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Exhibit 10.3
DATED JANUARY 12, 2000
(1) XXXXXXXXX TELECOMMUNICATIONS LIMITED
(2) XXXXXXXXX WHAMPOA LTD.
(3) GLOBAL CROSSING LTD.
(4) GLOBAL CROSSING HOLDINGS LTD.
(5) HCL HOLDINGS LIMITED
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SHAREHOLDERS AGREEMENT
RELATING TO
HCL HOLDINGS LIMITED
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INDEX
PAGE
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1. DEFINITIONS AND INTERPRETATION.......................................................................... 2
2. THE COMPANY AND HCL..................................................................................... 9
3. ARTICLES OF ASSOCIATION................................................................................. 13
4. BUSINESS OF THE HCL GROUP............................................................................... 13
5. DIRECTORS............................................................................................... 16
6. SHAREHOLDERS MEETINGS................................................................................... 20
7. DEADLOCK................................................................................................ 21
8. ACCOUNTS AND INFORMATION TO SHAREHOLDERS................................................................ 22
9. BUSINESS PLAN; OPERATING BUDGET......................................................................... 23
10. EMPLOYMENT POLICIES..................................................................................... 25
11. TRANSFER OF SHARES AND SHAREHOLDERS LOANS............................................................... 25
12. INTENTIONALLY DELETED................................................................................... 27
13. GUARANTEE............................................................................................... 27
14. CONFIDENTIALITY......................................................................................... 29
15. NON COMPETITION AND OTHER OBLIGATIONS................................................................... 29
16. PROTECTION OF NAME...................................................................................... 35
17. TERMINATION............................................................................................. 35
18. MISCELLANEOUS........................................................................................... 36
19. NOTICE.................................................................................................. 38
20. TAXES................................................................................................... 39
21. AGENT FOR SERVICE....................................................................................... 42
22. EFFECTIVE DATE.......................................................................................... 43
SCHEDULE
SCHEDULE 1A - A GROUP SERVICES
SCHEDULE 1B - B GROUP SERVICES
SCHEDULE 2 - NON-COMPETE EXCEPTIONS
SCHEDULE 3 - RESERVED MATTERS
SCHEDULE 4 - DEED OF ADHERENCE
SCHEDULE 5 - ARBITRATION
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SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENTS is made on the 12th day of January, 2000
BETWEEN
(1) XXXXXXXXX TELECOMMUNICATIONS LIMITED, a company incorporated in
Hong Kong and having its registered office at 00xx Xxxxx, Xxxxxxxxx Xxxxx, 00
Xxxxxxxx Xxxx, Xxxx Xxxx ("Party A");
(2) XXXXXXXXX WHAMPOA LIMITED, a company incorporated in Hong Kong with
its registered office at 00xx Xxxxx, Xxxxxxxxx Xxxxx, 00 Xxxxxxxx Xxxx, Xxxx
Xxxx ("Principal Party A");
(3) GLOBAL CROSSING HOLDINGS LTD., a company incorporated in Bermuda
with its registered office at Wessex Hour, 00 Xxxx Xxxxxx, Xxxxxxxx, XX00,
Xxxxxxx ("Party B");
(4) GLOBAL CROSSING LTD., a company incorporated in Bermuda with its
registered office at Wessex House, 45 Xxxx Street, Xxxxxxxx, HM12, Bermuda
("Principal Party B"); and
(5) HCL HOLDINGS LIMITED, a company incorporated in the British Virgin
Islands with its registered office at the offices of Trident Trust Company
(B.V.I.) Limited, X.X. Xxx 000, Xxxx Xxxx, Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxxx (the
"Company").
WHEREAS,
(A) The Company is a company incorporated in the British Virgin Islands
with registered number 69098 and as at the date hereof has an
authorised capital of US$50,000 divided into 50,000 shares of US$1
each, 320 of such shares have been issued and are fully paid and are
beneficially owned by Party A and by Party B as to 160 shares each.
(B) Xxxxxxxxx Communications Limited ("HCL") is a company incorporated in
Hong Kong with registered number 385946 and as at the date hereof has
an authorised capital of HK$10,000 divided into 1,000 ordinary shares
of HK$10 each. Two of such shares have been issued and are fully paid
up and are all beneficially owned by the Company.
(C) The Company's Subsidiaries provide fixed telecommunication network and
multimedia services in Hong Kong.
(D) The parties hereto have agreed to enter into this Agreement to provide
for the ownership, management, financing and other activities of the
Company and its Subsidiaries and their rights and duties inter se.
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NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, the following
expressions shall have the following meanings respectively:
"A Group" means Principal Party A and its Subsidiaries and Affiliates
from time to time but unless otherwise expressly stated does not
include any member of the HCL Group.
"A Group Services" means the Telecommunications services provided in
Hong Kong as set forth in Schedule 1A, as supplemented from time to
time in accordance with Clause 2.12.
"AGCH" means Asia Global Crossing Holdings Ltd., a company incorporated
in Bermuda.
"Agreement" means this Shareholders Agreement including its recitals
and schedules, as it may be amended and/or supplemented from time to
time.
"Affiliate" means, as to any Person, (a) any corporation more than 20%
of whose stock of any class or classes having by the terms thereof
ordinary voting power (including the right to vote on appointment of
directors) is at the time directly or indirectly owned by such Person
and/or one or more Subsidiaries of such Person and (b) any partnership,
association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person have more than 20% direct or
indirect equity interests therein, in each case, other than a
Subsidiary of such Person.
"Articles" means the articles of association of the Company as amended
from time to time and for the time being in force.
"B Group" means Principal Party B and its Subsidiaries and its
Affiliates from time to time but unless otherwise expressly stated does
not include any member of the HCL Group.
"B Group Services" means the services set forth in Schedule 1B, as
supplemented from time to time in accordance with Clause 2.12.
"Board" means the board of Directors of the Company from time to time.
"Business" means the board of Directors of the Company from time to
time.
"Business" means the provision of
(a) HK Fixed Services;
(b) Internet Access and Transport Services in Hong Kong;
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(c) PRC Fixed Services;
(d) Internet Access and Transport Services in the PRC;
and
(e) Internet Enablement Services in Hong Kong.
"Business Days" means any day on which banks in Hong Kong, New York and
Los Angeles are officially open for business generally, except a
Saturday or a Sunday.
"Business Plan" means the business plan and operating budget of the HCL
Group as referred to in Clause 9.
"Capacity" means
(a) in the case of the HCL Group, backhaul, capacity, and
leased circuit services on the terrestrial networks
in Hong Kong and the PRC owned by the HCL Group or
with respect to which the HCL Group has the right to
set the price and other terms; and
(b) in the case of the B Group, wholesale international
cable capacity owned by the B Group or with respect
to which the B Group has the right to set the price
and other terms.
"CK" means Xxxxxx Kong Holdings Limited.
"Companies Ordinance" means the Companies Ordinance (Chap. 32) of the
Laws of Hong Kong.
"Content and Portal Distribution" means the provision of information,
entertainment and other content on the Internet and services associated
therewith including, for example, development, establishment and supply
of portal sites, provision of search engines and other software
development for content provisioning on the Internet.
"Director(s)" means the director(s) of the Company from time to time.
"E-Commerce" means the sale of goods and services on the Internet.
"Fundamental Breach" means any breach of any obligation hereunder the
commission of which would entitle of non-breaching party to terminate
this Agreement at law (ignoring for that purpose any contrary provision
in this Agreement).
"FTNS Licence" means any fixed telecommunications network services
licence issued under the Telecommunication Ordinance held from time to
time by the HCL Group and includes:
(a) any successor licence or licence replacing or
modifying the said fixed telecommunications network
service licence; and
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(b) all authorisations and licences issued pursuant to
the said fixed telecommunications network service
licence or incidental thereto.
"Global Crossing Network" means:
(a) those submarine and terrestrial cable systems
referred to in the Network Agreement; and
(b) submarine and terrestrial cable systems (other than
terrestrial cable systems in the PRC and Hong Kong)
owned by any one or members of the B Group from time
to time or with respect to which any one or more
members of the B Group has the right to set the price
and other terms for the related capacity.
"Group Services" means the collective reference to A Group Services and
B Group Services.
"HCL Group" means the Company and its Subsidiaries from time to time.
"Hong Kong" means the Hong Kong Special Administrative Region of the
PRC.
"HK Fixed Services" means the provision of wireline or wireless means
of Telecommunications services between fixed points in Hong Kong or
between one or more fixed points in Hong Kong and one or more fixed
points outside Hong Kong including the provision of services,
establishment and maintenance of networks (whether owned or leased) and
facilities and other activities from time to time authorised under
HCL's FTNS Licence, but does not include Satellite Based Services. For
the avoidance of doubt, HK Fixed Services includes the following to the
extent so authorised under HCL's FTNS Licence:
(a) facilitating the establishment of submarine cable
landing stations in Hong Kong as permitted by Clause
4.8; and
(b) without limiting the definition of Satellite Based
Services set out below, subject to the approval of
the Board in accordance with Clause 4.9, the
establishment and use of satellite earth stations and
the leasing of satellite capacity as part of the
network established under HCL's FTNS Licence for the
provision of services between fixed points.
"Intellectual Property" means all intellectual property rights, to the
extent acquired by or developed by or vested in the Company and/or its
Subsidiaries or their respective employees in the course of their
conducting the Business, including but not limited to the following
rights:
(a) patents, copyrights, registered designs, trade marks,
service marks, know how, discoveries, processes,
computer software and programs, codes and related
items, invention disclosures and related improvements
and any
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right of the Company to have confidential information
kept confidential; and
(b) any application or right to apply for registration of
any of the rights referred to in paragraph (a).
"Internet Access and Transport Services" means the establishment,
maintenance or provision of Internet access facilities or services or
the provision of capacity for accessing and transporting communications
on the Internet on a wholesale or retail basis. Internet Access and
Transport Services includes, without limitation, Internet Protocol
("IP") transit services.
"Internet Advertising" means advertising on the Internet and services
relating thereto.
"Internet Enablement Services" means Internet facilities management
(including network management services and system security monitoring
services), web hosting and associated web design, equipment collocation
and hosting, application hosting (whether the application is
proprietary or belongs to the customer) and data storage, back-up and
recovery services.
"Mobile Operator" means any person who holds a licence to provide
Mobile Services in Hong Kong.
"Mobile Services" means providing and maintaining a public
radio-telephone service (other than services provided pursuant to an
FTNS License) and the sales and/or lease of subscriber equipment
(mobile and portable radio telephone equipment and related
accessories).
"Network Agreement" means the Global Crossing Network Agreement, dated
as of the date hereof, among the Company, Principal Party B and its
Affiliate, as amended, supplemented or otherwise modified from time to
time.
"Paging Services" means paging and ancillary services, including
services of a type which were authorised under the Public Radio
Communications Services licenses.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, limited duration company, limited life
company, association, trust or other enterprise or a government,
including an agency thereof.
"PRC" means the People's Republic of China, including Macau, but
excluding Hong Kong, and for the avoidance of doubt does not include
Taiwan.
"PRC Fixed Services" means the provision by wireline or wireless means
of Telecommunications services between Fixed points in the PRC or
between one or more fixed points in the PRC and one or more fixed
points outside the PRC but does not include Satellite Based Services.
For the avoidance of doubt, PRC Fixed Services includes the following:
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(a) facilitating the establishment of submarine cable
landing stations in Hong Kong as permitted by Clause
4.8; and
(b) without limiting the definition of Satellite Based
Services set out below, subject to the approval of
the Board in accordance with Clause 4.9, the
establishment and use of satellite earth stations and
the leasing of satellite capacity as part of the
network established for the provision of services
between fixed points as aforesaid.
"Principal Parties" means Principal Party A and Principal Party B.
"Relevant Agreements" has the meaning assigned to that term in the Sale
and Purchase Agreement.
