EXHIBIT 10.18
SHAREHOLDERS AGREEMENT
This Shareholders Agreement (this "Agreement"), made on the 28th day of March
1998,
BETWEEN
VIP Calling, Inc., ("VIP Calling") a Delaware company headquartered at ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America;
AND
Microworld Limited ("Microworld") with registered address at ▇▇▇▇ ▇▇▇▇,
10th Floor, Shatin ▇▇ ▇▇▇▇▇, ▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇.▇., ▇▇▇▇ ▇▇▇▇;
WITNESSETH THAT:
WHEREAS, the Parties have agreed to participate in a joint venture for the
purpose of establishing a business (the "Business") that shall provide
telecommunications and other services; and
WHEREAS, the Parties have agreed to establish a limited liability company (the
"Company") incorporated under the laws of Hong Kong under the terms and
conditions set forth herein; and
WHEREAS, the Parties now desire to determine certain aspects of the Company and
to define their mutual interests and obligations therein;
NOW THEREFORE, IN CONSIDERATION OF THE FOREGOING AND OF THE MUTUAL COVENANTS AND
CONDITIONS SET FORTH HEREIN, THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1 THE COMPANY
The Parties agree to operate the Business as a limited liability company
incorporated in Hong Kong or such other place that the Parties shall agree. The
Parties shall purchase a shelf company, or incorporate a new company, as soon as
reasonably practicable, and shall name the Company VIP Calling Hong Kong Limited
or such other name as the Parties shall agree.
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ARTICLE 2 AUTHORIZED CAPITAL AND CAPITAL STRUCTURE
2.1 The initial authorized capital of the Company shall be the Hong Kong Dollar
equivalent of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (US$100,000)
represented by one hundred (100) ordinary shares with par value of the
equivalent of One Thousand United States Dollars (US$1,000) each. The issued
capital shall also be the Hong Kong Dollar equivalent of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (US$100,000), and no shares may be issued until fully
paid.
2.2 The capital structure of the Company shall be as follows:
Name of Party No. of Shares Amount (US$) Percentage Ownership
------------- ------------- ------------ --------------------
VIP Calling 51 51,000 51%
Microworld 49 49,000 49%
2.3 The Parties shall make their contributions as set forth in Paragraph 2.2
within thirty (30) calendar days from the date that this Agreement is signed.
The failure of a Party to make the full contribution amount within such time
period shall constitute a material breach of this Agreement by such Party. Once
these contributions are made, the Parties shall have no obligation to make any
additional contributions to the capital of the Company.
ARTICLE 3 TRANSFER OF SHARES
3.1 The Parties agree that a transfer of shares in the Company to a transferee
which is and remains a majority-owned subsidiary of the transferor Party shall
be permitted provided that the shares will be re-transferred to the transferor
Party immediately upon the transferee ceasing to be a majority-owned subsidiary
of such Party. In the event of a transfer under this Paragraph 3.1, the
transferee shall execute such documents as may reasonably be required by the
other Party to require that the transferee shall be bound by this Agreement, and
any appropriate amendments hereto.
3.2 Except as provided in Paragraph 3.1 above, or as may otherwise be agreed by
the Board of Directors, no Party shall sell, transfer, pledge or otherwise
dispose of any of its shares in the Company, except pursuant to Article 7 of
this Agreement.
ARTICLE 4 BOARD OF DIRECTORS
4.1 The Board of Directors shall be comprised of four (4) Directors: two (2)
Directors nominated by VIP Calling and two (2) Directors nominated by
Microworld.
4.2 The quorum for meetings of the Company shall be two (2) Directors, one
appointed by each Party. The Company shall require the agreement of a majority
of Directors on all material matters concerning the Company. The Chairman of the
Board of Directors shall be
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appointed by VIP Calling, and shall have a second or casting vote in the event
of an equal vote in a Board meeting. In the event that the Chairman is unable to
act, then another Director appointed by VIP Calling shall act as the Chairman
for such period of time as the Chairman is unavailable.
ARTICLE 5 BUSINESS AND MANAGEMENT OF THE COMPANY
5.1 Day-to-day operations will be run by a General Manager. The Parties agree to
appoint ▇▇▇▇▇▇ ▇▇▇▇ as the first General Manager, subject to the agreement of
the terms and conditions of employment between Normal Chan and the Company, with
succeeding General Managers to be chosen by the Board of Directors. All other
officers of the Company shall also be appointed by the Board of Directors.
5.2 Microworld agrees that as soon as practicable it shall assign the following
contracts to the Company such that the Company will receive the benefits
thereof:
- Service Agreement between Microworld and VIP Calling Inc.
- WIN Internet Telephone contract
- MFS co-location contract
- phone line contracts
- UUNet contract
Copies of these contracts are provided in Attachments C-G hereto.
