Dated 15th November, 1999
-------------------------
HUTCHISON WHAMPOA LIMITED
and
HUTCHISON TELECOMMUNICATIONS LIMITED
and
GLOBAL CROSSING LTD.
and
GLOBAL CROSSING LTD.
and
HCL HOLDINGS LIMITED
________________________________________
SUBSCRIPTION AND SALE AND
PURCHASE AGREEMENT
in relation to
HCL HOLDINGS LIMITED
________________________________________
EXHIBIT 10.33
THIS AGREEMENT is made on 15th November, 1999
BETWEEN:
(1) HUTCHISON WHAMPOA LIMITED, a company incorporated in Hong Kong and having
its registered office at 22nd Floor, Hutchison House, 10 Harcourt Road,
Hong Kong (the "Vendor Guarantor");
(2) HUTCHISON TELECOMMUNICATIONS LIMITED, a company incorporated in Hong Kong
and having its registered office at 22nd Floor, Hutchison House, 10
Harcourt Road, Hong Kong (the "Vendor");
(3) GLOBAL CROSSING LTD., a company incorporated in Bermuda and having its
registered office at Wessex House, 45 Reid Street, Hamilton, HM12, Bermuda
(the "Purchaser");
(4) GLOBAL CROSSING LTD., a company incorporated in Bermuda and having its
registered office at Wessex House, 45 Reid Street, Hamilton, HM12, Bermuda
(the "Purchaser Guarantor"); and
(5) HCL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands
and having its registered office at P.O. Box 146, Road Town, Tortola,
British Virgin Islands (the "Company").
WHEREAS:
(A) The Company is a company limited by shares incorporated in the British
Virgin Islands. The authorised share capital of the Company is as at the
date hereof US$50,000.00 divided into 50,000 shares of US$1.00 each.
Certain other particulars of the Company are set out in Schedule 1.
(B) Hutchison Communications Limited ("HCL") is a company limited by shares
incorporated in Hong Kong and is a wholly-owned subsidiary of the Company.
Certain other particulars of HCL are set out in Schedule 2.
(C) Immediately prior to Completion, the Vendor will be the beneficial owner of
three shares of US$1.00 each in the Company, all of which will have been
issued and fully paid up or credited as fully paid up and will represent
the entire issued share capital of the Company.
(D) The Vendor has agreed to sell and the Purchaser has agreed to purchase the
Vendor Share (as hereinafter defined) subject to and upon the terms and
conditions hereinafter appearing.
(E) The Purchaser has agreed to subscribe for and the Company has agreed to
issue and allot the New Share (as hereinafter defined).
2
(F) Following completion of the transactions described in Recitals (D) and (E),
the Vendor and the Purchaser will each be the holder of one half of the
issued share capital of the Company.
(G) The Purchaser may, in accordance with Clause 2.3, transfer its rights and
obligations under this Agreement to another person. The Purchaser
Guarantor agrees to enter into this Agreement to, inter alia, guarantee the
due and punctual performance of the obligations of that person.
(H) The Vendor is a wholly-owned subsidiary of the Vendor Guarantor. In
consideration of the Purchaser entering into this Agreement and at the
request of the Vendor, the Vendor Guarantor agrees to enter into this
Agreement to, inter alia, guarantee the due and punctual performance of the
obligations of the Vendor hereunder.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement (including the recitals above), the words and expressions
set out below shall have the following meanings attributed to them:
"Accounts" the HCL Accounts, the HMSL Accounts, the HGNL
Accounts and the Partnership Accounts;
"Accounts Date" 31st December, 1998;
"Affiliate" in relation to a company, any body corporate which
is for the time being the holding company or a
subsidiary of that company or a subsidiary of that
holding company ("holding company" and
"subsidiary" have for purposes of this Agreement
the meaning ascribed thereto in Section 2 of the
Companies Ordinance, Chapter 32 of the Laws of
Hong Kong);
"Agreement" this Agreement including its schedules and
exhibits;
"Business Day" a day on which banks in Hong Kong, New York and
Los Angeles are open for business (other than a
Saturday or a Sunday);
"Business Plan" the business plan of the Group set out in Exhibit
L;
3
"Certificate of the certificate of designations of the
Designations" Convertible Preferred Stock a draft of which is in
the agreed form;
"Completion" completion of the sale and purchase of the Vendor
Share and the subscription, issue and allotment of
the New Share in accordance with Clause 5 and
Schedule 3;
"Completion (a) if the Completion Date is on or before 15th
Accounts" January, 2000, the audited consolidated accounts
of the Group made up to 31st December, 1999; and
(b) if the Completion Date is after 15th January,
2000, the consolidated accounts of the Group made
up to the Completion Date and audited by the
auditors for the time being of the Company;
"Completion Date" (a) if the Conditions are satisfied before 31st
December, 1999, 3rd January, 2000; and
(b) if the Conditions are satisfied after 31st
December, 1999, the day falling ten Business Days
after the Conditions (other than the Condition in
Clause 4.1(e)) are so satisfied or waived but in
no event later than the End Date;
"Conditions" the conditions precedent set out in Clause 4.1 and
the expression "Condition" shall mean any of them;
"Consideration" the consideration due by the Purchaser in
accordance with Clause 3;
"Convertible the convertible preferred stock to be issued by
Preferred Stock" the Purchaser Guarantor, the terms and conditions
of which are set out in the Certificate of
Designations;
"Counter-indemnities" the counter-indemnities, particulars of which are
set out in Schedule 6;
"Disclosure Letter" the letter of even date herewith written by the
Vendor to the Purchaser and the Purchaser
4
Guarantor for the purposes of Clause 6.13(e)
before execution of this Agreement;
"End Date" 15th March, 2000 or such later date as the parties
may agree in writing;
"Exchange Act" the Securities Exchange Act of 1934 of the United
States;
"Excluded Business" the businesses of the provision of paging, call
centres and other ancillary services and the sales
of mobile phones, pagers and accessories carried
on and operated by HCL and the other retailing
activities to be within the scope of the Marketing