"Relevant Shareholder" means:
(a) in respect of Principal Party A, Party A and any
person for whose obligations Principal Party A is
liable under Clause 11.4;
(b) in respect of Principal Party B,
(i) Party b and any person for whose obligations
Principal Party B is liable under Clause
11.4; or
(ii) if Shares are owned by AGCH or one of its
wholly owned Subsidiaries in accordance with
Clause 11.2, AGCH or such wholly owned
Subsidiary for so long as such person owns
Shares; or
(iii) if Shares are owned by the Interim Entity
prior to the Interim Entity becoming a
wholly owned subsidiary of AGCH or a
transfer of Shares to AGCH pursuant to
Clause 1.6A, the Interim Entity for so long
as the Interim Entity owns Shares.
"Sale and Purchase Agreement" means a subscription and sale and
purchase agreement between the parties dated 15 November, 1999, as
amended, supplemented or otherwise modified from time to time.
"Satellite Based Services" means Telecommunications services provided
by satellite (other than services provided pursuant to a FTNS Licence)
including, without limitation, the ownership and operation of
satellites, television broadcasting and similar services provided by
satellite, VSAT services and services provided through global satellite
systems and global positioning services, and the establishment and
maintenance of facilities relating to any of the foregoing and services
ancillary thereto.
"Shareholder(s)" means holder(s) of Share(s) from time to time.
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"Shareholders Loan(s)" means loan(s) made or to be made to the Company
by the Shareholders (or where the context so requires, by a particular
Shareholder) or, where the context so requires, the outstanding amount
thereof.
"Share(s)" means the issued share(s) in the capital of the Company from
time to time.
"Subsidiary" means, as to any Person, (a) any corporation more than 50%
of whose stock of any class or classes having by terms thereof ordinary
voting power to elect a majority of the directors of such corporation
is at the time owned by such Person and/or one or more Subsidiaries of
such Person and (b) any partnership, association, joint venture or
other entity in which such Person and/or one or more Subsidiaries of
such Person have more than 50% equity interests therein provided that,
whether or not falling within paragraphs (a) and (b) of this
definition, (I) the Interim Entity shall be deemed to be a Subsidiary
of Principal Party B for so long as the Interim Entity owns any Shares
and is not a Subsidiary of AGCH as a result of becoming a wholly owned
subsidiary of AGCH under Clause 1.6A; and (II) without limiting the
foregoing, AGCH and its Subsidiaries (as defined in paragraph (a) and
(b) above) shall be deemed to be Subsidiaries of Principal Party B for
so long as AGCH or any of AGCH's Subsidiaries owns any Shares (and, if
AGCH or its Subsidiary disposes of its Shares after the restrictions on
transfer of Shares under this Agreement are removed pursuant to Clause
11.2(a), AGCH and its Subsidiaries shall be deemed to continue to be
Subsidiaries of Principal Party B from the date of such disposal until
the date this Agreement terminates under Clause 11.2).
"Telecommunication Ordinance" means the Telecommunication Ordinance,
Chapter 106 of the Laws of Hong Kong.
"Telecommunications" includes any communication by wire or radio waves
or any other electromagnetic means or by any combination thereof:
(a) whether between persons and persons, things and
things or persons and things; and
(b) whether in the form of speech, music or other sounds;
and
(c) whether in the form of data, text, visual images
(animated, moving or otherwise), signals or any other
form; and
(d) whether in any combination of forms.
"HKS" means Hong Kong dollars, the lawful currency of Hong Kong.
"US$" means United States dollars, the lawful currency of the United
States of America.
1.2 Reference herein to Clauses, paragraphs, Recitals and Schedules are to
clauses, paragraphs and recitals of and schedules to this Agreement
unless the context requires otherwise and the Recitals and the
Schedules shall form part of this Agreement.
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1.3 References to any statute or statutory provisions shall include any
statute or statutory provision which amends or replaces, or has amended
or replaced it and shall include any subordinate legislation made under
the relevant statute.
1.4 References to writing shall include typewriting, printing, lithography,
photography and facsimile message and other modes of reproducing words
in a legible and non-transitory form.
1.5 Words importing the singular include the plural and vice versa, words
importing a gender include every gender and references to any person
shall include references to an individual, firm, or body corporate or
unincorporate.
1.6 Headings are for convenience of reference only and shall not affect the
construction of this Agreement.
1.6A Transfer to the Interim Entity
The parties acknowledge that in order for Party B or one of its
Subsidiaries to transfer its Shares to AGCH (or one of AGCH's direct or
indirect wholly owned Subsidiaries) pursuant to Clause 11.2, Party B
may chose to temporarily transfer all of the Shares held by Party B to
an entity which is owned by the shareholders of AGCH in the same
proportion as their interests in AGCH and in which Principal Party B
owns legally and beneficially at least 51% of the outstanding voting
stock (the "Interim Entity") provided that:
(a) Principal Party B shall cause all of the Shares held by the
Interim Entity or all of the issued stock of the Interim
Entity to be promptly transferred to AGCH but in any event no
later than 90 days after the date of transfer to the Interim
Entity and, at all times prior to such transfer to AGCH,
Principal Party B shall own at least 51% of the voting shares
of the Interim Entity; and
(b) At all times the Interim Entity owns Shares, it shall comply
with all of the obligations imposed on a Shareholder under
this Agreement.
Party B shall at the time of such transfer to the Interim Entity,
provide written notice to Principal Party A of such transfer and, if
requested by Party A, an officer's certificate certifying as to its
ownership interest in the Interim Entity and warrants such certificate
shall be accurate.
1.7 The expressions "Party A", "Party B", "Principal Party A", "Principal
Party B", "Shareholder(s)" and "the Company" shall, where the context
permits, include their respective successors and permitted assigns.
1.8 Any obligation of a party to procure or cause an Affiliate to take any
action whatsoever shall be limited to an obligation to use reasonable
commercial endeavours to secure that the Affiliate undertakes that
action.
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2. THE COMPANY AND HCL
2.1 The Company
(a) The Company is and shall be an international business company
incorporated under the laws of the British Virgin Islands.
(b) The registered office of the Company is and shall be at the
address set out above.
2.2 HCL
(a) HCL is and shall be a private company limited by shares
incorporated under the Companies Ordinance.
(b) The registered office of HCL shall be as agreed by the parties
from time to time.
2.3 Change of Name
Each of the Shareholders hereby agrees and undertakes to procure that
the name of the Company and HCL shall be changed to "Xxxxxxxxx Global
Crossing Holdings Limited" and "Xxxxxxxxx Global Crossing Limited"
respectively as soon as practicable after the execution of this
Agreement.
2.4 Full Effect
Each of the Shareholders shall, and shall procure all persons nominated
by it on the board or the board of directors of any Subsidiaries of the
Company and representative(s) appointed to attend shareholders' meeting
of the Company or any of its Subsidiaries to, exercise all voting
rights and powers of control available to it in relation to the Company
and its Subsidiaries so as to give full effect to the terms and
conditions of this Agreement.
2.5 Listing
Upon written request to the Company made at any time after the second
anniversary of the date of this Agreement, either Principal Party A or
Principal Party B may demand that the Company undertake a listing of
not more than 15% of any of the Shares or the shares in the capital of
HCL or the shares of a holding company of the Company or HCL formed for
the purpose of seeking such listing (the "Listing Shares") in each case
on an internationally recognised stock exchange or other international
recognised securities market by means of an initial public offering
(the "Initial Public Offering") of the Listing Shares. If either
Principal Party A or Principal Party B makes such a demand, the parties
shall fully cooperate with each other in the marketing of the Listing
Shares and shall be unconditionally obliged to each take all actions
necessary or desirable to effect the Initial Public Offering. Without
prejudicing each party's unconditional obligation to effect an Initial
Public Offering in accordance with the previous sentence, the parties
agree to cooperate with each other and negotiate in good faith with
each other to address such
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amendments to this Agreement and other matters as may reasonably
necessary to effect the Initial Public Offering. Unless agreed to the
contrary:
(c) the Initial Public Offering shall take place on a Hong Kong
stock exchange which is recognised internationally and/or the
NASDAQ National Market as may be determined by agreement of
the parties (and in attempting to reach agreement the parties
will give good faith consideration to the written
recommendations of the underwriter to the Initial Public
Offering). If the parties do not agree on the exchange or
exchanges on which the Initial Public Offering shall take
place, the parties agree that the listing shall take place on
both a Hong Kong internationally recognised stock exchange and
on the NASDAQ National market; the percentage dilution of the
A Group and the B Group in the corporation the securities of
which are to be listed ("Listing Vehicle") shall be shared
equally;
(d) fees and expenses of the Initial Public Offering shall be
borne by the Listing Vehicle; and
(e) the Initial Public Offering shall be of a primary issue of
common shares of the Listing Vehicle.
2.5A The Shareholders agree to co-operate and negotiate in good faith to
establish a new corporation incorporated in Bermuda within six (6)
months from the date of this Agreement to be the holding company of the
HCL Group. Unless otherwise agreed by the Parties, it is anticipated
that the said corporation shall be the Listing Vehicle for the purpose
of Clause 2.5. The parties shall negotiate in good faith over the
necessary amendments to this Agreement in order to include such new
corporation within the HCL Group and in order to make the terms hereof
applicable to such new corporation and its Subsidiaries and shall each
undertake all such acts, and execute all such documents, as may be
reasonably necessary or desirable to give effect to this Clause.
2.6 A Group Obligation to Use B Group Services
Principal Party A agrees:
(a) to:
(i) procure that Subsidiaries of Principal Party A
(excluding Subsidiaries located outside of Hong Kong
or the PRC whose shares are publicly traded); and
(ii) use reasonable commercial efforts to procure that its
Subsidiaries located outside of Hong Kong or the PRC
whose shares are publicly traded and its Affiliates;
who require access to B Group Services shall subscribe for
such B Group Services from the B Group so long as such B Group
Services are reasonably competitive as to price, availability,
quality and other terms material to its competitiveness and
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provided that with respect to B Group Services not set forth
in Schedule 1B as of the date hereof, the B Group has complied
with its obligations set forth in Clause 2.12; and
(b) for so long as CK is the beneficial owner of at least 40% of
the voting shares of Principal Party A, to use its reasonable
commercial endeavors to cause CK and such of CK's Subsidiaries
located in Hong Kong or the PRC which require B Group Services
to obtain such B Group Services from the B Group so long as
such B Group Services are reasonably competitive as to price,
availability, quality and other terms material to its
competitiveness and provided that with respect to B Group
Services not set forth in Schedule 1B as of the date hereof,
the B Group has complied with its obligations set forth in
Clause 2.12;
provided, in each case that such B Group Services are not otherwise
provided by any member of the A Group or by the HCL Group.
2.6A HCL Group Use of B Group Services
The Company agrees to procure that members of the HCL Group who require
B Group Services shall, subject to the provisions of Clause 2.9 in the
case of purchases of Capacity, procure such B Group Services from the B
Group, so long as such B Group Services are reasonably competitive as
to price, availability, quality and other terms material to its
competitiveness and provided that with respect to B Group Services not
set forth in Schedule 1B as of the date hereof, the B Group has
complied with its obligations set forth in Clause 2.12.
2.7 B Group Obligation To Use A Group Services
Subject to Clause 15.8, Principal Party B agrees to procure that
members of the B Group (other than AGCH and its Subsidiaries if such
persons are deemed Subsidiaries of Principal Party B solely by
operation of the provisions contained in the last parenthetical of the
definition of "Subsidiary") who require A Group services in Hong Kong
(not otherwise provided by any member of the B Group or by any member
of the HCL Group) shall procure such services from the A Group, so long
as such services are reasonably competitive as to price, availability,
quality and other terms material to its competitiveness and provided
that with respect to A Group Services not set forth in Schedule 1A as
of the date hereof, the A Group has complied with its obligations set
forth in Clause 2.12.
