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EXECUTION COPY
Exhibit 10.6
CAPACITY COMMITMENT AGREEMENT
THIS CAPACITY COMMITMENT AGREEMENT, dated as of November 24, 1999
(as amended, supplemented or otherwise modified from time to time, this
"Agreement"), among GLOBAL CROSSING USA INC., a corporation organized and
existing under the laws of the State of Delaware and having its principal office
in Beverly Hills, California (said company, and any permitted successor or
assign hereunder, the "Grantor"), SOFTBANK CORP., a Japanese corporation
("Softbank"), and MICROSOFT CORPORATION, a Washington corporation ("Microsoft";
and together with Softbank, the "Purchasers").
W I T N E S S E T H:
WHEREAS, Atlantic Crossing Ltd. has constructed a fiber optic cable
system connecting the United States, the United Kingdom, the Netherlands and
Germany known as the Atlantic Crossing System or "AC-1"; Pacific Crossing Ltd.
is constructing a fiber optic cable system connecting the United States and
Japan known as the Pacific Crossing System or "PC-1"; Mid-Atlantic Crossing Ltd.
is constructing a fiber optic cable system connecting New York, Florida and St.
Croix, known as the Mid-Atlantic Crossing System or "MAC"; Pan American Crossing
Ltd. is constructing a fiber optic cable system connecting California, Mexico,
Panama, Venezuela and St. Croix, known as the Pan American Crossing System or
"PAC"; GC Pan European Crossing Holdings B.V. is constructing a fiber optic
cable network connecting various principal cities in Europe, known as
Pan-European Crossing or "PEC"; South American Crossing Ltd. is constructing a
fiber optic cable system connecting various principal cities in South America,
known as South American Crossing or "SAC"; and Global Access Ltd. is
constructing a fiber optic cable system connecting various principal cities in
Japan, known as Global Access or "GAL" (and together with any other Japanese
intercity network controlled (directly or indirectly) by the Grantor and/or its
subsidiaries, the "Japanese Intercity Networks");
WHEREAS, the Grantor and/or its affiliates are in the process of
developing a fiber optic cable system connecting Japan, Taiwan, Korea, The
Peoples Republic of China (including Hong Kong), the Philippines, Singapore and
Malaysia, known as East Asia Crossing or "EAC";
WHEREAS, Atlantic Crossing Ltd., Pacific Crossing Ltd.,
Mid-Atlantic Crossing Ltd., Pan American Crossing Ltd., GC Pan European
Crossing Holdings B.V. and South American Crossing Ltd. are referred to
herein as the "System Companies" and AC-1, PC-1, MAC, PAC, PEC, SAC, EAC and
the Japanese Intercity Networks are referred to herein as the "Systems";
WHEREAS, the Grantor is affiliated with each of the System
Companies;
WHEREAS, additional companies under common control with the Grantor
may in the future construct other systems, though there is no obligation to do
so, in which case such additional companies will be deemed to be "System
Companies" under this Agreement and such additional systems will be deemed to be
"Systems" under this Agreement; and
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WHEREAS, the Purchasers desire to acquire rights with respect to
capacity on one or more of the Systems on an indefeasible right of use basis
("IRU");
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto covenant and agree with each other as
follows:
1. DEFINITIONS.
Unless otherwise defined herein, all terms which are commonly used in the
telecommunications industry shall have the meanings commonly given such terms in
such industry. In addition to terms defined in the preamble, the recitals and in
the text of this Agreement, the following terms shall have the following
meanings:
"CPA" shall have the meaning assigned thereto in Section 2(g).
"Dollars" or "$" means United States Dollars.
"Final Payment Date" means the last day of the Purchase Period.
"Minimum Capacity Unit" or "MCU" means, with respect to any System, the
minimum amount of capacity that may be purchased by the Purchasers on such
System. The Grantor shall designate the MCU on each System.
"Purchase Period" means the period beginning on the Trigger Date and
ending on the third anniversary of such date.
"Shareholders Agreement" means the Subscription and Shareholders
Agreement, dated as of September 8, 1999, among Global Crossing Ltd.,
Softbank, Microsoft, The ▇▇▇▇▇▇▇ ▇▇▇▇▇ Group, Inc. and Asia Global Crossing
Holdings Ltd.
"Subsidiary" means as to any Person, (i) any corporation of which more
than 20% of the outstanding stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person and/or one
or more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person have more than a 20% equity interest therein.
"Trigger Date" means the date on which PC-1 is able to carry trans-pacific
traffic.
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2. PURCHASE AGREEMENT.
(a) The Purchasers hereby unconditionally and irrevocably agree to
purchase, pay for and activate (and/or cause one or more of their respective
Subsidiaries) to purchase, pay for and activate) MCUs on PC-1 and/or the
Japanese Intercity Networks during the Purchase Period in an aggregate amount
equal to $200,000,000 (the "Commitment").
