Preview of our top selling Europe - Joint Venture Agreement
British Telecom / MCI - Modified Joint Venture Agreement
(1 of 187)
Date: 1994
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(1) BRITISH TELECOMMUNICATIONS
public limited company
(2) MOORGATE (TWELVE) LIMITED
(3) MCI COMMUNICATIONS
(4) MCI VENTURES CORPORATION
(5) CONCERT COMMUNICATIONS
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MODIFIED JOINT VENTURE
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I N D E X
Clause Description Page No. No.
Parties .........................................1
Recitals ........................................1 1. Definitions ..................................2 2. Commencement of Agreement
and Conditions Precedent..........................10 3. Participation in NEWCO .......................21 4. Business of the Joint Venture ................21 5. Establishment of NEWCO .......................23 6. Closing and Closing Balance Sheet ............26 7. Management of NEWCO ..........................30 8. Appointment and Removal of Directors .........32 9. Meetings of Directors ........................33 10. Board Decisions ..............................35 11. Shareholder Consents .........................35 12. Shareholders' Meetings .......................39 13. Dividend Policy ..............................40 14. Accounts and Auditors ........................41 15. Financial Information ........................43 16. UK Tax Matters ...............................43 17. Shareholder Related Contracts ................47 18. Restrictions and Obligations on Shareholders .48 19. Restrictive Trade Practices Act ..............55 20. Business Plan and AOPB .......................56 21. Funding Obligations ..........................58 22. Breach of Funding Obligations ................59 23. Personnel ....................................61 24. Transfer of Shares ...........................61 25. Right of First Refusal on Transfer
of Shares ....................................62 26. Put Option ...................................69 27. Confidentiality ..............................73 28. Warranties and Undertakings ..................74 29. Relevant Events ..............................77 30. Call Options .................................84 31. Termination and Liquidation of NEWCO .........88 32. Severability .................................89 33. No Partnership or Agency .....................89 34. Conflicts ....................................89 35. Exercise of Voting Rights and Consents .......89 36. Further Assurance ............................90 37. Corporate and Trading Names ..................90
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38. Costs ........................................90 39. Waivers and Variations .......................90 40. Notices ......................................91 41. US Tax Treatment .............................92 42. Assignment ...................................92 43. Obligations of NEWCO .........................93 44. MCI Guarantee ................................93 45. BT Guarantee .................................93 46. Entire Agreement .............................94 47. Governing Law ................................94 48. Jurisdiction .................................94
SCHEDULE 1 (Form of Memorandum and Articles).........................96
SCHEDULE 2 (Particulars of NEWCO following Closing)...................126
SCHEDULE 3 (Form of Deed of Adherence)..............................127
SCHEDULE 4 (United States Tax Treatment) ..........................130
SCHEDULE 5 (List of Contracts) ...................................145
SCHEDULE 6 (Treatment of Newco Funding from Early Start Completion to Closing)..................146
1. Forms of Comfort Letter from the EC Commission ...148
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THIS AGREEMENT is made the day of 1994 BETWEEN
1. BRITISH TELECOMMUNICATIONS public limited company, a
company incorporated in England and Wales under
registration number 1800000, the registered office of
which is at 81 Newgate Street, London, EC1A 7AJ England
("BT")
2. MOORGATE (TWELVE) LIMITED a company incorporated in
England and Wales under registration number 2653079, the
registered office of which is at 81 Newgate Street,
London EC1A 7AJ, England ("BTH")
3. MCI COMMUNICATIONS CORPORATION a company incorporated
under the laws of Delaware the principal office of which
is at 1801 Pennsylvania Avenue NW, Washington DC 20006,
USA ("MCI")
4. MCI VENTURES CORPORATION a company incorporated under the
laws of Delaware the principal office of which is at 1801
Pennsylvania Avenue NW, Washington DC 20006, USA ("MCH")
5. CONCERT COMMUNICATIONS COMPANY an unlimited company
incorporated in England and Wales under registration
number 2840475, the registered office of which is at 81
Newgate Street, London EC1A 7AJ ("NEWCO")
RECITALS
(A) BT and MCI have entered into a Letter of Intent dated
June 2, 1993 whereby they indicated their agreement in
principle to merge certain of their activities in order
to achieve joint success in the global telecommunications
market and to offer a seamless set of global enhanced and
value added products to the customers of MCI and BT.