Microworld will ensure that all contracts are up-to-date as of the date of
the assignment and that there are no outstanding amounts or liabilities under
each contract. The Company shall incur no liability under any such contract
existing prior to the date of assignment to the Company, and Microworld shall
indemnify the Company therefor. If the Board of Directors agrees, new contracts
between the Company and the third-party contractors may be concluded to replace
the existing contracts listed above.
Microworld also agrees to work with Power Master Limited as soon as
practicable to assign the APNIC IP address assignment to the Company such that
the Company will receive the benefits thereof. Copy of this assignment is
provided in Attachment H hereto.
5.3 A business plan shall be developed by the Parties for approval by the Board
of Directors as soon as practicable. The business plan shall be reviewed on an
annual basis at least two (2) months prior to the commencement of each financial
year of the Company, such review to be undertaken by the Board of Directors.
5.4 The Parties may open a bank account in Hong Kong in the name of the Company.
All instructions to the company's bankers with regard to such account shall
require the signature of any two (2) Directors, except that any actions
involving disposition of funds from the bank account in excess of Five Thousand
United States Dollars (US$5,000), or its equivalent in Hong Kong Dollars, shall
require the signature of a Director nominated by VIP Calling and a Director
nominated by Microworld.
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ARTICLE 6 BUSINESS FINANCING
6.1 In addition to its capital contribution as set forth in Paragraph 2.2 above,
VIP Calling will transfer ownership of the equipment listed in Attachment A to
the Company. The equipment has an agreed value as set forth in Attachment A and
will be capitalized as a no-interest loan from VIP Calling to the Company at
such value. It is anticipated that re-payment of such loan will be made by the
Company to VIP Calling during 12-month period from which this Agreement is
signed.
6.2 In addition to its capital contribution as set forth in Paragraph 2.2 above,
Microworld will transfer ownership of the equipment listed in Attachment B to
the Company. The equipment has an agreed value as set forth in Attachment B and
will be capitalized as a no-interest loan from Microworld to the Company at such
value. It is anticipated that re-payment of such loan will be made by the
Company to Microworld during 12-month period from which this Agreement is
signed.
6.3 Microworld shall also use its best efforts to loan to the Company an
additional US$60,000 in cash, interest free, within 30 calender days from the
date that this agreement is signed. It is anticipated that re-payment of such
loan will be made by the Company to Microworld during 12-month period from which
this Agreement is signed.
6.4 For a period of 12 months from the date that this agreement is signed, VIP
Calling will pay the Company the cost of monthly Internet bandwidth minus
US$0.029 per minute of traffic terminating and originating by the Company.
6.5 All payments and investments resulting from Section 2 Attachment D -- The
WIN contract, will be paid by Microworld without liability to the Company or to
VIP Calling.
6.6 Except as provided above, the Parties shall not be required to lend the
Company any sums or to issue any guarantees for the purpose of securing any
sums.
ARTICLE 7 WITHDRAWAL AND TERMINATION
7.1 Either Party may withdraw from this Agreement by providing written
notification of its desire to withdraw to the other Party as provided in Article
13; provided, however, that no Party shall be allowed to withdraw until after it
has made its capital contribution in full, as set forth in Paragraph 2.2 above.
(a) Upon receipt of a notification of withdrawal in accordance with
Paragraph 7.1 above, the other Party shall have the option to
purchase the shares of the Company owned by the withdrawing Party at
a price equal to four (4) times the gross sales of the Company (in
United States Dollars) in the last-completed fiscal quarter
multiplied by the percentage equity ownership of the Company held by
the withdrawing Party.
(b) To exercise the option set forth in Subparagraph (a), the Party
having the option shall provide written notification of the exercise
of such option to the other Party, such notification to be provided
in accordance with Article 13,
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within thirty (30) days from receipt of the notification of
withdrawal and must make payment on or before thirty (30) days
thereafter, or such other date as the Parties may agree.
7.2 This Agreement shall terminate upon any one of the following circumstances:
(a) either of the Parties withdraws from this Agreement in accordance
with Paragraph 7.1 above, and such termination of this Agreement
shall take effect thirty (30) days from the date of receipt by the
other Party of the notification of withdrawal;
(b) the Parties elect to terminate this Agreement by mutual agreement,
and such termination of this Agreement shall take effect on such
date as the Parties may agree;
(c) one Party elects to terminate this Agreement upon the bankruptcy or
insolvency of the other Party, and such termination of this
Agreement shall take effect fourteen (14) days from the date of
written notification of termination from the terminating Party to
the other Party; or
(d) pursuant to Paragraph 7.3 below, and such termination of this
Agreement shall take effect upon the transfer of the shares of
Microworld in the Company to VIP Calling.
