Exhibit 4
Dated: 19 January 2005 EXECUTION COPY
Subscription Agreement
between
PCCW Limited
as Company
China Netcom Group Corporation (BVI) Limited
as Subscriber
and
China Network Communications Group Corporation
[GRAPHIC OMITTED]
as China Netcom
relating to
shares in the capital of PCCW Limited
[GRAPHIC OMITTED][GRAPHIC OMITTED]
00xx Xxxxx Xxxxxx Xxxx Xxxxxx 0 Xxxxx'x Xxxx Xxxxxxx Xxxx Xxxx T (852) 2868
1131 F (000) 0000 0000 DX 009121 Central 113 April 1999
CONTENTS
1. Definitions and Interpretation...........................................1
2. Agreement to Subscribe...................................................4
3. Conditions of the Subscription...........................................5
4. Completion of the Subscription...........................................6
5. Representations, Warranties and Undertakings of the Company..............9
6. Representations, Warranties and Undertakings of the Subscriber
and China Netcom........................................................11
7. The Group's operations in the PRC........................................15
8. Certain Company Undertakings.............................................16
9. Guarantee................................................................25
10. No "acting in concert"...................................................26
11. Confidentiality..........................................................26
12. Announcements............................................................27
13. Notices..................................................................28
14. Waiver of Immunity.......................................................29
15. Law and Arbitration......................................................30
16. Contracts (Rights of Third Parties) Act 1999.............................30
17. Provisions Relating to this Agreement....................................30
SCHEDULE 1 : THE COMPANY WARRANTIES...........................................33
SCHEDULE 2 : LIMITATIONS ON THE COMPANY'S LIABILITY..........................36
THIS AGREEMENT is dated 19 January 2005 and made
--------------
BETWEEN:
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(1) PCCW LIMITED, (the "Company"), a company incorporated in Hong Kong
with limited liability and whose registered office is at 00xx Xxxxx,
XXXX Xxxxx, XxxXxx Xxxxx, 000 Xxxx'x Xxxx, Xxxxxx Xxx, Xxxx Xxxx;
(2) CHINA NETCOM GROUP CORPORATION (BVI) LIMITED, (the "Subscriber"), a
company incorporated in the British Virgin Islands and whose
registered office is at P.O. Box 3140, Wickhams Cay 1, Road Town,
Tortola, British Virgin Islands (Business registration number
341457); and
(3) CHINA NETWORK COMMUNICATIONS GROUP CORPORATION
[GRAPHIC OMITTED], ("China Netcom"), a
state-owned enterprise established under the laws of the People's
Republic of China and whose registered office is at Xx.0 Xxxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxxxxx Xxxx, Xxxxxxx 000000, PRC.
Background:
(A) At the date of this Agreement, the Company has an authorised share
capital of HK$1,600,000,000 divided into 6,400,000,000 Shares, of
which 5,374,287,061 Shares have been issued and are fully paid up.
(B) All of the issued Shares are currently listed on the Stock Exchange.
(C) The Company has agreed to issue and the Subscriber has agreed to
subscribe for the Subscription Shares on the terms and subject to the
conditions set out in this Agreement.
(D) China Netcom has agreed to guarantee the obligations of the
Subscriber under this Agreement.
THE PARTIES AGREE THAT:
1. Definitions and Interpretation
------------------------------
1.1 Definitions
In this Agreement (including the recitals above), the following
expressions shall, unless the context requires otherwise, have the
following meanings:
"Articles" means the Articles of Association of the Company;
"associate" has the meaning ascribed to it in the Listing Rules;
"Authority" means any competent governmental, administrative,
supervisory, regulatory, judicial, determinative, disciplinary,
enforcement or tax raising body, authority, agency, board,
department, court or tribunal of any jurisdiction and whether
supranational, national, regional or local;
"Board" means the board of directors of the Company;
"Broadcasting Ordinance" means the Broadcasting Ordinance (Chapter
562 of the Laws of Hong Kong);
"Business Day" means any day (excluding a Saturday) on which banks
generally are open for business in Hong Kong;
"CNC Group" means China Netcom and its Subsidiaries and "member of
the CNC Group" shall be construed accordingly;
"CNC HK" means China Netcom Group Corporation (Hong Kong) Limited, a
Subsidiary of China Netcom, the shares of which are listed on the
Stock Exchange;
"Completion Date" means the second Business Day after the date upon
which the last of the Conditions (except such Conditions which are
expressed to be satisfied on or as at the Completion Date) has been
satisfied or, where applicable, waived provided that it shall be a
date no later than 15 June 2005, or such other time and/or date as
the Parties may agree in writing;
"Companies Ordinance" means the Companies Ordinance (Chapter 32 of
the Laws of Hong Kong);
"Company Warranties" means the representations and warranties to be
given by the Company set out in Schedule 1;
"Conditions" means the conditions to completion of the Subscription
set out in Clause 3.1;
"Data Room" means the copy documents relating to the affairs of the
Group to which the Subscriber has been afforded access and which are
listed in the index to the Data Room provided to the Subscriber;
"Disclosure Letter" means the letter dated the date hereof written
and delivered by or on behalf of the Company to the Subscriber;
"Disqualified Person" means a person who is, or who is considered by
the Broadcasting Authority of Hong Kong to constitute, a
"disqualified person" within the meaning of the Broadcasting
Ordinance;
"Encumbrances" means liens, charges and encumbrances, claims, options
and third party rights;
"Group" means the Company and its Subsidiaries and the expression
"member of the Group" shall be construed accordingly;
"Hong Kong" means the Hong Kong Special Administrative Region of the
People's Republic of China;
"HK$" means Hong Kong dollars, the lawful currency of Hong Kong;
"Listing Rules" means the Rules Governing the Listing of Securities
on the Stock Exchange and the expression "Listing Rule" shall be
construed accordingly;
"Parties" means the named parties to this Agreement and their
respective successors and permitted assigns and the expression
"Party" shall be construed accordingly;
"PRC" means the People's Republic of China excluding Hong Kong, the
Macau Special Administrative Region of the People's Republic of China
and Taiwan;
"PRC Business Development Committee" shall have the meaning ascribed
thereto in clause 7.1;
"PRC Operations" shall have the meaning ascribed thereto in clause
7.1;
"Principal Officer" means a person who is, or is considered by the
Broadcasting Authority of Hong Kong to constitute, a "principal
officer" within the meaning of the Broadcasting Ordinance;
"Proceedings" means any legal action or proceedings, including
arbitration, in connection with this Agreement;
"SFC" means the Securities and Futures Commission of Hong Kong;
"SFO" means the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong);
"Shares" means shares of HK$0.25 each in the capital of the Company;
"Stock Exchange" means The Stock Exchange of Hong Kong Limited;
"Subscription" means the subscription by the Subscriber for the
Subscription Shares on the terms and subject to the conditions set
out in this Agreement;
"Subscription Announcement" means the press announcement in agreed
form to be issued jointly by the Company and China Netcom in
substantially such form immediately following the execution of this
Agreement (or with such amendments as agreed by the Parties or as may
be required by the SFC and/or the Stock Exchange);
"Subscription Price" means HK$5.90 per Subscription Share;
"Subscription Shares" means 1,343,571,766 new Shares;
"Subsidiary" has the same meaning as in Section 2 of the Companies
Ordinance as at the date hereof;
"Substantial Shareholders" means Pacific Century Regional
Developments Limited, Pacific Century Group Holdings Limited and
Pacific Century Diversified Limited and "Substantial Shareholder"
means any one of them;
"Substantial Shareholders Anti-Dilution Agreements" means the
agreements dated the date hereof entered into between the Company and
each Substantial Shareholder and pursuant to which each Substantial
Shareholder has been granted anti-dilution rights substantially
similar to those rights to be granted to the Subscriber pursuant to
clause 8.5 of this Agreement (subject in each case to approval by the
shareholders of the Company as referred to in clause 3.1(A) below);
"Takeovers Code" means the Hong Kong Code on Takeovers and Mergers;
and
"US$" means United States dollars, the lawful currency of the United
States of America.
1.2 Construction and Certain References
In this Agreement:
(A) any reference to a document being "in agreed form" means in
the form of the document or the draft thereof signed for
identification on behalf of the Parties (and such other
parties as may be relevant) with (in the case of a draft)
such alterations (if any) as may be agreed between the
Parties (and such other parties as may be relevant);
(B) references to the singular shall include the plural and vice
versa and references to the masculine, the feminine and the
neuter shall include each other such gender;
(C) "person" includes any individual, partnership, body
corporate, corporation sole or aggregate, state or agency of
a state, and any unincorporated association or organisation,
in each case whether or not having separate legal
personality;
(D) "company" includes any body corporate, wherever incorporated
or existing;
(E) references to recitals, clauses, sub-clauses and schedules
are references to the recitals, clauses and sub-clauses of,
and schedules to, this Agreement;
(F) (save as otherwise expressly stated herein), references to
any statute, statutory provision, Listing Rule or rule of
the Takeovers Code includes a reference to that statute,
statutory provision, Listing Rule or rule of the Takeovers
Code as from time to time, amended, extended or re-enacted;
(G) all references in this Agreement in relation to any time,
date or period shall mean Hong Kong time;
(H) words introduced by the word "other" shall not be given a
restrictive meaning because they are preceded by words
referring to a particular class of acts, matters or things;
and
(I) general words shall not be given a restrictive meaning
because they are followed by words which are particular
examples of the acts, matters or things covered by the
general words and the word "including" shall be construed
without limitation.
1.3 Headings
Headings are inserted for convenience only and shall not affect the
interpretation of this Agreement.
2. Agreement to Subscribe
----------------------
2.1 Subscription
The Subscriber agrees to subscribe for, and the Company agrees to
issue, the Subscription Shares at the Subscription Price, free from
Encumbrances on the terms and subject to the conditions set out in
this Agreement.
2.2 Subscription Shares
The Company agrees that the Subscription Shares will, when fully
paid, rank pari passu in all respects with the other Shares in issue
or to be issued by the Company on or prior to the Completion Date
with the right to all dividends and other distributions declared or
resolved to be paid at any time on or after the date of allotment.