and Distribution Agreement;
"Excluded Business the arrangements for the transfer of the
Transfer Arrangements" Excluded Business and the Excluded Companies, a
summary of which is set out in Schedule 7;
"Excluded Companies" Mollson Limited, Hutchison-Management of
Telecommunication Services Limited, Goldpraise
Limited and Goldtop Limited and "Excluded Company"
means any of them;
"Global Crossing the licence agreement regarding the licence of
Licence Agreement" certain trademarks between a wholly-owned
subsidiary of the Purchaser Guarantor and HCL to
be executed by the parties thereto at Completion a
draft of which is in the agreed form;
"Global Crossing the agreement between the Company and Global
Network Agreement" Crossing USA Inc. to be entered into between the
parties thereto at Completion a draft of which is
in the agreed form;
"Group" the Company and the Subsidiaries, the expression
"Group Company" means any of them and the
expression "Group Companies" means all of them;
"Hong Kong" the Hong Kong Special Administrative Region of the
People's Republic of China;
5
"H" Hutchison Telecommunications (Hong Kong) Limited;
"H Service Agreement" the service agreement between H, HWL and HCL to be
executed by the parties thereto at Completion a
draft of which is in the agreed form;
"HCL Accounts" the audited accounts of HCL for the period ended
on and as at the Accounts Date, a copy of which is
in Exhibit A;
"HCL Network the partnership between Hongville Limited,
Partnership" Palliser Investments Limited and Aberdeen
Commercial Investments Limited constituted by a
partnership agreement dated 30th June, 1994 for
the purpose of leasing telecommunications
equipment to HCL, to be reorganised pursuant to
the Partnership Agreement;
"HGNL Accounts" the audited accounts of Hutchison Global Net
Limited ended on and as at the Accounts Date, a
copy of which is in Exhibit A;
"HMSL Accounts" the audited accounts of Hutchison Multimedia
Services Limited for the period ended on and as at
the Accounts Date, a copy of which is in Exhibit
A;
"Hutchison Licence the licence agreement regarding the licence of
Agreement" certain trade marks between Hutchison Whampoa
Enterprises Limited, HWL and HCL to be executed by
the parties thereto at Completion a draft of which
is in the agreed form;
"HWL Service Agreement" the service agreement between the Vendor Guarantor
and HCL to be executed by the parties thereto at
Completion a draft of which is in the agreed form;
"Intellectual Property" means patents, trade marks and service marks,
rights in designs, trade or business names, domain
names, copyrights and topography rights (whether
or not any of these is registered and including
applications for registration of any
6
such thing) and rights under licences and consents
in relation to any such thing and all rights or
forms of protection of a similar nature or having
equivalent or similar effect to any of these which
may subsist anywhere in the world;
"in the agreed form" in the form agreed (subject to Clause 4.12)
between the Vendor and the Purchaser, as evidenced
by initialling on their behalf simultaneously with
the execution of this Agreement;
"Interconnect Agreement" the agreement between Hutchison Telephone Company
Limited, HWL and HCL regarding interconnection to
be executed by the parties thereto at Completion a
draft of which is in the agreed form;
"Leased Lines Agreement" the agreement between HCL, HWL and Hutchison
Telephone Company Limited regarding leased lines
to be executed by the parties thereto at
Completion a draft of which is in the agreed form;
"Management Accounts" the unaudited proforma consolidated management
accounts of the Group Companies as at the
Management Accounts Date (prepared on the basis
that the Excluded Business Transfer Arrangements
and the restructuring referred to in Clause 4.5(d)
have taken place), a copy of which is in Exhibit
B;
"Management Accounts 30th September, 1999;
Date"
"Marketing and the agreement between HCL, HWL and Hutchison
Distribution Agreement" Paging Services Limited regarding marketing and
distribution services to be provided by Hutchison
Paging Services Limited to be executed by the
parties thereto at Completion a draft of which is
in the agreed form;
"MDC Agreement" the agreement between Global Crossing Holdings
Ltd. and HCL regarding a media distribution centre
to be executed by the parties
7
thereto at Completion a draft of which is in the
agreed form;
"New Share" means one new Share to be subscribed by the
Purchaser and issued and allotted by the Company
under this Agreement;
"OFTA" Office of the Telecommunications Authority;
"Partnership Accounts" the audited accounts of the HCL Network
Partnership for the period ended on and as at the
Accounts Date, a copy of which is in Exhibit A;
"Partnership Agreement" the deed between Hongville Limited, Palliser
Investments Limited, Aberdeen Commercial
Investments Limited, HCL and HCL Network
Partnership Holdings Limited referred to in Clause
4.5(d) in the agreed form to be executed by the
parties thereto at or before Completion whereby,
inter alia, HCL, Hongville Limited and HCL Network
Partnership Holdings Limited become respectively
99.98%, 0.01% and 0.01% partners of HCL Network
Partnership;
"Proceedings" any proceedings, suit or action arising out of or
in connection with this Agreement;
"Proforma 1998 Accounts" the unaudited proforma consolidated accounts of
the Group Companies for the period ended on and as
at the Accounts Date (prepared on the basis that
the Excluded Business Transfer Arrangements and
the restructuring referred to in Clause 4.5(d)
have taken place), a copy of which is in Exhibit
A;
"Purchaser Conditions" the Conditions in Clause 4.1(a)(ii), 4.1(b),
4.1(e)(ii), 4.1(f)(ii) and 4.1(h);
"Purchaser Warranties" the representations, warranties and undertakings
set out in Clause 7 and Part 3 of Schedule 5 given
by the Purchaser under this Agreement and under
the completion certificate to be provided under
Clause 4.1(h) and "Purchaser Warranty" shall be
construed accordingly;
8
"Purchaser Guarantor the representations, warranties and undertakings
Warranties" set out in Clause 7 and Part 4 of Schedule 5 given