7.3 Notwithstanding the foregoing, VIP Calling may elect to purchase the shares
of the Company owned by Microworld upon any one of the following circumstances:
(a) VIP Calling files a registration statement under relevant securities
laws pursuant to which all or a portion of the equity of VIP
Calling, or an entity controlled by VIP Calling, is to be sold to
the public; or
(b) there is a change in the control of the ownership, effective or
actual, of Microworld; or
(c) Microworld breaches this Agreement and such breach is not cured
within twenty (20) days from the date of written notification of
such breach from VIP Calling to Microworld.
In such event, the purchase price of the shares of Microworld shall be at
a price equal to:
(i) in the case of (a) above, the VIP Calling market value as
determined by the average of the bid and ask prices of the VIP
Calling shares for the thirty (30) trading days following the
Initial Public Offer (IPO), multiplied by the ratio of the gross
sales of the Company (in United States Dollars) in the
last-completed fiscal quarter to the gross sales of VIP Calling (in
United States Dollars) in the last-completed fiscal quarter,
multiplied by the percentage equity ownership of the Company held by
Microworld on the date that the VIP Calling registration statement
is filed; or
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(ii) in the case of either (b) or (c) above, four (4) times the
gross sales of the Company (in United States Dollars) in the
last-completed fiscal quarter, multiplied by the percentage equity
ownership of the Company held by Microworld.
ARTICLE 8 EFFECT OF TERMINATION
Upon termination of this Agreement for any reason other than (a) withdrawal
under Subparagraph 7.2(a) when the other Party elects to purchase the shares of
the Company owned by the withdrawing Party, or (b) in accordance with
Subparagraph 7.2(d), the Company shall be dissolved and wound up in accordance
with the applicable provisions of the laws of Hong Kong.
ARTICLE 9 CONFIDENTIALITY AND NON-COMPETITION
9.1 All documents and written information provided by one Party to the other
shall be deemed as confidential. Neither Party shall divulge any documents and
written information supplied to it by the other Party without the prior written
consent of the other Party which it shall have full liberty to withhold.
9.2 This Agreement and each part hereof shall be considered as confidential by
both Parties. Any disclosure of this Agreement by one Party to a third party
shall require the prior written consent of the other Party.
9.3 The obligations of the Parties under this Article shall not apply to
documents or written information which:
- are in the public domain or use;
- shall become in public use, by publication or otherwise, and due to
no fault of the receiving Party;
- are approved for release by the written authorization of the
disclosing Party; or
- are required, but only to the extent necessary, to be disclosed
pursuant to governmental or judicial order in which event the Party
concerned shall promptly notify the other Party of any such
requirement prior to such disclosure.
9.4 To the extent necessary for the implementation of this Agreement, each Party
may disclose to the officers and employees of the Company documents and written
information received from the other Party provided the recipient has first
agreed to be bound by the nondisclosure and use restrictions of this Agreement.
9.5 The confidentiality provisions in this Article 9 shall remain valid and
enforceable even after the termination of this Agreement.
ARTICLE 10 ASSIGNMENT
This Agreement, and the rights of each Party as described herein, may not be
assigned by either Party except with the prior written consent of the other
Party.
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ARTICLE 11 ACCOUNTING, DIVIDENDS AND BANK ACCOUNT
11.1 The fiscal year of the Company shall be January 1 to December 31.
11.2 The Parties agree that the Company shall adopt generally accepted
accounting practices ("GAAP") in Hong Kong.
11.3 Dividends will be distributed to the Parties as determined by the Board of
Directors. It is anticipated that quarterly dividends will be paid to
shareholders starting with the first quarter of 1999.
ARTICLE 12 REPRESENTATIONS AND WARRANTIES
12.1 VIP Calling represents and warrants that, as of the date hereof:
(a) it is an independent legal entity and a subsisting corporate body
duly organized under and pursuant to the laws of its place of
incorporation;
(b) it has full power and authority to execute this Agreement and to
perform its obligations hereunder;
(c) it has taken all requisite action to authorize the execution and
performance of this Agreement and to carry out the transactions
contemplated hereunder; the representative of VIP Calling whose
signature is affixed to this Agreement has full capacity and
authority to bind VIP Calling thereby; and this Agreement when
executed by VIP Calling and Microworld constitutes a valid and
binding agreement enforceable in accordance with its terms against
VIP Calling;
(d) neither the execution of this Agreement nor the performance by VIP
Calling of any of its obligations or the exercise of any of its
rights hereunder will conflict with or result in a breach of any
law, regulation, judgement, order, authorization, agreement or
obligation applicable to VIP Calling;
(e) no litigation, arbitration or administrative proceeding is currently
taking place or pending or, to the knowledge of VIP Calling,
threatened against VIP Calling or its assets.
12.2 VIP Calling agrees to indemnify and hold Microworld and the Company
harmless from any breach of the representations, warranties, covenants or
agreements set forth in this Agreement.