3. Conditions of the Subscription
------------------------------
3.1 Conditions
Completion of the Subscription is conditional upon:
(A) the passing by the shareholders of the Company (being such
shareholders as are allowed to vote under the Listing Rules
or permitted by the Stock Exchange to vote) at an
extraordinary general meeting of the Company of a resolution
in agreed form (or with such changes as are required by the
Stock Exchange or the SFC) to:
(1) increase the authorised share capital of the Company
to HK$2,500,000,000 comprising of 10,000,000,000
Shares;
(2) grant to the directors of the Company a specific
mandate to allot, issue and deal with the
Subscription Shares; and
(3) approve the anti-dilution rights granted in favour of
China Netcom contained in clause 8.5 below and the
anti-dilution rights granted in favour of each of the
Substantial Shareholders pursuant to the Substantial
Shareholders Anti-Dilution Agreements;
(B) (1) listing of and permission to deal in all the
Subscription Shares being granted by the Listing
Committee of the Stock Exchange; and
(2) the listing and permission referred to in Condition
3.1(B)(1) not subsequently being revoked prior to the
Completion Date;
(C) delivery by the Subscriber to the Company on the Completion
Date of a legal opinion from British Virgin Islands counsel
relating to, among other things, the capacity and authority
of the Subscriber to enter into this Agreement and perform
its obligations hereunder, such opinion to be in form and
substance satisfactory to the Company;
(D) delivery by China Netcom to the Company on the Completion
Date of a legal opinion from PRC counsel relating to, among
other things, the capacity and authority of China Netcom to
enter into this Agreement and perform its obligations
hereunder and the governmental, regulatory or similar
consents required from any Authority of the PRC required by
the Subscriber and/or China Netcom to enter into, and to
perform their respective obligations under this Agreement,
such opinion to be in form and substance satisfactory to the
Company;
(E) the obtaining by China Netcom of such consent or approval of
a PRC governmental body or regulatory authority as is
required for China Netcom and the Subscriber to enter into
and perform their obligations under this Agreement; and
(F) none of the Company Warranties being found to be, or no
event occurring or matter arising which renders any of the
Company Warranties, untrue or incorrect in any material
respect on and as at the Completion Date (and, but without
prejudice to any other rights of any of the Parties under
this Agreement, for the purposes of this sub-clause, a
Company Warranty will be deemed to be untrue or incorrect in
a material respect if the liability of the Company from the
resulting claim would be in excess of US$100 million).
3.2 Fulfilment
(A) The Subscriber and China Netcom shall use their reasonable
endeavours to procure the fulfilment of the Conditions in
clauses 3.1(C), 3.1(D) and 3.1(E), and in the case of the
Condition in clause 3.1(E), shall notify the Company
immediately upon the satisfaction thereof.
(B) The Company shall use its reasonable endeavours to procure
the fulfilment of the Condition in clauses 3.1(A) and
3.1(B).
(C) The Company, China Netcom and the Subscriber shall each use
its respective reasonable endeavours to procure the
fulfilment of the Condition in clause 3.1(A) and in
particular shall furnish such information, supply such
documents, give such undertakings and do all such acts and
things as may reasonably be required by each other, the SFC,
the Stock Exchange and/or any Authority in connection with
the fulfilment of such Conditions.
(D) Should any Party become aware of anything which will or is
reasonably likely to prevent any of the Conditions from
being satisfied, it shall forthwith disclose the same to the
others.
3.3 Non-Fulfilment
(A) The Condition in clause 3.1(F) may be waived by the
Subscriber. The Conditions in clauses 3.1(C) and 3.1(D) may
be waived by the Company.
(B) If the Conditions (except such Conditions which are
expressed to be satisfied on or as at the Completion Date)
are not each fulfilled or waived in writing by the relevant
Party on or before 13 June 2005 or such later date as may be
agreed between the Company and the Subscriber, this
Agreement shall terminate and none of the Parties will have
any claim against the other for costs, damages, compensation
or otherwise save for any antecedent breach (including, for
the avoidance of doubt, any breach of clauses 3.2 or 6).
4. Completion of the Subscription
------------------------------
4.1 Company's Obligations
Subject to the fulfilment of the Conditions and subject to the
performance by the Subscriber of its obligations under clause 4.2,
completion of the Subscription shall take place at the offices of the
Company (or at such other place as may be agreed upon in writing by
the Parties) on the Completion Date, at which time the Company shall:
(A) allot and issue to the Subscriber the Subscription Shares
and shall promptly thereafter register the Subscriber as a
member of the Company and shall cause to be delivered to the
Subscriber definitive certificates of title in respect
thereof in the name of the Subscriber in board lots (as
nearly as practicable);
(B) procure that the following appointments be made, effective
on the Completion Date:
(1) Xx. Xxxxx Chunjiang, Xx. Xxxx Suning and Dr. Fan
Xingcha as members of the Board;
(2) Xx. Xxxxx Chunjiang as an additional deputy chairman
of the Board; and
(3) each of the persons named in the left column below as
a member of the committee referred to in the right
column opposite his/her name:
Xx. Xxxx Suning The Executive Committee
Dr. Fan Xingcha The Finance and Management
Committee
Xx. Xxxx Suning The Remuneration Committee
Xx. Xxxxx Chunjiang The Nomination Committee
Xx. Xxxxx Chunjiang The Regulatory Compliance
Committee
Xx. Xxxx Suning and PRC Business Development
Committee
Dr. Fan Xingcha
(C) procure a resolution of the Board to be passed confirming
the Company's intention that it shall, during the 18 month
period commencing on the Completion Date, explore
opportunities for expanding the PRC Operations and that,
subject to satisfaction of the Group's capital investment
approval procedures and the identification of appropriate
investment opportunities, it presently intends to seek to
invest up to HK$5 billion in expanding its PRC Operations;
(D) deliver to the Subscriber certified copies of the resolution
passed by the Shareholders of the Company pursuant to clause
3.1(A);
(E) deliver to the Subscriber certified copies of the
resolutions of the directors of the Company (or a committee)
allotting the Subscription Shares pursuant to clause 4.1(A),
making the appointments pursuant to clause 4.1(B) and
confirming the Company's intentions in relation to the
expansion of the PRC Operations pursuant to clause 4.1(C);
(F) deliver to the Subscriber a certificate in agreed form
confirming, amongst other things, that there has been no
material adverse change since 30 September 2004 and a letter
from the Company in agreed form confirming the intention to
reduce the number of directors on the Board; and
(G) deliver a certified true copy of the permission from the
Listing Committee of the Stock Exchange referred to in
clause 3.1(C).
4.2 Subscriber's Obligations
At completion of the Subscription the Subscriber shall make or
procure the making of payment to the Company, in same day cleared
funds, of the aggregate Subscription Price of the Subscription
Shares, to the bank account nominated for that purpose by the Company
not less than three Business Days prior to the Completion Date, or in
such other manner as may be agreed in writing between the Parties.
4.3 Failure to Complete
If the provisions of clause 4.2 are not complied with by the
Subscriber, the Company may defer completion of the Subscription to a
date determined at the Company's sole discretion or terminate this
Agreement without liability of any kind and without prejudice to any
rights the Company has against any other Party in respect of any
antecedent breach of this Agreement.
4.4 Alternate Subscriber
(A) Provided that the Subscriber gives written notice in
accordance with clause 4.4(B), the Subscriber shall be
entitled to assign all (but not part only) of its rights in
and to this Agreement (including the right to subscribe for
and be issued and allotted the Subscription Shares at
completion of the Subscription and the rights and benefit of
and to the Company Warranties) to a company which is
wholly-owned by the Subscriber (the "Alternate Subscriber"),
provided that:
(1) at completion of the Subscription the Alternate
Subscriber is a wholly-owned subsidiary of the
Subscriber and an indirect wholly-owned subsidiary of
China Netcom;
(2) on or before the Completion Date, the Alternate
Subscriber enters into and delivers to China Netcom
and to the Company an agreement in a form
satisfactory to the Company undertaking to comply
with the obligations of the Subscriber under this
Agreement (including giving representations and
warranties relating to itself similar to those
contained in clause 6 of their Agreement relating to
the Subscriber);
(3) the legal opinion referred to in clause 3.1(C) and
(D) shall also relate to the Alternate Subscriber and
the agreement referred to in paragraph (2) above; and
(4) the Subscriber shall remain liable for any breach by
it of this Agreement prior to such assignment, and
shall remain bound to perform and comply with all its
covenants, undertakings and obligations under this
Agreement.
(B) If the Subscriber intends to assign its rights and interest
in and to this Agreement pursuant to clause 4.4(A), the
Subscriber shall notify the Company in writing of its
intention to do so not less than five Business Days prior to
the Completion Date. For the avoidance of doubt, the
Subscriber shall not be entitled to assign, transfer or
otherwise dispose of all or any of its obligations under
this Agreement. If the Subscription Shares are issued and
allotted to an Alternate Subscriber pursuant to this clause,
the references to the "Subscriber" in clauses 4.1, 6.3(B),
8.5(M), 8.7(A) and 8.7(B) shall be deemed thereafter to
refer to the "Alternate Subscriber", and references to
"Subscriber" in clause 6.4 shall be deemed to refer to both
the Subscriber and Alternate Subscriber.
5. Representations, Warranties and Undertakings of the Company
-----------------------------------------------------------
5.1 Representations and Warranties of the Company
(A) The Company hereby warrants and represents, to and for the
benefit of the Subscriber in the terms of the Company
Warranties set out in Schedule 1, subject to the provisions
of this Agreement and in particular the exclusions and
limitations in Schedule 2.
(B) The Company Warranties are given subject to facts and
matters disclosed in or by this Agreement, the Disclosure
Letter and every document contained in the Data Room and the
Subscriber shall accordingly have no claim in respect of any
of the Company Warranties in relation to any fact or matter
so disclosed.
(C) Any matter which would be or give rise to a breach of any of
the Non-Accounts Warranties but for an express exclusion
from, or qualification or limitation to, the terms of such
Non-Accounts Warranty (whether such exclusion, qualification
or limitation is in respect of the awareness of the Company,
materiality, or any other matter) shall be deemed not to be
or give rise to a breach of any of the Accounts Warranties.
For this purpose, the "Accounts Warranties" are the Company
Warranties set out in paragraphs 2, 3 and 13 of Schedule 1
and the "Non-Accounts Warranties" are all the Company
Warranties other than the Accounts Warranties.
(D) Each of China Netcom and the Subscriber acknowledges that it
has not been induced to enter into this Agreement by, and
that it does not in connection with this Agreement or its
subject matter rely on, any representation, warranty,
promise or assurance by the Company or any other person save
for those contained in this Agreement. Each of China Netcom
and the Subscriber agrees that it shall have no right or
remedy in respect of, and shall not in connection with any
claim arising in relation to this Agreement or its subject
matter, plead or assert the making or existence of, any
representation, warranty, promise or assurance by the
Company or its directors, employees, advisers or any other
person save for those herein contained. Neither China Netcom
nor the Subscriber shall have any right to rescind or
terminate this Agreement and the only remedy of China Netcom
and the Subscriber shall be damages for breach of this
Agreement.
