative and grant authority under this Plan.  Unless otherwise provided in the Memorandum and Articles of Association of the Company or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute action by the acting Administrator.
 
2.2          Plan Awards; Interpretation; Powers of Administrator.  Subject to the express provisions of this Plan, the Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of Awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within the authority delegated to that committee or person(s)), including, without limitation, the authority to:
 

 (a)
determine eligibility and, from among those persons determined to be eligible, the particular Eligible Persons who will receive Awards;
 

 (b)
grant Awards to Eligible Persons, determine the type, price and number of securities to be offered or awarded to any of such persons, determine the other specific terms and conditions of Awards consistent with the express limits of this Plan, establish the installments (if any) in which such Awards will become exercisable or will vest (which may include, without limitation, performance and/or time-based schedules), the form of payment or settlement with respect to Awards granted hereunder, whether in cash or Ordinary Shares, or determine that no delayed exercisability or vesting is required, establish any applicable performance targets, and establish the events of termination or reversion of such Awards;
 

 (c)
approve the forms of Award Agreements, which need not be identical either as to type of Award or among Participants;
 

 (d)
construe and interpret this Plan and any Award Agreement or other agreements defining the rights and obligations of the Company, its Affiliates, and Participants under this Plan, make factual determinations with respect to the administration of this Plan, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the Awards;
 

 (e)
cancel, modify, or waive the Company’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding Awards, subject to any required consent under Section 8.7.4;
 

 (f)
accelerate or extend the vesting, settlement or exercisability or extend the term of any or all outstanding Awards (within the maximum ten-year term of Awards under Sections 5.4.2 and 6.5) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a termination of employment or services or other events of a personal nature);
 

 (g)
determine Fair Market Value for purposes of this Plan and Awards;
 

 (h)
determine the duration and purposes of leaves of absence that may be granted to Participants without constituting a termination of their employment for purposes of this Plan;
 

 (i)
determine whether, and the extent to which, adjustments are required pursuant to Section 8.3 hereof and authorize the termination, conversion, substitution or succession of awards upon the occurrence of an event of the type described in Section 8.3; and
 

 (j)
implement any procedures, steps, additional or different requirements as may be necessary to comply with any laws that may be applicable to this Plan, any Award or any related documents.
 
2
2.3          Binding Determinations.  Any action taken by, or inaction of, the Company, any Affiliate, the Board or the Administrator relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons.  Neither the Board nor the Administrator, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any Award), and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time.
 
2.4          Reliance on Experts.  In making any determination or in taking or not taking any action under this Plan, the Administrator may obtain and may rely upon the advice of experts, including employees of and professional advisors to the Company.  No director, officer or agent of the Company or any of its Affiliates shall be liable for any such action or determination taken or made or omitted in good faith.
 
2.5          Delegation. The Administrator may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or any of its Affiliates or to third parties.
 
2.6          U.S. Taxpayers.  To the extent that any Eligible Person is subject to taxation in the United States of America (“U.S.”), such Eligible Person shall be subject to the additional terms and conditions relating to Section 409A of the Internal Revenue Code (the “Code”) separately provided in an Exhibit A (“Exhibit A”).  To the extent that any Eligible Person provides services for the Company or any of its Affiliates, either of which files a U.S. tax return, such Eligible Person and any Award granted hereunder will be subject to the additional terms and conditions relating to Section 162(m) as set forth in the separately provided Exhibit A.
 
3.          ELIGIBILITY.
 
Awards may be granted under this Plan only to those persons that the Administrator determines to be Eligible Persons.  An “Eligible Person” means any person who qualifies as one of the following at the time of grant of the respective Award:
 

 (a)
an officer (whether or not a director) or employee of the Company or any of its Affiliates;
 

 (b)
any member of the Board; or
 

 (c)
any director of one of the Company’s Affiliates, or any consultant or advisor who renders or has rendered bona fide services to the Company or one of its Affiliates.
 
3
An advisor or consultant may be selected as an Eligible Person pursuant to clause (c) above only if such person’s participation in this Plan would not adversely affect (1) the Company’s eligibility to rely on the Rule 701 exemption from registration under the Securities Act for the offering of shares issuable under this Plan by the Company, or (2) the Company’s compliance with any other applicable laws.
 
An Eligible Person may, but need not, be granted one or more Awards pursuant to Section 5, Section 6, and/or one or more Awards pursuant to Section 7.  An Eligible Person who has been granted an Award under this Plan may, if otherwise eligible, be granted additional Awards under this Plan if the Administrator so determines.  However, a person’s status as an Eligible Person is not a commitment that any Award will be granted to that person under this Plan.  Furthermore, an Eligible Person who has been granted an Award under any sections of this Plan is not necessarily entitled to an Award under any other section of this Plan, unless otherwise expressly determined by the Administrator.
 
Each Award granted under this Plan must be approved by the Administrator at or prior to the grant of the Award.
 
4.          SHARES SUBJECT TO THE PLAN.
 
4.1          Shares Available.  Subject to the provisions of Section 8.3.1, the shares that may be delivered under this Plan will be the Company’s authorized but unissued Ordinary Shares (and any of its Ordinary Shares held as treasury shares).  The Ordinary Shares issued and delivered may be issued and delivered for any lawful consideration. The Administrator has the sole discretion to determine the type of Ordinary Shares to be granted as Award with the rights and terms as set forth in the Memorandum and Articles of Association. Absent such determination by the Administrator, after the Initial Public Offering, all Ordinary Shares that may be issued and delivered pursuant to the Awards under this Plan, including Voting Ordinary Shares or Non-Voting Ordinary Shares, shall be re-designated as Class A Ordinary Shares on a one-to-one basis.  Any Ordinary Shares distributed pursuant to an Award may be represented by American depositary shares. If the number of Ordinary Shares represented by an American depositary share is other than on a one-to-one basis, the limitations of Section 4.2 shall be adjusted to reflect the distribution of American depositary shares in lieu of Ordinary Shares.
 
4.2          Share Limit.  Subject to the provisions of Section 8.3.1 and further subject to the share counting rules of Section 4.3, the maximum number of Class A Ordinary Shares that may be delivered pursuant to Awards granted under this Plan is (i) 176,775,641 Class A Ordinary Shares plus (ii) an annual increase on each of the first day of year 2023, 2024, 2025 and 2026 by 3% of the total number of ordinary shares of all classes of the Company outstanding on that day immediately before such annual increase (such maximum share number, the “Share Limit”).
 
4
4.3          Replenishment and Reissue of Unvested Awards.  To the extent that an Award is settled in cash or a form other than Ordinary Shares, the shares that would have been delivered had there been no such cash or other settlement shall not be counted against the shares available for issuance or delivery under this Plan.  No Award may be granted under this Plan unless, on the date of grant, the sum of (a) the maximum number of Ordinary Shares issuable or deliverable at any time pursuant to such Award, plus (b) the number of Ordinary Shares that have previously been issued or delivered pursuant to Awards granted under this Plan and have not been repurchased by the Company or, if repurchased by the Company, has been cancelled (and not designated as treasury shares by the Board) in connection with the repurchase, plus (c) the maximum number of Ordinary Shares that may be issued or delivered at any time after such date of grant pursuant to Awards that are outstanding on such date, does not exceed the Share Limit.  Ordinary Shares that are subject to or underlie Options, SARs, or RSUs granted under this Plan that expire or for any reason are canceled or terminated without having been exercised or settled (or Ordinary Shares subject to or underlying the unexercised or unsettled (as applicable) portion of such Options, SARs, or RSUs in the case of Options or SARs that were partially exercised or settled), as well as Ordinary Shares that are subject to, underlie or issued or delivered pursuant to Share Awards made under this Plan that are forfeited to the Company or otherwise repurchased by the Company and held as treasury shares as resolved by the Board (as adjusted pursuant to Section 8.3.1) will again, except to the extent prohibited by law or applicable listing or regulatory requirements, be available for subsequent Award grants under this Plan.  Shares that are exchanged by a Participant or withheld by the Company as full or partial payment in connection with any Award under this Plan, as well as any shares exchanged by a Participant or withheld by the Company or one of its Affiliates to satisfy the tax withholding obligations related to any Award, shall be available for subsequent Awards under this Plan.  In the case of an exercise of a SAR or settlement of an RSU, only the number of Ordinary Shares actually issued or delivered in respect of such exercise or settlement shall be charged against this Plan’s Share Limit.
 
4.4          Reservation of Shares.  The Company shall at all times reserve a number of Ordinary Shares sufficient to cover the Company’s obligations and contingent obligations to deliver shares with respect to Awards then outstanding under this Plan.  The Company shall re-designate all Voting and Non-voting Ordinary Shares into Class A Ordinary Shares on a one-to-one basis immediately prior to the closing of the Initial Public Offering, whether such Ordinary Shares are reserved for the Company’s outstanding Awards or grant of future Awards.
 
5.          OPTION AND SAR GRANT PROGRAM.
 
5.1          Option and SAR Grants in General.
 

 5.1.1
Each Option or SAR shall be evidenced by an Award Agreement in the form approved by the Administrator.  The Award Agreement evidencing an Option or SAR shall contain the terms established by the Administrator for that Award, as well as any other terms, provisions, or restrictions that the Administrator may impose on the Option or SAR or any Ordinary Shares subject to the Option or SAR; in each case subject to the applicable provisions and limitations of this Section 5 and the other applicable provisions and limitations of this Plan.  The Administrator may require that the recipient of an Option or SAR promptly execute and return to the Company his or her Award Agreement evidencing the Award.  In addition, the Administrator may require that the spouse of any married recipient of an Option or SAR also promptly execute and return to the Company the Award Agreement evidencing the Award granted to the recipient or such other spousal consent form that the Administrator may require in connection with the grant of the Award.
 
5

 5.1.2
Ordinary Share Status.  The Administrator will designate an Option granted under this Plan as exercisable for either “Voting Ordinary Shares” or “Non-voting Ordinary Shares”, and such designation shall be set forth in the applicable Award Agreement.
 
5.2          Incentive Stock Option Status.  The Administrator will designate each Option granted under this Plan to a U.S. resident as either an Incentive Stock Option or a Nonqualified Option, and such designation shall be set forth in the applicable Award Agreement.  Any Option granted under this Plan to a U.S. resident that is not expressly designated in the applicable Award Agreement as an Incentive Stock Option will be deemed to be designated a Nonqualified Option under this Plan and not an “incentive stock option” within the meaning of Section 422 of the Code.  Incentive Stock Options shall be subject to the provisions of Section 5.5 in addition to the provisions of this Plan applicable to Options generally.  The Administrator may designate any Option granted under this Plan to a non-U.S. resident in accordance with the rules and regulations applicable to options in the jurisdiction in which such person is a resident.
 

 5.3
Option or SAR Price.
 
5.3.1      Option Pricing Limits.  Subject to the following provisions of this Section 5.3.1, the Administrator will determine the purchase price per share of the Ordinary Shares covered by each Option (the “exercise price” of the Option) at the time of the grant of the Option, which exercise price will be set forth in the applicable Award Agreement.  In no case will the exercise price of an Option be less than the greatest of:
 

 (a)
the par value of an Ordinary Share;
 

 (b)
in the case of an Incentive Stock Option to a US resident and subject to clause (c) below, 100% of the Fair Market Value of an Ordinary Share on the date of grant; or
 

 (c)
in the case of an Incentive Stock Option to a US resident granted to a Participant described in Section 5.5.4, 110% of the Fair Market Value of an Ordinary Share on the date of grant.
 
5.3.2      Payment Provisions.  The Company will not be obligated to deliver certificates for the Ordinary Shares to be purchased upon the exercise of an Option unless and until it receives full payment of the exercise price therefor, all related withholding obligations under Section 8.6 have been satisfied, and all other conditions to the exercise of the Option set forth herein or in the Award Agreement have been satisfied.  The purchase price of any Ordinary Shares purchased upon the exercise of an Option must be paid in full at the time of each purchase in such lawful consideration as may be permitted or required by the Administrator, which may include, without limitation, one or a combination of the following methods:
 

 (a)
cash, check payable to the order of the Company, or electronic funds transfer;
 
6

 (b)
notice and third party payment in such manner as may be authorized by the Administrator;
 

 (c)
the delivery of previously owned Ordinary Shares;
 

 (d)
by a reduction in the number of Ordinary Shares otherwise deliverable pursuant to the Award;
 

 (e)
subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise”; or
 

 (f)
if authorized by the Administrator or specified in the applicable Award Agreement, by a promissory note of the Participant consistent with the requirements of Section 5.3.3.
 
In no event shall any shares newly-issued by the Company be issued for less than the minimum lawful consideration for such shares or for consideration other than consideration permitted by applicable law.  Ordinary Shares used to satisfy the exercise price of an Option (whether previously-owned shares or shares otherwise deliverable pursuant to the terms of the Option) shall be valued at their Fair Market Value on the date of exercise.  Unless otherwise expressly provided in the applicable Award Agreement, the Administrator may eliminate or limit a Participant’s ability to pay the purchase or exercise price of any Award by any method other than cash payment to the Company.  The Administrator may take all actions necessary to alter the method of Option exercise and the exchange and transmittal of proceeds with respect to Participants resident in the PRC not having permanent residence in a country other than the PRC in order to comply with applicable PRC foreign exchange and tax regulations and any other applicable PRC laws and regulations.
 
5.3.3      Acceptance of Notes to Finance Exercise.  The Company may, with the Administrator’s approval in each specific case, accept one or more promissory notes from any Eligible Person in connection with the exercise of any Option; provided that any such note shall be subject to the following terms and conditions:
 

 (a)
The principal of the note shall not exceed the amount required to be paid to the Company upon the exercise, purchase or acquisition of one or more Awards under this Plan and the note shall be delivered directly to the Company in consideration of such exercise, purchase or acquisition.
 

 (b)
The initial term of the note shall be determined by the Administrator; provided that the term of the note, including extensions, shall not exceed a period of five years.
 

 (c)
The note shall provide for full recourse to the Participant and shall bear interest at a rate determined by the Administrator, but not less than the interest rate necessary to avoid the imputation of interest under applicable tax law, rules or regulations, and to avoid any adverse accounting consequences in connection with the exercise, purchase or acquisition.
 
7

 (d)
If the employment or services of the Participant by or to the Company and its Affiliates terminates, the unpaid principal balance of the note shall become due and payable on the 30th business day after such termination; provided, however, that if a sale of the shares acquired on exercise of the Option would cause such Participant to incur liability under Section 16(b) of the Exchange Act, the unpaid balance shall become due and payable on the 10th business day after the first day on which a sale of such shares could have been made without incurring such liability assuming for these purposes that there are no other transactions (or deemed transactions) in securities of the Company by the Participant subsequent to such termination.
 

 (e)
If required by the Administrator or by applicable law, the note shall be secured by a pledge of any shares or rights financed thereby or other collateral, in compliance with applicable law.
 
The terms, repayment provisions, and collateral release provisions of the note and the pledge securing the note shall conform with all applicable rules and regulations as then in effect.
 
5.3.4       Base Price of SARs.  The Administrator will determine the base price per share of the Ordinary Shares covered by each SAR at the time of the grant of the SAR, which base price will be set forth in the applicable Award Agreement and shall conform with all applicable rules and regulations as then in effect.
 

 5.4
Vesting; Term; Exercise Procedure.
 
5.4.1       Vesting.  Except as provided in Section 5.8, an Option or SAR may be exercised only to the extent that it is vested and exercisable.  The Administrator will determine the vesting and/or exercisability provisions of each Option or SAR (which may be based on performance criteria, passage of time or other factors or any combination thereof), which provisions will be set forth in the applicable Award Agreement.  Unless the Administrator otherwise expressly provides, once exercisable an Option or SAR will remain exercisable until the expiration or earlier termination of the Option or SAR.
 
5.4.2       Term.  Each Option and SAR shall expire not more than 10 years after its date of grant.  Each Option and SAR will be subject to earlier termination as provided in or pursuant to Sections 5.6 and 8.3.
 
5.4.3       Exercise Procedure.  Any exercisable Option or SAR will be deemed to be exercised when (a) the applicable exercise procedures in the related Award Agreement have been satisfied (or, in the absence of any such procedures in the related Award Agreement, the Company has received written notice of such exercise from the Participant), and (b) in the case of an Option, the Company has received any required payment made in accordance with Section 5.3 and Section 8.6, and (c) in the case of an Option or SAR, the Company has received any written statement required pursuant to Section 8.5.1.
 
8
5.4.4       Fractional Shares/Minimum Issue.  Fractional share interests will be disregarded, but may be accumulated. The Administrator, however, may determine that cash, other securities, or other property will be paid or transferred in lieu of any fractional share interests.  No Option or SAR may be exercised as to fewer than 100 shares (subject to adjustment pursuant to Section 8.3.1) at one time unless the number as to which the Award is exercised is the total number at the time then subject to the vested and exercisable portion of the Award.  For U.S. residents or taxpayers, any fractional shares subject to an Award shall be rounded down to the nearest whole share.
 

 5.5
Special Limitations on Grant and Terms of Incentive Stock Options.
 
5.5.1       US$100,000 Limit.  To the extent that the aggregate Fair Market Value of shares with respect to which incentive stock options (within the meaning of Section 422 of the Code) first become exercisable by a U.S. resident Participant in any calendar year exceeds US$100,000, taking into account both Ordinary Shares subject to Incentive Stock Options under this Plan and shares subject to incentive stock options under all other plans of the Company or any of its Affiliates, such options will be treated as Nonqualified Options.  For this purpose, the Fair Market Value of the shares subject to options will be determined as of the date the options were awarded.  In reducing the number of options treated as incentive stock options to meet the US $100,000 limit, the most recently granted options will be reduced (recharacterized as Nonqualified Options) first.  To the extent a reduction of simultaneously granted options is necessary to meet the US$100,000 limit, the Administrator may, in the manner and to the extent permitted by law, designate which Ordinary Shares are to be treated as shares acquired pursuant to the exercise of an incentive stock option.
 
5.5.2       Other Code Limits.  Incentive Stock Options may only be granted to US resident individuals that are employees of the Company or one of its Affiliates and satisfy the other eligibility requirements of the Code.  Any Award Agreement relating to Incentive Stock Options will contain or shall be deemed to contain such other terms and conditions as from time to time are required in order that the Option be an “incentive stock option” as that term is defined in Section 422 of the Code.
 
5.5.3       ISO Notice of Sale Requirement.  Any Participant who exercises an Incentive Stock Option shall give prompt written notice to the Company of any sale or other transfer of the Ordinary Shares acquired on such exercise if the sale or other transfer occurs within (a) one year after the exercise date of the Option, or (b) two years after the grant date of the Option.
 
9
5.5.4       Limits on 10% Holders.  No Incentive Stock Option may be granted to any person who, at the time the Incentive Stock Option is granted, is a US resident and owns (or is deemed to own under Section 424(d) of the Code) outstanding shares of the Company (or any of its Affiliates) possessing more than 10% of the total combined voting power of all classes of shares of the Company (or any of its Affiliates), unless the exercise price of such Incentive Stock Option is at least 110% of the Fair Market Value of the shares subject to the Incentive Stock Option and the Incentive Stock Option by its terms is not exercisable more than five years after the date the Incentive Stock Option is granted.
 

 5.6
Effects of Termination of Employment on Options and SARs.
 
5.6.1      Dismissal for Cause.  Unless otherwise provided in the applicable Award Agreement and subject to earlier termination pursuant to or as contemplated by Section 5.4.2 or 8.3, if a Participant’s employment by or service to the Company or any of its Affiliates is terminated by such entity for Cause, the Participant’s Option or SAR will terminate on the Participant’s Severance Date, whether or not the Option or SAR is then vested and/or exercisable.
 
5.6.2       Death or Disability.  Unless otherwise provided in the Award Agreement (consistent with applicable securities laws) and subject to earlier termination pursuant to or as contemplated by Section 5.4.2 or 8.3, if a Participant’s employment by or service to the Company or any of its Affiliates terminates as a result of the Participant’s death or Total Disability:
 

 (a)
the Participant (or his or her Personal Representative or Beneficiary, in the case of the Participant’s Total Disability or death, respectively), will have until the date that is 12 months after the Participant’s Severance Date to exercise the Participant’s Option or SAR (or portion thereof) to the extent that it was vested and exercisable on the Severance Date;
 

 (b)
the Option or SAR, to the extent not vested and exercisable on the Participant’s Severance Date, shall terminate on the Severance Date; and
 

 (c)
the Option or SAR, to the extent exercisable for the 12-month period following the Participant’s Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the 12-month period.
 
5.6.3      Other Terminations of Employment.  Unless otherwise provided in the applicable Award Agreement (consistent with applicable securities laws) and subject to earlier termination pursuant to or as contemplated by Section 5.4.2 or 7.3, if a Participant’s employment by or service to the Company or any of its Affiliates terminates for any reason other than a termination by such entity for Cause or because of the Participant’s death or Total Disability:
 

 (a)
the Participant will have until the date that is 3 months after the Participant’s Severance Date to exercise his or her Option or SAR (or portion thereof) to the extent that it was vested and exercisable on the Severance Date;
 
10

 (b)
the Option or SAR, to the extent not vested and exercisable on the Participant’s Severance Date, shall terminate on the Severance Date; and
 

 (c)
the Option or SAR, to the extent exercisable for the 3-month period following the Participant’s Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the 3-month period.
 

 5.7
Option and SAR Repricing/Cancellation and Regrant/Waiver of Restrictions.  Subject to Section 4 and Section 8.7 and the specific limitations on Options and SARs contained in this Plan, the Administrator from time to time may authorize, generally or in specific cases only, for the benefit of any Eligible Person, any adjustment in the exercise or base price, the vesting schedule, the number of shares subject to, or the term of, an Option or SAR granted under this Plan by cancellation of an outstanding Option or SAR and a subsequent regranting of the Option or SAR, by amendment, by substitution of an outstanding Option or SAR, by waiver or by other legally valid means.  Such amendment or other action may result in, among other changes, an exercise or base price that is higher or lower than the exercise or base price of the original or prior Option or SAR, provide for a greater or lesser number of Ordinary Shares subject to the Option or SAR, or provide for a longer or shorter vesting or exercise period.
 
5.8          Early Exercise Options and SARs.  The Administrator may, in its discretion, designate any Option or SAR as an “early exercise Option” or “early exercise SAR” which, by express provision in the applicable Award Agreement, may be exercised prior to the date such Option or SAR has vested.  If the Participant elects to exercise all or a portion of an early exercise Option or SAR before it is vested, the Ordinary Shares acquired under the Option or SAR which are attributable to the unvested portion of the Option or SAR shall be Restricted Shares.  The applicable Award Agreement will specify the extent (if any) to which and the time (if ever) at which the Participant will be entitled to dividends, voting and other rights in respect of such Restricted Shares prior to vesting, and the restrictions imposed on such shares and the conditions of release or lapse of such restrictions.  Unless otherwise expressly provided in the applicable Award Agreement, such Restricted Shares shall be subject to the provisions of Sections 6.6 through 6.9, below.
 
6.          SHARE AWARD PROGRAM.
 
6.1          Share Awards in General.  Each Share Award shall be evidenced by an Award Agreement in the form approved by the Administrator.  The Award Agreement evidencing a Share Award shall contain the terms established by the Administrator for that Share Award, as well as any other terms, provisions, or restrictions that the Administrator may impose on the Share Award; in each case subject to the applicable provisions and limitations of this Section 6 and the other applicable provisions and limitations of this Plan.  The Administrator may require that the recipient of a Share Award promptly execute and return to the Company his or her Award Agreement evidencing the Share Award.  In addition, the Administrator may require that the spouse of any married recipient of a Share Award also promptly execute and return to the Company the Award Agreement evidencing the Share Award granted to the recipient or such other spousal consent form that the Administrator may require in connection with the grant of the Share Award.
 
11
6.2          Types of Share Awards.  The Administrator shall designate whether a Share Award shall be a Restricted Share Award, and such designation shall be set forth in the applicable Award Agreement.  Furthermore, the Administrator shall designate a Share Award for Voting Ordinary Shares or Non-voting Ordinary Shares, and such designation shall be set forth in the applicable Award Agreement.
 

 6.3
Purchase Price.
 
6.3.1       Pricing Limits.  Subject to the following provisions of this Section 6.3, the Administrator will determine the purchase price per share of the Ordinary Shares covered by each Share Award at the time of grant of the Award.  In no case will such purchase price be less than the par value of the Ordinary Shares.
 
6.3.2       Payment Provisions.  The Company will not be obligated to record in the Company’s register of members, or issue certificates evidencing, Ordinary Shares awarded under this Section 6 unless and until it receives full payment of the purchase price therefor and all other conditions to the purchase, as determined by the Administrator, have been satisfied, at which point the relevant shares shall be issued and noted in the Company’s register of members.  The purchase price of any shares subject to a Share Award must be paid in full at the time of the purchase in such lawful consideration as may be permitted or required by the Administrator, which may include, without limitation, one or a combination of the methods set forth in clauses (a) through (f) in Section 5.3.2 and/or past services rendered to the Company or any of its Affiliates.
 
6.4          Vesting.  The restrictions imposed on the Ordinary Shares subject to a Restricted Share Award (which may be based on performance criteria, passage of time or other factors or any combination thereof) will be set forth in the applicable Award Agreement.
 
6.5          Term.  A Share Award shall either vest or be repurchased by the Company as provided in Section 6.8 not more than 10 years after the date of grant.  Each Share Award will be subject to earlier termination as provided in or pursuant to Sections 6.8 and 8.3.  Any payment of cash or delivery of shares in payment for a Share Award may be delayed until a future date if specifically authorized by the Administrator in writing and by the Participant.
 
6.6          Share Certificates; Fractional Shares.  Share certificates evidencing Restricted Shares will bear a legend making appropriate reference to the restrictions imposed hereunder and will be held by the Company or by a third party designated by the Administrator until the restrictions on such shares have lapsed, the shares have vested in accordance with the provisions of the Award Agreement and Section 6.4, and any related loan has been repaid.  Fractional share interests will be disregarded, but may be accumulated.  The Administrator, however, may determine that cash, other securities, or other property will be paid or transferred in lieu of any fractional share interests. For U.S. residents or taxpayers, any fractional share interests shall be rounded down to the nearest whole share.
 
12
6.7          Dividend and Voting Rights.  Unless otherwise provided in the applicable Award Agreement, a Participant holding Restricted Shares of Voting Ordinary Shares will be entitled to cash dividend and voting rights for all Restricted Shares of Voting Ordinary Shares issued even though they are not vested, but such rights will terminate immediately as to any Restricted Shares which cease to be eligible for vesting or are repurchased by the Company.  Unless otherwise provided in the applicable Award Agreement, a Participant holding Restricted Shares of Non-voting Ordinary Shares will be entitled to cash dividend for all Restricted Shares of Non-voting Ordinary Shares issued even though they are not vested, but such Restricted Shares of Non-voting Ordinary Shares will not be entitled to any voting rights.
 
6.8          Termination of Employment; Return to the Company.  Unless the Administrator otherwise expressly provides, Restricted Shares subject to an Award that remain subject to vesting conditions that have not been satisfied by the time specified in the applicable Award Agreement (which may include, without limitation, the Participant’s Severance Date), will not vest and will be reacquired by the Company in such manner and on such terms as the Administrator provides, which terms shall include, to the extent not prohibited by law, return or repayment of the lower of (a) the Fair Market Value of the Restricted Shares at the time of the termination, or (b) if applicable, the original purchase price of the Restricted Shares, without interest.  The Award Agreement shall specify any other terms or conditions of the repurchase if the Award fails to vest.  Any other Share Award that has not been exercised as of a Participant’s Severance Date shall terminate on that date unless otherwise expressly provided by the Administrator in the applicable Award Agreement.
 
6.9          Waiver of Restrictions.  Subject to Sections 4 and 8.7 and the specific limitations on Share Awards contained in this Plan, the Administrator from time to time may authorize, generally or in specific cases only, for the benefit of any Eligible Person, any adjustment in the vesting schedule, or the restrictions upon or the term of, a Share Award granted under this Plan by amendment, by substitution of an outstanding Share Award, by waiver or by other legally valid means.
 
7.          RSU AWARD PROGRAM
 

 7.1
Each RSU shall be evidenced by an Award Agreement in the form approved by the Administrator. The Award Agreement evidencing a RSU shall contain the terms established by the Administrator for that Award, including terms relating to the vesting and settlement of any RSU, as well as any other terms, provisions, or restrictions that the Administrator may impose on the RSU or any Ordinary Shares subject to the RSU; in each case subject to the applicable provisions and limitations of this Section 5 and the other applicable provisions and limitations of this Plan. The Administrator may require that the recipient of an RSU promptly execute and return to the Company his or her Award Agreement evidencing the Award. In addition, the Administrator may require that the spouse of any married recipient of an RSU also promptly execute and return to the Company the Award Agreement evidencing the Award granted to the recipient or such other spousal consent form that the Administrator may require in connection with the grant of the Award.
 
13

 7.2
Ordinary Share Status.  The Administrator will settle an RSU granted under this Plan for either “Voting Ordinary Shares” or “Non-voting Ordinary Shares”, and such designation shall be set forth in the applicable Award Agreement.
 

 7.3
Vesting.  An RSU may only be settled to the extent that it is vested.  The Administrator will determine the vesting and/or settlement provisions of each RSU (which may be based on performance criteria, passage of time or other factors or any combination thereof), which provisions will be set forth in the applicable Award Agreement.
 

 7.4
Settlement.  Each RSU that vests in accordance with its terms will be settled for the designated number of Ordinary Shares as provided in the Award Agreement, and in any case shall be settled not more than 10 years after its date of grant.  Each RSU will be subject to earlier termination as provided herein.
 

 7.5
Fractional Shares/Minimum Issue.  Fractional share interests will be disregarded, but may be accumulated. The Administrator, however, may determine that cash, other securities, or other property will be paid or transferred in lieu of any fractional share interests.  For U.S. residents or taxpayers, any fractional shares issued to a Participant shall be rounded down to the nearest whole share.
 

 7.6
Termination of Employment; Forfeiture to the Company.  Unless the Administrator otherwise expressly provides, RSUs subject to an Award that remain subject to vesting conditions that have not been satisfied by the time specified in the applicable Award Agreement (which may include, without limitation, the Participant’s Severance Date), will not vest nor will they be settled.  The Award Agreement shall specify any other terms or conditions of the repurchase if the Award fails to vest.  Any other RSU that has not vested as of a Participant’s Severance Date shall terminate on that date unless otherwise expressly provided by the Administrator in the applicable Award Agreement.
 

 7.7
Waiver of Restrictions.  Subject to Sections 4 and 8.7 and the specific limitations on RSUs contained in this Plan, the Administrator from time to time may authorize, generally or in specific cases only, for the benefit of any Eligible Person, any adjustment in the vesting schedule, or the restrictions upon or the term of, an RSU granted under this Plan by amendment, by substitution of an outstanding RSU, by waiver or by other legally valid means.
 
8.          PROVISIONS APPLICABLE TO ALL AWARDS.
 

 8.1
Rights of Eligible Persons, Participants and Beneficiaries.
 
8.1.1      Employment Status.  No Person shall have any claim or rights to be granted an Award (or additional Awards, as the case may be) under this Plan, subject to any express contractual rights (set forth in a document other than this Plan) to the contrary.
 
14
8.1.2      No Employment/Service Contract.  Nothing contained in this Plan (or in any other documents under this Plan or related to any Award) shall confer upon any Eligible Person or Participant any right to continue in the employ or other service of the Company or any of its Affiliates, constitute any contract or agreement of employment or other service or affect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Company or any Affiliate to change such person’s compensation or other benefits, or to terminate his or her employment or other service, with or without cause at any time.  Nothing in this Section 8.1.2, or in Section 8.3 or 8.15, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract.  An Award Agreement shall not constitute a contract of employment or service.
 
8.1.3       Plan Not Funded.  Awards payable under this Plan will be payable in Ordinary Shares or from the general assets of the Company, and (except as to the share reservation provided in Section 4.4) no special or separate reserve, fund or deposit will be made to assure payment of such Awards.  No Participant, Beneficiary or other person will have any right, title or interest in any fund or in any specific asset (including Ordinary Shares, except as expressly provided) of the Company or any of its Affiliates by reason of any Award hereunder.  Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan will create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or any of its Affiliates and any Participant, Beneficiary or other person.  To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to any Award hereunder, such right will be no greater than the right of any unsecured general creditor of the Company.
 
8.1.4      Charter Documents.  The Memorandum and Articles of Association of the Company, as may lawfully be amended from time to time, may provide for additional restrictions and limitations with respect to the Ordinary Shares (including additional restrictions and limitations on the voting or transfer of Ordinary Shares) or priorities, rights and preferences as to securities and interests prior in rights to the Ordinary Shares.  To the extent that these restrictions and limitations are greater than those set forth in this Plan or any Award Agreement, such restrictions and limitations shall apply to any Ordinary Shares acquired pursuant to Awards under this Plan and are incorporated herein by this reference.
 

 8.2
No Transferability; Limited Exception to Transfer Restrictions.
 
8.2.1       Limit on Exercise and Transfer.  Unless otherwise expressly provided in (or pursuant to) this Section 8.2, by applicable law and by the Award Agreement, as the same may be amended:
 

 (a)
all Awards are non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge;
 

 (b)
Awards will be exercised only by the Participant; and
 
15

 (c)
amounts payable or shares issuable pursuant to an Award will be delivered only to (or for the account of), and, in the case of Ordinary Shares, registered in the name of, the Participant.
 
In addition, the shares shall be subject to the restrictions set forth in the applicable Award Agreement.
 
8.2.2       Further Exceptions to Limits on Transfer. The exercise and transfer restrictions in Section 8.2.1 will not apply to:
 

 (a)
transfers to the Company;
 

 (b)
transfers by gift or domestic relations order to one or more “family members” (as that term is defined in SEC Rule 701 promulgated under the Securities Act) of the Participant, including transfers to a trust in which the Participant (or other family member) has more than 50% of the beneficial interest, a foundation in which the Participant (or other family member) controls the management of assets, or an entity in which the Participant (or other family member) owns more than 50% of the voting interest, so long as such transfer is expressly authorized by the Administrator and is in compliance with all applicable laws;
 

 (c)
the designation of a Beneficiary to receive benefits if the Participant dies or, if the Participant has died, transfers to or exercises by the Participant’s Beneficiary, or, in the absence of a validly designated Beneficiary, transfers by will or the laws of descent and distribution; or
 

 (d)
if the Participant has suffered a disability, permitted transfers or exercises on behalf of the Participant by the Participant’s duly authorized legal representative.
 
Notwithstanding anything else in this Section 8.2.2 to the contrary, but subject to compliance with all applicable laws, Incentive Stock Options, RSUs and Restricted Share Awards will be subject to any and all transfer restrictions under the applicable laws and regulations to such awards or necessary to maintain the intended tax consequences of such Awards.  Notwithstanding clause (b) above but subject to compliance with all applicable laws, any contemplated transfer by gift or domestic relations order to one or more family members of a Participant as referenced in clause (b) above is subject to the condition precedent that the transfer be approved by the Administrator in order for it to be effective.  The Administrator may, in its sole discretion, withhold its approval of any such proposed transfer.
 
16

 8.3
Adjustments; Changes in Control.
 
8.3.1       Adjustments.  Subject to Section 8.3.2 below, upon (or, as may be necessary to effect the adjustment, immediately prior to) any reclassification, recapitalization, share split (including a share split in the form of a share dividend) or reverse share split; any merger, combination, consolidation, or other reorganization; any split-up, spin-off, or similar extraordinary dividend distribution in respect of the Ordinary Shares; or any exchange of Ordinary Shares or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of the Ordinary Shares; then the Administrator shall equitably and proportionately adjust (1) the number and type of shares of Ordinary Shares (or other securities) that thereafter may be made the subject of Awards (including the specific share limits, maximums and numbers of shares set forth elsewhere in this Plan), (2) the number, amount and type of Ordinary Shares (or other securities or property) subject to any outstanding Awards, (3) the grant, purchase, exercise or base price of any outstanding Awards, and/or (4) the securities, cash or other property deliverable upon exercise or vesting of any outstanding Awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Plan and the then-outstanding Awards.
 
Unless otherwise expressly provided in the applicable Award Agreement, upon (or, as may be necessary to effect the adjustment, immediately prior to) any event or transaction described in the preceding paragraph or a sale of all or substantially all of the business or assets of the Company as an entirety, the Administrator shall equitably and proportionately adjust the performance standards applicable to any then-outstanding performance-based Awards to the extent necessary to preserve (but not increase) the level of incentives by this Plan and the then-outstanding performance-based Awards.
 
It is intended that, if possible, any adjustments contemplated by the preceding two paragraphs be made in a manner that satisfies applicable legal, tax and accounting (so as to not trigger any charge to earnings with respect to such adjustment) requirements.
 
Without limiting the generality of Section 2.3, any good faith determination by the Administrator as to whether an adjustment is required in the circumstances pursuant to this Section 8.3.1, and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.
 
Unless otherwise expressly provided by the Administrator, in no event shall a conversion of one or more outstanding shares of the Company’s preferred share (if any) or any new issuance of securities by the Company for consideration be deemed, in and of itself, to require an adjustment pursuant to this Section 8.3.1.
 
8.3.2       Consequences of a Change in Control Event.  Upon the occurrence of a Change in Control Event, the Administrator may make provision for a cash payment in settlement of, or for the assumption, substitution or exchange of any or all outstanding Awards (or the cash, securities or other property deliverable to the holder(s) of any or all outstanding Awards) based upon, to the extent relevant in the circumstances, the distribution or consideration payable to holders of the Ordinary Shares upon or in respect of such event.
 
17
The Administrator may, in its sole discretion, provide in the applicable Award Agreement or by an amendment thereto for the accelerated vesting of one or more Awards to the extent such Awards are outstanding upon a Change in Control Event or such other events or circumstances as the Administrator may provide.
 
The Administrator may adopt such valuation methodologies for outstanding Awards as it deems reasonable in the event of a cash, securities or other property settlement.  In the case of Options and SARs, but without limitation on other methodologies, the Administrator may base such settlement solely upon the excess (if any) of the amount payable upon or in respect of such event over the exercise or base price of the Option or SAR, as applicable, to the extent of the then vested and exercisable shares subject to the Option or SAR.
 
In any of the events referred to in this Section 8.3.2, the Administrator may take such action contemplated by this Section 8.3.2 prior to such event (as opposed to on the occurrence of such event) to the extent that the Administrator deems the action necessary to permit the Participant to realize the benefits intended to be conveyed with respect to the underlying shares.  Without limiting the generality of the foregoing, the Administrator may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of the Award if an event giving rise to an acceleration does not occur.
 
Notwithstanding the foregoing, any escrow, holdback, earnout or similar provisions in the definitive documents relating to such Change in Control may apply to any payment to the holders of Options, SARs, Share Award or RSUs to the same extent and in the same manner as such provisions apply to the holders of Ordinary Shares. In addition, Participants will be required to execute any definitive transaction documents in connection with any Change in Control at the request of the Company or its Subsidiaries or Affiliates, or any of their collective successors.
 
18
8.3.3       Early Termination of Awards.  Upon the occurrence of a Change in Control Event, each then-outstanding Award (whether or not vested and/or exercisable) shall terminate, subject to any provision that has been expressly made by the Administrator, through a plan of reorganization or otherwise, for the survival, substitution, assumption, exchange or other continuation or settlement of such Award and provided that, in the case of Options and SARs that will not survive or be substituted for, assumed, exchanged, or otherwise continued or settled in the Change in Control Event, the holder of such Award shall be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise his or her outstanding and vested Options and SARs in accordance with their terms before the termination of the Awards (except that in no case shall more than ten days’ notice of the impending termination be required).  For purposes of this Section 8.3, an Award shall be deemed to have been “assumed” if (without limiting other circumstances in which an Award is assumed) the Award continues after the Change in Control Event, and/or is assumed and continued by a Parent (as such term is defined in the definition of Change in Control Event) following a Change in Control Event, and confers the right to purchase or receive, as applicable and subject to vesting and the other terms and conditions of the Award, for each Ordinary Share subject to the Award immediately prior to the Change in Control Event, the consideration (whether cash, shares, or other securities or property) received in the Change in Control Event by the shareholders of the Company for each Ordinary Share sold or exchanged in such transaction (or the consideration received by a majority of the shareholders participating in such transaction if the shareholders were offered a choice of consideration); provided, however, that if the consideration offered for an Ordinary Share in the transaction is not solely the ordinary or common shares of a successor company or a Parent, the Administrator may provide for the consideration to be received upon exercise or payment of the Award, for each share subject to the Award, to be solely ordinary or common shares (as applicable) of the successor company or a Parent equal in Fair Market Value to the per share consideration received by the shareholders participating in the Change in Control Event.
 
8.3.4      Other Acceleration Rules.  The Administrator may override the provisions of this Section 8.3 as to any Award by express provision in the applicable Award Agreement and may accord any Participant a right to refuse any acceleration, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Administrator may approve.
 

 8.4
Termination of Employment or Services.
 
8.4.1       Events Not Deemed a Termination of Employment.  Unless the Administrator otherwise expressly provides with respect to a particular Award, if a Participant’s employment by or service to the Company or an Affiliate terminates but immediately thereafter the Participant continues in the employ of or service to another Affiliate or the Company, as applicable, the Participant shall be deemed to have not had a termination of employment or service for purposes of this Plan and the Participant’s Awards.  Unless the express policy of the Company or the Administrator otherwise provides, a Participant’s employment relationship with the Company or any of its Affiliates shall not be considered terminated solely due to any sick leave, military leave, or any other leave of absence authorized by the Company or any Affiliate or the Administrator; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than three months.  In the case of any Participant on an approved leave of absence, continued vesting of the Award while on leave from the employ of or service with the Company or any of its Affiliates will be suspended until the Participant returns to service, unless the Administrator otherwise provides or applicable law otherwise requires.  In no event shall an Award be exercised after the expiration of the term of the Award set forth in the Award Agreement.
 
19
8.4.2       Effect of Change of Affiliate Status.  For purposes of this Plan and any Award, if an entity ceases to be an Affiliate, a termination of employment or service will be deemed to have occurred with respect to each Eligible Person in respect of such Affiliate who does not continue as an Eligible Person in respect of another Affiliate that continues as such after giving effect to the transaction or other event giving rise to the change in status.
 
8.4.3      Administrator Discretion.  Notwithstanding the provisions of Section 5.6 or 6.8, in the event of, or in anticipation of, a termination of employment or service with the Company or any of its Affiliates for any reason, the Administrator may accelerate the vesting and exercisability of all or a portion of the Participant’s Award, and/or, subject to the provisions of Sections 5.4.2 and 8.3, extend the exercisability period of the Participant’s Option or SAR upon such terms as the Administrator determines and expressly sets forth in or by amendment to the Award Agreement.
 
8.4.4       Termination of Consulting or Affiliate Services.  If the Participant is an Eligible Person solely by reason of clause (c) of Section 3, the Administrator shall be the sole judge of whether the Participant continues to render services to the Company or any of its Affiliates, unless a written contract or the Award Agreement otherwise provides.  If, in these circumstances, the Company or any Affiliate notifies the Participant in writing that a termination of the Participant’s services to the Company or any Affiliate has occurred for purposes of this Plan, then (unless the contract or the Award Agreement otherwise expressly provides), the Participant’s termination of services with the Company or Affiliate for purposes of this Plan shall be the date which is 10 days after the mailing of the notice by the Company or Affiliate or, in the case of a termination for Cause, the date of the mailing of the notice.
 

 8.5
Compliance with Laws.
 
8.5.1       General.  This Plan, the granting and vesting of Awards under this Plan, and the offer, issuance and delivery of Ordinary Shares, the acceptance of promissory notes and/or the payment of money under this Plan or under Awards are subject to compliance with all applicable laws, rules and regulations and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  Any person acquiring any securities under this Plan will, if requested by the Company, provide such assurances and representations to the Company as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.
 
8.5.2       Compliance with Securities Laws.  No Participant shall sell, pledge or otherwise transfer Ordinary Shares acquired pursuant to an Award or any interest in such shares except in accordance with the express terms of this Plan and the applicable Award Agreement.  Any attempted transfer in violation of this Section 8.5 shall be void and of no effect.  Without in any way limiting the provisions set forth above, no Participant shall make any disposition of all or any portion of Ordinary Shares acquired or to be acquired pursuant to an Award, except in compliance with all applicable securities laws and unless and until:
 
20

 (a)
there is then in effect a registration statement under the Securities Act or other applicable securities laws in other jurisdictions covering such proposed disposition and such disposition is made in accordance with such registration statement;
 

 (b)
such disposition is made in accordance with Rule 144 under the Securities Act or other comparable securities regulations in other jurisdictions; or
 

 (c)
such Participant notifies the Company of the proposed disposition and furnishes the Company with a statement of the circumstances surrounding the proposed disposition, and, if requested by the Company, furnishes to the Company an opinion of counsel acceptable to the Company’s counsel, that such disposition will not require registration under the Securities Act or other applicable securities laws and will be in compliance with all applicable securities laws.
 
Notwithstanding anything else herein to the contrary, neither the Company or any Affiliate has any obligation to register the Ordinary Shares or file any registration statement under securities laws.
 
8.5.3       Share Legends.  All certificates evidencing Ordinary Shares issued or delivered under this Plan shall bear the following legends where appropriate and/or any other appropriate or required legends under applicable laws:
 
“OWNERSHIP OF THIS CERTIFICATE, THE SHARES EVIDENCED BY THIS CERTIFICATE AND ANY INTEREST THEREIN ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS ON TRANSFER UNDER APPLICABLE LAW AND UNDER AGREEMENTS WITH THE COMPANY, INCLUDING RESTRICTIONS ON SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION.”
 
“THE SHARES ARE SUBJECT TO THE COMPANY’S RIGHT OF FIRST REFUSAL UNDER THE COMPANY’S SHARE INCENTIVE PLAN AND AGREEMENTS WITH THE COMPANY THEREUNDER.”
 
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (“ACT”) OR ANY APPLICABLE SECURITIES, NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.  NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE SECURITIES LAWS IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT OR OTHER COMPARABLE SECURITIES REGULATIONS, OR IN THE OPINION OF COUNSEL TO THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH ANY OTHER APPLICABLE SECURITIES LAWS.”
 
21
8.5.4       Confidential Information.  Any financial or other information relating to the Company obtained by Participants in connection with or as a result of this Plan or their Awards shall be treated as confidential.
 

 8.6
Tax Withholding.
 
8.6.1       Tax Withholding.  Upon any exercise, vesting, or payment of any Award or upon the disposition of Ordinary Shares acquired pursuant to the exercise of an Incentive Stock Option prior to satisfaction of the holding period requirements of Section 422 of the Code, the Company or any of its Affiliates shall have the right at its option to:
 

 (a)
require the Participant (or the Participant’s Personal Representative or Beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount of any taxes which the Company or Affiliate may be required to withhold with respect to such Award event or payment;
 

 (b)
deduct from any amount otherwise payable (in respect of an Award or otherwise) in cash to the Participant (or the Participant’s Personal Representative or Beneficiary, as the case may be) the minimum amount of any taxes which the Company or Affiliate may be required to withhold with respect to such Award event or payment; or
 

 (c)
reduce the number of Ordinary Shares to be delivered by (or otherwise reacquire shares held by the Participant) the appropriate number of Ordinary Shares, valued at their then Fair Market Value, to satisfy the minimum withholding obligation.
 
In any case where a tax is required to be withheld (including taxes in Singapore and the PRC where applicable) in connection with the delivery of Ordinary Shares under this Plan (including the sale of Ordinary Shares as may be required to comply with foreign exchange rules in the PRC for Participants resident in the PRC), the Administrator may in its sole discretion (subject to Section 8.5) grant (either at the time of the Award or thereafter) to the Participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, to have the Company reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their Fair Market Value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the minimum applicable withholding obligation on exercise, vesting or payment.  In no event shall the shares withheld exceed the minimum whole number of shares required for tax withholding under applicable law.  The Company may, with the Administrator’s approval, accept one or more promissory notes from any Eligible Person in connection with taxes required to be withheld upon the exercise, vesting or payment of any Award under this Plan; provided that any such note shall be subject to terms and conditions established by the Administrator and the requirements of applicable law.

22
 
8.6.2       Tax Loans.  If so provided in the Award Agreement or otherwise authorized by the Administrator, the Company may, to the extent permitted by law, authorize a loan to an Eligible Person in the amount of any taxes that the Company or any of its Affiliates may be required to withhold with respect to Ordinary Shares received (or disposed of, as the case may be) pursuant to a transaction described in Section 8.6.1.  Such a loan will be for a term and at a rate of interest and pursuant to such other terms and conditions as the Company may establish, subject to compliance with applicable law.  Such a loan need not otherwise comply with the provisions of Section 5.3.3.
 

 8.7
Plan and Award Amendments, Termination and Suspension.
 
8.7.1       Board Authorization.  The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part.  No Awards may be granted during any period that the Board suspends this Plan.
 
8.7.2       Shareholder Approval.  To the extent then required by applicable law or any applicable listing agency or required under applicable tax law, rules or regulations, to preserve the intended tax consequences of this Plan, or deemed necessary or advisable by the Board, any amendment to this Plan shall be subject to shareholder approval.
 
8.7.3       Amendments to Awards.  Without limiting any other express authority of the Administrator under (but subject to) the express limits of this Plan, the Administrator by agreement or resolution may waive conditions of or limitations on Awards to Participants that the Administrator in the prior exercise of its discretion has imposed, without the consent of a Participant, and (subject to the requirements of Sections 2.2 and 7.7.4) may make other changes to the terms and conditions of Awards.
 
8.7.4       Limitations on Amendments to Plan and Awards.  No amendment, suspension or termination of this Plan or amendment of any outstanding Award shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of the Participant or obligations of the Company under any Award granted under this Plan prior to the effective date of such change.  Changes, settlements and other actions contemplated by Section 8.3 shall not be deemed to constitute changes or amendments for purposes of this Section 8.7.
 
8.8          Privileges of Share Ownership.  Except as otherwise expressly authorized by the Administrator, a Participant will not be entitled to any privilege of share ownership as to any Ordinary Shares not actually delivered to and held of record by the Participant.  Except as expressly required by Section 8.3.1, no adjustment will be made for dividends or other rights as a shareholder for which a record date is prior to such date of delivery.
 
23
8.9          Share-Based Awards in Substitution for Awards Granted by Other Company.  Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee share options, share appreciation rights, restricted shares or other share-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Company or one of its Affiliates, in connection with a distribution, merger, amalgamation or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Company or one of its Affiliates, directly or indirectly, of all or a substantial part of the shares or assets of the employing entity.  The Awards so granted need not comply with other specific terms of this Plan, provided the Awards reflect only adjustments giving effect to the assumption or substitution consistent with the conversion applicable to the Ordinary Shares in the transaction and any change in the issuer of the security.  Unless otherwise expressly determined by the Administrator, any shares that are delivered and any Awards that are granted by, or become obligations of, the Company, as a result of the assumption by the Company of, or in substitution for, outstanding awards previously granted by an acquired company (or previously granted by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Company or one of its Affiliates in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares available for issuance under this Plan.
 
8.10          Effective Date of the Plan.  This Plan is effective upon the closing of the Initial Public Offering.  All Awards granted or in effect prior to the Effective Date shall be governed by the terms of this Plan as amended and restated.
 
8.11          Term of the Plan.  Unless earlier terminated by the Board, this Plan will terminate at the close of business on the day before the 10th anniversary of the Effective Date.  After the termination of this Plan either upon such stated expiration date or its earlier termination by the Board, no additional Awards may be granted under this Plan, but previously granted Awards (and the authority of the Administrator with respect thereto, including the authority to amend such Awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.
 

 8.12
Governing Law/Severability.
 
8.12.1     Choice of Law.  This Plan, the Awards, all documents evidencing Awards and all other related documents will be governed by, and construed in accordance with, the laws of the Cayman Islands.
 
8.12.2     Severability.  If it is determined that any provision of this Plan or an Award Agreement is invalid and unenforceable, the remaining provisions of this Plan and/or the Award Agreement, as applicable, will continue in effect provided that the essential economic terms of this Plan and the Award can still be enforced.
 
8.13          Captions.  Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference.  Such headings will not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.
 
8.14          Non-Exclusivity of Plan.  Nothing in this Plan will limit or be deemed to limit the authority of the Board or the Administrator to grant awards or authorize any other compensation, with or without reference to the Ordinary Shares, under any other plan or authority.
 
24
8.15          No Restriction on Corporate Powers.  The existence of this Plan, the Award Agreements, and the Awards granted hereunder, shall not limit, affect or restrict in any way the right or power of the Board or the shareholders of the Company to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the Company’s or any Affiliate’s capital structure or its business; (b) any merger, amalgamation, consolidation or change in the ownership of the Company or any Affiliate; (c) any issue of bonds, debentures, capital, preferred or prior preference shares ahead of or affecting the Company’s authorized shares or the rights thereof; (d) any dissolution or liquidation of the Company or any Affiliate; (e) any sale or transfer of all or any part of the Company or any Affiliate’s assets or business; or (f) any other corporate act or proceeding by the Company or any Affiliate.  No Participant, Beneficiary or any other person shall have any claim under any Award or Award Agreement against any member of the Board or the Administrator, or the Company or any employees, officers or agents of the Company or any Affiliate, as a result of any such action.
 