12.3 Microworld represents and warrants that, as of the date hereof:
(a) it is an independent legal entity and a subsisting corporate body
duly organized under and pursuant to the laws of its place of
incorporation;
(b) it has full power and authority to execute this Agreement and to
perform its obligations hereunder;
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(c) it has taken all requisite action to authorize the execution and
performance of this Agreement and to carry out the transactions
contemplated hereunder; the representative of Microworld whose
signature is affixed to this Agreement has full capacity and
authority to bind Microworld thereby; and this Agreement when
executed by VIP Calling and Microworld constitutes a valid and
binding agreement enforceable in accordance with its terms against
Microworld;
(d) neither the execution of this Agreement nor the performance by
Microworld of any of its obligations or the exercise of any of its
rights hereunder will conflict with or result in a breach of any
law, regulation, judgement, order, authorization, agreement or
obligation applicable to Microworld;
(e) no litigation, arbitration or administrative proceeding is currently
taking place or pending or, to the knowledge of Microworld,
threatened against Microworld or its assets;
12.4 Microworld agrees to indemnify and hold VIP Calling and the Company
harmless from any breach of the representations, warranties, covenants or
agreements set forth in this Agreement.
ARTICLE 13 NOTICES
Any notice required or permitted to be given hereunder shall be in writing and
delivered in person or by registered airmail, express mail, an internationally
recognized courier or by facsimile to the appropriate Party at the address
appearing at the beginning of this Agreement, or to such other address as may be
furnished by one Party to the other in accordance with this Article 13. All
notices sent by facsimile must be confirmed by registered airmail but shall be
effective upon the other Party's receipt of such facsimile as evidenced by the
confirmation of receipt of the facsimile.
ARTICLE 14 GOVERNING LAW
14.1 This Agreement shall be governed by the laws of Hong Kong.
14.2 If any provision of this Agreement is held to be invalid or unenforceable,
such invalidity or unenforceability shall not affect the validity and
enforceability of the remaining provisions contained herein.
ARTICLE 15 DISPUTES
15.1 The Parties shall attempt to resolve all disputes under this Agreement
through friendly discussions and consultations. In the event that the Parties
are unable to resolve any dispute through such friendly discussions and
consultations within ninety (90) days, then the matter shall be referred to
final and binding arbitration. The arbitration shall be administered by the
American Arbitration Association under its Commercial Arbitration Rules.
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15.2 There shall be only one (1) arbitrator, appointed by the American
Arbitration Association.
15.3 The place of arbitration shall be in Boston, Massachusetts, or such other
locale as the Parties may agree, and shall be conducted in English.
15.4 The decision of the arbitrator shall be final and conclusive on the
Parties. The decision and award of the arbitrator may be entered in any court of
competent jurisdiction, and enforced by due proceedings in such court. Costs for
the arbitration shall be borne by the Parties as determined by the arbitrator.
ARTICLE 16 TERM
The term for this Agreement shall be concurrent with the duration of the Company
unless sooner terminated as provided in Article 7 above. However, in the event
the Company is dissolved or liquidated prior to its term, this Agreement shall
remain in force and effect for so long as necessary for the regulation of the
settlement of the relationships of the Parties.
ARTICLE 17 MISCELLANEOUS
17.1 This Agreement contains the entire agreement between the Parties with
respect to the subject matter contained herein. The provisions of this Agreement
shall supersede any prior agreement or understanding, whether oral or in
writing, and shall constitute the only agreement between the Parties with
respect to the matters herein.
17.2 This Agreement shall be binding upon and enforceable against each of the
Parties and their respective successors and permitted assigns and shall enter
into force immediately upon the signatures of the Parties.
17.3 All amendments to this Agreement shall be made by a written agreement
signed by the Parties making specific reference to this Agreement.
17.4 In the event of any inconsistencies between this Agreement and the
Memorandum and Articles of Association of the Company, this Agreement shall
prevail.
17.5 Each Party shall take such actions and execute and deliver such other
agreements and instruments as from time to time may be necessary or appropriate
to effect the intent and purpose of this Agreement.
17.6 The relationship between the Parties with respect to the subject matter of
this Agreement shall be governed by the terms of this Agreement and shall not be
deemed to create a general partnership between them. No Party shall be deemed an
agent of the other, and no Party shall have any authority to bind any other
Party.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed as of the date first mentioned above.
/s/ ▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------------- ---------------------------------
VIP Calling, Inc. Microworld Limited
(Name) ▇▇▇▇ ▇▇▇▇▇▇ (Name) ▇▇▇▇▇▇ ▇▇▇▇
-------------------------- --------------------------
(Title) PRESIDENT & CEO (Title) DIRECTOR
------------------------- -------------------------
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