(E) The Subscriber shall be entitled to claim both before and
after completion of the Subscription that any of the Company
Warranties has or had been breached or is or was misleading
and, without limitation, to claim under any covenant even if
the Subscriber and/or China Netcom knew or could have
discovered on or before Completion that the Company Warranty
in question had been breached or was misleading and
Completion shall not in any way constitute a waiver of any
of the Subscriber's rights. Notwithstanding the preceding
sentence, each of China Netcom and the Subscriber warrants
and undertakes to the Company that, at the time of entering
into this Agreement, neither China Netcom nor the Subscriber
is aware of any facts or circumstances which will or may
entitle the Subscriber to make a claim under any of the
Company Warranties.
(F) The Subscriber and China Netcom acknowledge that neither the
Company nor any of its directors, shareholders, employees or
advisers owes to the Subscriber or China Netcom any duty of
care in relation to the subject matter of this Agreement or
any matter connected with it. Nothing in this sub-clause
shall restrict or impair the rights of the Subscriber and/or
China Netcom under this Agreement, or in the event of fraud
by any of the Company or any of its directors, shareholders,
employees or advisers.
(G) The Company makes no representation or warranty to the
Subscriber as to the completeness, truth or accuracy of the
matters disclosed in the Disclosure Letter or in the Data
Room other than the 2003 Accounts, the 30 September Accounts
and the Previous Announcements (as such terms are defined in
Schedule 1 and in respect of which the warranties in
paragraphs 2, 3 and 4 of Schedule 1 apply) provided always
that nothing in this sub-clause (G) shall exclude or limit
any claim under or in respect of the Company Warranties.
(H) Notwithstanding any provision in this Agreement to the
contrary, nothing in this clause 5.1 shall exclude or affect
any right or remedy available to the Subscriber (or, if
relevant, China Netcom) in respect of fraud. China Netcom
and the Subscriber acknowledges that their legal advisers
have explained to each of them the effect of this clause 5.1
and Schedule 2.
(I) The Company undertakes to disclose in writing to the
Subscriber anything which will be or is reasonably likely to
be a breach of any of the Company Warranties on and as at
the Completion Date promptly after such thing comes to its
notice both prior to and on the Completion Date. The Company
agrees to promptly provide such information as may be
reasonably requested by the Subscriber, from the date hereof
until the Completion Date, in order to enable the Subscriber
to assess whether a breach of the Company Warranty will
occur on the Completion Date.
(J) Each of the Company Warranties shall be construed as a
separate and independent warranty and shall not be limited
or restricted by reference to or inference from the terms of
any other Company Warranty or any other term of this
Agreement.
(K) The Subscriber agrees and acknowledges that the Company will
not be liable for any claim for any breach of the Company
Warranties if and to the extent that the claim results from
any act or circumstance which is carried out or arises as a
result of the entering into of, or the performance by the
Company of its obligations under, this Agreement.
5.2 Period
Save as expressly provided otherwise, the representations and
warranties set out in Schedule 1 are given as at the date hereof and
shall be deemed to be repeated by the Company on the Completion Date
as if given or made on such date, with reference in each case to the
facts and circumstances then subsisting.
5.3 Claims against parties other than the Company
Each of China Netcom and the Subscriber agrees and undertakes that
(save in respect of fraud) it has no rights against and shall not
make any claim against any Subsidiary of the Company or any present
or former employee, director, shareholder, agent, officer or adviser
of any member of the Group in connection with this Agreement or its
subject matter.
6. Representations, Warranties and Undertakings of the Subscriber and
China Netcom
------------------------------------------------------------------
6.1 Subscriber/China Netcom Warranties
The Subscriber (in relation to itself only) and China Netcom each
hereby undertakes, represents and warrants to the Company as follows:
(A) As at the date of this Agreement it has (subject to the
obtaining by China Netcom of the approval of the PRC State
Council), and on the Completion Date it will have, the full
right, power and authority to enter into, and to perform its
obligations under, this Agreement and this Agreement
constitutes its legal, valid and binding obligations
enforceable in accordance with its terms.
(B) As at the date of this Agreement it has (subject to the
obtaining by China Netcom of the approval of the PRC State
Council), and on the Completion Date it will have, obtained
all governmental, regulatory or similar consents required
from any Authority, authorities, approvals and permissions
required to enter into, and to perform its obligations
under, this Agreement and there are no regulatory or
administrative obstacles to the remittance of the
Subscription monies to the Company in Hong Kong in
accordance with the terms of this Agreement.
(C) China Netcom is the legal and beneficial owner of the whole
of the issued share capital of the Subscriber, and the
Subscriber is the legal and beneficial owner of all the
issued shares in CNC HK held by the CNC Group.
(D) The execution, delivery and performance by it of this
Agreement does not and will not result in a material breach
of any provision in its memorandum or articles of
association or other constitutional documents.
(E) No order has been made and no resolution has been passed for
the winding up of the Subscriber or China Netcom (as the
case may be) or for a provisional liquidator to be appointed
in respect of it and no petition has been presented and no
meeting has been convened for the purposes of winding up the
Subscriber or China Netcom (as the case may be).
(F) No administration order has been made and no petition for
such an order has been presented in respect of the
Subscriber or China Netcom (as the case may be).
(G) No receiver (which expression shall include an
administrative receiver) has been appointed in respect of
the Subscriber or China Netcom (as the case may be).
(H) It is not insolvent or unable to pay its debts and has not
stopped paying its debts as they fall due.
(I) No event analogous to any described in paragraphs (E) to (H)
has occurred in or outside the PRC with respect to the
Subscriber or China Netcom (as the case may be).
(J) All statements of fact relating to the CNC Group contained
in the Subscription Announcement are true and accurate in
all material respects and not misleading in any material
respect in the form and context in which they appear, all
expressions of opinion, intention or expectation contained
therein (which are stated to be held or expressed by any
member of the CNC Group) are made on reasonable grounds and
are truly and honestly held by the directors of the relevant
member of CNC Group and are fairly based, and there are no
other facts relating to the CNC Group omitted the omission
of which makes any such statement or expression in the
Subscription Announcement misleading in any material respect
or which are or can reasonably be expected to be material in
the context of the Subscription.
(K) Under the laws of the PRC, neither China Netcom nor any of
its properties, assets or revenues are entitled to any right
of immunity on the grounds of sovereignty from any legal
action, suit or proceedings, from set-off or counter claim,
from the jurisdiction of any court or arbitral tribunal,
from service of process, from attachment prior to or in aid
of execution of judgment or arbitral award, or from other
legal process or proceedings for the giving of any relief or
for the enforcement of any judgment or arbitral award.
(L) None of China Netcom, the Subscriber, and none of their
respective directors (or equivalent) or Principal Officers,
is a Disqualified Person.
6.2 Repetition of Subscriber/China Netcom Warranties, etc
(A) The representations and warranties set out in clause 6.1 are
given as at the date hereof and shall be deemed to be
repeated by the Subscriber and China Netcom on the
Completion Date as if given or made on such date, with
reference in each case to the facts and circumstances then
subsisting.
(B) Each of China Netcom and the Subscriber undertakes to
disclose in writing to the Company anything which will be or
is reasonably likely to be a breach of any of the
representations and warranties set out in clause 6.1 on and
as at the Completion Date promptly after such thing comes to
its notice both prior to and on the Completion Date. Each of
China Netcom and the Subscriber agrees promptly to provide
such information as may be reasonably requested by the
Company, from the date hereof until the Completion Date, in
order to enable the Company to assess whether a breach of
any representations and warranties set out in clause 6.1
will occur on the Completion Date.
6.3 Other Undertakings of Subscriber and China Netcom
(A) Each of the Subscriber and China Netcom undertakes that it
will, both prior to and following the Completion Date,
furnish such information, supply such documents, give such
undertakings and do all such acts and things as may
reasonably be required by the Company to:
(1) facilitate the satisfaction of the Conditions;
(2) facilitate the obtaining by the Group of all
consents, approvals and confirmations that may be
required from any Authority in connection with this
Agreement; and/or
(3) enable the Company to perform its obligations under
this Agreement.
(B) China Netcom undertakes that it will remain at all times the
direct or indirect holder of the entire issued share capital
of the Subscriber provided that China Netcom may dispose to
one or more third parties of not more than an aggregate of
25 per cent. (25%) of its direct or indirect interest in the
issued share capital of the Subscriber provided that:
(1) any relevant third party which acquires an interest
in the Subscriber ("Subscriber Investor") is not a
Disqualified Person; and
(2) China Netcom will, after such disposal, retain voting
control of the Subscriber and will also retain the
direct or indirect right to appoint a majority of the
board of directors of the Subscriber; and
(3) none of the Subscriber Investors shall have any right
or understanding or arrangement (whether formal or
informal) to nominate any person as a director of the
Company.
6.4 Matters relating to the Broadcasting Ordinance
General obligation - directors and Principal Officers of the Company/
Subscriber
(A) China Netcom undertakes that it will not nominate any person
who is a Disqualified Person as a director or Principal
Officer of the Company. Each of China Netcom and the
Subscriber undertakes that it will not nominate or appoint
any person who is a Disqualified Person as a director or
Principal Officer of the Subscriber.
Certain proposed changes
(B) If:
(1) China Netcom proposes to nominate any person to
replace any of the appointments made under clause
4.1(B); or
(2) China Netcom or the Subscriber proposes any change to
the directors or Principal Officers of the
Subscriber; or
(3) China Netcom or the Subscriber proposes to introduce
a Subscriber Investor or if either of them proposes
any change, or is aware of any proposed change, in
the shareholders of the Subscriber and their
respective interests in the Subscriber,
China Netcom and the Subscriber shall promptly provide such
information as the Company may reasonably request to enable
the Company to deal with such issues (if any) as may arise
in connection with the Broadcasting Ordinance and/or the
Group's licences issued under the Broadcasting Ordinance.
(C) If the Company reasonably considers that a "disqualified
person" issue will arise under the Broadcasting Ordinance as
a result of any of the proposals referred to in clause
6.4(B)(1) to (3), the Company is not obliged to procure that
China Netcom's proposed replacement Board nominee(s) is/are
appointed (notwithstanding clause 8.6, but without prejudice
to China Netcom's rights under clause 8.6 to nominate
another person as a replacement Board nominee and to the
Company's obligations thereunder in respect of such other
nominee), and China Netcom and the Subscriber shall not make
or permit to occur any of the changes referred to in clause
6.4(B)(2) and/or (3), until all information concerning such
nominee(s) or Subscriber Investor(s) (as applicable) as is
required by the Broadcasting Authority and the Chief
Executive in Council has been provided to them, and the
Broadcasting Authority and the Chief Executive in Council
have confirmed in writing that the relevant person(s) (or,
if applicable, the Subscriber Investor(s)) is/are not
Disqualified Person(s).