8.16          Other Company Compensation or Benefit Programs.  Payments and other benefits received by a Participant under an Award made pursuant to this Plan shall not be deemed a part of a Participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Affiliate, except where the Administrator or the Board expressly otherwise provides or authorizes in writing.  Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans or arrangements of the Company or any Affiliate.
 
9.          DEFINITIONS.
 
“Administrator” has the meaning given to such term in Section 2.1.
 
“Affiliate” means (a) any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the determination, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, or (b) any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the determination, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
 
“Award” means an award of any Option, SAR, Share Award, or RSU, or any combination thereof, whether alternative or cumulative, authorized by and granted under this Plan.
 
“Award Agreement” means any writing, approved by the Administrator, setting forth the terms of an Award that has been duly authorized and approved.
 
“Award Date” means the date upon which the Administrator took the action granting an Award or such later date as the Administrator designates as the Award Date at the time of the grant of the Award.

25
“Beneficiary” means the person, persons, trust or trusts designated by a Participant, or, in the absence of a designation, entitled by will or the laws of descent and distribution, to receive the benefits specified in the Award Agreement and under this Plan if the Participant dies, and means the Participant’s executor or administrator if no other Beneficiary is designated and able to act under the circumstances.
 
“Board” means the Board of Directors of the Company.
 
“Cause” with respect to a Participant means (unless otherwise expressly provided in the applicable Award Agreement, or another applicable contract with the Participant that defines such term for purposes of determining the effect that a “for cause” termination has on the Participant’s Awards) a termination of employment or service based upon a finding by the Company or any of its Affiliates, acting in good faith and based on its reasonable belief at the time, that the Participant:
 

 (a)
has been negligent in the discharge of his or her duties to the Company or any Affiliate, has refused to perform stated or assigned duties or is incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties;
 

 (b)
has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or use of inside information, customer lists, trade secrets or other confidential information;
 

 (c)
has breached a fiduciary duty, or willfully and materially violated any other duty, law, rule, regulation or policy of the Company or any of its Affiliates; or has been convicted of, or pled guilty or nolo contendere to, a felony or misdemeanor (other than minor traffic violations or similar offenses);
 

 (d)
has materially breached any of the provisions of any agreement with the Company or any of its Affiliates;
 

 (e)
has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Company or any of its Affiliates;
 

 (f)
has improperly induced a vendor or customer to break or terminate any contract with the Company or any of its Affiliates or induced a principal for whom the Company or any Affiliate acts as agent to terminate such agency relationship; or
 

 (g)
has material breached any proprietary information and invention assignment agreement entered into with the Company or any Affiliate.
 
A termination for Cause shall be deemed to occur (subject to reinstatement upon a contrary final determination by the Administrator) on the date on which the Company or any Affiliate first delivers written notice to the Participant of a finding of termination for Cause.
 
26
“Change in Control Event” means any of the following:
 

 (a)
Approval by shareholders of the Company (or, if no shareholder approval is required, by the Board alone) of the complete dissolution or liquidation of the Company, other than in the context of a business combination that does not constitute a Change in Control Event under paragraph (c) below;
 

 (b)
the acquisition of the Company or of more than 50% of all of the outstanding Shares of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, amalgamation, scheme of arrangement, consolidation, tender offer, or Share purchase, but excluding any merger effected exclusively for the purpose of changing the domicile of the Company or any bona fide equity financing transaction primarily for fund raising purposes) unless the Company’s shareholders of record as constituted immediately prior to such transaction or series of related transactions will, immediately after such transaction or series of related transactions (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold a majority of the voting power of the surviving or acquiring entity (or its parent);
 

 (c)
a sale or transfer of all or substantially all of the assets of the Company (or any series of related transactions resulting in such sale or transfer of all or substantially all of the assets of the Company);
 
provided, however, that a transaction shall not constitute a Change in Control Event if it is in connection with the underwritten public offering of the Company’s securities.
 
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.
 
“Company” means Sea Limited, an exempted company organized under the Companies Law of the Cayman Islands, and its successors.
 
“Class A Ordinary Shares” means Class A ordinary shares of the Company, each par value US$0.0005 per share.
 
“Effective Date” means the closing date of the Initial Public Offering.
 
“Eligible Person” has the meaning given to such term in Section 3 of this Plan.
 
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time.
 
“Fair Market Value,” for purposes of this Plan and unless otherwise determined or provided by the Administrator in the circumstances, means as follows:
 
27

 (a)
If the Ordinary Shares are listed or admitted to trade on the New York Stock Exchange or other national or international securities exchange (the “Exchange”), the Fair Market Value shall equal the closing price of an Ordinary Share as reported on the composite tape for securities on the Exchange for the date in question, or, if no sales of Ordinary Shares were made on the Exchange on that date, the closing price of an Ordinary Share as reported on said composite tape for the next preceding day on which sales of Ordinary Shares were made on the Exchange.  The Administrator may, however, provide with respect to one or more Awards that the Fair Market Value shall equal the closing price of an Ordinary Share as reported on the composite tape for securities listed on the Exchange on the last trading day preceding the date in question or the average of the high and low trading prices of an Ordinary Share as reported on the composite tape for securities listed on the Exchange for the date in question or the most recent trading day.
 

 (b)
If the Ordinary Shares are not listed or admitted to trade on a national securities exchange, the Fair Market Value shall be the value as reasonably determined by the Administrator for purposes of the Award in the circumstances (with the expectation being that, in the case of a valuation as of a transaction in which Ordinary Shares or similar securities are being sold or exchanged, such determination by the Administrator will be principally based on the value of the consideration received by the holders of the securities sold or exchanged in such transaction).
 
The Administrator also may adopt a different methodology for determining Fair Market Value with respect to one or more Awards if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other treatment for the particular Award(s) (for example, and without limitation, the Administrator may provide that Fair Market Value for purposes of one or more Awards will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date).
 
Any determination as to Fair Market Value made pursuant to this Plan shall be made without regard to any restriction other than a restriction which, by its terms, will never lapse, and shall be conclusive and binding on all persons with respect to Awards granted under this Plan.
 
“Incentive Stock Option” means an Option that is designated and intended as an “incentive stock option” within the meaning of Section 422 of the Code, the award of which contains such provisions (including but not limited to the receipt of shareholder approval of this Plan, if the award is made prior to such approval) and is made under such circumstances and to such persons who are U.S. residents as may be necessary to comply with that Section.
 
“Initial Public Offering” means the Company’s first public offering underwritten on a firm commitment basis of its Class A Ordinary Shares or ADSs representing such Class A Ordinary Shares.
 
“Nonqualified Option” means an Option that is not an “incentive stock option” within the meaning of Section 422 of the Code and includes any Option designated or intended as a Nonqualified Option and any Option designated or intended as an Incentive Stock Option that fails to meet the applicable legal requirements thereof.
 
28
“Non-voting Ordinary Shares” has the meaning given to such term in Section 5.1 of this Plan.
 
“Option” means an option to purchase Ordinary Shares granted under Section 5 of this Plan.
 
“Ordinary Shares” means prior to the closing of the Initial Public Offering, the Company’s Ordinary Shares, and following the closing of the Initial Public Offering, the Company’s Class A Ordinary Shares, and such other securities or property as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under Section 8.3.1 of this Plan.
 
“Participant” means an Eligible Person who has been granted and holds an Award under this Plan.
 
“Personal Representative” means the person or persons who, upon the disability or incompetence of a Participant, has acquired on behalf of the Participant, by legal proceeding or otherwise, the power to exercise the rights or receive benefits under this Plan by virtue of having become the legal representative of the Participant.
 
“Plan” means this Sea Limited Share Incentive Plan, as it may hereafter be amended from time to time.
 
“Restricted Shares” means Ordinary Shares awarded to a Participant under this Plan, subject to payment of such consideration and such conditions on vesting (which may include, among others, the passage of time, specified performance objectives or other factors) and such transfer and other restrictions as are established in or pursuant to this Plan and the related Award Agreement, to the extent such remain unvested and restricted under the terms of the applicable Award Agreement.
 
“Restricted Share Award” means an award of Restricted Shares.
 
“RSU” means a contractual right to receive either cash or Ordinary Shares awarded to a Participate under this Plan, subject to payment of such consideration and such conditions on vesting (which may include, among others, the passage of time, specified performance objectives or other factors) and such transfer and other restrictions as are established in or pursuant to this Plan and the related Award Agreement, to the extent such remain unvested and restricted under the terms of the applicable Award Agreement.
 
“SAR” means a share appreciation right, representing the right, subject to the terms and conditions of the Plan and the applicable Award Agreement, to receive a payment, in cash and/or Ordinary Shares (as specified in the applicable Award Agreement), equal to the excess of the Fair Market Value of an Ordinary Share on the date the SAR is exercised over the “base price” of the SAR, which base price shall be set forth in the applicable Award Agreement.
 
“Securities Act” means the U.S. Securities Act of 1933, as amended from time to time.

29
“Severance Date” with respect to a particular Participant means, unless otherwise provided in the applicable Award Agreement:


 (a)
if the Participant is an Eligible Person under clause (a) of Section 3 and the Participant’s employment by the Company or any of its Affiliates terminates (regardless of the reason), the last day that the Participant is actually employed by the Company or such Affiliate (unless, immediately following such termination of employment, the Participant is a member of the Board or, by express written agreement with the Company or any of its Affiliates, continues to provide other services to the Company or any Affiliate as an Eligible Person under clause (c) of Section 3, in which case the Participant’s Severance Date shall not be the date of such termination of employment but shall be determined in accordance with clause (b) or (c) below, as applicable, in connection with the termination of the Participant’s other services);
 

 (b)
if the Participant is not an Eligible Person under clause (a) of Section 3 but is an Eligible Person under clause (b) thereof, and the Participant ceases to be a member of the Board (regardless of the reason), the last day that the Participant is actually a member of the Board (unless, immediately following such termination, the Participant is an employee of the Company or any of its Affiliates or, by express written agreement with the Company or any of its Affiliates, continues to provide other services to the Company or any Affiliate as an Eligible Person under clause (c) of Section 3, in which case the Participant’s Severance Date shall not be the date of such termination but shall be determined in accordance with clause (a) above or (c) below, as applicable, in connection with the termination of the Participant’s employment or other services);
 

 (c)
if the Participant is not an Eligible Person under clause (a) or clause (b) of Section 3 but is an Eligible Person under clause (c) thereof, and the Participant ceases to provide services to the Company or any of its Affiliates as determined in accordance with Section 8.4.4 (regardless of the reason), the last day that the Participant actually provides services to the Company or such Affiliate as an Eligible Person under clause (c) of Section 3 (unless, immediately following such termination, the Participant is an employee of the Company or any of its Affiliates or is a member of the Board, in which case the Participant’s Severance Date shall not be the date of such termination of services but shall be determined in accordance with clause (a) or (b) above, as applicable, in connection with the termination of the Participant’s employment or membership on the Board).
 
“Share Award” means an award of Ordinary Shares under Section 6 of this Plan.  A Share Award may be a Restricted Share Award or an award of unrestricted Ordinary Shares.
 
“Total Disability” means a “total and permanent disability” within the meaning of Section 22(e)(3) of the Code and, with respect to Awards other than Incentive Stock Options, such other disabilities, infirmities, afflictions, or conditions as the Administrator may include.
 
“Voting Ordinary Shares” has the meaning given to such term in Section 5.1 of this Plan.

30
Exhibit 4.10

INDENTURE

Dated as of

September 14, 2021

between

SEA LIMITED

as Company

and

WILMINGTON TRUST, NATIONAL ASSOCIATION

as Trustee



DEBT SECURITIES

CROSS-REFERENCE TABLE


Trust Indenture Act Section
  
Indenture Section
Sec. 310(a)
  
11.04(a)
(b)
  
11.04(b), 11.05
Sec. 311
  
11.01(f)
Sec. 312(a)
  
10.03
(b)
  
11.09
(c)
  
11.09
Sec. 313(a)
  
10.01(a)
(b)
  
10.01(a)
(c)
  
10.01(b)
(d)
  
10.01(b)
Sec. 314(a)(1)
  
10.02
(a)(2)
  
10.02
(a)(4)
  
6.08
(c)
  
16.01(a)
(e)
  
16.01(b)
Sec. 315(a)(1)
  
11.02(b)(i)
(a)(2)
  
11.02(b)(ii)
(b)
  
11.03
(c)
  
11.02(a)
(d)
  
11.02(b)
(e)
  
7.08
Sec. 316(a) (last sentence)
  
1.01 (definition of “Outstanding”)
(a)(1)
  
7.06
(b)
  
7.07
(c)
  
8.02(e), 14.02(d)
Sec. 317(a)
  
7.03, 7.04
(b)
  
6.03(c)
Sec.318
  
16.02

Note:  This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture.

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS

Section 1.01
Definitions.
1
Section 1.02
Rules of Construction
9

ARTICLE II

FORMS OF SECURITIES

Section 2.01
Form Generally.
10
Section 2.02
Form of Trustee’s Certificate of Authentication.
10

ARTICLE III

THE DEBT SECURITIES

Section 3.01
Amount Unlimited; Issuable in Series
11
Section 3.02
Denominations
14
Section 3.03
Execution, Authentication, Delivery and Dating.
14
Section 3.04
Temporary Securities.
16
Section 3.05
Registrar.
17
Section 3.06
Transfer and Exchange.
18
Section 3.07
Mutilated, Destroyed, Lost and Stolen Securities.
22
Section 3.08
Payment of Interest; Interest Rights Preserved.
22
Section 3.09
Cancellation
23
Section 3.10
Computation of Interest
23
Section 3.11
Currency of Payments in Respect of Securities. Any series, payment of the principal of, premium, if any, and interest on, Securities of such series shall be made in U.S. Dollars.
24
Section 3.12
CUSIP Numbers
24

ARTICLE IV

REDEMPTION OF SECURITIES

Section 4.01
Applicability of Right of Redemption
25
Section 4.02
Selection of Securities to be Redeemed.
25
Section 4.03
Notice of Redemption.
25
Section 4.04
Deposit of Redemption Price
27
Section 4.05
Securities Payable on Redemption Date
27
Section 4.06
Securities Redeemed in Part
27
Section 4.07
Tax Redemption
28

ARTICLE V

SINKING FUNDS

Section 5.01
Applicability of Sinking Fund.
29
Section 5.02
Mandatory Sinking Fund Obligation
29
Section 5.03
Optional Redemption at Sinking Fund Redemption Price
29
Section 5.04
Application of Sinking Fund Payment.
30

ARTICLE VI

PARTICULAR COVENANTS OF THE COMPANY

Section 6.01
Payments of Principal, Premium and Interest
31
Section 6.02
Maintenance of Office or Agency; Paying Agent.
31
Section 6.03
To Hold Payment in Trust.
32
Section 6.04
Merger, Consolidation and Sale of Assets
33
Section 6.05
Additional Amounts
34
Section 6.06
Payment for Consent
36
Section 6.07
Compliance Certificate
36
Section 6.08
Conditional Waiver by Holders of Securities
37
Section 6.09
Statement by Officers as to Default
37

ARTICLE VII

REMEDIES OF TRUSTEE AND SECURITYHOLDERS

Section 7.01
Events of Default
37
Section 7.02
Acceleration; Rescission and Annulment.
39
Section 7.03
Other Remedies
40
Section 7.04
Trustee as Attorney-in-Fact
40
Section 7.05
Priorities
40
Section 7.06
Control by Securityholders; Waiver of Past Defaults
41
Section 7.07
Limitation on Suits
42
Section 7.08
Undertaking for Costs
42
Section 7.09
Remedies Cumulative; Delay or Omission Not Waiver
43

ii
ARTICLE VIII

CONCERNING THE SECURITYHOLDERS

Section 8.01
Evidence of Action of Securityholders
43
Section 8.02
Proof of Execution or Holding of Securities
44
Section 8.03
Persons Deemed Owners.
44
Section 8.04
Effect of Consents
45

ARTICLE IX

SECURITYHOLDERS’ MEETINGS

Section 9.01
Purposes of Meetings
45
Section 9.02
Call of Meetings by Trustee
45
Section 9.03
Call of Meetings by Company or Securityholders
45
Section 9.04
Qualifications for Voting
46
Section 9.05
Regulation of Meetings.
46
Section 9.06
Voting
47
Section 9.07
No Delay of Rights by Meeting
47

iii
ARTICLE X

REPORTS BY THE COMPANY AND THE TRUSTEE AND

SECURITYHOLDERS’ LISTS

Section 10.01
Reports by Trustee.
47
Section 10.02
Reports by the Company
48
Section 10.03
Securityholders’ Lists
48

ARTICLE XI

CONCERNING THE TRUSTEE

Section 11.01
Rights of Trustees; Compensation and Indemnity
49
Section 11.02
Duties of Trustee.
52
Section 11.03
Notice of Defaults
54
Section 11.04
Eligibility; Disqualification.
54
Section 11.05
Resignation and Notice; Removal
54
Section 11.06
Successor Trustee by Appointment.
55
Section 11.07
Successor Trustee by Merger
57
Section 11.08
Right to Rely on Opinion of Counsel and/or Officer’s Certificate
57
Section 11.09
Communications by Securityholders with Other Securityholders
57

ARTICLE XII

SATISFACTION AND DISCHARGE; DEFEASANCE

Section 12.01
Applicability of Article
58
Section 12.02
Satisfaction and Discharge of Indenture
58
Section 12.03
Defeasance upon Deposit of Moneys or U.S. Government Obligations
59
Section 12.04
Repayment to Company
61
Section 12.05
Indemnity for U.S. Government Obligations
62
Section 12.06
Deposits to Be Held in Escrow
62
Section 12.07
Application of Trust Money.
62

iv
ARTICLE XIII

IMMUNITY OF CERTAIN PERSONS

Section 13.01
No Personal Liability
62

ARTICLE XIV

SUPPLEMENTAL INDENTURES

Section 14.01
Without Consent of Securityholders
63
Section 14.02
With Consent of Securityholders; Limitations.
64
Section 14.03
Trustee Protected
66
Section 14.04
Effect of Execution of Supplemental Indenture
66
Section 14.05
Notation on or Exchange of Securities
66
Section 14.06
Conformity with TIA
67

ARTICLE XV

SUBORDINATION OF SECURITIES

Section 15.01
Agreement to Subordinate
67
Section 15.02
Distribution on Dissolution, Liquidation and Reorganization; Subrogation of Securities
67
Section 15.03
No Payment on Securities in Event of Default on Senior Indebtedness
68
Section 15.04
Payments on Securities Permitted
69
Section 15.05
Authorization of Securityholders to Trustee to Effect Subordination
69
Section 15.06
Notices to Trustee
69
Section 15.07
Trustee as Holder of Senior Indebtedness
70
Section 15.08
Modifications of Terms of Senior Indebtedness
70
Section 15.09
Reliance on Judicial Order or Certificate of Liquidating Agent
70
Section 15.10
Satisfaction and Discharge; Defeasance and Covenant Defeasance
70
Section 15.11
Trustee Not Fiduciary for Holders of Senior Indebtedness
70

v
ARTICLE XVI

MISCELLANEOUS PROVISIONS

Section 16.01
Certificates and Opinions as to Conditions Precedent.
71
Section 16.02
Trust Indenture Act Controls
72
Section 16.03
Notices to the Company and Trustee
72
Section 16.04
Notices to Securityholders; Waiver
73
Section 16.05
Legal Holiday
73
Section 16.06
Judgment Currency
73
Section 16.07
Effects of Headings and Table of Contents
74
Section 16.08
Successors and Assigns
74
Section 16.09
Severability
74
Section 16.10
Benefits of Indenture
74
Section 16.11
Counterparts
74
Section 16.12
Governing Law; Waiver of Trial by Jury
74
Section 16.13
Submission to Jurisdiction
75
Section 16.14
Waiver of Immunity
75
Section 16.15
Force Majeure
75

EXHIBITS

EXHIBIT A          Form of Security
EXHIBIT B          Form of Compliance Certificate

vi
INDENTURE, dated as of September 14, 2021, between Sea Limited, an exempted company incorporated in the Cayman Islands (the “Company”), and Wilmington Trust, National Association, a national banking association, as trustee (the “Trustee”).

WITNESSETH:

WHEREAS, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of debentures, notes, bonds or other evidences of indebtedness (the “Securities”) in an unlimited aggregate principal amount to be issued from time to time in one or more series as provided in this Indenture; and

WHEREAS, all things necessary to make this Indenture a valid and legally binding agreement of the Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That, in consideration of the premises and the purchase of the Securities by the Holders (as defined below) thereof for the equal and proportionate benefit of all of the present and future Holders of the Securities, each party agrees and covenants as follows:

ARTICLE I

DEFINITIONS

Section 1.01          Definitions.

(a)          Unless otherwise defined in this Indenture or the context otherwise requires, all terms used herein shall have the meanings assigned to them in the Trust Indenture Act.

(b)          Unless the context otherwise requires, the terms defined in this Section 1.01(b) shall for all purposes of this Indenture have the meanings hereinafter set forth, the following definitions to be equally applicable to both the singular and the plural forms of any of the terms herein defined:

“Additional Amounts” has the meaning provided in Section 6.05(a).

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agents” means the Paying Agents, the Registrar, and any other agent appointed under the terms of this Indenture.

“Bankruptcy Code” means Title 11 of the United States Code.

“Board of Directors” means the board of directors of the Company or any committee of such board duly authorized to act in respect hereof.

“Board Resolution” means any resolution duly adopted by the Board of Directors (or by a committee of the Board of Directors to the extent that any such committee has been authorized by the Board of Directors to establish or approve the matters contemplated therein).

“Business Day” means a day other than a Saturday, Sunday or a day on which banking institutions or trust companies in the State of New York, the Cayman Islands, Hong Kong, Singapore or a Place of Payment are authorized or obligated by law, regulation or executive order to remain closed.

“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Shares and limited liability or partnership interests (whether general or limited), but excluding any debt securities convertible or exchangeable into such equity.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Company” means the Person named as the “Company” in the recitals, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor Person.

“Company Order” means a written request or order signed in the name of the Company by any Officer and delivered to the Trustee.

“Consolidated Affiliated Entity” of any Person means any corporation, association or other entity which is or is required to be consolidated with such Person under Accounting Standards Codification subtopic 810-10, Consolidation: Overall (including any changes, amendments or supplements thereto) or, if such Person prepares its financial statements in accordance with accounting principles other than U.S. GAAP, the equivalent of Accounting Standards Codification subtopic 810-10, Consolidation: Overall under such accounting principles. Unless otherwise specified herein, each reference to a Consolidated Affiliated Entity will refer to a Consolidated Affiliated Entity of the Company.

“Corporate Trust Office,” or other similar term, means the designated office of the Trustee at which at any particular time this Indenture shall be administered, which office at the date hereof is located at, 246 Goose Lane, Suite 105, Guilford, Connecticut 06437, Attention: Sea Limited Administrator, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the designated corporate trust officer of any successor trustee (or such other address as such successor trustee may designate from time to time by notice to the Holders and the Company).

“Covenant Defeasance” has the meaning provided in Section 12.03(c).

2
“Currency” means U.S. Dollars or Foreign Currency.

“CUSIP” means the identification number provided by the Committee on Uniform Securities Identification Procedures.

“Default” has the meaning provided in Section 11.03.

“Defaulted Interest” has the meaning provided in Section 3.08(b).

“Depositary” means, with respect to the Securities of any series issuable in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Company pursuant to Section 3.01 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Depositary” shall mean or include each Person who is then a Depositary hereunder, and if at any time there is more than one such Person, “Depositary” as used with respect to the Securities of any such series shall mean the Depositary with respect to the Securities of that series.

“Discharged” has the meaning provided in Section 12.03(b).

“Event of Default” has the meaning provided in Section 7.01.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“FATCA” has the meaning provided in Section 6.05(a)(viii).

“Floating Rate Security” means a Security that provides for the payment of interest at a variable rate determined periodically by reference to an interest rate index specified pursuant to Section 3.01.

“Foreign Currency” means a currency issued by the government of any country other than the United States or a composite currency, the value of which is determined by reference to the values of the currencies of any group of countries.

 “Global Security” means any Security that evidences all or part of a series of Securities, issued in fully-registered certificated form to the Depositary for such series in accordance with Section 3.03 and bearing the legend prescribed in Section 3.03(f).

“Holder,” “Holder of Securities” or “Securityholder” means the Person in whose name Securities are registered in the Register.

“Indebtedness” means any and all obligations of a Person for money borrowed which, in accordance with U.S. GAAP, would be reflected on the balance sheet of such Person as a liability on the date as of which Indebtedness is to be determined.

“Indenture” means this instrument and all indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 3.01.

3
“Independent Tax Consultant” means an independent accounting firm or consultant of nationally recognized standing.

“Interest Payment Date” means, with respect to any Security, the Stated Maturity of an installment of interest on such Security.

“ISIN” means the International Securities Identification Number.

“Issue Date” means, with respect to any Security, the date on which such Security is originally issued under this Indenture.

“Judgment Currency” has the meaning provided in Section 16.06.

“Legal Defeasance” has the meaning provided in Section 12.03(b).

“Mandatory Sinking Fund Payment” has the meaning provided in Section 5.01(b).

“Maturity” means, with respect to any Security, the date on which the principal of such Security shall become due and payable as therein and herein provided, whether by declaration, call for redemption or otherwise.

“Members” has the meaning provided in Section 3.03(h).

“Officer” means the Chairman of the Board of Directors, the Group Chief Executive Officer, the Group Chief Corporate Officer, the Group Chief Financial Officer, the Group Chief Operating Officer or any Chief Executive Officer of the Company or, in the event that the Company is a partnership or a limited liability company that has no such officers, a person duly authorized under applicable law by the general partner, managers, members or a similar body to act on behalf of the Company.

“Officer’s Certificate” means a certificate signed by any Officer and delivered to the Trustee.

“Opinion of Counsel” means an opinion in writing signed by legal counsel who is reasonably acceptable to the Trustee, who may be an employee of or of counsel to the Company and meets the applicable requirements provided for in Section 16.01.

“Optional Sinking Fund Payment” has the meaning provided in Section 5.01(b).

“Original Issue Discount Security” means any Security that is issued with “original issue discount” within the meaning of Section 1273(a) of the Code and the regulations thereunder, or any successor provision, and any other Security designated by the Company as issued with original issue discount for United States federal income tax purposes.

4
“Outstanding” means, when used with respect to Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

(i)          Securities theretofore cancelled by the Trustee or the Paying Agent or delivered to the Trustee or the Paying Agent for cancellation;

(ii)          Securities or portions thereof for which payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities or Securities as to which the Company’s obligations have been Discharged; provided, however, that if such Securities or portions thereof are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and

(iii)          Securities that have been paid pursuant to Section 3.07(b) or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to a Responsible Officer of the Trustee proof satisfactory to it that such Securities are held by a protected purchaser in whose hands such Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite principal amount of Securities of a series Outstanding have performed any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) hereunder, Securities owned by the Company or any other obligor upon the Securities of such series or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding unless the Company, such Affiliate or such other obligor owns all of such Securities, except that, in determining whether the Trustee shall be protected in relying upon any such action, only Securities of such series for which the Trustee has received written notice to be so owned shall be so disregarded. Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon such Securities or any Affiliate of the Company or of such other obligor. In case of a dispute as to such right, the decision of the Trustee upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officer’s Certificate listing and identifying all such Securities, if any, known by the Company to be owned or held by or for the account of any of the above described Persons; and, subject to the provisions of Section 11.01, the Trustee shall be entitled to accept such Officer’s Certificate as conclusive evidence of the facts therein set forth and of the fact that all such Securities not listed therein are Outstanding for the purpose of any such determination. In determining whether the Holders of the requisite principal amount of Outstanding Securities of a series have performed any action hereunder, the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purpose shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to Section 7.02  and the principal amount of a Security denominated in a Foreign Currency that shall be deemed to be Outstanding for such purpose shall be the amount calculated pursuant to Section 3.11(b).

5
“Paying Agent” means any Person authorized by the Company to pay the principal of, premium, if any, or interest on any Securities on behalf of the Company. The Company may act as Paying Agent with respect to Securities of any series issued hereunder.

“Payment Default” has the meaning provided in Section 7.01(e).

“Person” means any individual, corporation, firm, limited liability company, partnership, joint venture, undertaking, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity (in each case whether or not being a separate legal entity).

“Place of Payment” has the meaning provided in Section 3.01(f).

“Predecessor Security” means, with respect to any Security, every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security, and, for the purposes of this definition, any Security authenticated and delivered under Section 3.07 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security.

“Preferred Shares,” as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) that is preferred in right of payment upon liquidation, dissolution or winding up.

“Prospectus” means the prospectus, dated September 8, 2021, relating to the offering of Securities.

“Record Date” means, with respect to any interest payable on any Security on any Interest Payment Date, the close of business on such date specified in such Security for the payment of interest pursuant to Section 3.01.

“Redemption Date” means, when used with respect to any Security to be redeemed, in whole or in part, the date fixed for such redemption by or pursuant to this Indenture and the terms of such Security, which, in the case of a Floating Rate Security, unless otherwise specified pursuant to Section 3.01, shall be an Interest Payment Date only.

“Redemption Price” means, when used with respect to any Security to be redeemed, in whole or in part, the price at which it is to be redeemed pursuant to the terms of the Security and this Indenture.

“Register” has the meaning provided in Section 3.05(a).

“Registrar” has the meaning provided in Section 3.05(a).

“Relevant Jurisdiction” has the meaning provided in Section 6.05(a).

“Responsible Officer” means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter relating to this Indenture is referred because of such Person’s knowledge of and familiarity with the particular subject and who, in each case, shall have direct responsibility for the administration of this Indenture.

6
“SEC” means the U.S. Securities and Exchange Commission, as constituted from time to time.

“Security” or “Securities” means any security or securities, as the case may be, duly authenticated by the Trustee and delivered pursuant to the provisions of this Indenture.

“Security Custodian” means the custodian with respect to any Global Security appointed by the Depositary, or any successor Person thereto, and shall initially be the Paying Agent.

“Senior Indebtedness” means the principal of, premium, if any, or interest on (i) Indebtedness of the Company, whether outstanding on the date hereof or thereafter created, incurred, assumed or guaranteed, for money borrowed other than (A) any Indebtedness of the Company which when incurred, and without respect to any election under Section 1111(b) of the Bankruptcy Code, was without recourse to the Company, (B) any Indebtedness of the Company to any of its Subsidiaries, (C) Indebtedness to any employee of the Company, (D) any liability for taxes, (E) Trade Payables and (F) any Indebtedness of the Company which is expressly subordinate in right of payment to any other Indebtedness of the Company, and (ii) renewals, extensions, modifications and refundings of any such Indebtedness. For purposes of the foregoing and the definition of “Senior Indebtedness,” the phrase “subordinated in right of payment” means debt subordination only and not lien subordination, and accordingly, (x) unsecured indebtedness shall not be deemed to be subordinated in right of payment to secured indebtedness merely by virtue of the fact that it is unsecured, and (y) junior liens, second liens and other contractual arrangements that provide for priorities among Holders of the same or different issues of indebtedness with respect to any collateral or the proceeds of collateral shall not constitute subordination in right of payment. This definition may be modified or superseded by a supplemental indenture.

“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1, Rule 1-02 of Regulation S-X under the Exchange Act. Each of the Company’s Consolidated Affiliated Entities will be deemed to be a “subsidiary” for the purposes of the definition of “significant subsidiary” in Article 1, Rule 1-02 of Regulation S-X.

“Special Record Date” has the meaning provided in Section 3.08(b)(i).

“Stated Maturity” means, when used with respect to any Security or any installment of interest thereon, the date specified in such Security as the fixed date on which the principal (or any portion thereof) of or premium, if any, on such Security or such installment of interest is due and payable.

7
“Subsidiary” means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person (or is otherwise required to be consolidated with such Person in accordance with U.S. GAAP). Unless otherwise specified herein, each reference to a Subsidiary will refer to a Subsidiary of the Company.

“Successor Company” has the meaning provided in Section 3.06(i).

“Successor Jurisdiction” has the meaning provided in Section 6.05(d).

“Tax Change” has the meaning provided in Section 4.07(a).

“Taxes” has the meaning provided in Section 6.05(a).

“Total Equity” as of any date, means the total equity attributable to the Company’s shareholders on a consolidated basis determined in accordance with U.S. GAAP, as shown on the consolidated balance sheet of the Company for the most recent fiscal quarter.

“Trade Payables” means accounts payable or any other Indebtedness or monetary obligations to trade creditors created or assumed by the Company or any Subsidiary of the Company in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities).

“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as amended.

“Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture until a successor Trustee shall have become such with respect to one or more series of Securities pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, “Trustee” as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series.

“U.S. Dollars” or “US$” means such currency of the United States as at the time of payment shall be legal tender for the payment of public and private debts.

“U.S. GAAP” refers to generally accepted accounting principles in the United States.

“U.S. Government Obligations” means securities that are (i) direct obligations of the United States for the payment of which its full faith and credit is pledged or (ii) obligations of an agency or instrumentality of the United States the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, and shall also include a depositary receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depositary receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depositary receipt.

8
“United States” shall mean the United States of America (including the States and the District of Columbia), its territories and its possessions and other areas subject to its jurisdiction.

“Voting Stock” of a Person means all classes of Capital Stock of such Person then outstanding and normally entitled to vote in the election of directors, managers or trustees, as applicable, of such Person.

Section 1.02          Rules of Construction.  For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a)          the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;

(b)          references to “Article” or “Section” or other subdivision herein are references to an Article, Section or other subdivision of the Indenture, unless the context otherwise requires;

(c)          references to any agreement, instrument, statute or regulation defined or referred to herein or in any instrument establishing the terms of any Securities (or executed in connection therewith) are references to such agreement, instrument, statute or regulation as from time to time amended, modified, supplemented or replaced, including (in the case of agreements or instruments) by waiver or consent and by succession of comparable successor agreements, instruments, statutes or regulations; and

(d)          unless otherwise provided herein, the words “execute,” “execution,” “signed” and “signature” and words of similar import used in or related to any document to be signed in connection with this Indenture or any of the transactions contemplated hereby (including amendments, waivers, consents and other modifications) shall be deemed to include electronic signatures and the keeping of records in electronic form, including DocuSign, AdobeSign or such other digital signature provider as specified in writing to Trustee by an authorized representative, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature in ink or the use of a paper-based recordkeeping system, as applicable, to the fullest extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other similar state laws based on the Uniform Electronic Transactions Act; provided that, notwithstanding anything herein to the contrary, the Trustee is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Trustee pursuant to reasonable procedures approved by the Trustee. The Company agrees to assume all risks arising out of the use of using digital signatures and electronic transmission methods to submit communications to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties.

9
ARTICLE II

FORMS OF SECURITIES

Section 2.01          Form Generally.

(a)          The Securities of each series shall be substantially in the form set forth in Exhibit A attached hereto or as shall be established pursuant to a Company Order, Officer’s Certificate or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange on which any series of the Securities may be listed or of any automated quotation system on which any such series may be quoted, or to conform to usage, all as determined by the officers executing such Securities as conclusively evidenced by their execution of such Securities.

(b)          The terms and provisions of the Securities shall constitute, and are hereby expressly made, a part of this Indenture, and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture expressly agree to such terms and provisions and to be bound thereby.

Section 2.02          Form of Trustee’s Certificate of Authentication.

(a)          Only such of the Securities as shall bear thereon a certificate substantially in the form of the Trustee’s certificate of authentication hereinafter recited, executed by the Trustee by manual signature, shall be valid or become obligatory for any purpose or entitle the Holder thereof to any right or benefit under this Indenture.

(b)          Each Security shall be dated the date of its authentication, except that any Global Security shall be dated as of the date otherwise specified herein.

(c)          The form of the Trustee’s certificate of authentication to be borne by the Securities shall be substantially as follows:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

Date of authentication: _______
Wilmington Trust, National Association,
as Trustee
 
By:
  
   
Authorized Signatory

10
ARTICLE III

THE DEBT SECURITIES

Section 3.01          Amount Unlimited; Issuable in Series.  The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued from time to time in one or more series. There shall be set forth in a Company Order, Officer’s Certificate or in one or more indentures supplemental hereto, prior to the issuance of Securities of any series:

(a)          the title of the Securities of the series (which shall distinguish the Securities of such series from the Securities of all other series, except to the extent that additional Securities of an existing series are being issued);

(b)          any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Section 3.04, 3.06, 3.07, 4.06, or 14.05) and the percentage or percentages of principal amount at which the Securities of the series will be issued;

(c)          the dates on which or periods during which the Securities of the series may be issued, and the dates on, or the range of dates within, which the principal of and premium, if any, on the Securities of such series are or may be payable or the method by which such date or dates shall be determined or extended;

(d)          the rate or rates at which the Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, or the method by which such date or dates shall be determined, the Interest Payment Dates on which any such interest shall be payable, and the Record Dates for the determination of Holders to whom interest is payable on such Interest Payment Dates or the method by which such date or dates shall be determined, the right, if any, to extend or defer interest payments and the duration of such extension or deferral;

(e)          if other than U.S. Dollars, the Foreign Currency in which Securities of the series shall be denominated or in which payment of the principal of, premium, if any, or interest on the Securities of the series shall be payable and any other terms concerning such payment;

(f)          if the amount of payment of principal of, premium, if any, or interest on, the Securities of the series may be determined with reference to an index, formula or other method;

11
(g)          the place or places, if any, in addition to or instead of the Corporate Trust Office of the Trustee where the principal of, premium, if any, and interest on Securities of the series shall be payable, and where Securities of any series may be presented for registration of transfer, exchange or conversion, and the place or places where notices and demands to or upon the Company in respect of the Securities of such series may be made (each such place, the “Place of Payment”);

(h)          the price or prices at which, the period or periods within which or the date or dates on which, and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company, if the Company is to have that option;

(i)          the obligation or right, if any, of the Company to redeem, purchase or repay Securities of the series pursuant to any sinking fund, amortization or analogous provisions or at the option of a Holder thereof and the price or prices at which, the period or periods within which or the date or dates on which and the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;

(j)          if other than minimum denominations of US$2,000 and any integral multiple of US$1,000 in excess thereof, the denominations in which Securities of the series shall be issuable;

(k)          if other than the principal amount thereof, the portion of the principal amount of the Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 7.02;

(l)          the guarantors, if any, of the Securities of the series, and the extent of the guarantees (including provisions relating to seniority, subordination, and the release of the guarantors), if any, and any additions or changes to permit or facilitate guarantees of such Securities;

(m)          whether the Securities of the series are to be issued as Original Issue Discount Securities and the amount of discount or premium, if any, with which such Securities may be issued;

(n)          provisions, if any, for the defeasance of Securities of the series in whole or in part and any addition or change in the provisions related to satisfaction and discharge;

(o)          whether the Securities of the series are to be issued in whole or in part in the form of one or more Global Securities and, in such case, (i) the Depositary for such Global Security or Securities, (ii) the form of legend in addition to or in lieu of that in Section 3.03(f) which shall be borne by such Global Security and (iii) the terms and conditions, if any, upon which interests in such Global Security or Securities may be exchanged in whole or in part for the individual Securities represented thereby;

(p)          the date as of which any Global Security of the series shall be dated if other than the original issuance of the first Security of the series to be issued;

12
(q)          the form of the Securities of the series;

(r)          whether the Securities of the series are subject to subordination and the terms of such subordination;

(s)          whether the Securities of the series shall be secured;

(t)          the securities exchange(s) or automated quotation system(s) on which the Securities of the series will be listed or admitted to trading, as applicable, if any;

(u)          any restriction or condition on the transferability of the Securities of the series;

(v)          any addition or change in the provisions related to compensation and reimbursement of the Trustee which applies to the Securities of the series;

(w)          any addition or change in the provisions related to supplemental indentures set forth in Sections 14.01, 14.02 and 14.04 which applies to the Securities of the series;

(x)          provisions, if any, granting special rights to Holders upon the occurrence of specified events;

(y)          any addition to or change in the Events of Default which applies to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 7.02 and any addition or change in the provisions set forth in Article VII which applies to Securities of the series;

(z)          any addition to or change in the covenants set forth in Article VI which applies to the Securities of the series

(aa)          if the Securities of such series are to be convertible into or exchangeable for any securities or property of any Person (including the Company), the terms and conditions upon which such Securities will be so convertible or exchangeable, and any additions or changes to this Indenture, if any, to permit or facilitate such conversion or exchange; and

(bb)          any other terms of the Securities of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 14.01, but which may modify, supplement or delete any provision of this Indenture insofar as it applies to such series), including any terms which may be required by or advisable under the laws of the United States or regulations thereunder or advisable (as determined by the Company) in connection with the marketing of Securities of the series.

All Securities of any one series shall be substantially identical, except as to denomination and except as may otherwise be provided herein or set forth in a Company Order, Officer’s Certificate or in one or more indentures supplemental hereto.

13
Unless otherwise specified with respect to the Securities of any series pursuant to this Section 3.01, the Company may, at its option, at any time and from time to time, issue additional Securities of any series of Securities previously issued under this Indenture which together shall constitute a single series of Securities under this Indenture.

Section 3.02          Denominations.  In the absence of any specification pursuant to Section 3.01 with respect to Securities of any series, the Securities of such series shall be issuable only as Securities in minimum denominations of US$2,000 and any integral multiple of US$1,000 in excess thereof, and shall be payable only in U.S. Dollars.

Section 3.03          Execution, Authentication, Delivery and Dating.

(a)          The Securities shall be executed in the name and on behalf of the Company by an Officer. Such signatures may be the manual, facsimile or other electronic signature of the present or any future such Officer. If the Person whose signature is on a Security no longer holds that office at the time the Security is authenticated and delivered, the Security shall nevertheless be valid.

(b)          At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities and, if required pursuant to Section 3.01, a supplemental indenture, Company Order or Officer’s Certificate setting forth the terms of the Securities of a series. The Trustee shall thereupon authenticate and deliver such Securities without any further action by the Company. The Company Order shall specify the principal amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated.

(c)          In authenticating the first Securities of any series and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall receive, and (subject to Section 11.02) shall be fully protected in relying upon, an Officer’s Certificate, prepared in accordance with Section 16.01 stating that the conditions precedent, if any, provided for in the Indenture have been complied with, and an Opinion of Counsel, prepared in accordance with Section 16.01 and substantially in the form set forth below:

(i)          that the form or forms of such Securities have been established in accordance with Article II and Section 3.01 and in conformity with the other provisions of this Indenture;

(ii)          that the terms of such Securities have been established in accordance with Section 3.01 and in conformity with the other provisions of this Indenture;

(iii)          that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors’ rights and to general equity principles; and

(iv)          that all conditions precedent, if any, provided for in the Indenture in respect of the authentication and delivery by the Company of such Securities have been complied with.

14
Notwithstanding the provisions of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officer’s Certificate or Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the authentication of each Security of such series if such Officer’s Certificate or Opinion of Counsel is delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued; provided that nothing in this clause (c) is intended to derogate Trustee’s rights to receive an Officer’s Certificate and Opinion of Counsel under Section 16.01.

(d)          The Trustee shall have the right to decline to authenticate and deliver the Securities under this Section 3.03 if the issue of the Securities pursuant to this Indenture will affect the Trustee’s own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.

(e)          Each Security shall be dated the date of its authentication.

(f)          If the Company shall establish pursuant to Section 3.01 that the Securities of a series are to be issued in whole or in part in the form of one or more Global Securities, then the Company shall execute and the Trustee shall authenticate and deliver one or more Global Securities that (i) shall represent an aggregate amount equal to the aggregate principal amount of the Outstanding Securities of such series to be represented by such Global Securities, (ii) shall be registered, if in registered form, in the name of the Depositary for such Global Security or Securities or the nominee of such Depositary, (iii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary’s instruction and (iv) shall bear a legend substantially to the following effect:

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

The aggregate principal amount of each Global Security may from time to time be increased or decreased by adjustments made on the records of the Security Custodian, as provided in this Indenture.

(g)          Each Depositary designated pursuant to Section 3.01 for a Global Security in registered form must, at the time of its designation and at all times while it serves as such Depositary, be a clearing agency registered under the Exchange Act and any other applicable statute or regulation.

15
(h)          Members of, or participants in, the Depositary (“Members”) shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Security Custodian under such Global Security, and the Depositary may be treated by the Company, the Trustee, the Paying Agent and the Registrar and any of their agents as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, the Paying Agent or the Registrar or any of their agents from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Members, the operation of customary practices of the Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Security. The Holder of a Global Security may grant proxies and otherwise authorize any Person, including Members and Persons that may hold interests through Members, to take any action that a Holder is entitled to take under this Indenture or the Securities.

(i)          No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in one of the forms provided for herein duly executed by the Trustee by manual signature of an authorized signatory of the Trustee, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.

Section 3.04          Temporary Securities.

(a)          Pending the preparation of definitive Securities of any series, the Company may execute and, upon receipt of a Company Order, the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise reproduced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such temporary Securities may determine, as conclusively evidenced by their execution of such temporary Securities. Any such temporary Security may be in global form, representing all or a portion of the Outstanding Securities of such series. Every such temporary Security shall be executed by the Company and shall be authenticated and delivered by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Security or Securities in lieu of which it is issued.

(b)          If temporary Securities of any series are issued, the Company shall cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of such temporary Securities at the office or agency maintained by the Company in a Place of Payment for such purposes provided in Section 6.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations and of like tenor. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series.

16
(c)          Upon any exchange of a portion of a temporary Global Security for a definitive Global Security or for the individual Securities represented thereby pursuant to this Section 3.04 or Section 3.06, the temporary Global Security shall be endorsed by the Trustee to reflect the reduction of the principal amount evidenced thereby, whereupon the principal amount of such temporary Global Security shall be reduced for all purposes by the amount so exchanged and endorsed.

Section 3.05          Registrar.

(a)          The Company shall keep, at an office or agency to be maintained by it in a Place of Payment where Securities may be presented for registration or presented and surrendered for registration of transfer or of exchange, and where Securities of any series that are convertible or exchangeable may be surrendered for conversion or exchange, as applicable (the “Registrar”), a security register for the registration and the registration of transfer or of exchange of the Securities (the registers maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the “Register”), as in this Indenture provided, which Register shall during normal office hours be open for inspection by the Trustee. Such Register shall be in written form or in any other form capable of being converted into written form within a reasonable time. The Company may have one or more co-Registrars; the term “Registrar” includes any co-registrar. In acting hereunder and in connection with the Notes, the Registrar shall act solely as agent of the Company, and will not thereby assume any obligations towards or relationship of agency or trust for or with any Holder.

(b)          The Company shall enter into an appropriate agency agreement with any Registrar or co-Registrar not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar for any series, the Trustee shall act as such. The Company or any Affiliate thereof may act as Registrar, co-Registrar or transfer agent.

(c)          The Company hereby initially appoints the Trustee located at the Corporate Trust Office as Registrar in connection with the Securities and this Indenture, until such time as another Person is appointed in replacement of the Trustee as such. In the case that the Trustee serves as Registrar, it will be entitled as Registrar to the same rights of compensation, reimbursement and indemnification under Section 11.01 and Section 11.02 as if it were the Trustee. No Person shall at any time be appointed as or act as Registrar unless such Person is at such time empowered under applicable law to act as such Registrar.

17
Section 3.06          Transfer and Exchange.

(a)          Transfer.

(i)          Upon surrender for registration of transfer of any Security of any series at the Registrar, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee, one or more new Securities of the same series for like aggregate principal amount of any authorized denomination or denominations. The transfer of any Security shall not be valid as against the Company or the Trustee unless registered at the Registrar at the request of the Holder, or at the request of his, her or its attorney duly authorized in writing.

(ii)          Notwithstanding any other provision of this Section, unless and until it is exchanged in whole or in part for the individual Securities represented thereby, a Global Security representing all or a portion of the Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary.

(b)          Exchange.

(i)          At the option of the Holder, Securities of any series (other than a Global Security, except as set forth below) may be exchanged for other Securities of the same series for like aggregate principal amount of any authorized denomination or denominations, upon surrender of the Securities to be exchanged at the Registrar.

(ii)          Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive.

(c)          Exchange of Global Securities for Individual Securities.  Except as provided below, owners of beneficial interests in Global Securities shall not be entitled to receive individual Securities.

(i)          Individual Securities shall be issued to all owners of beneficial interests in a Global Security in exchange for such interests if: (A) at any time the Depositary for the Securities of a series notifies the Company that it is unwilling or unable to continue as Depositary for the Securities of such series or if at any time the Depositary for the Securities of such series shall no longer be eligible under Section 3.03(g) and, in each case, a successor Depositary is not appointed by the Company within 90 calendar days of such notice, or (B) the Company executes and delivers to the Trustee and the Registrar an Company Order stating that such Global Security shall be so exchangeable.

In connection with the exchange of an entire Global Security for individual Securities pursuant to this subsection (c), such Global Security shall be deemed to be surrendered to the Trustee or the Paying Agent for cancellation, and the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of such series, shall authenticate and deliver to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of individual Securities of authorized denominations.

18
(ii)          The owner of a beneficial interest in a Global Security shall be entitled to receive an individual Security in exchange for such interest if an Event of Default has occurred and is continuing. Upon receipt by the Security Custodian and Registrar of instructions from the Holder of a Global Security directing the Security Custodian and Registrar to (x) issue one or more individual Securities in the amounts specified to the owner of a beneficial interest in such Global Security and (y) debit or cause to be debited an equivalent amount of beneficial interest in such Global Security, subject to the rules and regulations of the Depositary:

(A)          the Security Custodian and Registrar shall notify the Company and the Trustee of such instructions, identifying the owner and amount of such beneficial interest in such Global Security;

(B)          the Company shall promptly execute and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Securities of such series, shall authenticate and deliver to such beneficial owner individual Securities in an equivalent amount to such beneficial interest in such Global Security; and

(C)          the Security Custodian and Registrar shall decrease such Global Security by such amount in accordance with the foregoing. In the event that the individual Securities are not issued to each such beneficial owner promptly after the Registrar has received a request from the Holder of a Global Security to issue such individual Securities, the Company expressly acknowledges, with respect to the right of any Holder to pursue a remedy pursuant to Section 7.07, the right of any beneficial Holder of Securities to pursue such remedy with respect to the portion of the Global Security that represents such beneficial Holder’s Securities as if such individual Securities had been issued.

(iii)          If specified by the Company pursuant to Section 3.01 with respect to a series of Securities, the Depositary for such series of Securities may surrender a Global Security for such series of Securities in exchange in whole or in part for individual Securities of such series on such terms as are acceptable to the Company and such Depositary. Thereupon, the Company shall execute, and the Trustee shall authenticate and deliver at the expense of the Company, without service charge,

(A)          to each Person specified by such Depositary a new individual Security or Securities of the same series, of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person’s beneficial interest in the Global Security; and

(B)          to such Depositary a new Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of individual Securities delivered to Holders thereof.

19
(iv)          In any exchange provided for in clauses (i) through (iii), the Company shall execute and the Trustee shall authenticate and deliver individual Securities in registered form in authorized denominations.

(v)          Upon the exchange in full of a Global Security for individual Securities, such Global Security shall be cancelled by Trustee or the Paying Agent. Individual Securities issued in exchange for a Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Registrar. The Registrar shall deliver such Securities to the Persons in whose names such Securities are so registered.

(d)          All Securities issued upon any registration of transfer or exchange of Securities shall be valid obligations of the Company evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered for such registration of transfer or exchange.

(e)          Every Security presented or surrendered for registration of transfer or exchange, or for payment shall (if so required by the Company, the Trustee or the Registrar) be duly endorsed, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company, the Trustee and the Registrar, duly executed by the Holder thereof or by his, her or its attorney duly authorized in writing.

(f)          No service charge shall be made for any registration of transfer or exchange of Securities. The Company may require payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than those expressly provided in this Indenture to be made at the Company’s own expense or without expense or charge to the Holders.

(g)          The Company shall not be required to (i) register, transfer or exchange Securities of any series during a period beginning at the opening of business 15 calendar days before the day of the transmission of a notice of redemption of Securities of such series selected for redemption under Section 4.03 and ending at the close of business on the day of such transmission, or (ii) register, transfer or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

(h)          Prior to the due presentation for registration of transfer or exchange of any Security, the Company, the Trustee, the Paying Agent, the Registrar, any co-Registrar or any of their agents may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for all purposes whatsoever, and none of the Company, the Trustee, the Paying Agent, the Registrar, any co-Registrar or any of their agents shall be affected by any notice to the contrary.