(B) In order to foster the intent expressed in Recital (A) BT
and MCI will be entering a series of agreements designed
to:
(a) enable the introduction of new, sophisticated
information technology products more effectively,
economically and rapidly;
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(b) secure a more comprehensive and technically-
advanced product range while enabling BT and MCI to
rationalise their respective product portfolios;
(c) avoid duplication of effort, lead to improved
global technical solutions, create greater choices
for customers, and enable BT and MCI to meet
specific customer needs more effectively; and
(d) reduce costs through a combined technology
platform and product portfolio, and these cost
savings will be passed through to the customers due
to strong competition in the global market.
(C) BT and MCI desire to create an integrated venture for the
provision of the Global Platform and Global Products as
defined herein.
(D) BTH is a wholly owned subsidiary of BT through which it
will hold its investment in NEWCO.
(E) MCH is a wholly owned subsidiary of MCI through which it
will hold its investment in NEWCO.
(F) BTH and MCH wish to establish a joint venture company to
which the Ultimate Parents or their respective
subsidiaries or affiliates will transfer certain of their
activities and license certain of their technology rights
relating to the provision of the Global Platform and
Global Products.
(G) BTH and MCH desire to have NEWCO act, and NEWCO is
desirous of acting, as the vehicle for the proposed joint
venture activities and have set out below the terms
governing the relationship of the shareholders in NEWCO,
their respective contributions to its operations,
capital, assets, and management. In addition BT and MCI
have agreed to provide certain undertakings of a strictly
limited nature without which the joint venture would not
be formed between BTH and MCH.
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(6 of 187)
OPERATIVE PROVISIONS
1. Definitions
1.1 In this Agreement the following words and expressions
shall have the following meanings ascribed to them except
as expressly stated herein:
"Accounting Reference Date" means 31 March or such other
accounting reference date of NEWCO as may apply from time
to time;
"'A' Director" means any director appointed by the 'A'
Shareholder pursuant to the Articles;
"affiliate" means any undertaking in respect of which a
Participating Interest is held by a Party hereto, or by
its Parent Undertaking or Ultimate Parent and any
Subsidiary Undertaking of its Parent Undertaking or
Ultimate Parent, save that neither Ultimate Parent shall
be considered to be an affiliate of the other Ultimate
Parent and NEWCO shall not be considered to be an
affiliate of a Shareholder or either Ultimate Parent;
"Agreement" means this Agreement, including all
Schedules;
"AOPB" means the annual operating plan and budget of
NEWCO and the NEWCO Group, being a budget calendarised by
month for the Business prepared in respect of each
Financial Year in conjunction with or as a corollary to
the annually reviewed and updated Business Plan to
include all those matters identified and set out in
Clause 20.6 and the identification, planning and
development of Global Products, approved under the
procedures of Clauses 11.1 or 20.4, except the first such
AOPB, which is the "First AOPB", as defined in the Early
Start Agreement;
"Articles" means the articles of association of NEWCO as
current from time to time;
"'A' Shareholder" means the holder for the time being of
the 'A' Shares and the 'C' Shares;
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"'A' Shares" means all issued 'A' ordinary shares of 10p
each in the capital of NEWCO;
"Auditors" means the auditors of NEWCO as current from
time to time;
"'B' Director" means any director appointed by the 'B'
Shareholder pursuant to the Articles;
"Board" means the board of directors of NEWCO as current
from time to time;
"'B' Shareholder" means the holder for the time being of
the 'B' Shares;
"'B' Shares" means all issued 'B' ordinary shares of 10p
each in the capital of NEWCO;
"Borrowing" means (without limitation):-
(a) all moneys borrowed or raised (with or without
security) by NEWCO or any Subsidiary
Undertaking of NEWCO (other than any share
capital unless that share capital is
redeemable at the option of the holder)
including without limitation the unpaid
purchase price of any asset other than a trade
debt incurred in the ordinary course of
business;
(b) the principal amount raised by NEWCO or any
Subsidiary Undertaking of NEWCO by acceptances
or under any acceptance credit opened on its
behalf by any bank or accepting house (not
being acceptances in relation to the purchase
of goods in the ordinary course of business
the amounts raised whereunder are to remain
outstanding for less than 120 days);
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(c) amounts payable under any lease, lease
purchase, conditional sale, credit sale or
deferred purchase agreement where such amounts
are treated as being in the nature of a
finance lease for the purposes of the UK
Statement of Standard Accounting Practice 2l
(or any modification, amendment or replacement
thereof);
(d) receivables sold, assigned or discounted with
any recourse; and
(e) (but not so as to be counted more than once)
all amounts of the type described in
paragraphs (a) to (d) above which are for the