Changes in circumstances resulting in Disqualified Person issues
(D) If at any time any of:
(1) China Netcom;
(2) the Subscriber;
(3) the directors (or equivalent) or Principal Officers
of China Netcom or of the Subscriber;
(4) the persons nominated by China Netcom as directors of
the Company;
(5) a Subscriber Investor; or
(6) the persons nominated by a Subscriber Investor as
directors of the Subscriber,
is or becomes a Disqualified Person, or is reasonably
considered by the Company, China Netcom or the Subscriber to
be a "disqualified person" within the meaning of the
Broadcasting Ordinance, the Company, China Netcom or the
Subscriber (as applicable) shall immediately notify the
others in writing of such issue (which notice shall set out
reasonable details of the reasons why such person is or is
reasonably considered to be a "disqualified person"). China
Netcom shall assist and facilitate the Company in seeking
such consents, approvals and confirmations as may be
required from the Broadcasting Authority, the Chief
Executive in Council or otherwise in connection with the
Broadcasting Ordinance. China Netcom shall promptly provide
such information as the Company may reasonably request to
enable the Company to deal with such issues (if any) as may
arise in connection with the Broadcasting Ordinance and/or
the Group's licences issued under the Broadcasting
Ordinance.
(E) Notwithstanding any provision in this Agreement to the
contrary:
(1) if any person nominated by China Netcom as director
of the Company is or becomes a Disqualified Person,
and if requested by the Company so to do, China
Netcom shall immediately procure his removal from
office as a director of the Company;
(2) if a Subscriber Investor is or becomes a Disqualified
Person, and if requested by the Company so to do,
China Netcom shall immediately use all reasonable
endeavours to procure that such third party ceases to
be so interested; and
(3) if a person nominated by a Subscriber Investor as a
director of the Subscriber is or becomes a
Disqualified Person, China Netcom shall immediately
procure that such person ceases to hold such office.
(F) China Netcom shall provide such information as the Company
may from time to time reasonably request to ascertain
whether (1) any director (or equivalent) or Principal
Officer of any member of the CNC Group or (2) any person
nominated by China Netcom as a director of the Company is or
may be a "disqualified person" within the meaning of the
Broadcasting Ordinance.
7. The Group's operations in the PRC
---------------------------------
7.1 PRC Business Development Committee
(A) On the Completion Date, a committee, to be called the "PRC
Business Development Committee", shall be formed. The terms
of reference of the PRC Business Development Committee shall
include, as a principal function of such committee, advising
on possible opportunities for the expansion of the Group's
operations in the PRC ("PRC Operations") (including the
potential investment of up to HK$5 billion and the
investment fund of US$50-100 million referred to in clause
7.1(B)) and monitoring the use of funds allocated and
approved by the Board or relevant committee in relation to
opportunities approved by the Board or relevant committee in
connection with the expansion of the Group's PRC Operations.
The PRC Business Development Committee shall have four
members, two of whom shall be members of the Board nominated
by China Netcom. Except as determined by the Board from time
to time, all decisions of the PRC Business Development
Committee shall require the unanimous vote and approval of
all members of such committee.
(B) The Company undertakes that, as soon as practicable after
the Completion Date (and in any event within three months of
the Completion Date), it will establish a separate
investment fund with an initial capital investment by the
Company as the founder of the fund of US$100 million, or
such lesser amount above US$50 million as the Company may
determine (and such investment shall be part of the HK$5
billion referred to in clause 4.1(C)) and seek third party
investors to contribute additional capital with a view to
increasing the size of the fund to up to US$300 million. The
investment objectives of the fund will be value added
telecommunications services and operations in the PRC. The
investment fund shall have its own investment guidelines and
approval procedures (determined by the Board or relevant
committee at the time of establishing the fund). Two members
of the PRC Business Development Committee (of which only one
shall be a member of the Board nominated by China Netcom)
will be given responsibility for establishing the investment
fund and managing it thereafter in accordance with the
applicable investment guidelines and approval procedures,
together with such other managers as they shall recommend to
the Board or relevant committee for approval.
7.2 Co-Group Managing Director
(A) If at any time after the Completion Date the Group's PRC
Operations constitute a substantial part of the Group's
operations, and for as long as such PRC Operations remain a
substantial part of the Group's operations, China Netcom
shall have the right to nominate a person who is for the
time being a director of the Company and has the requisite
qualifications and experience, as "Co-Group Managing
Director", whose appointment shall be subject to the
approval of the Board. In the event that the Board declines
to appoint a director of the Company nominated by China
Netcom on the grounds that such director does not have the
requisite qualifications and experience, China Netcom may
nominate another director of the Company as Co-Group
Managing Director, whose appointment shall also be subject
to the approval of the Board. The Co-Group Managing Director
shall be in addition to such other managing director(s) of
the Group as may be in office at the time and from time to
time.
(B) For the purpose of clause 7.2(A), the PRC Operations shall
be deemed to constitute a substantial part of the Group's
Operations if:
(1) at any time during the twelve months commencing from
the Completion Date, the PRC Business Development
Committee (referred to in clause 7.1) resolves that
the PRC Operations have become a substantial part of
the Group's Operations; or
(2) the PRC Business Development Committee does not so
resolve within the twelve months commencing from the
Completion Date, and if at any time after such period
China Netcom determines that the PRC Operations have
become a substantial part of the Group's Operations.
7.3 Cessation
The provisions of clauses 7.1 and 7.2 shall cease to be of any effect
upon the earlier of:
(A) the Subscriber at any time ceasing to hold at least ten per
cent. (10%) of the total issued share capital of the
Company; and
(B) China Netcom ceasing to hold, directly or indirectly, at
least 75% of the issued share capital of the Subscriber or
China Netcom otherwise being in material breach of clause
6.3(B).
8. Certain Company Undertakings
----------------------------
8.1 China Netcom's Obligations to CNC HK
(A) For so long as the CNC HK Non-Competition Agreement remains
in effect, if the Company or any member of the Group
proposes to establish, engage or be directly or indirectly
interested in carrying on a Proposed Business, the Company
shall, before doing so or agreeing to do so, inform China
Netcom by notice in writing (a "Notice"), setting out the
principal details of the Proposed Business. Upon receipt of
such Notice (and any other relevant details which China
Netcom may reasonably request), China Netcom and the Company
shall discuss the Proposed Business. China Netcom shall,
within 15 days of the giving of the Notice ("15 Day
Period"), inform the Company in writing of its views as to
whether or not the Proposed Business will or is reasonably
likely to be considered to constitute a CNC HK Competing
Business.
(B) If, within the 15 Day Period, China Netcom notifies the
Company in writing that the Proposed Business will or is
reasonably likely to be considered to constitute a CNC HK
Competing Business, China Netcom and the Company shall
immediately consult in good faith with a view to (1)
determining to what extent and in what manner the Proposed
Business constitutes or might constitute a CNC HK Competing
Business, (2) determining to what extent it would be
possible for the Proposed Business to be structured so that
it or part of it does not constitute a CNC HK Competing
Business, and (3) assisting China Netcom to seek the consent
of CNC HK to the extent required under the CNC HK
Non-Competition Agreement or to the extent such consent has
not already been given in writing. The parties acknowledge
that the purpose of this clause is to enable due and careful
consideration to be given to the nature and extent of the
obligations of China Netcom under the CNC HK Non-Competition
Agreement, and to afford China Netcom an opportunity to
comply fully with its obligations thereunder.
(C) For the purpose of this clause 8.1:
(1) "CNC HK Competing Business" means a business that
falls within the meaning of paragraphs 3 and 4 of
clause 1 of the CNC HK Non-Competition Agreement;
(2) "CNC HK Non-Competition Agreement" means the
non-competition agreement dated 6 September 2004 made
between, amongst others, China Netcom and CNC HK; and
(3) "Proposed Business" means a business which the PRC
Business Development Committee considers will or may
be in direct or indirect competition with the
business of CNC HK or any of its Subsidiaries.
(D) Notwithstanding clause 8.1 (A), the Company and any member
of the Group may hold or be interested in securities in
another body corporate if such securities are listed on a
recognised stock exchange and confer not more than ten per
cent. (10%) of the votes which could normally be cast at a
general meeting of the body corporate.
(E) For the avoidance of doubt, this clause 8.1 shall not:-
(1) prevent or delay the Company or any member of the
Group from commencing or continuing any negotiations
in relation to any business opportunity (whether or
not such business opportunity constitutes or may
constitute a CNC HK Competing Business); or
(2) prevent the Company or any member of the Group from
entering into any contract or other arrangement in
relation to any business opportunity (whether or not
such business opportunity constitutes or may
constitute a CNC HK Competing Business), provided
that:
(a) if China Netcom gives notice in writing within
the 15 Day Period that the Proposed Business
will or is reasonably likely to be considered
to constitute a CNC HK Competing Business, the
Company or the relevant member of the Group
does not do so within 30 days of the giving by
China Netcom of such notice; and
(b) if China Netcom gives notice in writing within
the 15 Day Period of its view that Proposed
Business will not be considered to constitute
a CNC HK Competing Business, or if China
Netcom does not give a response to the Notice,
the Company or the relevant member of the
Group does not do so within the 15 Day Period.
8.2 Arrangements with CNC HK Competitor
(A) If the Company or any member of the Group either (i) intends
to pursue or develop a business opportunity, or (ii) is
offered an opportunity to participate in a business
opportunity, in each case with any entity which is the
holder of a licence currently required for the provision of
basic fixed-line telecommunications services in the PRC (or
a member of a group of which another member is the holder of
such a licence) relating to (a) the establishment of a new
joint venture (whether equity, co-operative or other profit
sharing arrangement in the nature of a joint venture) to
exploit a business opportunity within the PRC or (b) the
sale by the Group of any business or assets constituting a
business in the PRC (in each case, a "Relevant
Opportunity"), the Company shall, before doing so or
agreeing to do so, inform China Netcom by notice in writing
(a "JV Notice") provided that:
(1) in the case of the establishment of a new joint
venture, this clause 8.2 shall only apply if such
joint venture (whether equity, co-operative or other
profit sharing arrangement in the nature of a joint
venture) (i) relates to basic fixed line
telecommunications services as currently provided in
the PRC and is considered in good faith by China
Netcom (after having considered the details of the
Relevant Opportunity submitted to it) to be of a
strategic nature to the Group and/or involves an
initial capital investment or commitment by the Group
in excess of US$100 million; or (ii) relates to any
non-regulated services which involves an initial
capital investment or commitment by the Group in
excess of US$100 million;
(2) in the case of a sale by the Group of any business or
assets constituting a business in the PRC, this
clause 8.2 shall only apply if such business or
assets constituting a business is considered in good
faith by China Netcom (after having considered the
details of the Relevant Opportunity submitted to it)
to be of a strategic business or a strategic business
opportunity in the PRC;
(3) the provisions of clause 8.2 shall be subject to and
limited by any pre-emption or other contractually
binding obligations of the Company or the relevant
member of the Group; and
(4) nothing in this clause 8.2 is intended to relate to
contracts or arrangements in the ordinary course of
business.
