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EXHIBIT 10.19
JOINT VENTURE AGREEMENT
RELATING TO
EXODUS ASIA-PACIFIC LTD.
DATED AS OF SEPTEMBER 27, 2000
SHAREHOLDERS:
1. EXODUS EXODUS COMMUNICATIONS, INC., a Delaware corporation
with offices located at 2831 Mission College Blvd.,
Santa Clara, California 95054, United States of
America; and
2. ASIA GLOBAL ASIA GLOBAL CROSSING, LTD., a company organized under
CROSSING the laws of Bermuda, with offices located at Wessex
House, 45 Reid Street, Hamilton HM12, Bermuda.
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TABLE OF CONTENTS
RECITALS
ARTICLE 1: DEFINITIONS
ARTICLE 2: OBJECT OF THE COMPANY; NAME
ARTICLE 3: COMPLETION
ARTICLE 4: APPOINTMENT OF DIRECTORS
ARTICLE 5: ADDITIONAL FUNDING
ARTICLE 6: COVENANTS, REPRESENTATIONS AND WARRANTIES
ARTICLE 7: CONDUCT OF THE COMPANY'S AFFAIRS
ARTICLE 8: DISPUTE RESOLUTION
ARTICLE 9: INDEMNIFICATION; LIMITATIONS ON DAMAGES; CONTRACTUAL
LIMITATIONS
ARTICLE 10: CONFIDENTIAL INFORMATION; PUBLIC ANNOUNCEMENTS
ARTICLES 11: TRANSFERS OF INTERESTS AND ISSUANCE OF ADDITIONAL INTERESTS
ARTICLE 12: VOTING AGREEMENT
ARTICLE 13: DISSOLUTION AND WINDING UP
ARTICLE 14: INDEPENDENT VALUATION
ARTICLE 15: MISCELLANEOUS PROVISIONS
ARTICLE 16: WAIVER OF CONFLICT OF INTEREST
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SCHEDULES:
Schedule 1.48 Network Agreement
Schedule 6.4 No Conflict
Schedule 6.10 Encumbrances on Joint Venture Interest
Schedule 6.13 Business Interests in the Territory
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JOINT VENTURE AGREEMENT
RELATING TO
EXODUS ASIA-PACIFIC LTD.
THIS JOINT VENTURE AGREEMENT ("JOINT VENTURE AGREEMENT") relating to EXODUS
ASIA-PACIFIC LTD., a company with limited liability organized under the laws of
Bermuda made as of this 27th day of September, 2000.
RECITALS
A. EXODUS is in the business of providing mission critical Internet
hosting, managed and professional services and content distribution
services to business customers.
B. ASIA GLOBAL CROSSING is in the business of providing pan-Asian Internet
and long distance telecommunications facilities and services utilizing
a network of undersea digital fiber optic cable systems and associated
terrestrial backhaul capacity.
C. EXODUS and ASIA GLOBAL CROSSING desire to enter into a joint venture
(the "JOINT VENTURE") which shall operate through a company organized
under the laws of Bermuda to be known as "Exodus Asia-Pacific Ltd."
(the "COMPANY") on the terms and conditions set out below.
D. The Shareholders desire to set out the rights, duties and obligations
of the Shareholders in connection with the formation, ownership and
operation of the Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, the Shareholders hereto, intending to be legal bound hereby, agree as
follows:
ARTICLE 1
DEFINITIONS
Terms defined in the preamble, in the recitals and in the text hereof
shall have their respective meanings when used herein, and the following terms
used in this Joint Venture Agreement, whether singular or plural, shall (unless
otherwise expressly provided herein or unless the context otherwise requires)
have the following respective meanings:
1.1 "ACCEPTANCE" is defined in Section 5.35.3.
1.2 "ACCEPTANCE PERIOD" is defined in Section 11.2.
1.3 "AFFILIATE" means any corporation, company, partnership, joint
venture, firm and/or entity which Controls, is Controlled by, or is under common
Control with a Shareholder, except that such term shall not include the Company.
1.4 "AGREED PROPORTIONS" initially means 67% in respect of EXODUS
and 33% in respect of ASIA GLOBAL CROSSING and thereafter the percentages which
the nominal value
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of the Shares beneficially owned by each Shareholder respectively bears to the
combined nominal value of the fully issued and paid-up Shares of the Company.
1.5 "ASIA GLOBAL CROSSING" means Asia Global Crossing Ltd., a company
organized under the laws of Bermuda.
1.6 "ASIA GLOBAL CROSSING DIRECTOR" is defined in Section 4.2(b).
1.7 "BANKRUPTCY" means the entry of an order for relief with respect to
a Shareholder in proceedings under any bankruptcy, insolvency or similar law of
the jurisdiction of organization of such Shareholder.
1.8 "BOARD" means the Board of Directors of the Company.
1.9 "BUSINESS" is defined in Section 2.1(a).
1.10 "BUSINESS COMBINATION" is defined in Section 7.4(a).
1.11 "BUY-OUT EVENT" means:
(a) The filing of an application by a Shareholder for, or its
consent to, the appointment of a trustee, receiver, custodian or
similar person under the applicable laws of the jurisdiction of
organization of such Shareholder, for the assets of a Shareholder;
(b) The entry of a final order, judgment or decree by any
court of competent jurisdiction appointing a trustee, receiver,
custodian or similar person under the applicable laws of the
jurisdiction of organization of such Shareholder, for the assets of a
Shareholder;
(c) The failure by a Shareholder generally to pay its debts as
they become due or a Shareholder's admission in writing of its
inability to pay its debts as they become due;
(d) A Shareholder's Joint Venture Interest in the Company
becoming subject to the enforcement of any rights of a creditor of a
Shareholder, whether arising out of an attempted charge upon that
Shareholder's Joint Venture Interest by judicial process or otherwise,
if that Shareholder fails to effectuate the release of those
enforcement rights, whether by legal process, bonding, or otherwise,
within one hundred eighty (180) days; or
(e) The Bankruptcy of a Shareholder.
1.12 "BUY-OUT EVENT DATE" means the date of an occurrence of a Buy-Out
Event.
1.13 "CLOSING" shall mean the "Closing" as defined in the Merger
Agreement.
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1.14 "COMPANY" means "Exodus Asia-Pacific Ltd.", a company formed
pursuant to this Joint Venture Agreement and organized under the laws of Bermuda
and any successor thereto.
1.15 "CONFIDENTIAL INFORMATION" means any intellectual property of
non-public technical or business information written or orally disclosed or
delivered by one Shareholder or any of its Affiliates (the "DISCLOSING PARTY")
to another Shareholder or any of its Affiliates (the "RECEIVING Party").
Notwithstanding anything to the contrary in this Joint Venture Agreement,
Confidential Information shall not include:
(i) any information or material that is publicly known or
available, or becomes publicly known or available,
without any act or omission of the Receiving Party;
(ii) any information or material which prior to disclosure
was rightfully in the possession of the Receiving
Party without restriction on use or disclosure;
(iii) any information or material that is rightfully
received by the Receiving Party from a non-party
without an obligation of confidence; or
(iv) any information or material that is independently
developed by the Receiving Party without use or
reference to any Confidential Information of the
Disclosing Party.
1.16 "CONTRIBUTED ASSETS" is defined in Section 3.1(c)(ii).
1.17 "CONTROL", "CONTROLLED" or "CONTROLLING" means the control of a
person exercised through the direct or indirect ownership of greater than fifty
percent (50%) of the stock, shares or other voting interest of such person.
1.18 "DEDICATED PRIVATE EXTRANET NETWORK" shall mean a private IP
Network connecting communities of interests.
1.19 "DEFAULTING SHAREHOLDER" is defined in Section 11.9.
1.20 "DIRECTOR" means a director of the Company including, where
applicable, an alternate director.
1.21 "DISPOSITION," "DISPOSE" or "DISPOSING" refers to and means the
sale, assignment, transfer, exchange, pledge or encumbrance or other disposition
of all or any part of such Shareholder's Joint Venture Interest in the Company
or of some other specified property, in any manner, whether, voluntarily or
involuntarily, or by operation of law or otherwise; provided, however, that a
merger or other business combination of EXODUS or ASIA GLOBAL CROSSING shall not
be deemed a Disposition for purposes of this Joint Venture Agreement.
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1.22 "DISPUTE" is defined in Section 8.1.
1.23 "DOLLAR" or "$." means U.S. Dollars.
1.24 "EFFECTIVE TIME" means the Closing.
1.25 "ENTITLEMENT" is defined in Section 5.3.
1.26 "EQUITY SHARE CAPITAL" means all of the fully issued and
paid up Shares of the Company.
1.27 "EXODUS" means EXODUS COMMUNICATIONS, INC., a Delaware
corporation.
1.28 "EXODUS CORE TECHNOLOGIES" means the "EXODUS Core
Technologies" as defined in the Licensing Agreement.
1.29 "EXODUS DIRECTOR" is defined in Section 4.2(a).
1.30 "EXODUS SERVICES" means all technical, professional and
other services required in connection with the design, development,
construction and operation of data centers and the conduct of the
Company's Business furnished to the Company by Exodus.
1.31 "EXODUS STANDARD BUSINESS PRACTICES AND METHODOLOGIES"
means the standard business practices and methodologies as executed by
EXODUS globally as part of EXODUS' global operations, as adapted to
local conditions if necessary.
1.32 "EXODUS TECHNICAL SPECIFICATIONS AND STANDARDS" means the
EXODUS technical specifications and standards as promulgated by EXODUS
globally as part of EXODUS' global operations, as adapted to local
conditions if necessary. The Exodus Technical Specifications and
Standards shall be applicable to the distribution of the Company's
Services pursuant to reseller agreements to be entered into between the
Company and its customers.
1.33 "EXPORT ADMINISTRATION ACT" is defined in Section 6.11.
1.34 "FISCAL YEAR" means the annual accounting period of the
Company, which is the twelve months ended December 31, except that for
2000, it is the period from the date of the Company's incorporation and
ending on December 31, 2000.
1.35 "GLOBAL CROSSING" means GLOBAL CROSSING LTD., a company
organized under the laws of Bermuda.
1.36 "INDEMNITEES" is defined in Section 9.1.
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1.37 "INTELLECTUAL PROPERTY RIGHTS" means all patent rights,
copyright rights (including, but not limited to, rights in music and
audiovisual works and Moral Rights), trademark rights, trade secret
rights, design rights and confidentiality rights and any other
intellectual property rights recognized by the law of each applicable
jurisdiction.
1.38 "INTERNET" means a series of interconnected networks
linked together by a globally unique address space based on the
Internet Protocol (or a subsequent amendment or replacement protocol)
and which supports the exchange of data and other messages using
Transmission Control Protocol/Internet Protocol (TCP/IP) (or a
subsequent amendment or replacement protocol).
1.39 "INTERNET BACKBONE" means a wireline or wireless network
which: (i) can or does (a) assign IP addresses or manage IP address
assignments for machines or networks to which it is connected, (b)
accept or deliver IP datagrams from machines or networks to which it is
connected, or (c) maintain IP packet traffic to other machines or
networks; and (ii) provides IP connectivity on a regional, national or
international basis.
1.40 "INTERNET DATA CENTER SERVICES" means services such as
hosting, co-location and content distribution for the Internet.
1.41 "INTERNET PROTOCOLS" or "IP" means the Internet Protocols
as defined by the document titled RFC-91, by John Postell of the
University of Southern California, dated 1981, or subsequent revisions
thereof.
1.42 "INTERNET WEB HOSTING" means the provision of Internet
connectivity interconnected with servers, located within data centers
used for the purpose of accessing content and applications.
1.43 "JOINT VENTURE" means the joint venture entered into
pursuant to this Joint Venture Agreement.
1.44 "JOINT VENTURE AGREEMENT" means this Joint Venture
Agreement, as originally executed and as amended from time to time in
accordance with the terms hereof.
1.45 "JOINT VENTURE INTEREST" means, with respect to each
Shareholder, the Shares that are owned by such Shareholder and all
rights appurtenant thereto as a Shareholder of the Company under the
Company's Memorandum of Association and as provided under the
applicable provisions of the laws of Bermuda.