2.8 Access to a Group/CK Properties
Principal Party A agrees:
(a) to provide, and to cause each member of the A Group to
provide, HCL and its Subsidiaries with access to properties
(including related infrastructure) which from time to time are
owned or controlled by any member of the A Group; and
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(b) for so long as CK is the beneficial owner of at least 40% of
the voting shares of Principal Party A, to use its reasonable
commercial endeavours to cause CK and its Subsidiaries to
provide HCL and its Subsidiaries with access to properties
(including related infrastructure) which from time to time are
owned or controlled by CK or its Subsidiaries.
in each case on a commercially reasonable basis and on terms which are,
in any event, not worse (from the perspective of the HCL Group) than
the basis and terms on which access is currently provided to the HCL
Group.
2.9 Part of B Group Capacity For HCL Group
Principal Party B shall, and shall cause members of the B Group (other
than AGCH and its Subsidiaries if such persons are deemed Subsidiaries
of Principal Party B solely by operation of the provisions contained in
the last parenthetical of the definition of "Subsidiary") to, provide
Capacity on the Global Crossing Network to the HCL Group at a price
equal to the lowest price of any sale on the applicable Global Crossing
Network during the preceding calendar quarter to a non-affiliated
entity activating a similar amount of Capacity on the applicable
system(s) (excluding discounts given in respect of future commitments
and past purchases unless comparable circumstances apply in the case of
the proposed purchaser and having regard to timing of commitments,
purchase and activation) less 5%; provided, however, that in no event
shall such price be at below cost.
2.10 Price of HCL Group capacity for A Group and B Group
The HCL Group shall provide Capacity to Principal Party A and Principal
Party B and their respective Subsidiaries at a price equal to the
lowest price of any sale on the HCL Group network during the preceding
calendar quarter to a non-affiliated entity activating similar amount
and type of Capacity (excluding discounts given in respect of future
commitments and past purchases unless comparable circumstances apply in
the case of the proposed purchaser and having regard to timing of
commitments, purchases and activation) less 5%; provided, however, that
in no event shall such price be below cost.
2.11 Price of HCL Group Capacity To Third Parties
Except as otherwise agreed by the Board or as otherwise provided by
this Agreement (including, without limitation, in Clause 2.10),
Capacity shall be provided by the HCL Group to third parties at market
rates.
2.12 Notices of New Group Services
Each of Principal Party A and Principal Party B respectively shall be
permitted to supplement its respective Group Services by providing the
other Principal Party written notice of the services then being offered
by members of the A Group or the B Group (as the case may require)
(with respect to members of the A Group, in Hong Kong and with respect
to members of the B Group, outside of Hong Kong). Unless the Principal
Parties agree to the contrary, the services set forth in such notice
shall be deemed included in
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Schedule 1A or Schedule 1B, as the case may be, at the end of the
period of thirty (3) days after the date of such notice (the Principal
Parties to negotiate in good faith over such additional Group Services
during such period).
3. ARTICLES OF ASSOCIATION
In the event of inconsistency between this Agreement and the Articles
or the articles of association of HCL, this Agreement shall prevail.
4. BUSINESS OF THE HCL GROUP
4.1 The Business
The HCL Group shall carry on the Business as its primary areas of
focus.
4.2 Incidental Activities
In addition, the HCL Group may also carry on the following activities
incidental to the Business:
(a) the provision of E-Commerce in Hong Kong;
(b) the provision of Content and Portal Distribution in Hong Kong;
(c) the provision of Internet Advertising in Hong Kong.
(d) the establishment and maintenance of facilities and the
provision of services reasonably incidental to the Business
and to any of the above and/or as may be agreed;
(e) the provision of subscriber equipment in connection with the
services listed above.
4.3 Excluded
For the avoidance of doubt, the business of the HCL Group does not
include:
(a) the provision of Mobile Services;
(b) the provision of Paging Services and associated facilities; or
(c) Satellite Based Services.
4.4 Intentionally Deleted.
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4.5 PRC Business
(a) The Shareholders and the Principal Parties acknowledge that
PRC Fixed Services and Internet Access and Transport Services
in the PRC (together, the "PRC Business") are within the
Company's scope of business, and neither Principal Party (and
none of their respective Subsidiaries) shall pursue such an
opportunity except through the Company and its Subsidiaries,
other than as provided in this Clause 4.5 or Clause 15.
(b) If either Principal Party or their respective Subsidiaries
obtain an opportunity in a PRC Business which such party
wishes to pursue (each, a "PRC Opportunity"), such party (the
"Offering Party") shall give prompt written notice thereof to
the Board. Such notice shall specify the PRC Opportunity in
reasonable detail (including the timing of the transaction) so
that the Board can reasonably consider the PRC Opportunity.
(c) If the HCL Group is not permitted by law, or published policy,
regulation or decree to pursue a PRC Opportunity
(collectively, "Prohibition"), then the Offering Party shall
be permitted, after giving written notice thereof to the Board
and the other Principal Party, to pursue such PRC Opportunity
(through itself, through its related Principal Party or
through one of such related Principal Party's Subsidiaries),
provided, however, that:
(i) prior to exercising the rights conferred by the
remainder of this Clause based on the view that the
HCL Group is not permitted to pursue the PRC
Opportunity by virtue of a Prohibition, the Offering
Party shall first discuss the problem in good faith
with the other Principal Party with a view to
attempting to overcome the problem during a
reasonable period having regard to any time
constraints attached to the opportunity and having
regard to whether such Prohibition will cease within
a reasonable time period;
(ii) if the discussions in (i) have not resulted in the
problem being overcome and the Offering Party still
wishes to pursue the Opportunity, the Offering Party
shall in that event provide a written offer ("Offer")
to the other Principal party (the "Offered Party")
for the right to participate in 50% of the PRC
Opportunity available to the Offering Party (subject
to the Offered Party assuming 50% of the liabilities
attached thereto), such Offer to set out the terms of
the PRC Opportunity as well as the structure in which
the Offered Party and the Offering Party shall
participate, in each case in reasonable detail (the
"Offering Notice"). The Offered Party shall have a
reasonable opportunity to consider such Offer, but
shall, in any event, provide the Offering Party a
written reply to such offer within 30 days of
receiving the Offering Notice ("Offer Period"); and
(iii) should the Offered Party refuse or fail within the
Offer Period to accept in writing the Offer, the
Offering Party and/or its Subsidiary or Subsidiaries
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shall be entitled to undertake the PRC Opportunity.
If however the only reason preventing the Offered
Party from accepting the Offer is a Prohibition (and
the Offered Party notifies the Offering Party thereof
in writing within the Offer Period), the Offering
Party and the Offered Party shall negotiate in good
faith with the other to establish a mechanism through
which the other will be put in the same position,
including as to risks and returns, as if it had
invested directly in such PRC Opportunity; and
(iv) if the Offered Party accepts the Offer within the
Offer Period, both parties agree to proceed in
accordance with the terms of the Offer.
For the avoidance of doubt, the carrying on of businesses by
any Shareholder pursuant to this Clause shall not be regarded
as a breach of the non-competition provisions contained in
Clause 15. Any right to participate under this Clause may be
exercised by the Offered Party in its own right or by a
Subsidiary of the Offered Party.
4.6 Intellectual Property
Each of the Shareholders recognises and acknowledges that, as between
the HCL Group and the Shareholders, the Company is the sole and
exclusive owner of all of the rights in and to the Intellectual
Property. The Shareholders agree that no member of the HCL Group shall
grant a license to any member of the A Group or the B Group with
respect to any Intellectual Property, except a license in writing that
is approved by the Board. Each of the Shareholders agrees that neither
this Agreement nor any of the Shareholder's activities contemplated
herein shall confer upon any member of the A Group or B Group any
right, title or interest in or to any of the Intellectual Property or
any right to use the Intellectual Property except:
(a) to the extent licensed in writing to that Shareholder by an
HCL Group company;
(b) to the extent owned by that member of the A Group or B Group
and licensed to the HCL Group company; provided, however, that
any improvement or developments made by the Company and based
upon Intellectual Property licensed from a member of the A
Group or B Group shall belong exclusively to the Company; and
(c) in the case of know how or other information, that information
becomes generally known or generally available to the public
through no act or failure to act on the part of either
Shareholder.
4.7 Cable Landing Stations
The HCL Group shall not:
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(a) make any capital expenditure or equity contribution in
relation to a submarine cable landing station in Hong Kong or
the PRC (including the establishment thereof); or
(b) own cable stations or submarine cable systems in each case
which land in Hong Kong or the PRC or participate in
consortiums or similar arrangements doing the same;
provided that it is agreed that the HCL Group may facilitate the
establishment of cable landing stations to the extent desirable to
enable the HCL Group to compete as a provider of backhaul facilities
and domestic services in Hong Kong and the PRC.
4.8 Satellite Earth Stations/Capacity
The HCL Group shall not undertake the establishment and use of
satellite earth stations or the leasing of satellite capacity without
the prior approval of the Board and provided that the earth stations or
satellite capacity is required for purposes not reasonably to be
achieved on a competitive basis by use of submarine cables.
5. DIRECTORS
5.1 Directors' Appointment
The Board shall, unless the Shareholders otherwise unanimously agree,
consist of six Directors. Each Shareholder shall be entitled to
nominate 3 Directors and require the appoint by the Shareholders or by
the Board of the 3 Directors nominated by it. The nominating
Shareholder shall have the exclusive right to require the removal and
replacement of the Director(s) nominated by that Shareholder from time
to time. Each Shareholder shall from time to time promptly upon request
of the other Shareholder take all such action, including voting their
respective Shares, procuring their respective nominated Directors on
the Board to vote in favour of resolutions and signing documents as may
be necessary to appoint, remove or replace (as the case may require)
Director(s) under this Clause.
5.2 Board Meetings
Any two Directors may, at any time, convene a Board meeting. Meetings
of the Board shall be held at least once every quarter. Unless
otherwise agreed by a majority of the Directors, all Board meetings
shall be held after not less than 14 Business Days written notice
thereof (or such shorter period as the majority of the Directors
entitled to attend that meeting may agree) has been given to each
Director, or his alternate, stating the date, time, place and agenda of
the Board meeting (including details of arrangements for participant by
conference telephone or any other communication equipment permitted by
clause 5.8) and no business (other than business of a routine or
non-material nature) may be conducted at a Board meeting other than the
business specified in the agenda. The sending of a notice of a Board
meeting to the address or facsimile number from time to
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time notified or provided by each Director or his alternate to the
Company Secretary shall be deemed to be a valid service of a notice of
the Board meeting.
5.3 Quorum
No meeting of the Board may proceed to business nor transact any
business unless a quorum is present. The quorum for a Board meeting
shall be two Directors (including one Director nominated by Party A and
one Director nominated by Party B) present in person or by their
respective alternates. If a quorum is not present within twenty minutes
of the time scheduled for commencement of the Board meeting, the
meeting shall be adjourned to the same time and place on the same day
in the next week, unless at least one Director nominated by each of
Party A and Party B agree to an alternative date, time or place.
5.4 Vote
At any Board meeting, each Director shall have one vote.
5.5 Chairman
The Chairman of the Board shall initially be nominated by Party A from
among the persons for the time being nominated by Party A for
appointment as Directors and shall be in such office for 18 months. The
Chairman of the Board will then be appointed by Party B from among the
persons for the time being nominated for appointment by Party B for
appointment as Directors and shall also be in office for 18 months.
Thereafter, such right of nomination of the Chairman of the Board shall
be rotated between Party A and Party B every 18 months. The Chairman of
the Board shall not be entitled to a second or casting vote.
5.6 Directors' Fees
Unless otherwise agreed by the Shareholders unanimously, the Directors
(or their respective alternates) shall not be entitled to be paid
directors' fees but shall be reimbursed for all out-of-pocket
(including travel and accommodations) expenses reasonably incurred in
performing their duties as Directors and shall receive such
remuneration for executive services performed for any member of the HCL
Group as the Board may decide.
5.7 Written Resolutions
A resolution in writing signed by at least two Directors nominated by
Party A and at least two Directors nominated by Party B or by signed
facsimile of their signatures shall be valid and effective for all
purposes as if passed at a duly convened meeting of the Board. Any such
resolution may consist of one or several documents in like form, each
signed or authenticated by one or more of the Directors.