(B) The JV Notice shall outline the principal details of the
Relevant Opportunity (whether contemplated by a member of
the Group, or offered by the relevant third party) and
invite China Netcom to notify the Company in writing within
30 days after the date on which the JV Notice is given (the
"Exercise Period") whether (i) it (or a Subsidiary of China
Netcom) wishes to be involved in the Relevant Opportunity
or, (ii) where the Relevant Opportunity arises as a result
of an offer or invitation from a third party of an
opportunity to participate in a business opportunity,
whether it (or a Subsidiary of China Netcom) wishes and is
able to offer a similar business opportunity to the Group.
(C) If, within the Exercise Period, China Netcom notifies the
Company in writing that it (or a Subsidiary of China Netcom)
wishes to be involved in the Relevant Opportunity (or, as
applicable, wishes and is able to offer a similar business
opportunity to the Group), the Company will, or will procure
that the relevant member of the Group (as the case may be)
will, in good faith on an expeditious basis, enter into
discussions and negotiations with China Netcom in relation
to the Relevant Opportunity with a view to entering into a
joint venture agreement or other binding arrangement, or (in
the case of a sale referred to in clause 8.2(A)(2)) a sale
and purchase agreement for the sale of the relevant business
to China Netcom (or a Subsidiary of China Netcom), as soon
as practicable.
(D) If:
(1) within the Exercise Period China Netcom notifies the
Company in writing that neither it nor any of its
Subsidiaries wishes to be involved in the Relevant
Opportunity (or, as applicable, does not wish and/or
is unable to offer a similar business opportunity to
the Group), or
(2) China Netcom otherwise fails to notify the Company in
writing within the Exercise Period as to whether or
not it (or a Subsidiary of China Netcom) wishes to be
involved in the Relevant Opportunity (or, as
applicable, whether or not it (or a Subsidiary of
China Netcom) wishes and is able to offer a similar
business opportunity to the Group); or
(3) China Netcom having served notice pursuant to
sub-clause (C), no heads of terms, letter of intent
or similar outline of principal commercial terms (in
each case whether binding or non-binding) is entered
into between any member of the Group and China Netcom
(or a Subsidiary of China Netcom) within 30 days from
the date on which it served such notice,
any member of the Group may enter into a joint venture
agreement and/or other binding arrangement (including
agreements relating to the sale of the relevant business)
with a third party in relation to the Relevant Opportunity
provided that such arrangement is on substantially the same
terms as those set out in the JV Notice.
8.3 Existing Businesses
Notwithstanding clause 8.2 and any other provision of this Agreement,
the Group may continue to be interested and involved in its existing
businesses, and may continue to make such further investments in, and
to further develop and expand, its existing businesses, in each case
as the Board may consider appropriate from time to time.
8.4 Non-disposal of certain assets
(A) The Company shall not without the written consent of China
Netcom (such consent not to be unreasonably withheld or
delayed) sell or dispose of more than ten per cent. (10%) of
the Group's voting interest in PCCW-HKT Telephone Limited
and 25 per cent. (25%) of the Group's voting interest in
PCCW VOD Limited (other than in connection with a bona fide
reorganisation, amalgamation or scheme of arrangement
relating to the Group).
(B) The Company shall not, prior to the date falling 60 days
after the Completion Date and without the written consent of
China Netcom (such consent not to be unreasonably withheld
or delayed), sell or dispose of any of its shareholding in
Pacific Century Premium Developments Limited (other than in
connection with a bona fide reorganisation, amalgamation or
scheme of arrangement relating to the Group).
Notwithstanding the foregoing, China Netcom shall not
withhold or delay its consent if any such proposed sale or
disposal has in good faith been determined by the Board to
be in the best interests of the Company and the reasons for
such determination have been provided to China Netcom in
reasonable detail.
(C) Where the Group is considering any disposal of assets which
does not fall under clause 8.4(A) or 8.4(B) but such
disposal will require a circular to be issued by the Company
to it shareholders under the Listing Rules, the members of
the Board nominated by China Netcom shall be consulted in
advance.
8.5 Anti-dilution
General Anti-dilution
(A) Subject to clause 8.5(G), the Company will not without the
prior written consent of China Netcom (such consent not to
be unreasonably withheld or delayed) in the period from the
date of this Agreement to the Completion Date issue any new
Shares, any securities convertible into or exchangeable into
Shares or any warrants or other rights to subscribe for
Shares ("Relevant Securities").
(B) Subject to clauses 8.5(G) to 8.5(J), if the Company
proposes, following the Completion Date, to issue any
Relevant Securities, the Company shall notify China Netcom
in writing of such proposal (an "Issue Notice"). The Issue
Notice shall specify the number and type of Relevant
Securities to be offered by the Company and the material
terms of the proposed offer (including the proposed price
per security to be paid by the proposed third party
purchaser(s)).
(C) China Netcom shall have the right to purchase any number of
the Relevant Securities which are the subject of the Issue
Notice up to such number as shall represent the Pro Rata
Share (as defined in clause 8.5(K)(2)) of the Relevant
Securities, upon the same terms and conditions set forth in
the Issue Notice, by giving written notice to the Company of
the exercise of this right within ten Business Days of the
giving of the Issue Notice. A notice given by China Netcom
pursuant to this clause shall be irrevocable. If such notice
is not given or deemed not to have been given by China
Netcom within such ten Business Days, China Netcom shall be
deemed to have elected not to exercise its rights under this
clause 8.5(C).
(D) [Intentionally left blank]
(E) The completion of China Netcom's purchase of Relevant
Securities pursuant to clause 8.5(C) shall occur either
simultaneously with the completion of the offering of
Relevant Securities or at such other time and place as shall
be mutually agreed by the Company and China Netcom. At such
completion, China Netcom shall deliver the aggregate
purchase price for the Relevant Securities to be purchased
by China Netcom pursuant to clause 8.5(C) against the
Company's delivery of certificates representing the Relevant
Securities to be issued to China Netcom pursuant to clause
8.5(C).
(F) Any Shares issued to China Netcom pursuant to clauses 8.5(B)
to (E) shall be issued on the same terms as Shares are
issued to any proposed third party purchaser, such terms
being set out in the Issue Notice.
Options, convertibles, etc
(G) The provisions of clauses 8.5(A) to 8.5(F) shall not apply
to:
(1) the grant of any options, or the issue of any
Relevant Securities pursuant to the exercise of share
options granted (whether prior to or after the date
of this Agreement), pursuant to any share option
scheme of the Company in effect from time to time; or
(2) the issue of any Relevant Securities pursuant to any
share incentive scheme operated by the Group from
time to time; or
(3) the issue of any Relevant Securities pursuant to the
terms of any bonds or other securities issued at any
time by any member of the Group which are convertible
or exchangeable into Shares, or the issue of any
Relevant Securities as a result of the exercise of
warrants or other rights to subscribe for Shares.
For the avoidance of doubt, the anti-dilution right in
clauses 8.5(B) to 8.5(E) will apply in respect of issues of
securities that are convertible or exchangeable into Shares
and in respect of issues of warrants or other rights to
subscribe for Shares at the time of issue of those
convertible or exchangeable securities or warrants or other
rights to subscribe (as the case may be) save in the case of
a Pro-Rata Offering or a Non-Cash Issuance (as defined in
clauses 8.5(H)(1) and 8.5(I)(1) respectively).
Rights issues, open offers, bonus/capitalisation issues etc
(H) The provisions of clause 8.5(B) to 8.5(F) shall not apply to
the issue of any Relevant Securities pursuant to:
(1) an offer of Relevant Securities open for a period
fixed by the Board to holders of Shares on the
register of members on a fixed record date in
proportion to their then holdings of Shares (subject
to such exclusions or other arrangements as the Board
may deem necessary or expedient in relation to
fractional entitlements or having regard to any
restrictions or obligations under the laws of, or the
requirements of any recognised regulatory body or any
stock exchange in any territory outside Hong Kong)
("Pro-Rata Offering"); or
(2) an issue of Shares credited as fully paid to holders
of Shares (including, without limitation, Shares paid
up out of distributable profits or reserves and/or
share premium account issued in lieu of the whole or
any part of a cash dividend and free distributions or
bonus issue of Shares).
Consideration shares, top-up placings and subscriptions etc
(I) If following the Completion Date, the Company proposes to
issue any Relevant Securities ("Relevant New Issue"):
(1) for non-cash consideration, credited as fully paid
(including, without limitation, an issue of Relevant
Securities as consideration for the acquisition of
any interest in a company, business or other asset
but excluding any issue of Relevant Securities as
contemplated in clauses 8.5(G) and 8.5(H)) ("Non-Cash
Issuance"); or
(2) in connection with a placing and "top-up"
subscription of Relevant Securities,
clause 8.5(J) shall apply (and for the avoidance of doubt,
clauses 8.5(B) to 8.5(F) shall not apply).
(J) The following provisions shall apply in the event of a
Relevant New Issue:
(1) If the Company proposes to effect a Relevant New
Issue, the Company shall notify China Netcom in
writing of such proposal ("Relevant New Issue
Notice").
(2) The Relevant New Issue Notice shall specify the
number and (if relevant) the type of Relevant
Securities to be issued or proposed to be issued by
the Company and the material terms of the Relevant
New Issue (including the proposed price per security
("Relevant Price")).
(3) China Netcom shall have the right to purchase or
subscribe for such proportion as it may wish of the
Relevant Number of new Relevant Securities at the
Relevant Price by giving written notice to the
Company of the exercise of this right within three
Business Days of the giving of the Relevant New Issue
Notice. China Netcom and the Company acknowledge that
the "Relevant Number" will only be ascertainable
after the three Business Day period, and that the
actual Relevant Number will be set out in the notice
to be given by the Company to China Netcom pursuant
to clause 8.5(J)(5). A notice given by China Netcom
pursuant to this clause 8.5(J)(3) shall be
irrevocable. If such notice has not been given or
deemed to have been given by China Netcom within such
three Business Days, China Netcom shall be deemed to
have elected not to exercise its rights under this
clause 8.5(J)(3).