1.46 "LICENSING AGREEMENT" means the Licensing Agreement to be
entered into by and between EXODUS and/or any of its Affiliates and the
Company on or prior to the Effective Time in a form to be mutually
agreed upon by the parties hereto which, at a minimum, shall grant to
the Company an exclusive license in the Territory to all
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Intellectual Property Rights of EXODUS necessary for the Company to
pursue the Business and for the use of all trademarks owned by EXODUS
in connection with the Business in consideration for the payment by the
Company to EXODUS of a reasonable royalty not less favorable than that
granted to unaffiliated third parties which royalty shall begin to
accrue and be payable as measured from the first fiscal quarter that
the Company becomes profitable.
1.47 "LOCAL PARTICIPANT" is defined in Section 6.14(c).
1.48 "LOSSES" shall mean any claims, losses, liabilities,
damages, penalties, costs and expenses, including reasonable legal fees
and expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing any indemnity.
1.49 "MEMORANDUM OF ASSOCIATION" means the Memorandum of
Association of the Company and related By-laws of the Company.
1.50 "MERGER AGREEMENT" means the Agreement and Plan of
Merger, dated as of the date hereof, among EXODUS and GLOBAL CROSSING
and certain affiliated companies, as the same may from time to time be
amended, modified or supplemented.
1.51 "MORAL RIGHTS" shall mean any right of paternity or
integrity, any right to claim authorship, to object to or prevent any
distortion, mutilation or modification of, or other derogatory action
in relation to the subject work whether or not such would be
prejudicial to the author's honor or reputation, to withdraw from
circulation or control the publication or distribution of the subject
work, and any similar right, existing under judicial or statutory law
of any country in the world, or under any treaty, regardless of whether
or not such right is denominated or generally referred to as a "moral"
right.
1.52 "NETWORK AGREEMENT" means the Network Services Agreement,
Marketing and Cooperation Agreement, as amended, supplemented or
otherwise modified from time to time, and to be executed by such
parties in the form attached as Schedule 1.48 hereto on or prior to the
Effective Time.
1.53 "NOTICE OF PROPOSED SALE" is defined in Section 11.2.
1.54 "PERSON" shall mean any individual, sole proprietorship,
corporation, partnership, company with limited liability,
unincorporated society or association, trust, or other legal entity.
1.55 "QUALIFIED INITIAL PUBLIC OFFERING" is defined in Section
11.12.
1.56 "QUORUM" is defined in Section 7.2(e).
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1.57 "RELATED AGREEMENTS" means the Licensing Agreement, the
Network Agreements and the Services Agreement.
1.58 "REPRESENTATIVES" is defined in Section 10.1.
1.59 "REQUIRED ADDITIONAL EQUITY SHARE CAPITAL" is defined in
Section 5.1.
1.60 "RESTRICTED BUSINESS" shall mean the provision of
physical space with Internet connectivity interconnected with servers
or other types of data processing equipment (other than solely data
communications/networking equipment).
1.61 "SALE NOTICE" is defined in Section 11.10(b).
1.62 "SELLER" is defined in Section 11.10(a).
1.63 "SELLING SHAREHOLDER" is defined in Section 11.2.
1.64 "SERVICES" means the web hosting services provided by the
Company directly or through one or more of its subsidiaries in the
Territory.
1.65 "SERVICES AGREEMENT" means the Services Agreement to be
entered into by and between EXODUS and the Company on or prior to the
Effective Time in a form to be mutually agreed upon by the parties
hereto for the provision of the EXODUS Services to the Company and
which shall provide for the reimbursement by the Company of EXODUS'
fully-burdened costs of providing such EXODUS Services.
1.66 "SHAREHOLDER" means each of EXODUS and ASIA GLOBAL
CROSSING and each other Person that from time to time becomes a
Shareholder pursuant to the terms of this Joint Venture Agreement.
1.67 "SHARES" means ordinary shares of par value $0.01 each in
the capital of the Company with the rights, preferences and
designations set out in the Company's Memorandum of Association.
1.68 "SUBSIDIARY" or "SUBSIDIARIES" means with respect to any
Person (other than a natural individual), any other Person Controlled
by such Person.
1.69 "TAG-ALONG RIGHT" is defined in Section 11.10(a).
1.70 "TAG-ALONG NOTICE" is defined in Section 11.10(b).
1.71 "TAX" and "TAXES" shall mean any and all national, local
and foreign taxes, assessment and other governmental charges, duties,
impositions and liabilities including taxes based upon or measured by
gross receipts, income, profits, sales, use or 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.
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1.72 "TECHNICAL DATA" means all documentation and other
technical information provided by any Shareholder and/or its Affiliates
pursuant to this Joint Venture Agreement or the Related Agreements.
1.73 "TERM" means the Term of this Joint Venture Agreement as
set out in Section 3.3.
1.74 "TERMINATION NOTICE" is defined in Section 3.3.
1.75 "TERRITORY" means the collective reference to Brunei,
Burma, Cambodia, China (including Hong Kong), Fiji, Indonesia, Japan,
Kiribati, Laos, Macau, Malaysia, Marshall Islands, Federated States of
Micronesia, Mongolia, Nauru, North Korea, Palau, Papua New Guinea,
Philippines, Samoa (formerly Western Samoa), Singapore, Solomon
Islands, South Korea, Taiwan, Thailand, Tonga, Tuvalu, Vanuatu and
Vietnam.
1.76 "TRANSFER TAXES" is defined in Section 3.1(c)(ii).
1.77 "TRIGGER EVENT" is defined in Section 3.3.
1.78 "VALUATION DATE" is defined in Section 14.3.
ARTICLE 2
OBJECT OF THE COMPANY; NAME
2.1 Business. The Shareholders are entering into the Joint Venture and
forming the Company under the laws of Bermuda for the purpose and scope as
follows:
(a) Purpose. The purpose of the Joint Venture is to directly
or indirectly through one or more subsidiaries provide EXODUS' existing
and future services made available to customers including, without
limitation, Internet Data Center Services and Internet connectivity for
data centers, managed service offerings, professional services and
content distribution in accordance with EXODUS' Standard Business
Practices and Methodologies in the Territory (the "BUSINESS").
(b) Other Activities. Subject to Section 7.4, the Shareholders
may expand the scope of the Business as provided herein and will
determine appropriate business models covering any expanded businesses.
2.2 Name. The name of the Company shall be "Exodus Asia-Pacific Ltd."
in English, and all business of the Company shall be conducted under such name
or any other name approved at a general meeting of the Shareholders of the
Company, but in any case only to the extent permitted by applicable law and only
to the extent that the license granted to the Company for the use of the
"EXODUS" trade name and all associated Intellectual Property Rights is permitted
under the terms and conditions of the Licensing Agreement.
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2.3 Principal Place of Business. The registered office of the Company
shall be in Hamilton, Bermuda and the principal place of business of the Company
at which the records required to be maintained by the laws of Bermuda are to be
kept shall be in such place or places as the Board shall specify.
ARTICLE 3
COMPLETION
3.1 Formation of the Company. As soon as practicable following the full
execution of this Joint Venture Agreement and in accordance with all applicable
law:
(a) Organization. The Shareholders shall cause the Company to
be established under the laws of Bermuda, or such other jurisdiction of
organization as may be mutually agreed by the Shareholders, on the
following basis:
(i) the Company shall be a company limited by Shares;
(ii) the name of the Company shall be "Exodus
Asia-Pacific Ltd." in English or such other name as agreed by
the Shareholders;
(iii) the registered head office of the Company will
be as specified in Section 2.3; and
(iv) the authorized share capital of the Company
shall be $10.00 divided into 1,000 Shares of $0.01 each.
(b) Subscription of Shares. Upon the Closing, or on a
subsequent date to be mutually agreed by the Shareholders, the
Shareholders shall subscribe for their respective Shares as set out
below and pay to the Company (into a designated bank account at in
Bermuda) in full in cash:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES CONSIDERATION
----------- ------------- -------------
<S> <C> <C>
EXODUS 670 U.S. $ 67,000,000
ASIA GLOBAL CROSSING 330 U.S. $ 33,000,000
Total 1000 U.S. $100,000,000
</TABLE>
(c) In-Kind Capital Contributions.
(i) Except for the Intellectual Property Rights
licensed pursuant to the Licensing Agreement and subject to
Section 6.14 concurrent with the subscription of Shares
provided for in subsection (b) above, each of the Shareholders
shall contribute to the Company, free and clear of all liens,
security interests, mortgages
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or other encumbrances, all tangible and intangible assets,
real and personal, necessary to the conduct of the Business in
the Territory now owned or hereafter acquired by such
Shareholders, including all equity ownership interests in
Persons, data centers, equipment, real property, improvements,
software, applications, databases, employees, customers,
agreements, prospective Web addresses, licenses and permits,
in each case to the Company or to the Company's Subsidiaries
organized to pursue the Business in the Territory, which
assets shall include at a minimum those set forth on Schedule
6.13 (collectively, the "CONTRIBUTED ASSETS").
(ii) Each Shareholder shall pay all sales, use,
transfer, real property transfer, recording, gains, stock
transfer and other similar taxes and fees ("TRANSFER TAXES")
incurred in connection with their respective in-kind capital
contributions to the Company and shall be responsible for
filing all necessary documentation and tax returns with
respect to such Transfer Taxes.
(d) Each of the Shareholders shall take or cause to be taken
the following steps at Directors' and Shareholders' meetings of the
Company (as appropriate):
(i) the appointment of the individuals specified in
Section 12.1 as Directors of the Company;
(ii) the appointment of KPMG as statutory auditor(s)
of the Company;
(iv) the allotment and issue by the Company of 670
Shares to EXODUS;
(v) the allotment and issue by the Company of 330
Shares to ASIA GLOBAL CROSSING; and
(vi) the execution of the Licensing Agreement, the
Network Agreements and the Services Agreement.
(e) The Shareholders shall commence efforts to identify,
recruit and hire senior management personnel, subject to Board approval
and appointment.
3.2 Payment for Shares. The Shares shall be subscribed for cash and
shall be issued only upon the Company's receipt of payment in full.
3.3 Duration. The Term of this Joint Venture Agreement shall commence
on the Effective Time and shall continue in effect until terminated upon:
(a) The mutual agreement of all Shareholders;
(b) if the Effective Time does not occur and the Merger
Agreement is terminated; or
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(c) A resolution of Shareholders (subject to Section
7.4(a)(ii)) or of a court with jurisdiction over the Company's affairs
causing the Company to be wound-up.
Upon the occurrence of the event specified in Section 3.3(a) ("TRIGGER EVENT"),
either Shareholder may, within twenty-one (21) days of the Trigger Event, serve
a notice on the other Shareholder stating its desire to terminate this Joint
Venture Agreement (a "TERMINATION NOTICE") whereupon the Company shall be
wound-up and dissolved in accordance with Article 13 hereof.
(d) In the event that EXODUS shall no longer have the right to
appoint a majority of the Directors comprising the Company's Board,
then upon the occurrence of any of the following events:
(i) the unauthorized use by the Company of the
EXODUS Core Technologies or EXODUS Marks (as
each term is defined in the Licensing
Agreement), and such use is not promptly
terminated by the Company upon its receipt
of notice thereof; or
(ii) the failure of the Company to adhere in any
material respect to EXODUS Technical
Specifications and Standards or the EXODUS
Standard Business Practices and
Methodologies and such failure is not cured
by the Company within thirty (30) days upon
its receipt of notice thereof; or
(iii) the failure of the Company to make any
payment under the Licensing Agreement and
such failure continues for a period of not
less than sixty (60) days; or
(iv) any action by the Company which materially
injures or degrades the "EXODUS" brand;
then EXODUS may by written notice served upon the other Shareholders (a "EXODUS
TERMINATION NOTICE") terminate this Joint Venture Agreement whereupon the
Company shall be wound-up and dissolved in accordance with Article 13 hereof.
ARTICLE 4
APPOINTMENT OF DIRECTORS
4.1 Number. The maximum number of Directors holding office at any time
shall be six (6) unless otherwise approved by the Shareholders in accordance
with this Joint Venture Agreement.