5.8 Participation and Location
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Any or all Directors may participate in a meeting of the Board by means
of a conference telephone or any communications equipment which allows
all persons participating in the meeting to hear and speak to each
other. A person so participating shall be deemed to be present in
person at the meeting and shall be entitled to be counted in the quorum
and to vote accordingly. Unless otherwise agreed by the Shareholders,
(a) Board meetings (including attendance via conference calls)
shall take place in Hong Kong, Bermuda or such other location
as may be agreed by Party A and Party B; and
(b) written resolutions of the Board shall be signed by the Board
in Hong Kong, Bermuda or such other locations as may be agreed
by Party A and Party B.
5.9 Board Referral and Voting
The Board shall determined all matters by way of simple majority unless
otherwise provided for herein or unanimously agreed by the
Shareholders, provided that prior to the date upon which the transfer
restrictions on Shareholders cease by virtue of the application of
Clause 11.2(a), all action by the Board shall require an affirmative
vote of at least one director nominated by each Shareholder. The
Shareholders shall procure that no member of the HCL Group will do any
of the things listed in Schedule 3 without the prior approval of the
Board. Notwithstanding the foregoing:
(a) a resolution regarding termination of the service agreement of
even date between HCL, Principal Party A and Xxxxxxxxx
Telecommunications (Hong Kong) Limited or the service
agreement of even date between HCL and Principal Party A or
the termination of any service provided under either such
agreement may be passed by a majority of the directors
nominated by Party B present at a validly convened meeting of
directors of HCL and in the event of such termination Party A
shall procure that its nominated directors on the board of
directors of HCL do not unreasonably withhold their approval
of a replacement arrangement with a third party proposed by
Principal Party B; and
(b) a resolution regarding termination of the Licence and
Technical Assistance Agreement of even date between the
Company and Principal Party B may be passed by a majority of
the directors nominated by Party A present at a validly
convened meeting of directors of the Company or HCL (as the
case may require) and Principal Party B shall procure that its
nominated directors on the Board and on the board of directors
of HCL respectively do not unreasonably withhold their
approval of a replacement agreement with a third party
proposed by Principal Party B.
5.10 Board Matters
Any action to be taken by or on behalf of the Company with respect to
the matters set forth on Schedule 3 shall be first considered by the
Board; provided, however, that the list of such matters is not intended
and shall not be deemed to be an exhaustive list of items
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within the purview of the Board nor is it intended that the absence of
any matter from inclusion on Schedule 3 shall give rise to any
inference that any officer of the Company shall be permitted to take
any action on behalf of the Company with respect to such omitted matter
without first seeking the approval of the Board.
5.11 The Company's Subsidiaries Generally
Unless the Shareholders otherwise unanimously agree, clauses 5.1 to
5.10 shall apply, mutatis mutandis, to the Company's Subsidiaries
(except partly owned Subsidiaries whose boards include directors
appointed by third parties), provided however that in the case of such
Subsidiaries other than HCL:
(a) the board of directors of such Subsidiary shall consist of two
directors;
(b) each Shareholder shall be entitled to nominate one director
each for such Subsidiary and require the appointment of the
director nominated by it;
(c) meetings of the board of directors of such Subsidiary shall be
held in the manner and at the times agreed by the
Shareholders;
(d) no resolution shall be passed by the board of directors of
such Subsidiary unless it is approved by the two directors of
such Subsidiary, each acting in accordance with the
instructions of the Board or the board of directors of HCL;
(e) the Shareholders shall take any actions necessary to procure
that the decisions of the Board and of the board of directors
of HCL relating to such Subsidiary are implemented; and
(f) Clause 5.7 shall apply as if each reference therein to "two
Directors" were to a reference to "one Director".
5.12 Certain Party Owned Subsidiaries
In the case of party owned Subsidiaries of the Company whose boards
include directors appointed by third parties, each Shareholder shall be
entitled to appoint or require the appointment of, half the total
number of directors which the shareholder of that Subsidiary (being a
member of the HCL Group) is entitled to appoint to the board of
directors of such Subsidiary ("Total Number"), provided that where the
Total Number is an odd number, Party A and Party B shall mutually
decide on the remaining director. If the Shareholders agree, they may
appoint a lesser number of directors than the Total Number of the board
of directors of such Subsidiary, provided that the number of directors
appointed by each Shareholder shall be equal. The Shareholders shall
procure that no resolution shall be passed by the board of directors
unless it is approved by all the directors appointed by each
Shareholder, each acting in accordance with the instructions of the
Board or the board of directors of HCL. The Shareholders shall take any
actions within their power to procure that the decisions of the Board
and of the board of directors of HCL relating to such Subsidiary are
implemented.
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6. SHAREHOLDERS MEETINGS
6.1 Convening Meetings
Meetings of the Shareholders shall be convened at such times and in
such manner as specified in the Articles and as required by law. The
quorum for a meeting of the Shareholders shall be Shareholder A and
Shareholder B being present in person or by proxy or attorney. If there
is no quorum present within one hour of the time scheduled for the
commencement of such meeting, then such meeting shall be adjourned to a
date seven (7) days after the appointed date for such meeting and at
the same time and place.
6.2 Requisite Majority
The Shareholders shall determine all matters by way of simple majority
unless otherwise provided for herein or required by any law or
regulation applicable to the Company, in which case the matter shall be
determined in the manner so provided for or required by such applicable
law or regulation; provided, that all actions by Shareholders shall
require the affirmative vote of Shareholder A and Shareholder B. The
chairman of the meeting shall not have a second or casting vote. A
resolution in writing signed by the authorised representative(s) of all
Shareholders or by signed facsimile of their signatures shall be valid
and effective for all purposes as if passed at a duly convened meeting
of the Shareholders. Any such resolution may consist of one or several
documents in like form, each signed or authenticated for and on behalf
of one or more of the Shareholders.
7. DEADLOCK
7.1 Definition
A "deadlock" is deemed to have arisen where:
(a) (i) a matter relating to the affairs of the Company and/
or its Subsidiaries has been considered by a meeting
of the Board or of the Shareholders (or the board of
the Company's Subsidiaries, as the case may be); and
(ii) no resolution has been carried at such meeting of the
Board or the Shareholders (or the board of the
Company's Subsidiaries, as the case may be) in
relation to the matter by reason of an equality or
votes for and against any proposal for dealing with
it; and
(iii) such matter is not resolved at such meeting;
and
(b) such matter remains not resolved at the next meeting of the
Board or the Shareholders (or the board of the Company's
Subsidiaries, as the case may be).
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7.2 Escalation Procedures
When a "deadlock" is deemed to have arisen, the Company shall (and if
the Company fails to do so, either Party A or Party B may do so)
provide written notice thereof to the Third Level Executives, the
Second Level Executives and the First Level Executives (the date such
notice is delivered, the "Start Date"). The matter shall be referred in
the first instance to the Managing Director of Party A and the Chief
Executive Officer of Party B ("Third Level Executives") for their
consideration, discussion and mutual decision. If there is no written
agreement on such matter within 14 days from the Start Date, the matter
shall be referred to the Group Managing Director of Principal Party A
and the Chief Executive Officer of Principal Party B ("Second Level
Executives") for their consideration, discussion and mutual decision.
If they cannot reach a written agreement within 28 days from the Start
Date, the matter will be referred to the respective chairman of the
Principal Parties ("First Level Executives"). If, following this
process, there is no written agreement between the First Level
Executives with 45 days from the Start Date, the matter shall be
referred to arbitration and the provisions of Schedule 5 shall apply.
Any agreement between the Third Level Executives, Second Level
Executives or First Level Executives shall be recorded in writing and
notified to the Shareholders and the Company and shall thereupon bind
the parties.
8. ACCOUNTS AND INFORMATION TO SHAREHOLDERS
8.1 Accounting Records
Each member of the HCL Group shall maintain accurate and complete
accounting records and shall keep its accounts in accordance with
generally accepted accounting principles in Hong Kong and such accounts
shall be audited annually. In addition, each member of the HCL Group
shall prepare quarterly financial statements in accordance with
generally accepted accounting principles in Hong Kong, reconciled in
each instance to United States generally accepted accounting principles
at the cost of the Company.
8.2 Financial Year
The financial year of each member of the HCL Group shall end on 31st
December in each year or on such other date as may be determined by the
Board.
8.3 Auditors
The auditors of each member of the HCL Group shall be a major
international firm to be determined by the Board, but shall not be
either Xxxxxx Xxxxxxxx LLP or PricewaterhouseCoopers LLP.
8.4 Shareholder Inspection
Each of the Shareholders and its authorised representatives shall have
the right, by prior appointment made on reasonable notice, during
normal office hours, to inspect the books,
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accounting records and any document of any member of the HCL Group at
its own expense.
8.5 Management and Audited Accounts
The Company shall and will procure that each member of the HCL Group
periodically prepares and submits to each of the Directors and the
Shareholders:
(a) on a calendar monthly basis (and no later than 21 days after
the end of the relevant month) management accounts for such
month (and for the relevant financial year to date)
containing:
(i) both on a consolidated basis and for each member of
the HCL Group individually, a detailed profit and
loss account and cashflow statement for the relevant
period and a balance sheet drawn up as at the end of
such period; and
(ii) a comparison with the position at the relevant point,
and in respect of the relevant period, in the
previous financial year; and
(b) on an annual basis (and no later than 3 months after the end
of the financial year end) audited accounts for such financial
year containing both on a consolidated basis and for each
member of the HCL Group individually, a detailed profit and
loss account and cashflow statement for the financial year and
a balance sheet drawn up as at the end of such financial year;
and
(c) such further information in relation to the HCL Group (and in
such form) as any Shareholder may reasonably require from time
to time.
8.6 Non-Operating Companies
The Board will, in consultation with the auditors of the Company,
determine whether (a) management accounts shall be prepared for the
non-operating companies of the HCL Group and (b) auditors need be
appointed for such non-operating companies, and, in making such
determination, the Board shall consider whether such audits are
necessary in order to prepare the U.S. GAAP financial reconciliations
referred to in Section 8.1.
8.7 Minutes
The Company shall send to the Shareholders copies of minutes of all
meetings of the Board and the Shareholders as soon as they have been
finalised.
9. BUSINESS PLAN; OPERATING BUDGET
9.1 Business Plan
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The initial business plan for the HCL Group (comprising operative
budgets relating to income, capital expenditure, operating expense,
cash flow and plans for any funding requirements for the period up
until 31 December, 2004) has been agreed between the Shareholders
before the date of this Agreement. The Shareholders agree to procure
that the Business Plan shall be updated and thereafter should regularly
be revised and up- dated on a "rolling 5 year annual basis" in
accordance with the following provisions of this Clause 9.
9.2 Annual Plans
The Company shall arrange and procure that, no later than 45 days
before each financial year end, the Chief Financial Officer of the
Company shall prepare and submit to each of the Directors and the
Shareholders an updated 5 year business plan (for the financial year
immediately following such financial year end and the next 4 financial
years) incorporating (at least):
(a) a description of the HCL Group's intended activities over this
5 year period together with financial projections for the same
period; and
(b) the operating budgets (including, without limitation,
estimated revenues and expenditures) for the first financial
year of this period (the "Operating Budget") in substantially
the same format as the operating budgets included in the
Initial Business Plan.
9.3 Shareholder Approval
Following submission to the Directors and the Shareholders of each
business plan referred to in Clause 9.2, each of the Directors and the
Shareholders shall have the opportunity to comment on such business
plan and the Board shall consider such comments and, if considered
appropriate, make such alterations to such business plan as seem
appropriate with a view to the preparation of a definitive business
plan for the relevant financial years capable of approval by the
Shareholders as required in accordance with Clause 9.4. Following any
such alternations, the revised business plan for the relevant financial
years shall be re-circulated, as soon as practicable, to the same
parties.