(4) [Intentionally left blank]
(5) If China Netcom shall give notice to the Company
pursuant to, and in accordance with, clause
8.5(J)(3), the Company shall not later than three
Business Days after expiry of the three Business Day
period referred to in clause 8.5(J)(3) notify China
Netcom in writing of the Relevant Number of new
Relevant Securities which it is to purchase and the
total consideration due for such securities. The
completion of China Netcom's purchase of Relevant
Securities pursuant to this clause 8.5(J) shall occur
either simultaneously with the completion of the
Relevant New Issue or, in the case of a placing and
top-up subscription referred to in clause 8.5(I)(2),
at the time of completion of the top-up subscription,
or at such other time and place as shall be mutually
agreed by the Company and China Netcom. At such
completion, China Netcom shall deliver the aggregate
purchase price for the Relevant Securities to be
purchased by China Netcom pursuant to this clause
8.5(J) against the Company's delivery of certificates
representing the Relevant Securities to be issued to
China Netcom pursuant to this clause 8.5(J).
(6) In the case of a Non-cash Issuance, the Relevant
Price shall be based on the value of the Relevant
Securities or the consideration as stated in the
agreements relating to Non-Cash Issuance. If such
value or consideration is not stated, the Relevant
Price shall be such amount as may be agreed between
the Company and China Netcom or, in default of
agreement, the average closing price of Shares on the
Stock Exchange on the fifteen trading days prior to
the date on which binding agreements relating to the
Relevant New Issue were executed or, if earlier, the
date on which the Relevant New Issue was announced by
the Company in accordance with its obligations under
the Listing Rules.
(7) For the avoidance of doubt, nothing in clause
8.5(J)(1) to (6) shall delay, impede or obstruct the
completion of a Relevant New Issue.
General Provisions
(K) For the purposes of this clause 8.5:
(1) "Other Anti-Dilution Issues" means the Relevant
Securities to be issued as a result of the Relevant
New Issue to other shareholders of the Company
pursuant to anti-dilution rights substantially
similar to those contained in this clause 8.5;
(2) "Pro Rata Share" shall mean the following ratio
(measured as at the date of the relevant Issue
Notice):
A
-----
B
where:
"A" is the number of Shares in which China Netcom is
interested or deemed to be interested for the
purposes of Part XV of the SFO, excluding Shares in
which China Netcom has become interested other than
pursuant to clause 2 or this clause 8.5 and excluding
also any interests or deemed interests arising from
Relevant Securities other than Shares; and
"B" is the total number of Shares then in issue;
(3) "Relevant Number" shall mean:
(a) in the case of an issue of Shares, the number
of Shares required to be issued to China
Netcom such that the Relevant Ratio of China
Netcom's interest or deemed interest under
Part XV of the SFO (whether notified or not)
in the issued Share capital of the Company
will not be reduced as a result of the
Relevant New Issue and the Other Anti-Dilution
Issues; and
(b) in the case of an issue of Relevant Securities
other than Shares, the number of Relevant
Securities which represents the Relevant Ratio
of the total number of such Relevant
Securities to be issued pursuant to the
Relevant New Issue and the Other Anti-Dilution
Issues;
(4) "Relevant Ratio" shall mean the following ratio
(measured as at the date of the relative Relevant New
Issue Notice):
X
-----
Y
where:
"X" is the number of Shares in which China Netcom is
interested or deemed to be interested for the
purposes of Part XV of the SFO, excluding Shares in
which China Netcom has become interested other than
pursuant to clause 2 or this clause 8.5 and excluding
also any interests or deemed interests arising from
Relevant Securities other than Shares; and
"Y" is the total number of Shares then in issue
(excluding, for the avoidance of doubt, Shares issued
under the Relevant New Issue and the Other
Anti-Dilution Issues);
(5) for the purposes of sub-clauses (2) and (4) above and
to avoid doubt, where China Netcom is interested or
deemed interested in the Same Shares (as defined
below) pursuant to Part XV of the SFO, the number of
such Same Shares shall not be aggregated with the
number of Shares in which China Netcom is or would
already be interested or deemed interested pursuant
to Part XV of the SFO. "Same Shares" shall mean
Shares in which "associated corporations" (as defined
in Part XV of the SFO) (other than the Subscriber) of
China Netcom are interested or deemed interested
pursuant to Part XV of the SFO.
(L) [Intentionally left blank]
(M) China Netcom shall be entitled to purchase Relevant
Securities under this clause 8.5 directly or through the
Subscriber, and the provisions of this clause 8.5 shall be
construed accordingly.
(N) China Netcom acknowledges and agrees that its exercise of
the rights in this clause 8.5 shall in all cases be subject
to all applicable laws and regulations including the Listing
Rules and the Takeovers Code (including, where applicable,
any requirement to obtain the approval of the shareholders
of the Company).
(O) The provisions of clauses 8.5(B) to 8.5(N) are conditional
on the satisfaction of the Condition in clause 3.1(A).
8.6 Replacement of Directors
China Netcom shall be entitled to nominate persons from time to time
to replace any of the appointments made under clause 4.1(B) and the
Company shall use its best endeavours to procure such new
appointments to be made as soon as practicable. If any of the persons
appointed as a member of the Board pursuant to clause 4.1(B)(1) or
this clause 8.6, as the case may be, is employed by the Company as an
executive or officer, such person shall be appointed as an executive
director of the Company.
8.7 Cessation
(A) The provisions of this clause 8 (except clause 8.5
(Anti-dilution) and this clause 8.7) shall cease to be of
any effect on the earlier of:
(1) the Subscriber at any time ceasing to hold at least
ten per cent. (10%) of the total issued share capital
of the Company; and
(2) China Netcom ceasing to hold, directly or indirectly,
at least 75% of the issued share capital of the
Subscriber or China Netcom otherwise being in
material breach of clause 6.3(B).
(B) The provisions of clause 8.5 (Anti-dilution)) shall cease to
be of any effect on the earlier of:
(1) the third anniversary of the Completion Date;
(2) the Subscriber at any time ceasing to hold at least
15 per cent. (15%) of the total issued share capital
of the Company; and
(3) China Netcom ceasing to hold, directly or indirectly,
at least 75% of the issued share capital of the
Subscriber or China Netcom otherwise being in
material breach of clause 6.3(B).
9. Guarantee
---------
9.1 Guarantee Obligations
In consideration of the Company entering into this Agreement at the
request of China Netcom (as China Netcom hereby acknowledges), China
Netcom shall as primary obligations of it:
(A) procure that the Subscriber shall duly observe and perform
all its obligations owed to the Company under this Agreement
or any other agreement entered pursuant or ancillary hereto;
(B) if and whenever the Subscriber shall be in default in the
payment when due of any amount payable to the Company under
this Agreement or any other agreement entered into pursuant
or ancillary hereto and within two Business Days after being
given notice to that effect by the Company, pay to the
Company all amounts then so payable by the Subscriber to the
Company as though China Netcom instead of the Subscriber was
expressed to be the principal debtor; and
(C) indemnify the Company against all costs and expenses
(including legal fees) which the Company may pay or incur in
collecting any amount payable by the Subscriber or China
Netcom and referred to in clause 9.1(B).
9.2 Indemnity
Any amount not paid by the Subscriber and not recoverable from China
Netcom on the basis of a guarantee (whether because of any legal
limitation, disability or incapacity on the part of the Subscriber or
any other matter or thing whether known to the Company or not) shall
nevertheless be recoverable from China Netcom on the basis of an
indemnity.
9.3 Indulgence etc.
(A) China Netcom acknowledges that its liability under this
clause 9 shall not be discharged or affected in any way by
time being given to the Subscriber or by any other
indulgence or concession being granted to the Subscriber or
by any other act, omission, dealing, matter or thing
whatsoever (including without limitation any change in the
constitution of the Subscriber or China Netcom, any
amendment to this Agreement or any such other agreement
entered pursuant or ancillary hereto or the liquidation,
dissolution, reconstruction or amalgamation of the
Subscriber or China Netcom or the illegality or
unenforceability of this Agreement or such other agreement)
which but for this provision might operate to release China
Netcom from its obligations under this clause 9.
(B) China Netcom agrees that its liability under this clause 9
shall not be discharged or affected in any way by the
assignment (if any) by the Subscriber of its rights in this
Agreement to the Alternate Subscriber under clause 4.4.
9.4 Continuing Guarantee
The guarantee contained in this clause 9 is a continuing guarantee
and shall remain in full force and effect until all obligations of
the Subscriber hereby guaranteed have been discharged in full. It is
in addition to and shall not prejudice nor be prejudiced by any other
guarantee, indemnity or other security or right against any third
party which the Company may have for the due performance of the
obligations concerned.
10. No "acting in concert"
----------------------
10.1 Nothing in this Agreement nor any action taken or proposed to be
taken by the Subscriber, China Netcom and/or the Company under or in
connection with this Agreement is intended to result in the
Subscriber and/or China Netcom "acting in concert" (as defined in the
Takeovers Code) with the Substantial Shareholders (or vice versa).
10.2 The Company and China Netcom agree that if at any time any
Substantial Shareholder, the Subscriber or China Netcom
(collectively, "Relevant Shareholders") considers that anything in or
in connection with this Agreement, or any of the actions or proposed
actions of any of the Relevant Shareholders, mean that the Subscriber
and/or China Netcom are or will be "acting in concert" (as defined in
the Takeovers Code) with the Substantial Shareholders (or vice versa)
("Concert Party Issue"), it shall notify the other Relevant
Shareholders of the Concert Party Issue (including reasonable details
of the issue and reasons for its concern), and each of China Netcom,
the Subscriber and the Company agrees that:
(A) it will consult with each other and with the Substantial
Shareholders on a timely basis and in good faith to discuss
whether the proposed action or actions can be undertaken in
a manner or to an extent that will not have such a result;
and
(B) no action will be taken by it until the Concert Party Issue,
together with the proposed action(s) (if any), have been
resolved to the satisfaction of each of the Relevant
Shareholders PROVIDED THAT if the SFC confirms that any of
China Netcom or any of the Substantial Shareholders shall
not itself or themselves be under an obligation to make a
mandatory general offer for the shares in the Company not
held by them (or parties acting in concert with them)
(regardless of whether any of the other Relevant
Shareholders may be under such an obligation), then the
relevant Concert Party Issue shall be deemed for the
purposes of this provision to have been resolved to the
satisfaction of that or those Relevant Shareholders.
11. Confidentiality
---------------
11.1 Confidentiality
Subject to clauses 11.2, 11.3 and 12, each Party:-
(A) shall treat as strictly confidential the provisions of this
Agreement and the process of their negotiation and all
information about the other Parties obtained or received by
it as a result of entering into or performing its
obligations under this Agreement ("Confidential
Information"); and
(B) shall not, except with the prior written consent of the
other Party (which shall not be unreasonably withheld or
delayed and the Company shall only require the consent of
one of China Netcom of the Subscriber), make use of (save
for the purposes of performing its obligations under this
Agreement) or disclose to any person any Confidential
Information.
