EXHIBIT 10.33
EXECUTION COPY
CONFIDENTIAL TREATMENT REQUESTED; PORTIONS OMITTED FROM
THE PUBLICLY-FILED DOCUMENT AND FOR WHICH CONFIDENTIAL
TREATMENT IS REQUESTED ARE DENOTED BY AN ASTERISK
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SHAREHOLDERS' AGREEMENT
by and among
SHENZHEN HUAWEI INVESTMENT & HOLDING CO. LTD.,
3COM TECHNOLOGIES
and
HUAWEI-3COM CO., LTD.
DATED AS OF NOVEMBER 15, 2003
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS.................................................... 2
SECTION 1.01. Certain Defined Terms................................... 2
SECTION 1.02. Definitions............................................. 7
SECTION 1.03. Interpretation and Rules of Construction................ 8
ARTICLE II ORGANIZATIONAL DOCUMENTS...................................... 9
SECTION 2.01. Memorandum and Articles of Association of the JVCO and
the WFOE........................................................... 9
ARTICLE III CORPORATE GOVERNANCE......................................... 9
SECTION 3.01. Powers of the Board..................................... 9
SECTION 3.02. Directors............................................... 9
SECTION 3.03. Composition of Board.................................... 9
SECTION 3.04. Subsequent Nominations.................................. 10
SECTION 3.05. Removal................................................. 11
SECTION 3.06. Vacancies............................................... 11
SECTION 3.07. Covenant to Vote........................................ 11
SECTION 3.08. Chairman of the Board................................... 11
SECTION 3.09. Committees of the Board................................. 12
SECTION 3.10. Steering Committee...................................... 12
SECTION 3.11. Nomination and Compensation Committee................... 12
SECTION 3.12. Audit Committee......................................... 12
SECTION 3.13. OEM Committee........................................... 13
SECTION 3.14. R&D Committee........................................... 13
SECTION 3.15. Action by the Board..................................... 14
SECTION 3.16. Action by the Shareholders.............................. 16
SECTION 3.17. Approval of Annual Business Plan and Budget and
Long-Term Strategic Plan........................................... 16
SECTION 3.18. Executive Management.................................... 16
SECTION 3.19. Director's Undertaking.................................. 17
SECTION 3.20. Executive's Undertaking................................. 17
ARTICLE IV ADDITIONAL SHAREHOLDER FUNDING................................ 18
SECTION 4.01. Additional Capital Contributions........................ 18
SECTION 4.02. Shareholder Loans....................................... 19
SECTION 4.03. Extraordinary Funding Requirement....................... 19
ARTICLE V RESTRICTIONS ON TRANSFER....................................... 20
SECTION 5.01. General................................................. 20
SECTION 5.02. New Shareholders........................................ 20
SECTION 5.03. Recognition of Transfer by the JVCO..................... 20
SECTION 5.04. Rights of First Refusal on Shares....................... 20
SECTION 5.05. Co-sale Right........................................... 21
SECTION 5.06. Permitted Transferees................................... 22
SECTION 5.07. Participation Rights.................................... 22
SECTION 5.08. Effect of Purchase...................................... 23
SECTION 5.09. Legends................................................. 23
SECTION 5.10. Market Standoff......................................... 24
SECTION 5.11. Termination............................................. 24
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TABLE OF CONTENTS
(Continued)
PAGE
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ARTICLE VI SALES MATTERS AND OEM ARRANGEMENTS............................ 24
SECTION 6.01. Principal Products of the JVCO.......................... 24
SECTION 6.02. *....................................................... 24
SECTION 6.03. *....................................................... 24
SECTION 6.04. Sales of 3Com Products and 3Com Branded Products........ 25
SECTION 6.05. Designated Territory Determinations..................... 25
SECTION 6.06. *....................................................... 26
SECTION 6.07. *....................................................... 26
SECTION 6.08. Passive Sales........................................... 26
SECTION 6.09. General................................................. 26
ARTICLE VII ADDITIONAL AGREEMENTS........................................ 26
SECTION 7.01. Financial Information................................... 26
SECTION 7.02. Access to Information................................... 26
SECTION 7.03. *....................................................... 27
SECTION 7.04. Confidentiality......................................... 27
SECTION 7.05. Product Branding........................................ 27
SECTION 7.06. Cooperation Regarding Research and Development.......... 27
SECTION 7.07. Ownership of Net Outstanding Shares..................... 28
SECTION 7.08. Dividend Policy......................................... 28
ARTICLE VIII CALL OPTION; TERMINATION.................................... 28
SECTION 8.01. Call Option Upon Certain Events......................... 28
SECTION 8.02. Call Option After Third Anniversary..................... 30
SECTION 8.03. 3Com Option to Purchase................................. 30
SECTION 8.04. Termination............................................. 31
ARTICLE IX TAX MATTERS................................................... 31
SECTION 9.01. Operational Tax Matters................................. 31
ARTICLE X GENERAL PROVISIONS............................................. 32
SECTION 10.01. Conflict with Memorandum and Articles of Association
of the JVCO or the Articles of Association of the WFOE............. 32
SECTION 10.02. Further Action......................................... 32
SECTION 10.03. Indemnities............................................ 32
SECTION 10.04. Expenses............................................... 34
SECTION 10.05. Notices................................................ 34
SECTION 10.06. Public Announcements................................... 35
SECTION 10.07. Severability........................................... 35
SECTION 10.08. Entire Agreement....................................... 36
SECTION 10.09. Assignment............................................. 36
SECTION 10.10. No Third Party Beneficiaries........................... 36
SECTION 10.11. Amendment and Waiver................................... 36
SECTION 10.12. Governing Law.......................................... 36
SECTION 10.13. Dispute Resolution..................................... 36
SECTION 10.14. Counterparts........................................... 37
SECTION 10.15. Languages.............................................. 37
SECTION 10.16. Specific Performance................................... 37
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TABLE OF CONTENTS
(Continued)
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SCHEDULES:
Schedule A Initial Shareholders
Schedule B-1 *
Schedule B-2 *
Schedule C *
Schedule D *
EXHIBITS:
Exhibit A Memorandum and Articles of Association of the JVCO
Exhibit B Articles of Association of the WFOE
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SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of November 15, 2003, by and among
SHENZHEN HUAWEI INVESTMENT & HOLDING CO. LTD., a limited liability company
organized and existing under the laws of the People's Republic of China ("Huawei
Holding"), 3COM TECHNOLOGIES, a corporation organized under the laws of the
Cayman Islands and a wholly owned subsidiary of 3Com Corporation ("3Com") ("3Com
Technologies" and, together with 3Com, the "3Com Parties") and HUAWEI-3COM CO.,
LTD., a company incorporated under the laws of Hong Kong (the "JVCO"; each of
the JVCO, Huawei Holding and 3Com Technologies, a "Party" and, collectively, the
"Parties"). Capitalized terms that are used herein shall have the respective
meanings ascribed thereto in Article I.
WITNESSETH:
WHEREAS, Huawei Holding owns a 51% equity interest in the JVCO and 3Com
Technologies owns a 49% equity interest in the JVCO;
WHEREAS, Huawei Holding owns a 99.99% equity interest in Huawei
Technologies Co., Ltd., a limited liability company organized and existing under
the laws of the People's Republic of China ("Huawei Technologies" and, together
with Huawei Holding, the "Huawei Parties");
WHEREAS, the Parties desire to improve upon currently available and
complementary technologies, create new technologies and develop new products;
WHEREAS, the Parties desire to combine complementary distribution channels
and gain access to new markets for existing products or for new products for
distribution into existing markets;
WHEREAS, Huawei Technologies, 3Com and 3Com Technologies entered into the
Contribution Agreement providing for the establishment of the JVCO for the
purpose of conducting their combined enterprise data communications businesses
in the People's Republic of China (the "PRC");
WHEREAS, the Contribution Agreement provides that Huawei Technologies and
3Com Technologies shall contribute to the JVCO and to Hangzhou Huawei
Holding-3Com Technology Co., Ltd., a wholly owned subsidiary of the JVCO
organized under the laws of the PRC (the "WFOE" and, together with the JVCO, the
"JVCO Entities") the Huawei Contributed Assets and the 3Com Contributed Assets
(as such terms are defined in the Contribution Agreement), respectively;
WHEREAS, Huawei Technologies transferred its shares in the JVCO to Huawei
Holding (the "Share Transfer") on November 3, 2003;
WHEREAS, Huawei Holding, Huawei Technologies, 3Com and 3Com Technologies
entered into a Supplemental Agreement to the Contribution Agreement (the
"Supplemental Agreement"), dated as of the Closing Date, to reflect the Share
Transfer and other developments since the date of execution of the Contribution
Agreement;
WHEREAS, the execution of this Agreement is a condition to the obligations
of Huawei Holding, Huawei Technologies and the 3Com Parties to consummate the
transactions contemplated by the Contribution Agreement and the Supplemental
Agreement; and
WHEREAS, as a condition of the consummation of the transactions
contemplated by the Contribution Agreement and the Supplemental Agreement,
Huawei Holding, Huawei Technologies and the 3Com Parties have agreed that,
concurrently with the execution of this Agreement, (a) Huawei Technologies, 3Com
Technologies and the JVCO shall enter into the Transition Services Agreement,
(b) Huawei Technologies, 3Com, 3Com Technologies, the JVCO and the WFOE shall
enter into the Indemnification Agreement, (c) Huawei Technologies, the JVCO and
the Predecessor Entity (as defined in the Contribution Agreement) shall enter
into the Huawei License Agreement, (d) 3Com Technologies, the JVCO and the
Predecessor Entity shall enter into the 3Com License Agreement and (e) 3Com,
Huawei Technologies and the JVCO shall enter into the OEM Agreements.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth and intending to be legally bound hereby,
the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. For purposes of this
Agreement:
"3Com Brand" means a trademark owned by 3Com.
"3Com License Agreement" means the License Agreement to be entered into by
and among 3Com Technologies, the JVCO and the Predecessor Entity on the Closing
Date.
"3Com Products" means the products set forth on Schedule D, as may be
amended from time to time by the OEM Committee.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. For the
purposes of this Agreement, the JVCO Entities, the Huawei Parties and the 3Com
Parties are not Affiliates of each other.
"Agreement" or "this Agreement" means this Shareholders' Agreement, dated
as of the Closing Date, by and among Huawei Holding, 3Com Technologies and the
JVCO (including the Exhibits and Schedules hereto) and all amendments hereto
made in accordance with the provisions of Section 10.11.
"Board" means the board of directors of the JVCO.
"Business" means the research, development, manufacture, marketing and sale
of JVCO Products.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by applicable Law to be closed in Hong
Kong.
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"Carrier Customers" means telecommunications service providers, including
incumbent local exchange carriers, interexchange carriers, post, telephone and
telegraph administrations, competitive local exchange carriers, wireless service
providers, internet service providers and other alternative service providers
that mediate communications between a multitude of unaffiliated customers. With
respect to an entity with a discrete business unit that primarily provides any
of the services described above, "Carrier Customer" means only such discrete
business unit of such entity.
"Change of Control" with respect to a Party means any transaction or series
of related transactions in which a Person or group (within the meaning of Rule
13d-1 of the Exchange Act), in each case excluding the other Party or any of its
Affiliates, shall have acquired, directly or indirectly, including pursuant to a
sale of assets, tender offer, exchange offer, merger, consolidation, joint
venture, business combination, recapitalization, liquidation, dissolution or
similar transaction, more than 50% of the then outstanding voting power of such
Party or all or substantially all the assets of such Party.
"Closing" and "Closing Date" have the meanings specified in the
Contribution Agreement.
"Code" means the Internal Revenue Code of 1986, as amended through the date
hereof.
"Confidential Information Agreement" means the Amended and Restated
Confidential Information Agreement, dated as of the Closing Date, by and among
Huawei Technologies, 3Com and the JVCO (including the Exhibits and Schedules
thereto) and all amendments thereto.
"Contributed Assets" has the meaning set forth in the Contribution
Agreement.
"Contribution Agreement" means the Contribution Agreement, dated as of
March 19, 2003, by and among Huawei Technologies, 3Com and 3Com Technologies
(including the Exhibits and Schedules thereto) and all amendments thereto.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract, credit
arrangement or otherwise, including the ownership, directly or indirectly, of
securities or ownership interests having the power to elect a majority of the
board of directors or similar body governing the affairs of such person.
"Co-Ownership Agreement" means the Co-Ownership Agreement to be entered
into by and between the WFOE and the JVCO at or prior to the Closing.
"Director" means a member of the Board.
