EXHIBIT 10.33
EXECUTION COPY
CONFIDENTIAL TREATMENT REQUESTED; PORTIONS OMITTED FROM
THE PUBLICLY-FILED DOCUMENT AND FOR WHICH CONFIDENTIAL
TREATMENT IS REQUESTED ARE DENOTED BY AN ASTERISK
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SHAREHOLDERS' AGREEMENT
by and among
SHENZHEN HUAWEI INVESTMENT & HOLDING CO. LTD.,
3COM TECHNOLOGIES
and
HUAWEI-3COM CO., LTD.
DATED AS OF NOVEMBER 15, 2003
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TABLE OF CONTENTS
PAGE
---- ARTICLE I DEFINITIONS.................................................... 2
SECTION 1.01. Certain Defined Terms................................... 2
SECTION 1.02. Definitions............................................. 7
SECTION 1.03. Interpretation and Rules of Construction................ 8
ARTICLE II ORGANIZATIONAL DOCUMENTS...................................... 9
SECTION 2.01. Memorandum and Articles of Association of the JVCO and
the WFOE........................................................... 9
ARTICLE III CORPORATE GOVERNANCE......................................... 9
SECTION 3.01. Powers of the Board..................................... 9
SECTION 3.02. Directors............................................... 9
SECTION 3.03. Composition of Board.................................... 9
SECTION 3.04. Subsequent Nominations.................................. 10
SECTION 3.05. Removal................................................. 11
SECTION 3.06. Vacancies............................................... 11
SECTION 3.07. Covenant to Vote........................................ 11
SECTION 3.08. Chairman of the Board................................... 11
SECTION 3.09. Committees of the Board................................. 12
SECTION 3.10. Steering Committee...................................... 12
SECTION 3.11. Nomination and Compensation Committee................... 12
SECTION 3.12. Audit Committee......................................... 12
SECTION 3.13. OEM Committee........................................... 13
SECTION 3.14. R&D Committee........................................... 13
SECTION 3.15. Action by the Board..................................... 14
SECTION 3.16. Action by the Shareholders.............................. 16
SECTION 3.17. Approval of Annual Business Plan and Budget and
Long-Term Strategic Plan........................................... 16
SECTION 3.18. Executive Management.................................... 16
SECTION 3.19. Director's Undertaking.................................. 17
SECTION 3.20. Executive's Undertaking................................. 17
ARTICLE IV ADDITIONAL SHAREHOLDER FUNDING................................ 18
SECTION 4.01. Additional Capital Contributions........................ 18
SECTION 4.02. Shareholder Loans....................................... 19
SECTION 4.03. Extraordinary Funding Requirement....................... 19
ARTICLE V RESTRICTIONS ON TRANSFER....................................... 20
SECTION 5.01. General................................................. 20
SECTION 5.02. New Shareholders........................................ 20
SECTION 5.03. Recognition of Transfer by the JVCO..................... 20
SECTION 5.04. Rights of First Refusal on Shares....................... 20
SECTION 5.05. Co-sale Right........................................... 21
SECTION 5.06. Permitted Transferees................................... 22
SECTION 5.07. Participation Rights.................................... 22
SECTION 5.08. Effect of Purchase...................................... 23
SECTION 5.09. Legends................................................. 23
SECTION 5.10. Market Standoff......................................... 24
SECTION 5.11. Termination............................................. 24
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TABLE OF CONTENTS
(Continued)
PAGE
---- ARTICLE VI SALES MATTERS AND OEM ARRANGEMENTS............................ 24
SECTION 6.01. Principal Products of the JVCO.......................... 24
SECTION 6.02. *....................................................... 24
SECTION 6.03. *....................................................... 24