20
(i)          In case a successor Company (“Successor Company”) has executed an indenture supplemental hereto with the Trustee pursuant to Article XIV, any of the Securities authenticated or delivered pursuant to such transaction may, from time to time, at the request of the Successor Company, be exchanged for other Securities executed in the name of the Successor Company with such changes in phraseology and form as may be appropriate, but otherwise identical to the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the Successor Company, shall authenticate and deliver Securities as specified in such Company Order for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a Successor Company pursuant to this Section 3.06 in exchange or substitution for or upon registration of transfer of any Securities, such Successor Company, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time Outstanding for Securities authenticated and delivered in such new name.

(j)          Each Holder of a Security agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder’s Security in violation of any provision of this Indenture and/or applicable United States federal or state securities laws.

(k)          The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in, the Depositary or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption or purchase) or the payment of any amount or delivery of any Notes (or other security or property) under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners.

(l)          The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

(m)          Neither the Trustee nor any agent of the Trustee shall have any responsibility for any actions taken or not taken by the Depositary.

21
Section 3.07          Mutilated, Destroyed, Lost and Stolen Securities.

(a)          If (i) any mutilated Security is surrendered to the Trustee at its Corporate Trust Office or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee security and/or indemnity satisfactory to them to save each of them and any Paying Agent harmless, and neither the Company nor the Trustee receives notice that such Security has been acquired by a protected purchaser, then the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Security, a new Security of the same series and of like tenor, form, terms and principal amount, bearing a number not contemporaneously Outstanding, and neither gain nor loss in interest shall result from such exchange or substitution.

(b)          In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay the amount due on such Security in accordance with its terms.

(c)          Upon the issuance of any new Security under this Section 3.07, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in respect thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith.

(d)          Every new Security of any series issued pursuant to this Section shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder.

(e)          The provisions of this Section 3.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 3.08          Payment of Interest; Interest Rights Preserved.

(a)          Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Record Date for such interest notwithstanding the cancellation of such Security upon any transfer or exchange subsequent to the Record Date. Payment of interest on Securities shall be made at the Corporate Trust Office (except as otherwise specified pursuant to Section 3.01) or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the Trustee, by wire transfer to an account designated by the Holder.

22
(b)          Any interest on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the Holder on the relevant Record Date by virtue of his, her or its having been such a Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (i) or (ii) below:

(i)          The Company may elect to make payment of any Defaulted Interest to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest (a “Special Record Date”), which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 calendar days and not less than 10 calendar days prior to the date of the proposed payment and not less than 10 calendar days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to the Holders of such Securities at their addresses as they appear in the Register, not less than 10 calendar days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (ii).

(ii)          The Company may make payment of any Defaulted Interest on Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed or of any automated quotation system on which any such Securities may be quoted, and upon such notice as may be required by such exchange or quotation system, as applicable, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

(c)          Subject to the foregoing provisions in this Section 3.08, each Security delivered under this Indenture in exchange or substitution for, or upon registration of transfer of, any other Security shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

Section 3.09          Cancellation.  Unless otherwise specified pursuant to Section 3.01 for Securities of any series, all Securities surrendered for payment, redemption, registration of transfer or exchange or credit against any sinking fund or otherwise shall, if surrendered to any Person other than the Trustee or the Paying Agent, be delivered to the Trustee or the Paying Agent for cancellation and shall be promptly cancelled by it and, if surrendered to the Trustee or the Paying Agent, shall be promptly cancelled by it. The Company may at any time deliver to the Trustee or the Paying Agent for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee or the Paying Agent. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. The Trustee or the Paying Agent shall dispose of all cancelled Securities held by it in accordance with its then customary procedures and deliver a certificate of the cancellation of such Securities to the Company upon its written request therefor. The acquisition of any Securities by the Company shall not operate as a redemption or satisfaction of the Indebtedness represented thereby unless and until such Securities are surrendered to the Trustee or the Paying Agent for cancellation.
23
Section 3.10          Computation of Interest.  Except as otherwise specified pursuant to Section 3.01 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months.

Section 3.11          Currency of Payments in Respect of Securities.

(a)          Except as otherwise specified pursuant to Section 3.01 for Securities of any series, payment of the principal of, premium, if any, and interest on, Securities of such series shall be made in U.S. Dollars.

(b)          For purposes of any provision of the Indenture where the Holders of Outstanding Securities may perform an action that requires that a specified percentage of the Outstanding Securities of all series perform such action and for purposes of any decision or determination by the Trustee of amounts due and unpaid for the principal of and premium, if any, and interest on the Securities of all series in respect of which moneys are to be disbursed ratably, the principal of and premium, if any, and interest on the Outstanding Securities denominated in a Foreign Currency will be the amount in U.S. Dollars based upon exchange rates, determined as specified pursuant to Section 3.01 for Securities of such series, as of the date for determining whether the Holders entitled to perform such action have performed it or as of the date of such decision or determination by the Trustee, as the case may be.

(c)          Any decision or determination to be made regarding exchange rates shall be made by an agent appointed by the Company; provided, that such agent shall accept such appointment in writing and the terms of such appointment shall, in the opinion of the Company at the time of such appointment, require such agent to make such determination by a method consistent with the method provided pursuant to Section 3.01 for the making of such decision or determination. All decisions and determinations of such agent regarding exchange rates shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding upon the Company, the Trustee and all Holders of the Securities.

Section 3.12          CUSIP Numbers.  The Company in issuing any Securities may use CUSIP, ISIN or other similar numbers, if then generally in use, and thereafter with respect to such series, the Trustee may use such numbers in any notice of redemption or exchange, as a convenience to Holders, with respect to such series; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the CUSIP, ISIN or other similar numbers.
24
ARTICLE IV

REDEMPTION OF SECURITIES

Section 4.01          Applicability of Right of Redemption.  Redemption of Securities (other than pursuant to a sinking fund, amortization or analogous provision) permitted by the terms of any series of Securities shall be made (except as otherwise specified pursuant to Section 3.01 for Securities of any series) in accordance with this Article; provided, however, that if any such terms of a series of Securities shall conflict with any provision of this Article, the terms of such series shall govern.

Section 4.02          Selection of Securities to be Redeemed.

(a)          If the Company shall at any time elect to redeem all or any portion of the Securities of a series then Outstanding, it shall at least 15 calendar days (or such shorter period acceptable to the Trustee) prior to the date the notice of redemption is to be sent, notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. If less than all of the Securities of a series are to be redeemed, the Securities for redemption will be selected as follows: (i) if the Securities are listed on a securities exchange, then in compliance with the rules of such securities exchange, and if the Securities are held through clearing systems, then in compliance with the applicable rules and procedures of the clearing systems, or (ii) if the Securities are not listed on a securities exchange or held through clearing systems, then by lot or such other method as the Trustee shall deem to be fair and appropriate in its sole and absolute discretion or as otherwise required by applicable law; provided that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. In any case where more than one Security of such series is registered in the same name, the Trustee may treat the aggregate principal amount so registered as if it were represented by one Security of such series. The Trustee shall, as soon as practicable, notify the Company in writing of the Securities and portions of Securities so selected.

(b)          For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security that has been or is to be redeemed. If the Company shall so direct, Securities registered in the name of the Company, any Affiliate or any Subsidiary thereof shall not be included in the Securities selected for redemption.

Section 4.03          Notice of Redemption.

(a)          Notice of redemption shall be given by the Company or, at the Company’s request, by the Trustee in the name and at the expense of the Company, not less than 15 nor more than 60 calendar days prior to the Redemption Date (except that notices of redemption may be delivered more than 60 days prior to a Redemption Date if the notice is issued in connection with a defeasance of the Securities or a satisfaction and discharge of the Indenture), to the Holders of Securities of any series to be redeemed in whole or in part pursuant to this Article, in the manner provided in Section 16.04. Any notice given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. Failure to give such notice, or any defect in such notice to the Holder of any Security of a series designated for redemption, in whole or in part, shall not affect the sufficiency of any notice of redemption with respect to the Holder of any other Security of such series.

25
(b)          All notices of redemption shall identify the Securities to be redeemed (including CUSIP, ISIN or other similar numbers, if available) and shall state:

(i)          such election by the Company to redeem Securities of such series pursuant to provisions contained in this Indenture or the terms of the Securities of such series in a Company Order, Officer’s Certificate or a supplemental indenture establishing such series, if such be the case;

(ii)          the Redemption Date;

(iii)          the Redemption Price;

(iv)          if less than all Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the Securities of such series to be redeemed;

(v)          that on the Redemption Date the Redemption Price shall become due and payable upon each such Security to be redeemed, and that, if applicable, interest thereon shall cease to accrue on and after said date;

(vi)          the Place or Places of Payment where such Securities are to be surrendered for payment of the Redemption Price;

(vii)          that no representation is made as to the correctness or accuracy of the CUSIP number or ISIN Code, if any, listed in such notice or printed on the Securities; and

(viii)          if applicable, that the redemption is for a sinking fund, if such is the case.

(c)          At the Company’s request, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense; provided, however, that the Company shall have delivered to the Trustee, at least five (5) calendar days before notice of redemption is required to be sent or caused to be sent to Holders pursuant to this Section (or such shorter period as is acceptable to the Trustee), an Officer’s Certificate requesting that the Trustee give such notice and setting forth the information to be stated in the notice as provided in the preceding paragraph.

26
Section 4.04          Deposit of Redemption Price.  On or prior to 11:00 a.m., New York City time, on the Redemption Date for any Securities, the Company shall deposit with the Trustee or the Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 6.03) an amount of money in the currency in which such Securities are denominated sufficient to pay the Redemption Price of such Securities or any portions thereof that are to be redeemed on that date.

Section 4.05          Securities Payable on Redemption Date.  If notice of redemption has been given as above provided, any Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price and from and after such date (unless the Company shall Default in the payment of the Redemption Price) such Securities shall cease to bear interest, and, except as provided in Section 12.07, such Securities shall cease from and after the Redemption Date to be entitled to any benefit or security under the Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the Redemption Price thereof and unpaid interest to the Redemption Date. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Trustee or the Paying Agent with the moneys deposited in accordance with Section 4.04 above at the Redemption Price (unless the Company shall Default in the payment of the Redemption Price); provided, however, that (unless otherwise provided pursuant to Section 3.01) installments of interest that have a Stated Maturity on or prior to the Redemption Date for such Securities shall be payable according to the terms of such Securities and the provisions of Section 3.08.

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof shall, until paid or duly provided for, bear interest from the Redemption Date at the rate prescribed therefor in the Security.

Section 4.06          Securities Redeemed in Part.  Any Security that is to be redeemed only in part shall be surrendered at the Corporate Trust Office or such other office or agency of the Company as is specified in the notice of redemption or pursuant to Section 3.01 with, if the Company, the Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Registrar and the Trustee duly executed by the Holder thereof or his, her or its attorney duly authorized in writing, and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities of the same series, of like tenor and form, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; provided that if a Global Security is so surrendered, the Trustee may make a notation or the Company shall execute and the Trustee shall authenticate and deliver to the Depositary for such Global Security, without service charge, a new Global Security in a denomination equal to and in exchange for the unredeemed portion of the principal of the Global Security so surrendered. In the case of a Security providing appropriate space for such notation, at the option of the Holder thereof, the Registrar, in lieu of delivering a new Security or Securities as aforesaid, may make a notation on such Security of the payment of the redeemed portion thereof.
27
Section 4.07          Tax Redemption.

(a)          Each series of Securities may be redeemed at any time, at the option of the Company, in whole but not in part, upon written notice as described below, at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to, but not including, the Redemption Date, if (i) as a result of any change in, or amendment to, the laws or regulations of the Relevant Jurisdiction (or, in the case of Additional Amounts payable by a successor Person to the Company, the applicable Successor Jurisdiction), or any change in the official application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the Issue Date (or, in the case of Additional Amounts payable by a successor Person to the Company, the date on which such successor Person to the Company became such pursuant to the applicable provisions of this Indenture) (a “Tax Change”), the Company or any such successor Person to the Company is, or would be, obligated to pay Additional Amounts upon the next payment of principal, premium, if any, or interest in respect of such Securities and (ii) such obligation cannot be avoided by the Company or any such successor Person to the Company taking reasonable measures available to it, provided that changing the jurisdiction of the Company or such successor Person to Company is not a reasonable measure for purposes of this Section 4.07(a).

(b)          Prior to the giving of any notice of redemption of the Securities pursuant to Section 4.07(a), the Company or any such successor Person to the Company shall deliver to the Trustee (i) a notice of such redemption election, (ii) an Opinion of Counsel or an opinion of an Independent Tax Consultant to the effect that the Company or any such successor Person to the Company is, or would become, obligated to pay such Additional Amounts as the result of a Tax Change and (iii) an Officer’s Certificate from the Company or any such successor Person to the Company, stating that such amendment or change has occurred, describing the facts leading thereto and stating that such requirement cannot be avoided by the Company or any such successor Person to the Company taking reasonable measures available to it. The Trustee shall be entitled to rely conclusively upon such Officer’s Certificate and opinion as sufficient evidence of the conditions precedent described in Section 4.07(a), in which event it shall be conclusive and binding on the relevant Holders.

(c)          Any redemption of Securities pursuant to Section 4.07 shall be made (except as otherwise specified pursuant to Section 3.01 for Securities of any series) in accordance with this Article; provided that no such notice of redemption shall be given earlier than 90 calendar days prior to the earliest date on which the Company or any such successor Person to the Company would be required to pay Additional Amounts if a payment in respect of such Securities was then due.

28
ARTICLE V

SINKING FUNDS

Section 5.01          Applicability of Sinking Fund.

(a)          Redemption of Securities permitted or required pursuant to a sinking fund for the retirement of Securities of a series by the terms of such series of Securities shall be made in accordance with such terms of such series of Securities and this Article, except as otherwise specified pursuant to Section 3.01 for Securities of such series; provided, however, that if any such terms of a series of Securities shall conflict with any provision of this Article, the terms of such series shall govern.

(b)          The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a “Mandatory Sinking Fund Payment,” and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an “Optional Sinking Fund Payment.”  If provided for by the terms of Securities of any series, the cash amount of any Mandatory Sinking Fund Payment may be subject to reduction as provided in Section 5.02.

Section 5.02          Mandatory Sinking Fund Obligation.  The Company may, at its option, satisfy any Mandatory Sinking Fund Payment obligation, in whole or in part, with respect to a particular series of Securities by (a) delivering to the Trustee or the Paying Agent Securities of such series in transferable form theretofore purchased or otherwise acquired by the Company or redeemed at the election of the Company pursuant to Article IV or (b) receiving credit for Securities of such series (not previously so credited) acquired by the Company and theretofore delivered to the Trustee or the Paying Agent. The Trustee or the Paying Agent shall credit such Mandatory Sinking Fund Payment obligation with an amount equal to the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such Mandatory Sinking Fund Payment shall be reduced accordingly. If the Company shall elect to so satisfy any Mandatory Sinking Fund Payment obligation, it shall deliver to the Trustee and the Paying Agent not less than 45 calendar days prior to the relevant sinking fund payment date a written notice signed on behalf of the Company by an Officer, which shall designate the Securities (and portions thereof, if any) so delivered or credited and which shall be accompanied by such Securities (to the extent not theretofore delivered) in transferable form. In case of the failure of the Company, at or before the time so required, to give such notice and deliver such Securities, the Mandatory Sinking Fund Payment obligation shall be paid entirely in moneys.

Section 5.03          Optional Redemption at Sinking Fund Redemption Price.  In addition to the sinking fund requirements of Section 5.02, to the extent, if any, provided for by the terms of a particular series of Securities, the Company may, at its option, make an Optional Sinking Fund Payment with respect to such Securities. Unless otherwise provided by such terms, (a) to the extent that the right of the Company to make such Optional Sinking Fund Payment is not exercised in any year, it shall not be cumulative or carried forward to any subsequent year, and (b) such optional payment shall operate to reduce the amount of any Mandatory Sinking Fund Payment obligation as to Securities of the same series. If the Company intends to exercise its right to make such optional payment in any year, it shall deliver to the Trustee and the Paying Agent not less than 45 calendar days prior to the relevant sinking fund payment date an Officer’s Certificate, stating that the Company shall exercise such optional right, and specifying the amount which the Company shall pay on or before the next succeeding sinking fund payment date. Such Officer’s Certificate shall also state that no Event of Default has occurred and is continuing.
29
Section 5.04          Application of Sinking Fund Payment.

(a)          If the sinking fund payment or payments made in funds pursuant to either Section 5.02 or 5.03 with respect to a particular series of Securities plus any unused balance of any preceding sinking fund payments made in funds with respect to such series shall exceed US$50,000 (or a lesser sum if the Company shall so request, or such equivalent sum for Securities denominated other than in U.S. Dollars), it shall be applied by the Trustee or the Paying Agent on the sinking fund payment date next following the date of such payment; provided that, if the date of such payment shall be a sinking fund payment date, such payment shall be applied on such sinking fund payment date to the redemption of Securities of such series at the Redemption Price specified pursuant to Section 4.03(b). The Securities of such series shall be selected, in the manner provided in Section 4.02, for redemption on such sinking fund payment date, a sufficient principal amount of Securities of such series to absorb said funds, as nearly as may be, and shall, at the expense and in the name of the Company, thereupon cause notice of redemption, prepared by the Company, of the Securities to be given in substantially the manner provided in Section 4.03(a) for the redemption of Securities in part at the option of the Company, except that the notice of redemption shall also state that the Securities are being redeemed for the sinking fund. Any sinking fund moneys not so applied by the Trustee or the Paying Agent to the redemption of Securities of such series shall be added to the next sinking fund payment received in funds by the Trustee or the Paying Agent and, together with such payment, shall be applied in accordance with the provisions of this Section 5.04. Any and all sinking fund moneys held by the Trustee or the Paying Agent on the last sinking fund payment date with respect to Securities of such series, and not held for the payment or redemption of particular Securities of such series, shall be applied by the Trustee or the Paying Agent to the payment of the principal of the Securities of such series at Maturity.

(b)          On or prior to each sinking fund payment date, the Company shall pay to the Trustee or the Paying Agent a sum equal to all interest accrued to, but not including, the Redemption Date on Securities to be redeemed on such sinking fund payment date pursuant to this Section 5.04.

(c)          The Trustee or the Paying Agent shall not redeem any Securities of a series with sinking fund moneys or mail any notice of redemption of Securities of such series by operation of the sinking fund during the continuance of a Default in payment of interest on any Securities of such series or of any Event of Default (other than an Event of Default occurring as a consequence of this paragraph) of which the Paying Agent has written notice, except that if the notice of redemption of any Securities of such series shall theretofore have been mailed in accordance with the provisions hereof, the Trustee or the Paying Agent shall redeem such Securities if funds sufficient for that purpose shall be deposited with the Trustee or the Paying Agent in accordance with the terms of this Article. Except as above provided, any moneys in the sinking fund at the time any such Default or Event of Default shall occur and any moneys thereafter paid into the sinking fund shall, during the continuance of such Default or Event of Default, be held as security for the payment of all the Securities of such series; provided, however, that in case such Default or Event of Default shall have been cured or waived as provided herein, such moneys shall thereafter be applied on the next sinking fund payment date on which such moneys are required to be applied pursuant to the provisions of this Section 5.04.

30
ARTICLE VI

PARTICULAR COVENANTS OF THE COMPANY

The Company hereby covenants and agrees as follows:

Section 6.01          Payments of Principal, Premium and Interest.  The Company, for the benefit of each series of Securities, shall duly and punctually pay or cause to be paid the principal of, premium, if any, and interest on, each series of Securities, at the dates and place and in the manner provided in the Securities and in this Indenture.

Section 6.02          Maintenance of Office or Agency; Paying Agent.

(a)          The Company shall maintain in each Place of Payment for any series of Securities, if any, an office or agency where Securities may be presented or surrendered for payment, where Securities of such series may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company hereby initially appoints the Trustee as Paying Agent to receive all presentations, surrenders, notices and demands. So long as the Trustee serves as Paying Agent, it will be entitled as Paying Agent to the same rights of compensation, reimbursement and indemnification under Section 11.01 and Section 11.02 as if it were Trustee. In acting hereunder and in connection with the Notes, the Paying Agent shall act solely as agent of the Company, and will not thereby assume any obligations toward, or relationship of agency or trust for or with, any Holder. Notwithstanding anything herein to the contrary, no office of the Trustee shall be an office or agency of the Company for the purposes of service of legal process on the Company, which office or agent is as provided in Section 16.13.

(b)          The Company may also from time to time designate different or additional offices or agencies where the Securities of any series may be presented or surrendered for any or all such purposes (in or outside of such Place of Payment), and may from time to time rescind any such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligations described in the preceding paragraph. The Company shall give prompt written notice to the Trustee of any such additional designation or rescission of designation and of any change in the location of any such different or additional office or agency. The Company shall enter into an appropriate agency agreement with any Paying Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. The Company or any Affiliate thereof may act as Paying Agent.

31
Section 6.03          To Hold Payment in Trust.

(a)          If the Company or an Affiliate thereof shall at any time act as Paying Agent with respect to any series of Securities, then, on or before the date on which the principal of, premium, if any, or interest on any of the Securities of that series by their terms or as a result of the calling thereof for redemption shall become payable, the Company or such Affiliate shall segregate and hold in trust for the benefit of the Holders of such Securities or the Trustee a sum sufficient to pay such principal, premium, if any, or interest which shall have so become payable until such sums shall be paid to such Holders or otherwise disposed of as herein provided, and shall notify the Trustee of its action or failure to act in that regard.

Upon any proceeding under the Bankruptcy Code or any applicable state bankruptcy laws with respect to the Company or any Affiliate thereof, if the Company or such Affiliate is then acting as Paying Agent, the Trustee shall promptly replace the Company or such Affiliate as Paying Agent.

(b)          If the Company shall appoint, and at the time have, a Paying Agent for the payment of the principal of, premium, if any, or interest on any series of Securities, then prior to 11:00 a.m., New York City time, on the date on which the principal of, premium, if any, or interest on any of the Securities of that series shall become payable as above provided, whether by their terms or as a result of the calling thereof for redemption, the Company shall deposit with such Paying Agent a sum sufficient to pay such principal, premium, if any, or interest, such sum to be held in trust for the benefit of the Holders of such Securities or the Trustee, and (unless such Paying Agent is the Trustee), the Company or any other obligor of such Securities shall promptly notify the Trustee of its payment or failure to make such payment.

(c)          If the Paying Agent shall be a Person other than the Trustee, the Company shall cause such Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 6.03, that such Paying Agent shall:

(i)          comply with the provisions of the Trust Indenture Act applicable to it as Paying Agent;

(ii)          hold all moneys held by it for the payment of the principal of, premium, if any, or interest on the Securities of that series in trust for the benefit of the Holders of such Securities until such sums shall be paid to such Holders or otherwise disposed of as herein provided;

(iii)          give to the Trustee notice of any Default by the Company or any other obligor upon the Securities of that series in the making of any payment of the principal of, premium, if any, or interest on the Securities of that series; and

(iv)          at any time during the continuance of any such Default, upon the written request of the Trustee, pay to the Trustee all sums so held in trust by such Paying Agent.

(d)          Anything in this Section 6.03 to the contrary notwithstanding, the Company may at any time, for the purpose of obtaining a release, satisfaction or discharge of this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by the Company or by any Paying Agent other than the Trustee as required by this Section 6.03, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent and, upon such payment by a Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such moneys.

32
(e)          Subject to applicable law governing abandoned property, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Security of any series and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company upon Company Order along with any interest that has accumulated thereon as a result of such money being invested at the direction of the Company (or, if then held by the Company, shall be discharged from such trust), and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment of such amounts without interest thereon, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease.

Section 6.04          Merger, Consolidation and Sale of Assets.  Except as otherwise provided as contemplated by Section 3.01 with respect to any series of Securities:

(a)          The Company shall not consolidate with or merge into any other Person in a transaction in which the Company is not the surviving entity, or convey, transfer or lease its properties and assets substantially as an entirety to, any Person, unless

(i)          any Person formed by such consolidation or into or with which the Company is merged or to whom the Company has conveyed, transferred or leased its properties and assets substantially as an entirety is a corporation, partnership, trust or other entity validly existing under the laws of the United States or any State thereof or the District of Columbia, Bermuda, the British Virgin Islands, the Cayman Islands, Hong Kong or Singapore, and such Person expressly assumes by an indenture supplemental to this Indenture all the obligations of the Company under this Indenture and the Securities, including the obligation to pay Additional Amounts with respect to any jurisdiction in which it is organized or resident for tax purposes;

(ii)          immediately after giving effect to the transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and

(iii)          the Company has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger, disposition, conveyance, transfer or lease and such supplemental indenture comply with this Indenture and that all applicable conditions precedent and covenants therein relating to such transaction have been complied with, and, with respect to such Opinion of Counsel, that such supplemental indenture constitutes the valid and binding obligation of the Company or its successor, as applicable, enforceable against the Company or its successor, as applicable, in accordance with its terms (subject to customary exceptions).

33
(b)          Upon any consolidation with or merger into any other entity, or any sale other than for cash, or any sale, conveyance, lease, transfer or other disposition, of the properties and assets of the Company substantially as an entirety in accordance with this Section 6.04, the successor entity formed by such consolidation or into or with which the Company is merged or to which the Company is sold or to which such sale, conveyance, transfer, lease, transfer or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor entity had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Company shall be relieved of all obligations and covenants under this Indenture and the Securities, and from time to time such entity may exercise each and every right and power of the Company under this Indenture, in the name of the Company, or in its own name; and any act or proceeding by any provision of this Indenture required or permitted to be done by the Board of Directors or any officer of the Company may be done with like force and effect by the like board of directors or officer of any entity that shall at the time be the successor of the Company hereunder.  In the event of any such sale or conveyance, but not any such lease, the Company (or any successor entity which shall theretofore have become such in the manner described in this Section 6.04) shall be discharged from all obligations and covenants under this Indenture and the Securities and may thereupon be dissolved and liquidated.

Section 6.05          Additional Amounts.

(a)          All payments of principal, premium, if any, and interest made by or on behalf of the Company in respect of any Securities (unless otherwise specified pursuant to Section 3.01 for Securities of any series) shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company or any successor to the Company is, for tax purposes, organized or resident or doing business (each, as applicable, a “Relevant Taxing Jurisdiction”) or through which payment is made or deemed made (together with each Relevant Taxing Jurisdiction, a “Relevant Jurisdiction,” and in each case, any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law.  In the event that any such withholding or deduction is so required, the Company shall pay to each Holder such additional amounts (“Additional Amounts”) as may be necessary to ensure that the net amount received by the Holders after such withholding or deduction (and after deducting any taxes on the Additional Amounts) will equal the amounts that would have been received by such Holders had no such withholding or deduction been required; provided that no Additional Amounts will be payable:

(i)          for or on account of:

(A)          any tax, duty, assessment or other governmental charge that would not have been imposed but for:

(1)          the existence of any present or former connection between the Holder or beneficial owner of such Security and the Relevant Jurisdiction, other than merely holding such Security or the receipt of payments thereunder, including such Holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein;

34
(2)          the presentation of such Security (in cases in which presentation is required) more than 30 calendar days after the later of the date on which the payment of the principal of and interest on such Security became due and payable pursuant to the terms thereof or was made or duly provided for;

(3)          the failure of the Holder or beneficial owner to comply with a timely request from the Company, addressed to the Holder, to provide certification, information, documents or other evidence concerning such Holder’s or beneficial owner’s nationality, residence, identity or connection with the Relevant Jurisdiction, or to make any declaration or satisfy any other reporting requirement relating to such matters, if and to the extent that due and timely compliance with such request is required by statute, regulation or administrative practice of the Relevant Jurisdiction in order to reduce or eliminate any withholding or deduction as to which Additional Amounts would have otherwise been payable; or

(4)          the presentation of such Security (in cases in which presentation is required) for payment in the Relevant Jurisdiction, unless such Security could not have been presented for payment elsewhere;

(B)         any estate, inheritance, gift, sale, transfer, excise, personal property or similar tax, assessment or other governmental charge;

(C)          any tax, duty, assessment or other governmental charge that is payable otherwise than by withholding from payments or deliveries under or with respect to the Securities;

(D)         any tax, assessment, withholding or deduction required by sections 1471 through 1474 of the Code (“FATCA”), any current or future Treasury Regulations or rulings promulgated thereunder, any law, regulation or other official guidance enacted in any jurisdiction implementing FATCA, any intergovernmental agreement between the United States and any other jurisdiction to implement FATCA or any law enacted by such other jurisdiction to give effect to such agreement, or any agreement with the U.S. Internal Revenue Service under FATCA; or

(E)         any combination of taxes, duties, assessments or other governmental charges referred to in the preceding clauses (A), (B), (C) or (D); or

35
(ii)          with respect to any payment of the principal of and interest on such Security to a Holder, if the Holder is a fiduciary, partnership or person other than the sole beneficial owner of that payment to the extent that such payment would be required to be included in the income under the laws of the Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, a partner or member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner, member or beneficial owner been the Holder thereof.

(b)          The Trustee and the Paying Agent shall also be entitled to make any withholding or deduction pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to FATCA and any regulations or agreements thereunder or official interpretations thereof.

(c)          Any reference in this Indenture or the Securities in any context to the payment of principal of and interest on any Security or any other amount payable with respect to such Security, shall be deemed to include payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable with respect to that amount pursuant to this Section 6.05.

(d)          If the Company is required to make any deduction or withholding from any payments or deliveries with respect to the Securities, it will deliver to the Trustee and the Holders official tax receipts evidencing the remittance to the relevant tax authorities of the amounts so withheld or deducted.

(e)          The Trustee shall have no obligation to determine whether any Additional Amounts are payable under the Indenture or the amount thereof.

(f)          The foregoing obligations shall survive termination or discharge of this Indenture.

Section 6.06          Payment for Consent.  The Company will not, and will not permit any of its Consolidated Affiliated Entities to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or any series of the Securities unless such consideration is offered to be paid and is paid to all Holders of such series of Securities as may be affected thereby that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to consent, waiver or amendment.

Section 6.07          Compliance Certificate.  Except as otherwise provided as contemplated by Section 3.01 with respect to any series of Securities, the Company shall furnish to the Trustee (a) annually, within 120 calendar days after the end of each fiscal year of the Company and (b) within 10 Business Days of a written request from the Trustee, a certificate in or substantially in the form attached hereto as Exhibit B from the principal executive officer, principal financial officer, principal accounting officer or treasurer as to his or her knowledge of the Company’s compliance with all conditions and covenants under this Indenture (which compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture), specifying if any Default has occurred and, in the event that any Default has occurred, specifying each such Default and the nature and status thereof of which such person may have knowledge.
36
Section 6.08          Conditional Waiver by Holders of Securities.  Anything in this Indenture to the contrary notwithstanding, the Company may fail or omit in any particular instance to comply with a covenant or condition set forth herein with respect to any series of Securities if the Company shall have obtained and filed with the Trustee, prior to the time of such failure or omission, evidence (as provided in Article VIII) of the consent of the Holders of a majority in aggregate principal amount of the Securities of such series affected by such waiver and at the time Outstanding, either waiving such compliance in such instance or generally waiving compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, or impair any right consequent thereon and, until such waiver shall have become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect.

Section 6.09          Statement by Officers as to Default.  The Company shall deliver to the Trustee as soon as possible and in any event within 30 calendar days after the Company becomes aware of the occurrence of any Event of Default or an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default, an Officer’s Certificate setting forth the details of such Event of Default or Default and the action which the Company proposes to take with respect thereto.
ARTICLE VII

REMEDIES OF TRUSTEE AND SECURITYHOLDERS

Section 7.01          Events of Default.  Except where otherwise indicated by the context or where the term is otherwise defined for a specific purpose, the term “Event of Default” as used in this Indenture with respect to Securities of any series shall mean any of the following described events unless it is either inapplicable to a particular series or it is specifically deleted or modified in the manner contemplated in Section 3.01:

(a)          the Company defaults in the payment of principal or premium, if any, in respect of a Security of such series when due and payable (whether at Stated Maturity or upon declaration of acceleration, redemption or otherwise under this Indenture);

(b)          the Company defaults in the payment of interest on a Security of such series when due and payable, which default shall have continued unremedied for a period of 30 calendar days;

(c)          the Company, subject to the provisions of Section 6.08, defaults in the performance of or breaches any covenant or agreement in this Indenture or in respect of the Securities of such series (other than a default specified in clause (a) or (b) above) and such default or breach continues unremedied (or without provision deemed to be adequate for the remedying thereof) for a period of 90 consecutive calendar days after written notice specified below shall have been given to the Company;

37
(d)            the Company, pursuant to or within the meaning of any bankruptcy, insolvency or other similar law now or hereafter in effect applicable to the Company for the relief of debtors (“Bankruptcy Law”), shall (1) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Company or its debts, (2) consent to the entry of an order for relief against it in an involuntary case or other proceeding, (3) consent to the appointment of a trustee, receiver, liquidator, custodian or other similar official under any Bankruptcy Law (“Custodian”) of the Company or its property substantially in the entirety, (4) consent to the taking possession by a Custodian of the Company or its property substantially in the entirety, or (5) make a general assignment for the benefit of its creditors;

(e)          an involuntary case or other proceeding shall be commenced against the Company under any Bankruptcy Law by a court of competent jurisdiction seeking liquidation, reorganization or similar relief with respect to the Company or its debts or seeking the appointment of a Custodian of the Company or its property substantially in the entirety, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 120 consecutive calendar days; or

(f)          the occurrence of any other Event of Default with respect to Securities of such series as provided in Section 3.01;

provided, however, that a Default under Section 7.01(c) above will not constitute an Event of Default until the Trustee provides written notice to the Company or the Holders of 25% or more in aggregate principal amount of the Securities of such series then Outstanding provide written notice to the Company and the Trustee of the Default and the Company does not cure such Default within the time specified in Section 7.01(c) above after receipt of such notice. In the case of such notice given to the Company by the Holders, the Company will provide a copy of such notice to the Trustee.

Notwithstanding the foregoing provisions of this Section 7.01, if the principal or any premium or interest on any Security is payable in a Currency other than the Currency of the United States and such Currency is not available to the Company for making payment thereof due to the imposition of exchange controls or other circumstances beyond the control of the Company, the Company will be entitled to satisfy its obligations to Holders of the Securities by making such payment in the Currency of the United States in an amount equal to the Currency of the United States equivalent of the amount payable in such other Currency, as determined by the Company’s agent in accordance with Section 3.11(c) hereof by reference to the noon buying rate in The City of New York for cable transfers for such Currency (“Exchange Rate”), as such Exchange Rate is reported or otherwise made available by the Federal Reserve Bank of New York on the date of such payment, or, if such rate is not then available, on the basis of the most recently available Exchange Rate.  Notwithstanding the foregoing provisions of this Section 7.01, any payment made under such circumstances in the Currency of the United States where the required payment is in a Currency other than the Currency of the United States will not constitute an Event of Default under this Indenture.

38
Section 7.02          Acceleration; Rescission and Annulment.

(a)          Except as otherwise provided as contemplated by Section 3.01 with respect to any series of Securities, if any one or more of the above-described Events of Default (other than an Event of Default specified in Section 7.01(d) or 7.01(e)) shall happen with respect to Securities of any series at the time Outstanding, then, and in each and every such case, during the continuance of any such Event of Default, the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding may declare the principal (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of and all accrued but unpaid interest on all the Securities of such series then Outstanding to be due and payable immediately by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration of acceleration such principal amount (or specified amount) shall become immediately due and payable. If an Event of Default specified in Section 7.01(d) or 7.01(e) occurs and is continuing, then in every such case, the principal amount of all of the Securities of that series then Outstanding shall automatically, and without any declaration of acceleration or any other action on the part of the Trustee or any Holder, become due and payable immediately. Upon payment of such amounts in the Currency in which such Securities are denominated (subject to the last paragraph of Section 7.01 and except as otherwise provided pursuant to Section 3.01), all obligations of the Company in respect of the payment of principal of and interest on the Securities of such series shall terminate.

(b)          At any time after such a declaration of acceleration with respect to the Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of at least a majority in aggregate principal amount of the Securities of such series at the time Outstanding may, subject to Sections 7.06 and 14.02, waive all past Defaults and rescind and annul such acceleration if:

(i)          the rescission of the acceleration with respect to the Securities of such series would not conflict with any judgment or decree of a court of competent jurisdiction; and

(ii)          all Events of Default with respect to the Securities of such series, other than the non-payment of principal, premium, if any, or interest on the Securities of such series that became due solely because of such acceleration, have been cured or waived as provided in Section 7.06.

(c)          No rescission as provided in this Section 7.02 shall affect any subsequent default or impair any right consequent thereon.

(d)          For all purposes under this Indenture, if a portion of the principal of any Original Issue Discount Securities shall have been accelerated and declared due and payable pursuant to the provisions hereof, then, from and after such declaration of acceleration, unless such declaration of acceleration has been rescinded and annulled, the principal amount of such Original Issue Discount Securities shall be deemed, for all purposes hereunder, to be such portion of the principal thereof as shall be due and payable as a result of such acceleration, and payment of such portion of the principal thereof as shall be due and payable as a result of such acceleration, together with interest, if any, thereon and all other amounts owing thereunder, shall constitute payment in full of such Original Issue Discount Securities.

39
Section 7.03          Other Remedies.  If the Company shall fail for a period of 30 calendar days to pay any installment of interest on the Securities of any series or shall fail to pay the principal of and premium, if any, on any of the Securities of such series when and as the same shall become due and payable, whether at Maturity, or by call for redemption (other than pursuant to the sinking fund), by declaration of acceleration as authorized by this Indenture, or otherwise, or shall fail for a period of 30 calendar days to make any required sinking fund payment as to a series of Securities, then, upon demand of the Trustee, the Company shall pay to the Paying Agent, for the benefit of the Holders of Securities of such series then Outstanding, the whole amount which then shall have become due and payable on all the Securities of such series, with interest on the overdue principal and premium, if any, and (so far as the same may be legally enforceable) on the overdue installments of interest at the rate borne by the Securities of such series, and all amounts owing the Trustee and any predecessor trustee hereunder under Section 11.01(a).

In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceeding at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor upon the Securities of such series, and collect the moneys adjudged or decreed to be payable out of the property of the Company or any other obligor upon the Securities of such series, wherever situated, in the manner provided by law. Every recovery of judgment in any such action or other proceeding, subject to the payment to the Trustee of all amounts owing the Trustee and any predecessor trustee hereunder under Section 11.01(a), shall be for the ratable benefit of the Holders of such series of Securities which shall be the subject of such action or proceeding. All rights of action upon or under any of the Securities or this Indenture may be enforced by the Trustee without the possession of any of the Securities and without the production of any thereof at any trial or any proceeding relative thereto.

Section 7.04          Trustee as Attorney-in-Fact.  Nothing herein contained shall be deemed to authorize or empower the Trustee to consent to or accept or adopt, on behalf of any Holder of Securities, any plan of reorganization or readjustment affecting the Securities or the rights of any Holder thereof, or to authorize or empower the Trustee to vote in respect of the claim of any Holder of any Securities in any such proceeding.

Section 7.05          Priorities.  Any moneys or properties collected by the Trustee, or, after an Event of Default, any moneys or other property distributable in respect of the Company’s obligations under this Indenture, in either case with respect to a series of Securities under this Article VII shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys or properties and, in the case of the distribution of such moneys or properties on account of the Securities of any series, upon presentation of the Securities of such series, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:
40
First:          To the payment of all amounts (including indemnity payments) due to the Trustee, Paying Agent, Registrar and any other Agent and any predecessor trustee, paying agent, registrar and other Agent under Section 11.01(a) and the reasonably incurred expenses and disbursements of its agents, delegates, attorneys and counsel.

Second:          In case the principal of the Outstanding Securities of such series shall not have become due and be unpaid, to the payment of interest on the Securities of such series, in the chronological order of the Stated Maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the rate borne by such Securities, such payments to be made ratably to the Persons entitled thereto.

Third:          In case the principal of the Outstanding Securities of such series shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon the Securities of such series for principal and premium, if any, and interest, with interest on the overdue principal and premium, if any, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the rate borne by the Securities of such series, and in case such moneys shall be insufficient to pay in full the whole amounts so due and unpaid upon the Securities of such series, then to the payment of such principal and premium, if any, and interest without preference or priority of principal and premium, if any, over interest, or of interest over principal and premium, if any, or of any installment of interest over any other installment of interest, or of any Security of such series over any other Security of such series, ratably to the aggregate of such principal and premium, if any, and accrued and unpaid interest.

Fourth:          Any surplus then remaining shall be paid to the Company, its successors or assigns, or to whomsoever may be determined by a court of competent jurisdiction to be so entitled.

Section 7.06          Control by Securityholders; Waiver of Past Defaults.  The Holders of a majority in principal amount of the Securities of any series at the time Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee hereunder, or of exercising any trust or power hereby conferred upon the Trustee with respect to the Securities of such series; provided, however, that, subject to the provisions of Section 11.02, the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by counsel determines that the action so directed may not lawfully be taken, would involve the Trustee in personal liability or would be unduly prejudicial to the Holders not joining in the direction (it being understood that the Trustee has no affirmative duty to determine whether any action is unduly prejudicial to any Holder of a Security). The Holders of not less than a majority in aggregate principal amount of such series of Securities at the time Outstanding may on behalf of all Holders of the Securities of such series waive any existing or past Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default (i) in the payment of principal of, premium, if any, or interest on (or Additional Amount payable in respect of), the Securities of such series then Outstanding, in which event the consent of all Holders of the Securities of such series then Outstanding affected thereby is required, or (ii) in respect of a covenant or provision which under Section 14.02 cannot be modified or amended without the consent of the Holder of each Security of such series then Outstanding affected thereby. Upon any such waiver, the Company, the Trustee and the Holders of the Securities of such series shall be restored to their former positions and rights hereunder, respectively; provided that no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 7.06, said Default or Event of Default shall for all purposes of the Securities of such series and this Indenture be deemed to have been cured and to be not continuing.
41
Section 7.07          Limitation on Suits.  No Holder of any Security of any series shall have any right to institute any action, suit or proceeding at law or in equity for the execution of any trust hereunder or for the appointment of a receiver or for any other remedy hereunder, in each case with respect to an Event of Default with respect to such series of Securities, unless (i) such Holder previously shall have given to the Trustee written notice of one or more of the Events of Default herein specified with respect to such series of Securities, (ii) the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding shall have requested the Trustee in writing to take action in respect of the matter complained of, (iii) there shall have been offered, and if requested provided, to the Trustee pre-funding, security and/or indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby, and (iv) the Trustee, for 60 calendar days after receipt of such notification, request and offer of pre-funding, security and/or indemnity, shall have failed to institute any such action, suit or proceeding and have not received from the Holders of a majority in aggregate principal amount of the Securities of such series then Outstanding a direction inconsistent with such request; and such notification, request and offer of pre-funding, security and/or indemnity are hereby declared in every such case to be conditions precedent to any such action, suit or proceeding by any Holder of any Security of such series; it being understood and intended that no one or more of the Holders of Securities of such series shall have any right in any manner whatsoever by his, her, its or their action to enforce any right hereunder, except in the manner herein provided, and that every action, suit or proceeding at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Holders of the Outstanding Securities of such series; provided, however, that nothing in this Indenture or in the Securities of such series shall affect or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on, the Securities of such series to the respective Holders of such Securities at the respective due dates in such Securities stated, or affect or impair the right, which is also absolute and unconditional, of such Holders to institute suit to enforce the payment thereof.

Section 7.08          Undertaking for Costs.  All parties to this Indenture and each Holder of any Security, by such Holder’s acceptance thereof, shall be deemed to have agreed that any court may in its discretion require, in any action, suit or proceeding for the enforcement of any right or remedy under this Indenture, or in any action, suit or proceeding against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such action, suit or proceeding of an undertaking to pay the costs of such action, suit or proceeding, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such action, suit or proceeding, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 7.08 shall not apply to any action, suit or proceeding instituted by the Trustee, to any action, suit or proceeding instituted by any one or more Holders of Securities holding in the aggregate more than 10% in principal amount of the Securities of any series Outstanding, or to any action, suit or proceeding instituted by any Holder of Securities of any series for the enforcement of the payment of the principal of, premium, if any, or the interest on, any of the Securities of such series, on or after the respective due dates expressed in such Securities.
42
Section 7.09          Remedies Cumulative; Delay or Omission Not Waiver.  No remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities of any series is intended to be exclusive of any other remedy or remedies, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of the Trustee or of any Holder of the Securities of any series to exercise any right or power accruing upon any Default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Default or Event of Default or an acquiescence therein; and every power and remedy given by this Article VII to the Trustee and to the Holders of Securities of any series, respectively, may be exercised from time to time and as often as may be deemed expedient by the Trustee or by the Holders of Securities of such series, as the case may be. In case the Trustee or any Holder of Securities of any series shall have proceeded to enforce any right under this Indenture and the proceedings for the enforcement thereof shall have been discontinued or abandoned because of waiver or for any other reason, or shall have been adjudicated adversely to the Trustee or to such Holder of Securities, then and in every such case, subject to any determinations in such proceedings, the Company, the Trustee and the Holders of the Securities of such series shall severally and respectively be restored to their former positions and rights hereunder, and thereafter all rights, remedies and powers of the Trustee and the Holders of the Securities of such series shall continue as though no such proceedings had been taken, except as to any matters so waived or adjudicated.

ARTICLE VIII

CONCERNING THE SECURITYHOLDERS

Section 8.01          Evidence of Action of Securityholders.  Whenever in this Indenture it is provided that the Holders of a specified percentage or a majority in aggregate principal amount of the Securities or of any series of Securities may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the Holders of such specified percentage or majority have joined therein may be evidenced by (a) any instrument or any number of instruments of similar tenor executed by Securityholders in person, by an agent or by a  proxy appointed in writing, including through an electronic system for tabulating consents operated by the Depositary for such series or otherwise (such action becoming effective, except as herein otherwise expressly provided, when such instruments or evidence of electronic consents are delivered to the Trustee and, where it is hereby expressly required, to the Company), or (b) by the record of the Holders of Securities voting in favor thereof at any meeting of Securityholders duly called and held in accordance with the provisions of Article IX, or (c) by a combination of such instrument or instruments and any such record of such a meeting of Securityholders.
43
Section 8.02          Proof of Execution or Holding of Securities.  Proof of the execution of any instrument by a Securityholder or his, her or its agent or proxy and proof of the holding by any Person of any of the Securities shall be sufficient if made in the following manner:

(a)          The fact and date of the execution by any Person of any such instrument may be proved (i) by the certificate of any notary public or other officer in any jurisdiction who, by the laws thereof, has power to take acknowledgments or proof of deeds to be recorded within such jurisdiction, that the Person who signed such instrument did acknowledge before such notary public or other officer the execution thereof, or (ii) by the affidavit of a witness of such execution sworn to before any such notary or other officer. Where such execution is by a Person acting in other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority.

(b)          The ownership of Securities of any series shall be proved by the Register of such Securities or by a certificate of the Registrar for such series.

(c)          The record of any Holders’ meeting shall be proved in the manner provided in Section 9.06.

(d)          The Trustee may require such additional proof of any matter referred to in this Section 8.02 as it shall deem appropriate or necessary, so long as the request is a reasonable one.

(e)          If the Company shall solicit from the Holders of Securities of any series any action, the Company may, at its option, fix in advance a record date for the determination of Holders of Securities entitled to take such action, but the Company shall have no obligation to do so. Any such record date shall be fixed at the Company’s discretion; provided that such record date shall not be more than 30 calendar days prior to the first solicitation of any consent or waiver or more than 30 calendar days prior to the date of the most recent list of Holders furnished to the Trustee prior to such solicitation pursuant to Section 312 of the TIA. If such a record date is fixed, such action may be sought or given before or after the record date, but only the Holders of Securities of record at the close of business on such record date shall be deemed to be Holders of Securities for the purpose of determining whether Holders of the requisite proportion of Outstanding Securities of such series have authorized or agreed or consented to such action, and for that purpose the Outstanding Securities of such series shall be computed as of such record date.

Section 8.03          Persons Deemed Owners.

(a)          The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Security is registered in the Register as the owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Section 3.08) interest, if any, on, such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. All payments made to any Holder, or upon his, her or its order, shall be valid, and, to the extent of the sum or sums paid, effectual to satisfy and discharge the liability for moneys payable upon such Security.

44
(b)          None of the Company, the Trustee, any Paying Agent or the Registrar shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Section 8.04          Effect of Consents.  After an amendment, supplement, waiver or other action becomes effective as to any series of Securities, a consent to it by a Holder of such series of Securities is a continuing consent conclusive and binding upon such Holder and every subsequent Holder of the same Securities or portion thereof, and of any Security issued upon the transfer thereof or in exchange therefor or in place thereof, even if notation of the consent is not made on any such Security. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

ARTICLE IX

SECURITYHOLDERS’ MEETINGS

Section 9.01          Purposes of Meetings.  A meeting of Securityholders of any or all series may be called at any time and from time to time pursuant to the provisions of this Article IX for any of the following purposes:

(a)          to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article VIII;

(b)          to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article XI;

(c)          to consent to the execution of an Indenture or of indentures supplemental hereto pursuant to the provisions of Section 14.02; or

(d)          to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Securities of any one or more or all series, as the case may be, under any other provision of this Indenture or under applicable law.

Section 9.02          Call of Meetings by Trustee.  The Trustee may at any time call a meeting of all Securityholders of any or all series that may be affected by the action proposed to be taken, to take any action specified in Section 9.01, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders of a series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to Holders of Securities of such series at their addresses as they shall appear on the Register. Such notice shall be mailed not less than 20 nor more than 90 calendar days prior to the date fixed for the meeting.

Section 9.03          Call of Meetings by Company or Securityholders.  In case at any time the Company or the Holders of at least 10% in aggregate principal amount of the Securities of a series (or of all series, as the case may be) then Outstanding that may be affected by the action proposed to be taken shall have requested the Trustee to call a meeting of Securityholders of such series (or of all series), by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 calendar days after receipt of such request, then the Company or such Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 9.01, by mailing notice thereof as provided in Section 9.02.
45
Section 9.04          Qualifications for Voting.  To be entitled to vote at any meeting of Securityholders, a Person shall (a) be a Holder of one or more Securities affected by the action proposed to be taken at the meeting or (b) be a Person appointed by an instrument in writing as proxy by a Holder of one or more such Securities. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

Section 9.05          Regulation of Meetings.

(a)          Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem fit.

(b)          The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 9.03, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chair. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting.

(c)          At any meeting of Securityholders of a series, each Securityholder of such series of such Securityholder’s proxy shall be entitled to one vote for each US$1,000 principal amount of Securities of such series Outstanding held or represented by him or her; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities of such series held by him or her or instruments in writing as aforesaid duly designating him or her as the Person to vote on behalf of other Securityholders. At any meeting of the Securityholders duly called pursuant to the provisions of Section 9.02 or 9.03, the presence of Persons holding or representing Securities in an aggregate principal amount sufficient to take action upon the business for the transaction of which such meeting was called shall be necessary to constitute a quorum, and any such meeting may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.

46
Section 9.06          Voting.  The vote upon any resolution submitted to any meeting of Securityholders of a series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts of the Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 9.02. The record shall show the principal amounts of the Securities voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee.

Any record so signed and verified shall be conclusive evidence of the matters therein stated.

Section 9.07          No Delay of Rights by Meeting.  Nothing contained in this Article IX shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Securityholders of any series or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Securityholders of such series under any of the provisions of this Indenture or of the Securities of such series.

ARTICLE X

REPORTS BY THE COMPANY AND THE TRUSTEE AND
SECURITYHOLDERS’ LISTS

Section 10.01          Reports by Trustee.

(a)          Any Trustee’s report required under Section 313(a) of the Trust Indenture Act shall be transmitted on or before the sixtieth (60th) calendar day after September 14 in each year following the date hereof, so long as any Securities are Outstanding hereunder, and shall be dated as of a date convenient to the Trustee no more than 60 nor less than 45 calendar days prior thereto.

(b)          The Trustee shall, at the time of the transmission to the Holders of Securities of any report pursuant to the provisions of this Section 10.01, file a copy of such report with each securities exchange upon which the Securities are listed or each automated quotation system on which the Securities are quoted, if any, and also with the SEC in respect of a Security listed and registered on a national securities exchange or automated quotation system, if any. The Company agrees to notify the Trustee when, as and if the Securities become listed or delisted on any securities exchange or admitted to trading on any automated quotation system and of any delisting thereof.

47
The Company shall reimburse the Trustee for all expenses incurred in the preparation and transmission of any report pursuant to the provisions of this Section 10.01 and of Section 10.02.

Section 10.02          Reports by the Company.  The Company shall file with the Trustee and the SEC, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided in the Trust Indenture Act; provided that, any such information, documents or reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 30 calendar days after the same is filed with the SEC; provided further that the filing of the reports specified in Section 13 or 15(d) of the Exchange Act by an entity that is the direct or indirect parent of the Company shall satisfy the requirements of this Section 10.02 so long as such entity is an obligor or guarantor on the Securities; provided further that the reports of such entity shall not be required to include condensed consolidating financial information for the Company in a footnote to the financial statements of such entity.

Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute actual or constructive notice or knowledge of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates). It is expressly understood that materials transmitted electronically by the Company to the Trustee or filed pursuant to the SEC’s EDGAR system (or any successor electronic filing system) shall be deemed filed with the Trustee and transmitted to Holders for purposes of this Section 10.02. The Trustee shall not be obligated to monitor or confirm, on a continuing basis or otherwise, the Company’s compliance with the covenants under this Indenture or with respect to any reports or other documents filed with the SEC or posted on the Company’s website pursuant to the Indenture, or determine whether any reports have been filed or posted.

Section 10.03          Securityholders’ Lists.  The Company covenants and agrees that it shall furnish or cause to be furnished to the Trustee:

(a)          semi-annually, within 5 Business Days after each Record Date, but in any event not less frequently than semi-annually, a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of Securities to which such Record Date applies, as of such Record Date, and

(b)          at such other times as the Trustee may request in writing, within 30 calendar days after receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 calendar days prior to the time such list is furnished;

provided, however, that so long as the Trustee shall be the Registrar, such lists shall not be required to be furnished.

48
ARTICLE XI

CONCERNING THE TRUSTEE

Section 11.01          Rights of Trustees; Compensation and Indemnity.  The Trustee accepts the trusts created by this Indenture upon the terms and conditions hereof, including the following, to all of which the parties hereto and the Holders from time to time of the Securities agree:

(a)          The Company covenants and agrees to pay to the Trustee, in any capacity under this Indenture, from time to time, and the Trustee shall be entitled to, compensation for all services rendered by it hereunder in any capacity (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) as mutually agreed to in writing between the Trustee and the Company. The Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Trustee in accordance with any of the provisions of this Indenture in any capacity thereunder (including the reasonable compensation and the expenses and disbursements of its agents and counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as shall have been caused by its gross negligence or willful misconduct as determined by a final, non-appealable decision of a court of competent jurisdiction.

The Company also agrees to indemnify the Trustee and the Trustee’s officers, employees, directors and agents hereunder for, and to hold it harmless against, any and all loss, liability, damage, claim (provided that the Company need not pay for settlement of any such claim made without its consent, which consent shall not be unreasonably withheld) or expense incurred without gross negligence or willful misconduct on the part of the Trustee, its officers, employees, directors and agents, as the case may be, as determined by a final, non-appealable decision of a court of competent jurisdiction, and arising out of or in connection with the acceptance or administration of this Indenture and the performance of its duties hereunder (including in any agent capacity in which it acts), including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except those caused by its own gross negligence or willful misconduct (as determined by a final, non-appealable decision of a court of competent jurisdiction). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity; provided, however, that the failure to so notify the Company shall not affect the obligations of the Company hereunder to indemnify. In the absence of a Default or an Event of Default, the Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld.

As security for the performance of the obligations of the Company under this Section 11.01(a), the Trustee shall have a lien upon all property and funds held or collected by the Trustee as such, except funds held in trust by the Trustee to pay principal of and interest on any Securities.  The Trustee’s right to receive payment of any amounts due under this Section 11.01(a) shall not be subordinate to any other liability or indebtedness of the Company.  The indemnity under this Section 11.01(a) is payable upon demand by the Trustee. Notwithstanding any provisions of this Indenture to the contrary, the obligations of the Company to compensate and indemnify the Trustee under this Section 11.01(a) shall survive the resignation or removal of the Trustee, any satisfaction and discharge under Article XII , the payment of any Securities and the termination of this Indenture for any reason.  In addition to and without prejudice to its other rights hereunder, when the Trustee incurs fees, expenses or renders services after an Event of Default specified in clause (g) or (h) of Section 7.01 occurs, the fees and expenses (including the reasonable fees and expenses of its counsel) and compensation for the services are intended to constitute expenses of administration under the Bankruptcy Code or any applicable state bankruptcy, insolvency or similar laws.

49
(b)          The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, delegates, custodians, nominees or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, delegate, representative, custodian, nominee or attorney appointed by it with due care hereunder.

(c)          The Trustee shall not be responsible in any manner whatsoever for the correctness of the recitals herein or in the Securities (except its certificates of authentication thereon) contained, all of which are made solely by the Company; and the Trustee shall not be responsible or accountable in any manner whatsoever for or with respect to the validity or execution or sufficiency of this Indenture or of the Securities (except its certificates of authentication thereon), and the Trustee makes no representation with respect thereto, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of any Securities, or the proceeds of any Securities.

(d)          Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection, and, subject to Section 11.02, the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Trustee hereunder in reliance thereon.

(e)          The Trustee, subject to Section 11.02, may rely upon the certificate of the Secretary or one of the Assistant Secretaries of the Company as to the adoption of any Board Resolution or resolution of the stockholders of the Company, and any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by, and whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee may rely upon, an Officer’s Certificate of the Company (unless other evidence in respect thereof be herein specifically prescribed).

(f)          Subject to Section 11.04, the Trustee or any agent of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 310(b) and 311 of the TIA, may otherwise deal with the Company with the same rights it would have had if it were not the Trustee or such agent.

50
(g)          Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on or investment of any money received by it hereunder except as otherwise agreed in writing with the Company. To the extent the Company does not provide the written instructions to the Trustee, such funds on deposit shall remain uninvested.

(h)          Any action taken by the Trustee pursuant to any provision hereof at the request or with the consent of any Person who at the time is the Holder of any Security shall be conclusive and binding in respect of such Security upon all future Holders thereof or of any Security or Securities which may be issued for or in lieu thereof in whole or in part, whether or not such Security shall have noted thereon the fact that such request or consent had been made or given.

(i)          The Trustee shall be entitled to conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, judgment, approval, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties.

(j)          The Trustee shall not be under any obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders of the Securities, pursuant to any provision of this Indenture, unless one or more of the Holders of the Securities shall have offered, and if requested provided, to the Trustee pre-funding, security and/or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred by it therein or thereby.

(k)          The Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and believed by it to be authorized or within its discretion or within the rights or powers conferred upon it by this Indenture.

(l)          The Trustee shall not be deemed to have knowledge or be charged with notice of any Default or Event of Default with respect to any Securities unless a Responsible Officer of the Trustee has actual knowledge by way of written notice thereof or unless the Company or the Holders of not less than 25% of the Outstanding Securities notify the Trustee in writing at the Corporate Trust Office thereof.

(m)          The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of Indebtedness or other paper or document; provided, however, that the Trustee, may, but shall not be required to, make further inquiry or investigation into such facts or matters as it may see fit at the expense of the Company and shall incur no liability of any kind by reason of such inquiry or investigation.

(n)          The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder (including, as of the date of this Indenture, the Paying Agent and the Registrar), and to each agent, custodian and other person employed to act hereunder.

51
(o)          In no event shall the Trustee be responsible or liable for special, indirect, punitive, incidental or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit, goodwill or opportunity), whether or not foreseeable, even if the Trustee has been advised of the possibility of such loss or damage and regardless of the form of action. The provisions of this Section 11.01(o) shall survive the termination or discharge of this Indenture and the resignation or removal of the Trustee.

(p)          The Trustee may request that the Company deliver an Officer’s Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officer’s Certificate may be signed by any person authorized to sign an Officer’s Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

(q)          The permissive right of the Trustee to take or refrain from taking action hereunder shall not be construed as a duty.

(r)          The Trustee is not required to give any bond or surety with respect to the performance of its duties or the exercise of its powers under this Indenture.

(s)          The Trustee may refrain from taking any action in any jurisdiction if taking such action in that jurisdiction would, in the reasonable opinion of the Trustee based on written legal advice received from qualified legal counsel in the relevant jurisdiction, be contrary to any law of that jurisdiction or, to the extent applicable, the State of New York. Furthermore, the Trustee may refrain from taking such action if, in the reasonable opinion of the Trustee based on such legal advice, it would otherwise render the Trustee liable to any person in that jurisdiction or the State of New York and there has not been offered to the Trustee pre-funding, security and/or indemnity satisfactory to it against the liabilities to be incurred therein or thereby, or the Trustee would not have the legal capacity to take such action in that jurisdiction by virtue of applicable law in that jurisdiction or the State of New York or by virtue of a written order of any court or other competent authority in that jurisdiction that the Trustee does not have such legal capacity.

Section 11.02          Duties of Trustee.

(a)          If one or more of the Events of Default specified in Section 7.01 with respect to the Securities of any series shall have happened, then, during the continuance thereof, the Trustee shall, with respect to such Securities, exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)          Unless and until an Event of Default specified in Section 7.01 with respect to the Securities of any series shall have happened which at the time is continuing,

(i)          the Trustee undertakes to perform such duties and only such duties with respect to the Securities of that series as are specifically set out in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee, whose duties and obligations shall be determined solely by the express provisions of this Indenture; and

52
(ii)          the Trustee shall be entitled to conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, in the absence of gross negligence or willful misconduct on the part of the Trustee, upon certificates and opinions furnished to it pursuant to the express provisions of this Indenture; provided that, in the case of any such certificates or opinions which, by the provisions of this Indenture, are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts, statements, opinions or conclusions stated therein).

(c)          None of the provisions of this Indenture shall be construed as relieving the Trustee from liability for its own grossly negligent action, grossly negligent failure to act, or its own willful misconduct, except that, anything in this Indenture contained to the contrary notwithstanding,

(i)          the Trustee shall not be liable to any Holder of Securities or to any other Person for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was grossly negligent in ascertaining the pertinent facts;

(ii)          the Trustee shall not be liable to any Holder of Securities or to any other Person with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of Securityholders given as provided in Section 7.06, relating to the time, method and place of conducting any proceeding for any remedy available to it or exercising any trust or power conferred upon it by this Indenture;

(iii)          none of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate pre-funding, security and/or indemnity against such risk or liability is not reasonably assured to it; and

(iv)          this subsection (c) shall not be construed to limit the effect of subsection (b) of this Section 11.02.

(d)          Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 11.02.

53
Section 11.03          Notice of Defaults.  Within the later of 90 calendar days after the occurrence thereof if known to the Trustee and promptly after obtaining actual knowledge thereof, the Trustee shall give to the Holders of the Securities of a series notice of each Default or Event of Default with respect to the Securities of such series known to the Trustee, by transmitting such notice to Holders at their addresses as the same shall then appear on the Register, unless such Default shall have been cured or waived before the giving of such notice (the term “Default” being hereby defined to be the events specified in Section 7.01, which are, or after notice or lapse of time or both would become, Events of Default as defined in said Section). Except in the case of a Default or Event of Default in payment of the principal of, premium, if any, or interest on, any of the Securities of such series when and as the same shall become payable, or to make any sinking fund payment as to Securities of the same series, the Trustee shall be protected in withholding such notice, if and so long as a Responsible Officer or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities of such series (it being understood that the trustee does not have an affirmative duty to ascertain whether or not any such notice is in the interests of such Holders).

Section 11.04          Eligibility; Disqualification.

(a)          The Trustee shall at all times satisfy the requirements of Section 310(a) of the TIA. The Trustee shall have a combined capital and surplus of at least US$50 million as set forth in its most recent published annual report of condition and shall have a Corporate Trust Office. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 11.04, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

(b)          The Trustee shall comply with Section 310(b) of the TIA; provided, however, that there shall be excluded from the operation of Section 310(b)(i) of the TIA any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are Outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the TIA are met. If the Trustee has or shall acquire a conflicting interest within the meaning of Section 310(b) of the TIA, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. If Section 310(b) of the TIA is amended any time after the date of this Indenture to change the circumstances under which a Trustee shall be deemed to have a conflicting interest with respect to the Securities of any series or to change any of the definitions in connection therewith, this Section 11.04 shall be automatically amended to incorporate such changes.

Section 11.05          Resignation and Notice; Removal.  The Trustee, or any successor to it hereafter appointed, may at any time resign and be discharged of the trusts hereby created with respect to any one or more or all series of Securities by giving to the Company notice in writing.  Such resignation shall take effect upon the appointment of a successor Trustee and the acceptance of such appointment by such successor Trustee.  Any Trustee hereunder may be removed with respect to any series of Securities at any time, upon 30 calendar days’ prior written notice delivered to the Trustee and the Company by the Holders of a majority in principal amount of the Securities of such series then Outstanding, specifying such removal and the date when it shall become effective.
54
If at any time:

(1)          the Trustee shall fail to comply with the provisions of Section 310(b) of the TIA after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or

(2)          the Trustee shall cease to be eligible under Section 11.04 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or

(3)          the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, (i) the Company by written notice to the Trustee may remove the Trustee and appoint a successor Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the TIA, any Securityholder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.

Upon its resignation or removal, any Trustee shall be entitled to the payment of compensation for the services rendered hereunder by such Trustee and to the payment of all expenses reasonably incurred hereunder and all moneys then due to it hereunder. The Trustee’s rights to indemnification and its lien provided in Section 11.01(a) shall survive its resignation or removal, the satisfaction and discharge of this Indenture and the termination of this Indenture for any reason.

Section 11.06          Successor Trustee by Appointment.

(a)          In case at any time the Trustee shall resign, or shall be removed (unless the Trustee shall be removed as provided in Section 11.04(b), in which event the vacancy shall be filled as provided in Section 11.04(b)), or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or if a receiver of the Trustee or of its property shall be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation with respect to the Securities of one or more series, a successor Trustee with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any series) may be appointed by the Holders of a majority in aggregate principal amount of the Securities of that or those series then Outstanding, by an instrument or instruments in writing signed in duplicate by such Holders and filed with the Company and the other with the successor Trustee; provided that, until a successor Trustee shall have been so appointed by the Holders of Securities of that or those series as herein authorized, the Company, or, in case all or substantially all the assets of the Company shall be in the possession of one or more custodians or receivers lawfully appointed, or of trustees in bankruptcy or reorganization proceedings (including a trustee or trustees appointed under the provisions of the Bankruptcy Code), or of assignees for the benefit of creditors, such receivers, custodians, trustees or assignees, as the case may be, by an instrument in writing, shall appoint a successor Trustee with respect to the Securities of such series. Subject to the provisions of Sections 11.04 and 11.05, upon the appointment as above provided of a successor Trustee with respect to the Securities of any series, the Trustee with respect to the Securities of such series shall cease to be Trustee hereunder. After any such appointment other than by the Holders of Securities of that or those series, the Person making such appointment shall forthwith cause notice thereof to be mailed to the Holders of Securities of such series at their addresses as the same shall then appear on the Register but any successor Trustee with respect to the Securities of such series so appointed shall, immediately and without further act, be superseded by a successor Trustee appointed by the Holders of Securities of such series in the manner above prescribed, if such appointment be made prior to the expiration of one year from the date of the mailing of such notice by the Company, or by such receivers, trustees or assignees.

55
(b)          If any Trustee with respect to the Securities of one or more series shall resign or be removed and a successor Trustee shall not have been appointed by the Company or by the Holders of the Securities of such series or, if any successor Trustee so appointed shall not have accepted its appointment within 30 calendar days after such appointment shall have been made, the resigning Trustee may, on behalf of and at the expense of the Company, appoint its own successor or the retiring Trustee or the Company may apply to any court of competent jurisdiction for the appointment of a successor Trustee. If in any other case a successor Trustee shall not be appointed pursuant to the foregoing provisions of this Section 11.06 within three months after such appointment might have been made hereunder, the Holder of any Security of the applicable series or any retiring Trustee at the expense of the Company may apply to any court of competent jurisdiction to appoint a successor Trustee. Such court may thereupon, in any such case, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee.

(c)          Any successor Trustee appointed hereunder with respect to the Securities of one or more series shall execute, acknowledge and deliver to its predecessor Trustee and to the Company, or to the receivers, trustees, assignees or court appointing it, as the case may be, an instrument accepting such appointment hereunder, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations with respect to such series of such predecessor Trustee with like effect as if originally named as Trustee hereunder, and such predecessor Trustee, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to pay over, and such successor Trustee shall be entitled to receive, all moneys and properties held by such predecessor Trustee as Trustee hereunder, subject nevertheless to its lien provided for in Section 11.01(a). Nevertheless, on the written request of the Company or of the successor Trustee or of the Holders of at least 10% in aggregate principal amount of the Securities of such series then Outstanding, such predecessor Trustee, upon payment of its said charges and disbursements, shall execute and deliver an instrument transferring to such successor Trustee upon the trusts herein expressed all the rights, powers and trusts of such predecessor Trustee and shall assign, transfer and deliver to the successor Trustee all moneys and properties held by such predecessor Trustee, subject nevertheless to its lien provided for in Section 11.01(a); and, upon request of any such successor Trustee and the Company shall make, execute, acknowledge and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Trustee all such authority, rights, powers, trusts, immunities, duties and obligations.

56
Section 11.07          Successor Trustee by Merger.  Any Person into which the Trustee or any successor to it in the trusts created by this Indenture shall be merged or converted, or any Person with which it or any successor to it shall be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee or any such successor to it shall be a party, or any Person to which the Trustee or any successor to it shall sell or otherwise transfer all or substantially all of the corporate trust business of the Trustee, shall be the successor Trustee under this Indenture without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such Person shall be otherwise qualified and eligible under this Article. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture with respect to one or more series of Securities, any of such Securities shall have been authenticated but not delivered by the Trustee then in office, any successor to such Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to such Trustee may authenticate such Securities either in the name of any predecessor Trustee hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

Section 11.08          Right to Rely on Opinion of Counsel and/or Officer’s Certificate.  Subject to Section 11.02, and subject to the provisions of Section 16.01 with respect to the opinions and certificates required thereby, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of gross negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Opinion of Counsel and/or Officer’s Certificate with respect thereto delivered to the Trustee, and such Opinion of Counsel and/or Officer’s Certificate, in the absence of gross negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof.

Section 11.09          Communications by Securityholders with Other Securityholders.  Holders of Securities may communicate pursuant to Section 312(b) of the TIA with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of Section 312(c) of the TIA with respect to such communications.
57
ARTICLE XII

SATISFACTION AND DISCHARGE; DEFEASANCE

Section 12.01          Applicability of Article.  If, pursuant to Section 3.01, provision is made for the defeasance of Securities of a series and if the Securities of such series are denominated and payable only in U.S. Dollars (except as provided pursuant to Section 3.01), then the provisions of this Article shall be applicable except as otherwise specified pursuant to Section 3.01 for Securities of such series.

Section 12.02          Satisfaction and Discharge of Indenture.

(a)          This Indenture, with respect to the Securities of any series (if all series issued under this Indenture are not to be affected), shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of such Securities herein expressly provided for and rights to receive payments of principal of, premium, if any, and interest on, such Securities) when:

(i)          either:

(A)          all Securities of such series that have been authenticated, except (x) lost, stolen or destroyed Securities that have been replaced or paid and (y) Securities for whose payment money has been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or

(B)          all Securities of such series that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company has irrevocably deposited or caused to be deposited with the Trustee or the Paying Agent as trust funds in trust solely for the benefit of the Holders, cash in U.S. Dollars, U.S. Government Obligation, or a combination of cash in U.S. Dollars and U.S. Government Obligation, in amounts as will be sufficient (in the case of a deposit not entirely in cash, in the opinion of an internationally recognized investment bank, appraisal firm or firm of independent public accountants), without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on such Securities not delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the Stated Maturity or Redemption Date, as the case may be; provided, however, in the event a petition for relief under the Bankruptcy Code or any applicable state bankruptcy, insolvency or other similar law is filed with respect to the Company within 91 calendar days after the deposit and the Trustee or the Paying Agent (as the case may be) is required to return the moneys then on deposit with the Trustee or the Paying Agent (as the case may be) to the Company, the obligations of the Company under this Indenture with respect to such Securities shall not be deemed terminated or discharged;

58
(ii)          no Default or Event of Default under this Indenture has occurred and is continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound;

(iii)          the Company has paid or caused to be paid all sums payable by it under this Indenture with respect to all Securities of such series; and

(iv)          the Company has delivered irrevocable instructions to the Trustee or the Paying Agent (as the case may be) under this Indenture to apply the deposited money toward the payment of the Securities of such series at the Stated Maturity or Redemption Date, as the case may be.

(b)          The Company shall deliver an Officer’s Certificate and an Opinion of Counsel (which opinion may be subject to customary assumptions and exclusions) to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

(c)          Notwithstanding the satisfaction and discharge of this Indenture, the Company’s obligations under Section 11.01(a) shall survive and if money shall have been deposited with the Trustee or the Paying Agent (as the case may be) pursuant to subclause (A)(y) of clause (i) of Section 12.02(a), the obligations of the Trustee or the Paying Agent (as the case may be) under Section 12.07 and Section 6.03(e) shall survive such satisfaction and discharge.

Section 12.03          Defeasance upon Deposit of Moneys or U.S. Government Obligations.

(a)          The Company may, at its option and at any time, elect to have either Section 12.03(b) or Section 12.03(c) applied to all Outstanding Securities of any series upon compliance with the conditions set forth below in this Section 12.03.

(b)          Upon the Company’s exercise under Section 12.03(a) of the option applicable to this Section 12.03(b), the Company shall, subject to the satisfaction of the conditions set forth in Section 12.03(d), be deemed to have been Discharged from its obligations with respect to all Outstanding Securities of such series on the date such conditions are satisfied (“Legal Defeasance”). For this purpose, “Legal Defeasance” means that the Company shall be deemed to have paid and Discharged the entire Indebtedness represented by the Securities of such series then Outstanding and to have satisfied all of its other obligations under the Securities of such series and this Indenture, except for the following provisions which shall survive until otherwise terminated or discharged hereunder:

(i)          the rights of Holders of the Securities of such series then Outstanding to receive payments in respect of the principal of, or interest or premium on the Securities when such payments are due from the trust referred to in Section 12.03(d);

(ii)          the Company’s obligations concerning issuing temporary Securities, registration of Securities, mutilated, destroyed, lost or stolen Securities and the maintenance of an office or agency for payment and money for security payments held in trust;

59
(iii)          the rights, powers, trusts, duties, indemnities and immunities of the Trustee, and the Company’s obligations in connection therewith; and

(iv)          this Section 12.03(b) and Section 12.03(c) with respect to the Securities of such series.

Following the Company’s exercise of its Legal Defeasance option, payment of the Securities of such series may not be accelerated because of an Event of Default. Subject to compliance with this Article XII, the Company may exercise its option under this Section 12.03(b) notwithstanding the prior exercise of its option under Section 12.03(c).

“Discharged” means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by, and obligations under, the Securities of a series and to have satisfied all the obligations under this Indenture relating to the Securities of such series (and the Trustee, at the expense of the Company, shall execute such instruments reasonably requested by the Company acknowledging the same), except (A) the rights of Holders of Securities of such series to receive, from the trust fund described in clause (i) of 12.03(d), payment of the principal of, premium, if any, or interest on such Securities when such payments are due, (B) the Company’s obligations with respect to Securities of such series under Sections 3.04, 3.06, 3.07, 6.02, 6.03, 12.06 and 12.07 and (C) the rights, powers, trusts, duties, indemnities and immunities of the Trustee hereunder.

(c)          Upon the Company’s exercise under Section 12.03(a) of the option applicable to this Section 12.03(c), the Company shall, subject to the satisfaction of the conditions set forth in Section 12.03(d), be released from its obligations under the covenants contained in Section 6.04, Section 6.06 and as provided pursuant to Section 3.01(x), on and after the date the conditions set forth in Section 12.03(d) are satisfied (“Covenant Defeasance”). For this purpose, “Covenant Defeasance” means that, with respect to this Indenture and the Securities of such Series then Outstanding, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document, and such omission to comply shall not constitute a Default or an Event of Default under Section 7.01, but, except as specified above, the remainder of this Indenture and the Securities shall be unaffected thereby. In addition, upon the Company’s exercise under Section 12.03(a) of the option applicable to this Section 12.03(c), subject to the satisfaction of the conditions set forth in Section 12.03(d), Sections 7.01(c), 7.01(d) (only with respect to covenants that are released as a result of such Covenant Defeasance), 7.01(e) and 7.01(f), in each case, shall not constitute Events of Default.

(d)          The following shall be the conditions to the exercise of either the Legal Defeasance option under Section 12.03(b) or the Covenant Defeasance option under Section 12.03(c):

(i)          the Company must irrevocably deposit with the Trustee or the Paying Agent as trust funds, in trust, for the benefit of the Holders of all Securities subject to Legal Defeasance or Covenant Defeasance, cash in U.S. Dollars, U.S. Government Obligation, or a combination of cash in U.S. Dollars and U.S. Government Obligation, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants to pay the principal of, or interest and premium on such Securities that are then Outstanding on the Stated Maturity or Redemption Date, as the case may be, and the Company must specify whether such Securities are being defeased to maturity or to a particular Redemption Date;

60
(ii)          in the case of Legal Defeasance, the Company must deliver to the Trustee an Opinion of Counsel of recognized standing with respect to U.S. federal income tax matters that is acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the U.S. Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel will confirm that, the beneficial owners of the Securities then Outstanding will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(iii)          in the case of Covenant Defeasance, the Company must deliver to the Trustee an Opinion of Counsel of recognized standing with respect to U.S. federal income tax matters that is acceptable to the Trustee confirming that the beneficial owners of the Securities of such series then Outstanding will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(iv)          no Default or Event of Default must have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);

(v)          the Company must deliver to the Trustee an Officer’s Certificate stating that the deposit was not made by it with the intent of preferring the Holders of Securities over the Company’s other creditors with the intent of defeating, hindering, delaying or defrauding its creditors or others; and

(vi)          the Company must deliver to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Section 12.04          Repayment to Company.  The Trustee and any Paying Agent shall promptly pay to the Company (or to its designee) upon Company Order any excess moneys or U.S. Government Obligations held by them at any time, including any such moneys or U.S. Government Obligations held by the Trustee under the Indenture.  The provisions of the last paragraph of Section 6.03 shall apply to any moneys or U.S. Government Obligations held by the Trustee or any Paying Agent under this Article that remains unclaimed for two years after the Maturity of any series of Securities for which moneys or U.S. Government Obligations have been deposited pursuant to Section 12.03.
61
Section 12.05          Indemnity for U.S. Government Obligations.  The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the deposited U.S. Government Obligations or the principal or interest received on such U.S. Government Obligations.

Section 12.06          [Reserved].

Section 12.07          Application of Trust Money.

(a)          Neither the Trustee nor any other paying agent shall be required to pay interest on any moneys deposited pursuant to the provisions of this Indenture, except such as it shall agree with the Company in writing to pay thereon. Any moneys so deposited for the payment of the principal of, or premium, if any, or interest on the Securities of any series and remaining unclaimed for two years after the date of the maturity of the Securities of such series or the date fixed for the redemption of all the Securities of such series at the time Outstanding, as the case may be, shall be applied as provided in Section 6.03(e).

(b)          Subject to the provisions of clause (a) above, any moneys or U.S. Government Obligations which at any time shall be deposited by the Company or on its behalf with the Trustee or any other paying agent for the purpose of paying the principal of, premium, if any, and interest on any of the Securities shall be and are hereby assigned, transferred and set over to the Trustee or such other paying agent in trust for the respective Holders of the Securities for the purpose for which such moneys or U.S. Government Obligations shall have been deposited; provided that such moneys or U.S. Government Obligations need not be segregated from other funds except to the extent required by law.

ARTICLE XIII

IMMUNITY OF CERTAIN PERSONS

Section 13.01          No Personal Liability.  No recourse shall be had for the payment of the principal of, or the premium, if any, or interest on, any Security or for any claim based thereon or otherwise in respect thereof or of the Indebtedness represented thereby, or upon any obligation, covenant or agreement of this Indenture, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor thereto, either directly or through the Company or any successor thereto, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that this Indenture and the Securities are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor thereto, either directly or through the Company or any successor corporation, because of the incurring of the Indebtedness hereby authorized or under or by reason of any of the obligations, covenants, promises or agreements contained in this Indenture or in any of the Securities, or to be implied herefrom or therefrom, and that all liability, if any, of that character against every such incorporator, stockholder, officer and director is, by the acceptance of the Securities and as a condition of, and as part of the consideration for, the execution of this Indenture and the issue of the Securities expressly waived and released.
62
ARTICLE XIV

SUPPLEMENTAL INDENTURES

Section 14.01          Without Consent of Securityholders.  Except as otherwise provided as contemplated by Section 3.01 with respect to any series of Securities, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any one or more of or all the following purposes:

(a)          to cure any ambiguity, omission, defect or inconsistency contained herein or in any supplemental indenture; provided, however, that such amendment does not materially and adversely affect the rights of Holders as determined by the Company;

(b)          to evidence the succession of another corporation to the Company, or successive successions, and the assumption by such successor of the covenants and obligations of the Company contained in the Securities of one or more series and in this Indenture or any supplemental indenture;

(c)          to comply with the rules of any applicable Depositary;

(d)          to secure any series of Securities;

(e)          to add to the covenants and agreements of the Company, to be observed thereafter and during the period, if any, in such supplemental indenture or indentures expressed, and to add Events of Default, in each case for the protection or benefit of the Holders of all or any series of the Securities (and if such covenants, agreements and Events of Default are to be for the benefit of fewer than all series of Securities, stating that such covenants, agreements and Events of Default are expressly being included for the benefit of such series as shall be identified therein), or to surrender any right or power herein conferred upon the Company;

(f)          to make any change in any series of Securities that does not adversely affect the legal rights under this Indenture of any Holder of such Securities in any material respect;

(g)          to evidence and provide for the acceptance of an appointment under this Indenture of a successor Trustee; provided that the successor Trustee is otherwise qualified and eligible to act as such under the terms hereof;

(h)          to conform the text of this Indenture or any series of the Securities to any provision of the section entitled “Description of Debt Securities” in the Prospectus to the extent that such provision in the Prospectus was intended to be a verbatim recitation of a provision of this Indenture or such series of the Securities as evidenced by an Officer’s Certificate;

63
(i)          to make any amendment to the provisions of this Indenture relating to the transfer and legending of Securities as permitted by this Indenture, including, but not limited to, facilitating the issuance and administration of any series of the Securities or, if incurred in compliance with this Indenture, additional Securities; provided, however, that (i) compliance with this Indenture as so amended would not result in any series of the Securities being transferred in violation of the U.S. Securities Act of 1933, as amended, or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of Holders to transfer Securities;

(j)          to change or eliminate any of the provisions of this Indenture; provided that any such change or elimination shall become effective only when there is no Outstanding Security of any series created prior to the execution of such supplemental indenture that is entitled to the benefit of such provision and as to which such supplemental indenture would apply;

(k)          to make any amendment to this Indenture necessary to qualify this Indenture under the Trust Indenture Act;

(l)          to add guarantors or co-obligors with respect to any series of Securities; and

(m)          to establish the form and terms of Securities of any series as permitted in Section 3.01, or to provide for the issuance of additional Securities in accordance with the limitations set forth in this Indenture, or to add to the conditions, limitations or restrictions on the authorized amount, terms or purposes of issue, authentication or delivery of the Securities of any series, as herein set forth, or other conditions, limitations or restrictions thereafter to be observed.

Subject to the provisions of Section 14.03, the Trustee is authorized to join with the Company in the execution of any such supplemental indenture, to make the further agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property or assets thereunder.

Any supplemental indenture authorized by the provisions of this Section 14.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 14.02.

Section 14.02          With Consent of Securityholders; Limitations.

(a)          With the consent of the Holders (evidenced as provided in Article VIII) of a majority in aggregate principal amount of the Outstanding Securities of each series affected by such supplemental indenture voting separately, the Company and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any provisions of this Indenture or of modifying in any manner the rights of the Holders of the Securities of such series to be affected; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security of each such series affected thereby,

(i)          change the Stated Maturity of the principal of and premium, if any, or any installment of interest on any Security;

(ii)          reduce the principal amount of, payments of interest on or stated time for payment of interest on any Security;

64
(iii)          change any obligation of the Company to pay Additional Amounts with respect to any Security;

(iv)          reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 7.02;

(v)          impair the right to institute suit for the enforcement of any payment due on or with respect to any Security;

(vi)          reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any supplemental indenture;

(vii)          reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain Defaults hereunder and their consequences provided for in this Indenture;

(viii)          modify any of the provisions of this Section 14.02, Section 7.06 or Section 6.08, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to the “Trustee” and concomitant changes in this Section 14.02 and Section 6.08, or the deletion of this proviso, in accordance with the requirements of Sections 11.06 and 14.01(g);

(ix)          amend, change or modify any provision of this Indenture or the related definition affecting the ranking of any series of Securities in a manner which adversely affects the Holders of such Securities; or

(x)          reduce the amount of the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed as described in Section 4.07 or as provided pursuant to Section 3.01, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise.

(b)          A supplemental indenture that changes or eliminates any provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.

65
(c)          It shall not be necessary for the consent of the Securityholders under this Section 14.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

(d)          The Company may set a record date pursuant to Section 8.02(e) for purposes of determining the identity of the Holders of each series of Securities entitled to give a written consent or waive compliance by the Company as authorized or permitted by this Section 14.02.

(e)          Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 14.02, the Company shall mail a notice, setting forth in general terms the substance of such supplemental indenture, to the Holders of Securities at their addresses as the same shall then appear in the Register. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

Section 14.03          Trustee Protected.  Upon the request of the Company, accompanied by the Officer’s Certificate and Opinion of Counsel required by Section 16.01 stating that the execution of such supplemental indenture to be entered into pursuant to Section 14.01 or Section 14.02 is authorized or permitted by this Indenture, and evidence satisfactory to the Trustee of consent of the Holders if the supplemental indenture is to be executed pursuant to Section 14.02, the Trustee shall join with the Company in the execution of said supplemental indenture unless said supplemental indenture affects the Trustee’s own rights, duties, indemnities or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into said supplemental indenture. The Trustee shall be fully protected in relying upon such Officer’s Certificate and Opinion of Counsel.

Section 14.04          Effect of Execution of Supplemental Indenture.  Upon the execution of any supplemental indenture pursuant to the provisions of this Article XIV, this Indenture shall be deemed to be modified and amended in accordance therewith and, except as herein otherwise expressly provided, the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders of all of the Securities or of the Securities of any series affected, as the case may be, shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

Section 14.05          Notation on or Exchange of Securities.  Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in the form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for the Securities then Outstanding in equal aggregate principal amounts, and such exchange shall be made without cost to the Holders of the Securities.
66
Section 14.06          Conformity with TIA.  Every supplemental indenture executed pursuant to the provisions of this Article shall conform to the requirements of the Trust Indenture Act as then in effect.

ARTICLE XV

SUBORDINATION OF SECURITIES

Section 15.01          Agreement to Subordinate.  In the event a series of Securities is designated as subordinated pursuant to Section 3.01, and except as otherwise provided in a Company Order, Officer’s Certificate or in one or more indentures supplemental hereto, the Company, for itself, its successors and assigns, covenants and agrees, and each Holder of Securities of such series by his, her or its acceptance thereof, likewise covenants and agrees, that the payment of the principal of, premium, if any, or interest on each and all of the Securities of such series is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all Senior Indebtedness. In the event a series of Securities is not designated as subordinated pursuant to Section 3.01(p), this Article XV shall have no effect upon such series of Securities.

Section 15.02          Distribution on Dissolution, Liquidation and Reorganization; Subrogation of Securities.  Subject to Section 15.01, upon any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company, whether in bankruptcy, insolvency, reorganization or receivership proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company or otherwise (subject to the power of a court of competent jurisdiction to make other equitable provision reflecting the rights conferred in this Indenture upon the Senior Indebtedness and the holders thereof with respect to the Securities and the holders thereof by a lawful plan of reorganization under the Bankruptcy Code or any applicable state bankruptcy laws):

(a)          the holders of all Senior Indebtedness shall be entitled to receive payment in full of the principal, premium, if any, or interest thereon before the Holders of the Securities are entitled to receive any payment upon the principal of, premium, if any, or interest on Indebtedness evidenced by the Securities; and

(b)          any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XV in respect of the principal of, premium, if any, or interest, on the Securities shall be paid by the liquidation trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, premium, if any, or interest on the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and

67
(c)          in the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character in respect of the principal of, premium, if any, or interest on Indebtedness evidenced by the Securities, whether in cash, property or securities prohibited by the foregoing, shall be received by the Trustee or the Holders of the Securities before all Senior Indebtedness is paid in full, such payment or distribution shall be paid over, upon and pursuant to the terms of a Company Order to a Responsible Officer of the Trustee, to the holder of such Senior Indebtedness identified in such Company Order or his, her or its representative or representatives or to the trustee or trustees under any indenture identified in such Company Order under which any instrument evidencing any of such Senior Indebtedness may have been issued, ratably as aforesaid, as calculated by the Company, for application to payment of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness.

(d)          Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated to the rights of the holders of Senior Indebtedness (to the extent that distributions otherwise payable to such holder have been applied to the payment of Senior Indebtedness) to receive payments or distributions of cash, property or securities of the Company applicable to Senior Indebtedness until the principal of, premium, if any, or interest on the Securities shall be paid in full and no such payments or distributions to the Holders of the Securities of cash, property or securities otherwise distributable to the holders of Senior Indebtedness shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities be deemed to be a payment by the Company to or on account of the Securities. It is understood that the provisions of this Article XV are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness, on the other hand. Nothing contained in this Article XV or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, the obligation of the Company, which is unconditional and absolute, to pay to the Holders of the Securities the principal of, premium, if any, or interest on the Securities as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or in the Securities prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Section 15.05, shall be entitled to conclusively rely upon a certificate of the liquidating trustee or agent or other person making any distribution to the Trustee for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereof and all other facts pertinent thereto or to this Article XV.

Section 15.03          No Payment on Securities in Event of Default on Senior Indebtedness.  Subject to Section 15.01, no payment by the Company on account of principal (or premium, if any), sinking funds or interest, if any, on the Securities shall be made at any time if: (i) a default on Senior Indebtedness exists that permits the holders of such Senior Indebtedness to accelerate its maturity and (ii) the default is the subject of judicial proceedings or the Company has received notice of such default. The Company may resume payments on the Securities when full payment of amounts then due for principal (premium, if any), sinking funds and interest on Senior Indebtedness has been made or duly provided for in money or money’s worth.
68
In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.03, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of such Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, but only to the extent that the holders of such Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 calendar days of such payment of the amounts then due and owing on such Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of such Senior Indebtedness and it has received a written notice from the Company pursuant to Section 15.06 hereof that verifies the notice from the holders of the Senior Indebtedness and confirms that payments subject to such notice are prohibited under this Article XV and to instruct the Trustee to make the payments as provided for in such Company Order.

Section 15.04          Payments on Securities Permitted.  Subject to Section 15.01, nothing contained in this Indenture or in any of the Securities shall (a) affect the obligation of the Company to make, or prevent the Company from making, at any time except as provided in Sections 15.02 and 15.03, payments of principal of (or premium, if any) or interest, if any, on the Securities or (b) prevent the application by the Trustee of any moneys or assets deposited with it hereunder to the payment of or on account of the principal of, premium, if any, or interest on the Securities, unless a Responsible Officer of the Trustee shall have received (i) written notice of any fact prohibiting the making of such payment from the Company, or (ii) from the holder of any Senior Indebtedness or from the trustee for any such holder, together with proof satisfactory to the Trustee of such holding of Senior Indebtedness or of the authority of such trustee, together with a Company Order confirming such holding of Senior Indebtedness or authority of such trustee and directing the Trustee to comply with such notice in accordance with the terms of this Article XV, more than two (2) Business Days prior to the date fixed for such payment.

Section 15.05          Authorization of Securityholders to Trustee to Effect Subordination.  Subject to Section 15.01, each Holder of Securities by his acceptance thereof authorizes and directs the Trustee on his, her or its behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article XV.

Section 15.06          Notices to Trustee.  The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of moneys or assets to or by the Trustee in respect of the Securities of any series pursuant to the provisions of this Article XV. Subject to Section 15.01, notwithstanding the provisions of this Article XV or any other provisions of this Indenture, neither the Trustee nor any Paying Agent (other than the Company) shall be charged with knowledge of the existence of any Senior Indebtedness or of any fact which would prohibit the making of any payment of moneys or assets to or by the Trustee or such Paying Agent, unless and until a Responsible Officer of the Trustee shall have received (in the case of a Responsible Officer of the Trustee) either (i) written notice thereof from the Company, or (ii) from the holder of any Senior Indebtedness or from the trustee for any such holder, together with proof satisfactory to the Trustee of such holding of Senior Indebtedness or of the authority of such trustee, together with a Company Order confirming such holding of Senior Indebtedness or authority of such trustee and directing the Trustee to comply with such notice in accordance with the terms of this Article XV, and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects conclusively to presume that no such facts exist; provided, however, that if at least two (2) Business Days prior to the date upon which by the terms hereof any such moneys or assets may become payable for any purpose (including, without limitation, the payment of either the principal of, premium, if any, or interest on any Security) a Responsible Officer of the Trustee shall not have received with respect to such moneys or assets the notices provided for in this Section 15.06, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such moneys or assets and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it within two (2) Business Days prior to such date. The Trustee shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such a notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder; provided, however, the Trustee shall not act under this Article XV and shall in all cases be fully protected in refraining from acting under this Article XV unless and until it has received the aforementioned Company Order instructing it to do so. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending its receipt of the aforementioned Company Order and/or judicial determination as to the right of such Person to receive such payment. The Trustee shall not incur any liability for its reliance upon any such notice, evidence, direction, order or other writing delivered to it hereunder that it believes to be genuine. The Trustee may consult with legal counsel (who may be counsel for the Company) and other experts selected by it in connection with any notice, evidence, direction, order or other request received by it under this Article XV, and shall not be liable for any action take or not taken by it.
69
Section 15.07          Trustee as Holder of Senior Indebtedness.  Subject to Section 15.01, the Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it to the same extent as any other holder of Senior Indebtedness and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Sections 7.05 or 11.01.

Section 15.08          Modifications of Terms of Senior Indebtedness.  Subject to Section 15.01, any renewal or extension of the time of payment of any Senior Indebtedness or the exercise by the holders of Senior Indebtedness of any of their rights under any instrument creating or evidencing Senior Indebtedness, including, without limitation, the waiver of default thereunder, may be made or done all without notice to or assent from the Holders of the Securities or the Trustee. No compromise, alteration, amendment, modification, extension, renewal or other change of, or waiver, consent or other action in respect of, any liability or obligation under or in respect of, or of any of the terms, covenants or conditions of any indenture or other instrument under which any Senior Indebtedness is Outstanding or of such Senior Indebtedness, whether or not such release is in accordance with the provisions of any applicable document, shall in any way alter or affect any of the provisions of this Article XV or of the Securities relating to the subordination thereof.

Section 15.09          Reliance on Judicial Order or Certificate of Liquidating Agent.  Subject to Section 15.01, upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee and the Holders of the Securities shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.

Section 15.10          Satisfaction and Discharge; Defeasance and Covenant Defeasance.  Subject to Section 15.01, moneys and U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Article XII and not, at the time of such deposit, prohibited to be deposited under Sections 15.02 or 15.03 shall not be subject to this Article XV.

Section 15.11          Trustee Not Fiduciary for Holders of Senior Indebtedness.  With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness. The Trustee shall not be liable to any such holder if it shall pay over or distribute to or on behalf of Holders of Securities or the Company, or any other Person, moneys or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise. For the avoidance of doubt, (i) when acting under this Article, the Trustee shall have all of the rights, benefits, privileges, protections and indemnities provided to the Trustee under Article XI of this Indenture, and (ii) the Trustee shall not have any duty to take any discretionary action or exercise any discretionary powers in acting under this Article.
70
ARTICLE XVI

MISCELLANEOUS PROVISIONS

Section 16.01          Certificates and Opinions as to Conditions Precedent.

(a)          Upon any request or application by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such document is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

(b)          Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 6.07 of this Indenture) shall include (i) a statement that the Person giving such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable such Person to express an informed view or opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

(c)          Any certificate, statement or opinion of an Officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate, statement or opinion is based are erroneous. Any certificate, statement or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate, statement or opinion of, or representations by, an Officer or Officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate, statement or opinion or representations with respect to such matters are erroneous.

(d)          Any certificate, statement or opinion of an Officer of the Company or of counsel to the Company may be based, insofar as it relates to accounting matters, upon a certificate or opinion of, or representations by, an accountant or firm of accountants, unless such officer or counsel, as the case may be, knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the accounting matters upon which his or her certificate, statement or opinion may be based are erroneous. Any certificate or opinion of any firm of independent registered public accountants filed with the Trustee shall contain a statement that such firm is independent.

(e)          In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

71
(f)          Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Section 16.02          Trust Indenture Act Controls.  If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by, or with a provision included in this Indenture which is required to be included in this Indenture by any of the provisions of Sections 310 to 318, inclusive, of, the TIA, such imposed duties or incorporated provision shall control.

Section 16.03          Notices to the Company and Trustee.  Any notice or demand authorized or permitted by this Indenture to be made upon, given or furnished to, or filed with, the Company or the Trustee shall be sufficiently made, given, furnished or filed for all purposes if it shall be mailed, by regular mail or overnight courier, delivered, faxed or sent electronically in PDF format to:

(a)          the Company, at Sea Limited, 1 Fusionopolis Place, #17-10, Galaxis, Singapore, 138522, Attention: General Counsel, or at such other address or facsimile number as may have been furnished in writing to the Trustee by the Company.

(b)          the Trustee, at the Corporate Trust Office, Attention: Sea Limited Administrator.

Any such notice, demand or other document shall be in the English language. Anything herein to the contrary notwithstanding, no such notice or demand shall be effective as to the Trustee unless it is actually received by the Trustee at its Corporate Trust Office.

The Trustee and the Agents agree to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e-mail, PDF, facsimile or other similar unsecured electronic transmission methods; provided, however, that the Trustee and the Agents shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Company elects to give the Trustee and the Agents e-mail or facsimile instructions (or instructions by a similar electronic transmission method), the Trustee’s and the Agents’ understanding of such instructions shall be deemed controlling. The Trustee and the Agents shall have no duty or obligation to verify or confirm that the person who sent such instructions or directions is, in fact, a person authorized to give instructions or directions on behalf of the Company (other than to verify that the signature on a PDF or facsimile transmission is the signature of a person authorized to give instructions and directions on behalf of the Company). The Trustee and the Agents shall not be liable for any losses, liabilities, costs or expenses arising directly or indirectly from the Trustee’s and the Agents’ reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Company agrees to assume all risks arising out of the use of such electronic transmission methods to submit instructions and directions to the Trustee and the Agents, including without limitation the risk of the Trustee and the Agents acting on unauthorized instructions, and the risk or interception and misuse by third parties.

72
Section 16.04          Notices to Securityholders; Waiver.  Any notice required or permitted to be given to Securityholders shall be sufficiently given (unless otherwise herein expressly provided), if to Holders, if given in writing by first class mail, postage prepaid, to such Holders (or the first named of joint Holders) at their respective addresses as the same shall appear on the Register; provided that notices to Holders of Global Securities will be provided in accordance with the procedures of the Depositary.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be delivered to the Trustee, but such delivery shall not be a condition precedent to the validity of any action taken in reliance on such waiver.  In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given.  In any case where notice to Holders is given by publication, any defect in any notice so published as to any particular Holder shall not affect the sufficiency of such notice with respect to other Holders, and any notice that is published in the manner herein provided shall be conclusively presumed to have been duly given.

Section 16.05          Legal Holiday.  Unless otherwise specified pursuant to Section 3.01, in any case where any Interest Payment Date, Redemption Date or Maturity of any Security of any series shall not be a Business Day at any Place of Payment for the Securities of that series, then payment of principal and premium, if any, or interest need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on such Interest Payment Date, Redemption Date or Maturity and no interest shall accrue on such payment for the period from and after such Interest Payment Date, Redemption Date or Maturity, as the case may be, to such Business Day if such payment is made or duly provided for on such Business Day.

Section 16.06          Judgment Currency.  To the fullest extent permitted by law, the obligations of the Company to any Holder under this Indenture or the Securities of any series, as the case may be, shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than U.S. Dollars, be discharged only to the extent that on the Business Day following receipt by such Holder or the Trustee, as the case may be, of any amount in the Judgment Currency, such Holder or the Trustee, as the case may be, may in accordance with normal banking procedures purchase the U.S. Dollars with the Judgment Currency. If the amount of U.S. Dollars so purchased is less than the amount originally to be paid to such Holder or the Trustee, as the case may be, in U.S. Dollars, the Company agrees, as a separate obligation and notwithstanding such judgment, to pay the difference, and if the amount of U.S. Dollars so purchased exceeds the amount originally to be paid to such Holder, such Holder or the Trustee, as the case may be, agrees to pay to or for the account of the Company such excess; provided that such Holder shall not have any obligation to pay any such excess as long as a Default by the Company in its obligations under this Indenture or such series of Securities has occurred and is continuing, in which case such excess may be applied by such Holder to such obligations. In the event the Trustee is required or requested to make such purchases of U.S. Dollars with the Judgment Currency, the Trustee will in good faith select a recognized banking institution in The City of New York through which the Trustee will purchase the U.S. Dollars with the Judgment Currency; provided that the Trustee will not be liable for any losses or shortfalls in amounts so paid as a result of the foreign exchange rate applied by such banking institution to such purchases of the U.S. Dollars with the Judgment Currency in accordance with normal banking procedures.
73
Section 16.07          Effects of Headings and Table of Contents.  The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

Section 16.08          Successors and Assigns.  All covenants and agreements in this Indenture by the parties hereto shall bind their respective successors and assigns and inure to the benefit of their permitted successors and assigns, whether so expressed or not.

Section 16.09          Severability.  If any provision hereof shall be held to be invalid, illegal or unenforceable under applicable law, then the remaining provisions hereof shall be construed as though such invalid, illegal or unenforceable provision were not contained herein.

Section 16.10          Benefits of Indenture.  Nothing in this Indenture expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or to give to, any Person other than the parties hereto and their successors and the Holders of the Securities any benefit or any right, remedy or claim under or by reason of this Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all covenants, conditions, stipulations, promises and agreements in this Indenture contained shall be for the sole and exclusive benefit of the parties hereto and their successors and of the Holders of the Securities.

Section 16.11          Counterparts.  This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. One signed copy is enough to prove this Indenture. The exchange of copies of this Indenture and of signature pages by facsimile, PDF or other electronic transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile, PDF or other electronic transmission shall be deemed to be their original signatures for all purposes.

Section 16.12          Governing Law; Waiver of Trial by Jury.  This Indenture and the Securities shall be deemed to be contracts made under the laws of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State.

EACH OF THE COMPANY AND THE TRUSTEE HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS INDENTURE.

74
Section 16.13          Submission to Jurisdiction.  The Company irrevocably and unconditionally submits to the non-exclusive jurisdiction of any U.S. federal or New York State court located in the Borough of Manhattan, The City of New York over any suit, action or proceeding arising out of or relating to this Indenture or the Securities. Service of any process, summons, notice or document by registered mail addressed to the Company’s agent, Puglisi & Associates, at the address 850 Library Avenue, Suite 204, Newark, Delaware 19711, shall be effective service of process against the Company for any suit, action or proceeding brought in any such court. The Company irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection to the laying of venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. A final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts to whose jurisdiction the Company is or may be subject, by suit upon judgment. The Company further agrees that nothing herein shall affect any Holder’s right to effect service of process in any other manner permitted by law or bring a suit action or proceeding (including a proceeding for enforcement of a judgment) in any other court or jurisdiction in accordance with applicable law.

Section 16.14          Waiver of Immunity.  To the extent that the Company or any of its properties, assets or revenues may have or may hereafter become entitled to, or have attributed to each of the Company, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any such legal action, suit or proceeding, from setoff or counterclaim, from the jurisdiction of any Cayman Islands, Singapore, New York state or U.S. federal court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution of judgment, or from execution of judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any such court in which proceedings may at any time be commenced, with respect to the obligations and liabilities of the Company or any other matter under or arising out of or in connection with this Indenture, the Company hereby irrevocably and unconditionally waives or will waive such right to the extent permitted by applicable law, and agree not to plead or claim, any such immunity and consent to such relief and enforcement.

Section 16.15          Force Majeure.  In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, epidemics, nuclear or natural catastrophes or acts of God, interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services, any act or provision of any present or future law or regulation or governmental authority, governmental action or the unavailability of the Federal Reserve Bank wire or facsimile or other wire or communication facility; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

[Signatures on following page]

75
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

 
SEA LIMITED,
 
as Company
     
 
By:
 /s/ Forrest Xiaodong Li
   
Name: Forrest Xiaodong Li
   
Title: Chairman and Group Chief Executive Officer
     
 
WILMINGTON TRUST, NATIONAL ASSOCIATION,
 
as Trustee
     
  By:
/s/ Hallie E. Field
   
Name: Hallie E. Field
   
Title: Vice President

EXHIBIT A

FORM OF SECURITY

FACE OF NOTE

[For Inclusion in a Global Security only -- UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]

SEA LIMITED

_________ Notes Due _________

PRINCIPAL AMOUNT:  _________

CUSIP: ___________

ISIN: ___________

No.: ___________

Sea Limited, an exempted company incorporated in the Cayman Islands (the “Company,” which term includes any successor thereto under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to ___________, or registered assigns, the principal sum of __________________ (_____) (or such other principal amount as shall be set forth in the Schedule of Increases or Decreases in Note attached hereto) on _____________, or on such earlier date as the principal hereof may become due in accordance with the provisions of this Note.

