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EXHIBIT 10.38
C1.
DATED MARCH 1999
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ABOVENET COMMUNICATIONS INC
▇▇. ▇. ▇▇▇▇▇▇ AND ▇▇. ▇. ▇▇▇▇▇▇▇▇
- and -
ABOVENET UK LIMITED
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SHAREHOLDERS AGREEMENT
RELATING TO
ABOVENET UK LIMITED
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▇▇▇▇▇ ▇▇▇▇▇
Watchmaker Court
▇▇ ▇▇. ▇▇▇▇'▇ ▇▇▇▇
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▇▇▇▇ ▇▇▇
Tel: ▇▇▇▇-▇▇▇ ▇▇▇▇
Fax: ▇▇▇▇-▇▇▇ ▇▇▇▇
Ref: RLH/RAC/334107
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CONTENTS
Clause No. Page
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1. INTERPRETATION.......................................................................1
2. ESTABLISHMENT OF THE COMPANY.........................................................6
3. WARRANTIES BY FOUNDERS...............................................................7
4. OBJECTIVES OF THE COMPANY............................................................7
5. DIRECTORS AND CHAIRMAN...............................................................8
6. BOARD MEETINGS.......................................................................9
7. SECRETARY...........................................................................10
8. REGISTERED OFFICE...................................................................10
9. AUDITORS............................................................................10
10. ACCOUNTING REFERENCE DATE...........................................................10
11. BANKERS.............................................................................10
12. COMPANY BOOKS RECORDS AND ACCOUNTS..................................................11
13. OPERATION OF THE COMPANY............................................................12
14. KEY EMPLOYEES.......................................................................16
15. INSURANCE OBLIGATIONS...............................................................16
16. EMPLOYEE SHARE OPTION SCHEME(S).....................................................17
17. DUE ADMINISTRATION OF THE COMPANY...................................................18
18. GLOBAL TECHNICAL COMMITTEE..........................................................19
19. TRANSFER OF SHARES..................................................................19
20. CHARGING OF SHARES..................................................................27
21. FINANCE.............................................................................28
22. DIVIDEND POLICY.....................................................................30
23. PURCHASE OPTION.....................................................................31
24. DEFAULT.............................................................................35
25. LEGEND ON SHARE CERTIFICATES........................................................42
26. CONFIDENTIALITY AND DISCLOSURE......................................................42
27. NON-COMPETITION.....................................................................43
28. NON-SOLICITATION....................................................................43
29. ASSIGNMENT..........................................................................44
30. PROPRIETARY KNOW-HOW................................................................45
31. NAMES...............................................................................45
32. TERM................................................................................45
33. INTEREST............................................................................46
34. SEVERABILITY........................................................................46
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35. CONFLICT WITH ARTICLES..............................................................46
36. NO PARTNERSHIP......................................................................47
37. FURTHER ASSURANCE...................................................................47
38. COSTS...............................................................................47
39. ENTIRE AGREEMENT....................................................................47
40. VARIATION...........................................................................48
41. WAIVER/FORBEARANCE..................................................................48
42. EXECUTION IN COUNTERPARTS...........................................................48
43. NOTICES.............................................................................48
44. GOVERNING LAW AND JURISDICTION......................................................50
THE SCHEDULE (FORM OF SUPPLEMENTAL DEED).................................................51
AGREED TERM DOCUMENTS:
A. Articles of Association
B. Draft Business Plan
▇. ▇▇▇▇▇▇ Service Agreement
▇. ▇▇▇▇▇▇▇▇ Service Agreement
E. Key Employee Agreements
F. Licence Agreement
G. Stock Purchase Agreement
H. Loan Note Instrument
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SHAREHOLDERS AGREEMENT
DATE: March 1999
PARTIES:
(1) ABOVENET COMMUNICATIONS, INC a corporation incorporated in the State of
California USA on 8 March 1996 and reincorporated in the State of
Delaware, USA in November 1998 whose business address is ▇▇, ▇. ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ SE1010, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇ (together with
its successors in title and permitted assigns `Inc'); and
(2) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇ of ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (together with
their respective successors in title "the Founders", which expression
shall include either or both of them); and
(3) ABOVENET UK LIMITED a company incorporated in England (CR No. 3740487)
whose registered office is situate at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ (together with its successors in title and permitted assigns `the
Company').
RECITALS:
(A) The Company is a private company incorporated in England on 22 March
1999 under the Companies Acts 1985 and 1989 and has at the date hereof
an authorised share capital of Pound Sterling1,111,000 divided into
1,111,000 Ordinary Shares of Pound Sterling1.00 each, 600,000 of which
shares have been issued fully paid to the Founders
(B) The parties have agreed to procure that the business of the Company is
conducted in accordance with the provisions of this Agreement.
OPERATIVE PROVISIONS:
1. INTERPRETATION
In this Deed and its Recitals and Schedules:
`Affiliate' means with respect to any person (a) any entity of which the
ownership interests conferring a majority of votes at meetings of
interest owners of such entity are owned directly or indirectly by such
person or (b) any entity which owns, directly
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or indirectly, ownership interests of such person conferring a majority
of votes at meetings of interest owners of such person or (c) any entity
of which the ownership interests conferring a majority of votes at
meetings of interest owners of such person are owned directly or
indirectly, by an entity which also owns ownership interests conferring
a majority of votes at meetings of interest owners of such person or (d)
any participator in relation to any such entity or a director of any
such entity or any associate or relative of either thereof (if an
individual) (all as such terms are defined in Section 417 of the Taxes
Act)
`in the Agreed Terms' means in the form of an annexed draft agreed
between the parties and initialed by way of identification by the
parties or their respective legal advisers
`the Articles' means the Articles of Association of the Company to be
adopted pursuant to Clause 2.1.1 as amended from time to time
`an `A' Director' means a director appointed by the holder or holders of
the `A' Shares in accordance with Article 16 of the Articles and unless
otherwise stated, includes his duly appointed alternate
``A' Shares' means the `A' Ordinary Shares of Pound Sterling1.00 each
more particularly referred to in Clause 2.1.5 and any other shares so
designated or, where the context so admits, so many thereof as may from
time to time be in issue
`a `B' Director' means a director appointed by the holder or holders of
75% in nominal value of the `B' Shares in accordance with Article 16 of
the Articles and unless otherwise stated, includes his duly appointed
alternate
``B' Shares' means the `B' Ordinary Shares of Pound Sterling1.00 each
more particularly referred to in Clause 2.1.5 and any other shares so
designated, or where the context so admits, so many thereof as may from
time to time be in issue
`the Board' means the board of directors of the Company for the time
being or from time to time
`the Business' means the business of establishing and operating an
Internet Co-location Centre and Internet Service Exchange, including
occupying and maintaining a property for an Internet Co-location Centre,
operating related local network infrastructure in cooperation with Inc,
and marketing and sales activities relating to the sale of services and
products detailed in the Licence Agreement
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`the Business Plan' means the four year business plan in the form to be
agreed by the Original Shareholders pursuant to Clause 2.2 but pending
such agreement shall mean the Draft Business Plan
``C' Shares' means the `C' Ordinary Shares of Pound Sterling1.00 each
more particularly referred to in Clause 2.1.5 and any other shares so
designated, or where the context so admits, so many thereof as may from
time to time be in issue
`Controlling Interest' means in relation to any company the holding
(directly or indirectly) of more than 50 per cent of the Equity Share
Capital of that company or the ability to direct the casting of more
than 50 per cent of the votes normally entitled to be cast at a
shareholders' meeting of that company and for the purposes of
ascertaining whether any Person shall have a Controlling Interest (as
defined) account shall also be taken of the shareholding or voting
rights held by any Affiliate of that Person
`Convertible Loan Notes' means convertible loan notes of the Company
constituted by the Loan Note Instrument
`Director' means any director for the time being of the Company
including where applicable any alternate director
`Draft Business Plan' means the draft four year business plan in the
Agreed Terms
`the Effective Date' means the date on which the various matters
referred to in Clause 2.1 are completed
`Equity Share Capital' shall have the meaning ascribed to such
expression by Section 744 of the UK Companies ▇▇▇ ▇▇▇▇
`Financial Year' means the financial year (as defined in the UK
Companies Act 1985) of the Company, being the year from 22 March 1999 to
30 June 2000 and thereafter the year ending on 30 June in each year
`Group Company' means, in relation to any company, any Holding Company
of that company and any Subsidiary of that company or of any of its
Holding Companies
`Inc's Original Holding' means the 133,334 `A' Shares subscribed by Inc
pursuant to Clause 2.1.6, any further `A' Shares subscribed by it
pursuant to Clause 2.2 and any
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`A' Shares acquired by it as a consequence of exercising its conversion
rights under any Convertible Loan Note(s)
`ISP' means an internet service provider
`Key Employees' means such senior employees of the Company as the Board
shall from time to time determine
`Key Employee Agreement' means an agreement to be entered into between
the Company and each of the Key Employees, each such agreement being in
or substantially in the Agreed Terms
`Licence Agreement' means the License, Connectivity and Marketing
Agreement between Inc (1) and the Company (2) in the Agreed Terms
`Loan Note Instrument' means the instrument constituting Pound
Sterling1,200,000 5 per cent Convertible Loan Notes of the Company in
the Agreed Terms
`▇▇. ▇▇▇▇▇▇' means ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, one of the Founders
`the Dobbie Service Agreement' means the service agreement between the
Company (1) and ▇▇. ▇▇▇▇▇▇ (2) in the Agreed Terms
"▇▇. ▇▇▇▇▇▇▇▇" means ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, one of the Founders
`the MacSween Service Agreement' means the service agreement between the
Company (1) and ▇▇. ▇▇▇▇▇▇▇▇ (2) in the Agreed Terms
`Ordinary Shares' means the `A' Shares and/or (as the context requires)
the `B' Shares and/or (as the context requires) the `C' Shares in the
capital of the Company
`the Original Shareholders' means Inc and the Founders
`Person' includes and individual, corporation, unincorporated
association or partnership
`Retention Account' shall have the meaning ascribed to such expression
by Clause 2.3
`Share' means a share in the capital of the Company of whatever class
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`the Shareholders' means the Original Shareholders or any Person or
Persons to whom they lawfully transfer their Shares or who is or are
allotted Shares in the Company pursuant to the provisions of this
Agreement
`Subsidiary' and 'Holding Company' shall bear the meanings ascribed to
such expressions by Section 736 of the UK Companies ▇▇▇ ▇▇▇▇
`Supplemental Agreement' means an agreement entered into pursuant to
Clause29.2.
`Taxes Act' means the UK Income and Corporation Taxes ▇▇▇ ▇▇▇▇.
1.2 In this Agreement, references to any statutory provision shall include
such provision as from time to time amended, whether before on or (in
the case of re-enactment or consolidation only) after the date hereof,
and shall be deemed to include provisions of earlier legislation (as
from time to time amended) which have been re-enacted (with or without
modification) or replaced (directly or indirectly) by such provision and
shall further include all statutory instruments or orders from time to
time made pursuant thereto.
1.3 In this Agreement and its Schedules:
1.3.1 the neuter gender shall include the masculine and the feminine;
1.3.2 the singular number shall include the plural and vice versa;
1.3.3 the headings are inserted for convenience only and shall not
affect the construction or interpretation of this Agreement; and
1.3.4 references to Recitals, Clauses and Schedules and sub-divisions
thereof, unless a contrary intention appears, are to the
Recitals and Clauses of and Schedules to this Agreement and
sub-divisions thereof respectively.