4.2 Appointment. The Directors of the Company shall be appointed as
follows:
(a) EXODUS shall be entitled to appoint four (4) Directors to
be designated as the EXODUS Directors ("EXODUS DIRECTORS"); and
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(b) ASIA GLOBAL CROSSING shall be entitled to appoint two (2)
Director to be designated as the ASIA GLOBAL CROSSING Director ("ASIA
GLOBAL CROSSING DIRECTORS").
In the event that the Board shall delegate any of its responsibilities to a
committee of the Board, the proportion of EXODUS Directors to ASIA GLOBAL
CROSSING Directors shall be no greater than two to one (2-1)
4.3 Appointment of Chief Executive Officer. As soon as practicable
after the Effective Time, EXODUS shall nominate a candidate for election as the
Company's Chief Executive Officer subject to the approval of the Company's Board
of Directors (the "CHIEF EXECUTIVE OFFICER"). The Chief Executive Officer shall
serve for four (4) years from the date of such appointment. If the Chief
Executive Officer's employment shall terminate for any reason during this four
year period, EXODUS may nominate a further Chief Executive Officer to serve for
the remainder of such four (4) year term, subject to Board approval.
ARTICLE 5
ADDITIONAL FUNDING
5.1 Subscription for Additional Equity Share Capital by the
Shareholders. Subject to Section 11.9 hereinbelow, as determined by the Board,
each Shareholder may be required to subscribe for additional Shares in the
Agreed Proportions, up to an aggregate additional amount of (i) $200,000,000
(including the $100,000,000 initial capital subscription) during the first year,
(ii) $200,000,000 during the second year, and (iii) $200,000,000 during the
third year, each such period being measured from the Effective Time. Such Shares
shall be subscribed for in such amount and at such times as determined by the
Board upon a simple majority vote at which a Quorum is present and acting
throughout, as may be necessary and/or prudent to fund the requirements of the
Company as determined in the sole discretion of the Board (the "REQUIRED
ADDITIONAL EQUITY SHARE CAPITAL"). All subscriptions for Required Additional
Equity Share Capital shall be made at a subscription price per Share based upon
the valuation of the Company at the time of such subscription, as determined in
good faith by the Board. If any other person shall become a Shareholder, such
person shall be obligated to subscribe for additional Shares in the Agreed
Proportions, as amended, at the same time as the existing Shareholders and the
Required Additional Equity Share Capital shall be increased in accordance with
the following formula:
E = R x EQ'/ EQ
where:
E = the Required Additional Equity Share Capital after
admission of the additional Shareholder, in U.S.
Dollars.
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R = the Required Additional Equity Share Capital prior to
admission of such Additional Shareholder, in U.S.
Dollars.
EQ' = the aggregate amount of Equity Share Capital, in U.S.
Dollars, paid in by all Shareholders of the Company,
including the additional Shareholder.
EQ = the aggregate amount of Equity Share Capital, in U.S.
Dollars, paid in by all Shareholders of the Company,
excluding the additional Shareholder.
Notwithstanding the foregoing, the Shareholders shall cause the Company
to procure that the requirements of the Company for further capital to finance
the Business are met, as far as reasonably practicable in order to reduce the
Shareholders' capital contributions and maximize their return on invested equity
on the most favorable terms readily available which may include, without
limitation: borrowings from banks and other similar sources on the most
favorable terms reasonably obtainable as to interest, repayment and security,
but without allowing a prospective lender a right to participate in the Equity
Share Capital of the Company as a condition of a loan.
5.2 Notice and Acceptance. Shareholders must respond, if at all, to the
Notice within thirty (30) days of receipt, informing the Company in writing how
many Shares they wish to purchase, which may be more or less than their
Entitlement (an "ACCEPTANCE"). Such Acceptances, once given, shall be
irrevocable by the Shareholder. If, with respect to any Notice, Shareholders
fail to give Acceptances within the requisite time period, in respect of all
Shares offered, the Company shall have ninety (90) days after the expiration of
the time in which the Acceptances are required to be delivered, in which to sell
the number of Shares for which Acceptances have not been received at a price not
less than that described in the Notice to such persons as holders of a majority
of the Shares held by Shareholders who have submitted Acceptances shall approve.
5.3 Excess Acceptances. If the number of Shares in respect of which
Acceptances have been received exceeds the number of Shares being offered, the
Company may (i) increase the size of the offering to equal the number of Shares
in respect of which Acceptances have been received or (ii) allot each accepting
Shareholder its Entitlement and allot the balance of the Shares among those
Shareholders whose Acceptances are for a greater number of Shares than their
Entitlement, pro rata in accordance with their Entitlement, but not to exceed
the number of Shares specified in their respective Acceptances.
5.4 Loan Finance. Subject to Section 7.4(a), following the subscription
by the Shareholders of all Required Additional Equity Share Capital or otherwise
at any time, the Shareholders may cause the Company to procure that the
requirements of the Company for working capital to finance the Business are met,
as far as reasonably practicable, by borrowings from banks and other similar
sources on the most favorable terms reasonably obtainable as to
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interest, repayment and security, but without allowing a prospective lender a
right to participate in the Equity Share Capital of the Company as a condition
of a loan.
5.5 Guarantees Given by Shareholders. Any guarantee or indemnity given
by the Shareholders to secure indebtedness or obligations of the Company for the
purpose of financing the Business shall be approved by the Shareholders as set
forth in Section 7.4(a) and provided by the Shareholders on a several basis in
proportion to their Agreed Proportions from time to time. If any guarantee or
indemnity to be provided by any Shareholder pursuant to this Section 5.5 is not
acceptable to the relevant lender or obligee, then one or more of the remaining
Shareholders may, in their sole discretion, guarantee or indemnify the
unacceptable Shareholder's Agreed Proportion of such guarantee or indemnity as
well as their own on condition that the unacceptable Shareholder shall provide
to the guaranteeing or indemnifying Shareholder a guarantee to pay its Agreed
Proportion of any actual liabilities incurred by such guaranteeing or
indemnifying Shareholder pursuant to the guarantee or indemnity provided by them
in accordance with this Section 5.5.
ARTICLE 6
COVENANTS, REPRESENTATIONS AND WARRANTIES
6.1 Compliance with Applicable Law. Each Shareholder shall comply with
all applicable laws, regulations, rules and orders of governmental authorities
the non-compliance with which could have a material adverse effect on the
business affairs or financial condition of the Company.
6.2 No Restrictive Covenants. No Shareholder shall enter into or become
subject to any contract, agreement, restriction or covenant which would apply to
the Company so as to impair or inhibit the Company's ability to conduct its
business as contemplated herein or otherwise frustrate the Business of the Joint
Venture.
6.3 Organization. Each Shareholder represents and warrants that, on and
as of the date of this Joint Venture Agreement, it is duly organized and
existing under the laws of its jurisdiction of organization, that it has the
corporate (or other) power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and as proposed
to be conducted and to perform its obligations under any contracts by which it
is bound, including, without limitation, this Joint Venture Agreement and the
Related Agreements. Each Shareholder has all requisite corporate (or other)
power and authority to enter into this Joint Venture Agreement and the Related
Agreements and to consummate the transactions contemplated hereby and thereby.
6.4 No Conflict. Except as set forth on Schedule 6.4, subject only to
the approval of the principal terms of this Joint Venture Agreement and the
Related Agreements by each Shareholder's Board of Directors or other governing
body, the execution and delivery of this Joint Venture Agreement by each
Shareholder does not, and as of the Effective Time, the consummation of the
transactions contemplated hereby and by the Related Agreements will not conflict
with, or result in any violation of, or default by such Shareholder under (with
or without
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<PAGE> 18
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (a)
any provision of such Shareholders' Memorandum of Incorporation or Bylaws or
other constituent documents, (b) any material contract assigned by or assumed by
the Company from such Shareholder, (c) any instrument, permit, concession,
franchise, license, judgment, order or decree applicable to the Company or its
properties, assets or subsidiaries, or (d) any agreement or governing documents
relating to existing joint venture or other interests to be contributed by a
Shareholder to the Company.
6.5 Governmental Consents. Each Shareholder represents and warrants
that it will use all commercially reasonable efforts to obtain any and all
approvals or consents of, and to make all notices and filings with, all
governmental authorities necessary for the Shareholders to enter into this Joint
Venture Agreement and for the Company to conduct its Business as contemplated
hereby, including, without limitation:
(a) a notice of the intent to enter into the Joint Venture and
to form the Company shall have been filed with the
appropriate authorized competition authority in the
Territory, if applicable;
(b) subject to Section 6.11 hereinbelow, export licenses, as
required by the United States government;
(c) consent of Bermuda Monetary Authority to Share issuance.
If, notwithstanding all commercially reasonable efforts of the Shareholders
hereto, any of such necessary governmental licenses, approvals or consents are
not granted, with the result that the purposes of this Joint Venture Agreement
are substantially frustrated, the Shareholders shall enter into good faith
negotiations with the objective of restructuring the relationship between them
such that the effects of such nonoccurrence shall be minimized.
6.6 Other Approvals. Each Shareholder represents and warrants that it
will use all commercially reasonable efforts to obtain all other consents and/or
approvals of any third parties necessary for such Shareholder to enter into this
Joint Venture Agreement and for the Company to conduct its Business as
contemplated hereby; provided, that if, notwithstanding the all commercially
reasonable efforts of the Shareholders hereto, any of such consents and/or
approvals are not granted, with the result that the purposes of this Joint
Venture Agreement are substantially frustrated, the Shareholders shall enter
into good faith negotiations with the objective of restructuring the
relationship between them such that the effects of such nonoccurrence shall be
minimized.
6.7 Litigation. There is no action, suit or proceeding of any nature
pending or, to each Shareholder's knowledge, threatened against such
Shareholder, its properties or any of its officers, directors or employees that
would prohibit, alter or delay the consummation of the transactions contemplated
by this Joint Venture Agreement or which would prohibit or restrict the Business
of the Company as it is currently contemplated to be conducted, nor, to the
knowledge of each Shareholder, is there any reasonable basis therefor. To each
Shareholder's knowledge, there is no investigation pending or threatened against
such Shareholder, its
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<PAGE> 19
properties or any of its officers, directors or employees by or before any
governmental authority. No governmental authority has at any time challenged or
questioned the legal right of each Shareholder to conduct its operations as
presently or previously conducted.
6.8 Businesses of Shareholders. Subject to Section 6.9 hereinbelow, any
Shareholder and its respective Affiliates may engage in and/or possess an
interest in other business ventures of any nature and description, independently
or with others; and neither the Company nor the other Shareholders hereto shall
have any right by virtue of this Joint Venture Agreement in or to any such
independent venture or to any income or profits derived therefrom and no
Shareholder or any Affiliate of any Shareholder shall be obligated to present
any particular investment opportunity to the Company even if such opportunity is
of a character that, if presented to the Company, could be taken by the Company,
and each of them shall have the right to take for its own account (individually
or as a trustee) or to recommend to others any such particular investment
opportunity.
6.9 Exclusivity. Subject to the terms and conditions set forth below in
this Section 6.9 and in Section 6.14, the Company will be the exclusive vehicle
for the Shareholders to pursue the Restricted Business in the Territory. Each of
the Shareholders hereby covenants to and with the other Shareholders that
neither they nor any of their respective Affiliates which they control will do
any one or more of the following:
(a) enter into any negotiations, discussions, deliberations,
agreements or arrangements of any nature whatsoever with any third
party to either directly or indirectly carry on or be engaged or
interested in a Restricted Business or be directly or indirectly
engaged, concerned or interested whether on its own account or as a
member, shareholder, consultant, agent, beneficiary, trustee or
otherwise in any enterprise, corporation, firm, trust, joint venture or
syndicate which is engaged, concerned or interested in or carrying on
any Restricted Business;
(b) on its own account or for any person, enterprise, firm,
trust, joint venture or syndicate directly or indirectly entice (or
attempt to entice) away from the Company any Restricted Business of any
customer of the Company;
(c) on its own account or for any person, enterprise, firm,
trust, joint venture or syndicate directly or indirectly entice (or
attempt to entice) away from the Company any supplier to the Company to
the extent related to any Restricted Business;
(d) on its own account or for any person, enterprise, firm,
trust, joint venture or syndicate directly or indirectly entice (or
attempt to entice) away from the Company any employee, officer, agent
consultant, advisor, or any individual who is employed by the Company
in any capacity whatsoever. As used herein, "entice" means contact or
communicate in any manner whatsoever, including, but not limited to,
contacts or communications by or through intermediaries, agents,
contractors, representatives, or other Shareholders, provided, however,
that nothing herein shall be construed to prohibit the Shareholders
from (a) placing advertisements for employment which are aimed at the
public at large in any newspaper, trade magazine, or other periodical
in general
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circulation or advertising for employment through any other mass medium
such as radio, television or the Internet, (b) responding to any
unsolicited inquiry by an employee concerning employment or (c)
employing an employee of the Company after first having obtained the
approval of the Board which approval, with respect to EXODUS and its
Affiliates, should be unanimous; or
(e) personally or by its employees or agents or by circulars,
letters or advertisements whether on its own account or for any other
Person, enterprise, firm, trust, joint venture or syndicate directly or
indirectly interfere with the Restricted Business of the Company or
divulge to any Person any information concerning the Restricted
Business of the Company or the Company or any of its respective
dealings, transactions or affairs except to the extent it is required
to do so:
(i) to comply with applicable laws, to defend or
prosecute litigation or to comply with government
regulations; or
(ii) as part of normal report or review procedure to its
parent company, auditors or attorneys.