by the Purchaser Guarantor under this Agreement
and under the completion certificate to be
provided under clause 4.1(h) and "Purchaser
Guarantor Warranty" shall be construed
accordingly;
"Purchaser Parties" the Purchaser, the Purchaser Guarantor and each
subsidiary of the Purchaser Guarantor which is a
party to any Relevant Agreement and "Purchaser
Party" means any of them;
"Registration Rights the registration rights agreement between the
Agreement" Purchaser Guarantor and the Vendor to be executed
by the parties thereto at Completion a draft of
which is in the agreed form;
"Relevant Agreements" this Agreement, the Global Crossing Network
Agreement, the H Service Agreement, the HWL
Service Agreement, the Hutchison Licence
Agreement, the Global Crossing Licence Agreement,
the Marketing and Distribution Agreement, the
Partnership Agreement, the Shareholders Agreement,
the Tax Covenant, the Registration Rights
Agreement, the MDC Agreement, the Interconnect
Agreement, the Leased Lines Agreement and the
Certificate of Designations and "Relevant
Agreement" means any of them;
"SEC" the Securities and Exchange Commission of the
United States of America;
"Securities Act" the Securities Act of 1933 of the United States;
"Shareholders Agreement" the shareholders agreement between the Vendor, the
Vendor Guarantor, the Purchaser, the Purchaser
Guarantor and the Company in the agreed form to be
executed by the parties thereto at Completion;
"Shares" means shares of US$1.00 each in the capital of the
Company;
9
"Subsidiaries" the companies which are to be the subsidiaries of
the Company at Completion, particulars of which
are set out in Schedule 2;
"Target Date" 15th December, 1999;
"Taxation" (a) any form of tax whenever created or imposed and
whether of Hong Kong or elsewhere, payable to or
imposed by any Taxation Authority and includes,
without limitation, profits tax, provisional
profits tax, interest tax, salaries tax, property
tax, taxes on gross or net income or receipts,
taxes on gains, estate duty, capital duty, stamp
duty, payroll tax, sales or use tax, franchise
tax, ad valorem tax, transfer tax, value added tax
and other similar liabilities or contributions and
any other taxes, levies, duties, charges, imposts
or withholdings similar to, corresponding with, or
replacing or replaced by any of the foregoing; and
(b) all charges, interest, additional tax, penalties
and fines, incidental or relating to any taxation
falling within (a) above
and includes (for the avoidance of doubt) any of
the foregoing (within (a) or (b)) which arises out
of the Excluded Business Transfer Arrangements and
the restructuring referred to in Clause 4.5(d) or
which are payable by or imposed on the HCL Network
Partnership;
"Taxation Authority" the Inland Revenue Department of Hong Kong and/or
any other revenue, customs, fiscal governmental,
statutory, central, federal, regional, state,
provincial, local governmental or municipal
authority, body or person, whether of Hong Kong or
elsewhere;
"Tax Covenant" the tax covenant to be executed in the agreed form
by the Vendor and the Vendor Guarantor in favour
of the Purchaser, the Purchaser Guarantor and the
Company at Completion;
10
"Vendor Conditions" the Conditions except (i) the Purchaser Conditions
and (ii) the Condition in Clause 4.1(l);
"Vendor Parties" the parties to the Relevant Agreements (other than
the Purchaser Parties) and the Group Companies and
"Vendor Party" means any of them;
"Vendor Share" one issued Share to be sold by the Vendor and
purchased by the Purchaser under this Agreement;
"Vendor Warranties" the representations, warranties and undertakings
set out in Clause 6 and Part 1 of Schedule 5 given
by the Vendor under this Agreement and under the
completion certificate to be provided under Clause
4.1(g) and "Vendor Warranty" shall be construed
accordingly;
"Vendor Guarantor the representations, warranties and undertakings
Warranties" set out in Clause 6 and Part 2 of Schedule 5 given
by the Vendor Guarantor under this Agreement and
under the completion certificate to be provided
under Clause 4.1(g) and "Vendor Guarantor
Warranty" shall be construed accordingly;
"Warranties" the Vendor Warranties, the Vendor Guarantor
Warranties, the Purchaser Warranties and the
Purchaser Guarantor Warranties and "Warranty"
shall be construed accordingly;
"HK$" and "Hong Kong Hong Kong dollars, the lawful currency of Hong
dollars" Kong; and
"US$" and "US dollars" United States dollars, the lawful currency of the
United States of America.
1.2 References to statutory provisions shall where the context so admits or
requires be construed as references to those provisions as respectively amended,
consolidated, extended, or re-enacted from time to time, and shall, where the
context so admits or requires, be construed as including reference to the
corresponding provisions of any earlier legislation (whether repealed or not)
directly or indirectly amended, consolidated, extended, or replaced thereby or
re-enacted therein, which may be applicable to any
11
relevant tax year or other period, and shall include any orders, regulations,
instruments or other subordinate legislation made under the relevant statute.
1.3 Unless the context otherwise requires, words importing the singular only
shall include the plural and vice versa and words importing natural persons
shall include corporations and un-incorporated associations; words
importing the masculine gender only shall include the feminine gender and
the neuter gender. References to Clauses, Schedules and Exhibits are to
clauses of, schedules to and exhibits to this Agreement.
1.4 In this Agreement and the Schedules, the words and expressions hereinbefore
defined shall (unless the context otherwise requires) bear the same
meanings therein given to them and this Agreement and the Schedules shall
be construed and interpreted accordingly. The Schedules and Exhibits form
part of this Agreement and shall be construed and have the same full force
and effect as if expressly set out in the body of this Agreement. The
headings contained in this Agreement are for the purposes of convenience
only and do not form part of and shall not affect the construction of this
Agreement or any part thereof.