1.4 The Schedules form part of this Agreement and shall be construed and
shall have the same full force and effect as if expressly set out in the
body of this Agreement.
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ESTABLISHMENT OF THE COMPANY
2.1 Forthwith upon the execution of this Agreement each of the Original
Shareholders shall itself take or (as appropriate) shall cause to be
taken at directors' meetings and shareholders meetings of the Company
the following steps in the following order:-
2.1.1 the increase of the authorised share capital of the Company to
Pound Sterling2,311,000 by the creation of 1,200,000 Ordinary
Shares of Pound Sterling1 each
2.1.2 the adoption by the Company of new Articles of Association in
the Agreed Terms;
2.1.3 the appointment of ▇▇▇▇▇ ▇▇▇▇ and (on a temporary basis) ▇▇▇▇
▇▇▇▇▇▇▇, each as an `A' Director of the Company who shall be
deemed so appointed pursuant to the Articles;
2.1.4 the redesignation of ▇▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇▇ as `B'
Directors of the Company who shall be deemed so appointed
pursuant to the Articles;
2.1.5 the redesignation of the existing issued Ordinary Shares in the
capital of the Company registered in the name of ▇▇ ▇▇▇▇▇▇ as
`B' Shares and the redesignation of the existing issued Ordinary
Shares in the capital of the Company registered in the name of
▇▇ ▇▇▇▇▇▇▇▇ as `B' Shares and the conversion and redesignation
of 1,600,000 of the remaining unissued shares as `A' Shares and
the balance of 111,000 of the unissued Shares as `C' Shares in
each case having the rights set out in the Articles;
2.1.6 Inc shall deliver to the Board an application for the allotment
and issue to it at a subscription price of Pound Sterling [*]
per share of 133,334 `A' Shares accompanied by payment in full
in cash of the subscription moneys of Pound Sterling [*];
2.1.7 the parties shall procure that a Board Meeting of the Company is
held at which the application referred to in Clause 2.1.6 shall
be approved and the shares applied for shall be allotted and
issued to Inc in accordance with its application;
2.1.8 Inc and the Company shall enter into the Licence Agreement;
2.1.9 ▇▇. ▇▇▇▇▇▇ and the Company shall enter into the Dobbie Service
Agreement; and
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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2.1.10 ▇▇. ▇▇▇▇▇▇▇▇ and the Company shall enter into the MacSween
Service Agreement.
2.2 The Original Shareholders shall in good faith seek to refine and
finalise the Draft Business Plan and to agree the form of the Business
Plan as soon as practicable following the Effective Date and in any
event by 30 April 1999. Within 30 days of such agreement, (subject to
each of the Founders having complied with Clause 15.1 and provided that
(i) neither the Company nor the Founders are in material breach of this
Agreement and (ii) the Company is not in material breach of the Licence
Agreement) Inc shall apply or procure applications from third parties
for an additional 266,666 `A' Shares at a subscription price of Pound
Sterling4.50 per share payable in full in cash on subscription. The
parties shall procure that a Board Meeting of the Company is held within
seven days of such application(s) at which such application(s) are
approved and the shares applied for shall be allotted and issued to the
applicant(s) in accordance with their respective applications.
2.3 The subscription moneys in respect of the application(s) referred to in
Clause 2.2 (namely Pound Sterling1,199,997) shall be credited to a
separate interest bearing bank account in the name of the Company ("the
Retention Account"), which account shall be opened by the Company as
soon as practicable following the Effective Date. No cheques may be
drawn on or amounts withdrawn from the Retention Account except in
accordance with Clause 11.3
3. WARRANTIES BY FOUNDERS
3.1 The Founders jointly and severally warrant and represent to Inc that no
charge, lien or other encumbrance exists or will be created over any
interest in all or any of the Shares held by them or either of them
(without the prior written consent of Inc acting reasonably provided
that such consent may be withheld or given or given subject to
reasonable conditions, as Inc may acting reasonably deem fit);
4. OBJECTIVES OF THE COMPANY
4.1 Each of the Shareholders undertakes with the others to use all
reasonable endeavours to procure (so far as it is able to do) that the
activities of the Company shall be limited to the Business.
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4.2 Each of the Shareholders undertakes with the others that it will use all
reasonable endeavours to procure that the Company shall conduct the
Business on sound commercial profit making principles so as to generate
the maximum achievable revenues.
4.3 Each of the Shareholders further undertakes that it will use its best
endeavours to promote the Business and the interests of the Company
Provided that this Clause 4.3 shall not apply to Inc or any Affiliate of
Inc at any time after the Licence Agreement has terminated or any of the
rights granted thereunder to the Company have ceased to be exclusive.
5. DIRECTORS AND CHAIRMAN
5.1 The maximum number of Directors holding office at any time shall be
seven.
5.2 Unless and until otherwise agreed between the Shareholders, Inc shall
have the right (but not the obligation) to appoint and maintain in
office from time to time up to two `A' Directors (or if and for so long
as there are more `A' Shares in issue than `B' Shares in issue, up to
three `A' Directors) and the persons holding not less than 75% in
nominal value of the `B' Shares shall have the right to appoint and
maintain in office from time to time up to three `B' Directors (or if
and for so long as there are more `A' Shares in issue than `B' Shares in
issue, up to two `B' Directors) and each shall have the right to remove
any director so appointed by it and to appoint another in his place
(such appointment and removal to be effected by notice in writing to the
Company).
5.3 In addition, the `A' Directors (if any) and the `B' Directors may by
notice to the Company together appoint up to two more persons with
relevant industry experience (and who are approved by all of them or if
there is no `A' Director, by the `B' Directors and Inc) as additional
directors. Any person so appointed may be removed and another appointed
in his place (such appointment and removal to be effected by notice in
writing to the Company signed by the `A' Directors and the `B' Directors
or, if there is no `A' Director, by the `B' Directors and someone duly
authorised on behalf of Inc).
5.4 The Chairman at any meeting of the Board shall not be entitled to a
second or casting vote nor shall the Chairman have a second or casting
vote in the case of an equality of votes at any general meeting of the
Company.
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5.5 If Inc does not exercise its right to maintain an `A' Director in
office, it shall nonetheless be entitled from time to time to appoint a
person to attend at meetings of the Directors as an observer and any
person so appointed ("an Observer") shall be given (at the same time as
the Directors) notice of all meetings of the Directors and all agendas,
minutes and other papers relating to such meetings.
5.6 An Observer shall be entitled to attend any and all meetings of the
Directors and to speak and place items on the agenda for discussion
provided that an Observer shall not be entitled in any circumstances to
vote. Inc may remove an Observer appointed by it and appoint another
person in his place. Any such appointment and removal shall be effected
by notice in writing to the Company signed by someone duly authorised on
behalf of Inc.
6. BOARD MEETINGS
6.1 The Shareholders shall procure that at all times during the continuance
of this Agreement meetings of the Board of the Company shall unless
otherwise agreed between the Shareholders be held at regular intervals
(and in any event not less frequently than once every quarter) and shall
be convened on not less than 30 days notice in writing to the Directors
and (if at any time there is no `A' Director) Inc accompanied by an
agenda specifying the business to be transacted.
6.2 With effect from 1 April 1999 the quorum necessary for the transaction
of the business of the Directors shall be two if no `A' Director is
appointed and three if an `A' Director has been appointed of whom
throughout the meeting one shall be an "A" Director (if any is
appointed) and one a "B" Director (a "Board Quorum"). A person who holds
office only as an alternate director shall, if his appointor is not
present, be counted in the quorum. Prior to 1 April 1999 a Board Quorum
shall comprise any two Directors.
6.3 If a Board Quorum is not present within half an hour from the time
appointed for the meeting, or if during the meeting a Board Quorum
ceases to be present, the meeting shall stand adjourned to the day 30
days following the date appointed for the meeting at the same time and
place or to such other time and place as the Directors may determine
(such adjourned meeting being called the "First Adjourned Meeting").
6.4 If a Board Quorum is not present within half an hour from the time
appointed for the First Adjourned Meeting, or if during the First
Adjourned Meeting a Board Quorum
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ceases to be present, the First Adjourned Meeting shall stand adjourned
to the same day in the next week at the same time and place or to such
other time and place as the Directors may determine (such further
adjourned meeting being called the "Second Adjourned Meeting")
6.5 If a Board Quorum is not present within half an hour from the time
appointed for the Second Adjourned Meeting, or if during the Second
Adjourned Meeting a Board Quorum ceases to be present the Directors
present shall be a quorum.
7. SECRETARY
7.1 ▇▇ ▇▇▇▇▇▇▇▇ (or such other person as may from time to time be determined
by the Board) shall act as the Secretary of the Company.
8. REGISTERED OFFICE
8.1 The registered office of the Company shall be ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇ or such other place in England as may from time to time be
determined by the Board and approved in writing by Inc.
9. AUDITORS
9.1 The auditors of the Company shall be Deliotte & Touche or such other
firm of Chartered Accountants of international standing and reputation
as may from time to time be the auditors of (or the United Kingdom
associate of the auditors of) Inc.
10. ACCOUNTING REFERENCE DATE
10.1 The accounting reference date of the Company for the purpose of Section
224 of the UK Companies ▇▇▇ ▇▇▇▇ shall be 30 June or such other date as
may from time to time be determined by the Board and approved in writing
by Inc.
11. BANKERS
11.1 The Company shall maintain bank accounts with Clydesdale Bank plc and/or
such other bank or banks as may from time to time be determined by the
Board and approved in writing by Inc.
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11.2 The Shareholders shall procure that all cheques drawn by the Company and
other withdrawals from the said accounts shall be signed or otherwise
authorised in accordance with the bank mandate from time to time
approved by Inc and the Board.
11.3 The Shareholders shall procure that save as Inc may otherwise agree in
writing from time to time, no cheques shall be drawn by the Company on
or other withdrawal made from the Retention Account:
11.3.1 save for expenditure and investments as envisaged in the
Business Plan; and
11.3.2 unless the same shall be signed or otherwise authorised by Mr.
▇▇▇▇ ▇▇▇▇▇▇ (or such other person as Inc may from time to time
nominate for the purpose by notice in writing to the Company).
12. COMPANY BOOKS RECORDS AND ACCOUNTS
12.1 The Shareholders shall procure that the Company shall keep such books
records and accounts in connection with its business and shall provide
such financial trading or other information regarding the affairs of the
Company as the Shareholders shall from time to time require and without
prejudice to the foregoing shall procure that the Company shall at all
times comply with the provisions of the UK Companies Acts 1985 and 1989
(or any statutory modification or re-enactment thereof) provided that
each of the Shareholders shall have the right at its own cost to call
for examine and inspect at all reasonable times the books records and
accounts of the Company and may appoint or authorise any Person to make
such examination and inspection on their behalf.
12.2 Notwithstanding the generality of Clause 12.1 the Shareholders shall
procure that the Company prepares and makes available to each of them:
12.2.1 quarterly financial statements within 15 days of the end of
the relevant quarter prepared in accordance with US GAAP;
12.2.2 profit forecasts cashflow forecasts and budgets for each
Financial Year prior to the commencement of each such
Financial Year.
12.2.3 audited annual financial statements within 30 days of the end
of the relevant Financial Year prepared in accordance with US
GAAP
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Provided that Inc shall reimburse to the Company the reasonable
additional cost to the Company of having any quarterly or annual
financial statements, initially prepared for the purposes of this
Clause 12.2 in accordance with UK accounting principles and practices,
brought into compliance with US GAAP.