Interest Rate:  ___________.

Interest Payment Dates:  ___________ and ___________ of each year, commencing on ___________.

Interest Record Dates:  ___________ and ___________.

Reference is made to the further provisions of this Note set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee under the Indenture referred to on the reverse hereof.

A-1
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

 
SEA LIMITED
 
By:
  
 
Name:
 
Title:


Dated:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of the Notes described
in the within-named Indenture.

By:
_______________________________
Authorized Signatory

A-2
REVERSE OF NOTE

SEA LIMITED

________ Notes Due 20___

This Note is one of a duly authorized issue of debt securities of the Company of the series designated as the “______________” (the “Notes”), all issued or to be issued under and pursuant to an Indenture, dated as of ________, 20_____ (the “Base Indenture”), duly executed and delivered by and between the Company and Wilmington Trust, National Association, as trustee (the “Trustee,” which term includes any successor trustee)[, as supplemented by the ______ Supplemental Indenture, dated as of _________ (the “Supplemental Indenture”), duly executed and delivered by and between the Company and the Trustee]. The Base Indenture [as supplemented and amended by the Supplemental Indenture] is referred to herein as the “Indenture”. Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Indenture.

1. Interest.  The Company promises to pay interest on the principal amount of this Note at a rate of ___% per annum.  The Company will pay interest semi-annually on _________ and _________ of each year.  If a payment date is not a Business Day as defined in the Indenture at a Place of Payment, payment may be made at that place on the next succeeding day that is a Business Day, and no interest shall accrue on such payment for the intervening period.  Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

2. Method of Payment.  The Company shall pay interest on the Notes (except Defaulted Interest), if any, to the Persons in whose name such Notes are registered at the close of business on the Record Date referred to on the face of this Note for such interest installment.  In the event that the Notes or a portion thereof are called for redemption, and the Redemption Date is subsequent to a Record Date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Notes will instead be paid upon presentation and surrender of such Notes as provided in the Indenture.  Payment of interest on the Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and private debts, at the Corporate Trust Office or, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the Trustee, by wire transfer to an account designated by the Holder.

3. Paying Agent and Registrar.  Initially, Wilmington Trust, National Association, will act as Paying Agent and Registrar.  The Company may change or appoint any Paying Agent or Registrar without notice to any Holder.  The Company may act in any such capacity.

4. Indenture.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (“TIA”) as in effect on the date the Indenture is qualified.  The Notes are subject to all such terms, and Holders are referred to the Indenture and TIA for a statement of such terms.  The Notes are unsecured general obligations of the Company and constitute the series designated on the face of this Note as the “____________,” initially limited to US$_________ in aggregate principal amount.  The Company will furnish to any Holder upon written request and without charge a copy of the Base Indenture [and the Supplemental Indenture].  Requests may be made to: Sea Limited, 1 Fusionopolis Place, #17-10, Galaxis, Singapore, 138522, Attention General Counsel.

A-3
5. Redemption; No Sinking Fund.  The Notes are subject to optional redemption. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

6. Denominations, Transfer, Exchange.  The Notes are in registered form without coupons in the minimum denominations of US$2,000 or any integral multiple of US$1,000 in excess thereof.  The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture.  The Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed if so required by the Company or the Registrar) at the office of the Registrar or at the office of any transfer agent designated by the Company for such purpose.  The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part.

7. Persons Deemed Owners.  The registered Holder may be treated as its owner for all purposes.

8. Amendments, Supplements and Waivers.  The Indenture and the Notes may be amended or supplemented as provided in the Indenture.  Any consent or waiver by the Holders as provided in the Indenture shall be conclusive and binding upon such Holders and upon all future Holders and holders of any security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon the Notes.

9. Defaults and Remedies.  The Events of Default relating to the Notes are defined in Section 7.01 of the Base Indenture.  Upon the occurrence of an Event of Default, the rights and obligations of the Company, the Trustee and the Holders shall be as set forth in the applicable provisions of the Indenture.

10. No Recourse Against Others.  No recourse under or upon any obligation, covenant or agreement contained in the Indenture or the Notes, or because of any indebtedness evidenced thereby, shall be had against any incorporator as such, or against any past, present or future stockholder, officer, director or employee, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof.

11. Authentication.  This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.

12. Governing Law.  The Base Indenture[, the Supplemental Indenture] and this Note shall be deemed to be contracts made under the laws of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State.

A-4
ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

[PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE]




[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

          
the within Note and all rights thereunder, hereby irrevocably constituting and appointing ____________________________________________________________ Attorney to transfer such Note on the books of the Company, with full power of substitution in the premises.

Signature:


Dated:
      
   
NOTICE:  The signature to this assignment must correspond with the name as written upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever.


SIGNATURE GUARANTEE

[Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.]

A-5
SCHEDULE OF INCREASES OR DECREASES IN NOTE*

The initial principal amount of this Note is US$___________.  The following increases or decreases in a part of this Note have been made:
Date
Amount of decrease in principal amount of this Note
Amount of increase in principal amount of this Note
Principal amount of this Note following such decrease (or increase)
Signature of authorized signatory of Trustee
         



* Insert in Global Notes.
A-6
EXHIBIT B

FORM OF COMPLIANCE CERTIFICATE

This Compliance Certificate is delivered pursuant to Section 6.07 of the Indenture, dated as of _______________, 20_____, as amended, supplemented or modified from time to time (the “Indenture”), between Sea Limited, an exempted company incorporated in the Cayman Islands (the “Company”) and Wilmington Trust, National Association, as trustee (the “Trustee”). Capitalized terms defined in the Indenture are used herein as therein defined.

The undersigned hereby certifies to the Trustee as follows:


 1.
I am the duly elected, qualified and acting [title] or [title], as the case may be, of the Company.


2.
I have reviewed and am familiar with the contents of this Compliance Certificate.


3.
I have reviewed the terms of the Indenture.


4.
A review has been conducted of the activities of the Company’s performance under the Indenture, in each case since the [Issue Date/date of last Compliance Certificate], and since the [Issue Date/date of last Compliance Certificate] the Company has been in compliance with all conditions and covenants under the Indenture]/[if there has been a default in the fulfillment of any obligation under the Indenture, specifying each such default and the nature and status thereof.]

[Signature page follows]

B-1
IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate as of the date set forth below.

 
SEA LIMITED
     
 
By:
  
   
Name:
   
Title:
     
 
Date: _________________

[Signature Page to Form of Compliance Certificate]
Exhibit 4.11

EXECUTION COPY

SEA LIMITED
 
AND
 
WILMINGTON TRUST, NATIONAL ASSOCIATION,
 
as Trustee
 
FIRST SUPPLEMENTAL INDENTURE
 
Dated as of September 14, 2021
 
to Indenture
 
Dated as of September 14, 2021
 
 
0.25% Convertible Senior Notes due 2026

TABLE OF CONTENTS
 

   
Page
     
ARTICLE 1
Definitions
 
Section 1.01.
Definitions
2
Section 1.02.
References to Interest
13
Section 1.03.
References to Principal
14
     
ARTICLE 2
Issue, Description, Execution, Registration and Exchange of Notes
 
Section 2.01.
Scope of Supplemental Indenture
14
Section 2.02.
Designation and Amount
14
Section 2.03.
Form of Notes
14
Section 2.04.
Date and Denomination of Notes; Payments of Interest and Defaulted Amounts
15
Section 2.05.
Exchange and Registration of Transfer of Notes; Depositary
17
Section 2.06.
Mutilated, Destroyed, Lost or Stolen Notes
19
Section 2.07.
Cancellation of Notes Paid, Converted, Etc
19
Section 2.08.
Additional Notes; Repurchases
19
     
ARTICLE 3
Satisfaction and Discharge
 
Section 3.01.
Applicability of Article 12 of the Base Indenture
20
Section 3.02.
Satisfaction and Discharge
20
     
ARTICLE 4
Particular Covenants of the Company
 
Section 4.01.
Maintenance of Office or Agency
21
Section 4.02.
Appointments to Fill Vacancies in Trustee’s Office
21
Section 4.03.
Provisions as to Paying Agent
21
Section 4.04.
Existence
23
Section 4.05.
Additional Amounts
23
Section 4.06.
Stay, Extension and Usury Laws
25
Section 4.07.
Compliance Certificates; Statements as to Defaults
 26
Section 4.08.
Further Instruments and Acts
26
Section 4.09.
No Conditional Waiver
26

i
ARTICLE 5
[Intentionally Omitted]
 
ARTICLE 6
Defaults and Remedies
 
Section 6.01.
Applicability of Article VII of the Base Indenture
26
Section 6.02.
Events of Default
26
Section 6.03.
Acceleration; Rescission and Annulment
28
Section 6.04.
Additional Interest
29
Section 6.05.
Payments of Notes on Default; Suit Therefor
30
Section 6.06.
Application of Monies Collected by Trustee
31
Section 6.07.
Proceedings by Holders
32
Section 6.08.
Proceedings by Trustee
33
Section 6.09.
Remedies Cumulative and Continuing
33
Section 6.10.
Direction of Proceedings and Waiver of Defaults by Majority of Holders
33
Section 6.11.
Notice of Defaults and Events of Default
34
Section 6.12.
Undertaking to Pay Costs
34
     
ARTICLE 7
Concerning the Trustee
 
Section 7.01.
Monies and ADSs to Be Held in Trust
35
Section 7.02.
Compensation and Expenses of Paying Agent, Conversion Agent and Registrar
35
     
ARTICLE 8
Concerning the Holders
 
Section 8.01.
Who Are Deemed Absolute Owners
35
Section 8.02.
Company-Owned Notes Disregarded
36
Section 8.03.
Revocation of Consents
36
     
ARTICLE 9
[Intentionally Omitted]
 
ARTICLE 10
Supplemental Indentures
 
Section 10.01.
Supplemental Indentures Without Consent of Holders
37
Section 10.02.
Supplemental Indentures with Consent of Holders
38
     
ARTICLE 11
Consolidation, Merger, Sale, Conveyance and Lease
 
Section 11.01.
Company May Consolidate, Etc. on Certain Terms
39
Section 11.02.
Successor Corporation to Be Substituted
39
Section 11.03.
Opinion of Counsel to Be Given to Trustee
40

ii
ARTICLE 12
No Subordination
 
Section 12.01.
Non-Subordination of Notes
40
     
ARTICLE 13
Intentionally Omitted
 
ARTICLE 14
Conversion of Notes
 
Section 14.01.
Conversion Privilege
40
Section 14.02.
Conversion Procedure; Settlement Upon Conversion
43
Section 14.03.
Increased Conversion Rate Applicable to Certain Notes Surrendered in Connection with Make-Whole Fundamental Changes
48
Section 14.04.
Adjustment of Conversion Rate
51
Section 14.05.
Adjustments of Prices
61
Section 14.06.
Class A Ordinary Shares to Be Fully Paid
61
Section 14.07.
Effect of Recapitalizations, Reclassifications and Changes of the Class A Ordinary Shares
61
Section 14.08.
Certain Covenants
63
Section 14.09.
Responsibility of Trustee
64
Section 14.10.
Notice to Holders Prior to Certain Actions
64
Section 14.11.
Stockholder Rights Plans
65
Section 14.12.
Limit on Issuance of ADSs Upon Conversion
65
Section 14.13.
Termination of Depositary Receipt Program
65
Section 14.14.
Exchange In Lieu Of Conversion
66
     
ARTICLE 15
Repurchase of Notes at Option of Holders
 
Section 15.01.
Intentionally Omitted
66
Section 15.02.
Repurchase at Option of Holders Upon a Fundamental Change
66
Section 15.03.
Withdrawal of Fundamental Change Repurchase Notice
69
Section 15.04.
Deposit of Fundamental Change Repurchase Price
69
Section 15.05.
Covenant to Comply with Applicable Laws Upon Repurchase of Notes
70
     
ARTICLE 16
Optional Redemption, Cleanup Redemption and Tax Redemption.
 
Section 16.01.
Applicability of Article IV and Article V of the Base Indenture
71
Section 16.02.
Optional Redemption
72
Section 16.03.
Cleanup Redemption
73
Section 16.04.
Tax Redemption
73
Section 16.05.
Redemption Notice
74
Section 16.06.
Conversion Election
75

iii
ARTICLE 17
Miscellaneous Provisions
 
Section 17.01.
Provisions Binding on Company’s Successors
75
Section 17.02.
Official Acts by Successor Corporation
75
Section 17.03.
Addresses for Notices, Etc.
75
Section 17.04.
Legal Holidays
76
Section 17.05.
Governing Law; Waiver of Trial by Jury
76
Section 17.06.
No Security Interest Created
76
Section 17.07.
Benefits of Indenture
76
Section 17.08.
Execution in Counterparts.
76
Section 17.09.
Severability
77
Section 17.10.
Calculations
77
Section 17.11.
USA PATRIOT Act
77
     
EXHIBIT
 
Exhibit A
Form of Note
A-1

iv
FIRST SUPPLEMENTAL INDENTURE dated as of September 14, 2021 (this “Supplemental Indenture”) between SEA LIMITED, a Cayman Islands exempted company, as issuer (the “Company,” as more fully set forth in Section 1.01) and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association, as trustee (the “Trustee,” as more fully set forth in Section 1.01), supplementing the Indenture dated as of September 14, 2021 between the Company and the Trustee (the “Base Indenture” and the Base Indenture, as amended and supplemented by this Supplemental Indenture, and as it may be further amended or supplemented from time to time with respect to the Notes, the “Indenture”).
 
W I T N E S S E T H:
 
WHEREAS, the Company executed and delivered the Base Indenture to the Trustee to provide, among other things, for the issuance, from time to time, of the Company’s Securities, in an unlimited aggregate principal amount, in one or more series to be established by the Company under, and authenticated and delivered as provided in, the Base Indenture;
 
WHEREAS, Sections 2.01, 2.02 and 3.01 of the Base Indenture provide for the Company to issue Securities thereunder in the form set forth in Exhibit A thereto or established pursuant to a Company Order, Officer’s Certificates or in one or more indentures supplemental thereto;
 
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of a single series of Securities designated as its 0.25% Convertible Senior Notes due 2026 (the “Notes”), initially in an aggregate principal amount not to exceed US$2,875,000,000, and in order to provide the terms and conditions upon which the Notes are to be authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this Supplemental Indenture;
 
WHEREAS, the Form of Note, the certificate of authentication to be borne by each Note, the Form of Notice of Conversion, the Form of Fundamental Change Repurchase Notice and the Form of Assignment and Transfer to be borne by the Notes are to be substantially in the forms hereinafter provided;
 
WHEREAS, the conditions set forth in the Base Indenture for the execution and delivery of this Supplemental Indenture have been complied with; and
 
WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee, as in this Supplemental Indenture provided, the valid, binding and legal obligations of the Company, and this Supplemental Indenture a valid agreement according to its terms, have been done and performed, and the execution of this Supplemental Indenture and the issuance hereunder of the Notes have in all respects been duly authorized.
 
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
 
That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and

acceptance of the Notes by the Holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as otherwise provided below), as follows:
 
ARTICLE 1
Definitions
 
Section 1.01.  Definitions. For all purposes of the Indenture, except as otherwise expressly provided or unless the context otherwise requires:
 
(a)          the terms defined in this Article 1 shall have the respective meanings assigned to them in this Article 1 and include the plural as well as the singular and, to the extent applicable, supersede the definitions thereof in the Base Indenture;
 
(b)          all words, terms and phrases defined in the Base Indenture (but not otherwise defined herein) shall have the same meanings as in the Base Indenture;
 
(c)          the words “herein,” “hereof,” “hereunder,” and other words of similar import (i) when used with regard to any specified Article, Section or sub-division, refer to such Article, Section or sub-division of this Supplemental Indenture and (ii) otherwise, refer to the Indenture as a whole and not to any particular Article, Section or other subdivision; and
 
(d)          Section 1.01 of the Base Indenture is amended and supplemented, solely with respect to the Notes, by inserting the following additional defined terms in their appropriate alphabetical positions and deleting any defined terms therein that are also defined in this Section 1.01:
 
“2023 Notes” means the Company’s outstanding 2.25% Convertible Senior Notes due 2023.
 
“2024 Notes” means the Company’s outstanding 1.00% Convertible Senior Notes due 2024.
 
“2025 Notes” means the Company’s outstanding 2.375% Convertible Senior Notes due 2025.
 
“Additional ADSs” shall have the meaning specified in Section 14.03(a).
 
“Additional Amounts” shall have the meaning specified in Section 4.05(a).
 
“Additional Interest” means all amounts, if any, payable pursuant to Section 6.04, as applicable.
 
“ADS” means an American Depositary Share, issued pursuant to the Deposit Agreement, representing one Class A Ordinary Share of the Company as of the date of this Supplemental Indenture, and deposited with the ADS Custodian.
 
2
“ADS Custodian” means The Bank of New York Mellon, with respect to the ADSs delivered pursuant to the Deposit Agreement, or any successor entity thereto.
 
“ADS Depositary” means The Bank of New York Mellon, as depositary for the ADSs, or any successor entity thereto.
 
“ADS Price” shall have the meaning specified in Section 14.03(c).
 
“Affiliate” shall have the meaning specified in the Base Indenture; provided that, notwithstanding anything to the contrary herein or therein, the determination of whether one Person is an “Affiliate” of another Person for purposes of the Indenture shall be made based on the facts at the time such determination is made or required to be made, as the case may be, hereunder.
 
“Affiliate Notes” means Notes that are held or beneficially owned by an entity affiliated with a principal shareholder of the Company or an entity affiliated with one of the Company’s directors that purchased these Notes in the initial offering.
 
 “Agents” means the Paying Agent, the Transfer Agent, the Registrar, the Conversion Agent and the Bid Solicitation Agent, in each case, unless the Company is acting in such capacity.
 
“Base Indenture” shall have the meaning specified in the first paragraph of this Supplemental Indenture.
 
“Bid Solicitation Agent” means the Company or the Person appointed by the Company to solicit bids for the Trading Price of the Notes in accordance with Section 14.01(b)(i). The Company shall initially act as the Bid Solicitation Agent.
 
“Business Day” means, with respect to any Note, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in the State of New York, Hong Kong, Singapore, the Cayman Islands or, in the case of a payment under the Indenture, Place of Payment are authorized or obligated by law or executive order to close.
 
“Cash Settlement” shall have the meaning specified in Section 14.02(a).
 
“Change in Tax Law” shall have the meaning specified in Section 16.04.
 
“Class A Ordinary Shares” means the Class A ordinary shares of the Company, par value US$0.0005 per share, at the date of this Supplemental Indenture, subject to Section 14.07.
 
“Class B Ordinary Shares” means the Class B ordinary shares of the Company, par value US$0.0005 per share, at the date of this Supplemental Indenture, subject to Section 14.07.
 
“Clause A Distribution” shall have the meaning specified in Section 14.04(c).
 
“Clause B Distribution” shall have the meaning specified in Section 14.04(c).
 
3
“Clause C Distribution” shall have the meaning specified in Section 14.04(c).
 
“Cleanup Redemption” shall have the meaning specified in Section 16.03.
 
“close of business” means 5:00 p.m. (New York City time).
 
“Combination Settlement” shall have the meaning specified in Section 14.02(a).
 
“Common Equity” of any Person means Capital Stock of such Person that is generally entitled (a) to vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management or policies of such Person.
 
“Company” shall have the meaning specified in the preamble of this Supplemental Indenture, and subject to the provisions of Article 11, shall include its successors and assigns.
 
“Conversion Agent” shall have the meaning specified in Section 4.01.
 
“Conversion Consideration” shall have the meaning specified in Section 14.14(a).
 
“Conversion Date” shall have the meaning specified in Section 14.02(c).
 
“Conversion Obligation” shall have the meaning specified in Section 14.01(a).
 
“Conversion Price” means as of any time, US$1,000, divided by the Conversion Rate as of such time.
 
“Conversion Rate” shall have the meaning specified in Section 14.01(a).
 
“Custodian” means the Trustee, as custodian for The Depository Trust Company, with respect to the Global Notes, or any successor entity thereto.
 
“Daily Conversion Value” means, for each of the 40 consecutive Trading Days during the Observation Period, 2.5% of the product of (a) the Conversion Rate in effect immediately after the close of business on such Trading Day and (b) the Daily VWAP for such Trading Day.
 
“Daily Measurement Value” means the Specified Dollar Amount (if any), divided by 40.
 
“Daily Settlement Amount,” for each of the 40 consecutive Trading Days during the Observation Period, shall consist of:
 
(a)          cash in an amount equal to the lesser of (i) the Daily Measurement Value and (ii) the Daily Conversion Value on such Trading Day; and
 
(b)          if the Daily Conversion Value on such Trading Day exceeds the Daily Measurement Value, a number of ADSs equal to (i) the difference between the Daily Conversion Value and the Daily Measurement Value, divided by (ii) the Daily VWAP for such Trading Day.
 
4
“Daily VWAP” means, for each of the 40 consecutive Trading Days during the relevant Observation Period, the per ADS volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page “SE <equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such Trading Day (or if such volume-weighted average price is unavailable, the market value of one ADS on such Trading Day determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained for this purpose by the Company). The “Daily VWAP” shall be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.
 
“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
 
“Defaulted Amounts” means any amounts on any Note (including, without limitation, the Redemption Price, the Fundamental Change Repurchase Price, principal and interest) that are payable but are not punctually paid or duly provided for.
 
“delivered” means, with respect to any notice to be delivered, given or mailed to a Holder pursuant to the Indenture, notice (x) given to the Depositary (or its designee) pursuant to the standing instructions from the Depositary or its designee, including by electronic mail in accordance with accepted practices or procedures at the Depositary (in the case of a Global Note) or (y) mailed to such Holder by first class mail, postage prepaid, at its address as it appears on the Register, in each case in accordance with Section 16.03 of the Base Indenture and Section 17.03 of this Supplemental Indenture. Notice so “delivered” shall be deemed to include any notice to be “mailed” or “given,” as applicable, under this Indenture.
 
“Deposit Agreement” means the Deposit Agreement, dated as of October 19, 2017, among the Company, the ADS Depositary, and the holders and owners from time to time of the ADSs issued thereunder, delivered thereunder or, if amended or supplemented as provided therein, as so amended or supplemented.
 
“Depositary” means, with respect to each Global Note and notwithstanding anything to the contrary in the Base Indenture, the Person specified in Section 2.05(d) as the Depositary with respect to such Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of the Indenture, and thereafter, “Depositary” shall mean or include such successor.
 
“Designated Financial Institution” shall have the meaning specified in Section 14.14(a).
 
“Distributed Property” shall have the meaning specified in Section 14.04(c).
 
“Distribution Conversion Period” shall have the meaning specified in Section 14.01(b)(ii).
 
“DTC” means The Depository Trust Company, a New York corporation, or any other applicable securities depositary.
 
5
“Effective Date” shall have the meaning specified in Section 14.03(c), except that, as used in Section 14.04 and Section 14.05, “Effective Date” means the first date on which ADSs trade on the applicable exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as applicable.
 
“Event of Default” shall have the meaning specified in Section 6.02, notwithstanding anything to the contrary in the Base Indenture.
 
“Ex-Dividend Date” means the first date on which the ADSs trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance, dividend or distribution in question, from the Company or, if applicable, from the seller of the ADSs on such exchange or market (in the form of due bills or otherwise) as determined by such exchange or market.
 
“Exchange Election” shall have the meaning specified in Section 14.14(a).
 
“Exempted Fundamental Change” shall have the meaning specified in Section 15.05.
 
“Expiring Rights” means any rights, options or warrants to purchase Class A Ordinary Shares or ADSs that expire on or prior to the Maturity Date.
 
“FATCA” shall have the meaning specified in Section 4.05(a)(i)(D).
 
“Form of Assignment and Transfer” means the “Form of Assignment and Transfer” attached as Attachment 3 to the Form of Note attached hereto as Exhibit A.
 
 “Form of Fundamental Change Repurchase Notice” means the “Form of Fundamental Change Repurchase Notice” attached as Attachment 2 to the Form of Note attached hereto as Exhibit A.
 
“Form of Note” means the “Form of Note” attached hereto as Exhibit A.
 
“Form of Notice of Conversion” means the “Form of Notice of Conversion” attached as Attachment 1 to the Form of Note attached hereto as Exhibit A.
 
“Fundamental Change” shall be deemed to have occurred at the time after the Notes are originally issued if any of the following occurs:
 
(a)          Except as described in clause (b) below, (A) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, its Subsidiaries and Consolidated Affiliated Entities, the Company’s and any such Subsidiary’s and Consolidated Affiliated Entity’s employee benefit plans, and any Permitted Holder, files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of the Company’s ordinary share capital (including ordinary share capital held in the form of ADSs) representing more than 50% of the voting power of the Company’s ordinary share capital or (B) the Permitted Holders, individually or in the aggregate, file a Schedule TO or any
6
schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of more than 50% of the Company’s then outstanding Class A Ordinary Shares (including Class A Ordinary Shares held in the form of ADSs); provided, however, that for purposes of clause (B), in calculating the beneficial ownership percentage of the Class A Ordinary Shares held by any Permitted Holder, any Class A Ordinary Shares (including Class A Ordinary Shares held in the form of ADSs) (1) (i) beneficially owned directly or indirectly by any Permitted Holder on September 9, 2021 (including any Class A Ordinary Shares issued or issuable under employee benefit plans, upon conversion of the Class B Ordinary Shares, the Notes, the 2023 Notes, the 2024 Notes or the 2025 Notes) or (ii) issued or issuable by the Company to the Permitted Holders after September 9, 2021 shall be excluded from both the numerator and denominator, and (2) deemed to be beneficially owned directly or indirectly by any Permitted Holder at any time solely because of voting proxy or agreements shall be excluded from the numerator;
 
(b)          the consummation of (A) any recapitalization, reclassification or change of the Class A Ordinary Shares or the ADSs (other than changes resulting from a subdivision or combination) as a result of which the Class A Ordinary Shares or the ADSs would be converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation or merger of the Company or any similar transaction pursuant to which the Class A Ordinary Shares or the ADSs will be converted into cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its Subsidiaries and Consolidated Affiliated Entities, taken as a whole, to any Person other than one of the Company’s Subsidiaries or Consolidated Affiliated Entities; provided, however, that a transaction described in clause (B) in which the holders of all classes of the Company’s ordinary share capital immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of Common Equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions vis-a-vis each other as such ownership immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause (b);
 
(c)          the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or
 
(d)          the ADSs (or Class A Ordinary Shares or other Common Equity or American Depositary Shares in respect of Reference Property) cease to be listed or quoted on any of The New York Stock Exchange, The Nasdaq Global Select Market or The Nasdaq Global Market (or any of their respective successors) and none of the ADSs, Class A Ordinary Shares, other Common Equity and American Depositary Shares in respect of Reference Property is listed or quoted on one of The New York Stock Exchange, The Nasdaq Global Select Market or The Nasdaq Global Market (or any of their respective successors) within one Trading Day of such cessation;
 
provided, however, that a transaction or transactions described in clause (a) or (b) above shall not constitute a Fundamental Change, if at least 90% of the consideration received or to be received

7
by holders of the ADSs, excluding cash payments for fractional ADSs and cash payments made pursuant to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of Common Equity or American Depositary Shares in respect of Common Equity that are listed or quoted on any of The New York Stock Exchange, The Nasdaq Global Select Market or The Nasdaq Global Market (or any of their respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or transactions and as a result of such transaction or transactions such consideration, excluding cash payments for fractional ADSs, becomes Reference Property for the Notes.
 
“Fundamental Change Company Notice” shall have the meaning specified in Section 15.02(c).
 
“Fundamental Change Repurchase Date” shall have the meaning specified in Section 15.02(a).
 
“Fundamental Change Repurchase Notice” shall have the meaning specified in Section 15.02(b)(i).
 
“Fundamental Change Repurchase Price” shall have the meaning specified in Section 15.02(a).
 
“Global Note” shall have the meaning specified in Section 2.05(d) and shall constitute a Global Security for purposes of the Base Indenture.
 
“Indenture” shall have the meaning specified in the first paragraph of this Supplemental Indenture.
 
 “Interest Payment Date” means each March 15 and September 15 of each year, beginning on March 15, 2022.
 
“Last Reported Sale Price” of the ADSs on any date means the closing sale price per ADS (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the ADSs are traded. If the ADSs are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last Reported Sale Price” shall be the last quoted bid price for the ADSs in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If the ADSs are not so quoted, the “Last Reported Sale Price” shall be the average of the mid-point of the last bid and ask prices for the ADSs on the relevant date from each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose. The “Last Reported Sale Price” shall be determined without regard to after-hours trading or any other trading outside of regular trading session hours.
 
“Make-Whole Fundamental Change” means any transaction or event described in clause (a), (b) or (d) of the definition of Fundamental Change (determined after giving effect to any exceptions to or exclusions from such definition, including in the proviso immediately

8
succeeding clause (d) of the definition thereof, but without regard to the proviso in clause (b) of the definition thereof).
 
“Market Disruption Event” means, for the purposes of determining amounts due upon conversion, (a) a failure by the primary U.S. national or regional securities exchange or market on which the ADSs are listed or admitted for trading to open for trading during its regular trading session or (b) the occurrence or existence prior to 1:00 p.m., New York City time, on any Scheduled Trading Day for the ADSs for more than one half-hour period in the aggregate during regular trading hours of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant stock exchange or otherwise) in the ADSs or in any options contracts or futures contracts relating to the ADSs.
 
“Maturity Date” means September 15, 2026.
 
“Measurement Period” shall have the meaning specified in Section 14.01(b)(i).
 
“Merger Event” shall have the meaning specified in Section 14.07(a).
 
 “Note” or “Notes” shall have the meaning specified in the third paragraph of the recitals of this Supplemental Indenture.
 
“Notice of Conversion” shall have the meaning specified in Section 14.02(b).
 
“Observation Period” with respect to any Note surrendered for conversion means: (i) subject to clause (ii), if the relevant Conversion Date occurs prior to June 15, 2026, the 40 consecutive Trading Day period beginning on, and including, the second Trading Day immediately succeeding such Conversion Date; (ii) if the relevant Conversion Date occurs on or after the date of the Company’s issuance of a Redemption Notice with respect to the Notes pursuant to Article 16 and prior to the close of business on the second Business Day immediately preceding the related Redemption Date, the 40 consecutive Trading Days beginning on, and including, the 42nd Scheduled Trading Day immediately preceding such Redemption Date; and (iii) subject to clause (ii), if the relevant Conversion Date occurs on or after June 15, 2026, the 40 consecutive Trading Days beginning on, and including, the 42nd Scheduled Trading Day immediately preceding the Maturity Date.
 
“Officer” means, with respect to the Company, the Chairman, the President, the Chief Executive Officer, the Chief Financial Officer, the Treasurer, the Secretary, or any Vice President (in each case, whether or not such person is designated by a number or numbers or word or words added before or after the title of such person).
 
“open of business” means 9:00 a.m. (New York City time).
 
“Optional Redemption” shall have the meaning specified in Section 16.02(a).
 
“Ordinary Shares” means the Class A Ordinary Shares and the Class B Ordinary Shares.
 
9
“outstanding,” when used with reference to Notes, shall, subject to the provisions of Section 8.02, mean, as of any particular time, all Notes authenticated and delivered by the Trustee under the Indenture, except:
 
(a)          Notes theretofore canceled by the Trustee or accepted by the Trustee for cancellation;
 
(b)          Notes, or portions thereof, that have become due and payable and in respect of which monies in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent);
 
(c)          Notes that have been paid pursuant to Section 3.07 of the Base Indenture or Notes in lieu of which, or in substitution for which, other Notes shall have been authenticated and delivered pursuant to the terms of Section 3.07 of the Base Indenture unless proof satisfactory to the Trustee is presented that any such Notes are held by protected purchasers in due course;
 
(d)          Notes converted pursuant to Article 14 and required to be cancelled pursuant to Section 2.07;
 
(e)          Notes redeemed pursuant to Article 16; and
 
(f)          Notes repurchased by the Company pursuant to the third sentence of Section 2.08.
 
“Paying Agent” shall have the meaning specified in Section 4.01.
 
“Paying Agent Office” means the designated office of the Paying Agent at which at any time the Indenture shall be administered, which office at the date hereof is the Corporate Trust Office or such other address as the Paying Agent may designate from time to time by notice to the Holders and the Company, or the designated office of any successor paying agent (or such other address as such successor paying agent may designate from time to time by notice to the Holders and the Company).
 
 “Permitted Holder” means (i) any holder or “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of the Class B Ordinary Shares as of the date hereof and permitted transferees of such holder or beneficial owner under the terms of the Class B Ordinary Shares as of the date hereof and (ii) any “group” within the meaning of Section 13(d) of the Exchange Act consisting of one or more Permitted Holders.
 
“Physical Notes” means permanent certificated Notes in registered form issued in minimum denominations of US$1,000 principal amount and integral multiples of US$1,000 in excess thereof.
 
“Physical Settlement” shall have the meaning specified in Section 14.02(a).
 
10
“Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note and shall constitute a Predecessor Security for purposes of the Base Indenture; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.07 of the Base Indenture (as supplemented by Section 2.06 of this Supplemental Indenture) in lieu of or in exchange for a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note that it replaces.
 
“Prospectus Supplement” means the preliminary prospectus supplement dated September 8, 2021, as supplemented by the related pricing term sheet dated September 9, 2021, in each case, relating to the offering and sale of the Notes.
 
 “Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Class A Ordinary Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other property or in which the Class A Ordinary Shares (directly or in the form of ADSs) (or such other security) are exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise). The definition of “Record Date” in the Base Indenture shall not apply to the Notes, and, solely for purposes of the Notes, references to “Record Date” in the Base Indenture shall be deemed to be references to “Regular Record Date” as such term is defined in this Supplemental Indenture.
 
“Redemption Date” means the date fixed for the redemption of any Notes by the Company pursuant to Article 16.
 
“Redemption Notice” means the written notice of redemption of any Notes delivered by the Company to each Holder of such Notes, the Trustee, the Conversion Agent (if other than the Trustee) and the Paying Agent (if other than the Trustee) pursuant to Section 16.05.
 
“Redemption Notice Date” means, with respect to a redemption of any Notes, the date on which the Company sends the Redemption Notice for such redemption pursuant to Article 16.
 
“Redemption Period” means, with respect to an Optional Redemption, a Cleanup Redemption or a Tax Redemption pursuant to Article 16, the period from the Redemption Notice Date for such Optional Redemption, Cleanup Redemption or Tax Redemption, as applicable, until the close of business on the second Business Day immediately preceding the Redemption Date (or, if the Company fails to pay the Redemption Price, until the second Business Day immediately preceding the date on which the Redemption Price has been paid or duly provided for).
 
“Redemption Price” means the cash price payable by the Company to redeem any Note upon its redemption, calculated pursuant to Article 16.
 
“Redemption Reference Date” shall have the meaning specified in Section 14.03(g).
 
“Redemption Reference Price” shall have the meaning specified in Section 14.03(g).
 
11
“Reference Property” shall have the meaning specified in Section 14.07(a).
 
“Regular Record Date,” with respect to any Interest Payment Date, shall mean the March 1 or September 1 (whether or not such day is a Business Day) immediately preceding the applicable March 15 or September 15 Interest Payment Date, respectively.
 
“Relevant Jurisdiction” shall have the meaning specified in Section 4.05(a).
 
“Relevant Taxing Jurisdiction” shall have the meaning specified in Section 4.05(a).
 
“Scheduled Trading Day” means a day that is scheduled to be a Trading Day on the principal U.S. national or regional securities exchange or market on which the ADSs are listed or admitted for trading. If the ADSs are not so listed or admitted for trading, “Scheduled Trading Day” means a Business Day.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
“Settlement Amount” has the meaning specified in Section 14.02(a)(iv).
 
“Settlement Method” means, with respect to any conversion of Notes, Physical Settlement, Cash Settlement or Combination Settlement, as elected (or deemed to have been elected) by the Company.
 
“Settlement Notice” has the meaning specified in Section 14.02(a)(iii).
 
“Specified Dollar Amount” means the maximum cash amount per US$1,000 principal amount of Notes to be received upon conversion as specified in the Settlement Notice related to any converted Notes (or deemed specified pursuant to Section 14.02(a)(iii)).
 
“Spin-Off” shall have the meaning specified in Section 14.04(c).
 
“Subsidiary” means, notwithstanding anything in the Base Indenture to the contrary, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person. For the avoidance of doubt, the term “Subsidiary” or “Subsidiaries” includes the Company’s Consolidated Affiliated Entities.
 
“Successor Company” shall have the meaning specified in Section 11.01(a).
 
“Supplemental Indenture” shall have the meaning specified in the first paragraph of this Supplemental Indenture.
 
12
“Tax Redemption” shall have the meaning specified in Section 16.04.
 
“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be determined) generally occurs on The New York Stock Exchange or, if the ADSs (or such other security) are not then listed on The New York Stock Exchange, on the principal other U.S. national or regional securities exchange on which the ADSs (or such other security) are then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities exchange, on the principal other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale Price for the ADSs (or closing sale price for such other security) is available on such securities exchange or market; provided that, if the ADSs (or such other security) are not so listed or traded, “Trading Day” means a Business Day; and provided, further, that for purposes of determining amounts due upon conversion only, “Trading Day” means a day on which (x) there is no Market Disruption Event and (y) trading in the ADSs generally occurs on The New York Stock Exchange or, if the ADSs are not then listed on The New York Stock Exchange, on the principal other U.S. national or regional securities exchange on which the ADSs are then listed or, if the ADSs are not then listed on a U.S. national or regional securities exchange, on the principal other market on which the ADSs are then listed or admitted for trading, except that if the ADSs are not so listed or admitted for trading, “Trading Day” means a Business Day.
 
“Trading Price” means, with respect to the Notes and any date of determination, the average of the secondary market bid quotations obtained by the Bid Solicitation Agent for US$1,000,000 principal amount of Notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers the Company selects for this purpose; provided that if three such bids cannot reasonably be obtained by the Bid Solicitation Agent but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Bid Solicitation Agent, that one bid shall be used. If the Bid Solicitation Agent cannot reasonably obtain at least one bid for US$1,000,000 principal amount of Notes from a nationally recognized securities dealer on any determination date, then the Trading Price per US$1,000 principal amount of Notes on such determination date shall be deemed to be less than 98% of the product of the Last Reported Sale Price of the ADSs and the Conversion Rate. Any such determination will be conclusive absent manifest error.
 
“Transfer Agent” means Wilmington Trust, National Association, or any successor entity thereto.
 
“Trigger Event” shall have the meaning specified in Section 14.04(c).
 
“unit of Reference Property” shall have the meaning specified in Section 14.07(a).
 
“Valuation Period” shall have the meaning specified in Section 14.04(c).
 
Section 1.02.  References to Interest. Unless the context otherwise requires, any reference to interest on, or in respect of, any Note in the Indenture shall be deemed to include Additional Interest if, in such context, Additional Interest is, was or would be payable pursuant to Section 6.04. Unless the context otherwise requires, any express mention of Additional Interest in any provision hereof shall not be construed as excluding Additional Interest in those provisions hereof where such express mention is not made.

13
Section 1.03.  References to Principal. Unless the context otherwise requires, any reference to the principal of, or the principal amount of, any Security or Note in the Base Indenture or this Supplemental Indenture shall be deemed to include the Redemption Price and the Fundamental Change Repurchase Price, if, in such context, the Redemption Price and/or the Fundamental Change Repurchase Price (as applicable) is, was or would be payable in accordance with Article 15 or Article 16, as applicable. Unless the context otherwise requires, any express mention of the Redemption Price or the Fundamental Change Repurchase Price in any provision hereof shall not be construed as excluding the Redemption Price or the Fundamental Change Repurchase Price, as applicable, in those provisions hereof where such express mention is not made.
 
ARTICLE 2
Issue, Description, Execution, Registration and Exchange of Notes
 
Section 2.01.  Scope of Supplemental Indenture. This Supplemental Indenture amends and supplements the provisions of the Base Indenture, to which provisions reference is hereby made. The changes, modifications and supplements to the Base Indenture effected by this Supplemental Indenture shall be applicable only with respect to, and shall only govern the terms of, the Notes, which may be issued from time to time in accordance herewith, and shall not apply to any other Securities that may be issued under the Base Indenture unless a supplemental indenture with respect to such other Securities specifically incorporates such changes, modifications and supplements. For all purposes under the Base Indenture, the Notes shall constitute a single series of Securities. The provisions of this Supplemental Indenture shall supersede, with respect to the Notes, any conflicting provisions in the Base Indenture.
 
Section 2.02.  Designation and Amount. The Notes are hereby created and authorized as a single series of Securities under the Base Indenture. The Notes shall be designated as the “0.25% Convertible Senior Notes due 2026.” The aggregate principal amount of Notes that may be authenticated and delivered under the Indenture is initially limited to US$2,875,000,000, subject to Section 2.08 and except for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other Notes to the extent expressly permitted under the Indenture.
 
Section 2.03.  Form of Notes. The Notes and the Trustee’s certificate of authentication to be borne by such Notes shall be substantially in the respective forms set forth in Exhibit A, the terms and provisions of which shall constitute, and are hereby expressly incorporated in and made a part of the Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of the Indenture, expressly agree to such terms and provisions and to be bound thereby. In the case of any conflict between the Notes and the Indenture, the provisions of the Indenture shall control and govern.
 
Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of the Indenture as may be required by the Depositary, or as may be required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation system upon which the Notes may be listed or traded or designated for issuance or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Notes are subject.

14
Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements as the Officer executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of the Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, or to conform to usage or to indicate any special limitations or restrictions to which any particular Notes are subject.
 
Each Global Note shall represent such principal amount of the outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be increased or reduced to reflect redemptions, repurchases, cancellations, conversions, transfers or exchanges permitted hereby. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee or the Registrar, at the direction of the Trustee in such manner and upon instructions given by the Holder of such Notes in accordance with the Indenture. Payment of principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, and accrued and unpaid interest on, a Global Note shall be made to the Holder of such Note on the date of payment, unless a record date or other means of determining Holders eligible to receive payment is provided for herein.
 
Section 2.04.  Date and Denomination of Notes; Payments of Interest and Defaulted Amounts. (a) Notwithstanding Section 3.02 of the Base Indenture, the Notes shall be issuable in registered form without coupons in minimum denominations of US$1,000 principal amount and integral multiples of US$1,000 in excess thereof. Each Note shall be dated the date of its authentication and shall bear interest from the date specified on the face of such Note. Notwithstanding Section 3.10 of the Base Indenture, accrued interest on the Notes shall be computed on the basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual days elapsed over a 30-day month.
 
(b)          Section 3.08(a) of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 2.04(b), and any reference in the Base Indenture to Section 3.08(a) shall, with respect to the Notes, be deemed to refer instead to this Section 2.04(b), as the context may require. The Person in whose name any Note (or its Predecessor Note) is registered on the Register at the close of business on any Regular Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date. Interest shall be payable at the office or agency of the Company maintained by the Company for such purposes in the contiguous United States, which shall initially be the Corporate Trust Office. The Company shall pay, or cause the Paying Agent to pay (to the extent funded by the Company), interest (i) on any Physical Notes (A) to Holders holding Physical Notes having an aggregate principal amount of US$5,000,000 or less, by check mailed (at the Company’s expense)

15
to the Holders of these Notes at their address as it appears in the Register and (B) to Holders holding Physical Notes having an aggregate principal amount of more than US$5,000,000, either by check mailed (at the Company’s expense) to such Holders or, upon application by such Holder to the Trustee not later than the relevant Regular Record Date, by wire transfer in immediately available funds to that Holder’s account within the United States, which application shall remain in effect until the Holder notifies, in writing, the Trustee to the contrary or (ii) on any Global Note by wire transfer of immediately available funds to the account of the Depositary or its nominee.
 
(c)          Section 3.08(b) of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 2.04(c), and any reference in the Base Indenture to Section 3.08(b) shall, with respect to the Notes, be deemed to refer instead to this Section 2.04(c), as the context may require. Any Defaulted Amounts shall forthwith cease to be payable to the Holder on the relevant payment date but shall accrue interest per annum at the rate per annum borne by the Notes, subject to the enforceability thereof under applicable law, from, and including, such relevant payment date, and such Defaulted Amounts together with such interest thereon shall be paid by the Company, at its election in each case, as provided in clause (i) or (ii) below:
 
(i)           The Company may elect to make payment of any Defaulted Amounts to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a special record date for the payment of such Defaulted Amounts, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of the Defaulted Amounts proposed to be paid on each Note and the date of the proposed payment (which shall be not less than 25 days after the receipt by the Trustee of such notice, unless the Trustee in its sole discretion shall consent to an earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount to be paid in respect of such Defaulted Amounts or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Amounts as in this clause provided. Thereupon the Company shall fix a special record date for the payment of such Defaulted Amounts which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment, and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Company shall promptly notify the Trustee and Holders of the proposed payment of such Defaulted Amounts and the special record date therefor, at each Holder’s address as it appears in the Register or by electronic means to the Depositary in the case of Global Notes, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Amounts and the special record date therefor having been so delivered, such Defaulted Amounts shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such special record date and shall no longer be payable pursuant to the following clause (ii) of this Section 2.04(c). The Trustee shall have no responsibility whatsoever for the calculation of any Defaulted Amounts.
 
16
(ii)          The Company may make payment of any Defaulted Amounts to the Persons in whose name the Notes (or their respective Predecessor Notes) are registered in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, and upon such notice as may be required by such exchange or automated quotation system, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.
 
Section 2.05.  Exchange and Registration of Transfer of Notes; Depositary.
 
(a)          Section 3.06(j) of the Base Indenture shall not apply to the Notes.
 
(b)          Section 3.06(f) of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 2.05(b), and any reference in the Base Indenture to Section 3.06(f) shall, with respect to the Notes, be deemed to refer instead to this Section 2.05(b), as the context may require. No service charge shall be imposed by the Company, the Transfer Agent, the ADS Depositary, the Registrar, the co-Registrar or the Paying Agent for any exchange or registration of transfer of Notes, but the Company may require a Holder to pay a sum sufficient to cover any documentary, stamp or similar issue or transfer tax required in connection therewith as a result of the name of the Holder of new Notes issued upon such exchange or registration of transfer being different from the name of the Holder of the old Notes surrendered for exchange or registration of transfer. The Company shall be responsible for the ADS Depositary’s fees for issuance of the ADSs.
 
(c)          Section 3.06(g) of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 2.05(c), and any reference in the Base Indenture to Section 3.06(g) shall, with respect to the Notes, be deemed to refer instead to this Section 2.05(c), as the context may require. None of the Company, the Trustee, the Registrar or any co- Registrar shall be required to exchange or register a transfer of (i) any Notes surrendered for conversion or, if a portion of any Note is surrendered for conversion, such portion thereof surrendered for conversion, (ii) any Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn) in accordance with Article 15 or (iii) any Notes selected for redemption in accordance with Article 16 or (iv) any Notes between a Regular Record Date and corresponding Interest Payment Date.
 
(d)          So long as the Notes are eligible for book-entry settlement with the Depositary, unless otherwise required by law, subject to Section 2.05(c) all Notes shall be represented by one or more Notes in global form (each, a “Global Note”) registered in the name of the Depositary or the nominee of the Depositary. The transfer and exchange of beneficial interests in a Global Note that does not involve the issuance of a Physical Note shall be effected through the Depositary in accordance with the Indenture and the applicable procedures of the Depositary therefor.
 
The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as Depositary with respect to each Global Note. Initially, each Global Note shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as custodian for Cede & Co.

17
(e)          Section 3.06(c) of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 2.05(e), and any reference in the Base Indenture to Section 3.06(c) shall, with respect to the Notes, be deemed to refer instead to this Section 2.05(e), as the context may require.
 
If (i) the Depositary notifies the Company at any time that the Depositary is unwilling or unable to continue as depositary for the Global Notes and a successor depositary is not appointed within 90 days, (ii) the Depositary ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days, (iii) an Event of Default with respect to the Notes has occurred and is continuing and, subject to the Depositary’s applicable procedures, a beneficial owner of any Note requests that its beneficial interest therein be issued as a Physical Note, or (iv) the Company or a beneficial owner of the Affiliate Notes requests that the Affiliate Notes be issued as a Physical Note, the Company shall execute, and the Trustee, upon receipt of an Officer’s Certificate and a Company Order for the authentication and delivery of Notes, shall authenticate and deliver (x) in the case of clause (iii), a Physical Note to such beneficial owner in a principal amount equal to the principal amount of such Note or Affiliate Notes, as applicable, corresponding to such beneficial owner’s beneficial interest and (y) in the case of clause (i) or (ii), Physical Notes to each beneficial owner of the related Global Notes (or a portion thereof) in an aggregate principal amount equal to the aggregate principal amount of such Global Notes in exchange for such Global Notes, and upon delivery of the Global Notes to the Trustee such Global Notes shall be canceled.
 
Physical Notes issued in exchange for all or a part of the Global Note pursuant to this Section 2.05(e) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, or, in the case of clauses (iii) and (iv) of the immediately preceding paragraph, the relevant beneficial owner, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such Physical Notes to the Persons in whose names such Physical Notes are so registered.
 
At such time as all interests in a Global Note have been converted, canceled, repurchased, redeemed or transferred, such Global Note shall be, upon receipt thereof, canceled by the Trustee in accordance with standing procedures and existing instructions of the Depositary. At any time prior to such cancellation, if any interest in a Global Note is exchanged for Physical Notes, converted, canceled, repurchased, redeemed or transferred to a transferee who receives Physical Notes therefor or any Physical Note is exchanged or transferred for part of such Global Note, the principal amount of such Global Note shall, in accordance with the standing procedures and existing instructions of the Depositary, be appropriately reduced or increased, as the case may be, and an endorsement shall be made on such Global Note, by the Trustee, to reflect such reduction or increase.
 
None of the Company, any agent of the Company, the Trustee, the Paying Agent, the Conversion Agent or any other agent of the Trustee shall have any responsibility or liability for the payment of amounts to beneficial holders, any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

18
(f)           Any Note or ADS delivered upon the conversion or exchange of any Note (including any Affiliate Note) that is repurchased or owned by any Affiliate of the Company (or any Person who was an Affiliate of the Company during the three months immediately preceding) may not be resold by such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act in a transaction that results in such Note or ADS, as the case may be, no longer being a “restricted security” (as defined under Rule 144 under the Securities Act). The Company shall cause any Note that is repurchased or owned by it to be surrendered to the Paying Agent for cancellation in accordance with Section 2.07.
 
Section 2.06.  Mutilated, Destroyed, Lost or Stolen Notes.
 
(a)          Section 3.07(b) of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 2.06(a), and any reference in the Base Indenture to section 3.07(b) shall, with respect to the Notes, be deemed to refer instead to this Section 2.06(a), as the context may require. In case any Note that has matured or is about to mature or has been surrendered for required repurchase or is about to be converted in accordance with Article 14 shall become mutilated or be destroyed, lost or stolen, the Company may, in its sole discretion, instead of issuing a substitute Note, pay or authorize the payment of or convert or authorize the conversion of the same (without surrender thereof except in the case of a mutilated Note), as the case may be.
 
(b)          Section 3.07(c) of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 2.06(b), and any reference in the Base Indenture to section 3.07(c) shall, with respect to the Notes, be deemed to refer instead to this Section 2.06(b), as the context may require. No service charge shall be imposed by the Company, the Transfer Agent, the ADS Depositary, the Registrar, any co-Registrar or the Paying Agent upon the issuance of any substitute Note, but the Company may require a Holder to pay a sum sufficient to cover any documentary, stamp or similar issue or transfer tax required in connection therewith as a result of the name of the Holder of the new substitute Note being different from the name of the Holder of the old Note that became mutilated or was destroyed, lost or stolen.
 
Section 2.07.  Cancellation of Notes Paid, Converted, Etc. Section 3.09 of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 2.07, and any reference in the Base Indenture to Section 3.09 shall, with respect to the Notes, be deemed to refer instead to this Section 2.07, as the context may require. The Company shall cause all Notes surrendered for the purpose of payment, repurchase, redemption, registration of transfer or exchange or conversion, if surrendered to any Person other than the Trustee (including any of the Company’s agents, Subsidiaries, Consolidated Affiliated Entities or Affiliates), to be delivered and surrendered to the Trustee for cancellation. All Notes delivered to the Trustee shall be canceled promptly by it, and except for Notes surrendered for transfer or exchange, no Notes shall be authenticated in exchange thereof except as expressly permitted by any of the provisions of the Indenture. The Trustee shall dispose of all canceled Notes held by it in accordance with its customary procedures and, after such disposition, shall deliver a certificate of such cancellation and disposition to the Company, at the Company’s written request in a Company Order.