1.5 References to a "company" shall be construed so as to include any company,
corporation or other body corporate, wherever and however incorporated or
established.
1.6 References to a "person" shall be construed so as to include any
individual, firm, company, government, state or agency of a state or any
joint venture, association or partnership (whether or not having separate
legal personality).
1.7 References to "indemnify" and "indemnifying" any person against any
circumstance include indemnifying and keeping him harmless from all
actions, claims and proceedings from time to time made against that person
and all loss or damage and all payments, costs or expenses made or incurred
by that person as a consequence of or which would not have arisen but for
that circumstance.
1.8 References to the knowledge, information, belief or awareness of any person
shall be treated as including any knowledge, information, belief or
awareness which the person would have if the person made reasonable
enquiries.
1.9 The rule known as the ejusdem generis rule shall not apply and accordingly:
(a) general words introduced by the word "other" shall not be given a
restrictive meaning by reason of the fact that they are preceded by words
indicating a particular class of acts, matters or things; and
(b) general words shall not be given a restrictive meaning by reason of the
fact that they are followed by particular examples intended to be embraced
by the general words.
12
2. SALE AND PURCHASE AND SUBSCRIPTION AND SUBSTITUTION OF PURCHASER
2.1 Subject to the fulfilment of the Conditions and the terms and conditions of
this Agreement, the Vendor shall sell and transfer all the legal and
beneficial interests in the Vendor Share to the Purchaser and the Purchaser
shall purchase the Vendor Share free from all charges, liens and other
encumbrances whatsoever and together with all rights attaching thereto
including in particular but without prejudice to the generality of the
foregoing the right to all dividends and other distributions declared
and/or paid on or after the Completion Date.
2.2 Subject to the fulfilment of the Conditions and the terms and conditions of
this Agreement, the Purchaser shall subscribe for and the Company shall
allot and issue, fully paid, the New Share. The New Share shall be free
from all charges, liens and other encumbrances whatsoever and together with
all rights attaching thereto including in particular but without prejudice
to the generality of the foregoing the right to all dividends and other
distributions declared and/or paid on or after the Completion Date.
2.3 The Purchaser Guarantor may, at any time before Completion, by delivering a
notice to that effect to the other parties to this Agreement, cause any of
its wholly-owned subsidiaries or any person to whom it could, following
Completion, transfer Shares under the Shareholders Agreement to become the
Purchaser instead of itself, whereupon such person shall have all the
rights and obligations of the Purchaser under this Agreement and the
Purchaser Guarantor shall cease to have such rights and obligations, but
without prejudice to its rights and obligations in its capacity as
Purchaser Guarantor.
3. CONSIDERATION
3.1 The consideration for the sale of the Vendor Share shall be the issue and
allotment to the Vendor (or to such other wholly-owned subsidiary of the
Vendor Guarantor as the Vendor may direct and as shall have agreed with the
Purchaser Guarantor to be bound by Clause 10) of US$400 million in nominal
amount of Convertible Preferred Stock credited as fully paid at par. The
conversion price for the Convertible Preferred Stock shall be as set forth
in the Certificate of Designations. If any event requiring adjustment of
the Conversion Price (as defined in the Certificate of Designations) under
the Certificate of Designations occurs between the date hereof and the
Completion Date, the Conversion Price will be modified in accordance with
such provisions and the change shall be reflected in the Certificate of
Designations.
3.2 The consideration for the issue and allotment of the New Share shall be the
payment to the Company of US$50 million in cash, US$200 million to be
satisfied by the entry into and performance of the Global Crossing Network
Agreement and US$150 million to be satisfied by the entry into and
performance of the MDC Agreement.
13
4. CONDITIONS PRECEDENT AND PRE- AND POST-COMPLETION MATTERS
4.1 Completion shall be subject to and conditional upon the fulfilment of the
following Conditions:
(a) all approvals and consents which may be required or necessary to be
obtained from any government or any governmental or regulatory
authority in order for:
(i) each Vendor Party to enter into and perform each Relevant
Agreement to which it is a party and to do every thing
contemplated to be done by it as a result of or as a condition
precedent (or otherwise preparatory) to the entry into and
performance of the Relevant Agreements; and
(ii) each Purchaser Party to enter into and perform each Relevant
Agreement to which it is a party and to do every thing
contemplated to be done by it as a result of or as a condition
precedent (or otherwise preparatory) to the entry into and
performance of the Relevant Agreements having been obtained;
(b) the approvals and/or consents listed in Part 1 of Schedule 9 having
been obtained;
(c) the approvals and/or consents listed in Part 2 of Schedule 9 having
been obtained and OFTA shall not have objected in writing to the entry
into or performance of any Relevant Agreement (on the grounds that it
will or might breach the terms of any licence referred to in paragraph
7.1(1)(a) of Part 1 of Schedule 5 or otherwise);
(d) the Vendor and the Vendor Guarantor having complied with their
obligations under Clause 4.4 and 4.6;
(e) no government or governmental or regulatory authority having
instituted or threatened in writing any action (including the passing
of any statute or regulation), suit or investigation to restrain,
prohibit or otherwise challenge, or which would materially restrict or
delay, the entry into or performance:
(i) by any Vendor Party of any Relevant Agreement or any thing to be
done by any Vendor Party under or as contemplated by any Relevant
Agreement; or
(ii) by any Purchaser Party of any Relevant Agreement or any thing to
be done by any Purchaser Party under or as contemplated by any
Relevant Agreement.