12.3 The Shareholders shall use all reasonable endeavours to procure that
within six (6) months of the end of each Financial Year of the Company:
12.3.1 the auditors of the Company shall prepare and deliver proper
audited accounts in accordance with statutory requirements
together with the auditors statutory report in respect of
such Financial Year; and
12.3.2 that such audited accounts and auditors' report shall be laid
before the Company together with the directors' report
thereon for approval by the members of the Company in general
meeting.
13. OPERATION OF THE COMPANY
13.1 Each of the Shareholders covenants with the others that it shall
exercise all voting rights and other powers of control available to it
in relation to the Company so as to procure (insofar as it is able by
the exercise of such voting rights and powers) and the Company, to the
extent permitted by law, covenants with the Shareholders that the
Company shall not without the prior written consent of both Inc and both
of the Founders (such consent not to be unreasonably withheld or delayed
by any of them):-
13.1.1 make any alteration or variation whatsoever to its Memorandum or
Articles of Association; or
13.1.2 cease or threaten to cease to carry on its business; or
13.1.3 make any material change in the nature of its business or
commence any new type of business; or
13.1.4 borrow any monies in excess of the amounts provided for in the
Business Plan in respect of the first Financial Year ending 30
June 2000 and thereafter in the annual budget produced under
Clause 12.2 and approved by both Inc and the Founders; or
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13.1.5 create any mortgage charge or lien (other than a lien arising
by operation of law) over or otherwise use as security its
undertaking property or assets or any part thereof or any
interest therein (including goodwill and uncalled capital);
or
13.1.6 enter into any guarantee or indemnity or stand surety for the
obligations of any third party or enter into any agreement
for the same for an aggregate amount in excess of the amounts
provided for in the Business Plan in respect of the first
Financial Year ending 30 June 2000 and thereafter in the
annual budget produced under Clause 12.2 and approved by both
Inc and the Founders; or
13.1.7 make any loan or advance or (except in the ordinary course of
business) grant any credit to any person; or
13.1.8 sell transfer lease assign or otherwise dispose of any real
property, whether freehold or leasehold, or of the whole or a
material part of its undertaking property or assets (or
interest therein) or contract so to do;
13.1.9 enter into any contract arrangement or commitment involving
expenditure on capital account (in excess of the amounts
provided for in the Business Plan in respect of the first
Financial Year of the Company ending 30 June 2000 and
thereafter in the annual budget produced under Clause 12.2
and approved by both Inc and the Founders) or the realisation
of capital assets; or
13.1.10 engage any senior employee on a compensation package in
excess of that provided for in the Business Plan in respect
of the first Financial Year ending 30 June 2000 and
thereafter in the annual budget produced under Clause 12.2
and approved by both Inc and the Founders; or
13.1.11 take or agree to take any freehold or leasehold interest in
or licence over any land; or
13.1.12 (without prejudice to the generality of Clause 13.1.27) enter
into any transaction arrangement or agreement with or for the
benefit of any Director (except for the Dobbie Service
Agreement and MacSween Service Agreement); or
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13.1.13 acquire any material asset (or receive any material service)
at more than market value or dispose of any material asset
(or give any material service) at less than market value; or
13.1.14 acquire or create or dispose of any interest in any
Subsidiary or acquire the undertaking or assets or any
substantial part of the business of any Person; or
13.1.15 appoint or remove any Director or the chairman of the Company
(except as provided for hereunder or as permitted under the
Articles); or
13.1.16 initiate any litigation or arbitration other than in the
ordinary course of business or settle or compromise any
claims, litigation or arbitration (other than monetary
settlements or compromises involving payments to or by the
Company of less than US $50,000 in aggregate in any one
Financial Year); or
13.1.17 permit any transfer of Shares in the Company except in
accordance with this Agreement and the Articles of
Association for the time being; or
13.1.18 pay any fees or make any other payments (other than
emoluments due by reason of their employment) to any
Directors; or
13.1.19 allot or issue any unissued shares for the time being or
create or issue any new shares; or
13.1.20 alter any rights attaching to any class of share in the
capital of the Company; or
13.1.21 consolidate, sub-divide or convert the Company's share
capital or in any way alter the rights attaching thereto; or
13.1.22 enter into any partnership or (other than in the ordinary
course of business) profit sharing agreement with any Person;
or
13.1.23 do or permit or suffer to be done any act or thing whereby
the Company may be wound up (whether voluntarily or
compulsorily), save as otherwise expressly provided for in
this Agreement; or
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13.1.24 issue any debentures or debenture stock or other securities
convertible into shares or debentures or any share warrants or
any options in respect of shares; or
13.1.25 enter into any contract or transaction except in the ordinary
and proper course of the Business and on arm's length terms; or
13.1.26 acquire, purchase or subscribe for any shares, debentures,
mortgages or securities (or any interest therein) in any
company, trust or other body; or
13.1.27 save as specifically provided in the Licence Agreement, the
Dobbie Service Agreement and/or the MacSween Service Agreement
or in the Business Plan in respect of the first Financial Year
ending 30 June 2000 and thereafter in the annual budget produced
under Clause 12.2 and approved by both the Founders and Inc
create any contract with or obligation to pay money or money's
worth in excess of US $20,000 in any one Financial Year to any
Founder or to any Shareholder or to any Affiliate of such
Founder or Shareholder or to any Person as a nominee or
associate of any such Founder or Shareholder or Affiliate
(including any renewal thereof or any variation in the terms of
any existing contract or obligation); or
13.1.28 appoint any committee of the Board or any local board or
delegate any of the powers of the Directors to such committee or
local board; or
13.1.29 merge or amalgamate with any other company or undertaking; or
13.1.30 enter into any compromise or arrangement to which Section 425 of
the UK Companies ▇▇▇ ▇▇▇▇ applies; or
13.1.31 change the accounting policies of the Company save as required
to comply with UK GAAP; or
13.1.32 capitalise or repay any amount standing to the credit of any
reserve of the Company or redeem or purchase any shares of the
Company or otherwise reorganise the share capital of the
Company; or
13.1.33 surrender to any Founder or Shareholder or to any Affiliate of
such Founder or Shareholder any loss, relief, allowance,
exemption, set-off,
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deduction or credit in computing or against income, profits, gains or
taxation or any right to a repayment of taxation.
13.2 Notwithstanding anything contained in this Agreement Inc hereby consents
to the issue and allotment of new shares in the Company at the time of
and in connection with a Flotation (as defined in Clause 23.10) to which
Clause 23.9 applies.
13.3 The Founders undertakes with Inc that, notwithstanding any voting rights
or powers or control otherwise available to them, they will permit Inc
to conduct negotiations in connection with and enforce in each case on
behalf of or in the name of the Company all and any rights arising or
enforceable against:
13.3.1 ▇▇. ▇▇▇▇▇▇ under the Dobbie Service Agreement and/or ▇▇. ▇▇▇▇▇▇▇▇
under the MacSween Service Agreement and in particular but
without limitation to the generality of the foregoing Inc shall
be solely responsible for reviewing the Founders' salaries and
approving any increases thereof; and/or
13.3.2 Iomart Limited under the letter of today's date from Iomart
Limited to the Company.
13.4 Inc undertakes with the Founders that, notwithstanding any voting rights
or powers or control otherwise available to it, it will permit the
Founders to conduct negotiations in connection with and enforce on
behalf of or in the name of the Company all and any rights arising or
enforceable against Inc under the Licence Agreement.
14. KEY EMPLOYEES
Each of the Founders and the Shareholders covenants with the others that
it shall exercise all voting rights and other powers of control
available to it in relation to the Company so as to procure (insofar as
it is able by the exercise of such voting rights and powers) and the
Company covenants with the Shareholders that the Company and each Key
Employee shall enter into a Key Employee Agreement at the same time as
or before that Key Employee commences employment with the Company.
15. INSURANCE OBLIGATIONS
15.1 As soon as practicable after Completion and in any event no later than
30 April 1999 the Founders will obtain up to date medical reports the
scope of each of which is satisfactory to Inc in all material respects
(including findings, range of report and
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qualification of reporter). If both the Founders shall have failed to
comply with this Clause 15.1 by 30 April 1999 (or such later date as Inc
may in writing agree) then the Company shall be wound up as soon as
practicable.
15.2 Each of the Founders and the Shareholders covenants with the others that
it shall exercise all voting rights and other powers of control
available to it in relation to the Company so as to procure (insofar as
it is able by the exercise of such voting rights and powers) and the
Company covenants with the Shareholders that the Company shall at its
own expense within one month of the Effective Date:
15.2.1 effect and maintain for its own benefit, key man five year term
and disability insurance with an insurance company of good
repute on the lives of each of the Founders (who will co-operate
fully in all respects in relation thereto) in the sum of not
less than US $1 million each; and
15.2.2 effect and maintain for the benefit of each Director, other
officer or auditor of the Company in respect of any liability
which may attach to him or loss or expenditure which he may
incur in relation to anything done or alleged to have been done
or omitted to be done as a Director, officer or auditor in such
amount as the Board considers reasonable.
16. EMPLOYEE SHARE OPTION SCHEME(S)
16.1 Notwithstanding anything else in this Agreement the Shareholders hereby
consent to the creation and implementation of one or more Employee Share
Option Schemes whereby senior employees of the Company may be granted
options to acquire in aggregate not more than 111,000 `C' Shares (or
such greater number as Inc and the Founders may agree in writing from
time to time) (being part of the authorised but unissued share capital
of the Company at the date hereof) on terms that the exercise price per
Share in respect of any such option shall be the fair market value of a
share on the date of grant of the option and otherwise on such terms as
the Original Shareholders may approve Provided that no option may be
granted to an employee or consultant before his engagement with the
Company begins. The grant of any such option shall require the unanimous
approval of the Board (such approval not to be unreasonably withheld).
16.2 It is the intention of the Shareholders that (subject to the
Shareholders being satisfied with relevant accounting, tax and legal
requirements and until such time as any
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Person acquires a Controlling Interest in Inc) Inc will grant options to
purchase Inc Common Stock to senior employees of the Company during the
Financial Year of the Company ending on the dates referred to in column
(A) below in respect of up to the aggregate numbers of shares of Inc set
opposite those dates in column (B) below:
(A) (B)
Financial Year ending: Nos. of Inc. shares*
--------------------- --------------------
30.06.00 15,000
30.06.01 20,000
30.06.02 25,000
30.06.03 40,000
*The numbers of shares and/or subscription price therefor shall be
adjusted in such manner as Inc's auditors confirm to be fair and
reasonable in the event of any stock splits, stock dividends,
combinations, recapitalisations or like changes in the outstanding
capital stock of Inc.
The grant of options shall be dependent upon the audited financial
statement of the Company demonstrating the Company's achievement of
revenue, net income and EBITDA targets specified in the Business Plan,
as modified from time to time with the written approval of Inc. The
price per share at which an option may be exercised will be the fair
market value of an Inc share at the date when the option is issued. Each
option granted will be subject to such terms as the Original
Shareholders approve.
It shall be a term of any option that if any Person acquires a
Controlling Interest in Inc in a transaction in which employee options
are assumed or options of the acquiror are substituted for outstanding
employee options, Inc shall have the right to require the optionholder
to release his option in Inc ("the Old Option") on the grant to him of
an option in the acquiring company which is equivalent to the Old
Option.
17. DUE ADMINISTRATION OF THE COMPANY
17.1 Each of the Shareholders undertakes with the others and the Company
undertakes with each Shareholder that (except as the Shareholders may
otherwise agree in writing) it will at all times exercise all voting
rights and powers of control available to it in relation to the Company
so as to give full effect to the terms and conditions of this Agreement
including, where appropriate, the carrying into effect of such terms as
if they were embodied in the Company's Memorandum and Articles of
Association.