9.4 Reasonable Endeavours to Agree
Once the business plan is approved by the Shareholders it shall become
the "Business Plan" for the purposes of this Agreement. Each of the
Shareholders will use its respective reasonably endeavours to agree the
Business Plan on or before the date which is 20 days before the
financial year end.
9.5 Expenditure and Failure by Board to Approve
No expenditure shall be incurred by or on behalf of the HCL Group which
is not contemplated, either specifically or generally, by the Operating
Budget then in effect. If the Board does not approve the proposed
Business Plan (including the Operating Budget)
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for any financial year, then the Operating Budget to be used by the HCL
Group in connection with the management of the HCL Group for such
financial year shall be the Operating Budget for the immediately
preceding financial year (a "Roll-Over Budget"), except that the
aggregate expenses of the HCL Group for the preceding financial year
shall be increased by 7.5%, provided, however:
(a) the budget may include funding for any emergency expenditures
necessary during the current year that were not included in
the Operating Budget for the preceding financial year; and
(b) the budget may include funding for any preexisting commitment
of the HCL Group which has received any required approvals
under this Agreement.
At least 10 Business Days prior to the beginning of each quarter of any
financial year covered by a Roll-Over Budget, the Chief Financial
Officer of the Company will prepare and present a proposed operating
budget with respect to the remainder of such financial year which, upon
Board approval thereof in accordance with Clause 5, shall be used by
the HCL Group as the Operating Budget for such period.
10. EMPLOYMENT POLICIES
10.1 Key Staff
(a) Subject to the provisions of this Clause 10.1, the Board shall
consult each of the Shareholders regarding the appointment of
key senior management staff of HCL provided always that
whether or not to appoint such person and if so the terms
thereof shall be determined by the Board at its absolute
discretion.
(b) The initial Chief Executive Officer of the Company and its
Subsidiaries shall be Xxxxx Xxxx. The Chief Executive Officer
of the Company and its Subsidiaries from time to time will be
nominated by Party A with appointment subject to the Board's
approval.
(c) The Chief Financial Officer of the Company and its
Subsidiaries from time to time shall be nominated by Party B,
with appointment subject to the Board's approval.
(d) The Sales and Marketing Director shall from time to time be
nominated by Party B, with appointment subject to the Board's
approval.
(e) The initial Internet Director of the Company and its
Subsidiaries shall be Xxxxx Xxx; provided, however, that until
30 June, 2000 and pending Principal Party A replacing Xxxxx
Xxx for non HCL Group Internet business but in no event later
than June 30, 2000, Principal Party A may continue to utilise
Xxxxx Xxx for up to 50% of his time. The Internet Director
from time to time will be nominated by Party A with
appointment subject to the Board's approval.
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(f) The Chief Technology Officer of the Company and its
Subsidiaries shall be Xxxxx Xxx. Any successor engineering
director from time to time shall be nominated by Party A, with
appointment subject to the Board's approval.
(g) The Director of International Engineering of the Company and
its Subsidiaries from time to time shall be nominated by Party
B from time to time, with appointment subject to the Board's
approval. The said Director will report tot he Chief
Technology Officer.
11. TRANSFER OF SHARES AND SHAREHOLDERS LOANS
11.1 General Restriction
Subject to Clause 11.2 and Clause 11.3, no Shareholder shall, except
with the prior written consent of the other Shareholder, sell, assign
or otherwise dispose of create or permit to subsist any pledge, lien or
charge over, or grant any opinion or other rights or any interest in
all or any of the Shares held by it or all or part of the Shareholders
Loans made by it.
11.2 AGCH
Notwithstanding Clause 11.1, Party B may transfer all (but not less
than all) of its Shares and assign all (but not less than all) of its
Shareholders Loans owed to its to AGCH or one of AGCH's wholly-owned
Subsidiaries provided that, at the time of such transfer, Principal
Party B holds legally and beneficially at least 40% of the outstanding
voting stock of AGCH. Principal Party B shall at the time of such
transfer provide written notice to Principal Party A of such transfer
and, if requested by Party A, an officer's certificate certifying as to
its ownership interest in AGCH and warrants such certificate shall be
accurate. Principal Party B further agrees that, following such
transfer, if it ceases to legally and beneficially hold directly and
indirectly at least 35% of the outstanding voting stock of AGCH (a
"Triggering Event"):
(a) The restrictions on the Shareholders under Clause 11.1 and on
the Principal Parties under Clause 11.3 shall no longer apply
upon and from the date being 90 days from the date of the
occurrence of the Triggering Event (or, if earlier, the date
referred to in clause (c) below); and
(b) this Agreement shall terminate automatically upon the date
being 180 days from the date of the Triggering Event and all
obligations of the parties hereto under this Agreement shall
terminate, without prejudice to accrued liabilities.
In addition, upon the occurrence of a Triggering Event, Principal Party
B shall have the right, upon written notice to Principal Party A, to
immediately terminate this Agreement effective on the date Principal
Party A receives such notice and upon such termination, all obligations
of the parties hereto under this Agreement shall terminate, without
prejudice to accrued liabilities.
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11.3 Legal and Beneficial Ownership
Principal Party A and Principal Party B covenant that they shall
continue to own legally and beneficially, directly or indirectly, 100%
of the Shares owned by Party A and Party B respectively (as the case
may be) except:
(a) as permitted under Clause 11.2(a) and 1.6A; and
(b) that Principal Party B may reduce its direct and indirect
ownership in AGCH (and consequently, its indirect ownership in
the Shares owned by Party B) subject to the consequences set
out in Clause 11.2 in the event of a Triggering Event; and
(c) that Principal Party B may reduce its direct and indirect
ownership in the Interim Entity subject to Principal Party B
owning not less than 51% of the issued voting shares of the
Interim Entity at all times when the Interim Entity holds any
Share and is not a wholly-owned subsidiary of AGCH as a result
of a transfer of stock of the Interim Entity to AGCH under
clause 1.6A.
11.4 Transfer to Wholly Owned Subsidiaries
Notwithstanding anything herein to the contrary, a Shareholder (other
than the Interim Entity) may transfer all (but not less than all) of
its Shares and Shareholders Loans to any company which is a direct or
indirect wholly owned Subsidiary of the Principal Party of that
Shareholder ("Relevant Principal Party"), without the consent of the
other Shareholder provided that written notice is given to the other
Principal Party. Each of the Principal Parties further agrees that, in
the event that its Relevant Shareholder transfers Shares and
Shareholders Loans to a direct or indirect wholly owned Subsidiary of
such Principal Party, it will procure that such transferee (a) is and
will remain its direct or indirect wholly owned Subsidiary and without
limiting the foregoing, if for any reason it ceases to be so, shall
procure the re-transfer of the Shares and Shareholders Loans to itself
or the transfer of the Shares or Shareholders Loans to another direct
or indirect wholly owned Subsidiary of it, and (b) (as a condition of
any such transferee becoming a Shareholder) agrees to the adherence to
this Agreement by executing and delivering to the other Shareholder a
deed of adherence substantially in the form set out in Schedule 4. In
the event of any such transfer, such Relevant Principal Party shall
remain liable for all obligations of the transferee under this
Agreement.
12. INTENTIONALLY DELETED
13. GUARANTEE
13.1 Guarantee of Relevant Shareholder
Each of the Principal Parties, in consideration of the Shareholder
other than its Relevant Shareholder (the "Other Shareholder") and the
other Principal Party entering into this
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Agreement, hereby guarantees, unconditionally and irrevocably as
primary obligor, the due observance and performance by its Relevant
Shareholder of all its agreements, obligations, commitments and
undertakings contained in this Agreement (the "Guaranteed
Obligations").
13.2 Continuing Guarantee etc.
The guarantee and indemnity provided by each of the Principal Parties
in this Clause 13 shall be a continuing guarantee and indemnity and
shall cover all Guaranteed Obligations of its Relevant Shareholder
notwithstanding the liquidation, incapacity or any change in the
constitution or direct or indirect shareholding of its Relevant
Shareholder or any settlement of account or variation or modification
of this Agreement or any indulgence or waiver given by any party hereto
or other matter whatsoever until the last claim whatsoever by the Other
Shareholder against its Relevant Shareholder has been satisfied in
full.
13.3 Invalidity
Should any Guaranteed Obligation of the Relevant Shareholder, which if
valid or enforceable would be the subject of the guarantee and
indemnity in this Clause 13, be or become wholly or in part invalid or
unenforceable against the Relevant Shareholder by reason of any defect
in or insufficiency or want of powers of the Relevant Shareholder or
irregular or improper purported exercise thereof or breach or want of
authority by any person purporting to act on behalf of the Relevant
Shareholder or because any of the rights have become barred by reason
of any legal limitation, disability, incapacity or any other fact or
circumstance whether or not always known to the Other Shareholder,
Principal Party A or Principal Party B (as the case may be) shall
nevertheless be liable to each Other Shareholder notwithstanding the
avoidance or invalidity of any term or condition of this Agreement or
of any Relevant Agreement whatsoever (including, without limitation,
avoidance under any enactment relating to liquidation) in respect of
that Guaranteed Obligation as if the same were wholly valid and
enforceable.
13.4 Enforcement
The guarantee and indemnity provided by each of the Principal Parties
in this Clause 13 may be enforced against it by the Company or any
Shareholder other than its Relevant Shareholder at any time without
first instituting legal proceeding against its Relevant Shareholder in
the first instance or joining in its Relevant Shareholder or the other
Shareholder or the other Principal party as a party in the same
proceedings against it.
13.5 Deed of Adherence
Prior to a Shareholder disposing of any or all of its direct and
indirect interest in the Shares under this Agreement, such Shareholder
shall procure that the acquiror of such Shares (as a condition to any
such acquiror becoming a Shareholder) agrees to the adherence to this
Agreement by executing and delivering to the other Shareholder a deed
of adherence substantially in the form set out in Schedule 4 (the "Deed
of Adherence").
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For avoidance of doubt, the guarantee under Clause 13.1 of the
Principal Party whose Relevant Shareholder disposes of Shares under
this Agreement remains in full force and effect notwithstanding such
disposal and supports all agreements, obligations, commitments and
undertakings of the acquiror of such Shares contained in this
Agreement.
13.6 AGCH Public Entity
This Clause 13.6 applies if AGCH or one of its Subsidiaries shall
beneficially own Shares (whether directly or indirectly) and AGCH or
its immediate holding company is a public corporation (the "AGCH Public
Entity"), the securities of which are publicly traded. Upon request by
Principal Party B, Principal Party A shall not unreasonably withhold
its consent to the release of Principal Party B from its obligations
under this Clause 13 (without prejudice to accrued obligations) upon
the AGCH Public Entity agreeing to assume those obligations in form
reasonably acceptable to Principal Party A.
14. CONFIDENTIALITY
Each Shareholder and Principal Party shall, and shall exercise all of
its powers so as to procure that its Subsidiaries and the Company
shall, keep secret all trade secrets, know-how and other confidential
information of the Company and of the other Shareholder and its
Principal Party and the terms and conditions of this Agreement and
shall not use or disclose any such confidential information except as
authorised in writing by the owner. This obligation shall survive
termination of this Agreement but shall not apply to any information
after it has come into the public domain other than through a breach
under this Agreement or to any disclosure to a party's professional
advisors or if is required by any applicable laws or rules or
regulations of any stock exchange or regulatory body, by order of a
court of competent jurisdiction or in order to enforce the
Shareholders' rights under this Agreement.
15. NON COMPETITION AND OTHER OBLIGATIONS
15.1 Non Solicitation of Employees
Each of the Shareholders and the Principal Parties undertakes to and
with the other that during the term of this Agreement and for a period
of one year (or if a court of competent jurisdiction determines that
this period is unenforceable, six (6) months) thereafter ("the Period")
it will not, and it will procure that none of its Subsidiaries,
directly or indirectly and whether as shareholder, supplier or in any
other capacity either on its own account or in conjunction with or on
behalf of any other person, solicit or entice away or attempt to
solicit or entice away from any member of the HCL Group any person who
within one year prior to the commencement of the Period was an officer,
manager, consultant or employee of any member of the HCL Group in Hong
Kong or the PRC whether or not such person would commit a breach of
contract by reason of leaving such employment;
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provided, however, nothing shall prohibit general solicitations not
focused on the HCL Group.