14
(f) the delivery of legal opinions:
(i) reasonably satisfactory to the Purchaser, covering the existence
and due incorporation of the Vendor Parties, their capacity and
authority to their enter into and perform the Relevant Agreements
to which they are parties, the validity, binding nature and
enforceability of their obligations under those Relevant
Agreements and the obtaining of all necessary legal and
regulatory consents; and
(ii) reasonably satisfactory to the Vendor, covering the existence and
due incorporation of the Purchaser Parties and their capacity and
authority to enter into and perform the Relevant Agreements to
which they are parties, the validity, binding nature and
enforceability of their obligations under those Relevant
Agreements and the obtaining of all necessary legal and
regulatory consents;
(g) the Vendor Warranties and the Vendor Guarantor Warranties being
accurate in all material respects and not misleading if they were
repeated at the time of Completion and on the basis that a reference
to the actual time of Completion were substituted for any express or
implied reference to the time of this Agreement and a completion
certificate shall be delivered by the Vendor (in relation to the
Vendor Warranties) and by the Vendor Guarantor (in relation to the
Vendor Guarantor Warranties) to the Purchaser and the Purchaser
Guarantor to that effect;
(h) the Purchaser Warranties and the Purchaser Guarantor Warranties being
accurate in all material respects and not misleading if they were
repeated at the time of Completion and on the basis that a reference
to the actual time of Completion were substituted for any express or
implied reference to the time of this Agreement and a completion
certificate shall be delivered by the Purchaser (in relation to the
Purchaser Warranties) and by the Purchaser Guarantor (in relation to
the Purchaser Guarantor Warranties) to the Vendor and the Vendor
Guarantor to that effect;
(i) each contract and licence in existence at the date of this Agreement
which relates to the business of any Group Company but which has been
entered into by the Vendor Guarantor or a subsidiary of the Vendor
Guarantor which is not a Group Company shall have been novated to that
first mentioned Group Company without amendment to its terms or the
economic benefit and burden of that contract or, as case may be,
licence, shall have been otherwise transferred to that first mentioned
Group Company in a manner satisfactory to the Purchaser;
(j) each contract in existence at the date of this Agreement which has
been entered into by the Vendor Guarantor or any subsidiary of the
Vendor Guarantor which is not a Group Company as agent for a Group
Company but which has not been
15
reduced to writing shall have been reduced to writing on terms
satisfactory to the Purchaser;
(k) the Vendor having delivered to the Purchaser proforma audited
consolidated accounts of the Group (including balance sheet and
related statement of income and statement of cash flows and prepared
on the basis that the Excluded Business Transfer Arrangements and the
restructuring referred to in Clause 4.5(d) have taken place) prepared
in accordance with generally accepted accounting principles in the
United States for the financial years ended and as of 31st December,
1996, 1997 and 1998;
(l) each of the Relevant Agreements referred to in Clause 4.12 having been
entered into in form and content satisfactory to the parties; and
(m) the constitutive documents of each Group Company having been amended
in the manner contemplated by Clause 3 of the Shareholders Agreement.
4.2 If the Vendor Conditions shall not have been fulfilled (or waived by the
Purchaser) on or before the End Date, the Purchaser shall have the right,
in its sole discretion, to terminate this Agreement. If the Condition in
Clause 4.1(l) shall have not been fulfilled (or waived by both parties) on
or before the End Date, each of the Purchaser and the Vendor shall have the
right (in its sole discretion) to terminate this Agreement. If the
Purchaser Conditions shall not have been fulfilled (or waived by the
Vendor) on or before the End Date, the Vendor shall have the right, in its
sole discretion, to terminate this Agreement. Notwithstanding the foregoing
the Purchaser may not, without the consent of the Vendor, require
Completion if any Vendor Condition in Clause 4.1(a)(i) or 4.1(b) is not
fulfilled and the Vendor may not, without the consent of the Purchaser,
require Completion if any Purchaser Condition in Clause 4.1(a)(ii) or
4.1(c) is not fulfilled. Upon any termination by the Vendor or the
Purchaser under this Clause 4.2, this Agreement and everything contained in
it (except for the continuing obligations under Clauses 16 and 17) shall
terminate and be null and void and of no further effect and no party to
this Agreement shall have any liability to the other parties, save in
respect of any prior breaches of the terms of this Agreement.
4.3 The Vendor and the Vendor Guarantor agree to use all reasonable endeavours
to procure the fulfilment of the Vendor Conditions and the Purchaser and
the Purchaser Guarantor agree to use all reasonable endeavours to procure
the fulfilment of the Purchaser Conditions, in each case by the Target
Date.
4.4 Subject to the matters specifically disclosed (against this Clause 4.4) in
the Disclosure Letter and matters specifically provided for in this
Agreement (including its Exhibits) or the Relevant Agreements, the Vendor
and the Vendor Guarantor will procure that, between the time of this
Agreement and Completion, each Group Company will carry on business in the
normal course. In addition, the matters listed in Schedule 4 shall require
the prior consent in writing of the Purchaser or the Purchaser Guarantor.
16
4.5 The Vendor shall, immediately prior to Completion:
(a) procure that no Group Company has outstanding any indebtedness, actual
or contingent, except for:
(i) any indebtedness owed by Group Companies to each other and to no
other person; and
(ii) any indebtedness permitted to exist because of Clause 4.6;
(b) procure that there are no amounts outstanding from any of the Vendor,
the Vendor Guarantor or any of their respective Affiliates (other than
the Excluded Companies) to any of the Group Companies other than
routine trade payables arising in the ordinary course of business or
amounts payable in respect of the matters referred to in (i), (ii) or
(iii) of paragraph (v) of Schedule 4;
(c) implement and carry out the Excluded Business Transfer Arrangements so
as, inter alia, to ensure that the Group does not include any Excluded
Company, that no Group Company carries on or is in any way interested
in the Excluded Business and that there are no amounts outstanding
from any of the Excluded Companies to any of the Group Companies (the
Vendor hereby agreeing to indemnify each Group Company against any
liability, actual or contingent, arising out of or connected with the
Excluded Business); and
(d) implement and carry out such steps and acts and execute such
documents, instruments and deeds as referred to in Schedule 8
(including without limitation the Partnership Agreement) to procure
that, inter alia, HCL and HCL Network Partnership Holdings Limited
shall become 99.98% and 0.01% partners respectively of HCL Network
Partnership and that no Group Company has any liability, actual or
contingent, arising out of or connected with the HCL Network
Partnership incurred before the date of the Partnership Agreement.