SECTION 6.04. Sales of 3Com Products and 3Com Branded Products........ 25
SECTION 6.05. Designated Territory Determinations..................... 25
SECTION 6.06. *....................................................... 26
SECTION 6.07. *....................................................... 26
SECTION 6.08. Passive Sales........................................... 26
SECTION 6.09. General................................................. 26
ARTICLE VII ADDITIONAL AGREEMENTS........................................ 26
SECTION 7.01. Financial Information................................... 26
SECTION 7.02. Access to Information................................... 26
SECTION 7.03. *....................................................... 27
SECTION 7.04. Confidentiality......................................... 27
SECTION 7.05. Product Branding........................................ 27
SECTION 7.06. Cooperation Regarding Research and Development.......... 27
SECTION 7.07. Ownership of Net Outstanding Shares..................... 28
SECTION 7.08. Dividend Policy......................................... 28
ARTICLE VIII CALL OPTION; TERMINATION.................................... 28
SECTION 8.01. Call Option Upon Certain Events......................... 28
SECTION 8.02. Call Option After Third Anniversary..................... 30
SECTION 8.03. 3Com Option to Purchase................................. 30
SECTION 8.04. Termination............................................. 31
ARTICLE IX TAX MATTERS................................................... 31
SECTION 9.01. Operational Tax Matters................................. 31
ARTICLE X GENERAL PROVISIONS............................................. 32
SECTION 10.01. Conflict with Memorandum and Articles of Association
of the JVCO or the Articles of Association of the WFOE............. 32
SECTION 10.02. Further Action......................................... 32
SECTION 10.03. Indemnities............................................ 32
SECTION 10.04. Expenses............................................... 34
SECTION 10.05. Notices................................................ 34
SECTION 10.06. Public Announcements................................... 35
SECTION 10.07. Severability........................................... 35
SECTION 10.08. Entire Agreement....................................... 36
SECTION 10.09. Assignment............................................. 36
SECTION 10.10. No Third Party Beneficiaries........................... 36
SECTION 10.11. Amendment and Waiver................................... 36
SECTION 10.12. Governing Law.......................................... 36
SECTION 10.13. Dispute Resolution..................................... 36
SECTION 10.14. Counterparts........................................... 37
SECTION 10.15. Languages.............................................. 37
SECTION 10.16. Specific Performance................................... 37
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TABLE OF CONTENTS
(Continued)
PAGE
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SCHEDULES:
Schedule A Initial Shareholders
Schedule B-1 *
Schedule B-2 *
Schedule C *
Schedule D *
EXHIBITS:
Exhibit A Memorandum and Articles of Association of the JVCO
Exhibit B Articles of Association of the WFOE
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SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of November 15, 2003, by and among SHENZHEN HUAWEI INVESTMENT & HOLDING CO. LTD., a limited liability company organized and existing under the laws of the People's Republic of China ("Huawei Holding"), 3COM TECHNOLOGIES, a corporation organized under the laws of the Cayman Islands and a wholly owned subsidiary of 3Com Corporation ("3Com") ("3Com Technologies" and, together with 3Com, the "3Com Parties") and HUAWEI-3COM CO., LTD., a company incorporated under the laws of Hong Kong (the "JVCO"; each of the JVCO, Huawei Holding and 3Com Technologies, a "Party" and, collectively, the "Parties"). Capitalized terms that are used herein shall have the respective meanings ascribed thereto in Article I.