"Encumbrance" means any security interest, pledge, mortgage, lien, charge,
lease, license, encumbrance, servient easement, adverse claim, reversion,
restrictive covenant, condition or restriction of any kind, including any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership, or any right of termination,
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amendment, acceleration, suspension, revocation, cancellation, right of first
refusal, right of first offer, put right, obligation to tender or similar
transfer restriction.
"Enterprise Customers" shall mean all customers other than Carrier
Customers.
"Equity Equivalents" means any (a) Shares and (b) outstanding rights to
acquire Shares or other equity interests in the JVCO (including any securities
exercisable for or otherwise convertible into equity securities of the JVCO),
measured on an as-converted to ordinary shares basis.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
"Financial Statements" means true and complete copies of the consolidated
audited balance sheet of the JVCO as of the last day of the JVCO's fiscal year
and the related statements of income, retained earnings, shareholders' equity
and cash flows of the JVCO for the fiscal year, together with all related notes
and schedules thereto, prepared in accordance with U.S. GAAP, accompanied by the
report thereon of the JVCO's independent auditors.
"Governmental Authority" means any foreign, federal, national,
supranational, state, provincial, municipal, local, or similar government,
governmental, regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body.
"Hong Kong" means the Hong Kong Special Administrative Region of the PRC.
"Huawei Brand" means a trademark owned by Huawei Technologies.
"Huawei Contributed Product Designs" means the designs and Technology for
Huawei Technologies' LAN switch products (excluding LAN switch 8016) and low-end
and mid-range (46xx series and below) router products, as more fully described
in Exhibit C to the Huawei License Agreement.
"Huawei Contributed Products" means products manufactured by or for the
JVCO Entities and based on the Huawei Contributed Product Designs.
"Huawei License Agreement" means the License Agreement to be entered into
by and among Huawei Technologies, the JVCO and the Predecessor Entity on the
Closing Date.
"Huawei Products" means the products set forth on Schedule C, as may be
amended from time to time by the OEM Committee.
"IAS" means international accounting standards.
"Indemnification Agreement" means the Indemnification Agreement to be
entered into by and among, Huawei Technologies, 3Com, 3Com Technologies, the
JVCO and the WFOE at the Closing.
"Intellectual Property Rights" means all rights in intellectual property of
any type throughout the world, including but not limited to the following: (a)
patents and patent applications, including provisionals, continuations,
continuations-in-part, reissues, reexaminations and extensions thereof and all
other rights corresponding thereto throughout
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the world; (b) trade secrets and all other rights in know-how and confidential
or proprietary information and all other rights corresponding thereto throughout
the world; (c) database rights, common law copyrights, copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (d) mask works, mask work registrations and
applications therefor, and any equivalent or similar rights in semiconductor
masks, layouts, architectures or topology; (e) industrial designs and any
registrations and applications therefor throughout the world; (f) rights in
World Wide Web addresses and domain names and applications and registrations
therefor; and (g) trade names, logos, common law trademarks and service marks,
trademark and service xxxx registrations and applications therefore and all
other rights corresponding thereto throughout the world.
"Interim Financial Statements" means true and complete copies of the
consolidated unaudited balance sheet of the JVCO as of the last day of each
fiscal quarter of the JVCO and the related statements of income, retained
earnings, shareholders' equity and cash flows of the JVCO for each such fiscal
quarter, together with all related notes and schedules thereto, prepared in
accordance with U.S. GAAP.
"Inventions" means findings, discoveries, inventions, additions,
modifications, formulations, variations, enhancements, refinements or derivative
works (whether or not patentable).
"JVCO Products" means products manufactured by or for the JVCO Entities
based either on designs for Huawei Contributed Products or designs owned by the
JVCO Entities.
"Law" means any foreign, federal, national, supranational, state,
provincial, municipal, local or similar statute, law, ordinance, regulation,
rule, code, order, requirement or rule of law.
"LIBOR" means London Interbank Offered Rate.
"Net Outstanding Shares" means the then outstanding Equity Equivalents held
by Huawei Holding and its Affiliates and 3Com and its Affiliates, on an
aggregate basis, but excluding any Equity Equivalents issued pursuant to a
Non-participation Issuance.
"OEM" means original equipment manufacturing.
"OEM Agreements" shall mean the following agreements: (a) the "JVCO-Huawei
OEM Agreement" between the JVCO and Huawei Technologies under which the JVCO
will supply JVCO Products to Huawei Technologies for resale by Huawei
Technologies, (b) the "Huawei-JVCO OEM Agreement" between Huawei Technologies
and the JVCO under which Huawei Technologies will supply Huawei Products to the
JVCO for resale by the JVCO, (c) the "JVCO-3Com OEM Agreement" between the JVCO
and 3Com under which the JVCO will supply JVCO Products to 3Com for resale by
3Com, and (d) the "3Com-JVCO OEM Agreement" between 3Com and the JVCO under
which 3Com will supply 3Com Products to the JVCO for resale by the JVCO.
"Other Shareholder" means, (i) in the case of Huawei Holding, 3Com
Technologies and (ii) in the case of 3Com Technologies, Huawei Holding.
"Permitted Encumbrances" means (a) liens for Taxes and other governmental
charges or levies not yet due and payable or that are being contested in good
faith, (b) Encumbrances
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imposed by Law, such as materialmen's, mechanics', carriers', workmen's and
repairmen's liens and other similar liens arising in the ordinary course of
business, (c) pledges and deposits to secure obligations under workers'
compensation Laws or similar legislation or to secure public or statutory
obligations, and (d) in the case of real property, zoning, building or other
restrictions, variances, covenants, rights of way, encumbrances, easements,
minor survey exceptions, and other customary encumbrances on title to real
property that, in each case, do not materially adversely affect the value of
such property or the use of such property.
"Person" means any individual, partnership, firm, corporation, limited
liability company, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"PRC GAAP" means generally accepted accounting principles and practices in
the PRC as in effect from time to time and applied consistently throughout the
periods involved
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Shareholder" means each of Huawei Holding and 3Com Technologies.
"Shares" means any then issued and outstanding equity securities of the
JVCO (or, in the case of Section 5.07, equity securities, or securities
exercisable for or otherwise convertible into equity securities, of the JVCO
proposed to be issued and outstanding). All voting securities of the JVCO shall
be deemed "Shares."
"Subsidiary" or "Subsidiaries" of any Person means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which such Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, more than 50% of the shares or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"Tax" or, collectively, "Taxes" means any and all PRC, United States,
provincial, state, local and other taxes, assessments and other governmental
charges, duties, impositions and liabilities, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts, and any obligations with respect
to such amounts arising as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period or under any agreements
or arrangements with any other Person and including any liability for taxes of a
predecessor or transferor entity.
"Technology" has the meaning set forth in the Huawei License Agreement.
"Transaction Documents" means this Agreement, the Contribution Agreement,
the Supplemental Agreement, the Huawei License Agreement, the 3Com License
Agreement, the OEM Agreements, the Transition Services Agreement, the
Confidential Information Agreement, the Indemnification Agreement and the
Co-Ownership Agreement.
"Transfer" or "Transferred" means the voluntary or involuntary sale,
assignment, transfer (by gift or otherwise), assumption, pledge, hypothecation,
grant of a participation
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interest or other disposition or conveyance of legal or beneficial interest,
directly or indirectly, whether in one transaction or in a series of related
transactions.
"Transition Services Agreement" means the Transition Services Agreement to
be entered into among Huawei Technologies, 3Com and the JVCO on the Closing
Date.
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently throughout
the periods involved.
SECTION 1.02. Definitions. The following terms have the meanings
set forth in the Sections set forth below:
Definition Location
---------- --------
3Com................................................................. Preamble
3Com Branded Products................................................ 6.04(a)
3Com Designated Territories.......................................... 6.02(b)
3Com Directors....................................................... 3.04(d)
3Com Option to Purchase.............................................. 8.03
3Com Parties......................................................... Recitals
3Com Technologies.................................................... Recitals
Additional Capital................................................... 4.01(a)
Affected Shareholder................................................. 8.01(a)
Annual Business Plan and Budget...................................... 3.17
Audit Committee...................................................... 3.12
Bidding Call Option.................................................. 8.02(a)
Bid Price............................................................ 8.02(c)
Cause................................................................ 3.05(b)
Competitive Product.................................................. 7.03(a)
Consideration........................................................ 5.04(a)
Co-sale Closing...................................................... 5.05(a)
Co-sale Period....................................................... 5.05(a)
Co-sale Right........................................................ 5.05(a)
Covered Person....................................................... 10.03(a)
Director's Undertaking............................................... 3.19
Election Event....................................................... 3.03(b)
Excess Contribution.................................................. 4.01(b)
Executive Management................................................. 3.18
Executive's Undertaking.............................................. 3.20
Exercising Shareholder............................................... 8.01(b)
Fair Value........................................................... 4.01(b)
Fundamental Decision................................................. 3.15(a)
Huawei Holding....................................................... Preamble
Huawei Holding Directors............................................. 3.04(d)
Huawei Parties...................................................... Recitals
Huawei Technologies................................................. Recitals
IPO.................................................................. 5.07(c)
Issuance Notice...................................................... 5.07(a)
JVCO................................................................. Preamble
JVCO Designated Territories.......................................... 6.02(c)
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Definition Location
---------- --------
JVCO Entities........................................................ Recitals
Long-Term Strategic Plan............................................. 3.17
Nomination and Compensation Committee................................ 3.11
Non-participation Issuance........................................... 5.07(c)
Non-selling Shareholder.............................................. 5.04(b)
Notice of Exercise................................................... 5.04(b)
OEM Committee........................................................ 3.13
Option Exercise Notice............................................... 8.01(b)
Option Price......................................................... 8.01(c)
Participating Shareholder............................................ 5.05(a)
Participating Shareholder Shares..................................... 5.05(a)
Participation Exercise Period........................................ 5.07(a)
Participation Purchase Price......................................... 5.07(a)
Party or Parties..................................................... Preamble
Permitted Transferee................................................. 5.06
PRC.................................................................. Recitals
Predecessor Entity................................................... Recitals
Price of an Excess Share............................................. 4.01(b)
Pro Rata Share....................................................... 4.01(a)
R&D Committee........................................................ 3.14
Sale Notice.......................................................... 5.04(a)
Sale Price........................................................... 5.04(a)
Sale Property........................................................ 5.04(a)
Selling Shareholder.................................................. 5.04(a)
Share Transfer....................................................... Recitals
Steering Committee................................................... 3.10
Supplemental Agreement............................................... Recitals
Tax Matters Partner.................................................. 9.01(a)
Third Party.......................................................... 5.04(a)
Triggered Call Option................................................ 8.01(a)
WFOE................................................................. Recitals
SECTION 1.03. Interpretation and Rules of Construction. (a) The
headings contained in this Agreement, in any Exhibit or Schedule hereto and in
the table of contents to this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. All
Schedules or Exhibits annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein.
(b) In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties, and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any provisions of this
Agreement.
(c) The definitions of the terms herein shall apply equally to the
singular and the plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include,"
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"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." The word "will" shall be construed to have the same meaning and
effect as the word "shall." Unless the context requires otherwise (i) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or otherwise set forth in the Transaction Documents), (ii) any reference herein
to any Person shall be construed to include the Person's successors and
permitted assigns, (iii) the words "herein," "hereof" and "hereunder," and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, and (iv) all references herein to
Articles, Sections, Schedules or Exhibits shall be construed to refer to
Articles, Sections, Schedules or Exhibits of this Agreement. The terms "dollars"
and "US$" shall mean United States dollars.
ARTICLE II
ORGANIZATIONAL DOCUMENTS
SECTION 2.01.Memorandum and Articles of Association of the JVCO
and the WFOE. Attached hereto as Exhibit A and Exhibit B are true and correct
copies of the Memorandum and Articles of Association of the JVCO and the
Articles of Association of the WFOE, respectively, as in effect on the date
hereof.
ARTICLE III
CORPORATE GOVERNANCE
SECTION 3.01. Powers of the Board. The Board shall have the
powers and authority set forth in the JVCO's Memorandum and Articles of
Association. Except as specifically provided for in this Agreement, no Director
or group of Directors acting without the consent and approval of the Board as
specified in Section 3.15 has the power to bind the JVCO or the WFOE.
SECTION 3.02. Directors. Subject to Section 3.04, the Board shall
initially consist of nine Directors, with five Directors designated by Huawei
Holding and four Directors designated by 3Com Technologies. In the event 3Com
and its Affiliates collectively hold at least 49% of the Net Outstanding Shares
immediately prior to the exercise of the 3Com Option to Purchase, and the 3Com
Option to Purchase is exercised, then the Board and the JVCO shall, immediately
after the closing of such 3Com Option to Purchase, take all actions required to
reconstitute the Board to consist of nine Directors, with five Directors
designated by 3Com Technologies and four Directors designated by Huawei Holding.