11.2 Permitted disclosure or use
Clause 11.1 shall not apply if and to the extent that the Party using
or disclosing Confidential Information can demonstrate that:
(A) such disclosure is to a Substantial Shareholder or a company
controlled by a Substantial Shareholder or under common
control with a Substantial Shareholder (a "Related Party)
(B) such disclosure is required by law or by any supervisory,
regulatory or governmental body having jurisdiction over it
or a Related Party (including the Stock Exchange, the SFC,
the Singapore Stock Exchange and the PRC State Council) and
whether or not the requirement has the force of law; or
(C) such disclosure is to its professional advisers in relation
to the negotiation, entry into or performance of this
Agreement or any matter arising out of the same; or
(D) such disclosure is required to facilitate the satisfaction
of any of the Conditions; or
(E) such disclosure is required in order to facilitate any
assignment or proposed assignment of the whole or any part
of the rights or benefits under this Agreement which is
permitted by clause 17.7; or
(F) in the case of disclosure or use, the Confidential
Information concerned was lawfully in its possession (as
evidenced by written records) prior to its being obtained or
received as described in clause 11.1(A); or
(G) in the case of disclosure or use, the Confidential
Information concerned has come into the public domain other
than through its fault or the fault of any person to whom
such Confidential Information has been disclosed in
accordance with clause 11.1(B).
11.3 Continuance of restrictions
The restrictions contained in this clause 11 shall continue without
limit of time.
12. Announcements
-------------
12.1 Restrictions
Subject to clause 12.2, no Party to this Agreement shall make any
announcement or issue any communication concerning the provisions or
subject matter of this Agreement or containing any information about
the other Parties without the prior written approval of the other
(which shall not be unreasonably withheld or delayed and the Company
shall only require the consent of one of China Netcom or the
Subscriber).
12.2 Permitted announcements
Clause 12.1 shall not apply:
(A) to the Subscription Announcement; and
(B) if and to the extent that any announcement is required by
law or by any supervisory, regulatory or governmental body
having jurisdiction over it (including the Stock Exchange
and the SFC), and whether or not the requirement has the
force of law and provided that any such announcement shall
be made only after consultation with the other Parties.
13. Notices
-------
(A) Any notice (which term shall in this clause include any
other communication) required to be given under this
Agreement or in connection with the matters contemplated by
it shall, except where otherwise specifically provided, be
in writing in the English language.
(B) Any such notice shall be addressed as provided in sub-clause
(C) and may be:
(1) personally delivered, in which case it shall be
deemed to have been given upon delivery at the
relevant address; or
(2) if within Hong Kong, sent by pre-paid post, in which
case it shall be deemed to have been given two
Business Days after the date of posting; or
(3) if from or to any place outside Hong Kong, sent by
pre-paid airmail, in which case it shall be deemed to
have been given seven Business Days after the date of
posting; or
(4) sent by facsimile, in which case it shall be deemed
to have been given when despatched, subject to
confirmation of uninterrupted transmission by a
transmission report provided that any notice
despatched by facsimile after 5:00 p.m. on any day
shall be deemed to have been received at 9:00 a.m. on
the next Business Day.
(C) The addresses and other details of the Parties referred to
in sub-clause (B) are, subject to sub-clause (C):
If to the Company, to:
PCCW Limited
00xx Xxxxx, XXXX Xxxxx,
XxxXxx Xxxxx,
000 Xxxx'x Xxxx,
Xxxxxx Xxx,
Xxxx Xxxx
Facsimile: x000 0000 0000
Attention: The Company Secretary
If to the Subscriber, to:
China Netcom Group Corporation (BVI) Limited
59/F, Bank of Xxxxx Xxxxx,
0 Xxxxxx Xxxx,
Xxxx Xxxx
Facsimile: x000 0000 0000
Attention: Wang Chuanbao
If to China Netcom, to:
China Network Communications Group Corporation
[GRAPHIC OMITTED]
59/F, Bank of Xxxxx Xxxxx,
0 Xxxxxx Xxxx,
Xxxx Xxxx
Facsimile: x000 0000 0000
Attention: Head of Business Development
(D) Any Party may notify the other Parties of any change to the
address or any of the other details specified in sub-clause
(C), provided that such notification shall only be effective
on the date specified in such notice or five Business Days
after the notice is given, whichever is later.
14. Waiver of Immunity
------------------
14.1 Immunity
It is acknowledged that the status of China Netcom in the PRC may
afford it certain protections and immunities not available to
entities wholly independent of any state body in the PRC and China
Netcom has therefore agreed to waive such protections and immunities
as set out below.
14.2 Waiver
China Netcom irrevocably and unconditionally agrees with the Company
that in respect of any Proceedings brought against China Netcom or
its assets by the Company in relation to this Agreement or any other
agreement entered into pursuant to or as a result of this Agreement:
(A) no immunity from those proceedings (including, without
limitation, suit, attachment prior to judgement, other
attachment, the obtaining of any judgement, execution or
other enforcement, or the enforcement and execution of any
award rendered by an arbitral tribunal constituted pursuant
to this Agreement) will be claimed by or on behalf of itself
or with respect to its assets;
(B) China Netcom shall (and hereby) waives any such right of
immunity which it or its assets now has or may subsequently
acquire; and
(C) China Netcom consents generally in respect of any such
proceedings to the giving of any relief or the issue of any
process in connection with those proceedings, including,
without limitation, the making, enforcement or execution
against any assets whatsoever (irrespective of its use or
intended use) of any order or judgement which may be made or
given in those proceedings or of any award rendered by an
arbitral tribunal constituted pursuant to this Agreement.
15. Law and Arbitration
-------------------
15.1 Law
This Agreement shall be governed by and construed in accordance with
the laws of England for the time being in force.
15.2 Arbitration
(A) Any dispute, controversy or claim arising out of or in
connection with this Agreement, including any question
regarding its existence, validity or termination, shall be
referred to and finally resolved by arbitration under the
LCIA Rules, which Rules are deemed to be incorporated by
reference into this clause. The arbitration commission shall
be the LCIA.
(B) The number of arbitrators shall be three.
(C) The seat of the arbitration shall be London.
(D) The language to be used in the arbitral proceedings shall be
English.
(E) By agreeing to arbitration pursuant to this clause, the
Parties waive irrevocably their right to any form of appeal,
review or recourse to any state court or other judicial
authority, insofar as such waiver may validly be made. In
particular, no Party may apply to the court to determine any
question of law arising in the course of the arbitration
pursuant to section 45 of the Arbitration Xxx 0000 or
otherwise, and no Party may appeal to the court on a
question of law arising out of an award made in the
arbitration pursuant to section 69 of the Arbitration Xxx
0000 or otherwise.
(F) The Parties shall have the right to seek interim injunctive
relief from a court of competent jurisdiction, both before
and after the arbitrators have been appointed, at any time
up until the arbitrators have made the final award.
16. Contracts (Rights of Third Parties) Xxx 0000
--------------------------------------------
16.1 Subject to clause 16.2, no person who is not for the time being a
Party to this Agreement shall have any right under the Contracts
(Rights of Third Parties) Xxx 0000 to enforce any term of this
Agreement.
16.2 Each of the persons referred to in clauses 5.1(F) and 5.3 shall be
entitled to enforce the benefits conferred on him by such clauses,
provided that the consent of such persons shall not be required for
the variation or termination of this Agreement.
17. Provisions Relating to this Agreement
-------------------------------------
17.1 Counterparts
This Agreement may be executed in any number of counterparts, which
shall together constitute one Agreement. Any Party may enter into
this Agreement by signing any such counterpart.
17.2 Whole agreement
(A) This Agreement, together with any documents referred to in
it, constitutes the whole agreement between the Parties
relating to its subject matter and supersedes and
extinguishes any prior drafts, agreements, and undertakings,
whether in writing or oral, relating to such subject matter,
except to the extent that the same are repeated in this
Agreement.
(B) Each of the Parties acknowledges that it has not been
induced to enter into this Agreement by any representation,
warranty, promise or assurance by any of the others or any
other person save for those contained in this Agreement.
17.3 Variations
No variation of this Agreement shall be effective unless made in
writing and signed by each of the Parties.
17.4 Further assurance
At any time after the Completion Date every Party hereto shall, at
the request of any other Party and at such requesting Party's cost,
execute or procure the execution of such documents and do or procure
the doing of such acts and things as the requesting Party may
reasonably require for the purpose of vesting in the requesting Party
or its permitted assignees the full benefit of all its rights in this
Agreement.
17.5 Costs
Each Party shall bear its own costs arising out of or in connection
with the preparation, negotiation and implementation of this
Agreement. Any capital duty or fees payable to the Stock Exchange in
relation to the Subscription shall be borne by the Company.
17.6 Time Of The Essence
Any time, date or period mentioned in this Agreement may be extended
by written agreement between the Parties but otherwise and except as
expressly provided, as regards any time, date or period originally
fixed or any date or period so extended as aforesaid, time shall be
of the essence.
17.7 Agreement Binding and Assignment
This Agreement shall be binding on and enure for the benefit of each
Party's respective successors and permitted assigns. No Party shall
assign any of its rights under this Agreement (all of which shall be
incapable of assignment) or purport to do so without the prior
written consent of the other Parties.
17.8 Waiver
No failure or delay by any Party in exercising any right, power or
remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of the same preclude any further
exercise thereof or the exercise of any other right, power or remedy.
Without limiting the foregoing, no waiver by any Party of any breach
of any provision hereof shall be deemed to be a waiver of any
subsequent breach of that or any other provision hereof.
17.9 Invalidity and Severance
If any provision of this Agreement shall be held to be illegal, void,
invalid or unenforceable under the laws of any jurisdiction, the
legality, validity and enforceability of the remainder of this
Agreement in that jurisdiction shall not be affected, and the
legality, validity and enforceability of the whole of this Agreement
in any other jurisdiction shall not be affected.
AS WITNESS the hands of the duly authorised representatives of the Parties on
the day and year first before written.
SIGNED by LI TZAR KAI, XXXXXXX ) /s/ Li Tzar Kai, Xxxxxxx
for and on behalf of )
PCCW LIMITED )
in the presence of: )
SIGNED by ZHANG CHUNJIANG ) /s/ Zhang Chunjiang
for and on behalf of )
CHINA NETCOM GROUP )
CORPORATION (BVI) LIMITED )
in the presence of: )
SIGNED by ZHANG CHUNJIANG ) /s/ Zhang Chunjiang
for and on behalf of )
CHINA NETWORK COMMUNICATIONS )
GROUP CORPORATION )
in the presence of: )
SCHEDULE 1: THE COMPANY WARRANTIES
The Company hereby represents and warrants to the Subscriber that:
1. Subscription Announcement: All statements of fact contained in the
Subscription Announcement (other than statements relating to the CNC
Group or any member of the CNC Group) are true and accurate in all
material respects and not misleading in any material respect in the
form and context in which they appear, all expressions of opinion,
intention or expectation contained therein (which are stated to be
held or expressed by the Company) are made on reasonable grounds and
are truly and honestly held by the directors of the Company and are
fairly based and there are no other facts relating to the Company
omitted the omission of which makes any such statement or expression
in the Subscription Announcement misleading in any material respect
or which are or can reasonably be expected to be material in the
context of the Subscription.