Each Shareholder acknowledges that each of the prohibitions
and restrictions contained in Sections 6.9(a) through (e) are reasonable as to
period, territorial limitations and subject matter in order to protect the
Business and material breach of any of the prohibitions and restrictions
contained herein may not be adequately compensated by an award of damages and
therefore any breach by a Shareholder of any of those prohibitions and
restrictions will entitle any other Shareholder, in addition to any other
remedies available at law or in equity, to seek an injunction to restrain the
committing of any breach (or continuing breach) of any of those prohibitions or
restrictions. Notwithstanding anything to the contrary herein, in the event that
the Hong Kong assets of ASIA GLOBAL CROSSING have not been contributed to the
Company on or prior to the Closing, for so long as such transfer has not been
completed: (i) Hong Kong shall be excluded from the definition of Territory for
purposes of this Section 6.9 as it applies to EXODUS, and (ii) ASIA GLOBAL
CROSSING's ownership of its Hong Kong assets and its compliance with the terms
and conditions under the agreements governing the ownership of such assets shall
be excluded from this Section 6.9 as it applies to ASIA GLOBAL CROSSING. The
provisions of this Section 6.9 shall terminate with respect to any Shareholder
on the date that is the earlier of (x) two (2) years following an underwritten
offering of the Company's securities on a national exchange, (y) the date that
such Shareholder's Joint Venture Interest in the Company is less than ten
percent (10%) of the total outstanding Shares, provided that such reduction in a
Shareholder's Joint Venture Interest in not as a result of such Shareholder's
failure to make any capital contribution duly approved and called for by the
Board and (z) with respect to ASIA GLOBAL CROSSING, only upon the first date
when the Company shall no longer be obligated to purchase network capacity under
the Network Agreement pursuant to the terms thereof. In the event that this
Joint Venture Agreement shall be terminated (other than pursuant to Section
3.3(b) hereto) prior to the second anniversary of the Closing, ASIA GLOBAL
CROSSING shall remain subject to this Section 6.9 until, but not later than, the
second anniversary of the Closing and this Section 6.9 shall survive such
termination to such extent.
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(f) Notwithstanding the provisions of paragraph (a) of this
Section 6.9, EXODUS and ASIA GLOBAL CROSSING, INC. and their respective
Affiliates who they control shall be permitted to:
(i) maintain investments existing on the date hereof
and make investments of ten percent (10%) or less of any class of
equity securities of any Person directly or indirectly engaged in
Internet Web-Hosting, provided that neither EXODUS nor ASIA GLOBAL
CROSSING members participates in the management or control of such
Person;
(ii) acquire securities representing a majority of
the voting power of a Person whose business includes an Internet
Web-Hosting business that represents greater than 25% of such Person's
consolidated revenues for the most recent four calendar quarters,
provided that the acquiring company divests such Internet Web-Hosting
business within one year of its acquisition (prior to divesting such
business, such Shareholder shall provide written notice to the Company
of the consideration it intends to receive in respect of such
divestiture and the other relevant principal terms and the Company
shall, within 15 days of receiving such notice, provide the relevant
Shareholder with written notice of whether it is interested in
acquiring such business on such terms, and if the Company is so
interested, the parties shall in good faith negotiate long form
definitive documents setting forth the details of such transaction
within the following thirty (30) days, and if the parties cannot reach
mutually acceptable terms within such time period the Company shall be
permitted to sell such business to other parties, provided no such sale
shall be at a materially lower price or on terms which, in the
aggregate, are materially less favorable to the Company than those
offered to such Shareholder);
(iii) acquire securities representing a majority of
the voting power of a Person whose business includes an Internet
Web-Hosting business that represents less than 25% of such Person's
consolidated revenues for the most recent four calendar quarters,
provided that the acquiring company shall, at the time of the
acquisition, provide written notice of the acquisition to the Company
and, if the Company is interested in acquiring such business, consider
any proposal from the Company to purchase such business from the
acquiring company.
(iv) acquire securities representing less than thirty
percent (30%) of the voting power of a Person whose business includes a
Restricted Business that represents less than 25% of such Person's
consolidated revenues for the most recent four calendar quarters,
provided that neither EXODUS nor ASIA GLOBAL CROSSING members
participate in the management or control of such Restricted Business;
(v) provide, directly or indirectly, services on its
Dedicated Private Extranet Network including, without limitation, the
provision of remote access, Internet access and redundancy, in each
case in connection or associated with providing such services; and
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(vi) without limitation to clause (v) above, continue
to provide, directly or indirectly, the products and services provided
at present by IXnet (the parties contemplated that IXnet will be a
customer of the Company for hosting services).
(g) If ASIA GLOBAL CROSSING or EXODUS (the "RELEVANT PARTY")
is acquired by a third party, the provisions of this Section 6.9 shall not
prevent the new parent of the Relevant Party from engaging in, owning, managing,
controlling or participating in the ownership, management or control of entities
engaged in the Restricted Business but all members of the Relevant Party's
Group, excluding the acquiror, will continue to be bound by this Section 6.9,
except as provided in the next sentence. If the Relevant Party is acquired by a
third party and, upon its acquisition by such third party, (i) the Relevant
Party or a member of the Relevant Party's Group is merged with or into the
acquiror or a substantial portion of the Relevant Party's assets are acquired by
the acquiror pursuant to an asset acquisition and such Relevant Party's Group
assets are commingled with those of the acquiror such that the Relevant Party's
Group assets do not remain independently identifiable, and (ii) the acquiror is
materially engaged in the Restricted Business, then the provisions of this
Section 6.9 shall cease to apply to such Relevant Party's Group assets and (iii)
if the Relevant Party is ASIA GLOBAL CROSSING, then EXODUS will have the right
to terminate the Network Agreement effective immediately upon the closing of the
transaction and (iv) if the Relevant Party is EXODUS, then the provisions of
this Section 6.9 will terminate with respect to ASIA GLOBAL CROSSING effective
immediately upon the closing of the transaction.
6.10 No Encumbrances on Joint Venture Interest. Except as otherwise set
forth on Schedule 6.10 hereto and further subject to the provisions of this
Joint Venture Agreement, no Shareholder shall pledge, mortgage, charge or
otherwise encumber its Joint Venture Interest, including the Shares held by such
Shareholder without the prior written consent of the other Shareholder.
6.11 Export Assurances. The Company and each of ASIA GLOBAL CROSSING
and EXODUS and each of their respective Affiliates acknowledges and agrees that,
all Technical Data may be subject to export controls imposed by the United
States Export Administration Act of 1979, as amended (the "EXPORT ADMINISTRATION
ACT") or any future United States export control legislation and the regulations
promulgated thereunder. The Company and each of ASIA GLOBAL CROSSING and EXODUS
and their respective Affiliates agrees not to export or re-export, directly or
indirectly, any Technical Data without complying with the Export Administration
Act. The Company and each of ASIA GLOBAL CROSSING and EXODUS certify that
neither the Technical Data nor its direct product: (a) are intended to be used
for any purpose prohibited by the Export Administration Act or regulations
including, without limitation, nuclear related activities or chemical/biological
weapons or missiles; and (b) are intended to be released, shipped or
re-exported, either directly or indirectly, to a national of a country in
Country Groups D:1 (Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia,
China (PRC), Estonia, Georgia, Kazakhstan, Kyrgyzstan, Laos, Latvia, Lithuania,
Moldova, Mongolia, Romania, Russia, Tajikstan, Turkmenistan, Ukraine, Uzbekistan
and Vietnam) or E:2 (Cuba, North Korea, Libya) or Angola, Iraq, Iran, Sudan or
Syria, or to any other destination to which the United States has prohibited
shipment. This Section 6.11 shall survive any termination or
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expiration of this Joint Venture Agreement and the Related Agreements. Each
Shareholder acknowledges and agrees that this Section 6.11 is required by the
Export Administration Act and is not intended to, nor does it, modify more
restrictive provisions in this Joint Venture Agreement or the Related Agreements
regarding the use by any Shareholder or the Company of Technical Data.
6.12 Referral and Solicitation of Additional Customers. Each
Shareholder will refer all inquiries of customers for Services in the Territory
to the Company.
6.13 No Other Restricted Business Interests in the Territory. Each
Shareholder hereby represents and warrants that, after giving effect to the
transactions contemplated hereby and except as otherwise set forth in Schedule
6.13 hereto, neither it nor any of their respective Affiliates, has any other
interests (equity or voting) in any Person in the Territory engaged in a
Restricted Business and that neither Shareholder nor any of their respective
Affiliates is obligated under any agreement, understanding or other obligation
to enter into, acquire or otherwise hold an interest (equity or voting) in any
Person that is or is contemplated to be engaged in a Restricted Business that
would compete directly or indirectly with the Business of the Company in the
Territory.
6.14 Combination of Interests.
(a) Each Shareholder hereby covenants to use their
commercially reasonable best efforts to assist the Company in
effectuating a combination of the business interests in Japan that each
Shareholder is contributing to the Joint Venture pursuant to this Joint
Venture Agreement.
(b) ASIA GLOBAL CROSSING hereby covenants to use its
commercially reasonable best efforts to conform the existing
relationship between ASIA GLOBAL CROSSING and Hutchinson Whampoa with
respect to the Internet Data Center Services business currently being
conducted in Hong Kong through their Hutchinson Global Crossing joint
venture to the provisions herein or as otherwise agreed to that such
Internet Data Center Services business can be contributed to the Joint
Venture.
(c) In the event that ASIA GLOBAL CROSSING is not able on or
prior to the Closing to effectuate the transfer of its Hong Kong assets
as contemplated by this Joint Venture Agreement, then, ASIA GLOBAL
CROSSING will contribute to the Company an amount equal to the fair
market value of the Hong Kong assets which shall in no event exceed
$25,000,000; provided, however, that if at the Closing ASIA GLOBAL
CROSSING is negotiating in good faith to obtain all consents and/or
approvals necessary to effectuate such contribution and receipt of such
consents and approvals is reasonably likely, then EXODUS will extend
for an additional one-hundred eighty (180) days from the date of
Closing the period during which the Hong Kong assets are required to be
transferred to the Company.
(d) Each Shareholder hereby agrees that in many countries
within the Territory it may be desirable or necessary to engage in the
Business with a local entity
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(each such entity, a "LOCAL PARTICIPANT"). Each Shareholder agrees
that, for each of the following countries, the Joint Venture intends to
conduct the Business with the Local Participant(s) indicated: Japan
(Softbank Corp and Internet Research Institute) and Hong Kong
(Hutchison Whampoa). With respect to other jurisdictions within the
Territory, EXODUS, in consultation with ASIA GLOBAL CROSSING, shall
identify each potential Local Participant and, subject to Board
Approval, shall negotiate the terms and conditions of such Local
Participant's participation in the Business. EXODUS shall notify the
Company and ASIA GLOBAL CROSSING promptly upon identifying each
potential Local Participant and shall maintain a regular and timely
flow of information regarding the discussions with that potential Local
Participant to the Company and ASIA GLOBAL CROSSING, including
providing copies of draft letters of intent, term sheets, joint venture
agreements and other documents.