4.6 The Vendor shall be responsible for the advancement of such sum of money to
the Group, by way of interest free shareholder loans, as is necessary to
fund the Group's operations until the Completion Date. All such shareholder
loans advanced up to the later of the Target Date and the date on which all
of the Vendor Conditions (except that in Clause 4.1(k)) are satisfied shall
(together with any excess of the balance referred to in the next sentence
over the maximum amount referred to in the next sentence) be capitalised
upon Completion. The balance (up to a maximum of HK$100 million per month
on a cumulative basis, prorated on a daily basis for part of a month) shall
be repaid upon Completion.
4.7 The parties shall use their respective reasonable endeavours to procure
that, as soon as practicable after the Completion Date, the Counter-
indemnities shall be absolutely released and cancelled and to be replaced
by new counter-indemnities or guarantees or other security documents to be
given by HCL or, if and to the extent that this is not
17
possible, by new counter-indemnities or guarantees or other security
documents to be given by the Vendor and the Purchaser on a several basis
(not joint or joint and several) in proportion to their respective
shareholdings in the Company immediately after Completion.
4.8 If and to the extent that the replacements contemplated by Clause 4.7
cannot be procured, the Purchaser shall give counter-indemnities to the
Vendor in respect of one-half of the amounts for which the Vendor is liable
under each of the non-replaced Counter-indemnities for the period from the
Completion Date until the expiry of the relevant non-replaced Counter-
indemnity. Pending such counter-indemnities being given, the Purchaser
shall indemnify the Vendor Guarantor, the Vendor and their subsidiaries and
keep the Vendor Guarantor, the Vendor and their subsidiaries harmless from
and against one-half of all claims, proceedings, liability, costs and
expenses incurred or suffered by the Vendor Guarantor, the Vendor and their
subsidiaries pursuant to the Counter-indemnities for the period from the
Completion Date until the date of the counter-indemnities being given by
the Purchaser.
4.9 As soon as practicable following Completion, the Company shall prepare and
have audited the Completion Accounts which shall be reviewed by Arthur
Andersen. The Completion Accounts will be prepared in accordance with
generally accepted accounting principles in Hong Kong and on a basis
consistent with the Management Accounts. If the consolidated net book value
of the tangible assets (less the consolidated liabilities) of the Group
appearing in the Completion Accounts (after adding back thereto the net
operating losses which are incurred between 30th September, 1999 and the
Completion Date) (the "Adjusted Net Assets") fall short of the consolidated
net book value of the tangible assets (less the consolidated liabilities)
of the Group shown in the Management Accounts (the "Initial Net Assets")
then an amount equal to one half of the shortfall will be paid by the
Vendor to the Purchaser. The Vendor agrees not to release, for the purpose
of preparing the Completion Accounts, any provision in the Management
Accounts for future expenditure which has not been incurred and is not
expected to be incurred or, if any such provision is released, that it
shall be deducted for the purpose of computing the Adjusted Net Assets.
4.10 This Clause applies if, following their review under Clause 4.9 above,
Arthur Andersen are of the opinion that the Adjusted Net Assets fall short
of the Initial Net Assets (when the firm of accountants undertaking the
audit are not of such opinion) or that the shortfall is greater than that
which exists in the opinion of such firm. If this Clause applies, the
Vendor and the Purchaser shall jointly appoint a third firm of accountants
to conduct a second review. If the third firm is of the same opinion as
Arthur Andersen, the shortfall shall be that which exists in the opinion of
that third firm for the purposes of computing the
18
amount payable by the Vendor to the Purchaser under Clause 4.9. If that
third firm is not of the same opinion as Arthur Andersen, this Clause 4.10
shall cease to apply. If the Vendor and the Purchaser cannot agree on the
identity of the third firm, it shall be a reputable major international
firm of accountants practising in Hong Kong selected by the President for
the time being of the Hong Kong Society of Accountants.
4.11 At any time, the Purchaser may notify the Vendor that the Purchaser wants
one or more of the Group Companies to file an election to be classified as
a disregarded entity (or as a partnership if such Group Company is owned by
more than one person or entity) for U.S. federal income tax purposes, in
which event each relevant Group Company shall promptly file such an
election (and the Vendor shall join in the making of such an election) on
Internal Revenue Service Form 8832 (or any successor form), which election
shall be effective as of a date specified by the Purchaser (the
"Election"). The Purchaser Guarantor shall indemnify and hold harmless the
Company and the Subsidiaries and the Vendor Guarantor and its Affiliates
against any income tax arising under the laws of the United States or any
political subdivision thereof for any period after Completion as a result
of the filing of the Election if such income tax arises as a result of
either (i) a post-Completion change in the tax law of the United States or
any political subdivision thereof or (ii) any post-Completion change in the
structure of the Group Companies (it being understood that the Election
itself shall not constitute a change in the structure of the Group
Companies). Notwithstanding anything to the contrary in this Section 4.11,
the Purchaser shall have no indemnity obligation hereunder with respect to
any tax that arises as a result of (i) any voluntary action taken by the
Vendor, the Vendor Guarantor or their respective Affiliates, (ii) any joint
action (other than the filing of the Election) taken by the Vendor or the
Vendor Guarantor and the Purchaser (or their respective Affiliates), (iii)
any connection between the Vendor, the Vendor Guarantor or their respective
Affiliates and the United States or any political subdivision thereof
(including, without limitation, the existence of a permanent establishment,
the carrying on of any trade or business, or the ownership of any assets
therein), or (iv) any obligation of the Vendor, the Vendor Guarantor or
their respective Affiliates under any contract or other agreement by which
it is responsible for the tax liability of any other person (including,
without limitation, under any tax sharing agreement).