2. 2003 Accounts: The consolidated balance sheet of the Group as at 31
December 2003 and the consolidated income statement, the consolidated
cash flow statement and the consolidated statement of changes in
equity of the Group for the financial year ended on that date
(including the notes thereto) as set out in the annual report and
accounts of the Group for the year ended on 31 December 2003 (the
"2003 Accounts") together gave a true and fair view of the state of
affairs of the Group as at 31 December 2003 and of the profits or
losses, cash flows and changes in equity of the Group for the
financial year ended on that date and were prepared on the basis set
out therein.
3. 30 September Accounts: The unaudited consolidated results of the
Group for the nine months ended 30 September 2004 published on 2
November 2004 (the "30 September Accounts") were carefully prepared
in accordance with accounting policies consistent with those used in
preparing the 2003 Accounts and fairly reflect the results of
operations for such nine months.
4. Previous Announcements: All statements of fact contained in all
announcements and circulars to shareholders made by or on behalf of
the Company pursuant to the Listing Rules since 31 December 2003 to
the date of this Agreement, except any announcement relating to the
financial results of the Group (including without limitation any
interim or financial results announcement), ("Previous
Announcements") were true and accurate in all material respects as at
the respective dates of such Previous Announcements and not
misleading in any material respect. All expressions of opinion or
intention contained in the Previous Announcements were made on
reasonable grounds and were truly and honestly held by the directors
of the Company and there were no other facts known to the directors
of the Company the omission of which would make any such statement or
expression in any of the Previous Announcements misleading in any
material respect in the context in which the Previous Announcements
were made and as at the respective dates of such Previous
Announcements.
5. Conduct of business: Save as disclosed in the Subscription
Announcement or any public disclosures made by the Company prior to
the date of this Agreement ("Previous Disclosures"), since 30
September 2004, the business of the Group has been carried on in the
ordinary and normal course; no contracts or commitments of an unusual
or unduly onerous nature have been entered into by any member of the
Group; and there has been no material depletion in the net assets of
the Group taken as a whole.
6. Licences: The Group has obtained all material licences (including
telecommunications and broadcasting licences) necessary to enable it
to operate the material parts of its business as at the date of this
Agreement, and each of those licences are valid and subsisting and,
so far as the Company is aware, there are no facts or circumstances
existing by reason of any breach by the licencees why any of such
licences will not be renewed on their expiry. So far as the Company
is aware, there are no governmental or regulatory investigations or
proceedings which have been initiated prior to the date of this
Agreement and have been notified in writing to any member of the
Group and which are reasonably likely to have a material adverse
effect on the business, prospects, assets, financial condition, or
results of operations of the Group taken as a whole.
7. No litigation: Save as disclosed in the Previous Disclosures, no
member of the Group is a defendant in any litigation, arbitration or
governmental proceeding which can reasonably be expected to have or
have had during the twelve months preceding the date hereof a
material adverse effect on the financial or trading position or
prospects of the Group or which is material for disclosure in the
context of the Subscription and no such litigation, arbitration or
proceeding is threatened or pending; nor, to the best of the
knowledge, information and belief of the directors of the Company,
are there any circumstances which can reasonably be expected to give
rise to any such litigation, arbitration or proceeding.
8. Indebtedness and obligations: No circumstances or events have arisen
or occurred or so far as the Company is aware are likely to arise or
occur such that any person is (or would, with the giving of notice
and/or lapse of time and/or fulfilment of any condition and/or the
making of any determination, become) entitled to repayment of any
material indebtedness prior to its due date for payment by any member
of the Group, or to take any step to enforce any security for any
such indebtedness of any member of the Group and no person to whom
any indebtedness for borrowed money of any member of the Group which
is payable on demand is owed has demanded or threatened to demand
repayment of the same; no member of the Group is party to or under
any obligation which is material and is of an unusual or unduly
onerous nature; neither this Agreement nor the Subscription will
constitute or give rise to a breach of or default under any agreement
or other arrangement to which the Company or any other member of the
Group is party or give rise to any rights of any third party in
respect of any assets of the Group.
9. Corporate power and consents: The Company has power under its
constitutional documents to permit its entry into this Agreement and
the Subscription in the manner set out herein and this Agreement (and
its performance) has been duly authorised (such authorisation
remaining in full force and effect), executed and delivered by, and
constitutes legal, valid and binding obligations of the Company
enforceable in accordance with its terms except as such
enforceability may be limited under applicable bankruptcy,
insolvency, fraudulent transfer, reorganisations or similar laws of
general applicability relating to or affecting creditors rights and
to general equitable principles; subject to satisfaction of the
Conditions, there is no authorisation, consent, approval or
notification required for the purposes of or as a consequence of the
Subscription either from governmental, regulatory or other public
bodies (including, without limitation, the Stock Exchange) or
authorities or courts or from the respective shareholders of the
Company or from any third party pursuant to any contractual or other
arrangement to which the Company or any other member of the Group is
party; the Subscription and the compliance by the Company with all of
the provisions of this Agreement will not conflict with or result in
a material breach or violation of any of the terms or provisions of,
or constitute a material default under, any agreement or instrument
to which it is a party or by which it is bound or to which any of its
property or assets is subject and will not contravene any law or
regulation applicable to, or any order of any court or governmental
agency with jurisdiction over the Company or any member of the Group,
or any of their respective assets or properties.
10. Subscription Shares: Upon completion of this Agreement, the
Subscription Shares will be duly and validly authorised and issued
and, when fully paid up, will rank pari passu in all respects with
the other issued Shares.
11. Stock Exchange and general compliance: The Company is not in material
breach of any rules, regulations or requirements of the Stock
Exchange, and the Company has complied in all material respects with
all other applicable rules, regulations and other requirements
material or relevant to the transactions contemplated by this
Agreement as are required to be complied with at the date hereof.
12. Incorporation and share capital: The Company has been duly
incorporated and is validly existing under the laws of the
jurisdiction of its incorporation with full corporate power and
authority to conduct its business and the information contained in
Recitals (A) and (B) to this Agreement is true and accurate; without
limiting the foregoing, except for the Subscription or pursuant to
the convertible securities listed below (the "Convertibles") or as
specified in the Previous Disclosures, no person has any outstanding
warrant, option, pre-emptive right or any other right of any
description to require Shares to be allotted or issued by the
Company. The Convertibles are: US$54,000,000 5% Mandatory Convertible
Notes due 2005 issued by the Company - 28 June 2002, the
US$450,000,000 1% Guaranteed Convertible Bonds due 2007 issued by
PCCW Capital No.2 Limited and guaranteed by the Company and PCCW-HKT
Telephone Limited and the US$1,100,000,000 3.5% Guaranteed
Convertible Bonds due 2005 issued by PCCW Capital Limited and
guaranteed by the Company - 6 December 2000. The terms and conditions
attached to each of the Convertibles at the time of their original
issue have not been amended or adjusted in any material manner which
would affect the number of Shares to be issued on conversion.
13. Certificate: The information and matters set out in the certificate
referred to in clause 4.1(F), when issued, are true and accurate in
all material respects.
SCHEDULE 2: LIMITATIONS ON THE COMPANY'S LIABILITY
1. Relevant Claims
---------------
In this schedule, "Relevant Claim" means any claim under this
Agreement.
2. Financial Limits
----------------
2.1 Aggregate limit
The aggregate liability of the Company under this Agreement,
including the Company Warranties, shall be limited to US$350 million.
2.2 Thresholds
The Company shall not be liable in respect of a Relevant Claim
unless:
(A) the liability of the Company in respect of that Relevant
Claim (and all other Relevant Claims arising out of or
related to the same or similar subject matter) exceeds US$5
million;
(B) the aggregate liability of the Company in respect of all
Relevant Claims in respect of the representations and
warranties contained in paragraphs 2 (2003 Accounts), 3 (30
September Accounts) and 13 (Certificate) of Schedule 1
exceeds US$20 million, in which case the Company shall be
liable for the whole amount and not merely the excess over
US$20 million; and
(C) the aggregate liability of the Company in respect of all
Relevant Claims (other than in respect of the
representations and warranties contained in paragraphs 2
(2003 Accounts), 3 (30 September Accounts) and 13
(Certificate) of Schedule 1) exceeds US$50 million (when
aggregated with all Relevant Claims in respect of the
representations and warranties contained in paragraphs 2
(2003 Accounts), 3 (30 September Accounts) and 13
(Certificate) of Schedule 1, if applicable), in which case
the Company shall be liable for the whole amount and not
merely the excess over US$50 million.
3. Time limits
-----------
The Company shall have no liability in respect of any Relevant Claim
in respect of a breach of the Company Warranties unless the
Subscriber shall have given notice in writing to the Company of such
claim specifying (in reasonable detail) the matter which gives rise
to the claim, the nature of the claim and the amount claimed in
respect thereof not later than 18 months after the date of this
Agreement (or, if later, 2 months after the date on which the audited
consolidated financial statements of the Group covering the year
ended 31 December, 2005 are published).
4. No duplication of recovery
--------------------------
The Subscriber shall not be entitled to recover damages or otherwise
obtain reimbursement or restitution more than once in respect of the
same loss.
5. Legislation
-----------
The Company will not be liable for any claim to the extent that the
claim results from any act, matter, omission, transaction or
circumstance which would not have occurred but for any legislation
not in force at the date of this agreement, or any change of any law
or administrative practice of any governmental agency including any
legislation or change which takes place retrospectively.
6. Insurance
---------
The Company will not be liable for any claim for breach of the
Company Warranties unless the Subscriber has first made a claim under
any insurance cover held by the Subscriber which may cover such claim
and only then after that claim is denied whole or in part by the
relevant insurer and if the Subscriber has still incurred some damage
or loss will the Company be liable for any claims under the terms of
this Agreement for that damage or loss. For the avoidance of doubt,
the preceding sentence is not intended to impose any obligation on
the Subscriber to take out any insurance cover in addition to that
which it holds at the date of this Agreement.
7. Impact of Tax
-------------
In calculating the liability of the Company for a breach of Company
Warranty, any tax benefit or reduction received by the Subscriber as
a result of the loss or damage arising from that breach shall be
taken into account.
8. Consequential and Indirect Loss
-------------------------------
The Subscriber may not claim for any indirect or consequential loss.