6.15 Enforcement of Rights Under Related Agreements. The Company shall
enforce its rights under each of the Related Agreements as though each such
agreement were a comparable arm's length transaction with an unrelated Person.
6.16 Tax Election. Each Shareholder hereby covenants and agrees that
with respect to the Company and each Subsidiary of the Company, they shall
mutually determine whether the Company or such Subsidiary shall make a "check
the box" election for tax reporting purposes or other relevant tax matters so as
to maximize the benefits to be received by all Shareholders and each Shareholder
shall execute and file all required documents related to such mutual
determinations.
6.17 Termination of Existing Joint Venture. At the time of the Closing,
ASIA GLOBAL CROSSING agrees to, and EXODUS agrees to cause Global Center Inc.
to, terminate the existing joint venture agreement between ASIA GLOBAL CROSSING
and Global Center Inc.
ARTICLE 7:
CONDUCT OF THE COMPANY'S AFFAIRS
7.1 Shareholders. The Shareholders shall exercise all voting rights and
other powers available to them in relation to the Company so as to procure
(insofar as they are reasonably able to do so by the exercise of those rights
and powers) that:
(a) the business of the Company consists exclusively of the
Business;
(b) the Company complies with the provisions of its Memorandum
of Association;
(c) the Board determines the general policy of the Company
(subject to the provisions of this Joint Venture Agreement) including
the scope of the Company's activities and operations, the Board
reserving to itself and to Shareholders matters involving major or
unusual decisions as described in Section 7.4 below, subject to the
applicable law of the Company's jurisdiction of organization.
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7.2 Board of Directors. The business, property and affairs of the
Company shall be managed by the Board in accordance with the provisions of this
Joint Venture Agreement, the Memorandum of Association, and all applicable law.
The Board shall use all reasonable efforts to maximize the Company's
profitability.
(a) Voting. Each Director shall cast one vote on each
resolution to be voted upon.
(b) Dismissal and Suspension. A Director shall only be
suspended or dismissed upon the written request of the Shareholder who
had the authority to nominate such Director for election.
(c) Vacancies. A vacancy shall only occur in the event of a
resignation or a dismissal of a Director, and any vacancy shall be
filled only by the Shareholder who was entitled to appoint such
resigning or dismissed Director.
(d) Meetings of the Board of Directors. The Shareholders agree
that:
(i) at least four (4) meetings of the Board will
take place each Fiscal Year;
(ii) additional meetings of the Board will be
convened at the written request of any
Director;
(iii) meetings of the Board will be held at the
principal office of the Company or such
other places as the Chairman of the Board,
after consultation with the rest of the
Board, decides and specifies in the Notice
of such meeting; and
(iv) meetings of the Board may be conducted by
telephonic conference or any similar means
of communication which enables all
participants to hear and be heard.
(e) Board Action. Except as otherwise set forth in this Joint
Venture Agreement, an action or decision of the Board or any committee
thereof shall require the consent or vote of a simple majority of all
of the Directors. A majority of the total number of directors (or the
Directors who are members of a committee) (which majority shall,
subject to Section 7.2(f), include at least one EXODUS Director and one
ASIA GLOBAL CROSSING Director) shall be necessary to constitute a
quorum ("QUORUM") for the transaction of business at any meeting of the
Board, and except as otherwise provided in this Joint Venture Agreement
or by the applicable laws of Bermuda, the action of a simple majority
of Directors (or the Directors who are members of a committee) present
at any meeting at which there is a Quorum, when duly assembled, is
valid. A meeting at which a Quorum is initially present may continue to
transact business, notwithstanding the withdrawal of directors, if any
action taken is approved by
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<PAGE> 26
a majority of the required Quorum for such meeting. No Shareholder,
acting in its capacity as a Shareholder, shall have the authority to
act for and bind the Company unless such matter has been approved by
the Board as set forth herein.
(f) Notice of Meetings. Notices of meetings of the Board (or
any committee thereof), including the time and place of any proposed
meeting and a proposed agenda for such meeting, shall be delivered
personally to each of the Directors (or the Directors who are members
of a committee) or personally communicated to them by an officer of the
Company by telephone and confirmed in writing by facsimile, or
communicated by overnight courier service (receipt requested) at least
thirty (30) days in advance of such proposed meeting, unless waived by
each of the Directors (or the Directors who are members of a
committee). Notice shall be transmitted to the last known facsimile
number or address of the Director as shown on the records of the
Company. Such notice as above provided shall be considered due, legal
and personal notice to such Director. If at any meeting of the Board
(or any committee thereof) that has been duly called or noticed, at
least one Director appointed by each Shareholder is not present, such
meeting shall be adjourned and reconvened in two (2) business days,
unless such adjournment has been waived by all of the Directors
(whether or not present at the meeting). Notice of the revised meeting
date shall be given to each director pursuant to the foregoing
provisions excluding the number of days of advance notice.
Notwithstanding the provisions of the second sentence of Section 7.2(e)
above, in the event that at least one Director appointed by each
Shareholder is not present at such reconvened meeting, such meeting
shall be deemed to have a Quorum if a majority of the total number of
Directors is present. Meetings of the Board (or any committee thereof)
shall be delayed only once for lack of participation of the Directors
appointed by any Shareholder. With respect to a meeting which has not
been duly called or noticed pursuant to the foregoing provisions, all
transactions carried out at the meeting are as valid as if they had
been carried out at a meeting regularly called and noticed if: (i) all
Directors are present at the meeting, and sign a written consent to the
holding of such meeting, (ii) a majority of the Directors are present
and if those not present sign a waiver of notice of such meeting or a
consent to holding the meeting or an approval of the minutes thereof,
whether prior to or after the holding of such meeting, which waiver,
consent or approval shall be filed with the other records of the
Company, or (iii) all Directors attend a meeting without notice and do
not protest prior to the meeting or at its commencement that notice was
not given to them.
(g) Action by Unanimous Written Consent. Any action required
or permitted to be taken by the Directors may be taken without a
meeting and will have the same force and effect as if taken by a vote
of Directors at a meeting properly called and noticed, if authorized by
a writing signed individually or collectively by all, but not less than
all, the Directors. Such consent shall be filed with the records of the
Company.
(h) Compensation and Reimbursement of Directors. The Directors
shall be reimbursed by the Company for any expenses reasonably incurred
in connection with their services as Directors.
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(i) Any Director may participate in any meeting of the Board
(or any committee thereof) telephonically or by any other electronic
audio or video means.
7.3 Appointment of Staff. The Company shall employ such staff as the
Board considers necessary for the proper conduct of its Business. The Chief
Executive Officer can appoint and shall use all reasonable endeavors to ensure
that the appointees have experience and qualifications which are commensurate
with the relevant appointment and dismiss employees in accordance with the
provisions of this Joint Venture Agreement and the Memorandum of Association and
any applicable laws of the Territory and can grant such employees any and all
titles (e.g., Vice-Chief Executive Officer or Secretary).
7.4. Required Shareholder Approvals.
(a) Actions Requiring Unanimous Approval of Shareholders.
During the term of this Joint Venture Agreement, the Company shall not,
and shall not permit any of its Subsidiaries, to take or cause to be
taken any of the following actions without the unanimous approval of
the Shareholders:
(i) (A) Any merger or consolidation, or (B) any
divestiture, joint venture, partnership,
acquisition or other business combination
with, by or of the Company into or with any
other Person ("BUSINESS COMBINATION") in
which the aggregate consideration for all
such transactions occurring in a year if
occurring during the first two (2) years of
this Joint Venture Agreement exceeds
$100,000,000, or thereafter, if such
transaction exceeds the greater of
$100,000,000 and fifteen percent of the fair
market value of the Company as determined in
accordance with Article 14.
(ii) Any proposed dissolution or liquidation of
the Company or application for bankruptcy of
the Company, winding up or the taking of any
action for the appointment of a liquidator
receiver or receiver and manager; or
(iii) Any dividend, distribution, redemption or
repurchase of Shares; or
(iv) Any issuance of any Shares to any Person
other than the existing Shareholder or any
obligation convertible into shares or the
grant of any warrant, option or right to
acquire any of the foregoing other than
pursuant to an employee incentivization
scheme approved by the Board; or
(v) Any expansion of the scope of the Business;
or
(vi) Any amendment to the Memorandum of
Association; or
(vii) Any increase or decrease in the number of
appointed Directors; or
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(viii) Any material amendment to any of the Related
Agreements; or
(ix) Any determination by the Board to call for
the subscription of Shares in excess of one
hundred twenty five percent (125%) of the
amounts set forth in Section 5.1 with
respect to the periods set forth therein;
(x) Any change in the accounting policies upon
which the Company prepares its books,
records and accounts; or
(xi) Any related party transactions (other than
this Joint Venture Agreement and the Related
Agreements) having a dollar value that
exceeds five million dollars (U.S.
$5,000,000) or meeting any of the following
criteria: (i) is not arms length, or (ii)
has no legitimate business purpose or; or
(xii) Incur indebtedness such that the Company's
total consolidated indebtedness does not
exceed the greater of (i) $100,000,000 or
(ii) four (4) times the Company's
consolidated earnings for the prior four
fiscal quarters calculated before deducting
expenses of interest, taxes, depreciation
and amortization.
(b) Other Shareholder Action. Subject to the other terms of
this Joint Venture Agreement, all other actions of the Shareholders
required pursuant to applicable provisions of the law of the Company's
jurisdiction of organization or the Company's Memorandum of Association
shall be approved by a simple majority vote at a duly constituted
meeting of Shareholders with each Shareholder entitled to one vote per
Share held of record as of the record date for such meeting.
7.5 Accounting and Internal Controls.
(a) Maintenance of Accounting Records. The Company will
conduct its business at all times in accordance with high standards of
business ethics and maintain full and accurate books, records and
accounts which will, in reasonable detail, accurately and fairly
reflect all transactions of the Company in accordance with generally
accepted accounting principles, procedures and practices in the United
States which have been consistently applied.
(b) US GAAP. The Company must ensure that a set of the
Company's annual and quarterly accounts, based on a calendar fiscal
year, is prepared in English and audited in accordance with U.S.
Generally Accepted Accounting Practices.
(c) Reports The Chief Executive Officer must provide the Board
and the Shareholders with sufficient management and financial
information and reports to allow the Board and the Shareholders to
monitor the conduct the Business
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(d) Appointment of Independent Auditor. Initially, the Board
of Directors shall appoint KPMG as the independent auditor of the
Company, which auditors shall examine and audit the financial accounts
of the Company and report the results to the Board.
(e) Approval of Annual Accounts. The authority to approve the
annual accounts of the Company lies with the Shareholders.
7.6 Bank Accounts. Company funds shall be deposited in the name, and
for the sole benefit, of the Company in such bank or savings and loan accounts
of the Company as may be designated by the Board. The Board of Directors shall
arrange for the appropriate conduct of those accounts and shall make
disbursements solely for the business of the Company or for distributions to the
Shareholders in accordance with this Joint Venture Agreement. Any security
deposits shall be maintained in a segregated interest bearing account and shall
be distributed pursuant to the agreement under which the deposit is received.
7.7 Transactions with Affiliates.
(a) General. Subject to Section 7.4(a), the Chief Executive
Officer and the Board of Directors may cause the Company to transact
business with any Shareholder or any Affiliate of any Shareholder for
the performance of services or purchase of goods or other property that
may at any time be reasonably required in carrying on the business of
the Company; except that the compensation or price therefor shall not
exceed that prevailing in arm's length transactions and shall be on
such standard commercial terms as are offered by other third parties
rendering similar quality goods or services on comparable transactions
as an on-going activity in the same geographical area.
(b) Related Agreements. Notwithstanding the provisions of
Sections 7.4 and 7.7(a), each Shareholder acknowledges that the Company
shall enter into and be bound by each of the Licensing Agreement, the
Network Agreements and the Services Agreement at or prior to the
Effective Time.