4.12 The parties will cooperate in good faith with a view to agreeing the terms
of the Interconnect Agreement, the Leased Lines Agreement, the Global
Crossing
19
Licence Agreement, the Hutchison Licence Agreement, the Registration Rights
Agreement, the Marketing and Distribution Agreement, the Global Crossing
Network Agreement, the H Service Agreement, the HWL Service Agreement, the
MDC Agreement and the Certificate of Designations by the Target Date.
5. COMPLETION
5.1 Subject to the fulfilment of the Conditions, Completion shall take place on
the Completion Date at the offices of Slaughter and May in Hong Kong, or at
such other place as the parties hereto may agree where the parties hereto
shall each perform the acts required of them as specified in Schedule 3.
5.2 Failure by the Vendor, the Vendor Guarantor or the Company to comply with
its obligations under Clause 5.1 shall entitle the Purchaser and the
Purchaser Guarantor to defer Completion or to terminate this Agreement.
Failure by the Purchaser or the Purchaser Guarantor to comply with its
obligations under Clause 5.1 shall entitle the remaining parties to defer
Completion or to terminate this Agreement.
6. VENDOR WARRANTIES AND VENDOR GUARANTOR WARRANTIES
6.1 The Vendor represents and warrants to the Purchaser and the Purchaser
Guarantor that each of the Vendor Warranties is accurate in all respects
and not misleading at the date of this Agreement and will be accurate in
all respects and not misleading as if it was repeated on the Completion
Date and on the basis that any reference to the Completion Date is
substituted for any express or implied reference to the date of this
Agreement.
6.2 The Vendor Guarantor represents and warrants to the Purchaser and the
Purchaser Guarantor that each of the Vendor Guarantor Warranties is
accurate in all respects and not misleading at the date of this Agreement
and will be accurate in all respects and not misleading as if it was
repeated on the Completion Date and on the basis that any reference to the
Completion Date is substituted for any express or implied reference to the
date of this Agreement.
6.3 The Vendor and the Vendor Guarantor accept that the Purchaser and the
Purchaser Guarantor are entering into this Agreement in reliance upon each
of the Vendor Warranties and the Vendor Guarantor Warranties.
6.4 The Vendor (in respect of the Vendor Warranties) and the Vendor Guarantor
(in respect of the Vendor Guarantor Warranties) undertake to disclose in
writing to the Purchaser and the Purchaser Guarantor anything which is or
may constitute a breach of or be inconsistent with any of the Vendor
Warranties (or, as the case may be, the Vendor Guarantor Warranties)
immediately it comes to the notice of any of them before Completion.
6.5 The Vendor and the Vendor Guarantor undertake (if any claim is made against
either of them in connection with any Relevant Agreement) not to enforce a
right which either
20
may have against any Group Company or any director, officer or employee of
any Group Company in respect of a misrepresentation, inaccuracy or omission
in or from information given by that Group Company or that director,
officer or employee for the purpose of assisting the Vendor or the Vendor
Guarantor in reaching agreement on any terms of any Relevant Agreement
provided that the foregoing shall not prevent the Vendor or the Vendor
Guarantor from enforcing any right where such misrepresentation, inaccuracy
or omission arises as a result of wilful or fraudulent misconduct or
omission by the Group Company, director, officer or employee in question.
6.6 Each of the Vendor Warranties and the Vendor Guarantor Warranties shall be
construed as a separate and independent warranty and (except where
expressly provided to the contrary) shall not be limited or restricted by
reference to or inference from the terms of any other Vendor Warranty or
Vendor Guarantor Warranty or any other term of this Agreement.
6.7 Subject to the provisions herein, none of the Vendor Warranties or the
Vendor Guarantor Warranties shall in any way be extinguished or affected by
Completion.
6.8 Without restricting the rights of the Purchaser or the Purchaser Guarantor
or its ability to claim damages on any basis in the event that any Vendor
Warranty or Vendor Guarantor Warranty is breached or is untrue or
misleading, the Vendor (in respect of the Vendor Warranties) and the Vendor
Guarantor (in respect of the Vendor Guarantor Warranties) covenant with the
Purchaser that the Vendor (or, as the case may be, the Vendor Guarantor)
will pay to the Group Company concerned an amount sufficient to place that
Group Company in the financial position which it would have been in had
such Vendor Warranty or (as the case may be) Vendor Guarantor Warranty not
been breached, untrue or misleading, taking into account, inter alia, the
following:
(a) the amount by which the value of an asset (including one warranted to
exist but not in fact existing) or contract of any Group Company is or
becomes less than its value would have been if that Vendor Warranty
(or, as the case may be, Vendor Guarantor Warranty) had not been
breached or not been untrue or misleading;
(b) the amount of any liability or increase in any liability which any
Group Company has incurred or is or becomes subject to which it would
not have incurred or become subject to or which would not have
increased if the Vendor Warranties (or, as the case may be, the Vendor
Guarantor Warranties) had not been breached or not been untrue or
misleading;
(c) the amount by which the profits of any Group Company are less or its
losses greater than would have been the case if that Vendor Warranty
(or, as the case may be, that Vendor Guarantor Warranty) had not been
breached or not been untrue or misleading; and
21
(d) any costs and expenses incurred directly or indirectly as a result of
or in connection with any deficiency or diminution in value of any
asset or contract or any liability or increased liability, as the case
may be, referred to in paragraph (a) or (b)
or will, at the direction the Purchaser, pay to the Purchaser an amount
equal to one-half of the amount which is so sufficient.
6.9 For the avoidance of doubt, amounts payable under Clause 6.8 will be
calculated without reference to the rules of general law relating to claims
for damages for breach of warranty.