19
Section 2.08. Additional Notes; Repurchases. The Company may, without the consent of, or notice to, the Holders and notwithstanding Section 2.02, reopen the Indenture and issue additional Notes hereunder with the same terms as the Notes initially issued hereunder (except for any differences in the issue price, the issue date, interest accrued, if any, and, if applicable, restrictions on transfer in respect of such additional Notes) in an unlimited aggregate principal amount; provided that if any such additional Notes are not fungible with the Notes initially issued hereunder for U.S. federal income tax or securities law purposes, such additional Notes shall have one or more separate CUSIP numbers. Prior to the issuance of any such additional Notes, the Company shall deliver to the Trustee a Company Order, an Officer’s Certificate and an Opinion of Counsel, such Officer’s Certificate and Opinion of Counsel to cover such matters required by Section 16.01 of the Base Indenture. In addition, the Company may, to the extent permitted by law, and directly or indirectly (regardless of whether such Notes are surrendered to the Company), repurchase Notes in the open market or otherwise, whether by the Company or through its Subsidiaries or Consolidated Affiliated Entities or through a private or public tender or exchange offer or through counterparties to private agreements. The Company shall cause any Notes so repurchased to be surrendered to the Trustee for cancellation in accordance with Section 2.07, and they will no longer be considered “outstanding” under the Indenture upon their cancellation. The Company may also enter into cash-settled swaps or other derivatives with respect to the Notes. For the avoidance of doubt, any Notes underlying such cash-settled swaps or other derivatives shall not be required to be surrendered to the Trustee for cancellation in accordance with Section 2.07 and will continue to be considered “outstanding” for purposes of the Indenture, subject to the provisions of Section 8.02.
 
ARTICLE 3
Satisfaction and Discharge
 
Section 3.01.  Applicability of Article 12 of the Base Indenture. Article 12 of the Base Indenture shall not apply to the Notes. Instead the provisions set forth in this Article 3 shall, with respect to the Notes, supersede in their entirety Article 12 of the Base Indenture, and all references in the Base Indenture to Article 12 thereof and the provisions therein, as the case may be, shall, with respect to the Notes, be deemed to be references to this Article 3 or the applicable provisions set forth in this Article 3, respectively.
 
Section 3.02.  Satisfaction and Discharge. The Indenture shall upon request of the Company contained in an Officer’s Certificate cease to be of further effect, and the Trustee, at the expense of the Company, shall execute instruments acknowledging satisfaction and discharge of the Indenture as reasonably requested by the Company, when (a) (i) all Notes theretofore authenticated and delivered (other than Notes which have been destroyed, lost or stolen and which have been replaced, paid or converted as provided in Section 2.06) have been delivered to the Trustee for cancellation; or (ii) the Company has deposited with the Trustee or delivered to Holders, as applicable, after the Notes have become due and payable, whether on the Maturity Date, any Redemption Date, any Fundamental Change Repurchase Date, upon conversion or otherwise, cash, ADSs or a combination thereof, as applicable, solely to satisfy the Company’s Conversion Obligation, sufficient, without consideration of reinvestment, to pay all of the outstanding Notes and all other sums due and payable under the Indenture by the Company; and (b) the Company has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the Indenture have been complied with. Notwithstanding the satisfaction and discharge of the Indenture, the obligations of the Company to the Trustee under Section 11.01 of the Base Indenture shall survive.

20
ARTICLE 4
Particular Covenants of the Company
 
Section 4.01.  Maintenance of Office or Agency. Section 6.02 of the Base Indenture shall be superseded by this Section 4.01, and any reference in the Base Indenture to Section 6.02 shall be deemed to refer instead to this Section 4.01. The Company will maintain in the contiguous United States of America, an office or agency (which will be the Corporate Trust Office initially) where the Notes may be surrendered for registration of transfer or exchange or for presentation for payment or repurchase (“Paying Agent”) or for conversion (“Conversion Agent”) and where notices in respect of the Notes and this Supplemental Indenture may be made. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made at the Corporate Trust Office.
 
The Company may also from time to time designate as co-Registrars one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the contiguous United States of America for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The terms “Paying Agent” and “Conversion Agent” include any such additional or other offices or agencies, as applicable.
 
The Company hereby initially designates the Trustee as the Paying Agent (other than for purposes of Article 15), Custodian, Registrar and Conversion Agent and the Corporate Trust Office shall be considered as one such office or agency of the Company for each of the aforesaid purposes; provided that no office of the Trustee shall be a place for service of legal process on the Company. For purposes of Article 15, the Paying Agent shall be the Trustee or other paying agent designated by the Company.
 
Section 4.02.  Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 11.06 of the Base Indenture, a Trustee, so that there shall at all times be a Trustee hereunder.
 
Section 4.03.  Provisions as to Paying Agent. Section 6.03 of the Base Indenture shall be superseded by this Section 4.03, and any reference in the Base Indenture to Section 6.03 shall be deemed to refer instead to this Section 4.03.
 
21
(a)          If the Company shall appoint a Paying Agent other than the Trustee, the Company will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 4.03:
 
(i)           that it will hold all sums held by it as such agent for the payment of the principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, and accrued and unpaid interest on, the Notes for the benefit of the Holders of the Notes;
 
(ii)          that it will give the Trustee prompt written notice of any failure by the Company to make any payment of the principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, and accrued and unpaid interest on, the Notes when the same shall be due and payable; and
 
(iii)         that at any time during the continuance of an Event of Default, upon request of the Trustee, it will forthwith pay to the Trustee all sums so held.
 
The Company shall, on or before each due date of the principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, or accrued and unpaid interest on, the Notes, deposit with the Paying Agent a sum in immediately available funds sufficient to pay such principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) or accrued and unpaid interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee in writing of any failure to take such action; provided that such deposit must be received by the Paying Agent by 11:00 a.m., New York City time, on the relevant due date.
 
(b)          If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, and accrued and unpaid interest on, the Notes, set aside, segregate and hold in trust for the benefit of the Holders of the Notes a sum sufficient to pay such principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) and accrued and unpaid interest so becoming due and will promptly notify the Trustee in writing of any failure to take such action and of any failure by the Company to make any payment of the principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, or accrued and unpaid interest on, the Notes when the same shall become due and payable.
 
(c)          Anything in this Section 4.03 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Supplemental Indenture, or for any other reason, pay, cause to be paid or deliver to the Trustee all sums or amounts held by the Company in trust or by any Paying Agent as required by this Section 4.03, such sums or amounts to be held by the Trustee upon the trusts herein contained and upon such payment or delivery by the Company or any Paying Agent to the Trustee, the Company or such Paying Agent shall be released from all further liability but only with respect to such sums or amounts. Upon the occurrence of any event specified in  Section 6.02(i) or Section 6.02(j), the Trustee shall automatically become the Paying Agent.
 
22
(d)          Subject to applicable escheatment laws, any money or property deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, and accrued and unpaid interest on, or in satisfaction of its Conversion Obligation with respect to, any Note and remaining unclaimed for two years after such principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) or interest has become due and payable, or such Conversion Obligation became due, shall be paid or delivered, as the case may be, to the Company on request of the Company contained in an Officer’s Certificate, or (if then held by the Company) shall be discharged from such trust and the Trustee shall have no further liability with respect to such funds; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such money or property, and all liability of the Company as trustee thereof, shall thereupon cease.
 
Section 4.04.  Existence. Subject to Article 11, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.
 
Section 4.05.  Additional Amounts. Section 6.05 of the Base Indenture shall be superseded by this Section 4.05, and any reference in the Base Indenture to Section 6.05 shall be deemed to refer instead to this Section 4.05.
 
(a)          All payments and deliveries made by, or on behalf of, the Company or any successor to the Company under or with respect to the Indenture and the Notes, including payments of principal (including, if applicable, the Redemption Price and the Fundamental Change Repurchase Price), payments of interest and payments of cash and/or deliveries of ADSs (together with payments of cash for any fractional ADS) upon conversion of the Notes, will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company or any successor to the Company is, for tax purposes, organized or resident or doing business (each, as applicable, a “Relevant Taxing Jurisdiction”) or through which payment is made or deemed made (together with each Relevant Taxing Jurisdiction, a “Relevant Jurisdiction,” and in each case, any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Company or any successor to the Company shall pay to each Holder such additional amounts (“Additional Amounts”) as may be necessary to ensure that the net amount received by the Holders after such withholding or deduction (and after deducting any taxes on the Additional Amounts) will equal the amounts that would have been received by such Holders had no such withholding or deduction been required; provided that no Additional Amounts will be payable:
 
(i)           for or on account of:
 
(A)         any tax, duty, assessment or other governmental charge that would not have been imposed but for:
 
23
(1)          the existence of any present or former connection between the Holder or beneficial owner of such Note and the Relevant Jurisdiction, other than merely holding such Note or the receipt of payments thereunder, including such Holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein;
 
(2)          the presentation of such Note (in cases in which presentation is required) more than 30 days after the later of the date on which the payment of the principal of (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) and interest on such Note or the payment of cash and/or the delivery of ADSs (together with payment of cash for any fractional ADS) upon conversion of such Note became due and payable pursuant to the terms thereof or was made or duly provided for;
 
(3)          the failure of the Holder or beneficial owner to comply with a timely request from the Company or any successor of the Company, addressed to the Holder, to provide certification, information, documents or other evidence concerning such Holder’s or beneficial owner’s nationality, residence, identity or connection with the Relevant Jurisdiction, or to make any declaration or satisfy any other reporting requirement relating to such matters, if and to the extent that due and timely compliance with such request is required by statute, regulation or administrative practice of the Relevant Jurisdiction in order to reduce or eliminate any withholding or deduction as to which Additional Amounts would have otherwise been payable; or
 
(4)          the presentation of such Note (in cases in which presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;
 
(B)          any estate, inheritance, gift, sale, transfer, excise, personal property or similar tax, assessment or other governmental charge;
 
(C)          any tax, duty, assessment or other governmental charge that is payable otherwise than by withholding from payments or deliveries under or with respect to the Notes;
 
(D)          any tax, assessment, withholding or deduction required by sections 1471 through 1474 of the Code (“FATCA”), any current or future Treasury regulations or rulings promulgated thereunder, any law, regulation or other official guidance enacted in any jurisdiction implementing FATCA, any intergovernmental agreement between the United States and any other jurisdiction to implement FATCA or any law enacted by such other jurisdiction

24
to give effect to such agreement, or any agreement with the U.S. Internal Revenue Service under FATCA; or
 
(E)          any combination of taxes, duties, assessments or other governmental charges referred to in the preceding clauses (A), (B), (C) or (D); or
 
(ii)          with respect to any payment of the principal of (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) and interest on such Note or the payment of cash and/or the delivery of ADSs (together with payment of cash for any fractional ADS) upon conversion of such Note to a Holder, if the Holder is a fiduciary, partnership or person other than the sole beneficial owner of that payment to the extent that such payment would be required to be included in the income under the laws of the Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, a partner or member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner, member or beneficial owner been the Holder thereof.
 
(b)          The Trustee and the Paying Agent shall also be entitled to make any withholding or deduction pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to FATCA and any regulations or agreements thereunder or official interpretations thereof.
 
(c)          Any reference in the Indenture or the Notes in any context to the payment of cash and/or the delivery of ADSs (together with payments of cash for any fractional ADS), as applicable, upon conversion of any Note or the payment of principal of (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) and interest on any Note or any other amount payable with respect to such Note, shall be deemed to include payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable with respect to that amount pursuant to this Section 4.05.
 
(d)          If the Company or its successor is required to make any deduction or withholding from any payments or deliveries with respect to the Notes, it will deliver to the Trustee and the Holders official tax receipts evidencing the remittance to the relevant tax authorities of the amounts so withheld or deducted.
 
(e)          The Trustee shall have no obligation to determine whether any Additional Amounts are payable under the Indenture or the amount thereof.
 
(f)          The foregoing obligations shall survive termination or discharge of the Indenture.
 
Section 4.06.  Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of the Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

25
Section 4.07.  Compliance Certificates; Statements as to Defaults.
 
(a)          Section 6.07 of the Base Indenture shall be superseded by this Section 4.07(a), and any reference in the Base Indenture to Section 6.07 shall be deemed to refer instead to this Section 4.07(a). The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2021) an Officer’s Certificate stating that a review has been conducted of the Company’s activities under the Indenture and the Company has fulfilled its obligations thereunder, and whether such Officer thereof have knowledge of any Default by the Company that occurred during the previous year that is then continuing and, if so, specifying each such Default and the nature thereof.
 
(b)          The Company shall deliver to the Trustee, as soon as possible, and in any event within 30 days after the Company becomes aware of the occurrence of any Default if such Default is then continuing, an Officer’s Certificate setting forth the details of such Default, its status and the action that the Company is taking or proposing to take in respect thereof.
 
Section 4.08.  Further Instruments and Acts. Upon written request of the Trustee, the Paying Agent or the Conversion Agent, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Supplemental Indenture.
 
Section 4.09.  No Conditional Waiver. Section 6.08 of the Base Indenture shall not apply to the Notes.
 
ARTICLE 5
[Intentionally Omitted]
 
ARTICLE 6
Defaults and Remedies
 
Section 6.01.  Applicability of Article VII of the Base Indenture. Article VII of the Base Indenture shall not apply to the Notes. Instead, the provisions set forth in this Article 6 shall, with respect to the Notes, supersede in its entirety Article VII of the Base Indenture, and all references in the Base Indenture to Article VII thereof and the provisions therein, as the case may be, shall, with respect to the Notes, be deemed to be references to this Article 6 and the applicable provisions set forth in this Article 6, respectively.
 
Section 6.02.  Events of Default. Each of the following events shall be an “Event of Default” with respect to the Notes:
 
(a)          default in any payment of interest or Additional Amounts, if any, on any Note when due and payable and the default continues for a period of 30 days;
 
26
(b)          default in the payment of principal of any Note when due and payable on the Maturity Date, upon Optional Redemption, upon any required repurchase, upon declaration of acceleration or otherwise;
 
(c)          failure by the Company to comply with its obligation to convert the Notes in accordance with the Indenture upon exercise of a Holder’s conversion right and such failure continues for a period of five Business Days;
 
(d)          failure by the Company to issue a Fundamental Change Company Notice in accordance with Section 15.02(c), notice of a Make-Whole Fundamental Change in accordance with Section 14.03(a) or notice of a specified corporate event in accordance with Section 14.01(b)(ii) or 14.01(b)(iii), in each case, when due and such failure continues for a period of five Business Days;
 
(e)          failure by the Company to comply with its obligations under Article 11;
 
(f)          failure by the Company for 60 days after written notice from the Trustee or by the Trustee at the request of the Holders of at least 25% in aggregate principal amount of the Notes then outstanding has been received by the Company to comply with any of its other agreements contained in the Notes or the Indenture;
 
(g)          default by the Company or any Significant Subsidiary of the Company with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of US$200 million (or the foreign currency equivalent thereof) in the aggregate by the Company and/or any such Significant Subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being declared due and payable prior to its stated maturity or (ii) constituting a failure to pay the principal or interest of any such indebtedness when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise and in each case, such indebtedness is not discharged, or such acceleration is not otherwise cured or rescinded, within 30 days (in the case of clause (ii) of this Section 6.02(g), within the greater of (x) 30 days or (y) the expiration of any grace period or extension of time for payment applicable thereto);
 
(h)          [Reserved].
 
(i)          the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Company or any such Significant Subsidiary or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or any such Significant Subsidiary or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or
 
(j)          an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to the Company or such Significant Subsidiary or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or such Significant Subsidiary or

27
any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 consecutive days.

For the avoidance of doubt, for purposes of Section 6.02(g), “indebtedness for money borrowed” shall not include any obligations due under any foreign exchange, currency option, currency swap or other similar transaction.
 
Section 6.03.  Acceleration; Rescission and Annulment. If one or more Events of Default shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), then, and in each and every such case (other than an Event of Default specified in Section 6.02(i) or Section 6.02(j) with respect to the Company or any of its Significant Subsidiaries), unless the principal of all of the Notes shall have already become due and payable, the Trustee may by notice in writing to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding determined in accordance with Section 8.02, by notice in writing to the Company and to the Trustee may, and the Trustee at the request of such Holders accompanied by security and/or indemnity satisfactory to the Trustee and otherwise subject to the limitations set forth in the Indenture, shall, declare 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable immediately, and upon any such declaration the same shall become and shall automatically be immediately due and payable, notwithstanding anything contained in the Indenture or in the Notes to the contrary. If an Event of Default specified in Section 6.02(i) or Section 6.02(j) with respect to the Company or any of its Significant Subsidiaries occurs and is continuing, 100% of the principal of, and accrued and unpaid interest on, all Notes shall become and shall automatically be immediately due and payable without any action on the part of the Trustee. If an Event of Default occurs and is continuing, all agents of the Company appointed under the Indenture will be required to act on the direction of the Trustee.
 
The immediately preceding paragraph, however, is subject to the conditions that if, at any time after the principal of the Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum in immediately available funds sufficient to pay installments of accrued and unpaid interest upon all Notes and the principal of any and all Notes that shall have become due otherwise than by acceleration (with interest on overdue installments of accrued and unpaid interest to the extent that payment of such interest is enforceable under applicable law, and on such principal at the rate per annum borne by the Notes) and amounts due to the Trustee pursuant to Section 11.01 of the Base Indenture, and if (1) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (2) any and all existing Events of Default under the Indenture, other than the nonpayment of the principal of and accrued and unpaid interest on Notes that shall have become due solely by such acceleration, shall have been cured pursuant to Section 6.02 or waived pursuant to Section 6.10, then and in every such case (except as provided in the immediately succeeding sentence) the Holders of a majority in aggregate principal amount of the Notes then outstanding, by written notice to the Company and to the Trustee, may waive all Defaults or Events of Default with respect to the Notes and rescind any such declaration and its consequences and such Default shall cease to exist, and any Event of Default arising therefrom

28
shall be deemed to have been cured for every purpose of the Indenture; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent Default or Event of Default, or shall impair any right consequent thereon. Notwithstanding anything to the contrary herein, no such waiver or rescission and annulment shall extend to or shall affect any Default or Event of Default resulting from (i) the nonpayment of the principal of, or accrued and unpaid interest on, any Notes, (ii) a failure to repurchase any Notes when required or (iii) a failure to pay or deliver, as the case may be, the consideration due upon conversion of the Notes.

Section 6.04.  Additional Interest. Notwithstanding anything in the Indenture or in the Notes to the contrary, to the extent the Company elects, the sole remedy for Event of Default relating to (i) the Company’s failure to file with the Trustee pursuant to Section 314(a)(1) of the Trust Indenture Act any documents or reports that the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act or (ii) the Company’s failure to comply with its obligations as set forth in Section 10.02 of the Base Indenture shall after the occurrence of such an Event of Default (which will be the 60th day after written notice is provided to the Company pursuant to Section 6.02(f)) consist exclusively of the right to receive Additional Interest on the Notes at a rate equal to:
 
(a)          0.25% per annum of the principal amount of the Notes outstanding for each day during the period beginning on, and including, the date on which such an Event of Default first occurs and ending on the earlier of (i) the date on which such Event of Default is cured or validly waived and (ii) the 180th day immediately following, and including, the date on which such Event of Default first occurred; and
 
(b)          if such Event of Default has not been cured or validly waived prior to the 181st day immediately following, and including, the date on which such Event of Default first occurred, 0.50% per annum of the principal amount of the Notes outstanding for each day during the period beginning on, and including, the 181st day immediately following, and including, the date on which such an Event of Default first occurred and ending on the earlier of (i) the date on which such Event of Default is cured or validly waived and (ii) the 360th day immediately following, and including, the date on which such Event of Default first occurred.
 
If the Company so elects, such Additional Interest shall be payable in the same manner and on the same dates as regular interest on the Notes. On the 366th day after such Event of Default (if the Event of Default with respect to the Company’s failure to file is not cured or waived prior to such 366th day), the Notes shall be immediately subject to acceleration as provided in Section 6.03. In the event the Company does not elect to pay the Additional Interest following an Event of Default in accordance with this Section 6.04 or the Company elected to make such payment but does not pay the Additional Interest when due, the Notes shall be immediately subject to acceleration as provided in Section 6.03.
 
In order to elect to pay Additional Interest as the sole remedy during the first 360 days after the occurrence of any Event of Default described in the immediately preceding paragraph, the Company must notify in writing all Holders of the Notes, the Trustee and the Paying Agent of such election prior to the beginning of such 360-day period. Upon the Company’s failure to timely give such written notice, the Notes shall be immediately subject to acceleration as provided in Section 6.03.

29
Section 6.05.  Payments of Notes on Default; Suit Therefor. If an Event of Default described in clause (a) or (b) of Section 6.02 shall have occurred, the Company shall, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of the Notes, the whole amount then due and payable on the Notes for principal and interest, if any, with interest on any overdue principal and interest, if any, at the rate per annum borne by the Notes at such time, and, in addition thereto, such further amount as shall be sufficient to cover any amounts due to the Trustee under Section 11.01 of the Base Indenture. If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Notes, wherever situated.
 
In the event there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Notes under Title 11 of the United States Code, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company or such other obligor, the property of the Company or such other obligor, or in the event of any other judicial proceedings relative to the Company or such other obligor upon the Notes, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.05, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and accrued and unpaid interest, if any, in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents and to take such other actions as it may deem necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceedings relative to the Company or any other obligor on the Notes, its or their creditors, or its or their property, and to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute the same after the deduction of any amounts due to the Trustee under Section 11.01 of the Base Indenture; and any receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each of the Holders to make such payments to the Trustee, as administrative expenses, and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for reasonable compensation, expenses, advances and disbursements, including agents and counsel fees, and including any other amounts due to the Trustee under Section 11.01 of the Base Indenture, incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses, advances and disbursements out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be

30
paid out of, any and all distributions, dividends, monies, securities and other property that the Holders of the Notes may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise.
 
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting such Holder or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
 
All rights of action and of asserting claims under the Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes.
 
In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of the Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Holders of the Notes parties to any such proceedings.
 
In case the Trustee shall have proceeded to enforce any right under the Indenture and such proceedings shall have been discontinued or abandoned because of any waiver pursuant to Section 6.10 or any rescission and annulment pursuant to Section 6.03 or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Holders, and the Trustee shall, subject to any determination in such proceeding, be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Holders, and the Trustee shall continue as though no such proceeding had been instituted.
 
Section 6.06.  Application of Monies Collected by Trustee. Any monies or property collected by the Trustee pursuant to this Article 6 with respect to the Notes shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such monies, upon presentation of the several Notes, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:
 
First, to the payment of all amounts due the Trustee under Section 11.01 of the Base Indenture and any payments due to the Paying Agent, the Conversion Agent and the Registrar;
 
Second, in case the principal of the outstanding Notes shall not have become due and be unpaid, to the payment of interest on, the Notes in default in the order of the date due of the payments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon such overdue payments at the rate per annum borne by the Notes at such time (including, without duplication, any Additional Interest on such overdue payments pursuant to Section 6.04), such payments to be made ratably to the Persons entitled thereto;
 
31
Third, in case the principal of the outstanding Notes shall have become due, by declaration or otherwise, and be unpaid to the payment of the whole amount (including, if applicable, the payment of the Redemption Price or the Fundamental Change Repurchase Price and any cash due upon conversion) then owing and unpaid upon the Notes for principal and interest, if any, with interest on the overdue principal and, to the extent that such interest has been collected by the Trustee, upon overdue installments of interest at the rate per annum borne by the Notes at such time, and in case such monies shall be insufficient to pay in full the whole amounts so due and unpaid upon the Notes, then to the payment of such principal (including, if applicable, the Redemption Price or the Fundamental Change Repurchase Price and any cash due upon conversion) and interest without preference or priority of principal over interest, or of interest over principal or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably to the aggregate of such principal (including, if applicable, the Redemption Price or the Fundamental Change Repurchase Price) and accrued and unpaid interest; and
 
Fourth, to the payment of the remainder, if any, to the Company.
 
Section 6.07.  Proceedings by Holders
 
. Except to enforce the right to receive payment of principal (including, if applicable, the Redemption Price or the Fundamental Change Repurchase Price) or interest when due, or the right to receive payment or delivery of the consideration due upon conversion, no Holder of any Note shall have any right by virtue of or by availing of any provision of the Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to the Indenture, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder, unless:
 
(a)          such Holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof, as herein provided;
 
(b)          Holders of at least 25% in aggregate principal amount of the Notes then outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder;
 
(c)          such Holders shall have offered (and if requested, provided) to the Trustee such security and/or indemnity satisfactory to the Trustee against any loss, liability or expense to be incurred therein or thereby;
 
(d)          the Trustee for 60 days after its receipt of such notice, request and offer of security and/or indemnity, shall have neglected or refused to institute any such action, suit or proceeding; and
 
(e)          no direction that, in the opinion of the Trustee, is inconsistent with such written request shall have been given to the Trustee by the Holders of a majority of the aggregate principal amount of the Notes then outstanding within such 60-day period pursuant to Section 6.10,
 
it being understood and intended, and being expressly covenanted by the taker and Holder of every Note with every other taker and Holder and the Trustee that no one or more Holders shall have any right in any manner whatever by virtue of or by availing of any provision of the Indenture to affect, disturb or prejudice the rights of any other Holder, (it being further understood that the Trustee shall not have an affirmative duty to ascertain whether or not any such direction is unduly prejudicial to any other Holder), or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under the Indenture, except

32
in the manner herein provided and for the equal, ratable and common benefit of all Holders (except as otherwise provided herein). For the protection and enforcement of this Section 6.07, each and every Holder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

Notwithstanding any other provision of the Indenture and any provision of any Note, the right of any Holder to receive payment or delivery, as the case may be, of (x) the principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, (y) accrued and unpaid interest on, and (z) the consideration due upon conversion of, such Note, on or after the respective due dates expressed or provided for in such Note or in the Indenture, or to institute suit for the enforcement of any such payment or delivery, as the case may be, on or after such respective dates against the Company shall not be impaired or affected without the consent of such Holder.
 
Section 6.08.  Proceedings by Trustee. In case of an Event of Default, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by the Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in the Indenture or in aid of the exercise of any power granted in the Indenture, or to enforce any other legal or equitable right vested in the Trustee by the Indenture or by law. The Trustee may maintain a proceeding even if it does not possess any Notes or does not produce any Notes in the proceeding.
 
Section 6.09.  Remedies Cumulative and Continuing. Except as provided in Section 3.07(e) of the Base Indenture, all powers and remedies given by this Article 6 to the Trustee or to the Holders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in the Indenture, and no delay or omission of the Trustee or of any Holder of any of the Notes to exercise any right or power accruing upon any Default or Event of Default shall impair any such right or power, or shall be construed to be a waiver of any such Default or Event of Default or any acquiescence therein; and, subject to the provisions of Section 6.07, every power and remedy given by this Article 6 or by law to the Trustee or to the Holders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders.
 
Section 6.10.  Direction of Proceedings and Waiver of Defaults by Majority of Holders.  The Holders of a majority of the aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 8.02 shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to Notes; provided, however, that (a) such direction shall not be in conflict with any rule of law or with this Supplemental Indenture, and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. The Trustee may refuse to follow any direction that it determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability (it being understood that the Trustee shall not have an affirmative duty to ascertain whether or not any such direction is unduly prejudicial to any other Holder), or if it is not provided with

33
security and/or indemnity to its satisfaction against loss, liability or expense. In addition, the Trustee will not be required to expend its own funds under any circumstances. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 8.02 may on behalf of the Holders of all of the Notes waive any past Default or Event of Default hereunder and its consequences except (i) a default in the payment of accrued and unpaid interest on, or the principal (including, if applicable, the Redemption Price or the Fundamental Change Repurchase Price) of, the Notes when due that has not been cured pursuant to the provisions of Section 6.02, (ii) a failure by the Company to pay or deliver, or cause to be delivered, as the case may be, the consideration due upon conversion of the Notes or (iii) a default in respect of a covenant or provision hereof which under Article 10 cannot be modified or amended without the consent of each Holder of an outstanding Note affected. Upon any such waiver the Company, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 6.10, said Default or Event of Default shall for all purposes of the Notes and the Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

Section 6.11.  Notice of Defaults and Events of Default. Section 11.03 of the Base Indenture shall be superseded by this Section 6.11, and any reference in the Base Indenture to Section 11.03 shall be deemed to refer instead to this Section 6.11. If a Default or Event of Default occurs and is continuing and is notified in writing to a Responsible Officer of the Trustee, the Trustee shall, within 90 days after the Responsible Officer of the Trustee receives such written notice or obtains such knowledge, send to all Holders (at the Company’s expense) as the names and addresses of such Holders appear upon the Register, notice of all Defaults known to a Responsible Officer, unless such Defaults shall have been cured or waived before the giving of such notice; provided that the Trustee shall not be deemed to have knowledge of any occurrence of a Default or an Event of Default unless a Responsible Officer of the Trustee has received written notice of such Default or Event of Default describing the circumstances of such, and identifying the circumstances constituting such Default or Event of Default and stating that such notification is a “notice of default.” Except in the case of a Default in the payment of the principal of (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable), or accrued and unpaid interest on, any of the Notes or a Default in the payment or delivery of the consideration due upon conversion, the Trustee shall be protected in withholding such notice if and so long as the Trustee (in its sole discretion) in good faith determines that the withholding of such notice is in the interests of the Holders.
 
Section 6.12.  Undertaking to Pay Costs. All parties to the Indenture agree, and each Holder of any Note by its acceptance thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or remedy under the Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this Section 6.12 (to the extent permitted by law) shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Notes at the time outstanding determined in accordance with Section 8.02, or to any

34
suit instituted by any Holder for the enforcement of the payment of the principal of or accrued and unpaid interest on any Note (including, but not limited to, the Redemption Price and the Fundamental Change Repurchase Price with respect to the Notes being repurchased as provided in this Supplemental Indenture) on or after the due date expressed or provided for in such Note or to any suit for the enforcement of the right to convert any Note in accordance with the provisions of Article 14.
 
ARTICLE 7
Concerning the Trustee
 
Section 7.01.  Monies and ADSs to Be Held in Trust. Section 11.01(g) of the Base Indenture shall be superseded by this Section 7.01, and any reference in the Base Indenture to Section 8.03 shall be deemed to refer instead to this Section 7.01. All monies and ADSs received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received. Money and ADSs held by the Trustee in trust or by the Paying Agent hereunder need not be segregated from other funds or property except to the extent required by law. Neither the Trustee nor the Paying Agent shall be under any liability for interest on any money or ADSs received by it hereunder.
 
Section 7.02.  Compensation and Expenses of Paying Agent, Conversion Agent and Registrar. The Paying Agent, the Conversion Agent and the Registrar shall be entitled to the compensation to be agreed upon in writing with the Company for all services rendered by it under the Indenture, and the Company agrees promptly to pay such compensation and to reimburse the Paying Agent, the Conversion Agent and the Registrar for its out-of-pocket expenses (including reasonable fees and expenses of counsel) incurred by it in connection with the services rendered by it under the Indenture. The Company hereby agrees to indemnify the Paying Agent, the Conversion Agent and the Registrar and their respective officers, directors, agents and employees and any successors thereto for, and to hold it harmless against, any loss, liability or expense (including reasonable fees and expenses of counsel) incurred without gross negligence or willful misconduct on its part, as determined by a final, non-appealable decision of a court of competent jurisdiction, arising out of or in connection with its acting as the Paying Agent, the Conversion Agent and the Registrar hereunder. The obligations of the Company under this paragraph shall survive the payment of the Notes, the termination of the Indenture and the resignation or removal of the Paying Agent, the Conversion Agent and the Registrar.
 
ARTICLE 8
Concerning the Holders
 
Section 8.01.  Who Are Deemed Absolute Owners. Section 8.03 of the Base Indenture shall be superseded by this Section 8.01, and any reference in the Base Indenture to Section 8.03 shall be deemed to refer instead to this Section 8.01 The Company, the Trustee, any Paying Agent, any Conversion Agent and any Registrar shall deem the Person in whose name a Note shall be registered upon the Register to be, and shall treat it as, the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or

35
other writing thereon made by any Person other than the Company or any Registrar) for the purpose of receiving payment of or on account of the principal of and (subject to Section 2.04) accrued and unpaid interest on such Note, for the purpose of conversion of such Note and for all other purposes under the Indenture; and neither the Company nor the Trustee nor any Paying Agent nor any Conversion Agent nor any Registrar shall be affected by any notice to the contrary.  The sole registered holder of a Global Note shall be the Depositary or its nominee. All such payments or deliveries so made to any Holder for the time being, or upon its order, shall be valid, and, to the extent of the sums or ADSs so paid or delivered, effectual to satisfy and discharge the liability for monies payable or ADSs deliverable upon any such Note. Notwithstanding anything to the contrary in the Indenture or the Notes following an Event of Default, any owner of a beneficial interest in a Global Note may directly enforce against the Company, without the consent, solicitation, proxy, authorization or any other action of the Depositary or any other Person, such owner’s right to exchange such beneficial interest for a Note in certificated form in accordance with the provisions of the Indenture.

Section 8.02.  Company-Owned Notes Disregarded. In determining whether the Holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent, waiver or other action under this Supplemental Indenture, Notes that are owned by the Company, by any Subsidiary thereof or by any Affiliate of the Company or any Subsidiary thereof shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or other action only Notes in respect of which a Responsible Officer is notified in writing shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as outstanding for the purposes of this Section 8.02 if the pledgee shall establish its right to so act with respect to such Notes and that the pledgee is not the Company, a Subsidiary thereof or an Affiliate of the Company or a Subsidiary thereof. Within five days of acquisition of the Notes by any of the above described persons or entities, the Company shall furnish to the Trustee promptly an Officer’s Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above described Persons; and, subject to Section 11.02 of the Base Indenture, the Trustee shall be entitled to accept such Officer’s Certificate as conclusive evidence of the facts therein set forth and of the fact that all Notes not listed therein are outstanding for the purpose of any such determination.
 
Section 8.03.  Revocation of Consents. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01 of the Base Indenture, of the taking of any action by the Holders of the percentage of the aggregate principal amount of the Notes specified in this Supplemental Indenture in connection with such action, any Holder of a Note that is shown by the evidence to be included in the Notes the Holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and upon proof of holding as provided in Section 8.02 of the Base Indenture, revoke such action so far as concerns such Note.
 
36
ARTICLE 9
[Intentionally Omitted]
 
ARTICLE 10
Supplemental Indentures
 
Section 10.01.  Supplemental Indentures Without Consent of Holders. Section 14.01 of the Base Indenture shall be supplemented by this Section 10.01, and any reference in the Base Indenture to Section 14.01 shall be deemed to refer to Section 14.01 of the Base Indenture as supplemented by this Section 10.01. The Company, when authorized by the resolutions of the Board of Directors, and the Trustee, at the Company’s expense and direction, may from time to time and at any time amend or enter into an indenture or indentures supplemental hereto for one or more of the following purposes without the consent of the Holders:
 
(a)          to cure any ambiguity, omission, defect or inconsistency;
 
(b)          to provide for the assumption by a Successor Company of the obligations of the Company under the Indenture pursuant to Article 11;
 
(c)          to add guarantees with respect to the Notes;
 
(d)          to secure the Notes;
 
(e)          to add to the covenants or Events of Default of the Company for the benefit of the Holders or surrender any right or power conferred upon the Company under the Indenture or the Notes;
 
(f)           upon the occurrence of any transaction or event described in Section 14.07(a), to (i) provide that the Notes are convertible into Reference Property, subject to Section 14.03, and (ii) effect the related changes to the terms of the Notes described under Section 14.07(a), in each case, in accordance with Section 14.07;
 
(g)          adjust the Conversion Rate as provided in this Supplemental Indenture;
 
(h)          provide for the appointment of and acceptance of appointment by a successor trustee or facilitate the administration of the trusts under this Supplemental Indenture by more than one trustee;
 
(i)           irrevocably elect a Settlement Method and/or a Specified Dollar Amount (or minimum Specified Dollar Amount), or eliminate our right to elect a Settlement Method;
 
(j)           comply with the rules of DTC;
 
(k)          to make any change that does not adversely affect the rights of any Holder in any material respect;
 
37
(l)           to conform the provisions of the Indenture or the Notes to the “Description of the Notes” section of the Prospectus Supplement, as certified by the Company in an Officer’s Certificate; or
 
(m)         to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act.
 
Upon the written request of the Company, the Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to, but may in its discretion, enter into any supplemental indenture that affects the Trustee’s own rights, duties, liabilities or immunities under the Indenture or otherwise.
 
Any supplemental indenture authorized by the provisions of this Section 10.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time outstanding, notwithstanding any of the provisions of Section 10.02.
 
Section 10.02.  Supplemental Indentures with Consent of Holders. Section 14.02(a) of the Base Indenture shall be superseded by this Section 10.02, and any reference in the Base Indenture to Section 14.02(a) shall be deemed to refer instead to this Section 10.02. With the consent (evidenced as provided in Article VIII of the Base Indenture, as amended and supplemented by Article 8 of this Supplemental Indenture) of the Holders of at least a majority of the aggregate principal amount of the Notes then outstanding (determined in accordance with Article VIII of the Base Indenture, as amended and supplemented by Article 8 of this Supplemental Indenture and including, without limitation, consents obtained in connection with a repurchase of, or tender or exchange offer for, Notes), the Company, when authorized by the resolutions of the Board of Directors, and the Trustee, at the Company’s expense, may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the consent of each Holder of an outstanding Note affected, no such supplemental indenture shall:
 
(a)          reduce the amount of Notes whose Holders must consent to an amendment;
 
(b)          reduce the rate of or extend the stated time for payment of interest on any Note;
 
(c)          reduce the principal of or extend the Maturity Date of any Note;
 
(d)          make any change that adversely affects the conversion rights of any Notes, except as required by the Indenture;
 
(e)          reduce the Redemption Price or the Fundamental Change Repurchase Price of any Note or amend or modify in any manner adverse to the Holders the Company’s obligation to make such payments, whether through an amendment or waiver of provisions in the covenants, definitions or otherwise;
 
(f)           make any Note payable in a currency other than U.S. dollars;
 
38
(g)          change the ranking of the Notes;
 
(h)          impair the right of any Holder to receive payment of principal and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Note;
 
(i)           change the Company’s obligation to pay Additional Amounts on any Note; or
 
(j)           make any change in this Article 10 that requires each Holder’s consent or in the waiver provisions in Section 6.03 or Section 6.10.
 
ARTICLE 11
Consolidation, Merger, Sale, Conveyance and Lease
 
Section 11.01.  Company May Consolidate, Etc. on Certain Terms. Section 6.04 of the Base Indenture shall be superseded by this Article 11, and any reference in the Base Indenture to Section 6.04 shall be deemed to refer instead to this Article 11. Subject to the provisions of Section 11.02, the Company shall not consolidate with, merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person, unless:
 
(a)          the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, the Cayman Islands, the British Virgin Islands, Bermuda, Singapore or Hong Kong and the Successor Company (if not the Company) shall expressly assume, by supplemental indenture all of the obligations of the Company under the Notes and the Indenture (including, for the avoidance of doubt, the obligation to pay Additional Amounts pursuant to Section 4.05); and
 
(b)          immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing under the Indenture.
 
For purposes of this Section 11.01, the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the Company to another Person.
 
Section 11.02.  Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or lease and upon the assumption by the Successor Company, by supplemental indenture, executed and delivered to the Trustee of the due and punctual payment of the principal of and accrued and unpaid interest on all of the Notes (including, for the avoidance of doubt, any Additional Amounts), the due and punctual delivery or payment, as the case may be, of any consideration due upon conversion of the Notes (including, for the avoidance of doubt, any Additional Amounts) and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Company, such Successor Company (if not the Company) shall succeed to and, except in the

39
case of a lease of all or substantially all of the Company’s properties and assets, shall be substituted for the Company, with the same effect as if it had been named herein as the party of the first part. Such Successor Company thereupon may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such Successor Company instead of the Company and subject to all the terms, conditions and limitations in the Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes that previously shall have been signed and delivered by any Officer of the Company to the Trustee for authentication, and any Notes that such Successor Company thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Notes so issued shall in all respects have the same legal rank and benefit under the Indenture as the Notes theretofore or thereafter issued in accordance with the terms of the Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger, sale, conveyance or transfer (but not in the case of a lease), upon compliance with this Article 11 the Person named as the “Company” in the first paragraph of this Supplemental Indenture (or any successor that shall thereafter have become such in the manner prescribed in this Article 11) may be dissolved, wound up and liquidated at any time thereafter and, except in the case of a lease, such Person shall be released from its liabilities as obligor and maker of the Notes and from its obligations under the Indenture and the Notes.
 
In case of any such consolidation, merger, sale, conveyance, transfer or lease, such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate.
 
Section 11.03.  Opinion of Counsel to Be Given to Trustee. No consolidation, merger, sale, conveyance, transfer or lease shall be effective unless the Trustee shall receive an Officer’s Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, conveyance, transfer or lease and any such assumption and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, complies with the provisions of this Article 11.
 
ARTICLE 12
No Subordination
 
Section 12.01.  Non-Subordination of Notes. Article XV of the Base Indenture shall not apply to the Notes.
 
ARTICLE 13
Intentionally Omitted
 
ARTICLE 14
Conversion of Notes
 
Section 14.01.  Conversion Privilege.
 
40
(a)          Subject to and upon compliance with the provisions of this Article 14, each Holder of a Note shall have the right, at such Holder’s option, to convert all or any portion (if the portion to be converted is US$1,000 principal amount or an integral multiple thereof) of such Note (i) subject to satisfaction of the conditions described in Section 14.01(b), at any time prior to the close of business on the Business Day immediately preceding June 15, 2026 under the circumstances and during the periods set forth in Section 14.01(b), and (ii) regardless of the conditions described in Section 14.01(b), on or after June 15, 2026 and prior to the close of business on the second Scheduled Trading Day immediately preceding the Maturity Date, in each case, at an initial conversion rate of 2.0964 ADSs (subject to adjustment as provided in this Article 14, the “Conversion Rate”) per US$1,000 principal amount of Notes (subject to, and in accordance with, the settlement provisions of Section 14.02, the “Conversion Obligation”).
 
(b)          (i) Prior to the close of business on the Business Day immediately preceding June 15, 2026, a Holder may surrender all or any portion of its Notes for conversion at any time during the five Business Day period immediately after any ten consecutive Trading Day period (the “Measurement Period”) in which the Trading Price per US$1,000 principal amount of Notes, as determined following a written request by a Holder of Notes in accordance with this subsection (b)(i), for each Trading Day of the Measurement Period was less than 98% of the product of the Last Reported Sale Price of the ADSs on each such Trading Day and the Conversion Rate on each such Trading Day. The Trading Prices shall be determined by the Bid Solicitation Agent pursuant to this subsection (b)(i) and the definition of Trading Price set forth in this Supplemental Indenture. The Company shall provide written notice to the Bid Solicitation Agent (if other than the Company) of the three independent nationally recognized securities dealers selected by the Company pursuant to the definition of Trading Price, along with appropriate contact information for each. The Bid Solicitation Agent (if other than the Company) shall have no obligation to determine the Trading Price per US$1,000 principal amount of Notes unless the Company has requested such determination in writing, and the Company shall have no obligation to make such request (or, if the Company is acting as Bid Solicitation Agent, the Company shall have no obligation to determine the Trading Price per US$1,000 principal amount of Notes) unless a Holder of at least US$2,000,000 aggregate principal amount of Notes provides the Company with reasonable evidence that the Trading Price per US$1,000 principal amount of Notes on any Trading Day would be less than 98% of the product of the Last Reported Sale Price of the ADSs on such Trading Day and the Conversion Rate on such Trading Day, at which time the Company shall instruct the Bid Solicitation Agent (if other than the Company) in writing to determine, or if the Company is acting as Bid Solicitation Agent, the Company shall determine, the Trading Price per US$1,000 principal amount of Notes beginning on the next Trading Day and on each successive Trading Day until the Trading Price per US$1,000 principal amount of Notes is greater than or equal to 98% of the product of the Last Reported Sale Price of the ADSs and the Conversion Rate. If (x) the Company is not acting as Bid Solicitation Agent, and the Company does not, when the Company is required to, instruct the Bid Solicitation Agent to determine the Trading Price per US$1,000 principal amount of Notes when obligated as provided in the preceding sentence, or if the Company instructs the Bid Solicitation Agent in writing to obtain bids and the Bid Solicitation Agent fails to make such determination, or (y) the Company is acting as Bid Solicitation Agent and the Company fails to make such determination when obligated as provided in the preceding sentence, then, in either case, the Trading Price per US$1,000 principal amount of Notes shall be deemed to be less than 98% of the product of the Last Reported Sale Price of the ADSs and the Conversion Rate on each Trading Day of such

41
failure. If the Trading Price condition set forth above has been met, the Company shall so notify the Holders, the Trustee and the Conversion Agent (if other than the Trustee) in writing. If, at any time after the Trading Price condition set forth above has been met, the Trading Price per US$1,000 principal amount of Notes is greater than or equal to 98% of the product of the Last Reported Sale Price of the ADSs and the Conversion Rate for such date, the Company shall so notify in writing the Holders, the Trustee and the Conversion Agent (if other than the Trustee), and thereafter neither the Company nor the Bid Solicitation Agent (of other than the Company) shall be required to solicit bids again until a new Holder request is made as provided in this Section 14.01.
 
(ii)          If, prior to the close of business on the Business Day immediately preceding June 15, 2026, the Company elects to:
 
(A)         issue to all or substantially all holders of the Class A Ordinary Shares (directly or in the form of ADSs) any rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or purchase Class A Ordinary Shares (directly or in the form of ADSs) at a price per share that is less than the average of the Last Reported Sale Prices of the ADSs, for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of such issuance; or
 
(B)          distribute to all or substantially all holders of the Class A Ordinary Shares (directly or in the form of ADSs) the Company’s assets, securities or rights to purchase securities of the Company, which distribution has a per share value, as determined by the Board of Directors, exceeding 10% of the Last Reported Sale Price of the ADSs on the Trading Day preceding the date of announcement for such distribution,
 
then, in either case, the Company shall notify all Holders of the Notes, the Trustee and the Conversion Agent (if other than the Trustee) in writing at least 44 Scheduled Trading Days prior to the Ex-Dividend Date for such issuance or distribution; provided that if the Company elects Physical Settlement for conversions that occur during the Distribution Conversion Period the Company may provide not less than 10 Business Days’ nor more than 30 Business Days’ notice before such Ex-Dividend Date. Once the Company has given such notice, a Holder may surrender all or any portion of its Notes for conversion at any time from, and including, the date the Company provides such notice until the earlier of (1) the close of business on the second Business Day immediately preceding the Ex-Dividend Date for such issuance or distribution and (2) the Company’s announcement that such issuance or distribution will not take place (such period, the “Distribution Conversion Period”), in each case, even if the Notes are not otherwise convertible at such time.
 
(iii)         If a transaction or event that constitutes a Fundamental Change or a Make-Whole Fundamental Change occurs prior to the close of business on the Business Day immediately preceding June 15, 2026, regardless of whether a Holder has the right to require the Company to repurchase the Notes pursuant to Section 15.02, or if the Company is a party to a consolidation, merger, binding share exchange, or transfer or

42
lease of all or substantially all of its assets that occurs prior to the close of business on the Business Day immediately preceding June 15, 2026, in each case, pursuant to which the ADSs would be converted into cash, securities or other assets, all or any portion of a Holder’s Notes may be surrendered for conversion at any time from or after the actual effective date of such transaction until 35 Business Days after the actual effective date of such transaction or, if such transaction also constitutes a Fundamental Change (other than an Exempted Fundamental Change), until the related Fundamental Change Repurchase Date. The Company shall notify Holders, the Trustee and the Conversion Agent (if other than the Trustee) in writing as promptly as practicable following the date the Company publicly announces such transaction.
 
(iv)         Prior to the close of business on the Business Day immediately preceding June 15, 2026, a Holder may surrender all or any portion of its Notes for conversion at any time during any calendar quarter commencing after the calendar quarter ending on December 31, 2021 (and only during such calendar quarter), if the Last Reported Sale Price of the ADSs for at least 20 Trading Days (whether or not consecutive) during the period of 30 consecutive Trading Days ending on, and including, the last Trading Day of the immediately preceding calendar quarter is greater than or equal to 130% of the Conversion Price on each applicable Trading Day.
 
(v)          If the Company calls any Notes for an Optional Redemption, a Cleanup Redemption, or a Tax Redemption pursuant to Article 16 prior to the close of business on the Business Day immediately preceding June 15, 2026, then a Holder may surrender for conversion all or any portion of such Notes called for redemption at any time during the related Redemption Period, even if the Notes are not otherwise convertible at such time.  After that time, the right to convert shall expire under this clause (v), unless the Company defaults in the payment of the Redemption Price, in which case a Holder of Notes may convert all or any portion of such Notes called for redemption until the Redemption Price has been paid or duly provided for.
 
Section 14.02.  Conversion Procedure; Settlement Upon Conversion.
 
(a)          Subject to this Section 14.02, Section 14.03(b) and Section 14.07(a), upon conversion of any Note, the Company shall pay or deliver, as the case may be, to the converting Holder, in respect of each US$1,000 principal amount of Notes being converted, cash (“Cash Settlement”), ADSs, together with cash, if applicable, in lieu of delivering any fractional ADSs in accordance with subsection (j) of this Section 14.02 (“Physical Settlement”) or a combination of cash and ADSs, together with cash, if applicable, in lieu of delivering any fractional ADS in accordance with subsection (j) of this Section 14.02 (“Combination Settlement”), at its election, as set forth in this Section 14.02.
 
(i)          All conversions for which the relevant Conversion Date occurs after the Company’s issuance of a Redemption Notice with respect to the Notes and prior to the related Redemption Date, and all conversions for which the relevant Conversion Date occurs on or after June 15, 2026 shall be settled using the same Settlement Method.
 
43
(ii)          Except for any conversions for which the relevant Conversion Date occurs after the Company’s issuance of a Redemption Notice with respect to the Notes but prior to the related Redemption Date, and any conversions for which the relevant Conversion Date occurs on or after June 15, 2026, the Company shall use the same Settlement Method for all conversions with the same Conversion Date, but the Company shall not have any obligation to use the same Settlement Method with respect to conversions with different Conversion Dates.
 
(iii)         If, in respect of any Conversion Date (or the period described in the third immediately succeeding set of parentheses, as the case may be), the Company elects a Settlement Method, the Company shall deliver a written notice (the “Settlement Notice”) of the relevant Settlement Method in respect of such Conversion Date (or such period, as the case may be) to converting Holders, the Trustee and the Conversion Agent (if other than the Trustee) no later than the close of business on the Trading Day immediately following the relevant Conversion Date (or, in the case of any conversions for which the relevant Conversion Date occurs during the related Redemption Period, in such Redemption Notice or on or after June 15, 2026, no later than June 15, 2026). If the Company does not elect a Settlement Method prior to the deadline set forth in the immediately preceding sentence, the Company shall no longer have the right to elect Cash Settlement or Physical Settlement for such conversion or during such period and the Company shall be deemed to have elected Combination Settlement in respect of its Conversion Obligation, and the Specified Dollar Amount per US$1,000 principal amount of Notes shall be equal to US$1,000. Such Settlement Notice shall specify the relevant Settlement Method and in the case of an election of Combination Settlement, the relevant Settlement Notice shall indicate the Specified Dollar Amount per US$1,000 principal amount of Notes. If the Company delivers a Settlement Notice electing Combination Settlement in respect of its Conversion Obligation but does not indicate a Specified Dollar Amount per US$1,000 principal amount of Notes in such Settlement Notice, the Specified Dollar Amount per US$1,000 principal amount of Notes shall be deemed to be US$1,000. By written notice to the Holders, the Trustee and the Conversion Agent, the Company may, prior to June 15, 2026, irrevocably elect a Settlement Method and/or a Specified Dollar Amount (or minimum Specified Dollar Amount), or eliminate the Company’s right to elect a Settlement Method, to apply all conversions for which the relevant Conversion Date occurs subsequent to the date of delivery of such notice; provided that any such election that is made during a Redemption Period or a Distribution Conversion Period shall not apply to any conversions of Notes called for redemption with Conversion Dates that occur during such Redemption Period or conversions during such Distribution Conversion Period (as applicable).
 