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18. GLOBAL TECHNICAL COMMITTEE
18.1 Inc shall establish a global technical committee ("the Technical
Committee") comprising one suitably qualified and experienced delegate
nominated by each of Inc, the Company and the other companies in which
Inc directly or indirectly shall have an interest and which shall be
formed in territories outside the Territory (as defined in the Licence
Agreement), whose respective businesses shall be the establishment of
Internet Co-location Centres and Internet Service Exchanges in those
other territories (the Business and such other businesses being herein
called the "Relevant Businesses").
18.2 The role of the Technical Committee shall be to consider all technical
matters pertaining to the smooth running and efficient operation of the
Relevant Businesses and to recommend to Inc ways in which the same might
be improved.
18.3 Inc shall consider the proper and reasonable recommendations of the
Technical Committee in good faith.
18.4 The Technical Committee shall meet quarterly at such locations as Inc
shall from time to time decide. Inc shall meet the reasonable travel and
accommodation expenses of the delegates in travelling to and from and
attending at such meetings.
19. TRANSFER OF SHARES
19.1 Each of the Shareholders agrees with the others that the transfer of any
of its Shares shall be restricted in accordance with the provisions of
the Articles and (where applicable) in accordance with the terms of this
Agreement.
19.2 A Share may be transferred otherwise than in accordance with this
Agreement and/or the Articles only where and insofar as the holders
(including the proposing transferor) for the time being holding not less
than 90 per cent of the Shares then in issue consent in writing to the
transfer of that Share.
19.3 Provided that Inc's shareholding does not drop below 13% of the Equity
Share Capital in the case of one or more transfers pursuant to Clauses
19.3.2 or 19.3.3 (save for the avoidance of doubt the immediately
foregoing proviso shall not apply to any transfer(s) made pursuant to
Clause 19.3.1) Inc may transfer:
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19.3.1 subject to the provisions of Clause 29.2 any Share held by it
to any Person who acquires a Controlling Interest in or
purchases all or substantially all of the assets of Inc or to
an Affiliate of such Person; provided that simultaneously
therewith such Person (or an Affiliate of such Person) accepts
an assignment of the benefit and burden of the Licence
Agreement; or
19.3.2 at any time on or before 31 December 1999 any Share comprised
in Inc's Original Holding at a price no greater than the price
at which the Share was originally subscribed without
restriction to any venture capital fund or financial
institution which, in either case, is a shareholder in Inc; or
19.3.3 at any time on or before 31 December 1999 any Share comprised
in Inc's Original Holding at a price no greater than the price
at which the Share was originally subscribed to any other
venture capital fund or financial institution with the prior
written approval of the Founders (such approval not to be
unreasonably withheld or delayed in the case of a venture
capital fund or financial institution of good standing and
repute).
19.4 The provisions of Clauses 19.5, 19.6, 19.7 and 19.8 shall apply if at
any time a Person ("the Offeror") shall make a bona fide offer which if
accepted would result in the Offeror (and/or an Affiliate of the
Offeror) acquiring a Controlling Interest in the Company.
19.5 The parties to whom the offer is addressed (herein "the Proposing
Transferors") severally covenant with Inc that they will not at any time
accept the offer from the Offeror in respect of any of their shares in
the Company unless the offer extends to all the Proposing Transferors'
shares in the Company and unless the Proposing Transferors shall first
have procured in favour of Inc a bona fide offer (herein an "Exit
Offer") from the Offeror to acquire all of the shares held by Inc in the
Company at a price per Ordinary Share no less (and otherwise on terms no
less favourable) than that payable for each Ordinary Share being sold by
the Proposing Transferors and at a price per share other than an
Ordinary Share of no less than par value and the Proposing Transferors
shall not dispose of any interest in any share in the Company held by
them (other than as aforesaid) unless:-
19.5.1 an Exit Offer shall first have been made and communicated to
Inc, which Exit Offer shall be irrevocable for a period of
not less than twenty-eight
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(28) days from the date it is made ("the Offer Period")
and shall state the identity of the Offeror and the
terms upon which and the price at which the Offeror is
prepared to acquire the shares in the Company held by
Inc; and
19.5.2 either:-
(i) Inc shall within the Offer Period have accepted the
Exit Offer or negotiated alternative terms mutually
acceptable to it and the Offeror; or
(ii) Inc shall within the Offer Period have offered to
purchase all the shares of the Proposing Transferors
in the Company at a price per share no less (and
otherwise on terms no less favourable save as provided
in Clause 19.10) than that offered by the Offeror
under the terms of the Exit Offer; or
(iii) Inc shall have rejected the Exit Offer and for this
purpose the Exit Offer shall be deemed to have been
rejected if (aa) Inc has not accepted it within the
Offer Period as provided in Clause 19.5.2 (i) or (bb)
Inc has not offered to purchase all the shares of the
Proposing Transferors as provided in Clause 19.5.2
(ii) within the Offer Period.
19.6 If an Exit Offer, having been made on the basis prescribed by Clause
19.5, is accepted pursuant to Clause 19.5.2 (i) the Proposing
Transferors and Inc shall be at liberty for a period of up to sixty (60)
days from the date of acceptance to sell all (but not part only) of
their shares in the Company to the Offeror conditionally upon the
Offeror also buying at the same time all of the shares of Inc in the
Company, such sales in each case to be on the terms of the Exit Offer or
such other terms as may be mutually acceptable to all of the Offeror,
the Proposing Transferors and Inc. So far as is practicable, it shall be
a term of the Exit Offer that completion of the sale of the shares of
the Proposing Transferors in the Company shall take place
contemporaneously with completion of the sale of the shares of Inc in
the Company and that the consideration payable in respect of both such
sales shall be satisfied in the same manner and paid at the same time or
times.
19.7 If, an Exit Offer having been made on the basis prescribed by Clause
19.5, subject to Clause 19.10, Inc in accordance with Clause 19.5.2 (ii)
shall within the Offer Period
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offer to purchase all the shares of the Proposing Transferors in the
Company at a price per share no less (and otherwise on terms no less
favourable) than that offered by the Offeror under the terms of the Exit
Offer, then within 45 days after the expiry of the Offer Period
o if the consideration offered by Inc consists wholly or partly of
Common Shares of Inc, Inc and the proposing transferor shall
enter into a Purchase Agreement in the Agreed Terms and
o in any event (subject to the said Purchase Agreement being entered
into, if required) Inc shall (subject as provided in Clause
19.15.1.2 and 19.15.2) complete the purchase and the Proposing
Transferors shall complete the sale of all (but not some only) of
the Proposing Transferors' shares in the Company at such price
and on such terms (such completion being herein called
"Completion"). Such Shares shall be sold with full title
guarantee and free from all liens, charges and encumbrances and
with all rights attaching to them with effect from the date of
Completion.
19.8 If an Exit Offer, having been made on the basis prescribed by Clause
19.5, is rejected or is deemed to have been rejected by Inc pursuant to
Clause 19.5.2 (iii), the Proposing Transferors shall be at liberty for a
period of up to sixty (60) days from the date of rejection of the Exit
Offer or expiry of the Offer Period (as appropriate) to sell all (but
not part only) of their shares in the Company to the Offeror on the
terms of the Exit Offer (but not otherwise).
19.9 If the consideration payable by the Offeror shall consist in whole or
part of something other than cash and/or marketable securities whose
value on a given day is readily ascertainable, then the value of such
other consideration ("the Other Consideration") shall be such value as
Inc and the Company shall agree. In the event of disagreement, the
determination of the value of the Other Consideration shall be referred
to an umpire (acting as expert and not as arbitrator) nominated by and
acting at the joint expense of the parties concerned (or, in the event
of disagreement as to nomination, appointed by the President for the
time being of the Institute of Chartered Accountants in England and
Wales at the request of either Inc or the Company) whose decision shall
be final and binding.
19.10 The consideration offered by Inc pursuant to Clause 19.5.2 (ii) may (at
Inc's election) consist wholly of cash or wholly of Common Shares of Inc
or partly of one and partly
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of the other Provided that Inc's Common Stock is then traded on the
NASDAQ National Market or listed on a major US Securities Exchange. If
Inc's Common Stock is not then traded on the NASDAQ National Market or
listed on a major US Securities Exchange the consideration shall be
cash.
19.11 If the Common Shares offered by way of consideration (the "Consideration
Shares") are not registered with the SEC prior to the Completion, Inc
shall within 30 days after the date of Completion, file with the SEC a
registration statement under the Securities Act of 1933, as amended, of
the United States (the "Securities Act") covering the resale to the
public by the shareholders of the Consideration Shares (the
"Registration Statement"). Inc shall use reasonable efforts to cause the
Registration Statement to be declared effective by the SEC as soon as
practicable. Inc shall use its best efforts to cause the Registration
Statement to remain effective until the earlier of (i) 120 days from the
effective date of the Registration Statement (the "Selling Period") or
(ii) such time as all of the Consideration Shares covered by the
Registration Statement have been sold pursuant thereto.
19.12 Notwithstanding the foregoing:
19.12.1 Inc may, at any time, delay the filing or effectiveness of the
Registration Statement or suspend the Registration Statement
after effectiveness and may further, by written notice to the
Shareholders, require the Shareholders immediately to cease
sales of the Consideration Shares during the Selling Period if,
and for so long as, Inc determines acting reasonably that the
existence of any fact or the happening of any event (including
without limitation pending negotiations relating to, or the
consummation of, a transaction or the occurrence of any other
event) would require additional disclosure of material
information by Inc in the Registration Statement the
confidentiality of which it has a valid business purpose to
preserve or which fact or event would render Inc unable to
comply with SEC requirements (in either case, a "Suspension
Event").
19.12.2 If Inc delays or suspends the Registration Statement or requires
any Shareholder to cease sales of shares pursuant to Clause
19.12.1, Inc shall, as promptly as practicable following the
termination of the circumstance which entitled Inc to do so
("the Reinstatement Period"), take such actions as may be
necessary to file or reinstate the
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effectiveness of the Registration Statement and/or give written
notice to the Shareholder concerned authorising that Shareholder
to resume sales pursuant to the Registration Statement. If as a
result thereof the prospectus included in the Registration
Statement has been amended to comply with the requirements of
the Securities Act Inc shall enclose such revised prospectus
with the notice to Shareholders given pursuant to this Clause
19.12.2, and Shareholders shall make no offers or sales of
shares pursuant to the Registration Statement other than by
means of such revised prospectus.
19.12.3 In the case of any Suspension Event occurring to and delaying
the filing of the Registration Statement, Inc shall file the
Registration Statement in accordance with Clause 19.12.2 and
shall be required to keep the Registration Statement effective
until the earlier of (i) such time as all the Common Shares
offered thereby have been disposed of in accordance with the
intended methods of distribution set forth in the Registration
Statement or (ii) 120 days plus an extended period equal to the
number of days during which any such suspension was in effect.
19.13 Where Clause 19.11 applies:
19.13.1 In connection with the filing by Inc of the Registration
Statement, Inc shall furnish to the Shareholders copies of the
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act and such additional
copies as are reasonably required by the Shareholders.
19.13.2 Inc shall use its best efforts to register or qualify the
Consideration Shares covered by the Registration Statement under
the securities laws of such states as the Shareholders shall
reasonably request; provided, however, that Inc shall not be
required in connection with this Clause 19.13.2 to qualify as a
foreign corporation or execute a general consent to service of
process in any jurisdiction.