(b) The Purchasers agree to utilize the Commitment as follows:
(i) $20,000,000 of the Commitment shall be purchased and activated
on PC-1 and the Japanese Intercity Networks no later than the Trigger
Date;
(ii) an additional $20,000,000 of the Commitment shall be purchased
and activated on PC-1 and the Japanese Intercity Networks during the
period from the Trigger Date to December 31, 2000; and
(iii) the balance of the Commitment (representing $160,000,000)
shall be purchased and activated during the Purchase Period in accordance
with the terms hereof.
(c) The payment terms for purchases of MCU in accordance with the terms
hereof shall be as follows:
(i) payment for purchases pursuant to clause (i) of Section 2(b)
will be made in two installments, with the Purchasers and/or their
respective Subsidiaries making a payment of $5,000,000 on the Trigger
Date, and the Purchasers and/or their respective Subsidiaries making an
additional payment of $15,000,000 not later than the date which is 360
days after the Trigger Date; and
(ii) payment for purchases pursuant to clause (ii) of Section 2(b)
will be made in two installments, with the Purchasers and/or their
respective Subsidiaries making a payment of $5,000,000 on the date the
Purchasers activate the applicable capacity, and the Purchasers and/or
their respective Subsidiaries making an additional payment of $15,000,000
not later than the date which is 360 days after such activation date.
The additional payments referred to under clauses (i) and (ii) above which are
not due when the related capacity is activated shall accrue interest at a rate
per annum equal to the prime rate announced from time to time by The Chase
Manhattan Bank, N.A., and such interest shall be payable by the Purchasers on
the date such amounts are due. All payments made hereunder shall be irrevocable.
(d) Purchases of capacity on PC-1 referred to above will represent
capacity from Global Access Ltd.'s point of presence in Tokyo, Japan to Global
Crossing's point of presence in or about San Francisco, California, Los Angeles,
California or Seattle, Washington. Except as set forth in clause (i) of Section
2(b), the Purchasers shall be permitted to utilize the Commitment during the
Purchase Period for purchases of MCUs on other operational Systems, subject to
the terms and
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conditions of this Agreement, provided that the Purchasers shall use commercial
reasonable efforts to use the Commitment on PC-1.
(e) The commitment contained herein to purchase MCUs is in addition to,
and separate from, any and all other commitments of the Purchasers and/or any of
their respective Subsidiaries to purchase capacity on the Systems. For the
avoidance of doubt, (i) a purchase of an MCU hereunder will not be deemed to
reduce or fulfill any other contractual commitment or other obligation to
purchase capacity on any System, other than purchases made by the Purchasers
and/or their respective Subsidiaries pursuant to Section 8.2(a) of the
Shareholders Agreement, (ii) a purchase of an MCU by the Purchasers or any of
their respective Subsidiaries pursuant to any other contractual commitment or
other obligation to purchase capacity on any System shall not be credited toward
the Commitment unless such other commitment or obligation arises after the date
hereof, has been entered into pursuant to Section 8.2(a) of the Shareholders
Agreement and otherwise satisfies the obligations of the Purchaser hereunder and
(iii) the obligation to purchase MCUs hereunder shall not be subject to the
provisions of Section 8.2 of the Shareholders Agreement.
(f) The price for MCUs on any System purchased pursuant to Section 2(a) or
2(b) hereof at any time shall be at a per MCU price no higher than the per MCU
price (determined by dividing the total commitments of the Customer referred to
below by the total number of MCUs to be provided to such Customer under such
commitments) at which capacity has been sold prior to such time, or is being
sold at such time, by the Grantor or its affiliates, as applicable, on such
System to a customer, other than to the Grantor's affiliates (a "Customer"),
taking into account the net present value of the Commitment, on the one hand,
and the net present value of the aggregate purchase commitments made by such
Customer, on the other hand. In calculating the foregoing, the price for any
capacity that is only to be delivered at a future date based on (directly or
indirectly) upgradeability and/or capacity availability shall not be considered.
(g) Each purchase of MCUs on any System pursuant to Section 2(a) or 2(b)
of this Agreement shall be effected by the applicable Purchaser executing,
delivering and complying with a capacity purchase agreement (a "CPA"), such CPA
to contain substantially the same terms and conditions regarding capacity as set
forth in the form capacity purchase agreement which is generally being executed
by Global Crossing in the market at the time such MCUs are being acquired.
Attached hereto as Exhibit A is the current form CPA which is currently
generally being executed by Global Crossing in the market.
(h) If, at any time during the Purchase Period, either Purchaser shall
have determined that any portion of the MCUs which have been purchased, fully
paid for and activated by such Purchaser pursuant to this Agreement have not
been and could not reasonably be expected to be used by such Purchaser and/or
its permitted assigns, such Purchaser shall exclusively use the Grantor (and/or
one of its affiliates) as its marketing agent and, in such capacity, the Grantor
shall use commercially reasonable efforts to market such unused capacity. In
consideration of such marketing services, the Grantor (or one of its affiliates
as designated by it) shall be entitled to receive a fee from the applicable
Purchaser for each marketed MCU in an amount equal to 5% of the consideration
received from the marketing of such MCU. Each such fee shall be payable in
Dollars on the date the applicable MCU is sold. If the Grantor shall not have
successfully sold any MCU to be marked
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under this paragraph within 3 months of the applicable Purchaser's written
request (made in accordance with the terms hereof), such Purchaser shall be
permitted to replace the Grantor as marketing agent for such MCU. The Grantor
makes no warranty or guarantee that any MCU which is requested to be marketed
will eventually be marketed, nor does the Grantor make any warranty or guarantee
with respect to the price at which such MCU shall be marketed. Each Purchaser
agrees that its sole and exclusive remedy in respect of any breach by the
Grantor of its obligations under this paragraph (h) shall be to replace the
Grantor as marketing agent.