15.2 Non-Compete
Save as otherwise agreed among the Shareholders or as otherwise
provided herein, during the term of this Agreement, each of the
Shareholders and Principal Parties shall not, and shall procure that
their respective Subsidiaries shall not, and Principal Party A shall,
for so long as CK is the beneficial owner of at least 40% of the voting
shares of Principal Party A, use its reasonable commercial endeavours
to cause CK and its Subsidiaries not to, and, without limiting the
foregoing, Principal Party B shall, for so long as the Interim Entity
owns Shares and is not a wholly-owned subsidiary of AGCH, use its
reasonable commercial endeavours to cause AGCH not to, directly or
indirectly with any third party for an investment in, or otherwise make
any investment in, any entity engaged in or intending to engage in any
Business (each, a "Competing Entity") in:
(a) with respect to PRC Fixed Services, the PRC;
(b) with respect to Internet Access and Transport Services, Hong
Kong and/or the PRC; and
(c) with respect to HK Fixed Services and Internet Enablement
Services, Hong Kong only;
in any case, other than through the HCL Group.
15.3 Exceptions to Non-Compete
Nothing in Clause 15.1 or Clause 15.2 or any other provision of this
Agreement shall:
(a) prohibit any Shareholder or its Subsidiaries or Principal
Party or its Subsidiaries (each a "Restricted Person") from
investing in any Competing Entity so long as (a) the
consolidated revenues of such Competing Entity from any
service or activity within the scope of the Business do not
exceed 15% of the total consolidated revenues of such
Competing Entity shall not use the name "Xxxxxxxxx" and/or
"Whampoa" or "Global Crossing" as part of its name; provided
however, in a case where the service or activity within the
scope of the Business is conducted by an entity which has no
significant operations or operating history and, within two
years from the date of such investment, the consolidated
revenues of the Competing Entity from such service and/or
activity exceeds 20% of the total consolidated revenues of
such Competing Entity, such Restricted Person shall provide
the Company an option to acquire its investment in such
Competing Entity (subject to any necessary third party
consents provided that such party shall use commercially
reasonable efforts to avoid the requirement for, and obtain,
if applicable, the necessary consents) in cash at the fair
market value thereof but subject to the proviso contained in
this Clause 15.3(a), the said Restricted Person may maintain
such investment notwithstanding such revenues
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in the future exceed 15% of the total consolidated revenues of
such Competing Entity.
(b) prohibit a Restricted Person from being or becoming the owner
for investment purposes of the shares or other securities of
any corporation which carries on any business provided that
(i) such investment has been notified to the Board in writing
prior to the investment; (ii) the corporation does not use as
part of its corporate or business name the name "Global
Crossing", "Xxxxxxxxx" and/or "Whampoa" and (iii) such
investment does not exceed 10% of the outstanding voting stock
of such corporation;
(c) prohibit any Restricted Person from carrying on a PRC Business
in accordance with Clauses 4.5 and 4.6;
(d) prohibit any Restricted Person (being a member of a group of
Subsidiaries of a Principal Party which carries on a single or
related business or itself carrying on a single or related
business) from self-providing Internet Enablement Services if
such services are used solely by the members of that group (or
as the case may be, that person) to meet the needs of that
single or related business, so long as such business is not
within the scope of the Business;
(e) prohibit any Restricted Person from engaging in (or entering
into investments that are engaging in) any service or activity
within the scope of the Business to the extent such service,
activity or investment was considered by the Board and was
rejected by the Board; provided that (i) such Restricted
Person or its relevant proposing Principal Party notifies the
Board in writing of its intent to engage in such service or
activity or make such investment at least 30 days prior to
committing to undertake such service or activity or make such
investment and (ii) such service or activity or investment
shall not use the name "Xxxxxxxxx" and/or Whampoa or "Global
Crossing"; and provided, further, if the reason the Board
rejected such service, activity or investment was due to
capital requirements and the Restricted Person pursues such
opportunity, the Company shall have an option, for a period of
one year from the date of the notice referred to above to
acquire such opportunity from the Restricted Person for cash
in an amount equal to the Restricted Person's total investment
cost plus interest thereon at a rate per annum equal to the
Restricted Person's cost of capital;
(f) prohibit any member of the A Group from carrying on the
activities set forth in Schedule 2;
(ff) prohibit any member of the A Group or the B Group from
performing Internet Enablement Services incidental to a
business solution or service which, but for the Internet
Enablement Services, would not be within the scope of Internet
Enablement Services; Internet Enablement Services are
"incidental" to a business solution/service in cases where the
revenue derived from such Internet Enablement Services is less
than 15% of the combined revenue derived from providing the
business solution/service.
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(g) require Principal Party A to cause CK or its Subsidiaries to
refrain from engaging in any activity which a member of the A
Group could undertake sub-clauses (a) through to (f) above;
(h) prohibit any Restricted Person within the B Group from
developing, constructing, owning, operating, maintaining
and/or using cable landing stations (for the avoidance of
doubt, the B Group shall be permitted to develop, construct,
own, operate, maintain and land submarine cable systems, and
terrestrial systems outside Hong Kong and the PRC, and sell
capacity and services thereon, subject to the proviso
contained in Paragraph (i) of Clause 15.3.
(i) prohibit any Restricted Person within the B Group from
developing, constructing, operating, maintaining, owning,
leasing or otherwise providing backhaul facilities in Hong
Kong and the PRC to connect cable stations owned and operated
by any member of the B Group in Hong Kong and the PRC with
related Point-of-Presence in Hong Kong and the PRC (together
with Capacity and services on their submersible cable systems
and their terrestrial cable systems outside Hong Kong and the
PRC); provided, however that no member of the B Group shall
supply capacity of services on such backhaul facilities, or
utilise such Points-of-Presence for provision of such capacity
or services to persons other than:
(a) Carriers in Hong Kong and/or the PRC in connection
with the use of the B Group's network or cable
landing station(s); and
(b) persons located outside Hong Kong requiring
international connectivity provided that the
agreements in relation to such connectivity were
initiated outside Hong Kong and the PRC and provided
further that no member of the B Group shall engage in
marketing in Hong Kong or the PRC to any person other
than a Carrier; provided further that each member of
the B Group shall use the HCL Group for all Capacity
in Hong Kong subject to the terms set out in Clause
15.8. For avoidance of doubt, nothing in this
paragraph (i) shall allow any member of the B Group
to develop, construct, own, lease, or use any
terrestrial link between Hong Kong and the PRC or any
terrestrial links between Points-of-Presence in Hong
Kong or the PRC (other than terrestrial links
connecting its cable stations in Hong Kong with a
Point of Presence in Hong Kong or connecting its
cable stations in the PRC with a Point of Presence in
the PRC) (as the case may be), other than on the HCL
network or otherwise in accordance with Clause 15.8.
15.4 Definition of Carrier
For the purposes of Clause 15.3(i) above,
(a) "Carrier" means:
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(i) in relation to services provided in Hong Kong, a
person in Hong Kong who is authorised to undertake
the full range of HK Fixed Services in Hong Kong; and
(ii) in relation to services provided in the PRC, a person
in the PRC who is authorised to undertake the full
range of PRC Fixed Services in the PRC.
If the competitive environment in relation to the Business or the
licensing regime for HK Fixed Services or PRC Fixed Services changes
after the date hereof and as a result thereof the provisions of Clause
15.3(i), applying the definition of Carrier as defined above, no longer
reflects the commercial understanding of the parties at the date hereof
(which commercial understanding was arrived at having regard to the
competitive environment and the licensing regime as at the date
hereof), Principal Party B shall be permitted, by giving notice to
Principal Party A, to request that the definition of "Carrier" be
renegotiated. The parties shall co-operate with each other in relation
to such re-negotiation and shall undertake such re-negotiation in good
faith.
(b) "Point-of-Presence" or "POP" means a facility or equipment
connecting the B Group's network with the network of a local
fixed network in Hong Kong (other than a cable landing
station).
15.4A Overseas Sales by HCL Group
No member of the HCL Group shall sell any services or facilities
comprising the Business to any Person outside Hong Kong and the PRC
provided that:
(a) the HCL Group shall be permitted to sell capacity or rights
thereto acquired under the Network Agreement of even date
between Global Crossing USA Inc., the Company and Principal
Party B or any Capacity Agreement entered into thereunder to
Principal Party A or its Subsidiaries pursuant to and subject
to the terms set out in Section 9(c) of the said Network
Agreement; and
(b) the HCL Group shall be permitted to sell services or
facilities to Persons located outside of Hong Kong and the PRC
requiring international connectivity provided that: (i) the
discussions, negotiations and offer of sale in relation to
such connectivity were initiated with a Person located in Hong
Kong or the PRC; (ii) the negotiations in respect of such sale
were conducted in Hong Kong or the PRC, and (iii) the Person
located outside Hong Kong or the PRC purchasing such services
or facilities is affiliated with the Person located in Hong
Kong or the PRC with whom the initial discussions and
negotiations were entered into; and (iv) the Person located
outside Hong Kong or the PRC is entering into the relevant
agreement for such sale due to corporate approval, regulatory,
tax or other similar circumstances, and provided further that
no member of the HCL Group shall engage in marketing outside
Hong Kong and the PRC.
15.5 Without prejudice to Clause 2.9 and 15.8, Principal Party B shall and
shall procure that members of the B Group shall allow connection to
their respective cable landing stations
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located in Hong Kong or to their respective POPs located in Hong Kong
on reasonable commercial terms with network facilities and services
owned, operated or provided by the HCL Group.
15.6 Compatibility with Global Crossing Network
The parties agree to procure that HCL's network and services will be
compatible with the Global Crossing Network in order to provide for
seamless network management in accordance with international industry
standards.
15.7 Restrictions Reasonable
While the restrictions contained in this Clause 15 are considered by
the parties hereto to be reasonable in all the circumstances, it is
recognised that restrictions of the nature in question may fail for
technical reasons unforeseen. It is hereby agreed and declared that if
any such restrictions shall be adjudged to be void as going beyond what
is reasonable in all the circumstances for the protection of the
interests of the parties hereto, but would be valid if parts of the
wording thereof were deleted or the period thereof were reduced, the
said restrictions shall apply with such modifications as may be
necessary to make it valid and effective.
15.8 Use of HCL Group
Except as provided in this Clause 15,
(a) Principal Party A and Principal Party B respectively agree,
and agrees to cause members of the A Group and the B Group
respectively, to use the HCL Group for all Capacity and
service needs in the PRC and Hong Kong which fall within the
Business and are being provided by the HCL Group; and
(b) Principal Party A agrees, for so long as CK is the beneficial
owner of at least 40% of the voting shares of Principal Party
A, to use its reasonable commercial endeavors to cause CK and
its Subsidiaries to use the HCL Group for all Capacity and
service needs in the PRC and Hong Kong which fall within the
Business and are being provided by the HCL Group;
provided that the terms offered by the HCL Group are competitive with
available alternatives with respect to price, availability, quality and
other terms material to its competitiveness and subject to Clause 2.10.
In the event that the terms offered by HCL Group are not competitive as
aforesaid, then the relevant member of the A Group or the B Group (as
the case may require) or CK or its Subsidiaries, as the case may be,
may use a third party to provide the relevant Capacity and services in
respect of which HCL Group was not so competitive and such use shall
not infringe this Clause 15.
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15.9 Revenues
For purposes of Clause 15.3(a) above, revenues of a Competing Entity
shall be determined on the basis of financial information for the most
recent period of twelve months for which financial information is
available.