6.10 Subject to the other provisions contained in this Clause 6, the Vendor and
the Vendor Guarantor (in respect of the Vendor Guarantor Warranties)
undertake to indemnify the Purchaser and the Purchaser Guarantor against
any losses, costs (including legal costs reasonably incurred), expenses,
claims, damages and liabilities which the Purchaser and the Purchaser
Guarantor may incur or suffer as a result of, arising out of or in
connection with any breach of the Vendor Warranties or of the obligations
of the Vendor in clause 4.5 (or, as the case may be, the Vendor Guarantor
Warranties).
6.11 Subject to the limitations set out in Clause 6.12 and 6.13, the Purchaser
and the Purchaser Guarantor shall be entitled to claim both before and
after Completion that any of the Vendor Warranties or the Vendor Guarantor
Warranties has or had been breached or is or was misleading and, without
limitation, to claim under any covenant. Notwithstanding the foregoing, if
(not less than two Business Days before Completion) the Vendor or the
Vendor Guarantor provides notice to the Purchaser or the Purchaser
Guarantor pursuant to Clause 6.4 (with full details of the breach) and the
Purchaser and the Purchaser Guarantor proceed to Completion, such shall
constitute a waiver of the Purchaser's and the Purchaser Guarantor's rights
to make a claim for breach of such Warranty or that such Warranty is
misleading.
6.12 The Vendor and the Vendor Guarantor shall not be liable for a claim for
breach of any of the Vendor Warranties or the Vendor Guarantor Warranties
to the extent that provision or reserve in respect thereof has been made in
the Management Accounts.
6.13 The liability of the Vendor in respect of any claims for breach of the
Vendor Warranties and the liability of the Vendor Guarantor in respect of
any claims for breach of the Vendor Guarantor Warranties shall be limited
as follows:
(a) the maximum liability of the Vendor and the Vendor Guarantor in
respect of all claims for breach of the Vendor Warranties (other
22
than the Vendor Warranties relating to Taxation) and the Vendor Guarantor
Warranties shall not exceed US$400 million in aggregate;
(b) neither the Vendor (in respect of the Vendor Warranties) nor the
Vendor Guarantor (in respect of the Vendor Guarantor Warranties) shall
be liable (other than in respect of the Vendor Warranties relating to
Taxation) for any individual claim which does not exceed US$150,000;
(c) the Vendor and the Vendor Guarantor shall only be liable in respect of
any claim for breach of the Vendor Warranties (other than the Vendor
Warranties relating to Taxation) if the liability of the Vendor and
the Vendor Guarantor for all such claims (excluding those which may
not be made because of paragraph (b) above) exceeds US$10,000,000 and
in such event the Vendor and the Vendor Guarantor shall be liable for
the whole amount of such claims and not only the excess.
(d) no claims may be brought against the Vendor in respect of a breach of
the Vendor Warranties or the Vendor Guarantor (in respect of a breach
of the Vendor Guarantor Warranties) after the expiry of a period of
six months after delivery of the audited accounts of the Group to the
directors of the Company for the year ended 31 December, 2000 (31st
March, 2006 where the relevant Vendor Warranty relates to Taxation),
and any claims brought within the specified time period shall be
notified to the Vendor or Vendor Guarantor in writing specifying the
basis of such claim.
(e) the Purchaser and the Purchaser Guarantor shall not be entitled to
claim that any fact causes any of the Vendor Warranties (or, as the
case may be, the Vendor Guarantor Warranties) to be breached or
renders any of them misleading to the extent that it has been fairly
disclosed to the Purchaser and the Purchaser Guarantor in the
Disclosure Letter.
(f) the Vendor (in respect of the Vendor Warranties) and the Vendor
Guarantor (in respect of the Vendor Guarantor Warranties) shall not be
liable for or in respect of any breach of the Vendor Warranties (or,
as the case may be, the Vendor Guarantor Warranties) which would not
have arisen but for a voluntary act, omission or transaction after the
date hereof on the part of the Purchaser which could reasonably have
been avoided or carried out and which was not in the ordinary course
of business or which arises from something done or omitted at the
Purchaser's written request or with its written consent;
(g) the Vendor (in respect of the Vendor Warranties) and the Vendor
Guarantor (in respect of the Vendor Guarantor Warranties) shall not be
liable for or in respect of any breach of the Vendor Warranties (or,
as the case may be, the Vendor Guarantor Warranties) which arises as a
result of legislation which comes into force after the Completion Date
and which is retrospective in effect;
(h) the Vendor shall not be liable for or in respect of any breach of the
Vendor Warranties which, being a liability in respect of Taxation,
arises by reason of an increase in the rates of taxation made after
the date hereof with retrospective effect;
23
(i) the Vendor (in respect of the Vendor Warranties) and the Vendor
Guarantor (in respect of the Vendor Guarantor Warranties) shall not be
liable for or in respect of any breach of the Vendor Warranties (or,
as the case may be, the Vendor Guarantor Warranties) which arises as a
result of a change in the Group's accounting policies after
Completion;
(j) the Vendor (in respect of the Vendor Warranties) and the Vendor
Guarantor (in respect of the Vendor Guarantor Warranties) shall not be
liable for or in respect of any breach of the Vendor Warranties (or,
as the case may be, the Vendor Guarantor Warranties) which arises as a
result of a Group Company failing to act in accordance with any
reasonable request of the Vendor or the Vendor Guarantor, which action
would have the effect of avoiding a breach of such Warranty or
mitigating losses or damages due to a breach of such Warranty after
being given a reasonable time in which to comply with any such request
and provided that the Group Company has been indemnified by the Vendor
and/or the Vendor Guarantor to the reasonable satisfaction of the
Purchaser against any liability, costs, damages or expenses which may
be incurred thereby; and
(k) the Vendor shall not be liable for or in respect of any breach of
Vendor Warranties to the extent of any recovery for such matter under
the Tax Covenant.
6.14 The Purchaser shall:
(a) upon any claim, action, demand or assessment being made or issued