WITNESSETH:
WHEREAS, Huawei Holding owns a 51% equity interest in the JVCO and 3Com Technologies owns a 49% equity interest in the JVCO;
WHEREAS, Huawei Holding owns a 99.99% equity interest in Huawei Technologies Co., Ltd., a limited liability company organized and existing under the laws of the People's Republic of China ("Huawei Technologies" and, together with Huawei Holding, the "Huawei Parties");
WHEREAS, the Parties desire to improve upon currently available and complementary technologies, create new technologies and develop new products;
WHEREAS, the Parties desire to combine complementary distribution channels and gain access to new markets for existing products or for new products for distribution into existing markets;
WHEREAS, Huawei Technologies, 3Com and 3Com Technologies entered into the Contribution Agreement providing for the establishment of the JVCO for the purpose of conducting their combined enterprise data communications businesses in the People's Republic of China (the "PRC");
WHEREAS, the Contribution Agreement provides that Huawei Technologies and 3Com Technologies shall contribute to the JVCO and to Hangzhou Huawei Holding-3Com Technology Co., Ltd., a wholly owned subsidiary of the JVCO organized under the laws of the PRC (the "WFOE" and, together with the JVCO, the "JVCO Entities") the Huawei Contributed Assets and the 3Com Contributed Assets (as such terms are defined in the Contribution Agreement), respectively;
WHEREAS, Huawei Technologies transferred its shares in the JVCO to Huawei Holding (the "Share Transfer") on November 3, 2003;
WHEREAS, Huawei Holding, Huawei Technologies, 3Com and 3Com Technologies entered into a Supplemental Agreement to the Contribution Agreement (the "Supplemental Agreement"), dated as of the Closing Date, to reflect the Share Transfer and other developments since the date of execution of the Contribution Agreement;
WHEREAS, the execution of this Agreement is a condition to the obligations of Huawei Holding, Huawei Technologies and the 3Com Parties to consummate the transactions contemplated by the Contribution Agreement and the Supplemental Agreement; and
WHEREAS, as a condition of the consummation of the transactions contemplated by the Contribution Agreement and the Supplemental Agreement, Huawei Holding, Huawei Technologies and the 3Com Parties have agreed that, concurrently with the execution of this Agreement, (a) Huawei Technologies, 3Com Technologies and the JVCO shall enter into the Transition Services Agreement, (b) Huawei Technologies, 3Com, 3Com Technologies, the JVCO and the WFOE shall enter into the Indemnification Agreement, (c) Huawei Technologies, the JVCO and the Predecessor Entity (as defined in the Contribution Agreement) shall enter into the Huawei License Agreement, (d) 3Com Technologies, the JVCO and the Predecessor Entity shall enter into the 3Com License Agreement and (e) 3Com, Huawei Technologies and the JVCO shall enter into the
OEM Agreements NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth and intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. For purposes of this Agreement:
"3Com Brand" means a trademark owned by 3Com.
"3Com License Agreement" means the License Agreement to be entered into by and among 3Com Technologies, the JVCO and the Predecessor Entity on the Closing Date.
"3Com Products" means the products set forth on Schedule D, as may be amended from time to time by the OEM Committee.
"Affiliate" means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. For the purposes of this Agreement, the JVCO Entities, the Huawei Parties and the 3Com Parties are not Affiliates of each other.
"Agreement" or "this Agreement" means this Shareholders' Agreement, dated as of the Closing Date, by and among Huawei Holding, 3Com Technologies and the JVCO (including the Exhibits and Schedules hereto) and all amendments hereto made in accordance with the provisions of Section 10.11.
"Board" means the board of directors of the JVCO.
"Business" means the research, development, manufacture, marketing and sale of JVCO Products.
"Business Day" means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by applicable Law to be closed in Hong Kong.
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"Carrier Customers" means telecommunications service providers, including incumbent local exchange carriers, interexchange carriers, post, telephone and telegraph administrations, competitive local exchange carriers, wireless service providers, internet service providers and other alternative service providers that mediate communications between a multitude of unaffiliated customers. With respect to an entity with a discrete business unit that primarily provides any of the services described above, "Carrier Customer" means only such discrete business unit of such entity.
"Change of Control" with respect to a Party means any transaction or series of related transactions in which a Person or group (within the meaning of Rule 13d-1 of the Exchange Act), in each case excluding the other Party or any of its Affiliates, shall have acquired, directly or indirectly, including pursuant to a sale of assets, tender offer, exchange offer, merger, consolidation, joint venture, business combination, recapitalization, liquidation, dissolution or similar transaction, more than 50% of the then outstanding voting power of such Party or all or substantially all the assets of such Party.
"Closing" and "Closing Date" have the meanings specified in the Contribution Agreement.
"Code" means the Internal Revenue Code of 1986, as amended through the date hereof.
"Confidential Information Agreement" means the Amended and Restated Confidential Information Agreement, dated as of the Closing Date, by and among Huawei Technologies, 3Com and the JVCO (including the Exhibits and Schedules thereto) and all amendments thereto.