(iv)         The cash, ADSs or a combination of cash and ADSs, as applicable, in respect of any conversion of Notes (the “Settlement Amount”) shall be computed as follows:
 
(A)          if the Company elects to satisfy its Conversion Obligation in respect of such conversion by Physical Settlement, the Company shall deliver to the converting Holder in respect of each US$1,000 principal amount of Notes

44
being converted a number of ADSs equal to the Conversion Rate in effect immediately after the close of business on the relevant Conversion Date;
 
(B)          if the Company elects to satisfy its Conversion Obligation in respect of such conversion by Cash Settlement, the Company shall pay to the converting Holder in respect of each US$1,000 principal amount of Notes being converted cash in an amount equal to the sum of the Daily Conversion Values for each of the 40 consecutive Trading Days during the related Observation Period; and
 
(C)          if the Company elects (or is deemed to have elected) to satisfy its Conversion Obligation in respect of such conversion by Combination Settlement, the Company shall pay or deliver, as the case may be, in respect of each US$1,000 principal amount of Notes being converted, a Settlement Amount equal to the sum of the Daily Settlement Amounts for each of the 40 consecutive Trading Days during the related Observation Period.
 
(v)          The Daily Settlement Amounts (if applicable) and the Daily Conversion Values (if applicable) shall be determined by the Company promptly following the last day of the Observation Period. Promptly after such determination of the Daily Settlement Amounts or the Daily Conversion Values, as the case may be, and the amount of cash payable in lieu of delivering any fractional ADS, the Company shall notify the Trustee and the Conversion Agent (if other than the Trustee) in writing of the Daily Settlement Amounts or the Daily Conversion Values, as the case may be, and the amount of cash payable in lieu of delivering fractional ADSs. The Trustee and the Conversion Agent (if other than the Trustee) shall have no responsibility for any such determination.
 
(b)          Subject to Section 14.02(e), before any Holder of a Note shall be entitled to convert a Note as set forth above, such Holder shall (i) in the case of a Global Note, comply with the procedures of the Depositary in effect at that time and, if required, pay funds equal to interest payable on the next Interest Payment Date to which such Holder is not entitled as set forth in Section 14.02(h), and if required, pay all transfer or similar taxes, if any and (ii) in the case of a Physical Note (1) complete, manually sign and deliver a duly completed irrevocable notice to the Conversion Agent as set forth in the Form of Notice of Conversion (or a facsimile, PDF or other electronic transmission thereof) (a “Notice of Conversion”) at the office of the Conversion Agent and state in writing therein the principal amount of Notes to be converted and the name or names (with addresses) in which such Holder wishes the certificate or certificates for any ADSs to be delivered upon settlement of the Conversion Obligation to be registered, (2) surrender such Notes, duly endorsed to the Company or in blank (and accompanied by appropriate endorsement and transfer documents), at the office of the Conversion Agent, (3) if required, furnish appropriate endorsements and transfer documents and (4) if required, pay funds equal to interest payable on the next Interest Payment Date to which such Holder is not entitled as set forth in Section 14.02(h), and if required, pay all transfer or similar taxes, if any. The Trustee (and if different, the Conversion Agent) shall notify the Company of any conversion pursuant to this Article 14 on the Conversion Date, or promptly following instructions for such conversion. No Notice of Conversion with respect to any Notes may be delivered, and no Notes may be surrendered for conversion, by a Holder thereof if such Holder has also delivered a Fundamental

45
Change Repurchase Notice to the Company in respect of such Notes and has not validly withdrawn such Fundamental Change Repurchase Notice in accordance with Section 15.03.
 
If more than one Note shall be surrendered for conversion at one time by the same Holder, the Conversion Obligation with respect to such Notes shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted thereby) so surrendered.
 
(c)          A Note shall be deemed to have been converted immediately prior to the close of business on the date (the “Conversion Date”) that the Holder has complied with the requirements set forth in subsection (b) above. Except as set forth in Section 14.03(b) and Section 14.07(a), the Company shall pay or deliver, as the case may be, the consideration due in respect of the Conversion Obligation on the third Business Day immediately following the relevant Conversion Date, if the Company elects Physical Settlement, or on the third Business Day immediately following the last Trading Day of the relevant Observation Period, in the case of any other Settlement Method; provided that, with respect to any Conversion Date occurring during a Redemption Period, the Company shall settle any such conversion for which Physical Settlement is applicable on the relevant Redemption Date; provided further that, notwithstanding the foregoing, with respect to any Conversion Date occurring after the Regular Record Date immediately preceding the Maturity Date, the Company shall settle any such conversion for which Physical Settlement is applicable on the Maturity Date. If any ADSs are due to a converting Holder, the Company shall issue or cause to be issued, and deliver (if applicable) to such Holder, or such Holder’s nominee or nominees, the full number of ADSs to which such Holder shall be entitled, in book-entry format through the Depositary, in satisfaction of the Company’s Conversion Obligation.
 
(d)          In case any certificated Note shall be surrendered for partial conversion, the Company shall execute and the Trustee shall authenticate and deliver to or upon the written order of the Holder of the Note so surrendered a new Note or Notes in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Note, without payment of any service charge by the converting Holder but, if required by the Company or Trustee, with payment of a sum sufficient to cover any documentary, stamp or similar issue or transfer tax or similar governmental charge required by law or that may be imposed in connection therewith as a result of the name of the Holder of the new Notes issued upon such conversion being different from the name of the Holder of the old Notes surrendered for such conversion.
 
(e)          If a Holder submits a Note for conversion, the Company shall pay any documentary, stamp, issue, transfer or similar tax due on the delivery of any ADSs upon conversion of the Notes (or the issuance of the underlying Class A Ordinary Shares, unless the tax is due because the Holder requests such ADSs (or the Class A Ordinary Shares) to be issued in a name other than the Holder’s name, in which case the Holder shall pay that tax. The Company shall be responsible for the ADS Depositary’s fees for the issuance of the ADSs.
 
(f)           Except as provided in Section 14.04, no adjustment shall be made for dividends on any ADSs issued upon the conversion of any Note as provided in this Article 14.
 
46
(g)          Upon the conversion of an interest in a Global Note, the Trustee, or the Custodian at the direction of the Trustee, shall make a notation on such Global Note as to the reduction in the principal amount represented thereby. The Company shall notify the Trustee in writing of any conversion of Notes effected through any Conversion Agent other than the Trustee.
 
(h)          Upon conversion, a Holder shall not receive any separate cash payment for accrued and unpaid interest, if any, except as set forth below. The Company’s settlement of the full Conversion Obligation shall be deemed to satisfy in full its obligation to pay the principal amount of the Note and accrued and unpaid interest, if any, to, but not including, the relevant Conversion Date. As a result, accrued and unpaid interest, if any, to, but not including, the relevant Conversion Date shall be deemed to be paid in full rather than cancelled, extinguished or forfeited. Upon a conversion of Notes into a combination of cash and ADSs, accrued and unpaid interest will be deemed to be paid first out of the cash paid upon such conversion.  Notwithstanding the foregoing, if Notes are converted after the close of business on a Regular Record Date and prior to the open of business on the corresponding Interest Payment Date, Holders of such Notes as of the close of business on such Regular Record Date will receive the full amount of interest payable on such Notes on the corresponding Interest Payment Date notwithstanding the conversion. However, Notes surrendered for conversion during the period from the close of business on any Regular Record Date to the open of business on the immediately following Interest Payment Date must be accompanied by an amount in U.S. dollars equal to the amount of interest payable on the Notes so converted (regardless of whether the converting Holder was the holder of record on the corresponding Regular Record Date); provided that no such payment shall be required (1) for conversions following the Regular Record Date immediately preceding the Maturity Date; (2) if the Company has specified a Redemption Date that is after a Regular Record Date and on or prior to the second Business Day immediately succeeding the corresponding Interest Payment Date (or, if such Interest Payment Date is not a Business Day, the third Business Day immediately succeeding such Interest Payment Date); (3) if the Company has specified a Fundamental Change Repurchase Date that is after a Regular Record Date and on or prior to the Business Day immediately succeeding the corresponding Interest Payment Date (or, if such Interest Payment Date is not a Business Day, the second Business Day immediately succeeding such Interest Payment Date); or (4) to the extent of any Defaulted Amounts, if any Defaulted Amounts exists at the time of conversion with respect to such Note. Therefore, for the avoidance of doubt, the Holder of the Notes on the Regular Record Date immediately preceding the Maturity Date, any Fundamental Change Repurchase Date or Redemption Date, in each case, will receive the full interest payment due on the Maturity Date or other applicable Interest Payment Date in cash, regardless of whether their Notes have been converted following such Regular Record Date. Neither the Trustee nor the Conversion Agent (if other than the Trustee) will have any duty to determine or verify determination by the Company of whether any of the conditions to conversion have been satisfied.
 
(i)           The Person in whose name any ADSs shall be issuable upon conversion shall become the holder of record of such ADSs only as of the close of business on the date the ADS Depositary registers such ADSs upon issuance; provided, however, that the Company shall endeavor to treat such Person as the holder of record of such ADSs for purposes of dividends and distributions in respect of such ADSs as of the close of business on the relevant Conversion Date (if the Company elects to satisfy the related Conversion Obligation by Physical Settlement) or

47
the last Trading Day of the relevant Observation Period (if the Company elects to satisfy the related Conversion Obligation by Combination Settlement), as the case may be. Upon a conversion of Notes, such Person shall no longer be a Holder of such Notes surrendered for conversion.
 
(j)           The Company shall not issue any fractional ADSs upon conversion of the Notes and shall instead pay cash in lieu of delivering any fractional ADS issuable upon conversion based on the Daily VWAP for the relevant Conversion Date (in the case of Physical Settlement) or based on the Daily VWAP for the last Trading Day of the relevant Observation Period (in the case of Combination Settlement). For each Note surrendered for conversion, if the Company has elected (or is deemed to have elected) Combination Settlement, the full number of ADSs that shall be issued upon conversion thereof shall be computed on the basis of the aggregate Daily Settlement Amounts for the relevant Observation Period and any fractional shares remaining after such computation shall be paid in cash.
 
Section 14.03.  Increased Conversion Rate Applicable to Certain Notes Surrendered in Connection with Make-Whole Fundamental Changes. (a) If a Make-Whole Fundamental Change occurs prior to the Maturity Date and a Holder elects to convert its Notes in connection with such Make-Whole Fundamental Change, the Company shall, under the circumstances described below, increase the Conversion Rate for the Notes so surrendered for conversion by a number of additional ADSs (the “Additional ADSs”), as described below. A conversion of Notes shall be deemed for these purposes to be “in connection with” such Make-Whole Fundamental Change if the relevant Notice of Conversion is received by the Conversion Agent from, and including, the Effective Date of the Make-Whole Fundamental Change up to, and including, the second Business Day immediately prior to the related Fundamental Change Repurchase Date (or, in the case of a Make-Whole Fundamental Change that would have been a Fundamental Change but for the proviso in clause (b) of the definition thereof or that constitutes an Exempted Fundamental Change, the 35th Business Day immediately following the Effective Date of such Make-Whole Fundamental Change). The Company shall provide written notification to Holders, the Trustee and the Conversion Agent (if other than the Trustee) of the Effective Date of any Make-Whole Fundamental Change and publish a notice on the Company’s website or through such other public medium as the Company may use at that time announcing such Effective Date no later than five Business Days after such Effective Date.
 
(b)          Upon surrender of Notes for conversion in connection with a Make-Whole Fundamental Change, the Company shall, at its option, satisfy the related Conversion Obligation by Physical Settlement, Cash Settlement or Combination Settlement in accordance with Section 14.02; provided, however, that if, at the effective time of a Make-Whole Fundamental Change described in clause (b) of the definition of Fundamental Change, the Reference Property following such Make-Whole Fundamental Change is composed entirely of cash, for any conversion of Notes following the Effective Date of such Make-Whole Fundamental Change, the Conversion Obligation shall be calculated based solely on the ADS Price for the transaction and shall be deemed to be an amount of cash per US$1,000 principal amount of converted Notes equal to the Conversion Rate (including any adjustment for Additional ADSs), multiplied by such ADS Price. In such event, the Conversion Obligation shall be determined and paid to Holders in cash on the third Business Day following the Conversion Date.
 
48
(c)          The number of Additional ADSs, if any, by which the Conversion Rate shall be increased shall be determined by reference to the table below, based on the date on which the Make-Whole Fundamental Change occurs or becomes effective (the “Effective Date”) and the price (the “ADS Price”) paid (or deemed to be paid) per ADS in the Make-Whole Fundamental Change. If the holders of the ADSs receive in exchange for their ADSs only cash in a Make-Whole Fundamental Change described in clause (b) of the definition of Fundamental Change, the ADS Price shall be the cash amount paid per ADS. Otherwise, the ADS Price shall be the average of the Last Reported Sale Prices of the ADSs over the five Trading Day period ending on, and including, the Trading Day immediately preceding the Effective Date of the Make-Whole Fundamental Change.
 
(d)          The ADS Prices set forth in the column headings of the table below shall be adjusted as of any date on which the Conversion Rate of the Notes is otherwise adjusted. The adjusted ADS Prices shall equal the ADS Prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to such adjustment giving rise to the ADS Price adjustment and the denominator of which is the Conversion Rate as so adjusted. The number of Additional ADSs set forth in the table below shall be adjusted in the same manner and at the same time as the Conversion Rate as set forth in Section 14.04.
 
(e)          The following table sets forth the number of Additional ADSs by which the Conversion Rate shall be increased per US$1,000 principal amount of Notes pursuant to this Section 14.03 for each ADS Price and Effective Date set forth below:
 
 
ADS Price
 
US$318
  
US$350
  
US$400
  
US$477
  
US$500
  
US$600
  
US$700
  
US$800
  
US$1,000
  
US$1,250
  
US$1,500
  
US$2,000
  
Effective Date
                        
September 14, 2021
1.0482
0.8725
0.6661
0.4539
0.4073
0.2610
0.1730
0.1175
0.0568
0.0236
0.0094
0.0004
September 15, 2022
1.0482
0.8514
0.6367
0.4196
0.3726
0.2282
0.1445
0.0937
0.0410
0.0147
0.0047
0.0000
September 15, 2023
1.0482
0.8257
0.6001
0.3771
0.3300
0.1891
0.1117
0.0674
0.0253
0.0070
0.0013
0.0000
September 15, 2024
1.0482
0.7980
0.5555
0.3232
0.2759
0.1411
0.0740
0.0395
0.0112
0.0017
0.0000
0.0000
September 15, 2025
1.0482
0.7643
0.4909
0.2418
0.1950
0.0764
0.0304
0.0122
0.0015
0.0000
0.0000
0.0000
September 15, 2026
1.0482
0.7607
0.4036
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000

The exact ADS Prices and Effective Dates may not be set forth in the table above, in which case:
 
(i)           if the ADS Price is between two ADS Prices in the table above or the Effective Date is between two Effective Dates in the table, the number of Additional ADSs shall be determined by a straight-line interpolation between the number of Additional ADSs set forth for the higher and lower ADS Prices and the earlier and later Effective Dates, as applicable, based on a 365-day year;
 
(ii)          if the ADS Price is greater than US$2,000 per ADS (subject to adjustment in the same manner as the ADS Prices set forth in the column headings of the table above pursuant to subsection (d) above), no Additional ADSs shall be added to the Conversion Rate; and
 
(iii)         if the ADS Price is less than US$318 per ADS (subject to adjustment in the same manner as the ADS Prices set forth in the column headings of the table above
49
pursuant to subsection (d) above), no Additional ADSs shall be added to the Conversion Rate.
 
Notwithstanding the foregoing, in no event shall the Conversion Rate per US$1,000 principal amount of Notes exceed 3.1446 ADSs, subject to adjustment in the same manner as the Conversion Rate pursuant to Section 14.04.
 
(f)           Nothing in this Section 14.03 shall prevent an adjustment to the Conversion Rate pursuant to Section 14.04.
 
(g)          If the Holder elects to convert its Notes called for redemption in connection with an Optional Redemption, a Cleanup Redemption or a Tax Redemption pursuant to Article 16, the Conversion Rate shall be increased by a number of Additional ADSs determined pursuant to this Section 14.03(g). The Company shall settle conversions of Notes as described in Section 14.02 and, for the avoidance of doubt, pay Additional Amounts, if any, with respect to any such conversion.
 
A conversion of Notes called for redemption shall be deemed to be “in connection with” an Optional Redemption, a Cleanup Redemption or a Tax Redemption, if the relevant Notice of Conversion is received by the Conversion Agent during the relevant Redemption Period. In the event that a conversion of the Notes called for redemption in connection with an Optional Redemption, a Cleanup Redemption or a Tax Redemption pursuant to Article 16 would also be deemed to be in connection with a Make-Whole Fundamental Change, a Holder of the Notes to be converted shall be entitled to a single increase to the Conversion Rate with respect to the first to occur of the applicable Redemption Notice or the Effective Date of the applicable Make-Whole Fundamental Change, and the later event shall be deemed not to have occurred for purposes of this Section 14.03(g) and the adjustments described under Section 14.03(a). For the avoidance of doubt, if the Company issues a Redemption Notice as set forth under Article 16, the Company shall increase the Conversion Rate hereunder during the related Redemption Period only with respect to conversions of Notes called for redemption (or deemed to be called for redemption). Accordingly, if the Company elects fewer than all of the outstanding Notes as described under Article 16, Holders will not be entitled to convert the Notes that are neither called for redemption nor deemed to be called for redemption on account of the Redemption Notice and will not be entitled to an increased Conversion Rate for conversions of such Notes on account of the Redemption Notice during the related Redemption Period, even if such Notes are otherwise convertible.
 
The number of Additional ADSs by which the Conversion Rate will be increased in the event of conversions of Notes called for redemption in connection with an Optional Redemption, a Cleanup Redemption or a Tax Redemption pursuant to Article 16 will be determined by reference to the table in clause (e) above based on the Redemption Reference Date and the Redemption Reference Price (each as defined below), but determined for purposes of this Section 14.03(g) as if (x) the Holder had elected to convert its Notes called for redemption in connection with a Make-Whole Fundamental Change, (y) the applicable “Redemption Reference Date” were the “Effective Date” as specified in clause (c) above and (z) the applicable “Redemption Reference Price” were the “ADS Price” as specified in clause (c) above. For this purpose, the date on which the Company delivers a Redemption Notice is the “Redemption

50
Reference Date” and the average of the Last Reported Sale Prices of the ADSs over the five Trading Day immediately preceding, the date the Company delivers such Redemption Notice is the “Redemption Reference Price.”
 
Section 14.04.  Adjustment of Conversion Rate. If the number of Class A Ordinary Shares represented by the ADSs is changed, after the date of this Supplemental Indenture, for any reason other than one or more of the events described in this Section 14.04, the Company shall make an appropriate adjustment to the Conversion Rate such that the number of Class A Ordinary Shares represented by the ADSs upon which conversion of the Notes is based remains the same.
 
Notwithstanding the adjustment provisions described in this Section 14.04, if the Company distributes to holders of the Class A Ordinary Shares any cash, rights, options, warrants, shares of Capital Stock or similar equity interest, evidences of indebtedness or other assets or property of the Company (but excluding Expiring Rights) and a corresponding distribution is not made to holders of the ADSs, but, instead, the ADSs shall represent, in addition to Class A Ordinary Shares, such cash, rights, options, warrants, shares of Capital Stock or similar equity interest, evidences of indebtedness or other assets or property of the Company, then an adjustment to the Conversion Rate described in this Section 14.04 shall not be made until and unless a corresponding distribution (if any) is made to holders of the ADSs, and such adjustment to the Conversion Rate shall be based on the distribution made to the holders of the ADSs and not on the distribution made to the holders of the Class A Ordinary Shares. However, in the event that the Company issues or distributes to all holders of the Class A Ordinary Shares any Expiring Rights, notwithstanding the immediately preceding sentence, the Company shall adjust the Conversion Rate pursuant to Section 14.04(b) (in the case of Expiring Rights described in clause (b) below entitling holders of the Class A Ordinary Shares for a period of not more than 45 calendar days after the announcement date of such issuance to subscribe for or purchase Class A Ordinary Shares or ADSs) or Section 14.04(c) (in the case of all other Expiring Rights).
 
For the avoidance of doubt, if any event described in this Section 14.04 results in a change to the number of Class A Ordinary Shares represented by the ADSs, then such a change shall be deemed to satisfy the Company’s obligation to effect the relevant adjustment to the Conversion Rate on account of such an event to the extent to which such change reflects what a corresponding change to the Conversion Rate would have been on account of such event.
 
The Conversion Rate shall be adjusted from time to time by the Company if any of the following events occurs, except that the Company shall not make any adjustments to the Conversion Rate if Holders of the Notes participate (other than in the case of a (x) share split or share combination or (y) a tender or exchange offer), at the same time and upon the same terms as holders of the ADSs and solely as a result of holding the Notes, in any of the transactions described in this Section 14.04, without having to convert their Notes, as if they held a number of ADSs equal to the Conversion Rate, multiplied by the principal amount (expressed in thousands) of Notes held by such Holder. Neither the Trustee nor the Conversion Agent shall have any responsibility to monitor the accuracy of any calculation of adjustment of the Conversion Rate and the same shall be conclusive and binding on the Holders, absent manifest error.
 
51
(a)          If the Company exclusively issues Class A Ordinary Shares as a dividend or distribution on the Class A Ordinary Shares, or if the Company effects a share split or share combination, the Conversion Rate shall be adjusted based on the following formula:
 
 
where,
 
CR0 =           the Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for the ADSs of such dividend or distribution, or immediately prior to the open of business on the Effective Date of such share split or share combination, as applicable;
 
CR1 =           the Conversion Rate in effect after the open of business on such Ex-Dividend Date or Effective Date, as applicable;
 
OS0 =           the number of Class A Ordinary Shares issued and outstanding immediately prior to the open of business on such Ex-Dividend Date or Effective Date, as applicable (before giving effect to any such dividend, distribution, split or combination) ; and
 
OS1 =           the number of Class A Ordinary Shares issued and outstanding immediately after giving effect to such dividend, distribution, share split or share combination.
 
Any adjustment made under this Section 14.04(a) shall become effective immediately after the open of business on the Ex-Dividend Date for the ADSs for such dividend or distribution, or immediately after the open of business on the Effective Date for such share split or share combination, as applicable. If any dividend or distribution of the type described in this Section 14.04(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
 
(b)          If the Company issues to all or substantially all holders of the Class A Ordinary Shares (directly or in the form of ADSs) (other than in connection with a stockholder rights plan) any rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or purchase Class A Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share that is less than the average of the Last Reported Sale Prices of the Class A Ordinary Shares or the ADSs, as the case may be (divided by, in the case of the ADSs, the number of Class A Ordinary Shares then represented by one ADS), for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of such issuance, the Conversion Rate shall be increased based on the following formula:
 
 
52
where,
 
CR0 =           the Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for the ADSs for such issuance;
 
CR1 =           the Conversion Rate in effect immediately after the open of business on such Ex-Dividend Date;
 
OS0 =           the number of Class A Ordinary Shares issued and outstanding immediately prior to the open of business on such Ex-Dividend Date;
 
X           =           the total number of Class A Ordinary Shares (directly or in the form of ADSs) deliverable pursuant to such rights, options or warrants; and
 
Y           =           the number of Class A Ordinary Shares equal to (i) the aggregate price payable to exercise such rights, options or warrants, divided by (ii) the quotient of (a) the average of the Last Reported Sale Prices of the ADSs over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of the issuance of such rights, options or warrants divided by (b) the number of Class A Ordinary Shares then represented by one ADS.
 
Any increase made under this Section 14.04(b) shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the open of business on the Ex-Dividend Date for the ADSs for such issuance. To the extent that Class A Ordinary Shares or ADSs are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or warrants been made on the basis of delivery of only the number of Class A Ordinary Shares actually delivered (directly or in the form of ADSs). To the extent such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect had the adjustment been made on the basis of only the issuance, if any, actually made.
 
For purposes of this Section 14.04(b) and Section 14.01(b)(ii)(A), in determining whether any rights, options or warrants entitle the holders to subscribe for or purchase Class A Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share that is less than such average of the Last Reported Sale Prices of the Class A Ordinary Shares or the ADSs, as the case may be (divided by, in the case of the ADSs, the number of Class A Ordinary Shares then represented by one ADS), for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement for such issuance, and in determining the aggregate offering price of such Class A Ordinary Shares or ADSs, there shall be taken into account any consideration received by the Company for such rights, options or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board of Directors.
 
(c)          If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders of the Class A Ordinary Shares (directly or in

53
the form of ADSs), excluding (i) dividends, distributions or issuances as to which an adjustment was effected pursuant to Section 14.04(a) or Section 14.04(b), (ii) dividends or distributions paid exclusively in cash as to which an adjustment was effected pursuant to Section 14.04(d), and (iii) Spin-Offs as to which the provisions set forth below in this Section 14.04(c) shall apply (any of such shares of Capital Stock, evidences of indebtedness, other assets or property or rights, options or warrants to acquire Capital Stock or other securities of the Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:
 
 
where,
 
CR0 = the Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for such distribution;
 
CR1 = the Conversion Rate in effect immediately after the open of business on such Ex-Dividend Date;
 
SP0 = the average of the Last Reported Sale Prices of the ADSs (divided by the number of Class A Ordinary Shares then represented by one ADS) over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
 
FMV
=
 the fair market value (as determined by the Board of Directors) of the Distributed Property with respect to each outstanding Class A Ordinary Share (directly or in the form of ADSs) on the Ex-Dividend Date for the ADSs for such distribution.
 
Any increase made under the portion of this Section 14.04(c) above shall become effective immediately after the open of business on the Ex-Dividend Date for the ADSs for such distribution. To the extent such distribution is not so paid or made, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect had the adjustment been made on the basis of only the distribution, if any, actually made or paid. Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a Note shall receive, in respect of each US$1,000 principal amount thereof, at the same time and upon the same terms as holders of the ADSs receive the Distributed Property, the amount and kind of Distributed Property such Holder would have received if such Holder owned a number of ADSs equal to the Conversion Rate in effect on the Record Date for the ADSs for the distribution.
 
With respect to an adjustment pursuant to this Section 14.04(c) where there has been a payment of a dividend or other distribution on the Class A Ordinary Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued, will be, listed or admitted for trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the following formula:
 
54
 
where,
 
CR0 =
the Conversion Rate in effect immediately prior to the end of the Valuation Period;
 
CR1 = the Conversion Rate in effect immediately after the end of the Valuation Period;
 
FMV0 =
the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of the Class A Ordinary Shares (directly or in the form of ADSs) applicable to one Class A Ordinary Share (determined by reference to the definition of Last Reported Sale Price as set forth in Section 1.01 as if references therein to the ADSs were to such Capital Stock or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date of the Spin-Off (the “Valuation Period”); and
 
MP0 =
the average of the Last Reported Sale Prices of the ADSs (divided by the number of Class A Ordinary Shares then represented by one ADS) over the Valuation Period.
 
The increase to the Conversion Rate under the preceding paragraph shall occur at the close of business on the last Trading Day of the Valuation Period; provided that (x) in respect of any conversion of Notes for which Physical Settlement is applicable, if the relevant Conversion Date occurs during the Valuation Period, references to “10” in the preceding paragraph shall be deemed to be replaced with such lesser number of Trading Days as have elapsed between the Ex-Dividend Date of such Spin-Off and the Conversion Date in determining the Conversion Rate and (y) in respect of any conversion of Notes for which Cash Settlement or Combination Settlement is applicable, for any Trading Day that falls within the relevant Observation Period for such conversion and within the Valuation Period, references to “10” in the preceding paragraph shall be deemed to be replaced with such lesser number of Trading Days as have elapsed between the Ex-Dividend Date of such Spin-Off and such Trading Day in determining the Conversion Rate as of such Trading Day. If the dividend or other distribution constituting the Spin-Off is not so paid or made, the Conversion Rate shall be decreased, effective as of the date the Board of Directors determines not to make or pay such dividend or other distribution, to the Conversion Rate that would be in effect if such distribution had not been declared.
 
For purposes of this Section 14.04(c) (and subject in all respect to Section 14.11), rights, options or warrants distributed by the Company to all holders of the Class A Ordinary Shares (directly or in the form of ADSs) entitling them to subscribe for or purchase shares of the Company’s Capital Stock, including Class A Ordinary Shares (either initially or under certain circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such Class A Ordinary Shares (directly or in the form of ADSs); (ii) are not exercisable; and (iii) are also issued in respect of future issuances of the Class A Ordinary Shares (directly or in the form of ADSs), shall be deemed not to have been distributed for purposes of this Section 14.04(c) (and no adjustment to the Conversion Rate under this Section 14.04(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights, options or warrants shall be deemed to have been

55
distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section 14.04(c). If any such right, option or warrant, including any such existing rights, options or warrants distributed prior to the date of this Supplemental Indenture, are subject to events, upon the occurrence of which such rights, options or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Ex-Dividend Date with respect to new rights, options or warrants with such rights (in which case the existing rights, options or warrants shall be deemed to terminate and expire on such date without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the type described in the immediately preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 14.04(c) was made, (1) in the case of any such rights, options or warrants that shall all have been redeemed or purchased without exercise by any holders thereof, upon such final redemption or purchase (x) the Conversion Rate shall be readjusted as if such rights, options or warrants had not been issued and (y) the Conversion Rate shall then again be readjusted to give effect to such distribution, deemed distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per Ordinary Share redemption or purchase price received by a holder or holders of Class A Ordinary Shares (directly or in the form of ADSs) with respect to such rights, options or warrants (assuming such holder had retained such rights, options or warrants), made to all holders of Class A Ordinary Shares (directly or in the form of ADSs) as of the date of such redemption or purchase, and (2) in the case of such rights, options or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options and warrants had not been issued.
 
For purposes of Section 14.04(a), Section 14.04(b) and this Section 14.04(c), if any dividend or distribution to which this Section 14.04(c) is applicable also includes one or both of:
 
(A)          a dividend or distribution of Class A Ordinary Shares (directly or in the form of ADSs) to which Section 14.04(a) is applicable (the “Clause A Distribution”); or
 
(B)          a dividend or distribution of rights, options or warrants to which Section 14.04(b) is applicable (the “Clause B Distribution”),
 
then (1) such dividend or distribution, other than the Clause A Distribution and the Clause B Distribution, shall be deemed to be a dividend or distribution to which this Section 14.04(c) is applicable (the “Clause C Distribution”) and any Conversion Rate adjustment required by this Section 14.04(c) with respect to such Clause C Distribution shall then be made, and (2) the Clause A Distribution and Clause B Distribution shall be deemed to immediately follow the Clause C Distribution and any Conversion Rate adjustment required by Section 14.04(a) and Section 14.04(b) with respect thereto shall then be made, except that, if determined by the Company (I) the “Ex-Dividend Date” of the Clause A Distribution and the Clause B Distribution shall be deemed to be the Ex-Dividend Date of the Clause C Distribution and (II) any Class A Ordinary Shares (directly or in the form of ADSs) included in the Clause A Distribution or Clause B Distribution shall be deemed not to be “outstanding immediately prior to the open of business on such Ex-Dividend Date or Effective Date” within the meaning of Section 14.04(a) or

56
“outstanding immediately prior to the open of business on such Ex-Dividend Date” within the meaning of Section 14.04(b).
 
(d)          If any cash dividend or distribution is made to all or substantially all holders of the Class A Ordinary Shares (directly or in the form of ADSs), the Conversion Rate shall be adjusted based on the following formula:
 
 
where,
 
CR0 = the Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for the ADSs for such dividend or distribution;
 
CR1 = the Conversion Rate in effect immediately after the open of business on such Ex-Dividend Date;
 
SP0 = the Last Reported Sale Price of the ADSs (divided by the number of Class A Ordinary Shares then represented by one ADS) on the Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution; and
 
C =
 the amount in cash per Class A Ordinary Share the Company distributes to all or substantially all holders of the Class A Ordinary Shares (directly or in the form of ADSs).
 
Any increase pursuant to this Section 14.04(d) shall become effective immediately after the open of business on the Ex-Dividend Date for the ADSs for such dividend or distribution. To the extent such dividend or distribution is not so paid, the Conversion Rate shall be decreased, effective as of the date the Board of Directors determines not to make or pay such dividend or distribution, to be the Conversion Rate that would then be in effect had the adjustment been made on the basis of only the dividend or distribution, if any, actually made or paid. Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a Note shall receive, for each US$1,000 principal amount of Notes, at the same time and upon the same terms as holders of the ADSs, the amount of cash that such Holder would have received if such Holder owned a number of ADSs equal to the Conversion Rate on the Record Date for the ADSs for such cash dividend or distribution.
 
(e)          If the Company or any of its Subsidiaries make a payment in respect of a tender or exchange offer for the Class A Ordinary Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration included in the payment per Ordinary Share exceeds the average of the Last Reported Sale Prices of the ADSs (divided by the number of Class A Ordinary Shares then represented by one ADS) over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires, the Conversion Rate shall be increased based on the following formula:
 
57
 
where,
 
CR0 = the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
 
CR1 = the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
 
AC = the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for Class A Ordinary Shares or ADSs, as the case may be, purchased in such tender or exchange offer;
 
OS0 =
the number of Class A Ordinary Shares issued and outstanding immediately prior to the date such tender or exchange offer expires (prior to giving effect to the purchase of all Class A Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such tender or exchange offer);
 
OS1 = the number of Class A Ordinary Shares issued and outstanding immediately after the date such tender or exchange offer expires (after giving effect to the purchase of all Class A Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such tender or exchange offer); and
 
SP1 = the average of the Last Reported Sale Prices of the ADSs (divided by the number of Class A Ordinary Shares then represented by one ADS) over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires.
 
The increase to the Conversion Rate under this Section 14.04(e) shall occur at the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided that (x) in respect of any conversion of Notes for which Physical Settlement is applicable, if the relevant Conversion Date occurs during the 10 Trading Days immediately following, and including, the Trading Day next succeeding the expiration date of any tender or exchange offer, references to “10” or “10th” in the preceding paragraph shall be deemed replaced with such lesser number of Trading Days as have elapsed between the date that such tender or exchange offer expires and the Conversion Date in determining the Conversion Rate and (y) in respect of any conversion of Notes for which Cash Settlement or Combination Settlement is applicable, for any Trading Day that falls within the relevant Observation Period for such conversion and within the 10 Trading Days immediately following, and including, the Trading Day next succeeding the expiration date of any tender or exchange offer, references to “10” or “10th” in the preceding paragraph shall be deemed replaced with such lesser number of Trading Days as have elapsed between the

58
expiration date of such tender or exchange offer and such Trading Day in determining the Conversion Rate as of such Trading Day.
 
To the extent such tender or exchange offer is announced but not consummated (including as a result of being precluded from consummating such tender or exchange offer under applicable law), or any purchases or exchanges of the Class A Ordinary Shares (directly or in the form of ADSs) in such tender or exchange offer are rescinded, the Conversion Rate will be readjusted to the Conversion Rate that would then be in effect had the adjustment been made on the basis of only the purchases or exchanges of the Class A Ordinary Shares (directly or in the form of ADSs), if any, actually made, and not rescinded, in such tender or exchange offer.
 
(f)          Notwithstanding this Section 14.04 or any other provision of the Indenture or the Notes, if a Conversion Rate adjustment becomes effective on any Ex-Dividend Date, and a Holder that has converted its Notes on or after such Ex-Dividend Date and on or prior to the related Record Date would be treated as the record holder of the ADSs as of the related Conversion Date as described under Section 14.02(i) based on an adjusted Conversion Rate for such Ex-Dividend Date, then, notwithstanding the Conversion Rate adjustment provisions in this Section 14.04, the Conversion Rate adjustment relating to such Ex-Dividend Date shall not be made for such converting Holder. Instead, such Holder shall be treated as if such Holder were the record owner of the ADSs on an unadjusted basis and participate in the related dividend, distribution or other event giving rise to such adjustment.
 
(g)          Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Class A Ordinary Shares or ADSs or any securities convertible into or exchangeable for Class A Ordinary Shares or ADSs or the right to purchase Class A Ordinary Shares or ADSs or such convertible or exchangeable securities.
 
(h)          In addition to those adjustments required by clauses (a), (b), (c), (d) and (e) of this Section 14.04, and to the extent permitted by applicable law and subject to the applicable rules of the New York Stock Exchange and any other securities exchange on which any of the Company’s securities are then listed, the Company from time to time may increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the Company’s best interest, and the Company may (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of the Class A Ordinary Shares or the ADSs or rights to purchase Class A Ordinary Shares or ADSs in connection with a dividend or distribution of Class A Ordinary Shares or ADSs (or rights to acquire Class A Ordinary Shares or ADSs) or similar event.
 
(i)           Notwithstanding anything to the contrary in this Article 14, the Conversion Rate shall not be adjusted:
 
(i)           upon the issuance of any Class A Ordinary Shares or ADSs pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in Class A Ordinary Shares or ADSs under any plan;
 
59
(ii)          upon the issuance of any Class A Ordinary Shares or ADSs or options or rights to purchase those Class A Ordinary Shares or ADSs pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of the Company’s Subsidiaries and Consolidated Affiliated Entities;
 
(iii)         upon the repurchase of any Class A Ordinary Shares or ADSs pursuant to an open-market share repurchase program or other buyback transaction that is not a tender offer or exchange offer of the nature described in clause (e) of this Section 14.04 above;
 
(iv)         upon the issuance of any Class A Ordinary Shares or ADSs pursuant to any option, warrant, right or exercisable, exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the date the Notes were first issued (other than any rights under a rights plan);
 
(v)          solely for a change in the par value of the Class A Ordinary Shares or ADSs; or
 
(vi)         for accrued and unpaid interest, if any.
 
(j)           All calculations and other determinations under this Article 14 shall be made by the Company and shall be made to the nearest one-ten thousandth (1/10,000th) of an ADS.
 
(k)          If an adjustment to the Conversion Rate otherwise required by this Section 14.04 would result in a change of less than 1.00% to the Conversion Rate, then, notwithstanding the foregoing, the Company may, at its election, defer and carry forward such adjustment, except that all such deferred adjustments must be given effect immediately upon the earliest to occur of the following: (i) when all such deferred adjustments would result in an aggregate change of at least 1.00% to the Conversion Rate, (ii) on the Conversion Date for any Notes (in the case of Physical Settlement), (iii) on each Trading Day of any Observation Period related to any conversion of Notes (in the case of Cash Settlement or Combination Settlement) and (iv) on the Effective Date of any Fundamental Change or any Make-Whole Fundamental Change, in each case, unless the adjustment has already been made. In addition, the Company shall not account for such deferrals when determining whether any of the conditions described in Section 14.01(b) have been satisfied or what number of ADSs a Holder would have held on a given day had it converted its Notes.
 
(l)           Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly deliver to the Trustee (and the Conversion Agent if not the Trustee) an Officer’s Certificate setting forth (i) the adjusted Conversion Rate, (ii) the subsection of this Section 14.04 pursuant to which such adjustment has been made, showing in reasonable detail the facts upon which such adjustment is based, and (iii) the date as of which such adjustment is effective, and such Officer’s Certificate shall be conclusive evidence of the accuracy of such adjustment absent manifest error. Unless and until a Responsible Officer of the Trustee shall have received such Officer’s Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume without inquiry that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall

60
prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment becomes effective and shall deliver such notice of such adjustment of the Conversion Rate to each Holder at its last address appearing on the Register (with a copy to the Trustee). Failure to deliver such notice shall not affect the legality or validity of any such adjustment. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate or the information and calculations contained therein.
 
(m)         For purposes of this Section 14.04, the number of Class A Ordinary Shares at any time outstanding shall not include Class A Ordinary Shares held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any dividend or make any distribution on Class A Ordinary Shares held in the treasury of the Company (directly or in the form of ADSs), but shall include Class A Ordinary Shares issuable in respect of scrip certificates issued in lieu of fractions of Class A Ordinary Shares.
 
Section 14.05.  Adjustments of Prices. Whenever any provision of this Supplemental Indenture requires the Company to calculate the Last Reported Sale Prices, the Daily VWAPs, the Daily Conversion Values, the Daily Settlement Amounts, the ADS Price for purposes of a Make-Whole Fundamental Change or the Redemption Reference Price for purposes of an Optional Redemption, a Cleanup Redemption or a Tax Redemption pursuant to Article 16 over a span of multiple days, the Company shall make appropriate adjustments in good faith and in a commercially reasonable manner to each to account for any adjustment to the Conversion Rate that becomes effective pursuant to Section 14.04, or any event requiring an adjustment to the Conversion Rate pursuant to Section 14.04 where the Ex-Dividend Date, Effective Date or expiration date, as the case may be, of the event occurs, at any time during the period when such Last Reported Sale Prices, ADS Prices, the Daily VWAPs, the Daily Conversion Values or the Daily Settlement Amounts are to be calculated.
 
Section 14.06.  Class A Ordinary Shares to Be Fully Paid. The Company shall provide, free from preemptive rights, out of its authorized but unissued Class A Ordinary Shares or Class A Ordinary Shares held in treasury, a sufficient number of Class A Ordinary Shares that corresponds to the number of ADSs due upon conversion of the Notes from time to time as such Notes are presented for conversion (assuming that at the time of computation of such number of Class A Ordinary Shares, all such Notes would be converted by a single Holder and that Physical Settlement were applicable).
 
Section 14.07.  Effect of Recapitalizations, Reclassifications and Changes of the Class A Ordinary Shares.
 
(a)          In the case of:
 
(i)           any recapitalization, reclassification or change of the ADSs or Class A Ordinary Shares (other than changes resulting from a subdivision or combination),
 
(ii)          any consolidation, merger, combination or similar transaction involving the Company,
 
61
(iii)         any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s Subsidiaries substantially as an entirety or
 
(iv)         any statutory share exchange,
 
in each case, as a result of which the ADS or the Class A Ordinary Shares would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such event, a “Merger Event”), then, prior to or at the effective time of such Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture permitted under Section 10.01(f) providing that, at and after the effective time of such Merger Event, the right to convert each US$1,000 principal amount of Notes shall be changed into a right to convert such principal amount of Notes into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of ADSs equal to the Conversion Rate immediately prior to such Merger Event would have owned or been entitled to receive (the “Reference Property,” with each “unit of Reference Property” meaning the kind and amount of Reference Property that a holder of one ADS is entitled to receive) upon such Merger Event; provided, however, that at and after the effective time of the Merger Event (A) the Company shall continue to have the right to determine the form of consideration to be paid or delivered, as the case may be, upon conversion of Notes in accordance with Section 14.02 and (B) (I) any amount payable in cash upon conversion of the Notes in accordance with Section 14.02 shall continue to be payable in cash, (II) any ADSs that the Company would have been required to deliver upon conversion of the Notes in accordance with Section 14.02 shall instead be deliverable in the amount and type of Reference Property that a holder of that number of ADSs would have been entitled to receive in such Merger Event and (III) the Daily VWAP shall be calculated based on the value of a unit of Reference Property that a holder of one ADS would have received in such transaction.
 
If the Merger Event causes the ADSs or Class A Ordinary Shares to be converted into, or exchanged for, the right to receive more than a single type of consideration (determined based in part upon any form of holder election), then (i) the Reference Property into which the Notes will be convertible shall be deemed to be the weighted average of the types and amounts of consideration actually received by the holders of ADSs, and (ii) the unit of Reference Property for purposes of the immediately preceding paragraph shall refer to the consideration referred to in clause (i) attributable to one ADS. If the holders of the ADSs or Class A Ordinary Shares receive only cash in such Merger Event, then for all conversions for which the relevant Conversion Date occurs after the effective date of such Merger Event (A) the consideration due upon conversion of each US$1,000 principal amount of Notes shall be solely cash in an amount equal to the Conversion Rate in effect on the Conversion Date (as may be increased by any Additional ADSs pursuant to Section 14.03), multiplied by the price paid per ADS or Class A Ordinary Share, as applicable, in such Merger Event and (B) the Company shall satisfy the Conversion Obligation by paying cash to converting Holders on the second Business Day immediately following the relevant Conversion Date. The Company shall provide written notice to Holders, the Trustee and the Conversion Agent (if other than the Trustee) of such weighted average as soon as practicable after such determination is made.
 
62
Such supplemental indenture described in the second immediately preceding paragraph shall provide for anti-dilution and other adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article 14 (it being understood that no such adjustments shall be required with respect to any portion of the Reference Property that does not consist of shares of Common Equity (however evidenced) or depositary receipts in respect thereof). If, in the case of any Merger Event, the Reference Property includes shares of stock, securities or other property or assets (including cash or any combination thereof) of a Person other than the Company or the successor or purchasing Person, as the case may be, in such Merger Event, then such other Person shall also execute such supplemental indenture, and such supplemental indenture shall contain such additional provisions to protect the interests of the Holders of the Notes, including the right of Holders to require the Company to repurchase their Notes upon a Fundamental Change pursuant to Section 15.02, as the Board of Directors shall consider necessary by reason of the foregoing.
 
(b)          [RESERVED].
 
(c)          The Company shall not become a party to any Merger Event unless its terms are consistent with this Section 14.07. None of the foregoing provisions shall affect the right of a holder of Notes to convert its Notes into cash, ADSs or a combination of cash and ADSs, as applicable, as set forth in Section 14.01 and Section 14.02 prior to the effective date of such Merger Event.
 
(d)          The above provisions of this Section 14.07 shall similarly apply to successive Merger Events.
 
Section 14.08.  Certain Covenants. (a) The Company covenants that all ADSs delivered upon conversion of Notes, and all Class A Ordinary Shares represented by such ADSs, will be fully paid and non-assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.
 
(b)          The Company covenants that, if any ADSs to be provided for the purpose of conversion of Notes hereunder, or any Class A Ordinary Shares represented by such ADSs, require registration with or approval of any governmental authority under any federal or state law before such ADSs may be validly issued upon conversion, the Company will, to the extent then permitted by the rules and interpretations of the SEC, secure such registration or approval, as the case may be.
 
(c)          The Company further covenants that if at any time the ADSs shall be listed on any national securities exchange or automated quotation system the Company will list and keep listed, so long as the ADSs shall be so listed on such exchange or automated quotation system, any ADSs deliverable upon conversion of the Notes.
 
(d)          The Company further covenants to take all actions and obtain all approvals and registrations required with respect to the conversion of the Notes into ADSs and the issuance, and deposit into the ADS facility, of the Class A Ordinary Shares represented by such ADSs. The Company also undertakes to maintain, as long as any Notes are outstanding, the effectiveness of a registration statement on Form F-6 relating to the ADSs and an adequate
63
number of ADSs available for issuance thereunder such that ADSs can be delivered in accordance with the terms of the Indenture, the Notes and the Deposit Agreement upon conversion of the Notes.
 
Section 14.09.  Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty or responsibility to any Holder to determine the Conversion Rate (or any adjustment thereto) or whether any facts exist that may require any adjustment (including any increase) of the Conversion Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee and any other Conversion Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any ADSs, or of any securities, property or cash that may at any time be issued or delivered upon the conversion of any Note; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any ADSs or stock certificates or other securities or property or cash upon the surrender of any Note for the purpose of conversion, the accuracy or inaccuracy of any mathematical calculation or formulae under the Indenture, whether by the Company or any Person so authorized by the Company for such purpose under the Indenture or the failure by the Company to comply with any of the duties, responsibilities or covenants of the Company contained in this Article. Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 14.07 relating either to the kind or amount of ADSs or securities or property (including cash) receivable by Holders upon the conversion of their Notes after any event referred to in such Section 14.07 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 11.02 of the Base Indenture, may accept (without any independent investigation) as conclusive evidence of the correctness of any such provisions, and shall be protected in conclusively relying upon, the Officer’s Certificate (which the Company shall be obligated to deliver to the Trustee prior to the execution of any such supplemental indenture) with respect thereto. Neither the Trustee nor the Conversion Agent shall be responsible for determining whether any event contemplated by Section 14.01(b) has occurred that makes the Notes eligible for conversion or no longer eligible therefor until the Company has delivered to the Trustee and the Conversion Agent the notices referred to in Section 14.01(b) with respect to the commencement or termination of such conversion rights, on which notices the Trustee and the Conversion Agent may conclusively rely, and the Company agrees to deliver such notices to the Trustee and the Conversion Agent immediately after the occurrence of any such event or at such other times as shall be provided for in Section 14.01(b). Except as otherwise expressly provided herein, neither the Trustee nor any other agent acting under the Indenture (other than the Company, if acting in such capacity) shall have any obligation to make any calculation or to determine whether the Notes may be surrendered for conversion pursuant to the Indenture, or to notify the Company or the Depositary or any of the Holders if the Notes have become convertible pursuant to the terms of the Indenture.
 
Section 14.10.  Notice to Holders Prior to Certain Actions. In case of any:
 
(a)          action by the Company or one of its Subsidiaries that would require an adjustment in the Conversion Rate pursuant to Section 14.04 or Section 14.11;
 
64
(b)          Merger Event; or
 
(c)          voluntary or involuntary dissolution, liquidation or winding-up of the Company or any of its Subsidiaries;
 
then, in each case (unless notice of such event is otherwise required pursuant to another provision of the Indenture), the Company shall cause to be filed with the Trustee and the Conversion Agent (if other than the Trustee) and to be delivered to each Holder at its address appearing on the Register, as promptly as possible but in any event at least 20 days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if a record is not to be taken, the date as of which the holders of Class A Ordinary Shares or ADSs, as the case may be, of record are to be determined for the purposes of such action by the Company or one of its Subsidiaries, or (ii) the date on which such Merger Event, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Class A Ordinary Shares or ADSs, as the case may be, of record shall be entitled to exchange their Class A Ordinary Shares or ADSs, as the case may be, for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such action by the Company or one of its Subsidiaries, Merger Event, dissolution, liquidation or winding-up.
 
Section 14.11.  Stockholder Rights Plans. To the extent that the Company has a rights plan in effect upon conversion of the Notes, each ADS, if any, delivered upon such conversion shall be entitled to receive (either directly or in respect of the Class A Ordinary Shares underlying such ADSs) the appropriate number of rights, if any, and the certificates representing the ADSs delivered upon such conversion shall bear such legends, if any, in each case as may be provided by the terms of any such stockholder rights plan, as the same may be amended from time to time. However, if, prior to any conversion of Notes, the rights have separated from the Class A Ordinary Shares underlying the ADSs in accordance with the provisions of the applicable stockholder rights plan, the Conversion Rate shall be adjusted at the time of separation as if the Company distributed to all or substantially all holders of the Class A Ordinary Shares Distributed Property as provided in Section 14.04(c), subject to readjustment in the event of the expiration, termination or redemption of such rights.
 
Section 14.12.  Limit on Issuance of ADSs Upon Conversion. Notwithstanding anything to the contrary in the Indenture, if an event occurs that would result in an increase in the Conversion Rate by an amount in excess of limitations imposed by any shareholder approval rules or listing standards of any national or regional securities exchange that are applicable to the Company, the Company will, at its option, either obtain stockholder approval of any issuance of ADSs upon conversion of the Notes in excess of such limitations or pay cash in lieu of delivering any ADSs otherwise deliverable upon conversions in excess of such limitations based on the Daily VWAP for each Trading Day of the relevant Observation Period in respect of which, in lieu of delivering ADSs, the Company pays cash pursuant to this Section 14.12.
 
Section 14.13.  Termination of Depositary Receipt Program. If the Class A Ordinary Shares cease to be represented by ADSs issued under a depositary receipt program sponsored by the Company, all references in the Indenture to the ADSs shall be deemed to have been replaced

65
by a reference to the number of Class A Ordinary Shares (and other property, if any) represented by the ADSs on the last day on which the ADSs represented the Class A Ordinary Shares and as if the Class A Ordinary Shares and the other property had been distributed to holders of the ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to refer to the Last Reported Sale Price of the Class A Ordinary Shares, and other appropriate adjustments, including adjustments to the Conversion Rate, will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any other currency are required, the exchange rate in effect on the date of determination will apply. The Company shall provide written notice to the Holders, the Trustee and the Conversion Agent (if other than the Trustee) upon the occurrence of the foregoing.
 
Section 14.14.  Exchange In Lieu Of Conversion. (a) When a Holder surrenders its Notes for conversion, the Company may, at its election (an “Exchange Election”), direct the Conversion Agent to deliver, on or prior to the Business Day immediately following the Conversion Date, such Notes to one or more financial institutions designated by the Company (each, a “Designated Financial Institution”) for exchange in lieu of conversion. In order to accept any Notes surrendered for conversion, the Designated Financial Institution(s) must agree to timely pay and/or deliver, as the case may be, in exchange for such Notes, the cash, ADSs or a combination thereof, as applicable, that would otherwise be due upon conversion pursuant to Section 14.02 (the “Conversion Consideration”). If the Company makes an Exchange Election, the Company shall, by the close of business on the Business Day following the relevant Conversion Date, notify in writing the Trustee, the Conversion Agent (if other than the Trustee) and the Holder surrendering Notes for conversion that the Company has made the Exchange Election and the Company shall promptly notify the Designated Financial Institution(s) of the relevant deadline for delivery of the Conversion Consideration and the type of Conversion Consideration to be paid and/or delivered, as the case may be.
 