Except as otherwise provided in this Agreement or the JVCO's Memorandum and
Articles of Association, the number of Directors may not be increased or
decreased.
SECTION 3.03. Composition of Board. (a) As of the date hereof,
the members of the Board shall be as follows:
Xx. Xxxxx Xxxxxxx - Chairman (Director designated by 3Com Technologies);
Ms. Sun Yafang (Director designated by Huawei Holding);
Mr. Xxx Xxxxxxxx (Director designated by Huawei Holding);
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Xx. Xxx Ping (Director designated by Huawei Holding);
Ms. Ji Ping (Director designated by Huawei Holding);
Xx. Xxxxx Shusheng (Director designated by Huawei Holding);
Xx. Xxxxxx Xxxxxxx (Director designated by 3Com Technologies);
Xx. Xxxx Xxxxxx (Director designated by 3Com Technologies); and
Xx. Xxxx Xxxx (Director designated by 3Com Technologies).
(b) Unless a Director resigns or is removed pursuant to Section 3.05,
each Director shall hold office until the next annual or special meeting of
shareholders of the JVCO at which Directors are elected to the Board, or until
the members of the Board are otherwise elected by written consent (an "Election
Event"). SECTION
3.04. Subsequent Nominations. At the first annual meeting of
shareholders or at any subsequent Election Event, (a) (i) prior to the exercise
of the 3Com Option to Purchase, for so long as Huawei Holding and 3Com
Technologies together with their respective Affiliates own 51% and 49%,
respectively, of the Net Outstanding Shares, Huawei Holding and 3Com
Technologies shall be entitled to designate five and four individuals
respectively, to serve as members of the Board; and (ii) following the closing
of the 3Com Option to Purchase, if exercised, for so long as Huawei Holding and
3Com Technologies with their respective Affiliates own 49% and 51%,
respectively, of the Net Outstanding Shares, Huawei Holding and 3Com
Technologies shall be entitled to designate four and five individuals
respectively, to serve as members of the Board.
(b) In the event that each of Huawei Holding and 3Com Technologies
(with their respective Affiliates) owns 50% of the Net Outstanding Shares, then
the number of Directors shall be increased to ten and each of Huawei Holding and
3Com Technologies shall then be entitled to designate five Directors.
(c) In the event that Huawei Holding's and 3Com Technologies'
(together with their respective Affiliates) respective and relative Net
Outstanding Share ownership changes in a manner not otherwise contemplated by
this Section 3.04, then Huawei Holding and 3Com Technologies shall negotiate in
good faith to change the composition of the Board to reflect their respective
ownership of the Net Outstanding Shares.
(d) In each event, Directors designated by Huawei Holding shall be
referred to herein as the "Huawei Holding Directors" and Directors designated by
3Com Technologies shall be referred to herein as the "3Com Directors."
(e) No failure to elect a Director at an Election Event shall prevent
Huawei Holding or 3Com Technologies from thereafter filling the respective
vacancy in accordance with this Article III, or shall constitute a waiver of
such Shareholder's rights hereunder.
(f) Each Shareholder agrees to vote any Shares owned by it to cause
the election of each designated Huawei Holding Director or 3Com Director, as the
case may be, to the Board, and the JVCO agrees to take all necessary action to
cause the election of each such designee to the Board.
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SECTION 3.05. Removal. (a) Upon written request of Huawei Holding
or 3Com Technologies to remove any Director that it is entitled to designate
pursuant hereto (whether or not for Cause), the Other Shareholder shall consent
in writing to such removal and shall take or cause to be taken all actions
reasonably necessary to remove such Director. Any replacement Director shall be
designated by the Shareholder seeking removal and elected as provided in Section
3.06(a). Except as required by the second sentence of Section 3.02, neither 3Com
Party shall take any action to cause the removal of any Huawei Holding Directors
without Cause and Huawei Holding shall not take any action to cause the removal
of any 3Com Directors without Cause.
(b) Notwithstanding the foregoing, each Shareholder hereby agrees that
any Director designated pursuant to Section 3.04 hereof may be removed for Cause
if Shareholders holding or representing two-thirds of the Net Outstanding Shares
consent in writing to such removal. "Cause" shall mean the commission by a
Director of an indictable offense, or the commission by a Director of an act
affecting the JVCO or the WFOE that constitutes bad faith, gross negligence or
willful misconduct.
SECTION 3.06. Vacancies. (a) In the event that a vacancy is
created on the Board at any time by the death, disability, retirement,
resignation or removal (with or without Cause) of any Director, the remaining
Huawei Holding Directors, in the case of a vacancy created by a Huawei Holding
Director, and the remaining 3Com Directors, in the case of a vacancy created by
a 3Com Director, shall have the right to designate a replacement Director to
fill such vacancy. Each Shareholder agrees to vote all Shares owned by it in
favor of the election of each such replacement designee to the Board, and the
JVCO agrees to take all necessary action promptly to cause the election of each
such replacement designee to the Board.
(b) Notwithstanding any other provision in this Agreement, any
individual designated pursuant to this Section 3.06 by Huawei Holding or 3Com
Technologies may not previously have been a Director who was removed from the
Board for Cause.
SECTION 3.07. Covenant to Vote. (a) Each Shareholder shall, from
and after the date hereof, take all actions necessary to call, or cause the JVCO
and the appropriate officers and Directors of the JVCO to call, a special or
annual meeting of shareholders and to vote all Shares owned or held of record by
such Shareholder at any such annual or special meeting in favor of all actions,
or take all actions by written consent in lieu of any such meeting, necessary to
effect the intent of this Article III.
(b) Except as otherwise contemplated hereby, no Shareholder shall
enter into any agreements or arrangements of any kind with respect to the voting
of the Shares or deposit any Shares in a voting trust or other similar
arrangement.
SECTION 3.08. Chairman of the Board. For so long as 3Com
Technologies, together with its Affiliates, shall own at least 49% of the Net
Outstanding Shares, the Chairman of the Board shall be the Director so
designated by 3Com Technologies, and 3Com Technologies may redesignate another
Director as Chairman at any time. In the event that 3Com Technologies, together
with its Affiliates, shall own less than 49% of the Net Outstanding Shares, then
the Chairman of the Board shall be designated by Huawei Holding. The initial
Chairman of the Board shall be Xx. Xxxxx Xxxxxxx.
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SECTION 3.09. Committees of the Board. The Board may, by
resolution passed by a majority of the members thereof, designate one or more
committees, and, unless otherwise stated herein, each committee shall consist of
two or more Directors, and at least one member of each committee shall be a
Huawei Holding Director and at least one member of each committee shall be a
3Com Director. Except for the OEM Committee, each committee of the Board shall
consist of a relative number of Huawei Holding Directors and 3Com Directors that
is as equivalent as practicable to the relative number of Huawei Holding
Directors and 3Com Directors on the Board. In the event 3Com and its Affiliates
collectively hold at least 49% of the Net Outstanding Shares immediately prior
to the exercise of the 3Com Option to Purchase, and the 3Com Option to Purchase
is exercised, the Board and the JVCO shall, immediately after the closing of
such 3Com Option to Purchase, take all actions required to reconstitute each
committee of the Board, other than the OEM Committee, to consist of a relative
number of Huawei Holding Directors and 3Com Directors that is as equivalent as
practicable to the relative number of Huawei Holding Directors and 3Com
Directors designated in accordance with the second sentence of Section 3.02
above. The Board may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee; provided, however, that, with respect to Directors designated as
alternates, only a Huawei Holding Director may replace an absent or disqualified
committee member that is a Huawei Holding Director and only a 3Com Director may
replace an absent or disqualified committee member that is a 3Com Director.
SECTION 3.10. Steering Committee. The Board shall designate a
steering committee (the "Steering Committee"), which shall be composed of two or
more members, at least one of whom shall be a Huawei Holding Director and at
least one of whom shall be a 3Com Director, subject to the terms of Section
3.09. Regular meetings of the Steering Committee shall be held at least
quarterly during each fiscal year. The purpose of the Steering Committee shall
be, among other things, to (a) pre-approve the Annual Business Plan and Budget
and the Long-Term Strategic Plan, (b) guide strategic thinking of the JVCO and
(c) formulate and recommend to the Board actions that would assist the JVCO to
achieve its long-term objectives.
SECTION 3.11. Nomination and Compensation Committee. The Board
shall designate a nomination and compensation committee (the "Nomination and
Compensation Committee"), which shall be composed of two or more members, at
least one of whom shall be a Huawei Holding Director and at least one of whom
shall be a 3Com Director, subject to the terms of Section 3.09. Regular meetings
of the Nomination and Compensation Committee shall be held at least
semi-annually during each fiscal year. The purpose of the Nomination and
Compensation Committee shall be, among other things, to (a) review and recommend
to the Board the appropriate salary, bonus and benefit levels of the senior
management of the JVCO and the WFOE, (b) formulate the overall compensation
principles and benefit plans for the employees of the JVCO and the WFOE and (c),
subject to Section 3.18 below, when required due to a vacancy, nominate and
appoint replacement members of the Executive Management. Notwithstanding
anything to the contrary set forth herein, the Nomination and Compensation
Committee shall not be authorized or permitted to nominate, elect, designate or
otherwise appoint any Director to serve on the Board (or on the board of
directors of the WFOE or any of its Affiliates or successors in interest).
SECTION 3.12. Audit Committee. The Board shall designate an audit
committee (the "Audit Committee"), which shall be composed of two or more
members, at least one of whom shall be a Huawei Holding Director and at least
one of whom shall be a
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3Com Director, subject to the terms of Section 3.09. Regular meetings of the
Audit Committee shall be held at least quarterly during each fiscal year. The
purpose of the Audit Committee shall be, among other things, to (a) review and
recommend to the Board the selection and appointment of the JVCO's independent
auditors, (b) review and make recommendations to the Board regarding the
internal audit functions of the JVCO and the WFOE, (c) review the JVCO's
accounting systems, and (d) review the JVCO's Financial Statements, Interim
Financial Statements and accounting principles.
SECTION 3.13. OEM Committee. The Board shall designate an OEM
committee (the "OEM Committee"), which shall be composed of two members, one of
whom shall be a Huawei Holding Director and one of whom shall be a 3Com
Director, subject to the terms of Section 3.09. Regular meetings of the OEM
Committee shall be held at least quarterly during each fiscal year and as
necessary to hear and resolve disputes or concerns between the Parties
(including, for purposes of this Section 3.13, 3Com and Huawei Technologies)
relating to the application of the terms of Article VI below (other than Section
6.03(f) and Section 6.03(g)), subject to Section 10.13 hereof. The 3Com Parties
and the Huawei Parties (and their respective Affiliates) agree to abide by, and
to cause their respective Affiliates to abide by, the decisions of the OEM
Committee. The OEM Committee shall also review and approve decisions made on
behalf of the JVCO regarding the implementation of all OEM agreements of the
JVCO, including the OEM Agreements, with respect to OEM matters that are
material to the JVCO, including (a) new OEM partners, (b) initial product
specifications and material changes to such specifications, (c) initial product
pricing, margins and royalty rates and any material changes thereto, (d)
initiation or discontinuation of the sale of any products by the JVCO, and (e)
ownership and licensing of new intellectual property created pursuant to such
OEM arrangements. The OEM Committee shall also have the authority to amend
Schedule C and Schedule D. All decisions of the OEM Committee regarding these
and other JVCO matters to be decided by the OEM Committee must be unanimous.
Unanimous decisions of the OEM Committee with respect to matters under its
jurisdiction shall be binding upon the Board of Directors of the JVCO. In the
event that the OEM Committee fails to make a unanimous decision with respect to
any particular matter under its jurisdiction, such matter shall constitute a
Fundamental Decision (as defined in Section 3.15) that must be approved by the
affirmative vote of at least two-thirds of the Directors, which shall include
at least one (1) Huawei Holding Director and one (1) 3Com Director. The Parties
intend to further discuss and refine the scope and operation of the OEM
Committee following the execution of this Agreement.
SECTION 3.14. R&D Committee. The Board shall designate a research
and development committee (the "R&D Committee"), which shall be composed of two
or more members, at least one of whom shall be a Huawei Holding Director and at
least one of whom shall be a 3Com Director, subject to the terms of Section
3.09. Regular meetings of the R&D Committee shall be held at least quarterly
during each fiscal year. The purpose of the R&D Committee shall be to administer
and otherwise make decisions with respect to research and development activities
relating to and on behalf of the JVCO, including, to (a) discuss the research
and development direction of the JVCO, the Huawei Parties and the 3Com Parties
and determine product areas that are most suitable for the focus of the research
and development efforts of the JVCO, (b) identify research and development
projects that can be jointly undertaken by, and leverage the respective
strengths of, the JVCO, the Huawei Parties and the 3Com Parties, (c) determine
the research and development roadmap and resource allocation for the JVCO, (d)
selectively consider outsourcing projects when neither the JVCO nor 3Com has the
research and development capabilities to meet a
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particular market requirement, (e) ensure that research and development
decisions are made quickly, with due consideration for time-to-market
objectives, and (f) review disclosures regarding Inventions of the JVCO and make
timely determinations regarding the filing, prosecution and maintenance of
Intellectual Property Rights.