19.13.3 If Inc has delivered final prospectuses to the Shareholders and
after having done so the prospectus is amended to comply with
the requirements of the Securities Act, Inc shall promptly
notify the
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Shareholders and, if requested by Inc the Shareholders shall
immediately cease making offers or sales of shares under the
Registration Statement and return all prospectuses to Inc. Inc
shall promptly provide the Shareholders with revised
prospectuses and, following receipt of the revised prospectuses,
the Shareholders shall be free to resume making offers and sales
under the Registration Statement.
19.13.4 Inc shall pay the expenses incurred by it in complying with its
obligations under Clauses 19.11 to 19.14 inclusive, including
all registration and filing fees, exchange listing fees, fees
and expenses of counsel for Inc and fees and expenses of
accountants for Inc but excluding (i) any brokerage fees,
selling commissions or underwriting discounts incurred by the
Shareholders in connection with sales under the Registration
Statement and (ii) the fees and expenses of any counsel retained
by the Shareholders.
19.14 Inc shall not be required to include any Consideration Shares in the
Registration Statement unless each Shareholder furnishes to Inc in
writing such information regarding the Shareholder and the proposed sale
of Common Shares by the Shareholder as Inc may reasonably request in
writing in connection with the Registration Statement or as shall be
required in connection therewith by the SEC or any state securities law
authorities.
19.15.1 If Inc elects to offer a consideration consisting wholly or
partly of Common Shares in Inc then:
19.15.1.1 if the Consideration Shares are registered with the SEC prior
to Completion, the number of Consideration Shares to be issued
to satisfy the relevant element of the consideration ("the
Relevant Consideration") shall be determined by dividing the
amount of the Relevant Consideration by the value of one
Common Share (based upon the average closing price on NASDAQ
or a major US Securities Exchange of one Common Share over the
10 trading days ending three trading days prior to Completion)
19.15.1.2 if the Consideration Shares are not registered with the SEC
prior to Completion then:
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(i) the number of Consideration Shares to be issued to
satisfy the Relevant Consideration shall be calculated
as provided in Clause 19.15.1.1, save that
(ii) if the closing price on NASDAQ or a major US Securities
Exchange of a Common Share on the day prior to the
registration statement becoming effective is less than
the average closing price on NASDAQ or a major US
Securities Exchange of one Common Share over the 10
trading days ending three trading days prior to
Completion, then Inc will provide the transferring
Shareholders with (at Inc's option) cash or additional
Common Shares sufficient to compensate them for such
decrease.
19.15.2 If a Suspension Event occurs within the first 45 days after the
Registration Statement becomes effective which delays the sale
of the Consideration Shares and the value of a Consideration
Share at the end of the Reinstatement Period (based upon the
average closing price on NASDAQ or a major US Securities
Exchange of one Common Share over the 10 trading days
immediately prior to the end of the Reinstatement Period) is
less than the value of a Consideration Share immediately prior
to the Suspension Event (based upon the average closing price on
NASDAQ or a major US Securities Exchange of one Common Share
over the 10 trading days prior to the Suspension Event) then Inc
will provide the transferring shareholders with (at Inc's
option) cash or additional Common Shares sufficient to
compensate them for such decrease.
19.16 At completion of the sale the transferring Party shall procure that the
director(s) of the Company who are nominees of the transferring Party
shall forthwith resign (without any claims for loss of office or
otherwise).
19.17 The provisions of Clause 19.18 shall apply if:
19.17.1 at any time the Founders and/or the Affiliates of either or both
of them (the "Intending Transferors") receive from Inc a bona
fide offer (the "Offer") in respect of any of their Shares in
the Company; and
19.17.2 the Intending Transferors together hold 50% or more of the
Shares for the time being in issue and wish to accept such
Offer; and
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19.17.3 Inc also wishes to purchase the Shares in the Company other
than those of the Intending Transferors (the "Other Shares"
and the holders thereof are herein called the "Other
Shareholders") at a price per Share no less (and otherwise on
terms no less favourable) than that payable for each Share
being sold by the Intending Transferors.
19.18 Where this Clause 19.18 applies the Other Shareholders shall be deemed
to have accepted the Offer on the day after such Offer is made.
19.19 If an Offer having been made on the basis prescribed by Clause 19.17 is
deemed to be accepted pursuant to Clause 19.18 then the Intending
Transferors and the Other Shareholders shall be at liberty for a period
of up to 90 days from the date of the Offer to sell all (but not part
only) of their shares in the Company to Inc conditionally upon Inc
buying all of the shares in the Company, such sales to be on the terms
of the Offer. So far as practicable, it shall be a term of the offer
that completion of the sale of the shares of the Intending Transferors
in the Company shall take place contemporaneously with the completion of
the sale of the shares of the Other Shareholders. All such Shares shall
be sold with full title guarantee and free from all liens, charges and
encumbrances and with all rights attaching to them with effect from the
date of completion of the sales.
19.20 If after becoming bound to transfer any of its Shares the transferring
party makes default in transferring such Shares (or any of them) the
Company may receive the purchase monies or other consideration and the
transferring Party shall be deemed to have appointed one Director or the
Secretary of the Company his or its agent to execute a transfer of the
relevant Shares to the purchaser and upon execution of such transfer the
Company shall hold the purchase monies or other consideration in trust
for the transferring Party. The receipt of the Company for the purchase
monies or other consideration shall be a good discharge for the
purchaser and after his, its or their names has been entered in the
register of members of the Company, the validity of the proceedings
shall not be questioned by any Person.
20. CHARGING OF SHARES
20.1 None of the Shareholders shall (except with the prior written consent of
both of the Original Shareholders acting reasonably, provided that such
consent may be withheld or given or given subject to such reasonable
conditions, as either or both of the Original Shareholders may acting
reasonably deem fit) create or permit to subsist
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any charge, lien or other encumbrance over any interest in all or any of
the Shares held by it. It is agreed that either or both of the Original
Shareholders may reasonably withhold consent if the proposed chargee,
lien holder or other encumbrancer does not agree to be bound by this
Agreement.
21. FINANCE
21.1 The Founders jointly and severally undertake to use their best
commercial endeavours to procure that plant and equipment required by
the Company to carry on the Business having a list price of not less
than Pound Sterling1,200,000 shall be leased by the Company from one or
more independent third parties on commercial arms length terms.
22.2 The Company may from time to time prior to 31 December 1999 by notice in
writing to Inc require Inc (subject only to Inc and the Founders
agreeing the Conversion Basis, as defined in the Loan Note Instrument,
in accordance with Clause 21.3 below) to subscribe for the nominal
amount of Convertible Loan Notes specified in such notice. Any such
notice shall be accompanied by a copy of the minute of the meeting of
the Board at which the issue of the notice was approved. The total
nominal amount of Convertible Loan Notes required by all such notices to
be subscribed shall in no event exceed Pound Sterling1,200,000.
21.3 Within 21 days of the issue of a notice pursuant to Clause 21.2 Inc and
the Founders shall seek in good faith to agree the Conversion Basis. For
these purposes only, the value of the entire issued Equity Share Capital
of the Company shall be treated as three times the expected revenues of
the Company for the 12 months following the issue of the said notice, as
agreed between Inc and the Founders. In the absence of agreement as to
the applicable Conversion Basis, Inc shall not be obliged to subscribe
for any Convertible Loan Notes.
21.4 Within 21 days of the Conversion Basis having been agreed (and provided
always that (i) neither the Company, nor the Founders or any or all of
the foregoing, are in material breach of this Agreement and (ii) the
Company is not in material breach of the Licence Agreement and (iii) the
Founders have procured that plant and equipment required by the Company
to carry on the Business to a list price of not less than Pound
Sterling1,200,000 has been leased by the Company from one or more third
parties on commercial arms length terms and (iv) each of the Founders
has complied with Clause 15.1) the Company shall duly execute the Loan
Stock Instrument and Inc
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shall subscribe or procure that Permitted Third Parties subscribe in
cash at par the nominal amount of the Convertible Loan Notes specified
in the relevant notice. The minimum subscription by any single Permitted
Third Party shall not be less than Pound Sterling300,000. For the
purposes of this Clause 21.4, "Permitted Third Parties" means:
(a) any venture capital funds or financial institutions which, in
either case, are Shareholders in Inc;
(b) any other venture capital funds or financial institutions which
are approved in writing in advance by the Founders (such
approval not to be unreasonably withheld or delayed in the case
of a venture capital fund or financial institution of good
standing and repute).
21.5 The Parties shall procure that the Company forthwith allots the
Convertible Loan Notes subscribed in accordance with the previous
provisions of this Clause and issues a certificate in respect thereof to
the subscribers therefor forthwith upon receipt by the Company of
payment in full for the Convertible Loan Notes subscribed by Inc.
21.6 In addition to or instead of issuing Convertible Loan Notes to Inc, the
Company may by 31 December 1999 (or such later date as the Original
Shareholders may agree in writing) raise capital from venture
capitalists and/or financial institutions in any case of good standing
and reputation who is/are acceptable to the Original Shareholders and on
terms which are acceptable to the Original Shareholders. The
Shareholders shall co-operate with such capital raising. Each of the
Original Shareholders will have the right (but not the obligation) to
subscribe part of such additional capital so as to ensure that the
Ordinary Shares held by it immediately after such capital raising
represents the same percentage of the issued Equity Share Capital that
its Ordinary Shares represented immediately prior to such capital
raising.
21.7 The Shareholders hereby agree for the avoidance of doubt that (save as
expressly provided in Clause 21.4 in relation to Inc's obligation to
subscribe or procure subscribers for Convertible Loan Notes) nothing in
this Clause 21 shall be construed so as to require any of them to
provide any further finance for the Company.
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2. DIVIDEND POLICY
22.1 Unless Inc otherwise agrees in writing, the Company shall not make any
distribution of profits in respect of the Financial Years ending 30 June
2000, 30 June 2001 and 30 June 2002.
22.2 If in respect of any Financial Year ending on or after 30 June 2003 the
Company shall have profits available for distribution (within the
meaning of Part VIII of the Companies Act) then (unless the Shareholders
otherwise agree in writing in respect of a particular Financial Year)
the Shareholders shall procure that such profits shall be applied in the
following manner and order of priority:
(a) the provision of working and fixed capital to finance the
continuing operations and growth of the Business and the
Company and transfers to reserves consistent with the normal
commercial requirements of businesses similar to those
carried on by the Company all in the amounts provided for in
the annual budget for the next succeeding Financial Year
produced under Clause 12.2 and approved by at least four
Directors;
(b) the payment (provided that all Convertible Loan Notes then
outstanding (i) have been repaid in full or (ii) have been
converted into `A' Shares or (iii) in the absence of such
repayment or conversion, Inc has given its prior written
consent to the same):
o in respect of the Financial Years ending 30 June 2003
and 30 June 2004 of cash dividends of up to 25 per
cent of post-tax profits (or, if less up to 25 per
cent of accumulated distributable profits)
o in respect of Financial Years ending on and after 30
June 2005 of cash dividends of up to 75 per cent of
the post-tax profits (or, if less, up to 75 per cent
of accumulated distributable profits).
After (in each case) adequate cash has been reserved to
provide for the items referred to in (a) above for the
succeeding Financial Year, all as determined and agreed by a
majority of the Directors and within seven (7) months after
the end of the Financial Year concerned.
22.3 In deciding whether in respect of any Financial Year the Company had or
has profits available for distribution the Parties shall procure that
the auditors of the Company
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shall certify whether such profits are available or not and the amount
thereof (if any). In giving such certificate the auditors shall act as
experts and not arbitrators and their determination shall be final and
binding on the Parties.