7.8 Organization. The parties hereto shall mutually agree upon the
organizational structure of the Company
ARTICLE 8:
DISPUTE RESOLUTION
8.1 Negotiation Between Executives. Each of the Shareholders and the
Company shall attempt in good faith to resolve any dispute arising out of or
relating to the interpretation, breach or termination of this Joint Venture
Agreement (a "DISPUTE") promptly by negotiations between the Chief Executive
Officers of EXODUS and ASIA GLOBAL CROSSING. For the purpose of this Joint
Venture Agreement, the term "Dispute" does not include any disputes or
controversies resulting from, arising out of or with respect to any of the
Related Agreements, unless otherwise provided in any of the Related Agreements.
Any Shareholder or the Company
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who is a party to a Dispute shall give the other Shareholders and the Company
written notice of any Dispute not resolved in the normal course of business.
Within twenty (20) days after delivery of such a notice, executives of all
Shareholders involved in the Dispute, and the Company, shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the Dispute. All negotiations pursuant to this
Section 8.1 shall be confidential.
8.2 Arbitration. In the event that any Dispute cannot be resolved
thereby within a period of thirty (30) days after delivery of such notice has
been given, such Dispute shall be settled finally by arbitration in San Jose,
California, using the English language and in accordance with the rules then in
effect of the American Arbitration Association. The arbitrator(s), who shall be
experienced in the matters that are the subject of the Dispute or fundamental to
understanding the nature of the dispute, shall have the authority to grant
specific performance, and to allocate between the parties the costs of
arbitration in such equitable manner as the arbitrator(s) may determine. The
prevailing Shareholder in the arbitration shall be entitled to receive
reimbursement of its reasonable expenses incurred in connection therewith,
including the costs of travel to, and meals and hotel accommodation in, the
location of such proceedings. Judgment upon the award so rendered may be entered
in any court having jurisdiction or application may be made to such court for
judicial acceptance of any award and an order of enforcement, as the case may
be.
8.3 Irreparable Harm. The Shareholders hereby reserve their right to
seek immediate injunctive relief in the event of the breach of any provision of
this Joint Venture Agreement where such breach may cause irreparable harm, the
extent of which would be difficult to ascertain. Accordingly, they agree that,
in addition to any other legal remedies to which a non-breaching Shareholder
might be entitled, such Shareholder may seek immediate injunctive relief in the
event of any breach of any of the provisions of this Joint Venture Agreement
either through arbitration or through the courts.
ARTICLE 9:
INDEMNIFICATION; LIMITATION ON DAMAGES,
CONTRACTUAL LIMITATIONS PERIOD
9.1 Indemnification.
(a) From and after the Closing, each Shareholder shall
indemnify and hold harmless, the Company and each other Shareholder and
any Subsidiary of the Company (the "INDEMNITEES") from any liability
for, or arising out of or based on, or relating to,
(i) any Tax (i) of such Shareholder or any Subsidiary
of such Shareholder (other than the Company and its
Subsidiaries for any period beginning after the Closing date)
or (ii) relating to the income, business, assets, property or
operation of the Contributed Assets of such Shareholder, prior
to and on the date of Closing and with respect to any
Contributed Assets, the date on which the contribution of such
Contributed Asset is effected to the Company.
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(ii) any and all Losses incurred or suffered by an
Indemnitee, arising out of, based on or resulting from the
ownership and/or operation of the Contributed Assets prior to
and on the date which the contribution of such Contributed
Asset is effected to the Company.
(b) An Indemnitee shall notify the indemnifying Shareholder of
any claim for Tax or Losses in writing, and in reasonable detail, as
promptly as reasonably possible after receipt by such Indemnitee of
notice of such claim; provided, however, that failure to give such
notification on a timely basis shall not affect the indemnification
provided hereunder except to the extent that such Indemnifying
Shareholder shall have been actually materially prejudiced as a result
of such failure. Thereafter, the Indemnitee shall promptly deliver to
the Indemnifying Shareholder copies of all notices and documents
received by the Indemnitee relating to such claim.
(c) If a Tax Indemnitee receives a refund or credit of Taxes
for which it has been indemnified pursuant to this Section 9.1 such Tax
Indemnitee agrees to pay the indemnifying Shareholder the amount of
such refund or credit (including any interest received thereon).
9.2 Limitation on Damages.
(a) No Shareholder shall be liable for any indirect, special,
incidental or consequential loss or damage (including, without
limitation, loss of profits or loss of use) suffered by any other
Shareholder arising from or relating to a Shareholder's performance,
non-performance, breach of or default under a covenant, warranty,
representation, term or condition hereof; each Shareholder, other than
with respect to a claim arising from such other Shareholder's gross
negligence, willful misconduct or fraudulent actions, waives and
relinquishes claims for indirect, special, incidental or consequential
damages.
(b) The limitations on liability and damages set out in
Section 9.2(a) apply to all causes of action that may be asserted
hereunder, other than a cause of action resulting from another
Shareholder's grossly negligent, willful misconduct or fraudulent
actions, whether sounding in breach of contract, breach of warranty,
tort, product liability, negligence or otherwise.
9.3 Contractual Limitation Period. Any arbitration, litigation,
judicial reference or other legal proceeding involving the parties shall be
commenced within three (3) years after the accrual of the cause of action.
ARTICLE 10:
CONFIDENTIAL INFORMATION; PUBLIC ANNOUNCEMENTS
10.1 Treatment of Confidential Information. Confidential Information
will be kept confidential and shall not be disclosed, in whole or in part, to
any Person other than Affiliates,
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officers, directors, employees, agents or representatives of the Company or of a
Shareholder or the Company's or such Shareholder's legal counsel or independent
auditors, or prospective lenders to the Company or either Shareholder
(collectively, "REPRESENTATIVES") who need to know such Confidential Information
for the purpose of negotiating, executing and implementing this Joint Venture
Agreement and the transactions contemplated hereby. The Company and each
Shareholder agrees to inform each of its Representatives of the non-public
nature of the Confidential Information and to direct such Persons to treat such
Confidential Information in accordance with the terms of this Section. The
Company and each Shareholder agrees to be liable for any breach of the terms
hereof by its Representatives. Nothing herein shall prevent the Company or
either Shareholder from disclosing confidential Information (i) upon the order
of any court or administrative agency, (ii) as required by law or upon the
request or demand of, or pursuant to any regulation of, any regulatory agency or
authority, (iii) to the extent reasonably required in connection with the
exercise of any remedy hereunder, and/or (iv) to any actual or proposed
permitted assignee of all or part of its rights hereunder provided that such
actual or proposed assignee agrees in writing to be bound by the provisions of
this Section. Notwithstanding the foregoing, in the event that the Company or
any shareholder intends to disclose any Confidential Information pursuant to
clause (i) or (ii) of the preceding sentence, such Person agrees to (x) provide
the other parties hereto with prompt notice before such disclosure in order that
such parties may attempt to obtain a protective order or other assurance that
confidential treatment will be accorded such Confidential Information and (y)
cooperate with such parties in attempting to obtain such order or assurance. The
Company and each Shareholder agrees that it will maintain all Confidential
information disclosed to it in strict confidence and will take all reasonable
measures to maintain the confidentiality of all such Confidential Information in
its possession or control, but in no event less than the measures it uses to
maintain the confidentiality of its own information of similar importance. The
provisions of this Article 10 will survive termination of this Joint Venture
Agreement.
10.2 Company Employees. The Company shall require each of its employees
to sign written undertakings or agreements with the Company not to disclose any
Confidential Information.
10.3 Public Announcements. No Shareholder shall be entitled to make or
permit or authorize the making of any press release or other public statement or
disclosure concerning this Joint Venture Agreement, a Related Agreement or any
of the transactions contemplated herein without the prior written consent of the
other Shareholder except as otherwise may be required by law or the rules of a
stock exchange relevant to that Shareholder or its Affiliates and then only upon
the advise of such Shareholder's legal counsel.
ARTICLE 11:
TRANSFERS OF INTERESTS AND ISSUANCE OF ADDITIONAL INTERESTS
11.1 Disposition of a Shareholder's Joint Venture Interest.
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(a) General. Subject to Sections 11.2, 11.3, 11.4, 11.7 11.8,
11.9, 11.10 and 11.12 hereinbelow, no Shareholder may make any
Disposition of all or any part of its Joint Venture Interest or Shares,
in any manner, whether voluntarily or involuntarily, by operation of
law or otherwise, to any person. Any transfer not in accordance with
this Article 11 and the Memorandum of Association and applicable
provisions of the law of the Company's jurisdiction of organization
will be voidable at the option of any of the non-transferring
Shareholders or the Company.
(b) Transfers Prohibited During First Five (5) Years. Subject
to Section 11.7 hereinbelow, each of the Shareholders agrees not to
make any Disposition during the first Five (5) years following the
Effective Time, unless otherwise unanimously approved by the Board
(other than the directors nominated by the Shareholder which proposes
to make the Disposition).
11.2 Right of First Refusal. Subject to the provisions of Sections 11.3
and 11.7 below, in the event that a Shareholder desires to Dispose of all or any
part of its Joint Venture Interest (a "SELLING SHAREHOLDER") to a third party
the non-selling Shareholders will have a right of first refusal ("RIGHT OF FIRST
REFUSAL") in accordance with their Agreed Proportions on all sales of all or any
part of the Selling Shareholder's Joint Venture Interest. The Selling
Shareholder shall first provide to the non-selling Shareholders a written notice
of proposed sale ("NOTICE OF PROPOSED SALE") which shall specify the terms and
conditions for such sale (excluding any terms which are not reasonably capable
of acceptance or performance by the non-selling Shareholder) including the
portion of such Selling Shareholder's Joint Venture Interest proposed to be sold
and the price therefor and the identity of the Purchaser. The non-selling
Shareholder(s) shall then have thirty (30) calendar days from the date of such
Notice of Proposed Sale ("ACCEPTANCE PERIOD") in which to elect to purchase such
Selling Shareholder's Joint Venture Interest on the same terms and conditions as
specified in such Notice of Proposed Sale by providing the Selling Shareholder
written notice of its acceptance of such offer to purchase. If any component of
the price specified in the Notice of Proposed Sale includes the issuance of a
third party's securities, a non-selling Shareholder will be deemed to have
accepted the terms of such Notice of Proposed Sale if it agrees to pay the fair
market value of such securities. If such securities are traded on a nationally
recognized securities exchange, the fair market value of such securities
component shall be the closing price of such securities on the date of such
Notice of Proposed Sale or if not so traded, the fair market value of such
securities will be determined by an Independent Valuer in accordance with
Article 14. If the non-selling Shareholder(s) have not given notice to the
Selling Shareholder of their agreement to purchase the Selling Shareholder's
Joint Venture Interest within the Acceptance Period prescribed above, then the
Selling Shareholder shall be free to consummate the sale of its Joint Venture
Interest within sixty (60) days on such terms and conditions that are no less
favorable to the Selling Shareholder than the terms and conditions specified in
such Notice of Proposed Sale. If such sale is not consummated within such sixty
(60) day period immediately following the Acceptance Period, then any sale of
such Selling Shareholder's Joint Venture Interest must comply with the
provisions of this Section 11.2 and a new Notice of Proposed Sale shall be
provided to the non selling Shareholder(s).
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11.3 Assignment to Affiliate. Notwithstanding anything to the contrary
stated herein, a Shareholder's Joint Venture Interest or any rights or
obligations of such Shareholder hereunder may be assigned to any Affiliate of
such Shareholder who becomes a party to this Joint Venture Agreement pursuant to
Section 11.7; provided, that the assigning Shareholder shall remain liable as
the primary obligor of such Shareholder's obligations under this Joint Venture
Agreement and subject to the provisions of Sections 6.9 and 6.13 and upon the
reasonable request of the Board of Directors such Shareholder shall execute any
and all documentation deemed reasonable and desirable to effectuate such
continuing obligation; provided, further, that in the event that any such
assignee shall cease to be a Affiliate of the assigning party, such assignee
shall promptly assign such Joint Venture Interest or rights or obligations
hereunder back to the original assignor. Notwithstanding the foregoing, a
Shareholder may be released in whole or in part from its obligations under this
Joint Venture Agreement in connection with any such assignment upon the
unanimous approval of the remaining Shareholders.