16. PROTECTION OF NAME
16.1 Principal Party A/Xxxxxxxxx Name
In the event that Principal Party A or any of its Subsidiaries cease to
hold any of the Shares, the Shareholders shall, at the request of
Principal Party A and within a reasonable period of time of receipt
thereof, take such steps as may be necessary to procure that the
Company removes any reference to principal Party A's name or to the
name of "Xxxxxxxxx" in the name or business description of any member
of the HCL Group.
16.2 Principal Party B/Global Crossing Name
In the event that Principal Party B or any of its Subsidiaries ceases
to hold any of the Shares, the Shareholders shall, at the request of
Principal Party B and within a reasonable period of time of receipt
thereof, take such steps as may be necessary to procure that the
Company removes any reference to Principal Party B's name or to the
Global Crossing name in the name or business description of any member
of the HCL Group.
17. TERMINATION
17.1 Term
Save as otherwise provided, this Agreement shall continue indefinitely.
17.2 Termination
This Agreement, other than the provisions of Clause 14 shall terminate:
(a) with respect to a Shareholder when such Shareholder ceases to
be a shareholder of the Company by reason of a transfer of
Shares pursuant to Clause 11; and
(b) as contemplated by Clause 11.2;
and shall terminate upon the Company being wound up or otherwise
dissolved.
17.3 Termination by Principal Party
A Principal Party may without prejudice to its other rights at law,
terminate this Agreement in the event of occurrence of any of the
following:
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(a) any order shall be made by a competent court or other
appropriate governmental authority or any resolution shall be
passed for bankruptcy liquidation, winding-up or dissolution
or for the appointment of a trustee or similar official of the
other Principal Party and/or its Relevant Shareholder, or of
all or a substantial part of such other Principal Party's
and/or its Relevant Shareholder's assets, and shall not have
been dismissed or overturned for 60 days; or
(b) the other Principal Party and/or its Relevant Shareholder
shall stop payment to creditors or make an arrangement with
its creditors or shall be unable to pay its debts within the
meaning of any applicable legislation relating to bankruptcy;
or
(c) the occurrence of a Fundamental Breach by the other Principal
Party and/or its Relevant Shareholder ("Defaulter") which
breach, if capable of remedy, has not been remedied at the
expiry of 30 days following written notice by a non-breaching
Shareholder ("Innocent Party") having been served on the
Defaulter if the said written notice states in reasonable
detail the Fundamental Breach alleged and such Innocent
Party's intent to exercise its rights under this Clause 17 as
a result of such Fundamental Breach.
In order to terminate this Agreement under this Clause 17.3(c), the
Innocent Party must serve a further notice of termination ("Termination
Notice") on the Defaulter which notice may be served at any time after
the expiration of the 30 day period referred to in Clause 17.3(c).
Termination of this Agreement shall take effect at the time specified
in the Termination Notice, provided that such time so specified shall
not be less than 2 Business Days after the receipt by the Defaulter of
the Termination Notice from the Innocent Party.
17.4 Reservation of Other Rights
Each Party reserves all of its rights at law (including, without
limitation, rights to claim damages) arising out of any breach of this
Agreement by any other Party.
18. MISCELLANEOUS
18.1 Assignment
This Agreement shall be binding upon and shall ensure to the benefit of
the parties their successors and assigns, provided that this Agreement
may not be assigned or transferred in whole or in part by any party
without the consent of the other parties or otherwise as provided for
herein.
18.2 Implementation of Agreement
Each Shareholder agrees that it will at all times:
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(a) use all means reasonably available to it (including its voting
power direct or indirect in relation to the Company) so as to
ensure that the Company and any Director nominated by it (and
any alternate of such Director) shall implement the provisions
of this Agreement relating to the Company.
(b) cooperate in good faith and execute such documents and take
such action as may be reasonably required to give full effect
to the provisions and intent of this Agreement; and
(c) use its commercially reasonable endeavours to develop and
expand the business of the Company in accordance with the
Business Plan.
18.3 No Agency, Partnership or Third Party Beneficiaries
Other than for United States federal tax purposes, nothing contained in
or relating to this Agreement shall or shall be deemed to constitute a
partnership or agency relationship between any of the parties. This
Agreement does not provide, and is not intended to provide, third
parties with any remedy, claim, liability, reimbursement, cause of
action or any other right.
18.4 Severability
If any term or provision of this Agreement shall be found to be invalid
or unenforceable for any reason, the other terms or provisions shall
not be affected and such invalid or unenforceable term shall be deemed
to be deleted.
18.5 Counterparts and Amendments
This Agreement may be executed in multiple counterparts, each of which
when fully executed shall be deemed an original for all purposes. This
Agreement shall not be amended except by written instrument signed by
each of the Principal Parties (which amendment, when made, shall be
binding on all of the parties to this Agreement from time to time).
18.6 Governing Law and Jurisdiction
This Agreement shall be governed by and construed in accordance with
the laws of England and (other than matters to be determined under
Clause 7) each party hereby irrevocably submits to the non-exclusive
jurisdiction of English courts in England.
19. NOTICE
Each demand, notice or communication given or made under this Agreement
shall be in writing and shall be delivered or sent to the relevant
party personally, by expedited courier, by certified or registered mail
(airmail if overseas) with return receipt requested or by facsimile at
the following address or facsimile number (or such other addresses or
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facsimile number as the addressee has by fourteen (14) days' prior
notice specified to the other parties):
Principal Party A: Xxxxxxxxx Whampoa Limited
00xx Xxxxx, Xxxxxxxxx Xxxxx
00 Xxxxxxxx Xxxx
Xxxx Xxxx
Facsimile No.: 2128-1778
Attention: The Company Secretary
Party A: Xxxxxxxxx Telecommunications Limited
00 Xxx Xxxx Xxxxxx
Xxxx Xxx
Xxxxxxx
Xxxx Xxxx
Facsimile No.: 2128-3104
Attention: The Finance Director
Principal Party B: Global Crossing Ltd.
Xxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx, XX00
Xxxxxxx
Facsimile No.: 000-000-0000
Attention: Xxxxx X. Xxxxxx, Esq., General
Counsel
Party B: Global Crossing Holdings Ltd.
Wessex House
00 Xxxx Xxxxxx
Xxxxxxxx, XX00
Xxxxxxx
Xxxxxxxxx No.: 000-000-0000
Attention: Xxxxx X. Xxxxxx, Esq., General
Counsel
The Company: HCL Holdings Limited
00 Xxx Xxxx Xxxxxx
Xxxx Xxx
Xxxxxxx
Xxxx Xxxx
Facsimile No.: 2128-3104
Attention: The Finance Director
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Any notice so addressed shall be sufficiently served: (i) if delivered
personally, at t he time of delivery; (ii) if sent by expedited courier
or by certified or registered mail with postage or transmission charges
fully paid, on the fifth (5th) day following the date of posting or
dispatch; (iii) if by facsimile, at the time of transmission to the
correct facsimile number, provided that the sending party shall have
obtained electronic or other confirmation of accurate and complete
transmission.
20. TAXES
20.1 Tax Matters
(a) The "tax matters partner" for purposes of section 6231(a)(7)
of the Internal Revenue Code of 1986 of the United States, as
amended (the "Code") shall be Principal Party B or its
designated Affiliate (provided, however, that such Affiliate
must be a Shareholder) (the "Tax Matters Shareholder"). The
Tax Matters Shareholder shall have all of the rights, duties,
powers and obligations provided for in sections 6221 through
6231 of the Code with respect to the Company.
(b) Tax Returns
(i) The Tax Matters Shareholder shall timely prepare, or
cause to be prepared, all tax returns for each member
of the HCL Group for all taxable years or periods,
and in all jurisdictions other than Hong Kong, that
such tax returns are required to be filed;
(ii) HCL shall timely cause to be prepared all Hong Kong
tax returns for each member of the HCL Group for all
taxable years or periods that such tax returns are
required to be filed;
(iii) Any Shareholder may request in writing to review any
and all tax returns of the HCL Group, and all
reasonable comments proposed by such Shareholder
shall be incorporated into such tax returns by the
party controlling the preparation thereof; and
(iv) If a dispute arises with respect to the preparation
of any tax return, any Shareholder may request in
writing to submit such tax return to review by an
outside accounting firm mutually acceptable to all
Shareholders (the "Accounting Firm"), and the
determination made by the Accounting Firm shall be
binding on all members of the HCL group and on all
Shareholders. Such determination shall be made no
later than the 10th day prior to the due date for
filing such return.
(v) All fees incurred by the Accounting Firm with respect
to any dispute referred to in subclause (iv) shall be
paid as follows:
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(1) If the Accounting Firm determines that the
position of the party requesting review of a
return according to the provisions of
subclause (iv) above (the "Requesting
Party") is correct, then the non-requesting
party (the "Other Party") shall pay all such
fees;
(2) If the Accounting Firm determines that the
position of the Other Party is correct, then
the Requesting Party shall pay all such
fees; or
(3) If the Accounting Firm determines that the
position of neither or both parties is
correct, the Requesting Party and the Other
Party shall each pay half of all such fees.
20.2 HCL Group Tax Elections
(a) The Tax Matters Shareholder shall, in its reasonable
discretion, have the right to make, or cause each member of
the HCL Group to make, all United States federal, state and
local tax elections with respect to such member (including,
without limitation, any election to be classified as a
corporation for U.S. federal income tax purposes); provided
that the Tax Matters Shareholder shall notify and consult with
Principal Party A prior to making any such elections; and
provided further, however, that the elections described in
subclause (b) below may be made in the sole discretion of the
Tax Matters Shareholder, without notification of or
consultation with Principal Party A, and shall be subject to
the provisions of subclause (b).
(b) At any time, each member of the HCL Group shall, if so
requested by the Tax Matters Shareholder and subject to the
provisions of Clause 4.11 of the Subscription and Sale and
Purchase Agreement, make an election to be classified as a
partnership or a disregarded entity, as the case may be, for
U.S. federal income tax purposes by filing an election on
Internal Revenue Service Form 8832 (or any successor form),
all of which elections shall be effective as of a date
specified by the Tax Matters Shareholder; and
(c) Except as set forth in subsections (a) and (b) of this Clause
20.2, the Company shall make, or cause to be made, all other
tax elections of each member of the HCL Group, subject to
prior approval of the Board as set forth in Clause 5.9 hereof,
and subject further to the deadlock provisions of Clause 7
hereof, provided however, that such Board approval and such
deadlock procedures shall proceed in a manner so as to allow
any election under this subclause to be timely made.
20.3 Capital Accounts; Book Allocations
(a) There shall be established for each Shareholder on the books
of the Company as of the date hereof, or such later date on
which such Shareholder is admitted to the Company, a capital
account (each being a ("Capital Account"). The Capital Account
of each Shareholder shall be credited with the amount set
forth under
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"Initial Capital Account" on Schedule 1 opposite such
Shareholder's name paid by such Shareholder, increased by any
allocation of income or gain and by any additional capital
contributions by that Shareholder, and shall be reduced by any
allocation of loss, expense or deduction and by any
distribution to that Shareholder. Capital Accounts shall be
appropriately adjusted to reflect transfers of part (but not
all) of a Shareholder's Shares. Interest shall not be payable
on Capital Account balances.
(b) Except as otherwise provided herein, all items of Company
income, gain, loss, expense or deduction shall be allocated to
the Capital Accounts of the Shareholders in proportion to
their Share ownership. The foregoing provisions relating to
the maintenance of Capital Accounts and allocations of Company
income, gain, loss, expense or deduction are intended to
comply with U.S. Treasury Regulations section 1.704-1(b)
(including, without limitation, the "qualified income offset"
provisions contained therein) and shall be interpreted and
applied in a manner consistent with such U.S. Treasury
Regulations. Additionally, the foregoing allocation provisions
shall be interpreted and applied in a manner consistent with
the "minimum gain chargeback" provisions set forth in U.S.
Treasury Regulations section 1.704-2(f) and 1.704-2(i)(4).