SECTION 3.15. Action by the Board. Except as otherwise provided
by this Section 3.15 or by applicable Law:
(i) Meetings of the Board shall be held at least once every three
months, unless otherwise agreed to by Huawei Holding and 3Com Technologies.
Regular meetings of the Board shall be held upon not less than seven days'
notice to each Director; provided, however, that such notice may be waived in
writing. Special meetings of the Board may be called by a majority of the
members of the Board. Special meetings of the Board shall be held upon not less
than 48 hours' notice to each Director; provided, however, that such notice may
be waived in writing. Members of the Board may attend such meetings either in
person or telephonically.
(ii) (x) Prior to the exercise of the 3Com Option to Purchase,
for so long as Huawei Holding and 3Com Technologies with their respective
Affiliates own 51% and 49%, respectively, of the Net Outstanding Shares, at
least five Directors, a majority of whom shall be Huawei Holding Directors and
at least one (1) of whom shall be a 3Com Director, shall be present in person or
by telephone at any meeting of the Board in order to constitute a quorum for the
transaction of business at such meeting; and (y) following the closing of the
3Com Option to Purchase, if exercised, for so long as Huawei Holding and 3Com
Technologies with their respective Affiliates own 49% and 51%, respectively, of
the Net Outstanding Shares, at least five Directors, a majority of whom shall be
3Com Directors and at least one (1) of whom shall be a Huawei Holding Director,
shall be present in person or by telephone at any meeting of the Board in order
to constitute a quorum for the transaction of business at such meeting; and (z)
in the event the Shareholders' respective Net Outstanding Share ownership
changes in a manner not otherwise contemplated by this Section 3.15(a)(ii), then
the Shareholders shall negotiate in good faith to change such quorum requirement
to reflect their respective ownership;
(iii) All actions of the Board shall require the affirmative vote
of a majority of the votes cast by the Directors present at a duly convened
meeting of the Board at which a quorum is present or, in lieu of a meeting, by
the unanimous written consent of the members of the Board; provided, however,
that any resolutions covering the following items (each a "Fundamental
Decision") must be approved by the affirmative vote of at least two-thirds of
the Directors, which shall include at least one (1) Huawei Holding Director and
one (1) 3Com Director:
(1) any amendment to the Memorandum and Articles of Association
of the JVCO or any other charter documents of the JVCO (including any amendment
that would change the size of the Board or that would change the relative number
of Directors designated by each of Huawei Holding and 3Com Technologies on the
Board which, for the avoidance of doubt, does not apply to the change in the
number of Directors appointed by 3Com Technologies pursuant to Section 3.02 upon
the exercise of the 3Com Option to Purchase) or the Articles of Association of
the WFOE or any other charter documents of the WFOE;
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(2) any voluntary bankruptcy, liquidation, dissolution or winding
up of the JVCO or the WFOE;
(3) any issuance of capital stock (or rights to acquire capital
stock) by the JVCO or increase or decrease of registered capital of the WFOE,
including the material terms of any such issuance;
(4) any significant merger, acquisition, disposition or other
corporate reorganization or recapitalization of or involving the JVCO or the
WFOE;
(5) payment of dividends by the JVCO or the WFOE (other than the
payment of dividends in accordance with the dividend policy set forth in Section
7.08 hereof);
(6) any determination regarding the amount of profits of the WFOE
necessary to be retained for future growth pursuant to the dividend policy set
forth in Section 7.08 hereof;
(7) other distributions of assets by the JVCO or the WFOE;
(8) any capital contributions to the JVCO by the Shareholders (or
either of them), or loans to the JVCO or the WFOE from the Shareholders (or
either of them);
(9) the Long-Term Strategic Plan or any Annual Business Plan and
Budget, as well as any material deviations from such plans and budgets;
(10) any shift in JVCO or WFOE resource allocation between the
3Com Parties or their Affiliates and other OEM customers to the extent such
shift would have a significant negative impact on the business of the 3Com
Parties or their Affiliates;
(11) any agreement, arrangement or transaction between the JVCO
or any Affiliate of the JVCO on the one hand and Huawei Technologies or 3Com or
any Affiliate of Huawei Technologies or 3Com on the other hand, other than
transactions made in accordance with the terms of any existing agreement,
arrangement or transaction approved in accordance with the terms of the
Transaction Documents;
(12) any material amendment to the Huawei License Agreement, the
3Com License Agreement, any of the OEM Agreements, Section 7.03 herein or any
agreement subject to Section 3.15(a)(iii)(11);
(13) any matter subject to the jurisdiction of the OEM Committee
with respect to which the OEM Committee does not reach a unanimous decision;
(14) except as stipulated in the Annual Business Plan and Budget
as approved by the Board, any borrowing agreement, loan agreement or other
incurrence of debt by the JVCO or the WFOE in excess of US$5 million, either
individually or in the aggregate; and
(15) any sale, exclusive license or other transfer or disposition
of any significant technology or intellectual property of the JVCO or the WFOE.
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(iv) each of the members of the Board may consider the interests
of the Shareholder that appointed such Director to the Board in making any
determination as a Director;
(v) the Chairman shall only have a vote as a Director at the time
of any vote and shall therefore not have a tie-breaking vote; and
(vi) a majority of the Directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place.
(b) In the event a quorum is not present at a duly called meeting of
the Board, such meeting shall be adjourned and postponed and notice of a second
call for such meeting shall be sent to all Directors setting forth a time and
place for the reconvening of the postponed meeting which is not more than 15
days after the date initially set forth for the meeting. At such reconvened
meeting, the quorum requirement shall be the same as set forth in Section
3.15(a)(ii).
SECTION 3.16. Action by the Shareholders. (a) At all meetings of
shareholders of the JVCO, whether annual or special, the holders of a majority
of the Shares entitled to vote thereat, present in person or by proxy, will be
required for and will constitute a quorum for the transaction of business. In
the absence of a quorum, the holders of a majority of the Shares present at the
meeting may adjourn the meeting from time to time. At any such adjourned meeting
at which a quorum will be present, any business may be transacted which might
have been transacted at the meeting as originally called. Notice of the
adjourned meeting will be given to each Shareholder. Notwithstanding the
foregoing, the Shareholders acknowledge that for so long as Huawei Holding and
3Com Technologies, together with their respective Affiliates, each own at least
49% of the Net Outstanding Shares, the presence in person or by proxy of both
Huawei Holding and 3Com Technologies shall be required to constitute a quorum.
(b) If a Fundamental Decision has been approved by the Board in
accordance with Section 3.15(a)(iii), each Shareholder hereby agrees to vote all
Shares held by such Shareholder and its Affiliates in favor of such Fundamental
Decision, including by way of execution of any action by written consent.
SECTION 3.17. Approval of Annual Business Plan and Budget and
Long-Term Strategic Plan. The officers of the JVCO shall, not later than 45 days
prior to the beginning of each fiscal year, submit to the Steering Committee (i)
a proposed business plan for the JVCO that shall include an operating plan, a
capital improvement plan and a budget, including a capital expenditure budget
and an operating budget, for such fiscal year (the "Annual Business Plan and
Budget") and (ii) a rolling long-term strategic direction plan for the JVCO for
the next three to five fiscal years (the "Long-Term Strategic Plan"). Not later
than 10 days prior to the beginning of each fiscal year, the Board shall meet to
discuss the Annual Business Plan and Budget and the Long-Term Strategic Plan
submitted by the officers and shall, subject to Section 3.15(a)(iii)(7), adopt
an Annual Business Plan and Budget for such fiscal year and a Long-Term
Strategic Plan relating to the following three to five fiscal years.
SECTION 3.18. Executive Management. (a) The executive management
of the JVCO (the "Executive Management") shall conduct the day-to-day business
of the JVCO and the WFOE. The Executive Management shall initially consist of a
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chief executive officer, chief operations officer, a chief financial officer, a
controller and a general counsel. Persons to be appointed to each such position
shall be approved by the Board; provided that, until the time of the exercise,
if any, of the 3Com Option to Purchase, the chief executive officer, the chief
operations officer and, subject to the consent of 3Com (not to be unreasonably
withheld), the controller will be appointed by the Huawei Holding Directors and
the chief financial officer and general counsel will be appointed by the 3Com
Directors. The chief executive officer will initially be Mr. Xxx Xxxxxxxx, the
chief operations officer will initially be Xx.Xxxxx Shusheng, the chief
financial officer will initially be Xx. Xxxxx Xx, and the general counsel will
initially be Xx.Xxxxx Xxx. In the event (x) 3Com and its Affiliates collectively
hold at least 49% of the Net Outstanding Shares immediately prior to the
exercise of the 3Com Option to Purchase, (y) the 3Com Option to Purchase is
exercised, and (z) the chief executive officer or the chief operations officer
must thereafter be replaced due to death, disability, retirement, removal or
resignation, then the Nomination and Compensation Committee shall appoint such
replacement, provided that such replacement is unanimously approved in writing
by all members of the Nomination and Compensation Committee.
(b) The Executive Management shall report directly to the Board and
shall be directed and supervised solely by the Board on all matters related to
the JVCO and the WFOE and the operation, management and administration of the
JVCO and the WFOE.
(c) Consistent with the Annual Business Plan and Budget, the Executive
Management shall hire such other employees as they shall deem necessary to
operate the JVCO and the WFOE.
SECTION 3.19. Director's Undertaking. The Shareholders shall
require, as a condition to serving on the Board of the JVCO and the board of
directors of the WFOE, that each of the directors nominated by such Shareholders
execute an agreement with the JVCO, which shall provide that in the case of the
resignation of such director from the Board of the JVCO or the board of
directors of the WFOE, for any or no reason, with or without Cause, such
director shall resign immediately from the board of directors of the other JVCO
Entity on which such director serves (the "Director's Undertaking'). If a
director breaches such Director's Undertaking to which such director is a party
and fails to resign from the board of directors of both JVCO Entities on which
such director serves, the JVCO and the Shareholders shall take all actions
necessary to remove such director from the boards of directors of each JVCO
Entity on which such director serves.
SECTION 3.20. Executive's Undertaking. If any member of the
Executive Management of the JVCO dies, becomes disabled, retires, resigns or is
terminated for any reason or no reason, with or without Cause, such officer
shall be deemed to have resigned from or had such officer's employment
terminated by each of the JVCO and the WFOE. Each of the Shareholders shall
require, as a condition to serving as a member of the Executive Management of
the JVCO or the WFOE, each officer to execute an agreement with the JVCO, which
shall provide that in the case of the resignation of such officer from the JVCO
or the WFOE or termination of such officer's employment with the JVCO or the
WFOE, for any or no reason, with or without cause, such officer shall resign
immediately from the other JVCO Entity that employs such officer (the
"Executive's Undertaking"). If an officer breaches the Executive's Undertaking
to which such officer is a party and fails to resign from each JVCO Entity that
employs such officer, the JVCO and the Shareholders shall take all action
necessary to terminate the employment of such officer from each JVCO Entity that
employs such officer.
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ARTICLE IV
ADDITIONAL SHAREHOLDER FUNDING
SECTION 4.01. Additional Capital Contributions. (a) Subject to
Section 3.15(a)(iii)(6), in the event that the Board determines that (i) the
JVCO requires additional capital ("Additional Capital") in connection with
capital expenditure projects, repayment of indebtedness of the JVCO or otherwise
and (ii) it is necessary to request that Huawei Holding and 3Com Technologies
contribute Additional Capital and such request is made in writing to Huawei
Holding and 3Com Technologies, each of Huawei Holding and 3Com Technologies (or
their designated Affiliates) shall contribute its pro rata share of such
Additional Capital, based on the Equity Equivalents then owned by such
Shareholder (together with its Affiliates) in relation to the Net Outstanding
Shares (its "Pro Rata Share"). Each Shareholder (or its designated Affiliate),
in consideration for its respective contribution, shall receive a number of
additional Shares equal to (x) the amount of such contribution divided by (y)
the quotient determined by dividing (A) the Fair Value of the JVCO determined as
of immediately prior to such contribution of Additional Capital, by (B) the
total number of outstanding Equity Equivalents existing immediately prior to
such contribution of Additional Capital. If Huawei Holding or 3Com Technologies
(or their designated Affiliates) fails to contribute all or any portion of its
Pro Rata Share of the Additional Capital, the Board shall give notice to such
Shareholder, setting forth the amount outstanding. If, after 30 days from
delivery of such notice, the amount remains outstanding, subject to Section
4.01(c), the Other Shareholder shall be entitled, at its sole option and in its
sole discretion, to contribute (or cause a designated Affiliate to contribute)
additional amounts of Additional Capital. If the Shareholder (or its designated
Affiliate) makes an Excess Contribution, such Shareholder (or its designated
Affiliate, as the case may be) shall receive a number of additional Shares equal
to the Excess Contribution divided by the Price of an Excess Share.