11.4 Deemed Offer of Shares Upon Buy-Out Event. Upon the occurrence of
a Buy-Out Event, the Shares of the Shareholder with respect to whom a Buy-Out
Event occurs (the "TRANSFERRING SHAREHOLDER") are deemed to be offered for
transfer to (i) the other Shareholders, and (ii) the Company, on the terms and
conditions set out in Section 11.5 in due accordance with the provisions of the
Memorandum of Association, subject to the following:
(a) Priority of Purchase Right. The Shareholders shall have
priority over the Company in the exercise of their right to purchase
Shares following a Buy-Out Event. The Shareholders shall notify the
Company within 30 days of their being informed of the occurrence of the
Buy Out Event and the purchase consideration for the Shares. If more
than one Shareholder offers to purchase the Shares subject to the
Buy-Out Event, the Shares to be acquired from the Transferring
Shareholder shall be apportioned between the purchasers pro-rata
according to their respective Agreed Proportions.
(b) No Purchase Effected. Subject to sub-section (c) below, if
the Shares so offered, or any portion thereof, are not purchased by the
other Shareholders or the Company, the Transferring Shareholder may
retain its Shares.
(c) Retention of Shares. In the event that a Transferring
Shareholder elects to retain its Joint Venture Interest following the
occurrence of a Buy-Out Event the following terms and conditions shall
apply:
(i) such Transferring Shareholder shall
voluntarily relinquish its rights to make
nominations for the appointment of Directors
of the Company under Article 12 and/or the
Chief Executive Officer under Section 4.3,
as applicable as well as relinquish its
rights for Required Shareholder Approvals
under Section 7.4; and
(ii) such Transferring Shareholder shall take all
actions and execute all such documentation
as is deemed necessary or desirable by the
Board of Directors to relinquish such power,
including, but not limited to entering into
a voting agreement in which such
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Transferring Shareholder agrees to vote in
favor of the dismissal of those members of
the Board of Directors that were appointed
upon the nomination of such Transferring
Shareholder.
11.5 Terms of Contract The terms of a contract arising under Section
11.4 are as follows:
(a) the purchase consideration is the fair market value of the
Shares of the Transferring Shareholder as agreed between the
Shareholders within thirty (30) days of the Buy-Out Event or, failing
agreement between the Shareholders, determined by the Independent
Valuer in accordance with Article 14;
(b) the Transferring Shareholder warrants that:
(i) it has, or on the date of completion of the
sale and purchase will have, a clear and
unencumbered title to each of the Shares the
subject matter of the sale and purchase; and
(ii) each of the Shares the subject matter of the
sale and purchase is sold free from any
encumbrance and shall be transferred with
all rights and obligations appurtenant
thereto;
(c) the Transferring Shareholder must pay any stamp duty or
other transfer taxes payable on transfer of the Transferring
Shareholder's Shares;
(d) completion is subject to, and conditional upon, any
necessary regulatory approvals (which the Transferring Shareholder and
the purchasing Shareholder(s) undertake to use all reasonable efforts
to obtain);
(e) subject to satisfaction of any condition precedent
referred to Section 11.5(d) completion must occur within ten (10) days
after the Independent Valuer has determined the fair market value of
the Transferring Shareholder's Shares; and
(f) at completion, the Transferring Shareholder must tender to
the other Shareholder(s) against a bank check for the purchase
consideration calculated in accordance with Section 11.5(a):
(i) in respect of all the Transferring
Shareholder's Shares, the share certificates
and duly executed instruments of transfer in
registrable form naming as transferee the
other Shareholder(s) or its nominee(s), as
applicable;
(ii) the written resignations of each Director
appointed by the Transferring Shareholder;
and
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(iii) any other document which the other
Shareholder(s) require to obtain good title
to the Shares and to enable the other
Shareholder(s) to procure the registration
of the Shares in its name or the names of
its nominee(s), as applicable.
11.6 Attorney. Each Shareholder irrevocably appoints every Director
from time to time, jointly and severally, as its attorney and attorneys, on its
behalf and in its name to transfer its Shares in accordance with Section 11.5 to
execute under hand or under seal and deliver (conditionally or unconditionally)
in any place that the attorney chooses any instrument of transfer in respect of
those Shares and any other documents that in the opinion of the attorney are
necessary to carry out any of the provisions of Section 11.5.
11.7 Deed of Ratification and Accession. The Shareholders must procure
that the Board of Directors does not register a person (who at the time of
registration is not a Shareholder) as a Shareholder whether pursuant to:
(a) an issue of additional Shares;
(b) a transfer of Shares; or
(c) otherwise,
unless that person has first entered into a deed of ratification and accession
agreeing to be bound by the terms and conditions of this Joint Venture Agreement
as a Shareholder of the Company.
11.8 Issuance of Additional Shares.
(a) Generally. Subject to required Board and Shareholder
approvals, the Company may from time to time offer and issue additional
Shares to any person in such amounts, on such terms and conditions and
for such consideration as the Company's Board from time to time may
determine; provided, that prior to the issuance of any Shares to any
such person, such person shall first have executed a deed of
ratification and accession and become a party to this Joint Venture
Agreement unless otherwise unanimously agreed by the Board.
(b) Employee Share Ownership. Subject to Board approval, the
Shareholders agree to consider the adoption of an employee incentive
stock option scheme, pursuant to the provisions of the applicable law
of the Company's jurisdiction of organization or in the alternative the
Board may approve a warrant type stock option plan. In such case, each
of the Shareholders of the Company shall be diluted proportionately.
11.9 Failure to Make Capital Contributions. In the event that any
Shareholder shall fail to pay within thirty (30) days following the date due any
of (i) its Initial Capital Contribution pursuant to Section 3.1, or (ii) any
Required Additional Capital Contributions or Further Contributions under
Sections 5.1 or 5.3, respectively (such Shareholder, a "DEFAULTING
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SHAREHOLDER") then, EXODUS in the case of ASIA GLOBAL CROSSING and ASIA GLOBAL
CROSSING in the case of EXODUS, shall have the right, which right shall be the
exclusive remedy of such Shareholder hereunder to elect to: (i) exclude the
Defaulting Shareholder(s) from making any further Required Equity Capital
Contributions pursuant to Section 5.1 or otherwise and such Defaulting
Shareholder(s)' interests shall be diluted accordingly upon any further capital
contributions made to the Company by the remaining non-Defaulting
Shareholder(s), and, (ii) solely in the event such failure results in a material
adverse effect upon the Company, approve those items otherwise requiring
unanimous approval of the Shareholders specified in Section 7.4(a) shall be
approved by a simple majority vote of the Company's Board.
11.10 Tag-Along Rights.
(a) Subject to Section 11.10(e), in the event that any
Shareholder (the "SELLER") proposes to Dispose of any Shares then
collectively held by it and its Affiliates, other than to an Affiliate
in accordance with Section 11.3, then each other Shareholder shall have
the right (the "TAG-ALONG RIGHT") to require the proposed purchaser to
purchase from such other Shareholder up to the number of whole Shares
not to exceed the number derived from the following formula:
N x TS = Tag
S
where
N = total number of Shares owned by such other Shareholder
TS = total number of Shares proposed to be Disposed of by
the Seller
S = total number of Shares owned by the Seller immediately
prior to the Disposition
Tag = number of Shares in respect of which such other
Shareholder may exercise Tag-Along Rights.
Any Shares purchased from the other Shareholders pursuant to this
Section 11.10 shall be paid for in the same consideration received by
the Seller at the same price per Share and upon the same terms and
conditions as the proposed Disposition by the Seller; provided, however,
that in no event shall such other Shareholder be required to make any
representations or provide any indemnities with respect to matters
relating solely to the Seller.
(b) The Tag-Along Right may be exercised by the other
Shareholders by delivery of a written notice to the Seller (the
"TAG-ALONG NOTICE") within fifteen (15) days following delivery of the
Notice of Proposed Sale by the Seller. The Tag-Along Notice shall state
the amount of Shares that such other Shareholder proposes to include in
such Disposition to the proposed purchaser (not to exceed the number
determined as aforesaid).
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If a Shareholder has not so delivered a Tag-Along Notice as set forth
above it shall be deemed to have waived all of its rights with respect
to participating in the Transfer, and the Seller shall thereafter be
free (subject to Section 11.9(d)) to sell to the proposed purchaser, at
a price no greater than the price for such Shares set forth in the
Tag-along Notice and on other principal terms which are not more
favorable to the Seller than those set forth in the Notice of Proposed
Sale, without any further obligation to such other Shareholder. If,
prior to consummation, the terms of such proposed Disposition shall
change with the result that the price shall be greater than the Share
price for such Shares set forth in the Notice of Proposed Sale or the
other principal terms shall be substantially more favorable to the
Seller than those set forth in the Notice of Proposed Sale, it shall be
necessary for a separate Notice of Proposed Sale to be furnished, and
the terms and provisions of this Section 11.10 separately complied
with, in order to consummate such proposed Disposition pursuant to this
Section 11.10.
(c) The acceptance of any other Shareholders shall be
irrevocable except as hereinafter provided, and each accepting
Shareholder shall be severally bound and obligated to sell in the
Disposition on the same terms and conditions with respect to each Share
sold as the Seller, such number of Shares as such other Shareholders
shall have specified in such Tag-Along Notice; provided, however, that
in the event there is any change in the price or terms of the proposed
Disposition, the Seller shall notify the other Shareholders of such
changes and such other Shareholder have the right to withdraw its
Tag-Along Notice, in whole or in part. In the event the Seller shall be
unable to obtain the inclusion in the Disposition of the entire number
of Shares which the Seller and the other Shareholders desire to have
included in the Disposition (as evidenced in the case of the Seller by
the Sale Notice and in the case of the other Shareholders by the
Tag-along Notice), the number of Shares to be sold in the Disposition by
each of the Seller and the Other Shareholders shall be reduced on a pro
rata basis in accordance with their respective Agreed Proportions.
(d) If at the end of the 120th day following the date of the
delivery of the Sale Notice the Seller has not completed the Disposition
(other than as a result of a breach of this Agreement by such other
Shareholders), such other Shareholders shall be released from their
obligations under their Tag-along Notice, the Sale Notice shall be null
and void, and it shall be necessary for a separate Sale Notice to be
furnished, and the terms and provisions of this Section 11.10 separately
complied with, in order to consummate such Transfer pursuant to this
Section 11.10.
(e) The exercise or non-exercise of the rights of any
Shareholder to participate in one or more Dispositions of Shares shall
not adversely affect such Shareholder's right to participate in
subsequent Dispositions of Shares.
11.11 Termination of Restrictions on Transfer. The provisions of this
Article 11 restricting a Shareholder's ability to transfer its Shares shall
expire and be of no further force and effect upon the consummation of an
underwritten initial public offering of the Shares of the
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Company approved by the Company's Board of Directors in which the Company shall
receive cash proceeds of not less than $35 Million (net of underwriting
discounts and commissions.).
11.12 Mandatory Initial Public Offering; Registration Rights. Unless a
Qualified Initial Public Offering shall previously have been consummated, upon
receipt of a written request by ASIA GLOBAL CROSSING at any time on or after the
third anniversary of the Closing, the Company shall consummate as soon as
practicable a Qualified Initial Public Offering; provided, however, that such
offering may be delayed for up to one year if such delay is reasonably prudent
as a result of market conditions at such time. In connection with the
consummation of such Qualified Initial Public Offering, the Company shall agree
to provide customary "venture capital" registration rights to ASIA GLOBAL
CROSSING and EXODUS. For purposes of this Agreement, a "QUALIFIED INITIAL PUBLIC
OFFERING" shall mean an underwritten, firm commitment public offering of the
Shares in the United States that results in the receipt by the Company of cash
proceeds of at least $35 million (net of underwriting discounts and
commissions).
ARTICLE 12:
VOTING AGREEMENT
12.1 Election, Suspension and Dismissal of Directors; Election of Chief
Executive Officer. The Shareholders hereby acknowledge and agree to vote to
elect at any general or special meeting of Shareholders considering such matter
as Directors of the Company those nominees designated by EXODUS (4) and ASIA
GLOBAL CROSSING (2), as provided herein and to elect the Chief Executive Officer
as designated pursuant to Section 4.3. Further, the Shareholders hereby agree to
vote in favor of any resolution for the suspension or dismissal of a Director
made subject to a vote of any general or special meeting of Shareholders in
accordance with Section 7.2(b) hereof.