23. PURCHASE OPTION
23.1 In consideration of the sum of Pound Sterling1 now paid by Inc to the
Founders (receipt of which is hereby acknowledged) it is hereby agreed
that (subject as provided in Clause 23.9) at any time between 1 July
2002 and 30 June 2004 (both dates inclusive), Inc may serve notice
("Option Notice") on the Founders and the other Shareholders requiring
the Founders and such other Shareholders to sell all their Shares in the
Company ("the Option Shares") at the Option Price (as defined in Clause
23.2).
23.2 "Option Price" means a fair price per Share as at the date of the Option
Notice determined by an independent valuation expert from a first tier
bank or firm of chartered accountants of international standing and
reputation (not being the auditors for the time being or past auditors
of the Company, Inc or the Founders or of any Affiliate of any of them)
agreed upon by the Founders and Inc and whose costs shall be borne by
Inc and the Founders equally and in default of such agreement determined
in accordance with the following formula viz:
"Option Price" = A + B
---------------
2
Where:
"A" is a fair price per Share as at the date of the Option Notice
determined by an independent valuation expert from a first tier bank or
firm of chartered accountants of international standing and reputation
(not being the auditors for the time being or past auditors of the
Company, Inc or the Founders or any Affiliate of any of them) appointed
by Inc and whose costs shall be borne by Inc ; and
"B" is a fair price per Share as at the date of the Option Notice
determined by an independent valuation expert from a first tier bank or
firm of chartered accountants of international standing and reputation
(not being the auditors for the time being or past auditors of the
Company, Inc or the Founders or any Affiliate of any of them) appointed
by the Founders and whose costs shall be borne by the Founders.
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35
In determining a fair price pursuant to this Clause 23.2 an independent
valuation expert:
o shall apply US valuation principles for valuing comparable
private US Internet co-location companies and shall take account
of the value of the Company to Inc
o shall assume a sale on a going concern basis as between a
willing buyer and a willing seller contracting on arm's length
terms as at the date of the Option Notice and on the basis that
no account is taken of the fact that the Shares are a particular
portion (and in particular whether a minority or a majority) of
the total number of Ordinary Shares of the Company
o shall act as an expert and not as an arbitrator
o may consult with and take such advice as is in his opinion
desirable from such persons as he may determine
o shall, before the issue of any determination hereunder, offer
the opportunity to each Shareholder to review the information on
the basis of which such certificate is to be given and allow
such parties to make written representations of reasonable
length to him in regard thereto
o shall lay down such time limits for the provision of information
to him and for the making of such written representations as in
his discretion he considers reasonable and
o shall endeavour to issue his determination within two months of
his being instructed to do so and the Shareholders shall use
their reasonable endeavours to procure that the determination is
issued within such period.
23.3 Provided that if A/B is greater than 1.2 or less than 0.8 then in the
absence of agreement between Inc and the Founders the Option Price shall
be determined by an independent valuation expert from a London firm of
chartered accountants of international standing and reputation (not
being (i) the auditors for the time being or past auditors of the
Company, or Inc or the Founders or any Affiliate of any of them or (ii)
a firm previously instructed under Clause 23.2) agreed upon by Inc and
the Founders or in default of agreement nominated on the application of
either such party on notice to the other by the President for the time
being of the Institute of Chartered Accountants in England and Wales.
The costs of such independent valuation expert shall be borne by Inc and
the Founders equally.
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In determining a fair price pursuant to this Clause 23.3, the
independent valuation expert shall have regard to the matters and
assumptions referred to in Clause 23.2 and to the valuations prepared by
the other two independent valuation experts.
23.4 Within 45 days after the determination of the Option Price
o if the consideration offered by Inc consists wholly or partly of
Common Shares of Inc, Inc, the Founders and the other
Shareholders shall enter into a Purchase Agreement in the Agreed
Terms and
o in any event (subject to the said Purchase Agreement being
entered into, if required) Inc shall (subject as provided in
Clause 23.8.2) complete the purchase and the Founders and the
other Shareholders shall complete the sale of all (but not some
only) of the Option Shares (such Completion being hereinafter
called "Completion"). The Option Shares shall be sold with full
title guarantee and free from all liens, charges and
encumbrances and with all rights attaching to them with effect
from the date of Completion.
23.5 On Completion the Founders and the Shareholders (other than Inc) shall
deliver to Inc:
23.5.1 duly executed transfers of the Option Shares and the share
certificates relating to those Shares; and
23.5.2 a waiver or waivers duly signed by all the members of the
Company of any rights of pre-emption relative to the Option
Shares
and Inc shall deliver to the Founders and the other members the
consideration for the Option Shares.
23.6 The Option Price may (at Inc's election) be satisfied wholly in cash or
wholly in Common Shares of Inc or partly in one and partly in the other
provided that Inc Common Stock is then traded on the NASDAQ National
Market or listed on a major US Securities Exchange. If Inc Common Stock
is not traded on the NASDAQ National Market or listed on a major US
Securities Exchange the consideration shall be cash.
23.7 If Inc elects to satisfy the whole or part of the Option Price in Common
Shares, the provisions of Clauses 19.11 to 19.14 inclusive shall apply
mutatis mutandis.
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23.8 If Inc elects to satisfy the Option Price wholly or partly in Common
Shares then:
23.8.1 if the Common Shares to satisfy the whole or any part of the
Option Price are registered with the SEC prior to Completion
then the number of Shares to be issued to satisfy the relevant
element of the consideration ("the Relevant Consideration")
shall be determined by dividing the amount of the Relevant
Consideration by the value of one Common Share (based upon the
average closing price of Common Shares over the 10 trading days
ending three trading days prior to such completion)
23.8.2 the provisions of Clauses 19.15.1.2 and 19.15.2 shall apply
mutatis mutandis.
23.9 The option contained in Clause 23.1 shall lapse forthwith automatically
on a Flotation:
23.9.1 on the London Stock Exchange or EASDAQ if the Total
Capitalisation at the time of Flotation exceeds US $75,000,000
and the Amount Raised exceeds US $10,000,000 or
23.9.2 on the NASDAQ National Market if the Total Capitalisation at the
time of Flotation exceeds US $100,000,000 and the Amount Raised
exceeds US $20,000,000.
23.10 For the purposes of Clause 23.9:
"Flotation" means the becoming effective of a listing for the share
capital of the Company on the official list of the London Stock Exchange
or the admission of any Shares to trading on EASDAQ or the closing of a
public offering registered under the Securities Act (as defined in
clause 19.11).
"Amount Raised" means the gross amount of any new money raised by the
Company from the subscription for new shares issued by the Company at
the time of and in connection with the Flotation.
"Total Capitalisation" means on a Flotation, the valuation placed upon
the `A' Shares, the `B' Shares and the `C' Shares as shown in a
prospectus or listing particulars or offering circular published in
connection with such Flotation less the Amount Raised.
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24. DEFAULT
24.1 For the purpose of this Clause the following expressions shall have the
following meanings:-
24.1.1 `an event of default' means in relation to any Shareholder
the occurrence of any of the following in relation to it:-
EVENTS TRIGGERING SALE OF SHARES FOR NIL CONSIDERATION
24.1.1.1 the commission of a material breach of its obligations
under Clause 3 (Warranty by Founders), Clause [13]
(Operation of the Company), Clause 26 (Confidentiality
and Disclosure), Clause 27 (Non-Competition) or Clause
28 (Non-Solicitation) of this Agreement and, in the case
of a breach capable of remedy, failure to remedy the
same within thirty (30) days after being given notice in
writing so to do by any other Shareholder such notice to
be headed `CURE NOTICE' and to refer to this Clause and
the possibility of the Shareholder served with the
notice being required to sell its Shares pursuant to
this Clause; or
24.1.1.2 (in the case of Inc) Inc unlawfully terminates the
Licence Agreement at any time; or
24.1.1.3 (in the case of Inc) Inc lawfully terminates the
Licence Agreement on not less than 180 days notice
expiring on or before 30 June 2001 pursuant to Clause
12.4.4 thereof;
24.1.1.4 (in the case of ▇▇. ▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇ prior to 30 June
2001 and provided that the Founders hold a Controlling
Interest in the Company:
(i) "Voluntarily Resigns" (which expression shall
mean in relation to any person that he
voluntarily resigns without the agreement of
Inc, as a director or terminates his employment
with the Company (otherwise than by reason of
death or total and permanent disability as
certified by a medical
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practitioner approved by Inc, such approval
not to be unreasonably withheld)) or;
(ii) is properly and legally and summarily dismissed
without notice or on short notice (as provided
for in his service contract or particulars of
employment) (herein "Summarily Dismissed"); or
24.1.1.5 (in the case of ▇▇ ▇▇▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇▇▇ on or
prior to 30 June 2001 and at a time when the
Founders hold a Controlling Interest in the
Company:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed; or
EVENTS TRIGGERING SALE OF SHARES FOR 50% OF SUBSCRIPTION PRICE
24.1.1.6 (in the case of ▇▇ ▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇ after 30 June
2001 but on or prior to 30 June 2002 and provided
that the Founders hold a Controlling Interest in
the Company:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed; or
24.1.1.7 (in the case of ▇▇ ▇▇▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇▇▇ after 30
June 2001 but on or prior to 30 June 2002 and
provided that the Founders hold a Controlling
Interest in the Company:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed; or
24.1.1.8 (in the case of ▇▇ ▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇ on or prior
to 30 June 2001 and provided that the Founders do
not hold a Controlling Interest in the Company:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed; or
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24.1.1.9 (in the case of ▇▇ ▇▇▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇▇▇ on or
prior to 30 June 2001 and provided that the
Founders do not hold a Controlling Interest in the
Company:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed; or
24.1.1.10 (in the case of Inc) Inc lawfully terminates the
Licence Agreement on not less than 180 days notice
expiring after 30 June 2001 but on or before 30
June 2002 pursuant to Clause 12.4.4 thereof; or
EVENTS TRIGGERING SALE OF SHARES FOR SUBSCRIPTION PRICE
24.1.1.11 (In the case of Inc) any distress, execution,
sequestration or other process being levied or
enforced upon or sued out against any substantial
part of its property which is not contested in good
faith or discharged within 28 days; or
24.1.1.12 (In the case of Inc) its inability to pay its debts
as they fall due within the meaning of Section 123
of the UK Insolvency ▇▇▇ ▇▇▇▇; or
24.1.1.13 (In the case of Inc) it ceasing or threatening to
cease wholly or substantially to carry on its
business, otherwise than for the purpose of a
reconstruction or amalgamation without insolvency
previously approved by the other Shareholder (such
approval not to be unreasonably withheld or
delayed); or
24.1.1.14 (In the case of Inc) any encumbrancer taking
possession of, or a receiver, trustee or
administrator being appointed over the whole or any
substantial part of its undertaking, property or
assets in the case of Inc its entry into Chapter II
administration; or
24.1.1.15 (In the case of Inc) the making of an order or the
passing of a resolution for its winding up,
otherwise than for the purpose of a reconstruction
or amalgamation without insolvency
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previously approved by the other Shareholder
(such approval not to be unreasonably withheld
or delayed); or
24.1.1.16 (in the case of ▇▇ ▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇ after 30 June
2001 but on or prior to 30 June 2002 and provided
that the Founders do not hold a Controlling
Interest in the Company:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed; or
24.1.1.17 (in the case of ▇▇ ▇▇▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇▇▇ after 30
June 2001 but on or prior to 30 June 2002 and
provided that the Founders do not hold a
Controlling Interest in the Company:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed; or
24.1.1.18 (in the case of Inc) the Company terminates the
Licence Agreement by reason of Inc's material
breach thereof pursuant to Clause 12.2 thereof
where the notice of termination expires on or
before 30 June 2002; or
24.1.1.19 (in the case of Founders and for so long only as
the Founders hold a Controlling Interest in the
Company) Inc terminates the Licence Agreement by
reason of the Company's material breach thereof
pursuant to Clause 12.2 thereof where the notice of
termination expires on or before 30 June 2002; or
24.1.1.20 (in the case of the Founders) if an Inc Competitor
acquires directly or indirectly any interest in any
Affiliate of the Founders, where the term "Inc
Competitor" means an entity whose business (or that
of any Affiliate of such an entity) includes the
business of providing co-location and/or Internet
connectivity services; or
EVENTS TRIGGERING SALE OF SHARES AT FAIR PRICE
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24.1.1.21 in the case of Inc) Inc lawfully terminates
the Licence Agreement after 30 June 2002
pursuant to Clause 12.4.4 thereof; or
24.1.1.22 (in the case of Inc) the Company terminates
the Licence Agreement by reason of Inc's
material breach thereof pursuant to Clause 12.2
thereof where the notice of termination expires
after 30 June 2002; or
24.1.1.23 (in the case of the Founders and for so long only
as the Founders hold a Controlling Interest in the
Company) Inc terminates the Licence Agreement by
reason of the Company's material breach thereof
pursuant to Clause 12.2 thereof where the notice of
termination expires after 30 June 2002; or
24.1.1.24 any governmental action prohibiting or preventing
it from continuing to hold shares in the Company or
to perform this Agreement; or
24.1.1.25 (in the case of ▇▇ ▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇ after 30 June
2002:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed; or
24.1.1.26 (in the case of ▇▇ ▇▇▇▇▇▇▇▇) ▇▇. ▇▇▇▇▇▇▇▇ after 30
June 2002:
(i) Voluntarily Resigns; or
(ii) is Summarily Dismissed.