20.4 Tax Allocations. Except as otherwise required by the Code or U.S.
Treasury Regulations (including without limitation section 704(b) and
(c) of the Code and U.S. Treasury Regulations promulgated thereunder),
all items of Company income, gain, loss, expense, deduction and any
other items shall be allocated among the Shareholders for federal
income tax purposes in the same proportions as they share the
corresponding items pursuant to Section 20.3.
21. AGENT FOR SERVICE
21.1 Principal Party B
Principal Party B and (if Party B is a different entity to Party B)
Party B hereby irrevocably agrees that any Service Document may be
sufficiently and effectively served on it in connection with
Proceedings by service on its agent Global Crossing Ltd. At 0xx Xxxxx,
Xxxxxxxxxx House, 00-00 Xxxxxxx Xxxxxx, Xxxxxx X0X 0XX, Xxxxxxx, if no
replacement agent has been appointed and notified to the other parties
pursuant to Clause 21, or on the replacement agent if one has been
appointed and notified to the other parties.
21.2 Principal Party A
Principal Party A hereby irrevocably agrees that any Service Document
may be sufficiently and effectively served on it in connection with
Proceedings by service on its agent. The Law Debenture Corporation plc
at 00 Xxxxxxx Xxxxxx Xxxxxx, Xxxxxxx, if no replacement agent has been
appointed and notified to the other parties pursuant to Clause
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21.4, or on the replacement agent if one has been appointed and
notified to the other parties.
21.3 Service
Any document addressed in accordance with Clause 21.1 or 21.2 shall be
deemed to have been duly served if:
(a) left at the specified address, when it is left; or
(b) sent by first class post, two Business Days after the date of
posting.
21.4 Replacements
If the agent referred to in Clause 21.1 or Clause 21.2 (or any
replacement agent appointed pursuant to this Clause) at any time ceases
for any reason to act as such, the original appointer shall appoint a
replacement agent to accept service having an address for service in
London, England and shall notify the other parties of the name and
address of the replacement agent.
21.5 Definitions
In this Clause 21:
(a) "Proceeding" means any proceedings, suit or action arising out
of or in connection with this Agreement.
(b) "Service Document" means a writ, summons, order, judgement or
other process issued out of the courts of England in
connection with any Proceedings.
22. EFFECTIVE DATE
This Agreement shall come into effect on the date first written above
(the "Effective Date"). With effect from the Effective Date, this
Agreement and the Relevant Agreements shall represent the entire
agreement of the parties with respect to the subject matter hereof and
shall supersede all previous discussions, representation or agreement.
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SCHEDULE 1A
A GROUP SERVICES
1. Paging Services
2. Mobile Services
3. Call Centre Services
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SCHEDULE 1B
B GROUP SERVICES
List of Global Crossing Products
Wholesale Capacity on Global Crossing Network
- Subsea & Terrestrial
- Dark Fiber, Wavelengths, STMs, Ds-3s, Els, etc.
- IRUs and leases
Service Across Global Crossing Network
- Subsea & Terrestrial
- Data Services (incl. ATM and Frame Relay)
- IP Services (incl. Transit/Transport, Internet Access and IP
VPN)
- Voice (VOIP and Circuit Switched Minutes)
- IPLCs
Telehouse/MDC Services
- Collocation
- Internet Enablement Services (as defined in Shareholders
Agreement)
- Peering Services
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SCHEDULE 2
NON COMPETE EXCEPTIONS
The provision by Xxxxxxxxx Telephone Company Limited or its Subsidiary or
Affiliate of Internet Access and Transport Services through wireless means to
subscribers to its mobile telecommunications services, but subject to the
provision of Clause 15.8.
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SCHEDULE 3
RESERVED MATTERS
1. Any amendment to the Articles or the articles of association of any
member of the HCL Group.
2. The creation, allotment or issue of any Shares or of any shares in the
capital of any member of the HCL Group or the grant or agreement to
grant any option over Shares or any uncalled capital of the Company or
shares or uncalled capital of any member of the HCL Group or the issue
of any obligations convertible into Shares or shares of any member of
the HCL Group.
3. The redemption or purchase of any Shares or of any shares of any member
of the HCL Group.
4. Any change in the nature or scope of the Business or the commencement
of any new business not being ancillary or incidental to such business
and/or any modification to the Business Plan or the Operating Budget.
5. The giving of any guarantee, indemnity or other security to any person
(including, without limitation, to any of the Principal Parties or any
members of the A Group or the B Group) by the Company or any other
member of the HCL Group or the borrowing by the Company or any other
member of the HCL Group in excess of limits from time to time contained
in the Business Plan or otherwise not in excess of HK$7,500,000 or any
refinancing thereof or material amendments thereto.
6. The acquisition or the disposal by the Company or any member of the HCL
Group of:
(a) any shares or other interests in any company or other entity;
or
(b) any business (or assets formerly used in the conduct of any
business); or
(c) any assets, other than in the ordinary course of business.
7. The approval pursuant to Clause 9 of the Business Plan.
8. The amalgamation or merger of the Company or any other member of the
HCL Group with any other company or legal entity.
9. Any change in name of any member of the HCL Group.
10. The declaration or payment of dividends.
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11. The commencement of the defense or conduct of litigation by any member
of the HCL Group concerning a claim by a third party against any member
of the HCL Group which is material to such member.
12. Any changes to the accounting policies of any member of the HCL Group.
13. The commencement of a winding-up (or similar proceedings) (or the sale
of all or substantially all of the assets of any member of the HCL
Group).
14. The purchase of any freehold property, by, or the grant or assignment
of any leasehold property to, any member of the HCL Group.
15. The provision by HCL Group of backhaul services at other than market
rates where not expressly permitted by this Agreement.
16. The disposition of capacity on the HCL network for non-cash
consideration.
17. Any transaction or agreement between any member of the HCL Group, on
the one hand, and Principal Party A or Principal Party B (or their
respective affiliates), on the other hand, or any amendments to any
such agreements.
18. Capital expenditures in excess of HK$7,500,000, unless specifically
contemplated by the Operating Budget.
19. Execution or material amendment or termination of "material" contracts.
20. Election, appointment or removal of senior management.
21. Create, grant or issue or agree to create, grant or issue, any
mortgage, charge or other lien on any of its assets (or any of its
Shares).
22. Enter into any individual contract or commitment which is outside the
ordinary course of business or has a value in excess of HK$7,500,000 or
has a duration of greater than 18 months.
23. Disposition of any asset having a net book value in excess of
HK$7,500,000.
24. Changing the HCL Group's independent accountants.
25. Subject to Clauses 20.1 and 20.2, changing any member of the HCL
Group's residence for taxation purposes, making or changing any
taxation election, changing any annual taxation accounting period or
method of taxation accounting, filing any material amended taxation
return, settling any material taxation claim or assessment,
surrendering any right to claim a taxation refund or consenting to any
extension or waiver of the limitation period applicable to any taxation
claim assessment.
49
26. The acquisition of, or investment in, any company.
27. Any reorganisation, recapitalization or similar extraordinary corporate
action or transaction involving any member of the HCL Group.
28. Establishment of any new subsidiary.
For the purpose of this Schedule, a contract shall be "material" if (a) it
relates to a matter not within the ordinary course of business of the applicable
member of the HCL Group; (b) it has a value in excess of HK$7,500,000; (c) it
has a stated term (including automatic renewals and renewals which may be
exercised by the other party) in excess of 18 months (and, if any contract does
not have stated term it shall be deemed to be "material" if it cannot be
terminated on less than six months' notice); or (d) such contract can be
terminated (or the substantive rights set forth therein can be modified) in the
event of change in the underlying ownership or control of the member of the HCL
Group which is a party to such contract.
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SCHEDULE 4
DEED OF ADHERENCE
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DEED OF ADHERENCE
THIS DEED is dated _________, _____ and is made by [ ] of [ ] (the
"New Shareholder") in favor of the following persons ("Existing Parties"):
(1) [Include the name of each shareholder of HCL Holdings Limited other
than the outgoing shareholder, as at the date of the Deed] a company
incorporated in [ ] and having its registered office at
[ ] ("Existing Shareholder");
(2) Xxxxxxxxx Whampoa Limited, a company incorporated in Hong Kong and
having its registered office at 00xx Xxxxx, Xxxxxxxxx Xxxxx, 00
Xxxxxxxx Xxxx, Xxxx Xxxx ("Principal Party A");
(3) Global Crossing Ltd., a company incorporated in Bermuda and having its
registered office at Wessex House, 45 Xxxx Street, Xxxxxxxx, HM12,
Bermuda ("Principal Party B"); and
(4) HCL Holdings Limited, a company incorporated in the British Virgin
Islands and having its registered office at P.O. Box 957 Offshore
Incorporations Center, Road Town, Tortola, British Virgin Islands (the
"Company").
WHEREAS:
(A) This Deed is supplemental to a Shareholders Agreement, dated as of [ ]
January, 2000 (the "Shareholders Agreement"), a copy of which is
annexed hereto.
(B) Principal Party [A][B] [complete as applicable] has given written
notice to Principal Party [A][B] [complete as applicable] that the New
Shareholder is becoming a member of the Company.
NOW THIS DEED WITNESSETH THAT
(1) The New Shareholder hereby covenants and undertakes to the Existing
Parties that it will at all times perform and observe the continuing
provisions of the Shareholders Agreement as if the New Shareholder were
a party to the Shareholders Agreement and were named therein as a
Shareholder and Party [A][B] [complete as applicable] and on the basis
that references therein to "Shareholder" include a reference to the New
Shareholder and references to the "Principal Party" in respect of the
New Shareholder were a reference to Principal Party [A][B] [insert
Principal Party of the transferring party].
(2) (A) This Deed shall be governed by and construed in accordance
with the laws of England.
(B) The New Shareholder hereby irrevocably accepts and submits to
the non-exclusive jurisdiction of the courts of England but
this Deed may be enforced in any court of competent
jurisdiction.
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IN WITNESS WHEREOF, this Deed has been executed as a Deed the day and year
before first written.
SEALED with the Common Seal of )
[Insert Name of the New Shareholder] )
and SIGNED by )
in the presence of:
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SCHEDULE 5
ARBITRATION/EXPERT
Unless otherwise stated, references herein to Clauses are to clauses of this
Schedule.
1. General
1.1 If a deadlock arises between the Principal Parties in
connection with or arising from this Agreement and the matter
is referred to arbitration pursuant to Clause 7.2 of this
Agreement (a "Dispute"), the Dispute shall be submitted to
arbitration in accordance with Clause 2.
1.2 A party must not use information obtained in the course of any
procedure established by this Schedule for any purpose other
than to resolve the relevant dispute.
2. Arbitration
2.1 (a) Any referral of a Dispute to arbitration shall be
made by notice, including a statement of the matters
in the Dispute.
(b) The arbitration must be conducted in accordance with
the London Court of International Arbitration Rules
(the "Rules") in force at the time the arbitration is
commenced. The Rules are deemed to be incorporated by
reference into this Schedule.
(c) The arbitration shall take place in England and shall
be conducted in English.
(d) Party A and Principal Party A on the one hand, and
Party B and (if Principal Party B is a different
entity to Party B) Principal Party B, on the other
hand, shall each appoint one arbitrator to resolve
any Dispute, whereupon the two arbitrators shall
appoint a third arbitrator. If the arbitrators
appointed by the parties are unable to agree upon the
appointment of the third arbitrator within 14 days,
then such arbitrator shall be appointed by the London
Court of International Arbitration.
(e) In addition to the qualifications of the arbitrators
contemplated by the Rules, the arbitrators should:
(i) have an understanding of the relevant
aspects of the telecommunications industry;
and
(ii) not be an officer, director or employee of a
telecommunications company.
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(f) The parties agree to expedite the arbitration to the
extent possible.
(g) Unless determined to the contrary by the arbitrators,
the parties will bear their own costs of the
arbitration including the costs of any representatives
and will each bear half the costs of the arbitration.
2.2 The Parties agree that the arbitrators may refer business or technical
matters to experts for decision.