(b) For purposes of this Agreement, (i) "Excess Contribution" shall
mean the positive difference, if any, of the amount of Additional Capital
contributed by Huawei Holding or 3Com Technologies (or their designated
Affiliates), as the case may be, above its Pro Rata Share of such Additional
Capital, (ii) "Price of an Excess Share" shall mean the Fair Value of the JVCO
determined as of immediately prior to such contribution of Additional Capital
divided by the total number of outstanding Equity Equivalents existing
immediately prior to such contribution of Additional Capital and (iii) "Fair
Value" means the fair market value of securities or other assets as mutually
determined by the Board of Directors of each of the Shareholders in good faith.
If the Boards of Directors of the Shareholders are unable to reach a mutual
determination of Fair Value within 20 calendar days of the occurrence of the
event to which such determination applies, each Shareholder shall promptly
appoint (at its own expense) a qualified, recognized independent appraiser (such
as, by way of example only, the valuation group of an international accounting
firm or a global investment bank). Those two independent firms shall then submit
their respective determinations of the value of such securities or other assets
as promptly as practicable. If the difference between the two values submitted
equals 10% or less of the higher value, then the average shall be deemed to be
the Fair Value of such securities or assets in question. If the difference
between the two values is greater than 10% of the higher value, then Huawei
Holding and 3Com Technologies shall jointly select a third firm. That third firm
shall be required to choose only between the two previously submitted values,
and shall not be authorized to determine a new, third value. The value chosen by
such third firm shall then be deemed to be the Fair Value.
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(c) Notwithstanding anything herein to the contrary, in the event
Huawei Holding or 3Com Technologies (or their designated Affiliates), as the
case may be, fails to contribute its Pro Rata Share of the Additional Capital in
accordance with Section 4.01(a) above, then the Other Shareholder (or its
designated Affiliate) may make an Excess Contribution only after (i) the JVCO
shall have used commercially reasonable efforts to raise the respective
Additional Capital amount from a bank or other lending institution (provided
that such borrowed funds are available on commercially reasonable terms), and
(ii) such commercially reasonable efforts to raise such funds shall have failed.
(d) Promptly upon the contribution of the Excess Contribution by
Huawei Holding or 3Com Technologies (or their designated Affiliates), as the
case may be, pursuant to this Section, the JVCO shall issue to each Shareholder
(or its designated Affiliate) that receives additional Shares pursuant to this
Section new certificates representing such additional Shares and Schedule A to
this Agreement shall be amended to reflect the issuance of such additional
Shares and, if applicable, to reflect the name of the designated Affiliate
holding such Shares.
(e) Each of the Parties shall use all commercially reasonable efforts
to assist in the determination of the Fair Value of the JVCO, including
providing any information reasonably required for such purpose and having any
directors, officers, management and employees, that may be reasonably required,
assist in this process.
SECTION 4.02. Shareholder Loans. (a) Any Shareholder may make
unsecured loans to the JVCO to the extent requested and approved by the Board
(pursuant to Section 3.15(a)(iii)(6)) and required to fund operations. Such
loans shall be on terms no less favorable to the JVCO than would be available
from nonaffiliated parties, as agreed to by the Board and the lending
Shareholder. Under no circumstances shall a Shareholder be obligated to make
loans to the JVCO.
(b) If any Shareholder shall deliver any funds to the JVCO pursuant to
this Section, the amount of any such advance shall be a debt obligation of the
JVCO to such Shareholder payable and collectible only out of JVCO assets and no
other Shareholder shall have any personal liability in respect of the payment
thereof. Except as provided in Section 4.03 below, no Shareholder may make any
such advance without the prior written consent of the Other Shareholder. No
Shareholder may incur any indebtedness to third parties on behalf of the JVCO
through loans or other means.
SECTION 4.03. Extraordinary Funding Requirement. Notwithstanding
the provisions of this Article IV, if the JVCO requires additional funding and
either of the Shareholders refuses, for a period of 45 days from the date the
matter was first submitted to the Shareholders, to approve such additional
funding pursuant to Section 4.02, then each Shareholder shall be entitled to
make a loan to the JVCO to provide such additional funding, subject to prior
approval of the Board (pursuant to Section 3.15(a)(iii)(6)) but without any
prior approval or authorization of the Shareholders that may be required under
this Agreement or otherwise. Such loan shall not be for a principal amount in
excess of US$10,000,000 and the term of the loan shall not be shorter than two
months and shall not exceed twelve months. The per annum interest rate payable
by the JVCO shall not exceed LIBOR plus 2%, and the remaining terms and
conditions of such Shareholder loan shall be as provided in Section 4.02 above.
If at the end of such term, such loan has not been repaid in full, the remaining
principal amount of such loan shall be
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converted to equity and treated as an Excess Contribution and additional Shares
shall be issued to the lending Shareholder in accordance with Section 4.01.
ARTICLE V
RESTRICTIONS ON TRANSFER
SECTION 5.01. General. Each Shareholder agrees that it will not,
directly or indirectly, make any Transfer of, or create, incur, or assume any
Encumbrance with respect to, any Equity Equivalents, except in accordance with
Section 5.04, Section 5.05, Section 5.06 and Article VIII of this Agreement.
SECTION 5.02. New Shareholders. Any Permitted Transferee of
Huawei Holding, 3Com or 3Com Technologies that becomes a Shareholder after the
date hereof, whether as a transferee of Shares or otherwise, by becoming a
Shareholder, accepts, ratifies and agrees to be bound by all terms and
provisions of the Agreement and by all actions duly taken pursuant to the terms
and provisions of this Agreement prior to the date such Permitted Transferee
became a Shareholder.
SECTION 5.03. Recognition of Transfer by the JVCO. No Transfer of
any Equity Equivalents that is in violation of this Article V shall be valid or
effective, and neither the JVCO nor the Shareholders shall recognize the same.
Neither the JVCO nor the Non-selling Shareholder shall incur any liability as a
result of refusing to make any distributions to the transferee of any such
invalid Transfer.
SECTION 5.04 Rights of First Refusal on Shares. (a) If at any
time a selling Shareholder (a "Selling Shareholder") proposes to sell to a third
party (a "Third Party") all or a portion of its Equity Equivalents (the "Sale
Property"), then such Selling Shareholder will first be required to provide the
Other Shareholder with written notice of such proposed sale (a "Sale Notice"),
which Sale Notice shall set forth the following: (i) the Selling Shareholder's
bona fide intention to sell or otherwise Transfer such Sale Property; (ii) the
name of each proposed Third Party; (iii) a description of the Sale Property;
(iv) the Consideration for which the Selling Shareholder proposes to Transfer
the Sale Property (the "Sale Price"), and (v) all the other material terms and
conditions of the proposed sale. The "Consideration" shall be equal to (x) the
cash purchase price of the Sale Property, or (y) if the consideration is in a
form other than cash, the Fair Value of such Sale Property.
(b) Upon receipt of a Sale Notice from a Selling Shareholder, the
Other Shareholder (the "Non-selling Shareholder") shall then have the right,
subject to Section 5.04(d), to purchase at the Sale Price, all but not a portion
of the Sale Property. The right of the Non-selling Shareholder pursuant to this
Section 5.04(b) will be exercisable by the delivery of notice to the Selling
Shareholder (the "Notice of Exercise") within 30 days after the date of receipt
of the Sale Notice. The right of the Non-selling Shareholder pursuant to this
Section 5.04(b) will terminate if not exercised within 30 days after the date
the Sale Notice is received.
(c) In the event that the Non-selling Shareholder exercises its right
to purchase the Sale Property in accordance with Section 5.04(b), then the
Selling Shareholder will sell such Sale Property to the Non-selling Shareholder
as promptly as practicable after the date of delivery of the Notice of Exercise,
as applicable, at the Sale Price and otherwise on the terms and conditions set
forth in the Sale Notice.
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(d) Upon the consummation of any purchase and sale pursuant to this
Section 5.04, the Selling Shareholder shall deliver its Sale Property, free and
clear of Encumbrances together with duly executed written instruments of
transfer with respect thereto, in form and substance reasonably satisfactory to
the Non-selling Shareholder, against delivery of the Sale Price for such Sale
Property by wire transfer, in immediately available funds, to the account of the
Selling Shareholder designated for such purpose.
(e) If the Selling Shareholder has complied with the provisions of
Section 5.04(a) and the Non-selling Shareholder has determined not to exercise
its right to purchase the Sale Property, then the Selling Shareholder shall have
the right for a period of 45 days from the earlier of (i) the expiration of the
period specified in Section 5.04(b) or (ii) the date on which the Selling
Shareholder receives notice from the Non-selling Shareholder that it will not
exercise its rights under this Section 5.04, to execute definitive documentation
for the sale of the Sale Property to the Third Party specified in the Sale
Notice at a price not less than the Sale Price and for the same Consideration as
set forth in the Sale Notice, and otherwise on terms and conditions not
materially less favorable to the Selling Shareholder than the terms and
conditions set forth in the Sale Notice; provided that (i) such sale will be
consummated in accordance with this Section 5.04, (ii) such sale complies with
the provisions of Section 5.05 with respect to the Co-sale Right of the
Non-selling Shareholder, (iii) such definitive documentation provides for a
reasonable period of time after signing to close such sale and such sale is
actually consummated within such period, and (iv) such sale will not violate any
applicable Laws.
(f) In the event that the Non-selling Shareholder does not exercise
its right to purchase the Sale Property in accordance with this Section 5.04,
and the Selling Shareholder shall not have executed definitive documentation for
the sale of the Sale Property in accordance with Section 5.04(e) before the
expiration of the 45-day period described in Section 5.04(e), then the Selling
Shareholder may not (i) deliver another Sale Notice pursuant to this Section
5.04 for a period of 90 days following the last day of such 45-day period or
(ii) sell all or any portion of the Sale Property without again complying with
the provisions of this Section 5.04.
(g) The provisions of this Section will not apply to any Transfer
pursuant to Section 5.05 or Section 5.06 below, or pursuant to Article VIII
hereof.
SECTION 5.05. Co-sale Right. (a) To the extent that the
Non-selling Shareholder does not exercise its right of first refusal with
respect to the Sale Property pursuant to Section 5.04, then the Non-selling
Shareholder, upon notification to the Selling Shareholder in writing within 15
days after the earlier of (i) the expiration of the period specified in Section
5.04(b) or (ii) the date on which the Selling Shareholder receives notice from
the Non-selling Shareholder that it will not exercise its rights under Section
5.04 (the "Co-sale Period"), shall have the right to participate in such
Transfer of the Sale Property on the same terms and conditions as specified in
the Sale Notice. The Non-selling Shareholder (for purposes of this Section 5.05,
the "Participating Shareholder") shall indicate the number of Equity Equivalents
it (together with its Affiliates) then holds that it wishes to Transfer pursuant
to this Section 5.05(a); provided, however, that the Participating Shareholder's
right to Transfer Equity Equivalents pursuant to this Section 5.05(a) is limited
to an amount up to that number of Equity Equivalents (the "Participating
Shareholder Shares") that is equal to the number of Equity Equivalents set forth
in the Sale Notice multiplied by a fraction, (x) the numerator of which shall be
the number of Equity Equivalents (excluding any Equity Equivalents issued
pursuant to a Non-participation
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Issuance) held by the Participating Shareholder (together with its Affiliates),
and (y) the denominator of which shall be equal to the Net Outstanding Shares
(the "Co-sale Right"). The sale of these Participating Shareholder Shares shall
occur within 15 days from the expiration of the Co-sale Period (the "Co-sale
Closing").
(b) The Participating Shareholder may exercise its Co-sale Right by
delivering to the Selling Shareholder at or before the Co-sale Closing one or
more certificates, or, if applicable, other instruments, properly endorsed for
transfer, representing the Equity Equivalents to be transferred by the Selling
Shareholder on behalf of the Participating Shareholder. At the Co-sale Closing,
such certificates, or if applicable, other instruments, will be transferred and
delivered to the Third Party in consummation of the transfer of the
Participating Shareholder Shares pursuant to the terms and conditions specified
in the Sale Notice, and the Selling Shareholder will remit, or cause to be
remitted, to the Participating Shareholder, within two Business Days after such
closing, that portion of the proceeds of the Transfer to which the Participating
Shareholder is entitled by reason of its participation in such Transfer pursuant
to the Co-sale Right.