24.1.2 `the Prescribed Price' shall mean in respect of any Ordinary
Shares the subject matter of the relevant option;
24.1.2.1 in the case of an event of default falling within
Clause 24.1.1.1 to 24.1.1.5 inclusive nil per
share;
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24.1.2.2 in the case of an event of default falling within
Clause 24.1.1.6 to 24.1.1.10 inclusive, 50 per cent
of the subscription price of each share;
24.1.2.3 in the case of an event of default falling within
Clause 24.1.1.11 to 24.1.1.20 inclusive the
subscription price of each share;
24.1.2.4 in the case of an event of default falling within
Clause 24.1.1.21 to 24.1.1.26 inclusive a fair
price per share determined in the same way as the
Option Price under Clause 23.
24.2 If a Shareholder commits or suffers an event of default (as defined in
Clause 24.1.1), then the other Shareholders shall be entitled in its or
their (as the case may be) entire discretion to require the defaulting
Shareholder to sell all of the Shares held or beneficially owned by the
defaulting Shareholder to (subject as provided below) the other
Shareholders in proportion (as nearly as may be) to their then holdings
of Shares in the Company for a sum in aggregate equal to the Prescribed
Price (as defined in Clause 24.1.2) by serving written notice on the
defaulting Shareholder at any time within ninety (90) days of the date
of the occurrence of such event of default coming to the knowledge of
the other Shareholder stating that the option hereby conferred is
exercised Provided that if any other Shareholder shall not wish to take
up its proportion of the Shares of the defaulting Shareholder, then such
proportion may be taken up by those other Shareholders who do wish to
take up their proportion pro rata as nearly as may be to the respective
numbers of Shares then held by such other Shareholders and so on and so
forth for so long as any other Shareholder continues to state its
willingness to purchase Shares of the defaulting Shareholder.
24.3 If the option conferred by Clause 24.2 above is exercised, the
defaulting Shareholder shall deliver to the other Shareholder(s) within
twenty-eight (28) days after the date of service of the notice
exercising such option or within twenty eight (28) days of the date the
Prescribed Price is ascertained and notified to the Shareholders
(whichever shall be the later) one or more duly executed transfers in
respect of all its Ordinary Shares made out in such numbers and in
favour of the other Shareholder(s), as determined in accordance with
Clause 24.2, may in writing direct together with the
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supporting Share Certificates therefor (or an appropriate indemnity in
respect of any lost Certificates) and against such delivery the other
Shareholder(s) shall make full payment in sterling in London of the
Prescribed Price (as defined in Clause 24.1.2) for such Ordinary Shares.
The Ordinary Shares so transferred shall be deemed to be sold by the
transferor with full title guarantee with effect from the date of such
transfer free from any lien, charge or encumbrance with all rights
attaching thereto.
24.4 At completion of the sale the Directors who were nominees of the seller
Shareholder shall forthwith resign (without any claims for loss of
office or otherwise).
24.5 Completion of all relevant matters referred to in this clause shall take
place simultaneously.
24.6 Inc may elect to satisfy some or all of the Prescribed Price payable by
it under this Clause wholly in cash or wholly in Common Shares of Inc or
partly in one and partly in the other provided that Inc Common Stock is
then traded on the NASDAQ National Market or listed on a major US
Securities Exchange. If Inc Common Stock is not traded on the NASDAQ
National Market or listed on a major US Securities Exchange the
consideration shall be cash. The provisions of Clause 19.11 to 19.14
inclusive shall apply mutatis mutandis.
24.7 If Inc elects to satisfy the Prescribed Price wholly or partly in Common
Shares then:
25.7.1 if the Common Shares to satisfy the whole or any part of the
Prescribed Price are registered with the SEC prior to Completion
then the number of Shares to be issued to satisfy the relevant
element of the consideration ("the Relevant Consideration")
shall be determined by dividing the amount of the Relevant
Consideration by the value of one Common Share (based upon the
average closing price of Common Shares over the 10 trading days
ending three trading days prior to such completion)
25.7.2 the provisions of Clauses 19.15.1.2 and 19.15.2 shall apply
mutatis mutandis.
24.8 If after becoming bound to transfer its Shares the defaulting
Shareholder makes default in transferring such Shares (or any of them)
the Company may receive the purchase monies or other consideration and
the defaulting Shareholder shall be deemed to have appointed any one
Director or the Secretary of the Company its
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agent to execute a transfer of the relevant Shares to the other
Shareholder and upon execution of such transfer the Company shall hold
the purchase monies or other consideration in trust for the defaulting
Shareholder. The receipt of the Company for the purchase monies or other
consideration shall be a good discharge for the other Shareholder and
after its name has been entered in the register of members of the
Company, the validity of the proceedings shall not be questioned by any
Person.
25. LEGEND ON SHARE CERTIFICATES
25.1 Each certificate representing any of the Shares held by each of the
Shareholders in accordance with this Agreement and hereafter acquired by
any lawfully permitted transferee or successor shall bear the following
legend:-
`The holders of the Shares represented by this Certificate are subject
to the restrictions contained in a Shareholders Agreement between the
Company and its shareholders, a copy of which may be inspected at the
registered office of the Company.'
26. CONFIDENTIALITY AND DISCLOSURE
26.1 Each of the Directors of the Company may communicate any information
acquired by him in relation to the Company to the Shareholder appointing
him, subject always to the parties' duty of confidentiality contained in
Clause 26.2.
26.2 Each party will treat as confidential any information provided to it by
any of the others which has not been published, or which is not already
known to the receiving party, and will impose a similar duty of
confidentiality on any person to whom it is permitted to transfer such
information. The parties will maintain the utmost confidentiality
regarding this Agreement at all times and none of the parties will make
any announcement to the public or to any third party regarding the
arrangements contemplated by this Agreement without the consents of the
others such consent not to be unreasonably withheld or delayed save (in
the absence of agreement) for any statement or disclosure which may be
required by law or called for by the requirements of NASDAQ National
Market and/or the US Securities and Exchange Commission and/or the
London Stock Exchange and/or EASDAQ and any such statement or
disclosures shall be no more extensive than is usual or necessary to
meet the requirements imposed upon the party making such statement or
disclosure.
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26.3 Whilst the parties shall use their best endeavours to ensure compliance
with this Clause a party in breach of its terms shall not thereby commit
a material breach of its obligations under this Agreement for the
purpose of Clause 24.1.1.1 if it can show that it took reasonable steps
to prevent the breach and it could not reasonably have been expected to
have prevented it.
27. NON-COMPETITION
27.1 Each of the Shareholders undertakes that it will not while it or any of
its Affiliates is a member of the Company or for a period of one year
thereafter (the `Restricted Period') (and will procure that during the
Restricted Period none of its Affiliates will), either alone or jointly
with others, whether as principal, agent, manager, shareholder,
independent contractor or in any other capacity, directly or indirectly
through any other person, for its own benefit or that of others at any
time during the Restricted Period engage in or carry on or be concerned
or interested in any business in the United Kingdom in competition with
the Company (other than as a holder for investment of no more than 5% of
any class of shares or securities dealt in on a recognised stock
exchange).
27.2 The restrictions contained in Clause 27.1 shall not prevent or inhibit
Inc or any Affiliate of Inc from engaging in or carrying on or being
concerned or interested in any business in the United Kingdom in
competition with the Company at any time after the Licence Agreement has
terminated or any of the rights granted thereunder to the Company have
ceased to be exclusive.
27.3 The above restrictions are considered reasonable by the parties but in
the event that any such restriction shall be found to be void but would
be valid if some part thereof was deleted or the period of application
reduced such restriction shall apply with such modification as may be
necessary to make it valid and effective.
28. NON-SOLICITATION
Each Shareholder undertakes that it will not and neither will its
Affiliates either during the continuance of this Agreement or for a
period of one year thereafter:
28.1 solicit in competition with the Company the custom of any Person, who
shall during the 12 months prior to the relevant time be a customer of
the Company provided that this Clause 28.1 shall not apply to Inc and
its Affiliates; or
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28.2 endeavour to solicit or entice away from the Company or employ any
Person who during the 12 months prior to the relevant time was an
employee of the Company unless such person shall have been unfairly or
unlawfully dismissed by the Company.
29. ASSIGNMENT
29.1 Neither of the Shareholders shall assign or transfer or purport to
assign or transfer any of its rights or obligations hereunder save Inc
in connection with a transfer of its shares to a Person who acquires a
Controlling Interest in or purchases all or substantially all of the
assets of Inc or to an Affiliate of such Person provided that
simultaneously therewith, such Person or its Affiliate accepts an
assignment of the benefit and burden of the Licence Agreement. If
following such an assignment, the Founders would (but for such
assignment) be obliged to accept Common Shares or Common Stock of Inc in
whole or partial consideration for the sale of the Founders' Shares,
then if the Founders so agree at the time of such sale (such agreement
not to be unreasonably withheld or delayed) the Founders shall be
obliged to accept Common Shares or Common Stock of the Person concerned.
In the absence of such agreement at such time, the Person shall have no
ability to satisfy amounts due to the Founders by the issue of Common
Shares or Common Stock. Save as aforesaid, references herein to Common
Shares of Inc or Common Stock of Inc or similar expressions shall be
read as references to Common Shares of the Person concerned or (as the
case may be) Common Stock of the Person concerned.
29.2 The parties to this Agreement shall procure that (except for (i) any
allottee under Clause 2.2 or (ii) any transferee under a transfer made
pursuant to Clauses 19.3.2 or 19.3.3 or any successor in title to any
such allottee or transferee) any transferee or allottee of shares in the
Company shall, prior to any transfer or allotment to it taking effect,
have entered into an agreement with the parties to this Agreement and
the other holder or holders for the time being of all the shares in the
Company substantially in the form set out in the Schedule and provided
that such transfer or allotment is not otherwise prohibited by this
Agreement each party to this Agreement shall enter into such an
agreement whenever requested to do so by any other party to this
Agreement.