"Contributed Assets" has the meaning set forth in the Contribution Agreement.
"Contribution Agreement" means the Contribution Agreement, dated as of March 19, 2003, by and among Huawei Technologies, 3Com and 3Com Technologies (including the Exhibits and Schedules thereto) and all amendments thereto.
"control" (including the terms "controlled by" and "under common control with"), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise, including the ownership, directly or indirectly, of securities or ownership interests having the power to elect a majority of the board of directors or similar body governing the affairs of such person.
"Co-Ownership Agreement" means the Co-Ownership Agreement to be entered into by and between the WFOE and the JVCO at or prior to the Closing.
"Director" means a member of the Board.
"Encumbrance" means any security interest, pledge, mortgage, lien, charge, lease, license, encumbrance, servient easement, adverse claim, reversion, restrictive covenant, condition or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership, or any right of termination,
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amendment, acceleration, suspension, revocation, cancellation, right of first refusal, right of first offer, put right, obligation to tender or similar transfer restriction.
"Enterprise Customers" shall mean all customers other than Carrier Customers.
"Equity Equivalents" means any (a) Shares and (b) outstanding rights to acquire Shares or other equity interests in the JVCO (including any securities exercisable for or otherwise convertible into equity securities of the JVCO), measured on an as-converted to ordinary shares basis.
"Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
"Financial Statements" means true and complete copies of the consolidated audited balance sheet of the JVCO as of the last day of the JVCO's fiscal year and the related statements of income, retained earnings, shareholders' equity and cash flows of the JVCO for the fiscal year, together with all related notes and schedules thereto, prepared in accordance with U.S. GAAP, accompanied by the report thereon of the JVCO's independent auditors.
"Governmental Authority" means any foreign, federal, national, supranational, state, provincial, municipal, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.
"Hong Kong" means the Hong Kong Special Administrative Region of the PRC.
"Huawei Brand" means a trademark owned by Huawei Technologies.
"Huawei Contributed Product Designs" means the designs and Technology for Huawei Technologies' LAN switch products (excluding LAN switch 8016) and low-end and mid-range (46xx series and below) router products, as more fully described in Exhibit C to the Huawei License Agreement.
"Huawei Contributed Products" means products manufactured by or for the JVCO Entities and based on the Huawei Contributed Product Designs.
"Huawei License Agreement" means the License Agreement to be entered into by and among Huawei Technologies, the JVCO and the Predecessor Entity on the Closing Date.
"Huawei Products" means the products set forth on Schedule C, as may be amended from time to time by the OEM Committee.
"IAS" means international accounting standards.
"Indemnification Agreement" means the Indemnification Agreement to be entered into by and among, Huawei Technologies, 3Com, 3Com Technologies, the JVCO and the WFOE at the Closing.
"Intellectual Property Rights" means all rights in intellectual property of any type throughout the world, including but not limited to the following: (a) patents and patent applications, including provisionals, continuations, continuations-in-part, reissues, reexaminations and extensions thereof and all other rights corresponding thereto throughout
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the world; (b) trade secrets and all other rights in know-how and confidential or proprietary information and all other rights corresponding thereto throughout the world; (c) database rights, common law copyrights, copyrights, copyright registrations and applications therefor and all other rights corresponding thereto throughout the world; (d) mask works, mask work registrations and applications therefor, and any equivalent or similar rights in semiconductor masks, layouts, architectures or topology; (e) industrial designs and any registrations and applications therefor throughout the world; (f) rights in World Wide Web addresses and domain names and applications and registrations therefor; and (g) trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefore and all other rights corresponding thereto throughout the world.
"Interim Financial Statements" means true and complete copies of the consolidated unaudited balance sheet of the JVCO as of the last day of each fiscal quarter of the JVCO and the related statements of income, retained earnings, shareholders' equity and cash flows of the JVCO for each such fiscal quarter, together with all related notes and schedules thereto, prepared in accordance with U.S. GAAP.