(c) In the event that a Shareholder sells or otherwise Transfers any
Equity Equivalents to any Person as permitted by this Section 5.05, any
subsequent sales or other Transfers by such Person shall be subject to all the
terms and conditions of this Section 5.05.
SECTION 5.06. Permitted Transferees. Notwithstanding the
restrictions in this Article V, a Shareholder shall be permitted to Transfer all
or any portion of its Equity Equivalents to an Affiliate of such Shareholder (a
"Permitted Transferee"); provided that (i) the Affiliate shall execute a
statement in writing whereby such Affiliate expressly agrees to receive and hold
such Equity Equivalents subject to all of the provisions of this Agreement and
that there shall be no further transfer of such Equity Equivalents except in
accordance with the provisions of this Agreement, and (ii) if the Permitted
Transferee ceases at any time after any such Transfer to be an Affiliate of the
Shareholder transferor, all Equity Equivalents previously Transferred shall be
required to be Transferred back to the respective Shareholder transferor.
SECTION 5.07. Participation Rights. (a) Prior to any proposed
issuance by the JVCO of Shares, other than a Non-participation Issuance, the
JVCO shall offer to each Shareholder by written notice (the "Issuance Notice")
the right, for a period of 30 days following receipt of such Issuance Notice
(the "Participation Exercise Period"), to purchase, at a purchase price per
Share equal to the purchase price for which the Shares are to be issued (the
"Participation Purchase Price"), up to that number of Shares as is equal to the
total number of Shares to be issued multiplied by a fraction, the numerator of
which is the number of Net Outstanding Shares held by such Shareholder and the
denominator of which is the total number of Net Outstanding Shares as of the
date of the Issuance Notice. The Issuance Notice shall include the number of
Shares, price and any other terms of the offer.
(b) Each Shareholder may accept the JVCO's offer as to the full number
of Shares offered to it or any lesser number, by written notice thereof given by
such Shareholder to the JVCO prior to the expiration of the Participation
Exercise Period, in which event the JVCO shall promptly sell and such
Shareholder shall buy, upon the terms specified, the number of Shares agreed to
be purchased by such Shareholder. The JVCO shall be free at any time prior to 45
days after the expiration of the Participation Exercise Period, to offer and
sell to any Person the remainder of such Shares proposed to be issued by the
JVCO, at a price and on terms no less favorable to the JVCO than those specified
in the Issuance Notice. The
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JVCO shall not sell such Shares as shall not have been purchased within such
45-day period without again complying with this Section 5.07.
(c) A "Non-participation Issuance" is any issuance of Shares:
(i) in consideration for the acquisition (whether by merger or
otherwise) by the JVCO or any of its Subsidiaries of shares of capital stock or
assets of any other entity, in a transaction that has been approved by the
Board;
(ii) in connection with strategic transactions approved by the
Board;
(iii) pursuant to an initial public offering of the JVCO's
capital stock (an "IPO");
(iv) as a dividend, stock split, split-up or similar distribution
of the JVCO's equity securities approved by the Board;
(v) pursuant to options granted to employees, directors or
consultants of the JVCO pursuant to an option plan or other compensation
arrangement approved by the Board;
(vi) to financial institutions or lenders in connection with loan
or credit financing arrangements approved by the Board; and
(vii) upon exercise or conversion of outstanding securities of
the JVCO.
SECTION 5.08. Effect of Purchase. In the event that any Equity
Equivalents are validly purchased, transferred or sold pursuant to this Article
V, Schedule A shall be amended to reflect any changes in the Shareholders'
ownership of Equity Equivalents, and a copy of such amended Schedule A shall be
promptly distributed to each Shareholder. In the event that any Equity
Equivalents of a Shareholder are validly purchased, transferred or sold pursuant
to this Article V to a Third Party, as a condition to any such purchase,
transfer or sale, such Third Party shall execute an amendment to this Agreement
adding such Third Party as a Shareholder (only for purposes of Sections 3.04(f),
3.06(a), 3.07 and 3.16(b), and Article V hereof, but specifically excluding
Section 5.07), but not as an "Other Shareholder," and binding such Third Party
to the terms and conditions of this Agreement.
SECTION 5.09. Legends. The JVCO shall affix to each certificate,
or, if applicable, other instrument, evidencing Equity Equivalents, a legend in
substantially the following form (in addition to any other legends that may be
required under applicable Law):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION OF TRANSFER OF SUCH
SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS SUCH TRANSFER IS MADE
IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH
ACT DOES NOT APPLY.
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THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER AS SET FORTH IN A SHAREHOLDERS' AGREEMENT, DATED AS OF NOVEMBER 15,
2003, AS IT MAY THEREAFTER BE AMENDED, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION WILL BE MADE ON THE
BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED
WITH."
SECTION 5.10. Market Standoff. Each Shareholder hereby agrees
that such Shareholder shall not offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any Shares or other securities of the JVCO or enter
into any swap, hedging or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of any Shares or other
securities of the JVCO held by such Shareholder (other than those included in
the registration or offering) for a period specified by the representative of
the underwriters of Shares (or other securities of the JVCO) not to exceed one
hundred eighty (180) days following the date of the final prospectus used in a
registration of such Shares (or other securities of the JVCO); provided that:
(a) such agreement shall apply only to the IPO;
(b) such agreement shall not apply to any Shares or other securities
of the JVCO purchased in the IPO or purchased in the open market following the
IPO; and
(c) all officers and directors of the JVCO who hold Shares or other
securities of the JVCO and other shareholders who own at least 1% of the JVCO's
capital stock on a fully diluted basis enter into similar agreements.
SECTION 5.11. Termination. Section 5.01, Section 5.04, Section
5.05 and Section 5.07 of this Agreement shall terminate in the event of an IPO.
ARTICLE VI
SALES MATTERS AND OEM ARRANGEMENTS
SECTION 6.01. Principal Products of the JVCO. Consistent with the
Parties' intent to combine their complimentary strengths, the principal products
to be sold by the JVCO shall be current and future generation LAN switch
products, routers (including low-end, mid-range and high-end), which are
currently developed, manufactured and sold by Huawei Technologies, and current
and future generation LAN switch products, hub devices, LAN telephony/VoIP
devices, WLAN (infrastructure and client) and nJack products, which are
currently developed, manufactured and sold by 3Com or 3Com Technologies, and any
substitutes therefor, as well as any other products that are approved from time
to time by the Board.
SECTION 6.02. *
*
SECTION 6.03
(a) *
(b) *
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(c) *
(d) *
(e) *
(f) *
(g) Huawei Technologies and 3Com have entered into an interim
Huawei-3Com OEM agreement, pursuant to which 3Com purchases Huawei Contributed
Products from Huawei Technologies for sale until the termination of such interim
Huawei-3Com OEM agreement in accordance with its terms.
SECTION 6.04. Sales of 3Com Products and 3Com Branded Products.
(a) "3Com Branded Products" means (i) the 3Com Products, and (ii) JVCO Products,
purchased from JVCO under the JVCO-3Com OEM Agreement, under the 3Com Brand.
(b) The JVCO and 3Com shall, concurrently with the execution of this
Agreement, enter into the 3Com-JVCO OEM Agreement, substantially in the form
attached to the Contribution Agreement. The JVCO shall have the exclusive right
to sell 3Com Products purchased from 3Com pursuant to the 3Com-JVCO OEM
Agreement in the PRC (it being understood that, under the terms of the 3Com-JVCO
OEM Agreement, 3Com shall manufacture (or have manufactured) the 3Com Products
for the JVCO).
(c) *
SECTION 6.05. Designated Territory Determinations. Any disputes
over definitions of 3Com Designated Territories or JVCO Designated Territories
on Schedule B-1 and Schedule B-2, respectively, shall be referred to the OEM
Committee for resolution. No portion of Schedule B may be amended without Board
approval, including the affirmative vote of at least one Huawei Holding Director
and one 3Com Director.
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SECTION 6.06. *
(a) *
(b) *
SECTION 6.07. *
SECTION 6.08. Passive Sales. Nothing in this Article VI is
intended by the parties to limit customer choice with respect to the purchase of
any product covered by this Agreement.
SECTION 6.09. General. The parties intend through these
provisions, as they may be amended or clarified hereafter, to establish channels
of distribution that are most effective in creating and expanding sales of the
JVCO's products in competition with other suppliers * . To that end it is the
parties' intention to build upon the complementary product lines, customer
bases, brand names, channels and other assets of the parties, without unduly or
improperly restricting any current or future competition between 3Com and Huawei
Technologies or their Affiliates as independent companies.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Financial Information. The JVCO will prepare and
deliver to each Shareholder: (i) monthly income statements, balance sheet and
financial information (including cash flow) as soon as practicable but in any
event within five Business Days after the end of each month; (ii) Interim
Financial Statements audited by the JVCO's independent auditor as soon as
practicable but in any event within 15 Business Days after the end of each
fiscal quarter; and (iii) Financial Statements that are audited by the JVCO's
independent auditor as soon as practicable but in any event within 20 Business
Days after the end of each fiscal year. Upon request by 3Com Technologies or
Huawei Holding, as the case may be, the JVCO shall provide 3Com Technologies or
Huawei Holding with such additional financial information as each may require to
timely comply with its respective financial and other reporting requirements
under applicable Law. To the extent practicable, the Shareholder requesting such
additional financial information shall use commercially reasonable efforts to
provide such requests for additional information to the JVCO sufficiently in
advance of the required delivery date so as to allow the JVCO to incorporate
such requests into its standard record keeping practices (which shall include
U.S. GAAP, PRC GAAP and IAS record keeping) and minimize the incurrence of
additional expenses for the JVCO. The JVCO will also timely provide 3Com
Technologies and Huawei Holding with copies of all final reports (including
management representation letters, list of adjustments not booked, management
comment letters and the like) delivered by the JVCO's independent auditors.
SECTION 7.02. Access to Information. From and after the date of
the Closing, the JVCO will permit representatives of any of the Shareholders, at
such Shareholder's expense and upon reasonable notice, to obtain all documents
and other information in the possession of the JVCO as may reasonably be
requested in order to enable
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any such Shareholder to monitor its investment in the JVCO and exercise its
rights under this Agreement and the Transaction Documents. The JVCO shall,
promptly following the Closing Date, develop and maintain a stand-alone IT
system with a sufficient interface to the IT systems of each of 3Com and Huawei
Technologies to enable 3Com and Huawei Technologies to comply with their
respective financial and other reporting requirements under applicable Law.
SECTION 7.03. *
(a) * The restriction set forth in this Section 7.03(a) shall remain
in effect until the earlier of the closing of either a Triggered Call Option or
a Bidding Call Option, except with respect to the Shareholder that no longer has
an ownership interest in the JVCO, for which this restriction shall continue in
effect until the expiration of the eighteen-month period following the closing
of such Triggered Call Option or Bidding Call Option. Except as expressly
restricted herein, nothing in this Agreement shall act as a restriction on any
Party to freely sell or distribute any other products manufactured by themselves
or by third parties.
(b) Scope. The covenants set forth in Section 7.03(a) above will be
construed as a series of separate covenants, one for each country, province,
state, city, or other political subdivision in the world. Except for geographic
coverage, each separate covenant will be deemed identical in terms to the
covenants set forth above. If, in any judicial proceeding, a court refuses to
enforce any of the separate covenants (or any part thereof), then such
unenforceable covenant (or such part) will be eliminated from this Agreement to
the extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced. If the provisions of Section 7.03(a) above are deemed
to exceed the time, geographic or scope limitations permitted by applicable Law,
then the provisions will be reformed to the maximum time, geographic or scope
limitations permitted by applicable Laws.
(c) Reasonableness. Each of the Parties hereto acknowledges and agrees
that the limitations of time, geography and scope of activity in this Agreement
are reasonable because, among other things: (i) the Parties are engaged in a
highly competitive industry; (ii) the Parties will have unique access to each
others' trade secrets and know-how including, without limitation, the plans,
strategy, and technology relating to the JVCO Products; (iii) each of the
Parties is receiving significant consideration in the form of a potentially
lucrative business opportunity resulting from the terms of this Agreement and
the Transaction Documents; and (iv) each of the Parties will be able to maintain
a suitable and satisfactory business without violation of this Agreement.