12.2 Dissolution of the Company. In the event of the serving of a
Termination Notice or an EXODUS Termination Notice pursuant to 3.3(d),
respectively, the Shareholders agree to adopt and approve a resolution for the
dissolution and winding up of the Company pursuant to Article 13.
ARTICLE 13:
DISSOLUTION AND WINDING UP
The Company shall be dissolved and wound up upon the resolution of the
Shareholders pursuant to Section 7.4 pursuant to a proposal approved and
unanimously adopted by the Board of Directors or upon the serving of a
Termination Notice or EXODUS Termination Notice pursuant to Section 3.3(c) or
Section 3.3(d), respectively. The Board shall supervise the liquidation and
winding up of the Company.
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ARTICLE 14:
INDEPENDENT VALUATION
14.1 Application of Article. This Article 14 applies where the
Shareholders are required to obtain an independent valuation of Shares under the
Joint Venture Agreement.
14.2 Appointment of Independent Valuer.
(a) If this Article 14 applies, the Board shall appoint a
suitably qualified and experienced independent valuer, corporate
adviser, chartered accountant, investment banker or merchant banker as
an Independent Valuer to determine the value of each Share in
accordance with this Article 14.
(b) If the Board fails to appoint a person as contemplated by
Section 14.2(a), the Independent Valuer will be appointed by KPMG. In
appointing the Independent Valuer, KPMG must ensure that the
Independent Valuer satisfies the criteria set out in paragraph (c)
below;
(c) The Independent Valuer must not have had any business
dealings with any Shareholder or any of its Affiliates in the two years
before the date of appointment.
14.3 Valuation. The Independent Valuer must be instructed to determine
the fair market value of the Shares by valuing the Company (including any
subsidiary of the Company) as a whole on a going concern basis (taking into
account the terms of this Joint Venture Agreement and the Related Agreements) as
at the end of the month before the month in which the Independent Valuer is
appointed under this Article 14 ('VALUATION DATE'). In making his valuation, the
Independent Valuer shall assume that the event which has given rise to the
appointment of the Independent Valuer has occurred even if, as of the Valuation
Date, it had not occurred. The fair market value of each Share will be the
proportionate amount of the value of the Company which that Share represents
when compared to the total number of Shares.
14.4 Access to Information. The Board shall ensure that the Independent
Valuer has a right of access at all reasonable times to the accounting records
and other records of the Company (including any subsidiary of the Company) and
is entitled to require from any officer of the Company any information and
explanation which the Independent Valuer requires to value the Company.
14.5 Period of Determination. The Board must use commercially
reasonable efforts to ensure that the Independent Valuer makes a determination
as soon as practicable and in any event within sixty (60) days after
appointment.
14.6 Process. The Shareholders agree that, in determining a value for
the Shares under this Article 14, the Independent Valuer:
(a) will act as an expert and not as an arbitrator;
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(b) may obtain or refer to any documents, information or
material and undertake any inspections or inquiries as he or she
determines appropriate;
(c) must provide the Shareholders with a draft of his or her
determination and must give the Shareholders a reasonable opportunity
to comment on the draft determination before it is finalized; and
(d) may engage any assistance which he or she reasonably
believes is appropriate or necessary to make a determination.
14.7 Final and Binding. The Independent Valuer's determination will be
final and binding on the Shareholders.
14.8 Costs. The Shareholders will each bear a pro-rata share of the
costs and expenses of the Independent Valuer in accordance with the Agreed
Proportions.
ARTICLE 15:
MISCELLANEOUS PROVISIONS
15.1 Governing Law. This Joint Venture Agreement and the rights and
liabilities of the Shareholders hereunder, shall be governed by and construed in
accordance with the laws of Bermuda.
15.2 Captions. Captions contained in this Joint Venture Agreement are
inserted only as a matter of convenience and in no way define, limit, extend or
describe the scope of this Joint Venture Agreement or the intent of any
provision hereof.
15.3 Construction. References in this Joint Venture Agreement to a
statute or statutory instrument include a statute or statutory instrument
amending, consolidating or replacing them, and references to a statue include
statutory instruments and regulations made pursuant to it. Whenever the context
may require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. This Joint Venture Agreement has been
negotiated by the Shareholders hereto, each of which has been independently
represented by counsel and shall be interpreted in accordance with its terms
without any strict construction for or against any Shareholder.
15.4 Language. This Joint Venture Agreement is in the English language
only, which language shall be controlling in all respects, and all versions of
this Joint Venture Agreement in any other language shall be for accommodation
only and shall not be binding on the Shareholders to this Joint Venture
Agreement. All communications and notices made or given pursuant to this Joint
Venture Agreement, and all documentation and support to be provided, unless
otherwise noted, shall be in the English version.
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15.5 Survival. All representations and warranties herein shall survive
until the dissolution and final liquidation of the Company, except to the extent
that a representation or warranty expressly provides otherwise. In addition
Article 8 (Dispute Resolution), Article 9 (Limitation on Damages; Contractual
Limitation Period), Article 10 (Confidentiality; Public Announcements), Article
15 (Miscellaneous) and Article 16 (Waiver of Conflict of Interest) shall survive
the expiration or earlier termination of this Joint Venture Agreement.
15.6 Severability. Every provision of this Joint Venture Agreement is
intended to be severable. If any term or provision hereto is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity of the remainder of the terms or provisions of this Joint Venture
Agreement and the Shareholders agree that they will negotiate in good faith to
achieve an agreement that produces the same or a substantially similar result.
15.7 Assignment; Successors. Except as otherwise set forth herein,
neither party may assign or delegate any of its rights or obligations hereunder.
Any assignment or delegation in derogation of this Section 15.7 shall be null
and void. Subject to the limitations on transferability contained herein, each
and all of the covenants, terms, provisions and agreements herein contained in
shall be binding upon and inure to the benefit of the successors and assigns
(including an assignee of all or part of an interest in the Company ) of the
respective Shareholders hereto.
15.8 Execution and Counterparts. This Joint Venture Agreement and any
amendment hereto may be executed in multiple counterparts, each of which shall
be deemed an original and all of which together shall constitute one agreement.
In addition, this Joint Venture Agreement may be executed through the use of
counterpart signature pages. The signature of any Shareholder on any counterpart
agreement or counterpart signature page shall be deemed to be a signature to,
and may be appended to, one document.
15.9 Third Party Beneficiary. No provision of this Joint Venture
Agreement is intended to be for the benefit of or enforceable by any third party
except for the Company.
15.10 No Agency. Nothing in this Joint Venture Agreement or the
Schedules hereto shall be deemed to create any partnership or agency
relationship between any Shareholders or between all the Shareholders. The
Shareholders and the Company are each independent companies who shall operate
with each other in arm's length transactions. No Shareholder nor the Company
shall be entitled to act on behalf of and/or bind any one or more of the others
without prior written authorization establishing its authority to do so.
15.11 Entire Agreement. This Joint Venture Agreement, together with all
Schedules thereto, and the Related Agreements, collectively set out the entire
understanding and agreement between the Shareholders with respect to the matters
specifically addressed herein and therein and merger and supersedes all previous
communications, negotiations, representations and agreements, either oral or
written, with respect to the subject matter hereof and thereof. No agreements,
guarantees or representations, whether oral or in writing, have been concluded,
issued or made, upon which any Shareholder is relying in concluding this Joint
Venture Agreement and the Related Agreements except to the extent expressly set
out herein or therein.
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15.12 Amendment. The amendment of this Joint Venture Agreement shall
require the written consent or affirmative vote of each Shareholder hereto.
15.13 Notices. Any notice, consent, election, approval, payment,
demand, or communication required or permitted to be given by this Joint Venture
Agreement shall be in writing, must be in English and shall be deemed to have
been sufficiently given or served for all purposes if delivered personally or by
facsimile to the Shareholder or to an officer of the Shareholder to which
directed or if sent by registered or certified mail, postage and charges
prepaid, addressed to the address contained in the records of the Company. Any
such notice shall be deemed to be given on the date on which it was delivered
personally, sent by facsimile with transmission confirmation (provided that the
Shareholder giving notice shall also have deposited such notice for mailing
pursuant to the provisions of this Section 15.13) or three (3) calendar days
(or, if to an address outside the United States, seven (7) calendar days) after
deposited in a regularly maintained receptacle for the deposit of United States
Air Mail addressed as set out above. Any Shareholder may change its address for
purposes of this Joint Venture Agreement by giving the other Shareholders notice
of such change in the manner as set out above.
15.14 Further Documents. The Shareholders hereto agree to execute and
deliver to each other and/or to the Company, as the case may be, all such
additional instruments, to provide all such information, and to do or refrain
from doing all such further acts and things as may be necessary or as my be
reasonably requested by any Shareholder hereto, more fully to vest in, and to
assure each Shareholder of, all rights, powers, privileges, and remedies, herein
intended to be granted or conferred upon such Shareholder or the Company.
15.15 Action by the Company. Wherever in this Joint Venture Agreement
it states that any action is to be taken by the Company, it shall mean that the
Shareholders to this Joint Venture Agreement shall endeavor to use all
reasonable efforts as Shareholders of the Company to cause the Company to take
such action as herein described.
15.16 Several Liability. The obligations of each of the Shareholders
under this Joint Venture Agreement are several and not joint.
15.17 Fees and Expenses. Each party will pay its own fees and expenses
in connection with the formation of the Company and the preparation and
negotiation of this Joint Venture Agreement and the Related Agreements.
15.18 Prevalence of Agreement. In the event of any ambiguity or
conflict arising between the terms of this Joint Venture Agreement and those of
the Memorandum of Association of the Company, the terms of this Joint Venture
Agreement shall prevail as between the Parties except as otherwise provided by
applicable law.
15.19 Precedence. The provisions of this Joint Venture Agreement shall
prevail over any inconsistencies or conflicting provisions of any of the Related
Agreements.
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ARTICLE 16:
WAIVER OF CONFLICT OF INTEREST
EACH OF THE SHAREHOLDERS HAS BEEN REPRESENTED BY SEPARATE COUNSEL IN
CONNECTION WITH THIS JOINT VENTURE AGREEMENT AND THE RELATED AGREEMENTS. SUCH
COUNSEL HAS NOT REPRESENTED THE COMPANY TO DATE. THE LAWYERS, ACCOUNTANTS AND
OTHER EXPERTS WHO HAVE PERFORMED SERVICES FOR THE SHAREHOLDERS IN THE PAST MAY
PERFORM SERVICES FOR THE COMPANY AND MAY CONTINUE TO ALSO PERFORM SERVICES FOR
THE SEPARATE SHAREHOLDERS IN THE FUTURE. TO THE EXTENT THAT SUCH DUAL
REPRESENTATION CONSTITUTES A CONFLICT OF INTEREST, THE COMPANY AND EACH OF THE
SHAREHOLDERS HEREBY EXPRESSLY WAIVE ANY SUCH CONFLICT OF INTEREST WITH RESPECT
TO ANY SUCH DUAL REPRESENTATION RELATIVE TO THE NEGOTIATION, AUTHORSHIP AND
EXECUTION OF THIS JOINT VENTURE AGREEMENT AND THE RELATED AGREEMENTS.
(REMAINDER OF THIS PAGE INTENTIONALLY BLANK)
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IN WITNESS WHEREOF, the undersigned have each executed or caused this Joint
Venture Agreement to be executed as of the date and year first above written.
EXODUS COMMUNICATIONS, INC., a ASIA GLOBAL CROSSING, LTD., a
Delaware corporation company organized under the laws of
Bermuda
By: _______________________________ By: _______________________________
(SIGNATURE) (SIGNATURE)
Its: ______________________________ Its: ______________________________
(TITLE) (TITLE)
EXODUS ASIA-PACIFIC LTD, a company
organized under the laws of Bermuda
By: _______________________________
(SIGNATURE)
Its: ______________________________
(TITLE)
[SIGNATURE PAGE TO JOINT VENTURE AGREEMENT]
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