time being guaranteed by or secured by assets
of, or are the subject of any indemnity by,
NEWCO or any of its Subsidiary Undertakings;
"BT Distribution Agreement" means the agreement entered
into after Early Start Completion between NEWCO and BT
concerning the distribution of products and services of
NEWCO;
"BT Group" means BT and its 75% subsidiaries other than
NEWCO and its subsidiaries and "75% subsidiary" shall be
construed in accordance with Section 838 of ICTA;
"BT N.A. Purchase Agreement" means the agreement dated
4th August 1993 (as amended) herewith between MCI, MCI
Telecommunications Corporation, BT and BT North America
Inc. concerning the sale to MCI of the business of BT
North America Inc.;
"BT Transfer Agreement" means the agreement entered into
after Early Start Completion between NEWCO and BT whereby
certain assets, contracts and leaseholds were transferred
to NEWCO;
"Business" means the activities of NEWCO and the NEWCO
Group described in Clause 4.1;
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"Business Plan" means a rolling 5 year business plan for
NEWCO and the NEWCO Group (which, without limitation,
will deal with all material matters for the Business
during the period in question and shall set out the
Shareholders' joint funding commitment for the period to
which it relates) together with all variations, updates
and extensions approved under the procedures of Clause
11.1 or 20.4, the first such Business Plan being as
defined as the "First Business Plan" in the Early Start
Agreement;
"'C' Shares" means all issued 'C' ordinary shares of PS1
each in the capital of NEWCO;
"CEO" means the chief executive officer of NEWCO from
time to time;
"Closing" means the completion of this Agreement in
accordance with Clause 6;
"Closing Balance Sheet" means the consolidated balance
sheet of the NEWCO Group, as at the time immediately
prior to Closing, as agreed or deemed to be agreed
pursuant to Clause 6.6 or, failing which, as determined
by the independent accountants instructed pursuant to
Clause 6;
"Companies Act" means the Companies Act 1985;
"director" means a director of NEWCO as current from time
to time and shall be deemed to include any alternate
director validly appointed by such director in accordance
with the Articles;
"Distribution Agreements" means the BT Distribution
Agreement and the MCI Distribution Agreement;
"Distributable Reserves" means such sum that is available
for distribution to the Shareholders being Newco's
accumulated, realised profits as shown in the preceding
Financial Year's audited individual accounts for Newco
prepared pursuant to Clause 14.1(b), so far as not
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previously utilised by distribution or capitalisation,
less its accumulated, realised losses as shown in the
audited individual accounts for Newco for the preceding
Financial Year prepared pursuant to Clause 14.1(b), so
far as not previously written off in a reduction or
reorganisation of capital duly made;
"Early Start Agreement" means the agreement between the
Parties dated [ ] 1994, relating to this Modified Joint
Venture Agreement, and "Early Start Completion",
"Early Start Balance Sheet" and "Early Start Term" shall
have the same meanings as in that Early Start Agreement;
"EC Commission" means the Commission of the European
Communities;
"EEC Treaty" means the Treaty establishing the European
Community (Treaty of Rome);
"Enhanced and Value-added Telecommunication Service" or
"Enhanced and Value Added Services" means any
international telecommunications service which regulation
permits to be offered (other than those described in (i),
(ii), (iii) and (iv) below) between two or more countries
by members of a single Group and which regulation permits
to be managed on an end to end basis but, for the
avoidance of doubt, this shall not include (i) voice
international simple resale (ii) international direct
distance dialling provided on a correspondent basis (iii)
the provision of international private leased circuits
and (iv) any services which for regulatory reasons must
be offered on a correspondent basis;
"Financial Year" means in respect of the first Financial
Year the period from the Early Start Completion to the
next Accounting Reference Date (save in respect of Clause
16, where the first Financial Year will be deemed to be
the period from Closing to the next Accounting Reference
Date) and in respect of each subsequent Financial Year
the period commencing with the date following the end of
the previous Financial Year and ending on the next
Accounting Reference Date;
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"Global Platform" means those transmission, switching,
signalling, network intelligence and/or service
management systems which from time to time are owned,
leased, managed or contracted for by NEWCO excluding any
Remote Network in order to provide the Services
("Services" and "Remote Network" being as defined in the
Distribution Agreements);
"Global Products" means any current or future Enhanced
and Value-added Telecommunication Service between two or
more countries;
"Group," except in relation to BT Group in Clause 16,
means any corporation and its Subsidiary Undertakings;
"holding company", "subsidiary" and "wholly-owned
subsidiary" have the meanings ascribed to them in
Sections 736 and 736A of the Companies Act as in effect