SECTION 7.04. Confidentiality. Confidential Information (as
defined in the Confidential Information Agreement) exchanged under this
Agreement shall be governed by the Confidential Information Agreement.
SECTION 7.05. Product Branding *
SECTION 7.06. Cooperation Regarding Research and Development.
Notwithstanding anything to the contrary contained in this Agreement, the
Shareholders shall, and shall cause their Affiliates to, cause the JVCO to
allocate sufficient capital and resources to ensure (i) adequate
interoperability of JVCO
-27-
Products with the 3Com Parties' products in geographic regions and territories *
, (ii) adequate product roadmaps for JVCO Products and products produced on an
OEM basis for the JVCO, (iii) timely product launches to meet market
requirements in * and other geographic regions and territories, (iv) to the
extent permitted by Law, rationalization of the product offerings of the JVCO
with those of Huawei Technologies and the 3Com Parties, and (v) alignment of the
future research and development activities of the JVCO, Huawei Technologies and
the 3Com Parties, including any outsourced research and development activities.
SECTION 7.07 Ownership of Net Outstanding Shares. Notwithstanding
anything to the contrary contained in this Agreement, in the event that any
Shareholder's relative ownership percentage of Net Outstanding Shares would
increase as a result of any change, event, circumstance or effect (or lack
thereof) or otherwise, including any capital contribution, loan or other
transaction to the extent permitted by this Agreement but excluding any change
in ownership of Net Outstanding Shares as a result of any of the transactions
contemplated by Article VIII hereof, the JVCO and such Shareholder shall take
all action reasonably necessary to provide the Other Shareholder with a
reasonable opportunity to maintain such Other Shareholder's relative ownership
percentage of Net Outstanding Shares.
SECTION 7.08.Dividend Policy. After paying income tax in
accordance with the tax laws of the PRC, the Parties shall cause the WFOE to
allocate to a reserve fund and a bonus and welfare fund for staff and workers
from its profits to the extent required by PRC law. In the event that at least
two-thirds of the Directors, which shall include at least one (1) Huawei Holding
Director and one (1) 3Com Director, determine that retaining an amount from the
WFOE's profits is necessary for future growth pursuant to Section 3.15(iii)(6)
hereof, the WFOE shall retain such amount. Except as otherwise required by law
or as otherwise agreed to in writing by the holders of at least two-thirds of
the then outstanding JVCO Shares, at least once annually: (i) the Parties shall
cause the WFOE to distribute to the JVCO in U.S. dollars its remaining after-tax
profits; and (ii) the JVCO shall distribute all its distributable profits to the
Shareholders after allocating required reserves for the employee equity plan.
Such distribution by the JVCO shall be made to the Shareholders on a pro rata
basis based on their respective shareholdings in the JVCO. This Section 7.08
shall not be amended or modified without the written consent of the holders of
at least two-thirds of the then outstanding JVCO Shares.
ARTICLE VIII
CALL OPTION; TERMINATION
SECTION 8.01. Call Option Upon Certain Events. (a) In the event
(and in such event, with reasonable prior written notice to the Parties hereto)
of (i) the bankruptcy of a Shareholder (or, in the case of 3Com Technologies,
3Com), (ii) the liquidation, dissolution or winding-up of a Shareholder (or, in
the case of 3Com Technologies, 3Com), (iii) the expropriation of a Shareholder's
interest in the JVCO, (iv) the enactment, imposition or enforcement of any Law
that is or would reasonably be expected to be materially adverse to the
business, operations, assets, liabilities, financial condition or results of
operations of the JVCO, taken as a whole, or (v) a Change of Control with
respect to a Shareholder (or, in the case of 3Com Technologies, 3Com) (in each
case, an "Affected Shareholder"), the Other Shareholder shall have the option
(the "Triggered Call Option") to
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require the Affected Shareholder to sell to the Other Shareholder, at the Fair
Value, in the case of a Triggered Call Option triggered by Section 8.01(a)(i) or
at the Bid Price in the case of a Triggered Call Option triggered by Section
8.01(a)(ii) through (v), all of the Equity Equivalents held by the Affected
Shareholder and its Affiliates.
(b) The Triggered Call Option may be exercised by the Other
Shareholder (the "Exercising Shareholder") by delivering to the Affected
Shareholder notice of its intention to exercise such Triggered Call Option (the
"Option Exercise Notice"). In the case of Section 8.01(a)(i), the Option
Exercise Notice shall be irrevocable upon delivery to the Affected Shareholder.
In the case of Section 8.01(a)(ii) through (v), each Bid Price shall be
irrevocable upon delivery to the Other Shareholder in accordance with Section
8.01(d).
(c) In the event the Exercising Shareholder delivers an Option
Exercise Notice pursuant to Section 8.01(a)(i), each of the Parties shall use
all commercially reasonable efforts to assist in the determination of the Fair
Value of the Equity Equivalents (the "Option Price") held by the Affected
Shareholder, including providing any information reasonably required for such
purpose and having any directors, officers, management and employees, that may
be reasonably required, assist in this process.
(d) In the event the Exercising Shareholder delivers an Option
Exercise Notice pursuant to Section 8.01(a)(ii) through (v), the Exercising
Shareholder shall notify the Affected Shareholder of the price per Share (the
"Bid Price") at which it is willing to purchase all of the Affected
Shareholder's Equity Equivalents. The Affected Shareholder shall then be
required to either agree to sell all of its Equity Equivalents to the Exercising
Shareholder at the Bid Price or offer a higher Bid Price to purchase all of the
Exercising Shareholder's Equity Equivalents. This process shall be an iterative
bidding process alternating back and forth between the Shareholders until such
point as one Shareholder elects to sell all of its Equity Equivalents to the
Other Shareholder for the Bid Price being offered by the Other Shareholder. A
Shareholder shall have three (3) Business Days in each round to elect either to
accept the Bid Price of the Other Shareholder and sell its Equity Equivalents or
counter-propose its own Bid Price. In the event that a Shareholder fails to
deliver either such election to the Other Shareholder within any such three (3)
Business Day period, such Shareholder shall be deemed to have elected to accept
the Bid Price of the Other Shareholder and sell its Equity Equivalents. Each Bid
Price under this Section 8.01(d) must exceed the previous Bid Price of the Other
Shareholder by an amount equal to at least 2% of such previous Bid Price.
(e) Any purchase and sale pursuant to this Section 8.01 shall occur at
such date, time and place as the Shareholders shall agree, but in the event of a
failure to so agree, such purchase and sale shall occur no later than on the
15th Business Day following the determination of the Option Price held by the
Affected Shareholder or the Bid Price, as the case may be; provided, however,
such date shall be extended as necessary to permit the Parties to obtain (i) all
approvals of Governmental Authorities, and (ii) all approvals of Third Parties,
in each case, reasonably necessary to effectuate the exercise of the Triggered
Call Option.
(f) Upon the consummation of any purchase and sale pursuant to this
Section 8.01, the Affected Shareholder shall deliver its Equity Equivalents,
free and clear of Encumbrances and other charges together with duly executed
written instruments of transfer with respect thereto, in form and substance
reasonably satisfactory to the Other Shareholder, against delivery of the Option
Price for such Equity Equivalents by wire transfer, in
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immediately available funds, to the account of the Affected Shareholder
designated for such purpose.
(g) Notwithstanding anything to the contrary in this Agreement, the
exercise of the Triggered Call Option pursuant to this Section 8.01 shall not
require the approval or vote of the Board or the Shareholders.
SECTION 8.02. Call Option After Third Anniversary. (a)
Notwithstanding Section 8.01, at any time upon or after the third anniversary of
the Closing Date, each Shareholder shall have the right (the "Bidding Call
Option") to purchase all of the Equity Equivalents held by the Other Shareholder
and its Affiliates, according to the procedure set forth in Section 8.02(b).
(b) The Shareholder electing to exercise its Bidding Call Option set
forth in Section 8.02(a) shall, in connection with its delivery of the Option
Exercise Notice, notify the Other Shareholder of the Bid Price at which it is
willing to purchase all of the Other Shareholder's Equity Equivalents. The
non-exercising Shareholder shall then be required to either agree to sell all of
its Equity Equivalents to the exercising Shareholder at the Bid Price or offer a
higher Bid Price to purchase all of the exercising Shareholder's Equity
Equivalents. This process shall be an iterative bidding process alternating back
and forth between the Shareholders until such point as one Shareholder elects to
sell all of its Equity Equivalents to the Other Shareholder for the Bid Price
being offered by the Other Shareholder. A Shareholder shall have three (3)
Business Days in each round to elect either to accept the Bid Price of the Other
Shareholder and sell its Equity Equivalents or counter-propose its own Bid
Price. In the event that a Shareholder fails to deliver either such election to
the Other Shareholder within any such three (3) Business Day period, such
Shareholder shall be deemed to have elected to accept the Bid Price of the Other
Shareholder and sell its Equity Equivalents. Each Bid Price under this Section
8.02(b) must exceed the previous Bid Price of the Other Shareholder by an amount
equal to at least 2% of such previous Bid Price and shall be irrevocable upon
delivery to the Other Shareholder.
(c) Upon the consummation of any purchase and sale pursuant to this
Section 8.02, the selling Shareholder shall deliver its Shares, free and clear
of Encumbrances and other charges together with duly executed written
instruments of transfer with respect thereto, in form and substance reasonably
satisfactory to the Other Shareholder, against delivery of the Bid Price for
such Shares by wire transfer, in immediately available funds, to the account of
the selling Shareholder designated for such purpose. (d) Notwithstanding
anything to the contrary in this Agreement, the exercise of the Bidding Call
Option pursuant to this Section 8.02 shall not require the approval or vote of
the Board or the Shareholders.
SECTION 8.03. 3Com Option to Purchase. (a) Provided 3Com and its
Affiliates collectively hold at least 49% of the Net Outstanding Shares as of
the second (2nd) anniversary of the Closing Date, 3Com Technologies shall have
the one-time option to purchase from Huawei Holding, on such date, that number
of Shares that is equal to 2% of the Net Outstanding Shares (the "3Com Option to
Purchase"). The aggregate purchase price of these Shares shall be subject to
negotiation between the Shareholders at the time of such purchase, but shall in
no event be greater than US$28,000,000. In the event that the Shareholders fail
to agree on this purchase price, the Shares shall, subject to the preceding
-30-
sentence, be purchased for their Fair Value. 3Com Technologies shall notify
Huawei Holding no later than 60 days prior to the second (2nd) anniversary of
the Closing Date regarding whether 3Com Technologies has chosen to exercise this
one-time option to purchase. 3Com Technologies may assign this right to any of
its Affiliates.
(b) Upon the consummation of the 3Com Option to Purchase pursuant to
this Section 8.03, Huawei Holding shall deliver that number of Shares that is
equal to 2% of the Net Outstanding Shares, free and clear of Encumbrances and
other charges together with duly executed written instruments of transfer with
respect thereto, in form and substance reasonably satisfactory to 3Com, against
delivery of the purchase price for such Shares by wire transfer, in immediately
available funds, to the account of Huawei Holding designated for such purpose.
(c) Notwithstanding anything in the contrary to this Agreement, the
exercise of the 3Com Option to Purchase pursuant to this Section 8.03 shall not
require the approval or vote of the Board or the Shareholders.
SECTION 8.04. Termination. This Agreement shall terminate with
respect to any Shareholder on the date on which such Shareholder no longer owns
any Equity Equivalents; provided, however, that any liabilities or obligations
of such Shareholder arising hereunder on or prior to such date, or based on any
event or circumstance arising on or prior to such date, shall survive
termination of this Agreement.
ARTICLE IX
TAX MATTERS
SECTION 9.01. Operational Tax Matters. (a) As soon as practicable
after the formation of the JVCO, Huawei Holding and 3Com Technologies shall
designate 3Com Technologies as the tax matters partner of the JVCO ("Tax Matters
Partner"), within the meaning of Section 6231(a)(7) of the Code. The Tax Matters
Partner, subject to the authority of the Executive Management, shall be
responsible solely for U.S. federal income tax matters of the JVCO. All other
non-U.S. tax matters shall be the responsibility of the chief financial officer
and his or her other financial officers.
(b) A tax committee shall be formed, which shall be comprised of one
(1) representative from each of 3Com Technologies and Huawei Holding. The tax
committee shall have the right to receive, upon reasonable request, information
regarding Tax matters in respect of the JVCO from the Tax Matters Partner and
the chief financial officer, and advise the Tax Matters Partner and the chief
financial officer with respect to any and all such Tax Matters. In the event of
a disagreement within the tax committee regarding any such Tax matter, either
member thereof may refer the disagreement to the Board, whose decision
(determined by a majority of its directors acting at any meeting during which
such Tax matter is acted upon, provided a quorum of its directors is present
thereat) shall be binding on the Tax Matters Partner and the chief financial
officer in respect of such Tax matter.