(b)          Any Notes delivered to the Designated Financial Institution(s) shall remain outstanding, subject to applicable procedures of the Depositary. If the Designated Financial Institution(s) agree(s) to accept any Notes for exchange but does not timely pay and/or deliver, as the case may be, the related Conversion Consideration, or if such Designated Financial Institution(s) does not accept the Notes for exchange, the Company shall pay and/or deliver, as the case may be, the relevant Conversion Consideration, as, and at the time, required pursuant to the Indenture as if the Company had not made the Exchange Election.
 
(c)          The Company’s designation of any Designated Financial Institution(s) to which the Notes may be submitted for exchange does not require such Designated Financial Institution(s) to accept any Notes.
 
ARTICLE 15
Repurchase of Notes at Option of Holders
 
Section 15.01.  Intentionally Omitted.
 
Section 15.02.  Repurchase at Option of Holders Upon a Fundamental Change. (a) If a Fundamental Change occurs at any time, each Holder shall have the right, at such Holder’s option, to require the Company to repurchase for cash all of such Holder’s Notes, or any portion

66
thereof that is equal to US$1,000 or an integral multiple of US$1,000, on the Business Day (the “Fundamental Change Repurchase Date”) notified in writing by the Company as set forth in Section 15.02(c) that is not less than 20 Business Days or more than 35 Business Days following the date of the Fundamental Change Company Notice at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon to, but excluding, the Fundamental Change Repurchase Date (the “Fundamental Change Repurchase Price”), unless the Fundamental Change Repurchase Date falls after a Regular Record Date but on or prior the Interest Payment Date to which such Regular Record Date relates, in which case the Company shall instead pay the full amount of accrued and unpaid interest to Holders of record as of such Regular Record Date on such Interest Payment Date, and the Fundamental Change Repurchase Price shall be equal to 100% of the principal amount of Notes to be repurchased pursuant to this Article 15. The Fundamental Change Repurchase Date shall be subject to postponement to comply with applicable law.
 
(b)          Repurchases of Notes under this Section 15.02 shall be made, at the option of the Holder thereof, upon:
 
(i)           delivery to the Paying Agent by a Holder of a duly completed notice (the “Fundamental Change Repurchase Notice”) in the form set forth in Attachment 2 to the Form of Note attached hereto as Exhibit A, if the Notes are Physical Notes, or in compliance with the Depositary’s procedures for surrendering interests in Global Notes, if the Notes are Global Notes, in each case on or before the close of business on the second Business Day immediately preceding the Fundamental Change Repurchase Date; and
 
(ii)          delivery of the Notes, if the Notes are Physical Notes, to the Paying Agent at any time after delivery of the Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer) or book-entry transfer of the Notes, if the Notes are Global Notes, in compliance with the procedures of the Depositary, in each case such delivery being a condition to receipt by the Holder of the Fundamental Change Repurchase Price therefor.
 
The Fundamental Change Repurchase Notice in respect of any Notes to be repurchased shall state:
 
(i)           in the case of Physical Notes, the certificate numbers of the Notes to be delivered for repurchase;
 
(ii)          the portion of the principal amount of Notes to be repurchased, which must be US$1,000 or an integral multiple thereof; and
 
(iii)        that the Notes are to be repurchased by the Company pursuant to the applicable provisions of the Notes and the Indenture;
 
provided, however, that if the Notes are Global Notes, the Fundamental Change Repurchase Notice must comply with applicable Depositary procedures.
 
67
Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Fundamental Change Repurchase Notice contemplated by this Section 15.02 shall have the right to withdraw, in whole or in part, such Fundamental Change Repurchase Notice at any time prior to the close of business on the second Business Day immediately preceding the Fundamental Change Repurchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 15.03.
 
The Paying Agent shall promptly notify the Company of the receipt by it of any Fundamental Change Repurchase Notice or written notice of withdrawal thereof.
 
(c)          On or before the 20th calendar day after the occurrence of the effective date of a Fundamental Change, the Company shall provide to all Holders, the Trustee and the Paying Agent (in the case of a Paying Agent other than the Trustee) a written notice (the “Fundamental Change Company Notice”) of the occurrence of the effective date of the Fundamental Change and of the repurchase right at the option of the Holders arising as a result thereof. In the case of Physical Notes, such notice shall be by first class mail or, in the case of Global Notes, such notice shall be delivered in accordance with the applicable procedures of the Depositary.  Simultaneously with providing such notice, the Company shall publish a notice containing the information set forth in the Fundamental Change Company Notice on the Company’s website or through such other public medium as the Company may use at that time. Each Fundamental Change Company Notice shall specify:
 
(i)           the events causing the Fundamental Change;
 
(ii)          the date of the Fundamental Change;
 
(iii)         the last date on which a Holder may exercise the repurchase right pursuant to this Article 15;
 
(iv)         the Fundamental Change Repurchase Price;
 
(v)          the Fundamental Change Repurchase Date;
 
(vi)         the name and address of the Paying Agent;
 
(vii)        if applicable, the Conversion Rate and any adjustments to the Conversion Rate;
 
(viii)       that the Notes with respect to which a Fundamental Change Repurchase Notice has been delivered by a Holder may be converted only if the Holder withdraws the Fundamental Change Repurchase Notice in accordance with the terms of the Indenture; and
 
(ix)         the procedures that Holders must follow to require the Company to repurchase their Notes.
 
68
No failure of the Company to give the foregoing notices and no defect therein shall limit the Holders’ repurchase rights or affect the validity of the proceedings for the repurchase of the Notes pursuant to this Section 15.02.
 
At the Company’s written request, the Trustee shall give such notice in the Company’s name and at the Company’s expense; provided, however, that, in all cases, the text of such Fundamental Change Company Notice shall be prepared by the Company and delivered to the Trustee no later than 2 Business Days (or such shorter period as is acceptable to the Trustee) prior to the date the Fundamental Change Company Notice is to be sent.
 
(d)          Notwithstanding the foregoing, no Notes may be repurchased by the Company on any date at the option of the Holders upon a Fundamental Change if the principal amount of the Notes has been accelerated, and such acceleration has not been rescinded, on or prior to such date (except in the case of an acceleration resulting from a Default by the Company in the payment of the Fundamental Change Repurchase Price with respect to such Notes). The Paying Agent will promptly return to the respective Holders thereof any Physical Notes held by it during the acceleration of the Notes (except in the case of an acceleration resulting from a Default by the Company in the payment of the Fundamental Change Repurchase Price with respect to such Notes), or any instructions for book-entry transfer of the Notes in compliance with the procedures of the Depositary shall be deemed to have been cancelled, and, upon such return or cancellation, as the case may be, the Fundamental Change Repurchase Notice with respect thereto shall be deemed to have been withdrawn.
 
Section 15.03.  Withdrawal of Fundamental Change Repurchase Notice. (i) A Fundamental Change Repurchase Notice may be withdrawn (in whole or in part) by means of a duly completed written notice of withdrawal delivered to the Paying Agent in accordance with this Section 15.03 at any time prior to the close of business on the second Business Day immediately preceding the relevant Fundamental Change Repurchase Date, specifying:
 
(ii)          the principal amount of the Notes with respect to which such notice of withdrawal is being submitted, which principal amount must be in principal amounts of US$1,000 or an integral multiple of US$1,000,
 
(iii)         if Physical Notes have been issued, the certificate number of the Note in respect of which such notice of withdrawal is being submitted, and
 
(iv)         the principal amount, if any, of such Note that remains subject to the original Fundamental Change Repurchase Notice, which portion must be in principal amounts of US$1,000 or an integral multiple of US$1,000;
 
provided, however, that if the Notes are Global Notes, the notice must comply with applicable procedures of the Depositary.
 
Section 15.04.  Deposit of Fundamental Change Repurchase Price. (a) The Company will deposit with the Trustee (or other Paying Agent appointed by the Company), or if the Company is acting as its own Paying Agent, set aside, segregate and hold in trust as provided in Section 4.03(b) on or prior to 11:00 a.m., New York City time, on the Fundamental Change Repurchase Date, an amount of money sufficient to repurchase all of the Notes to be repurchased

69
at the appropriate Fundamental Change Repurchase Price. Subject to receipt of funds and/or Notes by the Trustee (or other Paying Agent appointed by the Company), payment for Notes surrendered for repurchase (and not withdrawn in accordance with Section 15.03) will be made on the later of (i) the Fundamental Change Repurchase Date, (provided the Holder has satisfied the conditions in Section 15.02 and (ii) the time of book-entry transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the Company) by the Holder thereof in the manner required by Section 15.02, as applicable, by mailing checks for the amount payable to the Holders of such Notes entitled thereto as they shall appear in the Register; provided, however, that payments to the Depositary shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. The Trustee shall, promptly after such payment and upon written demand by the Company, return to the Company any funds in excess of the Fundamental Change Repurchase Price.
 
(b)          If by 11:00 a.m., New York City time, on the Fundamental Change Repurchase Date the Trustee (or other Paying Agent appointed by the Company) holds money sufficient to make payment on all the Notes or portions thereof that are to be repurchased on such Fundamental Change Repurchase Date, then, with respect to the Notes that have been properly surrendered for repurchase to the Trustee (or other Paying Agent appointed by the Company) and not validly withdrawn, on such Fundamental Change Repurchase Date, (i) such Notes will cease to be outstanding, (ii) interest will cease to accrue on such Notes (whether or not book-entry transfer of the Notes has been made or the Notes have been delivered to the Trustee (or other Paying Agent appointed by the Company)) and (iii) all other rights of the Holders of such Notes will terminate (other than the right to receive the Fundamental Change Repurchase Price).
 
(c)          Upon surrender of a certificated Note that is to be repurchased in part pursuant to Section 15.02, the Company shall execute and instruct the Trustee who shall authenticate and deliver to the Holder a new certificated Note in an authorized denomination equal in principal amount to the non-repurchased portion of the certificated Note surrendered.
 
Section 15.05.  Covenant to Comply with Applicable Laws Upon Repurchase of Notes. In connection with any repurchase offer, the Company will, if required:
 
(a)          comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act;
 
(b)          file a Schedule TO or other required schedule under the Exchange Act; and
 
(c)          otherwise comply with all federal and state securities laws in connection with any offer by the Company to repurchase the Notes;
 
in each case, so as to permit the rights and obligations under this Article 15 to be exercised in the time and in the manner specified in this Article 15.
 
The Company shall not be required to purchase, or to make an offer to purchase, the Notes upon a Fundamental Change if a third party makes such an offer in the same manner, at the same time, for the same or greater price and otherwise in compliance with the requirements for an offer made by the Company as set forth above in this Section 15.05 and such third party

70
purchases all Notes properly surrendered and not validly withdrawn under its offer in the same manner, at the same time, for the same or greater price and otherwise in compliance with the requirements for an offer made by the Company as set forth above in this Section 15.05.
 
Notwithstanding anything to the contrary in this Supplemental Indenture, the Company shall not be required to send a Fundamental Change Company Notice, or offer to repurchase or repurchase any Notes, pursuant to Section 15.02, in connection with a Fundamental Change occurring pursuant to clause (b)(A) or (b)(B) of the definition of Fundamental Change (or, for the avoidance of doubt, pursuant to clause (a) of the definition of Fundamental Change that also constitutes a Fundamental Change occurring pursuant to clause (b)(A) or (b)(B)) of the definition thereof), if:
 
(i)           such Fundamental Change constitutes a share exchange event for which the resulting Reference Property consists entirely of cash in U.S. dollars;
 
(ii)          immediately after such Fundamental Change, the Notes become convertible (pursuant to the provisions described in Section 14.07 and, if applicable, Section 14.03) into consideration that consists solely of U.S. Dollars in an amount per US$1,000 principal amount of Notes that equals or exceeds the Fundamental Change Repurchase Price per US$1,000 principal amount of Notes (calculated assuming a Fundamental Change Repurchase Date that results in a Fundamental Change Repurchase Price that includes the maximum amount of accrued interest); and
 
(iii)         the Company timely sends the notice required pursuant to Section 14.01(b)(iii).
 
Any Fundamental Change with respect to which the Company does not offer to repurchase any Notes in accordance with the paragraph above shall be referred to as an “Exempted Fundamental Change.”
 
Notwithstanding anything to the contrary in the Indenture, to the extent that the provisions of any federal or state securities laws or other applicable laws or regulations adopted after the date on which the Notes are first issued conflict with the provisions of the Indenture relating to the Company’s obligations to repurchase the Notes upon a Fundamental Change, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under such provisions of the Indenture by virtue of such conflict.
 
ARTICLE 16
Optional Redemption, Cleanup Redemption and Tax Redemption.
 
Section 16.01.  Applicability of Article IV and Article V of the Base Indenture. Article IV and Article V of the Base Indenture shall not apply to the Notes. Instead the provisions set forth in this Article 16 shall, with respect to the Notes, supersede in their entirety Article IV of the Base Indenture, and all references in the Base Indenture to Article IV thereof and the provisions therein, as the case may be, shall, with respect to the Notes, be deemed to be references to this Article 16 or the applicable provisions set forth in this Article 16, respectively.
 
71
Section 16.02.  Optional Redemption. (a) Except as described in Sections 16.03 and 16.04 below, the Notes may not be redeemed by the Company at its option prior to September 15, 2024. The Company may redeem for cash all or any part of the Notes, at its option, on a Redemption Date on or after September 15, 2024 and before the 42nd Scheduled Trading Day immediately preceding the Maturity Date, if the Last Reported Sale Price of the ADSs has been at least 130% of the Conversion Price then in effect for at least 20 Trading Days (whether or not consecutive) during any 30 consecutive Trading Day period (including the last Trading Day of such period) ending on, and including, the Trading Day immediately preceding the Redemption Notice Date, (such redemption, an “Optional Redemption”).
 
(b)          The Redemption Price for an Optional Redemption shall be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the Redemption Date; provided, however, that if the Redemption Date occurs after a Regular Record Date and on or prior to the corresponding Interest Payment Date, then (i) the Company shall pay on the Interest Payment Date the full amount of accrued and unpaid interest, if any, due on such Interest Payment Date to the record Holder of the Notes on the Regular Record Date corresponding to such Interest Payment Date, and (ii) the Redemption Price payable to the Holder who presents a Note for the Optional Redemption shall be equal to 100% of the principal amount of such Note, without the accrued and unpaid interest on such Note to, but excluding, the Redemption Date. The Redemption Date must be a Business Day.
 
(c)          If less than all Notes then outstanding are called for an Optional Redemption, then the Trustee shall select the Notes to be redeemed (in principal amounts of US$1,000 or multiples thereof) by lot, on a pro rata basis (subject to rounding to the nearest US$1,000 principal amount) or by another method the Trustee considers to be fair and appropriate and, in the case of a Global Note, in accordance with, and subject to, DTC’s applicable procedures.
 
(d)          If a portion of a Holder’s Notes are selected for a partial Optional Redemption and the Holder converts a portion of such Notes, the converted portion shall be deemed to be from the portion selected for such Optional Redemption.
 
(e)          If the Company elects to redeem less than all of the outstanding Notes pursuant to this Section 16.02, and the Holder of any Note, or any owner of a beneficial interest in any Global Note, is reasonably not able to determine, before the close of business on the 43rd Scheduled Trading Day immediately preceding the Redemption Date (or, if the Company elects Physical Settlement for conversions that occur during the related Redemption Period, on the fourth Business Day immediately preceding the relevant Redemption Date), whether such Note or beneficial interest, as applicable, is to be redeemed pursuant to such Optional Redemption, then such Holder or owner, as applicable, will be entitled to convert such Note or beneficial interest, as applicable, at any time before the close of business on the second Business Day immediately before such Redemption Date, and each such conversion will be deemed to be of a Note called for Optional Redemption for purposes of this Section 16.02 and Section 14.03(g).
 
(f)          In the event of any Optional Redemption in part, the Company shall not be required to register the transfer of or exchange any Note so selected for Optional Redemption, in whole or in part, except the non-redeemed portion of any Note being redeemed in part.
 
72
Section 16.03.  Cleanup Redemption. (a) The Company may redeem for cash all but not part of the Notes at any time, on a Redemption Date before the 42nd Scheduled Trading Day immediately preceding the Maturity Date, if less than US$250 million aggregate principal amount of Notes remains outstanding at such time (such redemption, a “Cleanup Redemption”).
 
(b)          The Redemption Price for a Cleanup Redemption shall be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the Redemption Date; provided, however, that if the Redemption Date occurs after a Regular Record Date and on or prior to the corresponding Interest Payment Date, then (i) the Company shall pay on the Interest Payment Date the full amount of accrued and unpaid interest, if any, due on such Interest Payment Date to the record Holder of the Notes on the Regular Record Date corresponding to such Interest Payment Date, and (ii) the Redemption Price payable to the Holder who presents a Note for the Cleanup Redemption shall be equal to 100% of the principal amount of such Note, without the accrued and unpaid interest on such Note to, but excluding, the Redemption Date. The Redemption Date must be a Business Day.
 
Section 16.04.  Tax Redemption. (a) If the Company has, or on the next Interest Payment Date would, become obligated to pay to the Holder of any Note Additional Amounts that are more than a de minimis amount, as a result of:
 
(i)           any change or amendment on or after September 9, 2021 (or, in the case of a jurisdiction that becomes a Relevant Taxing Jurisdiction after such date, after such later date) in the laws or any rules or regulations of a Relevant Taxing Jurisdiction; or
 
(ii)          any change on or after September 9, 2021 (or, in the case of a jurisdiction that becomes a Relevant Taxing Jurisdiction after such date, after such later date) in an interpretation, administration or application of such laws, rules or regulations by any legislative body, court, governmental agency, taxing authority or regulatory or administrative authority of such Relevant Taxing Jurisdiction (including the enactment of any legislation and the announcement or publication of any judicial decision or regulatory or administrative interpretation or determination);
 
(each, a “Change in Tax Law”), the Company may, at its option, redeem all but not part of the Notes (except in respect of certain Holders that elect otherwise as described below) on a Redemption Date before the 42nd Scheduled Trading Day immediately preceding the Maturity Date; provided that the Company may only redeem the Notes if: (i) the Company cannot avoid such obligations by taking commercially reasonable measures available to the Company (provided that changing the jurisdiction of incorporation of the Company shall be deemed not to be a commercially reasonable measure); and (ii) the Company delivers to the Trustee an opinion of outside legal counsel of recognized standing in the Relevant Taxing Jurisdiction and an Officer’s Certificate attesting to such Change in Tax Law and obligation to pay Additional Amounts (such redemption, a “Tax Redemption”).
 
(b)          The Redemption Price for a Tax Redemption shall be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the Redemption Date, including, any Additional Amounts with respect to such Redemption Price; provided, however, that if the Redemption Date occurs after a Regular Record Date and on or

73
prior to the corresponding Interest Payment Date, then (i) the Company shall pay on the Interest Payment Date the full amount of accrued and unpaid interest, if any, due on such Interest Payment Date to the record Holder of the Notes on the Regular Record Date corresponding to such Interest Payment Date, and (ii) the Redemption Price payable to the Holder who presents a Note for the Tax Redemption shall be equal to 100% of the principal amount of such Note, including, for the avoidance of doubt, any Additional Amounts with respect to such Redemption Price, but without the accrued and unpaid interest on such Note to, but excluding, the Redemption Date. The Redemption Date must be a Business Day.
 
(c)          Upon receiving the Redemption Notice for a Tax Redemption, each Holder shall have the right to elect to not have its Notes redeemed, in which case the Company shall not be obligated to pay any Additional Amounts on any payment with respect to such Notes solely as a result of such Change in Tax Law that resulted in the obligation to pay such Additional Amounts (whether upon conversion, required repurchase in connection with a Fundamental Change, maturity or otherwise, and whether in cash, ADSs, or a combination thereof, Reference Property or otherwise) after the Redemption Date (or, if the Company fails to pay the Redemption Price on the Redemption Date, the date on which the Redemption Price has been paid or duly provided for), and all future payments with respect to such Notes shall be subject to the deduction or withholding of such Relevant Taxing Jurisdiction and taxes required by law to be deducted or withheld as a result of such Change in Tax Law; provided that, notwithstanding the foregoing, if a Holder electing not to have its Notes redeemed converts its Notes in connection with a Tax Redemption pursuant to Section 14.03(g), the Company shall be obligated to pay Additional Amounts, if any, with respect to such conversion.
 
Section 16.05.  Redemption Notice. (a) To call any Notes for a redemption pursuant to Article 16, the Company shall (x) provide a Redemption Notice not less than 44 Scheduled Trading Days but no more than 60 Scheduled Trading Days before the Redemption Date (provided that if the Company elects Physical Settlement for conversions that occur during the related Redemption Period, the Company may provide not less than 10 Business Days’ nor more than 30 Business Days’ notice before the Redemption Date) to the Trustee, the Conversion Agent (if other than the Trustee), the Paying Agent (if other than the Trustee) and each Holder of Notes selected for redemption, and (y) simultaneously therewith, publish a notice on the Company’s website or through such other public medium as the Company may use at that time containing the information set forth in the Redemption Notice.
 
(b)          Such Redemption Notice must state:
 
(i)           that the Notes have been called for redemption, briefly describing the Company’s redemption right under this Supplemental Indenture;
 
(ii)          the Redemption Date for such redemption;
 
(iii)         the Redemption Price per US$1,000 principal amount of Notes (and, if the Redemption Date is after a Regular Record Date and on or before the next Interest Payment Date, the amount, manner and timing of the interest payment payable);
 
(iv)         the name and address of the Paying Agent and the Conversion Agent;
 
74
(v)          that Notes called for redemption may be converted at any time during the related Redemption Period;
 
(vi)         the Conversion Rate in effect on the Redemption Notice Date for such redemption and a description and quantification of any adjustments to the Conversion Rate that may result from such redemption (including pursuant to Section 14.03(g));
 
(vii)        the Settlement Method that will apply to all conversions of Notes with a Conversion Date that occurs on or after such Redemption Notice Date and on or before the second Business Day before such Redemption Date; and
 
(viii)       the CUSIP and ISIN numbers, if any, of the Notes.
 
Section 16.06.  Conversion Election. Subject to the applicable procedures of DTC in the case of Global Notes, a Holder electing to not have its Notes redeemed pursuant to this Article 16 must deliver to the Company, with a copy to the Paying Agent a written notice of election so as to be received by the Company and the Paying Agent or otherwise by complying with the requirements for conversion in Section 14.02(b) prior to the close of business on the second Business Day immediately preceding the Redemption Date. A Holder may withdraw any notice of election (other than such a deemed notice of election in connection with a conversion) by delivering to the Company and the Paying Agent a written notice of withdrawal prior to the close of business on the Business Day immediately preceding the Redemption Date (or, if the Company fails to pay the Redemption Price on the Redemption Date, the Business Day immediately preceding the date on which the Redemption Price has been paid or duly provided for). If no election is made, the Holder shall have its Notes redeemed without any further action.
 
No Notes may be redeemed if the principal amount of the Notes has been accelerated, and such acceleration has not been rescinded, on or prior to the Redemption Date (except in the case of an acceleration resulting from a Default by the Company in the payment of the Redemption Price with respect to such Notes).
 
ARTICLE 17
Miscellaneous Provisions
 
Section 17.01.  Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained in the Indenture shall bind its successors and assigns whether so expressed or not.
 
Section 17.02.  Official Acts by Successor Corporation. Any act or proceeding by any provision of the Indenture authorized or required to be done or performed by any board, committee or Officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the Company.
 
Section 17.03.  Addresses for Notices, Etc.
 
75
So long as and to the extent that the Notes are represented by Global Notes and such Global Notes are held by DTC, notices to owners of beneficial interests in the global notes may be given by delivery of the relevant notice to DTC for communication by it to entitled account holders.
 
Section 17.04.  Legal Holidays. Section 16.05 of the Base Indenture shall, with respect to the Notes, be superseded in its entirety by this Section 17.04, and any reference in the Base Indenture to Section 16.05 shall, with respect to the Notes, be deemed to refer instead to this Section 17.04, as the context may require. In any case where any Interest Payment Date, Fundamental Change Repurchase Date, Redemption Date, Conversion Date or Maturity Date is not a Business Day, then any action to be taken on such date need not be taken on such date, but may be taken on the next succeeding Business Day with the same force and effect as if taken on such date, and no interest shall accrue on such payment in respect of the delay.
 
Section 17.05.  Governing Law; Waiver of Trial by Jury. This Supplemental Indenture and the Notes shall be deemed to be contracts made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State.
 
EACH OF THE COMPANY AND THE TRUSTEE HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SUPPLEMENTAL INDENTURE.
 
Section 17.06 No Security Interest Created.  Nothing in the Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction.
 
Section 17.07.  Benefits of Indenture. Nothing in this Supplemental Indenture expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed to confer upon, or to give to, any Person other than the parties hereto and their successors and the Holders of the Notes any benefit or any right, remedy or claim under or by reason of the Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all covenants, conditions, stipulations, promises and agreements in the Indenture contained shall be for the sole and exclusive benefit of the parties hereto and their successors and of the Holders of the Notes.
 
Section 17.08.  Execution in Counterparts.This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile, PDF or other electronic transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile, PDF or such other electronic means shall be deemed to be their original signatures for all purposes. Unless otherwise provided in this Supplemental Indenture or in any Note, the words “execute,” “execution,” “signed” and

76
“signature” and words of similar import used in or related to any document to be signed in connection with this Supplemental Indenture, any Note or any of the transactions contemplated hereby (including amendments, waivers, consents and other modifications) shall be deemed to include electronic signatures and the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature in ink or the use of a paper-based recordkeeping system, as applicable, to the fullest extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other similar state laws based on the Uniform Electronic Transactions Act; provided that, notwithstanding anything herein to the contrary, the Trustee is not under any obligation to agree to accept electronic signatures in any form or in any format except for facsimile and PDF unless expressly agreed to by the Trustee pursuant to procedures approved by the Trustee.
 
Section 17.09.  Severability. If any provision hereof shall be held to be invalid, illegal or unenforceable under applicable law, then the remaining provisions hereof shall be construed as though such invalid, illegal or unenforceable provision were not contained herein.
 
Section 17.10.  Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations called for under the Notes. These calculations include, but are not limited to, determinations of the Last Reported Sale Prices of the ADSs, the Daily VWAPs, the Daily Conversion Values, the Daily Settlement Amounts, accrued interest payable on the Notes, the number of Additional ADSs to be added to the Conversion Rate upon a Make-Whole Fundamental Change, if any, and the Conversion Rate of the Notes. The Company shall make all these calculations in good faith and, absent manifest error, the Company’s calculations shall be final and binding on Holders. The Company shall provide a schedule of its calculations to each of the Trustee, the Paying Agent (if other than the Trustee) and the Conversion Agent (if other than the Trustee), and each of the Trustee, the Paying Agent and the Conversion Agent is entitled to rely conclusively and without liability upon the accuracy of the Company’s calculations without independent verification. The Trustee will forward the Company’s calculations to any registered Holder of Notes upon the written request of that Holder at the sole cost and expense of the Company. Neither the Trustee nor the Conversion Agent will have any responsibility to make calculations under this Supplemental Indenture, nor will either of them have any responsibility to monitor the Company’s stock or trading price, determine whether the conditions to convertibility of the Notes have been met or determine whether the circumstances requiring changes to the Conversion Rate have occurred.
 
Section 17.11.  USA PATRIOT Act. The parties hereto acknowledge that in accordance with Section 326 of the USA PATRIOT Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee. The parties to the Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the USA PATRIOT Act.
 
77
[Remainder of page intentionally left blank]
 
78
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first written above.
 
 
SEA LIMITED
     
  By:
/s/ Forrest Xiaodong Li
   
Name:
 Forrest Xiaodong Li
   
Title:
Chairman and Group Chief Executive Officer

 
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
     
  By:
/s/ Hallie E. Field
   
Name:
 Hallie E. Field
   
Title:
Vice President

EXHIBIT A
 
[FORM OF FACE OF NOTE]
 
[For Inclusion in a Global Security only -- UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
 
A-1
SEA LIMITED
 
0.25% Convertible Senior Note due 2026
 
No. [_____]
[Initially]1 US$_________
   
CUSIP No. [_________]
  
   
ISIN No. [___________]
  

Sea Limited, a company duly organized and validly existing under the laws of the Cayman Islands (the “Company,” which term includes any successor company or corporation or other entity under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to [CEDE & CO.]2 [_______]3, or registered assigns, the principal sum [as set forth in the “Schedule of Exchanges of Notes” attached hereto]4 [of US$[_______]]5, which amount, taken together with the principal amounts of all other outstanding Notes, shall not, unless permitted by the Indenture, exceed US$2,875,000,000, in accordance with the rules and procedures of the Depositary, on September 15, 2026, and interest thereon as set forth below.
 
This Note shall bear interest at the rate of 0.25% per year from September 14, 2021, or from the most recent date to which interest had been paid or provided for to, but excluding, the next scheduled Interest Payment Date until September 15, 2026. Interest is payable semi-annually in arrears on each March 15 and September 15, commencing on March 15, 2022, to Holders of record at the close of business on the preceding March 1 and September 1 (whether or not such day is a Business Day), respectively. Additional Interest will be payable as set forth in Section 6.04 of the within-mentioned Indenture, and any reference to interest on, or in respect of, any Note therein shall be deemed to include Additional Interest if, in such context, Additional Interest is, was or would be payable pursuant to Section 6.04, and any express mention of the payment of Additional Interest in any provision therein shall not be construed as excluding Additional Interest in those provisions thereof where such express mention is not made.
 
Any Defaulted Amounts shall accrue interest per annum at the rate per annum borne by the Notes, subject to the enforceability thereof under applicable law, from, and including, the relevant payment date to, but excluding, the date on which such Defaulted Amounts shall have been paid by the Company, at its election, in accordance with Section 2.04 of the Indenture.
 
The Company shall pay the principal of and interest on this Note, so long as such Note is a Global Note, by wire transfer in immediately available funds to the Depositary or its nominee, as the case may be, as the registered Holder of such Note. As provided in and subject to the provisions of the Indenture, the Company shall pay the principal of any Notes (other than Notes


1 Include if a Global Note.
2 Include if a Global Note.
3 Include if a Physical Note.
4 Include if a Global Note.
5 Include if a Physical note.

A-2
that are Global Notes) at the office or agency designated by the Company for that purpose. The Company has initially designated the Trustee as its Paying Agent, Conversion Agent and Registrar in respect of the Notes and its Corporate Trust Office as a place where Notes may be presented for payment or for registration of transfer.
 
Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions giving the Holder of this Note the right to convert this Note into cash, ADSs or a combination of cash and ADSs, as applicable, on the terms and subject to the limitations set forth in the Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.
 
This Note, and any claim, controversy or dispute arising under or related to this Note, shall be construed in accordance with and governed by the laws of the State of New York (without regard to the conflicts of laws provisions thereof).
 
In the case of any conflict between this Note and the Indenture, the provisions of the Indenture shall control and govern.
 
This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed manually by the Trustee under the Indenture.
 
[Remainder of page intentionally left blank]
 
A-3
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
 
 
SEA LIMITED
   
 
By:
  
 
Name:
 
Title:

Dated:
 
TRUSTEE’S CERTIFICATE OF AUTHENTICATION
 
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of the Notes described
in the within-named Indenture.
 
By:
  

Authorized signatory

A-4
[FORM OF REVERSE OF NOTE]
 
SEA LIMITED
 
0.25% Convertible Senior Note due 2026
 
This Note is one of a duly authorized issue of Notes of the Company, designated as its 0.25% Convertible Senior Notes due 2026 (the “Notes”), limited to the aggregate principal amount of US$2,875,000,000, all issued or to be issued under and pursuant to an Indenture dated as of September 14, 2021 (the “Base Indenture”), as amended and supplemented by the First Supplemental Indenture dated as September 14, 2021, (herein called the “Supplemental Indenture”; the Base Indenture, as amended and supplemented by the Supplemental Indenture, and as it may be further amended or supplemented from time to time, the “Indenture”), each between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Notes. Additional Notes may be issued in an unlimited aggregate principal amount, subject to certain conditions specified in the Indenture.
 
In case certain Events of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of, and interest on, all Notes may be declared, by either the Trustee or Holders of at least 25% in aggregate principal amount of Notes then outstanding, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions and certain exceptions set forth in the Indenture. In case certain Events of Default relating to a bankruptcy (or similar proceeding) with respect to the Company or a Significant Subsidiary of the Company shall have occurred, the principal of, and interest on, all Notes shall automatically become immediately due and payable, as set forth in the Indenture.
 
Subject to the terms and conditions of the Indenture, the Company will make all payments in respect of the principal amount on the Maturity Date, the Redemption Price and the Fundamental Change Repurchase Price, as the case may be, to the Holder who surrenders a Note to the Trustee to collect such payments in respect of the Note. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts.
 
Subject to the terms and conditions of the Indenture, Additional Amounts will be paid in connection with any payments made and deliveries caused to be made by the Company or any successor to the Company under or with respect to the Indenture and the Notes, including, but not limited to, payments of principal (including, if applicable the Redemption Price and the Fundamental Change Repurchase Price), payments of interest and the payment of cash and/or deliveries of ADSs (together with payments for any fractional ADS) upon conversion of the Notes to ensure that the net amount received by the Holder after any applicable withholding or deduction (and after deducting any taxes on the Additional Amounts) will equal the amount that would have been received by such Holder had no such withholding or deduction been required.
 
A-5
The Indenture contains provisions permitting the Company and the Trustee in certain circumstances, without the consent of the Holders of the Notes, and in certain other circumstances, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures modifying the terms of the Indenture and the Notes as described therein. It is also provided in the Indenture that, subject to certain exceptions, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of all of the Notes waive any past Default or Event of Default under the Indenture and its consequences.
 
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay or cause to be delivered, as the case may be, the principal (including the Redemption Price and the Fundamental Change Repurchase Price, if applicable) of, accrued and unpaid interest on, and the consideration due upon conversion of, this Note at the place, at the respective times, at the rate and in the lawful money or ADSs, as the case may be, herein prescribed.
 
The Notes are issuable in registered form without coupons in minimum denominations of US$1,000 principal amount and integral multiples of US$1,000 in excess thereof. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations, without payment of any service charge but, if required by the Company or Trustee, with payment of a sum sufficient to cover any transfer or similar tax that may be imposed in connection therewith as a result of the name of the Holder of the new Notes issued upon such exchange of Notes being different from the name of the Holder of the old Notes surrendered for such exchange.
 
The Company may not redeem the Notes prior to the Maturity Date, except in the event of an Optional Redemption, a Cleanup Redemption or a Tax Redemption as described in Article 16 of the Supplemental Indenture. No sinking fund is provided for the Notes.
 
Upon the occurrence of a Fundamental Change, the Holder has the right, at such Holder’s option, to require the Company to repurchase for cash all of such Holder’s Notes or any portion thereof (in principal amounts of US$1,000 or integral multiples thereof) on the Fundamental Change Repurchase Date at a price equal to the Fundamental Change Repurchase Price.
 
Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, during certain periods and upon the occurrence of certain conditions specified in the Indenture, prior to the close of business on the second Scheduled Trading Day immediately preceding the Maturity Date, to convert any Notes or portion thereof that is US$1,000 or an integral multiple thereof, into cash, ADSs or a combination of cash and ADSs, as applicable, at the Conversion Rate specified in the Indenture, as adjusted from time to time as provided in the Indenture.
 
Terms used in this Note and defined in the Indenture are used herein as therein defined.
 
A-6
ABBREVIATIONS
 
The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations:
 
TEN COM = as tenants in common

UNIF GIFT MIN ACT = Uniform Gifts to Minors Act

CUST = Custodian

TEN ENT = as tenants by the entireties

JT TEN = joint tenants with right of survivorship and not as tenants in common

Additional abbreviations may also be used though not in the above list.
 
A-7
SCHEDULE A6
 
SCHEDULE OF EXCHANGES OF NOTES
 
SEA LIMITED
0.25% Convertible Senior Notes due 2026
 
The initial principal amount of this Global Note is [_______] UNITED STATES DOLLARS (US$[_________]). The following increases or decreases in this Global Note have been made:
 
Date of exchange
 
Amount of
decrease in
principal amount
of this Global Note
  
Amount of
increase in
principal amount
of this Global Note
  
Principal amount
of this Global Note
following such
decrease or
increase
  
Signature of
authorized
signatory of
Trustee
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 

6 Include if a global note.

A-8
ATTACHMENT 1
 
[FORM OF NOTICE OF CONVERSION]
 
To:
SEA LIMITED
 
THE BANK OF NEW YORK MELLON, as Depositary for the ADSs
 
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Conversion Agent
 
The undersigned registered owner of this Note hereby exercises the option to convert this Note, or the portion hereof (that is US$1,000 principal amount or an integral multiple thereof) below designated, into cash, ADSs or a combination of cash and ADSs, as applicable, in accordance with the terms of the Indenture referred to in this Note, and directs that any cash payable and ADSs deliverable upon such conversion, together with any cash payable for any fractional ADS, and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If any ADSs or any portion of this Note not converted are to be issued in the name of a Person other than the undersigned, the undersigned will pay all documentary, stamp or similar issue or transfer taxes, if any in accordance with Section 14.02(d) and Section 14.02(e) of the Supplemental Indenture. Any amount required to be paid to the undersigned on account of interest accompanies this Note.
 
1
Dated:
    


 

     
   
Signature(s)
  
 
Signature Guarantee
 
Signature(s) must be guaranteed
by an eligible Guarantor Institution
(banks, stock brokers, savings and
loan associations and credit unions)
with membership in an approved
signature guarantee medallion program
pursuant to Securities and Exchange
Commission Rule 17Ad-15 if ADSs
are to be issued, or Notes are to be
delivered, other than to and in the
name of the registered holder.
 
Fill in for registration of ADSs if
to be issued, and Notes if to
be delivered, other than to and in the
name of the registered holder:
 
 
 
(Name)
 
 
     
 
 
 
(Street Address)
 
 
 
 
 
 
 
 
(City, State and Zip Code)
Please print name and address
    


 
Principal amount to be converted (if less than all): US$______,000
 
NOTICE: The above signature(s) of the Holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

Social Security or Other Taxpayer
Identification Number

ATTACHMENT 2
 
[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]
 
To:
SEA LIMITED
 
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Paying Agent
 
The undersigned registered owner of this Note hereby acknowledges receipt of a notice from Sea Limited (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and requests and instructs the Company to pay to the registered holder hereof in accordance with Section 15.02 of the Supplemental Indenture referred to in this Note (1) the entire principal amount of this Note, or the portion thereof (that is US$1,000 principal amount or an integral multiple thereof) below designated, and (2) if such Fundamental Change Repurchase Date does not fall during the period after a Regular Record Date and on or prior to the corresponding Interest Payment Date, accrued and unpaid interest thereon to, but excluding, such Fundamental Change Repurchase Date.
 
In the case of Physical Notes, the certificate numbers of the Notes to be repurchased are as set forth below:
 
Certificate Number(s):


Dated:
 

 

     
   
Signature(s)
  

Signature Guarantee
 
Signature(s) must be guaranteed
by an eligible Guarantor Institution
(banks, stock brokers, savings and
loan associations and credit unions)
with membership in an approved
signature guarantee medallion program
pursuant to Securities and Exchange
 
1
Commission Rule 17Ad-15 if ADSs
are to be issued, or Notes are to be
delivered, other than to and in the
name of the registered holder.
 
Fill in for registration of ADSs if
to be issued, and Notes if to
be delivered, other than to and in the
name of the registered holder:
 
 
 
(Name)
 
 
     
 
 
 
(Street Address)
 
 
 
 
 
 
 
 
(City, State and Zip Code)
Please print name and address
    

 
Social Security or Other Taxpayer
Identification Number
 
Principal amount to be repaid (if less than all): US$______,000
 
NOTICE: The above signature(s) of the Holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.
 
ATTACHMENT 3
 
[FORM OF ASSIGNMENT AND TRANSFER]
 
For value received ____________________________ hereby sell(s), assign(s) and transfer(s) unto _________________ (Please insert social security or Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints _____________________ attorney to transfer the said Note on the books of the Company, with full power of substitution in the premises.
 
B-1
Dated:
 
 
 
 
 
 
 
 
Signature(s)
 
 
 
 
Signature Guarantee
 

Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and
credit unions) with membership in an approved
signature guarantee medallion program pursuant
to Securities and Exchange Commission
Rule 17Ad-15 if Notes are to be delivered, other
than to and in the name of the registered holder.
 
NOTICE: The signature on the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.


B-2
Exhibit 8.1
 
List of Principal Subsidiaries and Consolidated Affiliated Entities of Sea Limited

Name of Entity*
Place of Incorporation
Composite Capital Management (Cayman) Limited
Cayman Islands
Foody Limited
Cayman Islands
Garena Limited
Cayman Islands
Happymall Limited
Cayman Islands
Locust Walk A1 Holdings Limited
Cayman Islands
Northern Point Technology Limited
Cayman Islands
Ocha Limited
Cayman Islands
Ray Eagle Limited
Cayman Islands
SCommerce Southeast Asia Limited
Cayman Islands
SCVN Limited
Cayman Islands
Sea Capital Limited
Cayman Islands
SeaIn Limited
Cayman Islands
SeaMoney (Credit) Limited
Cayman Islands
SeaMoney Digital Services Limited
Cayman Islands
SeaMoney Holding Limited
Cayman Islands
SeaMoney Holding PH Limited
Cayman Islands
SeaMoney International Inc.
Cayman Islands
SeaMoney (Payment) Limited
Cayman Islands
SEA Partnerships C1 Holdings Limited
Cayman Islands
Sea Ventures Limited
Cayman Islands
Shopee Express Limited
Cayman Islands
Shopee Limited
Cayman Islands
Shopee Logistics Services Limited
Cayman Islands
SHPS Limited
Cayman Islands
Wahoo Holding Limited
Cayman Islands
Airview Investment Pte. Ltd.
Singapore
Garena International II Private Limited
Singapore
Garena Online Private Limited
Singapore
Garena Mobile Private Limited
Singapore
Garena Ventures Private Limited
Singapore
Garena Vietnam Private Limited
Singapore
Good Mobile Games Private Limited
Singapore
GRNX Private Limited
Singapore
Hevolve Private Limited
Singapore
Lion City Sailors Private Limited
Singapore
MariBank Singapore Private Limited
Singapore
Moco Studios Private Limited
Singapore
Northern Point Technology Private Limited
Singapore
Northern Point Technology II Private Limited
Singapore
Ray Eagle Private Limited
Singapore
SCommerce Private Limited
Singapore
SeaInsure PG Private Limited
Singapore
SeaMoney (Credit) MY Private Limited
Singapore

SeaMoney (Credit) PH Private Limited
Singapore
SeaMoney (Credit) TH Private Limited
Singapore
SeaMoney Holding PH Private Limited
Singapore
SeaMoney (Payment) Private Limited
Singapore
SeaMoney (Payment) TH Private Limited
Singapore
SEA Partnerships S1 Holdings Private Limited
Singapore
SeaTalk Private Limited
Singapore
Shopee Express International I Private Limited
Singapore
Shopee Express International II Private Limited
Singapore
Shopee Express Private Limited
Singapore
Shopee International Private Limited
Singapore
Shopee International II Private Limited
Singapore
Shopee International IV Private Limited
Singapore
Shopee International VI Private Limited
Singapore
Shopee IP Singapore Private Limited
Singapore
Shopee Logistics Services Private Limited
Singapore
ShopeePay Private Limited
Singapore
Shopee Singapore Private Limited
Singapore
Shopee Taiwan Private Limited
Singapore
Shopee Ventures Private Limited
Singapore
SHPS I Private Limited
Singapore
PT Bank SeaBank Indonesia
Indonesia
PT Commerce Finance
Indonesia
PT Danadipa Artha Indonesia
Indonesia
PT Garena Indonesia
Indonesia
PT Gudang SPE Indonesia
Indonesia
PT Nusantara Pasifik Investama
Indonesia
PT Shopee International Indonesia
Indonesia
Garena Technology Private Limited Taiwan Branch
Taiwan
Happymall SCommerce (Taiwan) Co., Ltd.
Taiwan
ShopeePay (Taiwan) Co., Ltd.
Taiwan
Shopee (Taiwan) Co., Ltd.
Taiwan
Shopee Taiwan Private Limited Taiwan Branch
Taiwan
AirPay Joint Stock Company
Vietnam
Busy Bee Company Limited
Vietnam
Ocha Company Limited
Vietnam
Shopee Company Limited
Vietnam
Shopee Express Company Limited
Vietnam
S-Trading Co., Ltd.
Vietnam
Vietnam Esports and Entertainment Joint Stock Company
Vietnam
Garena Online Holding 1 (Thailand) Co., Ltd.
Thailand
Garena Online (Thailand) Co., Ltd.
Thailand
Scommerce (Thailand) Co., Ltd.
Thailand
SeaMoney (Capital) Co., Ltd.
Thailand
SeaMoney Payment Holding 1 Co., Ltd.
Thailand
Shopee Express (Thailand) Co., Ltd.
Thailand
ShopeeFood Co., Ltd.
Thailand

ShopeePay (Thailand) Co., Ltd.
Thailand
Shopee (Thailand) Co., Ltd.
Thailand
SeaMoney (Capital) Holding 1 Co., Ltd.
Thailand
Unicorn (Thailand) Co., Ltd.
Thailand
Unicorn Holding 2 (Thailand) Co., Ltd.
Thailand
SeaBank Philippines, Inc. (A Rural Bank)
Philippines
SeaInsure General Insurance Co., Inc.
Philippines
SeaMoney (Credit) Finance Philippines, Inc. (dba SPayLater and SLoans Philippines)
Philippines
ShopeePay Philippines, Inc.
Philippines
Shopee Philippines Inc.
Philippines
Garena Malaysia Sdn. Bhd.
Malaysia
SCommerce Trading Malaysia Sdn. Bhd.
Malaysia
SeaMoney Capital Malaysia Sdn. Bhd.
Malaysia
Shopee Express Malaysia Sdn. Bhd.
Malaysia
Shopee Mobile Malaysia Sdn. Bhd.
Malaysia
ShopeePay Malaysia Sdn. Bhd.
Malaysia
Beijing Shopee Information Technology Co., Ltd.
China
Dongjing Investment Co., Ltd.
China
Shanghai Dongrui Information Technology Co., Ltd.
China
Shanghai Jingle Information and Technology Co., Ltd.
China
Shanghai Dongyang Information Technology Co., Ltd.
China
Shenzhen Shopee Information Technology Co., Ltd.
China
Shenzhen Shopee Logistics Network Technology Co., Ltd.
China
Composite Capital Management (HK) Limited
Hong Kong
Garena Hong Kong Limited
Hong Kong
Shopee Express Hong Kong Limited
Hong Kong
Shopee Hong Kong Limited
Hong Kong
Turbo Cash Hong Kong Limited
Hong Kong
SHPP Brazil Payment Institution and Payment Services Ltda.
Brazil
SHPS Technology and Services Ltda.
Brazil
SHPX Logistics Ltda.
Brazil
Phoenix Labs, Inc.
United States
Shopee Korea Company Limited
Korea
SPMX Technologies and Services, S.A. de C.V.
Mexico
SHPL sp. z o.o.
Poland
 
*Non-English names have been translated to English.
Exhibit 12.1
 
Certification by the Group Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Forrest Xiaodong Li, certify that:
 
1. I have reviewed this annual report on Form 20-F of Sea Limited (the “Company”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
 
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
 
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
 
Date: April 22, 2022
 
By:
 /s/ Forrest Xiaodong Li
  
Name:
Forrest Xiaodong Li
Title:
Group Chief Executive Officer


 
Exhibit 12.2
 
Certification by the Group Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Tony Tianyu Hou, certify that:
 
1. I have reviewed this annual report on Form 20-F of Sea Limited (the “Company”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
 
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
 
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
 
Date: April 22, 2022
 
By:
 /s/ Tony Tianyu Hou
  
Name:
Tony Tianyu Hou
Title:
Group Chief Financial Officer


Exhibit 13.1
 
Certification by the Group Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
In connection with the Annual Report of Sea Limited (the “Company”) on Form 20-F for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Forrest Xiaodong Li, Group Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
 
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: April 22, 2022
     
By:
 /s/ Forrest Xiaodong Li
  
Name:
Forrest Xiaodong Li
Title:
Group Chief Executive Officer


Exhibit 13.2
 
Certification by the Group Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
In connection with the Annual Report of Sea Limited (the “Company”) on Form 20-F for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tony Tianyu Hou, Group Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
 
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: April 22, 2022
 
By:
 /s/ Tony Tianyu Hou
  
Name:
Tony Tianyu Hou
Title:
Group Chief Financial Officer


Exhibit 15.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements on Form F-3 (No. 333-230021 and No. 333-259389) and Form S-8 (No. 333-222071, No. 333-223551, No. 333-229137, No. 333-232859, No. 333-235799, No. 333-251873 and No. 333-261969) pertaining to Amended and Restated Share Incentive Plan of Sea Limited of our reports dated April 22, 2022, with respect to the consolidated financial statements of Sea Limited and the effectiveness of internal control over financial reporting of Sea Limited included in this Annual Report (Form 20-F) of Sea Limited for the year ended December 31, 2021, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Singapore

April 22, 2022
 
Exhibit 15.2

[Letterhead of Maples and Calder (Hong Kong) LLP]

 
Our ref
VSL/697247-000001/23244631v1

Sea Limited
1 Fusionopolis Place, #17-10, Galaxis
Singapore 138522

April 22, 2022

Dear Sirs

Sea Limited

We have acted as Cayman Islands legal advisers to Sea Limited (the "Company") in connection with the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2021 ("Form 20-F"), filed with the Securities and Exchange Commission under the U.S. Securities Act of 1933.

We hereby consent to the filing of this opinion as an exhibit to the Form 20-F and to the reference to our name in the Form 20-F, and further consent to the incorporation by reference into the Registration Statements on Form S-8 (No. 333-222071, No. 333-223551, No. 333-229137, No. 333-232859, No. 333-235799, No. 333-251873 and No. 333-261969). In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the Rules and Regulations of the Commission thereunder.

Yours faithfully

/s/ Maples and Calder (Hong Kong) LLP
 
Maples and Calder (Hong Kong) LLP
Exhibit 15.3

[Letterhead of LCS & Partners]
 
April 22, 2022
 
To:
Sea Limited
1 Fusionopolis Place
#17-10, Galaxis
Singapore 138522

Re: Annual Report on Form 20-F of Sea Limited

Dear Sirs or Madams:

We hereby consent to the filing of this letter as an exhibit to the annual report on Form 20-F for the year ended December 31, 2021 of Sea Limited with the U.S. Securities and Exchange Commission and to the references to our name in such annual report, and further consent to the incorporation by reference into the Registration Statements on Form S-8 (No. 333-222071, No. 333-223551, No. 333-229137, No. 333-232859, No. 333-235799, No. 333-251873 and No. 333-261969). In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the rules and regulations of the U.S. Securities and Exchange Commission thereunder.

 
Sincerely yours,
   
 
/s/ LCS & Partners
   
 
LCS & PARTNERS


Exhibit 15.4

[Letterhead of Kudun and Partners Company Limited]

TO:
Sea Limited
DATE: April 22, 2022
 
1 Fusionopolis Place
  
 
#17-10, Galaxis
  
 
Singapore 138522
  
 


FROM:
Kudun and Partners Company Limited
  
 
23rd Floor, Unit C and F
  
 
Gaysorn Tower, 127 Ratchadamri Road
  
 
Lumpini, Pathumwan, Bangkok, 10330, Thailand
  
     
Re: Annual Report on Form 20-F of Sea Limited
  

Dear Sir/Madam,

We hereby consent to the filing of this letter as an exhibit to the annual report on Form 20-F for the year ended December 31, 2021 of Sea Limited with the U.S. Securities and Exchange Commission and to the references to our name in such annual report, and further consent to the incorporation by reference into the Registration Statements on Form S-8 (No. 333-222071, No. 333-223551, No. 333-229137, No. 333-232859, No. 333-235799, No. 333-251873 and No. 333-261969). In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the rules and regulations of the U.S. Securities and Exchange Commission thereunder.

Sincerely,

/s/ Kudun and Partners Company Limited

Kudun and Partners Company Limited
Exhibit 15.5

[Letterhead of Rajah & Tann Singapore LLP]

SEA LIMITED
Private and Confidential
1 Fusionopolis Place
#17-10, Galaxis
Singapore 138522
  

SENDER’S REF
  
RECIPIENT’S REF
  
DATE
  
PAGE
TQY/337339/00033
  
-
  
22 April 2022
  
1/1

Dear Sirs,

Re: Annual Report on Form 20-F of Sea Limited

We hereby consent to the filing of this letter as an exhibit to the annual report on Form 20-F for the year ended December 31, 2021 of Sea Limited with the U.S. Securities and Exchange Commission and to the references to our name in such annual report, and further consent to the incorporation by reference into the Registration Statements on Form S-8 (No. 333-222071, No. 333-223551, No. 333-229137, No. 333-232859, No. 333-235799, No. 333-251873 and No. 333-261969). In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the rules and regulations of the U.S. Securities and Exchange Commission thereunder.

Yours faithfully

/s/ Rajah & Tann Singapore LLP

RAJAH & TANN SINGAPORE LLP