at the date hereof save (except in clauses 29.2(b) and
(d)) that NEWCO shall not be considered to be a
subsidiary of either Ultimate Parent and, for the
avoidance of doubt, for the purpose of determining
whether a company is a "wholly-owned subsidiary" any
share held by a nominee shall be deemed to be held by the
company appointing such nominee;
"ICTA" means the Income and Corporation Taxes Act 1988;
"Infonet" means Infonet Services Corporation;
"Intellectual Property Agreement" means the agreement in
the agreed form to be entered by NEWCO and each of the
Ultimate Parents or their affiliates relating to
intellectual property rights;
"International Outsourcing Services" means the provision
of the services described in Clause 4.1(d);
"Investment Agreement" means the agreement of even date
herewith between BT and MCI concerning the acquisition by
BT of shares of the class A common stock in MCI and
related terms in connection therewith;
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"MCI Distribution Agreement" means the agreement entered
into after Early Start Completion by NEWCO and MCI
Telecommunications Corporation concerning the
distribution of products and services of NEWCO;
"MCI Transfer Agreement" means the agreement in the
agreed form between NEWCO and MCI and its affiliates
whereby certain assets, contracts and leaseholds shall be
transferred to NEWCO;
"Memorandum" means the memorandum of association of NEWCO
as current from time to time;
"Merger Control Regulation" means EC Council Regulation
4064/89;
"Net Asset Value" means the value of the fixed and
current assets (including cash) less the liabilities of
the NEWCO Group as shown in the Closing Balance Sheet
"NEWCO Group" means NEWCO and its Subsidiary Undertakings
and for such purpose "Subsidiary Undertaking" shall have
the meaning in sections 258 to 260 and Schedule 10A of
the Companies Act as may be modified or amended from time
to time;
"Parent Undertaking", "Subsidiary Undertaking" and
"Participating Interest" shall have the meaning given in
sections 258 to 260 and Schedule 10A of the Companies
Act, as amended by the Companies Act 1989, as current at
the date hereof save that a Subsidiary Undertaking of
Newco shall have the meaning in sections 258 to 260 and
Schedule 10A of the Companies Act as may be modified or
amended from time to time;
"Party" means a party to this Agreement;
"Percentage Interest" means the aggregate voting rights
carried by the aggregate number of Shares held by a
Shareholder expressed as a percentage of the total voting
rights carried by all the Shares;
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"Registered Insolvency Practitioner" means an insolvency
practitioner licensed under the Insolvency Act 1986;
"Related Agreements" means the Investment Agreement, the
Distribution Agreements, the Intellectual Property
Agreement, the Syncordia Acquisition Agreement, the
Services Agreements, the Transfer Agreements and the
terms of Schedule 1 of the Early Start Agreement;
"RTPA" means the Restrictive Trade Practices Act 1976;
"Services Agreements" means the agreements entered into
after Early Start Completion between NEWCO and BT and
NEWCO and MCI Telecommunications Corporation whereby
certain services shall be provided to NEWCO;
"Share" means an 'A' Share, a 'B' Share or a 'C' Share;
"Shareholders" means the 'A' Shareholder and the 'B'
Shareholder;
"Start-up Costs" shall have the same meaning as in that
Early Start Agreement;
"Syncordia Acquisition Agreement" means the agreement
entered into after Early Start Completion whereby NEWCO
acquired from BT BT's Syncordia business;
"Taxes" means any US federal, state, county, local or
non-US, including, without limitation, any income,
transfer, sales, use, real or personal property taxes,
charges, fees, levies, other assessments, or withholding
taxes or charges imposed by any governmental entity, and
includes any interest and penalties (civil or criminal)
on or additions to any such taxes and any expenses
incurred in connection with the determination, settlement
or litigation of any Tax liability;
"Transfer Agreements" means the BT Transfer Agreement and
the MCI Transfer Agreement;
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"Treasury Regulation" means regulations drafted by the US
Department of the Treasury pertaining to the Internal
Revenue Code of 1986, as amended;
"Ultimate Parents" means BT and MCI;
"voice international simple resale" means voice over an
international private leased circuit with break-out into
the public switched telephone network at both ends;
"voting rights" means the number of votes exercisable
from time to time by a Shareholder in respect of the
Shares held by it on a poll at a general meeting of
NEWCO;
"working days" means Monday to Friday (inclusive)
excluding both English public and bank holidays and days
on which banks are authorised by law to close for
business in New York City;
"$" means US Dollars;
"PS" means UK pounds sterling.
1.2 Except as expressly provided herein, any reference
to any applicable legislation, including any Act of
Parliament, Act of US Congress or any EC Regulation shall
be deemed to include any amendment, replacement or re-
enactment thereof for the time being in force and to
include any bye-laws, licences, statutory instruments,
rules, regulations, orders, notices, directions, consents
or permissions made thereunder and any condition
attaching thereto.