(c) 3Com Technologies and Huawei Holding hereby agree that the JVCO
and the WFOE will make an election, or take such other action as may be required
under applicable Law, to cause the JVCO to be treated as a partnership, and the
WFOE to be treated as a disregarded entity, for all U.S. federal, state and
local income tax purposes, and neither
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Huawei Holding nor the 3Com Parties shall, and Huawei Holding and the 3Com
Parties shall cause the JVCO not to, take any action inconsistent with such
treatment.
(d) Huawei Holding and 3Com Technologies shall cause the JVCO to
furnish Huawei Holding and 3Com Technologies with a quarterly statement of such
owner's distributive share, if any, of estimated income, gains, losses,
deductions, and credits for the preceding fiscal quarter. Within 90 days after
the end of each fiscal year, Huawei Holding and 3Com Technologies shall cause
the JVCO to furnish Huawei Holding and 3Com Technologies with a final statement
of such Shareholder's distributive share, if any, of income, gains, losses,
deductions, and credits for the preceding fiscal year.
(e) The fiscal year of the JVCO for tax and accounting purposes shall
be from January 1st to December 31st.
(f) 3Com Technologies and Huawei Holding hereby agree to cooperate and
each use its commercially reasonable efforts to obtain any available Tax
exemption, Tax holiday or other Tax incentive or benefit available to the JVCO,
the WFOE or any Party under the Laws of Hong Kong, the PRC or any other relevant
governmental entity or subdivision.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Conflict with Memorandum and Articles of
Association of the JVCO or the Articles of Association of the WFOE. In the event
that any provision of this Agreement conflicts with any provision of the
Memorandum and Articles of Association of the JVCO or the Articles of
Association of the WFOE, to the extent permitted by applicable Law, the terms of
this Agreement shall control, and each Shareholder shall vote all of the Shares
that it holds of record and shall take all actions necessary to ensure that at
all times the Memorandum and Articles of Association of the JVCO or the Articles
of Association of the WFOE do not conflict with any provision of this Agreement.
SECTION 10.02. Further Action. Upon the terms and subject to the
conditions of this Agreement, each of the Parties shall use its commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable Laws, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and to consummate and
make effective the transactions contemplated hereby, including, without
limitation, the execution, acknowledgement, delivery and filing of the
Memorandum and Articles of Association of the JVCO and Articles of Association
of the WFOE, and any amendments thereto.
SECTION 10.03. Indemnities. (a) The JVCO shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the JVCO) by reason of the fact that he is or was a Director, officer,
employee or agent of the JVCO, or is or was serving at the request of the JVCO
as a director, officer, employee or agent of another corporation, partnership,
joint
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venture, trust or other enterprise (any such person, a "Covered Person"),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the JVCO,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person seeking indemnification did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the JVCO, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) The JVCO shall indemnify any Covered Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by or in the right of the JVCO to procure a judgment
in its favor by reason of the fact that he is or was a Director, officer,
employee or agent of the JVCO, or is or was serving at the request of the JVCO
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the JVCO
and except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to the
JVCO unless and only to the extent that the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which a court
shall deem proper.
(c) To the extent that a Covered Person has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
Section 10.03(a) and Section 10.03(b), or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under Section 10.03(a) and Section 10.03(b)
(unless ordered by a court) shall be made by the JVCO only as authorized in the
specific case upon a determination that indemnification of the Covered Person is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 10.03(a) and Section 10.03(b). Such determination
shall be made (i) by the Board by a majority vote of a quorum consisting of at
least two Directors who were not parties to such action, suit or proceeding or
(ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested Directors so directs, by independent legal counsel in a written
opinion.
(e) Expenses (including attorneys' fees) incurred by a Director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the JVCO in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the JVCO
authorized in this Section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the Board deems appropriate.
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(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any Law, agreement, vote of the Board or disinterested Directors
or otherwise, both as to action in an official capacity and as to action in
another capacity while holding such office. (g) The JVCO may purchase and
maintain insurance on behalf of any Covered Person against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of his status as such.
(h) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a Covered Person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 10.04. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated in this Agreement shall be paid by the Party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
SECTION 10.05. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by facsimile (with written
confirmation), or by registered or certified mail (postage prepaid, return
receipt requested) to the respective Parties at the following addresses (or at
such other address for a Party as shall be specified in a notice given in
accordance with this Section 10.05):
if to 3Com Technologies:
3Com Technologies
c/o 3Com Corporation
000 Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
X.X.X.
Attention: Chief Financial Officer
General Counsel
Telephone: (0-000) 000-0000
Fax: (0-000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
U.S.A.
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (0-000) 000-0000
Fax: (0-000) 000-0000
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if to Huawei Holding:
Shenzhen Huawei Investment & Holding Co., Ltd.
1st Fl., The Mechanical Processing Center
Huawei Industrial Base
Bantian, Longgang
Xxxxxxxx 000000, Xxxxx
Attention: Guo Ping, Executive Vice President
Telephone: (00-000) 0000-0000
Fax: (00-000) 0000-0000
with a copy to:
Shearman & Sterling
Suite 2318, China World Tower II
1 Jianguomenwai Dajie,
Xxxxxxxx Xxxxxxxx
000000 Xxxxxxx, Xxxxx
Attention: Xxx Xxxxxxx, Esq.
Telephone: (00-00) 0000-0000
Fax: (00-00) 0000-0000
If to the JVCO:
Huawei-3Com Co., Ltd.
Rooms 3610-12, 36th Floor, Xxx Xxxxxx
Xx. 00 Xxxxx'x Xxxx, Xxxxxxx, Xxxx Xxxx
Attention: General Counsel
Telephone: (000) 0000-0000
Fax: (000) 0000-0000
SECTION 10.06. Public Announcements. No Party hereto shall make,
or cause to be made, any press release or public announcement in respect of this
Agreement, the other Transaction Documents or the transactions contemplated
hereby or thereby or otherwise communicate with any news media without the prior
written consent of the other Parties, and the Parties shall cooperate as to the
timing and contents of any such press release or public announcement.
Notwithstanding the foregoing, where an announcement is required by Law or stock
exchange rules or regulations, the Party required to make such an announcement
shall notify the other Parties of such (and provide a copy of such to the other
Parties) as soon as practicable in advance of such announcement and, to the
extent practical, take the views of the other Parties in respect of such
announcement into account prior to making such announcement.
SECTION 10.07. Severability. The JVCO is not bound by any
provision of this Agreement to the extent that it constitutes an unlawful xxxxxx
on any statutory power of the JVCO. This shall not affect the validity of the
relevant provision as between the other Parties to this Agreement or the
respective obligations of the other Parties as between themselves. If any term
or other provision of this Agreement is invalid, illegal or incapable of being
enforced by any applicable Law or public policy, all other terms and provisions
of this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner
-35-
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 10.08. Entire Agreement. This Agreement and the other
Transaction Documents constitute the entire agreement of the Parties with
respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, among Huawei Holding, Huawei Technologies,
3Com and 3Com Technologies with respect to the subject matter hereof.
SECTION 10.09. Assignment. This Agreement may not be assigned by
operation of Law or otherwise without the express written consent of each
Shareholder (which consent may be granted or withheld in the sole discretion of
each such Shareholder).
SECTION 10.10. No Third Party Beneficiaries. This Agreement shall
be binding upon and inure solely to the benefit of the Parties and their
permitted assigns and, except as provided in Section 10.03, nothing herein,
express or implied, is intended to or shall confer upon any other Person, any
legal or equitable right, benefit or remedy of any nature whatsoever, under or
by reason of this Agreement.
SECTION 10.11. Amendment and Waiver. (a) This Agreement may not
be amended or modified except (i) by an instrument in writing signed by, or on
behalf of, each Shareholder and acknowledged by the JVCO, or (ii) by a waiver in
accordance with Section 10.11(b).
(b) Any Shareholder may (i) extend the time for the performance of any
of the obligations or other acts of the other Party or Parties, (ii) waive any
inaccuracies in the representations and warranties of the other Parties
contained herein or in any document delivered by the other Parties pursuant
hereto or (iii) waive compliance with any of the agreements or conditions of the
other Parties contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the Parties to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The delay or
failure of any Party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights. Any extension of time or other indulgence
granted to a Party hereunder shall not otherwise alter or affect any power,
remedy or right of any other Party, or the obligations of the Party to whom such
extension or indulgence is granted.
SECTION 10.12. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the Laws of the State of New York
applicable to contracts executed in and to be performed in that State without
regard to conflicts of law.
SECTION 10.13. Dispute Resolution. (a) All disputes between the
Parties arising out of or in connection with this Agreement shall be settled by
the Parties amicably through good faith discussions upon the written request of
any Party hereto. In the
-36-
event that any such dispute cannot be resolved thereby within a period of sixty
(60) calendar days after such written request has been given, any Party may
request resolution by arbitration and the dispute shall be finally settled by
arbitration in Singapore under the Rules of Arbitration of the International
Chamber of Commerce as then in effect. The arbitration shall be conducted by an
arbitral tribunal consisting of three arbitrators appointed in accordance with
the Rules of Arbitration of the International Chamber of Commerce. The award of
the arbitrators shall be final and binding upon the Parties, and shall not be
subject to any appeal.
(b) Each of the Parties participating in an arbitration pursuant to
the terms of this Agreement shall, subject to the award of the arbitrators, pay
an equal share of the arbitrators' fees. The arbitrators shall have the power to
award recovery of all costs (including reasonable attorney's fees,
administrative fees, arbitrators' fees and court costs) to the prevailing Party.
SECTION 10.14. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different Parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.15. Languages. This Agreement is being executed in
both the English and Chinese languages, and both language versions shall be
equally valid and binding.
SECTION 10.16. Specific Performance. The Parties agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the Parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or equity without the necessity of demonstration of the inadequacy
of monetary damages.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have caused this Shareholders'
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SHENZHEN HUAWEI INVESTMENT & HOLDING CO,
LTD.
By: /s/ XXX XXXXXXXX
------------------------------------
Name: Xxx Xxxxxxxx
Title: Chief Executive Officer
3COM TECHNOLOGIES
By: /s/ XXXX X. XXXXXXX
------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President
HUAWEI-3COM CO., LTD.
By: /s/ XXX XXXXXXXX
------------------------------------
Name: Xxx Xxxxxxxx
Title: Chief Executive Officer
Huawei Technologies hereby executes this Agreement with respect to, and
agrees to comply with, the provisions of Article VI and Section 7.03, Section
7.05 and Section 7.06 of this Agreement. In addition, (i) if, to the extent that
and only for so long as Huawei Technologies is deemed under applicable law to be
the legal owner of the Shares subscribed by Huawei Holding or (ii) if Huawei
Technologies succeeds to the interest of Huawei Holding in the JVCO, it will
fulfill all of Huawei Holding's obligations and responsibilities, and enjoy all
of Huawei Holding's rights and benefits under this Agreement, and shall hold
such Shares subject to all of the provisions of this Agreement.
HUAWEI TECHNOLOGIES CO., LTD.
By: /s/ XXX XXXXXXXX
------------------------------------
Name: Xxx Xxxxxxxx
Title: Chief Executive Officer
ACKNOWLEDGED AND AGREED BY:
3COM TECHNOLOGIES
By: /s/ XXXX X. XXXXXXX
---------------------------------
Name: Xxxx X. Xxxxxxx
Title: President
SHENZHEN HUAWEI INVESTMENT & HOLDING CO,
LTD.
By: /s/ XXX XXXXXXXX
---------------------------------
Name: Xxx Xxxxxxxx
Title: Chief Executive Officer
HUAWEI-3COM CO., LTD
By: /s/ XXX XXXXXXXX
---------------------------------
Name: Xxx Xxxxxxxx
Title: Chief Executive Officer
SCHEDULE A
INITIAL SHAREHOLDERS
Shares Ownership
Name Mailing Address Owned Percentage
---- --------------- --------- ----------
Huawei Holding Shenzhen Huawei Investment & Holding Co., Ltd. 4,949,550 51%
1st Fl., The Mechanical Processing Center
Huawei Industrial Base
Bantian, Longgang
Xxxxxxxx 000000, Xxxxx
Attention: Guo Ping, Executive Vice President
3Com Technologies 3Com Technologies 4,755,450 49%
c/o 3Com Corporation
000 Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
X.X.X.
Attention: Chief Financial Officer
General Counsel
SCHEDULE B-1
*
SCHEDULE B-2
*
SCHEDULE C
*
SCHEDULE D
*
EXHIBIT A
MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE JVCO
EXHIBIT B
ARTICLES OF ASSOCIATION OF THE WFOE