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30. PROPRIETARY KNOW-HOW
30.1 Save as expressly provided herein no party shall have any right as a
consequence of this Agreement to utilise any know-how or other
intellectual property licensed to the Company by any other without the
other's prior written consent.
31. NAMES
31.1 The parties acknowledge that the Company does not have any rights to the
use of the names AboveNet, Internet Service Exchange, AboveNet One-Hop
Solution, One-Hop Consortium, One-Hop Consortium Member, Global One-Hop
Network, Global One-Hop Consortium, AboveNet Global One-Hop Network,
ISPCondo, WebCondo, MRTG, ASAP, APS, EtherValve or any other current or
future trade ▇▇▇▇ or name of Inc or to any goodwill associated therewith
save to the extent provided in the Licence Agreement.
31.2 If at any time both Inc and its Affiliates cease to hold any shares in
the Company the Shareholders and the Company shall procure that within
one month thereafter the Company shall cease to use the name AboveNet
for any purpose and shall take such steps as are necessary to remove
such name from the registered corporate name of the Company and the
Shareholders (other than Inc) and their respective Affiliates (other
than any Affiliate of Inc) shall not thereafter use or suffer to be used
the name of AboveNet in connection with the operation of the Business.
32. TERM
32.1 This Agreement shall take effect from the date hereof and shall subject
as hereinbefore mentioned continue until:
32.1.1 Terminated by mutual consent in writing by the Shareholders; or
32.1.2 The date of the commencement of the Company's winding up; or
32.1.3 The date upon which any Shareholder ceases to be a holder of
Ordinary Shares in the Company (other than in circumstances
where Inc's Ordinary Shares are transferred to a Person who
acquires a Controlling Interest in Inc or to an Affiliate of
such Person as permitted herein) in which case the Agreement
shall terminate as regards the Shareholder so ceasing but
shall continue as regards the other Shareholders
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Provided that termination shall be without prejudice to any rights of
the Shareholders accrued at that time and the terms of this Agreement
shall nevertheless continue to bind the Shareholders thereafter to such
extent and for so long as may be necessary to give effect to the rights
and obligations embodied herein.
33. INTEREST
33.1 If any party fails to make any payment hereunder on the due date or
within the applicable period for payment, such party shall pay interest
to the payee on the amount for the time being outstanding at the rate of
3% per annum above the base lending rate of Bank of Scotland for the
time being in force on the basis of actual days elapsed from the due
date for payment or from the date of the expiry of such period (as the
case may be) until payment in full (after as well as before judgement).
34. SEVERABILITY
34.1 Each of the provisions contained in this Agreement and in each clause
and sub-clause hereof shall be construed as independent of every other
such provision to the effect that if any provision of this Agreement
shall be determined to be illegal invalid and/or unenforceable then such
determination shall not affect any other provisions of this Agreement
all of which other provisions shall remain in full force and effect.
34.2 If any provision of this Agreement shall be determined to be illegal
invalid and/or unenforceable but would be legal valid or enforceable if
amended the parties hereto shall consult together in good faith and
agree the scope and extent of any modification or amendment necessary to
render the provision legal, valid and enforceable and so as to give
effect to the intention of the parties as recorded in this Agreement.
35. CONFLICT WITH ARTICLES
35.1 The parties hereby agree that if and to the extent the Articles of
Association of the Company conflict with the provisions of this
Agreement the provisions of this Agreement shall prevail as between the
Shareholders.
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36. NO PARTNERSHIP
36.1 Nothing in this Agreement shall constitute or be deemed to constitute a
partnership between any of the parties hereto and neither of the
Shareholders shall have any authority to bind the other in any way.
37. FURTHER ASSURANCE
37.1 The parties hereto shall and shall use their respective reasonable
endeavours to procure that any necessary third parties shall do execute
and perform all such further deeds documents assurances costs and things
as any of the parties may reasonably require by notice in writing to the
others to carry the provisions of this Agreement into full force and
effect.
38. COSTS
38.1 The Shareholders agree that they shall each pay their own costs legal
fees and other expenses incurred in relation to the negotiation
preparation and execution of this Agreement and all documents ancillary
thereto.
39. ENTIRE AGREEMENT
39.1 This Agreement (and the Articles of Association, the Dobbie Service
Agreement, the MacSween Service Agreement and the Licence Agreement,
constitute the entire agreement between the parties in connection with
the subject matter herein contained and shall take effect in
substitution for all previous agreements and arrangements whether oral
written or implied between them in relation to such subject matter.
39.2 Each of the parties hereto confirms that, in agreeing to enter into this
Agreement, it has not relied on any representation, warranty or
undertaking (except those contained in this Agreement and/or the Licence
Agreement) and for the avoidance of doubt each party hereby irrevocably
and unconditionally waives any right to any remedy of any nature for
breach of any representation, warranty or undertaking (except those
contained in this Agreement) which there may have been or which may
hereafter occur.
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40. VARIATION
40.1 No variation of any of the terms of this Agreement (or of any other
documents referred to herein) shall be effective unless it is in writing
and signed by or on behalf of each of the parties hereto or thereto. The
expression `variation' shall include any variation, supplement, deletion
or replacement however effected.
41. WAIVER/FORBEARANCE
41.1 The rights of any party shall not be prejudiced or restricted by any
indulgence or forbearance extended to the other and no waiver by any
party in respect of any breach shall operate or be deemed to operate as
a waiver in respect of any subsequent breach.
42. EXECUTION IN COUNTERPARTS
42.1 This Agreement may be executed in counterparts each of which when
executed and delivered shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
43. NOTICES
43.1 Any notice to be given by any party to this Agreement shall be in
writing an shall be deemed duly served if delivered personally or sent
by facsimile transmission or by prepaid registered post (airmail in the
case of an address for service outside the United Kingdom) or delivered
by recognised international courier (who in the latter case obtains a
receipt for the notice signed by or on behalf of the addressee) to the
addressee at the address or (as the case may be) the facsimile number of
that party set opposite its name below:
Name of Party: Address and Facsimile Number
------------- ----------------------------
AboveNet Communication Inc ▇▇, ▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇
Fax No. ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Marked for the attention of the President
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AboveNet UK Limited ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇
▇▇▇
Fax No. ▇▇▇▇-▇▇▇ ▇▇▇▇
Marked for the attention of ▇▇ ▇. ▇▇▇▇▇▇▇
▇▇. ▇. ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
▇▇. ▇. ▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
or at such other address (or facsimile number) as the party to be served
may have notified (in accordance with the provisions of this clause) for
the purposes of this agreement.
43.2 Any notice sent by facsimile shall be deemed served three
hours after despatch, if despatched on a business day before
3.00 pm or in any other case, at midday on the business day
after the date of despatch.
Here `business day' means a day on which banks are open in the city or
other location to which the notice is sent; and the times mentioned are
those in that location.
43.3 Clause 43.2 does not apply:-
43.3.1 if before the time which the notice would otherwise be deemed
to have been served, the receiving party informs the sending
party that the notice has been received in a form which is
unclear in a material respect; and
43.3.2 if the receiving party does that by telephone, it despatches
a confirmatory telex or fax within three hours.
43.4 Any notice served by prepaid registered post shall be deemed served 48
hours after posting to an address in the United Kingdom or 5 days after
posting to an address outside the United Kingdom.
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43.5 In proving the service of any notice it will be sufficient to prove in
the case of a letter that such letter was properly stamped addressed and
placed in the post or delivered or left at the current address if
delivered personally and in the case of a facsimile (subject as provided
in clause 43.3) that such facsimile transmission was duly despatched to
the facsimile number of the addressee given above or subsequently
notified for the purposes of this Agreement.
44. GOVERNING LAW AND JURISDICTION
44.1 This Agreement (together with all documents referred to herein) shall be
governed by and construed and take effect in accordance with English
law.
44.2 Each of the parties hereto hereby submits to the jurisdiction of the
High Court of England and agrees that in the event of any action being
commenced the process by which it is commenced may be served on them in
accordance with Clause 43.
ATTESTATION:
This Agreement has been executed and delivered as a Deed the day and year first
above written.
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THE SCHEDULE
(FORM OF SUPPLEMENTAL DEED)
DATE:
PARTIES:
(1) [ ] LIMITED (CR No. ) whose registered office is
------------------------------
situate at [ ] [together with its successors in
title and permitted assigns `the New Party]'); and
(2) [NOTE: All the parties to the principal Agreement including any person
who has entered into a Supplemental Agreement pursuant to the Principal
Agreement but excluding any person (other than the Transferor) who has
ceased to be a Shareholder].
RECITALS:
(A) Under the terms of an Agreement dated [ ] 199. (`the Principal
Agreement') and entered into between [ ] [and to which
[ ] (`the Transferor') is [an original party] [a party by virtue
of a Supplemental Deed dated [ ]] the Transferor has sold and
transferred to the New Party [[insert number and type of shares] subject to
the New Party entering into this Supplemental Deed OR [the New Party has
agreed to subscribe for [insert number and type of shares]]
(B) The New Party wishes to accept such shares subject to such condition and
to enter into this Supplemental Deed pursuant to the Principal
Agreement.
OPERATIVE TERMS:
1. Expressions defined in the Principal Agreement shall (unless the context
otherwise requires) have the same meaning when used in this Agreement.
2. The New Party undertakes to and covenants with all the parties to the
Principal Agreement (including any person who has entered into a
Supplemental Agreement pursuant to the Principal Agreement) to comply
with the provisions of and to perform all the obligations in the
Principal Agreement so far as they become due to be
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observed and performed on or after the date hereof as if the New Party
had been an original party to the Principal Agreement [[in place of] [as
well as] the Transferor].
3. The New Party shall become a Shareholder [and the Transferor shall cease
to be a Shareholder] and on and after the date hereof the New Party
shall have the benefit of the provisions of the Principal Agreement as
if the New Party had been an original party thereto [[in place of] [as
well as] the Transferor] and the Principal Agreement shall be construed
and apply accordingly.
[4. For the avoidance of doubt, the New Party shall not be entitled to any
amount which has fallen due for payment to the Transferor before the
date hereof and shall not be liable in respect of any breach or
non-performance of the obligations of the Transferor pursuant to the
Principal Agreement before the date hereof and the Transferor shall
remain entitled to each such amount and shall not be released from any
liability of any such breach or non-performance.]
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EXECUTION:
EXECUTED and DELIVERED by )
ABOVENET COMMUNICATIONS INC )
(acting by Dr. ▇▇▇▇ ▇▇▇▇▇▇▇ its duly )
appointed Attorney) )
as a Deed in the presence of: )
...................................................
Witness signature
...................................................
Witness name in block capitals
............................................
............................................
............................................
Witness address
............................................
Witness occupation
EXECUTED and DELIVERED by )
ABOVENET UK LIMITED )
as a Deed in the presence of:- )
...................................................
Director
...................................................
Director
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EXECUTED and DELIVERED by )
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ )
as a Deed in the presence of:- )
............................................
Witness signature
............................................
Witness name in block capitals
............................................
............................................
............................................
Witness address
............................................
Witness occupation
EXECUTED and DELIVERED by )
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ )
(acting by ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ his duly )
appointed attorney) )
as a Deed in the presence of:- )
............................................
Witness signature
............................................
Witness name in block capitals
............................................
............................................
............................................
Witness address
............................................
Witness occupation
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