1.3 In this Agreement, the singular shall include the
plural and vice versa and the masculine shall include the
1.4 The headings in this Agreement are for ease of
reference only and shall not be taken into account in the
construction or interpretation of any provision to which
they refer.
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1.5 References herein to Clauses, Schedules and Annexes
shall refer to clauses of, schedules and annexes to this
1.6 References herein to "FCC Order", "the HSR Act",
"Exon-Florio", the "Certificate of Amendment" and the
"Byelaws Amendment" shall have the same meaning as in the
Investment Agreement.
1.7 References herein to a Party being obliged to procure
that another person shall do something or shall not do
something shall be deemed to require that Party to
exercise all voting rights and other powers of control
available to that Party in relation to that person so as
to procure, insofar as that Party is able by the exercise
of such rights and powers, that that person does or does
not do such thing, as appropriate.
1.8 The recitals to this Agreement shall not be taken
into account in the construction or interpretation of any
provision of this Agreement.
1.9 Whenever a document is referred to herein as being
"in the agreed form", it shall be in the form of the
document as initialled for identification purposes by
duly authorised representatives of the Parties upon
signature of this Agreement. Any note or text in bold
type in the BT Distribution Agreement, the MCI
Distribution Agreement, the Services Agreements and the
Intellectual Property Agreement indicates that the
provision in any clause or schedule remains to be
inserted or completed. Such provision in the BT
Distribution Agreement, the MCI Distribution Agreement,
the Intellectual Property Agreement and/or the Services
Agreements shall be subject to agreement by the Ultimate
Parents prior to execution of the BT Distribution
Agreement, the MCI Distribution Agreement, the
Intellectual Property Agreement and/or the Services
Agreements and shall (except in the case of the
Intellectual Property Agreement) be consistent with the
Business Plan.
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2. Commencement of Agreement and Conditions Precedent
2.1 Until Closing only the following Clauses shall be in
effect between the Parties, namely Clauses 1, 2, 5, 17,
19, 20.1, 20.2, 27, 28, 32 to 36 inclusive and 38 to 48
inclusive and from Closing all the Agreement shall be in
2.2 The following are conditions precedent of this
Agreement:
(a) the furnishing of particulars of this Agreement
and the Related Agreements and all other documents
relating to the arrangements contemplated thereby
under the RTPA as referred to in Clause 2.5(b)
shall have taken place and either:
(i) the Director General of Fair Trading shall
have indicated to either or both of the
Ultimate Parents in writing that this
Agreement and the Related Agreements are not
registrable under the RTPA; or
(ii) the Director General of Fair Trading
shall have indicated to either or both of the
Ultimate Parents in writing that he will
refrain from taking proceedings before the
Restrictive Practices Court under Section
21(1)(a) of the RTPA in respect of this
Agreement and the Related Agreements; or
(iii) the Secretary of State shall have given
directions under Section 21(2) of the RTPA
discharging the Director General of Fair
Trading from taking proceedings in the
Restrictive Practices Court in respect of this
Agreement and the Related Agreements, subject
only to conditions or undertakings which:
(A) unless BT agrees otherwise, have no
material adverse effect on the business
of BT taken as a whole or on BT's rights
under this Agreement and the Related
Agreements (other than the Investment
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Agreement) or which, in BT's reasonable
opinion, would not materially diminish,
taken as a whole, BT's rights or
protections with respect to its
investment in MCI under the Investment
Agreement, the Certificate of Amendment
or the Byelaws Amendment; and
(B) unless MCI agrees otherwise, have no
material adverse effect on the business
of MCI taken as a whole or on MCI's
rights under this Agreement and the
Related Agreements; and
(b) either one of the following conditions is
satisfied:
(i) the EC Commission shall have issued a
decision under the Merger Control Regulation
(or be deemed to have done so under such
Regulation) declaring the arrangements
contemplated in this Agreement and the Related
Agreements compatible with the common market,
subject only to conditions or undertakings
which:
(A) unless BT agrees otherwise, have no
material adverse effect on the business
of BT taken as a whole or on BT's rights
under this Agreement and the Related
Agreements (other than the Investment
Agreement) or which, in BT's reasonable
opinion, would not materially diminish,
taken as a whole, BT's rights or
protections with respect to its
investment in MCI under the Investment
Agreement, the Certificate of Amendment
or the Byelaws Amendment; and
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(B) unless MCI agrees otherwise, have no
material adverse effect on the business
of MCI taken as a whole or on MCI's
rights under this Agreement and the
Related Agreements;
For the avoidance of doubt, if the EC
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