"Inventions" means findings, discoveries, inventions, additions, modifications, formulations, variations, enhancements, refinements or derivative works (whether or not patentable).
"JVCO Products" means products manufactured by or for the JVCO Entities based either on designs for Huawei Contributed Products or designs owned by the JVCO Entities.
"Law" means any foreign, federal, national, supranational, state, provincial, municipal, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law.
"LIBOR" means London Interbank Offered Rate.
"Net Outstanding Shares" means the then outstanding Equity Equivalents held by Huawei Holding and its Affiliates and 3Com and its Affiliates, on an aggregate basis, but excluding any Equity Equivalents issued pursuant to a Non-participation Issuance.
"OEM" means original equipment manufacturing.
"OEM Agreements" shall mean the following agreements: (a) the "JVCO-Huawei OEM Agreement" between the JVCO and Huawei Technologies under which the JVCO will supply JVCO Products to Huawei Technologies for resale by Huawei Technologies, (b) the "Huawei-JVCO OEM Agreement" between Huawei Technologies and the JVCO under which Huawei Technologies will supply Huawei Products to the JVCO for resale by the JVCO, (c) the "JVCO-3Com OEM Agreement" between the JVCO and 3Com under which the JVCO will supply JVCO Products to 3Com for resale by 3Com, and (d) the "3Com-JVCO OEM Agreement" between 3Com and the JVCO under which 3Com will supply 3Com Products to the JVCO for resale by the JVCO.
"Other Shareholder" means, (i) in the case of Huawei Holding, 3Com Technologies and (ii) in the case of 3Com Technologies, Huawei Holding.
"Permitted Encumbrances" means (a) liens for Taxes and other governmental charges or levies not yet due and payable or that are being contested in good faith, (b) Encumbrances
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imposed by Law, such as materialmen's, mechanics', carriers', workmen's and repairmen's liens and other similar liens arising in the ordinary course of business, (c) pledges and deposits to secure obligations under workers' compensation Laws or similar legislation or to secure public or statutory obligations, and (d) in the case of real property, zoning, building or other restrictions, variances, covenants, rights of way, encumbrances, easements, minor survey exceptions, and other customary encumbrances on title to real property that, in each case, do not materially adversely affect the value of such property or the use of such property.
"Person" means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.
"PRC GAAP" means generally accepted accounting principles and practices in the PRC as in effect from time to time and applied consistently throughout the periods involved
"Securities Act" means the United States Securities Act of 1933, as amended.
"Shareholder" means each of Huawei Holding and 3Com Technologies.
"Shares" means any then issued and outstanding equity securities of the JVCO (or, in the case of Section 5.07, equity securities, or securities exercisable for or otherwise convertible into equity securities, of the JVCO proposed to be issued and outstanding). All voting securities of the JVCO shall be deemed "Shares."
"Subsidiary" or "Subsidiaries" of any Person means any corporation, partnership, limited liability company, joint venture or other legal entity of which such Person (either alone or through or together with any other subsidiary) owns, directly or indirectly, more than 50% of the shares or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.
"Tax" or, collectively, "Taxes" means any and all PRC, United States, provincial, state, local and other taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts, and any obligations with respect to such amounts arising as a result of being a member of an affiliated, consolidated, combined or unitary group for any period or under any agreements or arrangements with any other Person and including any liability for taxes of a predecessor or transferor entity.
"Technology" has the meaning set forth in the Huawei License Agreement.
"Transaction Documents" means this Agreement, the Contribution Agreement, the Supplemental Agreement, the Huawei License Agreement, the 3Com License Agreement, the OEM Agreements, the Transition Services Agreement, the Confidential Information Agreement, the Indemnification Agreement and the Co-Ownership Agreement.
"Transfer" or "Transferred" means the voluntary or involuntary sale, assignment, transfer (by gift or otherwise), assumption, pledge, hypothecation, grant of a participation
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interest or other disposition or conveyance of legal or beneficial interest, directly or indirectly, whether in one transaction or in a series of related transactions.
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