(i) Each Purchaser shall be severally liable for 50% of the Commitment.
Any purchase of MCUs hereunder by an entity which is a Subsidiary of both
Softbank and Microsoft shall be (i) applied to the Commitment in an amount equal
to such purchase and (ii) allocated between Softbank and Microsoft based upon
their respective ownership interests in such Subsidiary.
3. REPRESENTATIONS
(a) The Grantor hereby represents and warrants to the Purchasers that (i)
the Grantor is a corporation duly organized and validly existing under the laws
of the State of Delaware; (ii) the execution, delivery and performance of this
Agreement by Grantor has been duly authorized by all necessary corporate action
on the part of Grantor and this Agreement is a valid, binding and enforceable
obligation of Grantor enforceable with its terms and (iii) the execution,
delivery and performance of this Agreement by Grantor does not violate, conflict
with or constitute a breach of, the organizational documents or any order,
decree or judgment of any court, tribunal or governmental authority binding on
Grantor.
(b) Each Purchaser hereby represents and warrants to the Grantor that (i)
such Purchaser is a corporation duly organized and validly existing under the
laws of its jurisdiction of organization; (ii) the execution, delivery and
performance of this Agreement by such Purchaser has been duly authorized by all
necessary corporate action on the part of such Purchaser and this Agreement is a
valid, binding and enforceable obligation of such Purchaser enforceable in
accordance with its terms; and (iii) the execution, delivery and performance of
this Agreement by such Purchaser does not violate, conflict with or constitute a
breach of, the organizational documents or any order, decree or judgment of any
court, tribunal or governmental authority binding on such Purchaser.
4. SETTLEMENT OF DISPUTES.
(a) The parties hereto shall endeavor to settle amicably by mutual
discussions any disputes, differences, or claims whatsoever related to this
Agreement.
(b) Failing such amicable settlement, any controversy, claim or dispute
arising under or relating to this Agreement, including the existence, validity,
interpretation, performance, termination or breach thereof, shall finally be
settled by arbitration in accordance with the International Arbitration Rules of
the American Arbitration Association ("AAA"). There shall be three (3)
arbitrators (the "Arbitration Tribunal"), the first of which shall be appointed
by the claimant in its notice of arbitration, the second of which shall be
appointed by the respondent within thirty (30) days of the appointment of the
first arbitrator and the third of which shall be jointly appointed by the
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party-appointed arbitrators within thirty (30) days thereafter. The language of
the arbitration shall be English. The Arbitration Tribunal shall issue a written
opinion and will not have authority to award punitive damages to either party.
Each party shall bear its own expenses, but the parties shall share equally the
expenses of the Arbitration Tribunal and the AAA. This Agreement shall be
enforceable, and any arbitration award shall be final, and judgment thereon may
be entered in any court of competent jurisdiction. The arbitration shall be held
in New York, New York, USA.
5. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
6. NO THIRD PARTY BENEFICIARIES; WAIVER OF IMMUNITY.
This Agreement does not provide and is not intended to provide third
parties (including, but not limited to, customers of the Purchasers) with any
remedy, claim, liability, reimbursement, cause of action, or any other right.
The parties hereto acknowledge that this Agreement is commercial in nature, and
each party hereto expressly and irrevocably waives any claim or right which it
may have to immunity (whether sovereign immunity, act of state or otherwise) for
itself or with respect to any of its assets in connection with an arbitration,
arbitral award or other proceeding to enforce this Agreement, including, without
limitation, immunity from service of process, immunity of any of its assets from
pre- or post-judgment attachment or execution and immunity from the jurisdiction
of any court or arbitral tribunal.
7. ASSIGNMENT .
(a) This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
(b) The Grantor shall solely be responsible for complying with all of the
terms binding on the "Grantor" hereunder and shall not be permitted to assign,
transfer or otherwise dispose of any or all of its right, title or interest
hereunder or delegate any or all of its obligations hereunder to any person or
entity except that the Grantor shall be permitted to (i) effect a collateral
assignment of its rights hereunder to one or more lenders to the Grantor or its
affiliates and (ii) assign, transfer or otherwise dispose of any or all of its
rights hereunder and delegate any or all of its obligations hereunder to any
present or future entity controlled by, under the same control as, or
controlling, the Grantor. The Grantor shall give the Purchasers notice of any
such assignment, transfer or other disposition or any such delegation.
(c) The Purchasers shall solely be responsible for complying with all of
the terms binding on the "Purchasers" hereunder and shall not be permitted to
assign, transfer or otherwise dispose of any or all of its right, title or
interest hereunder or delegate any or all of its obligations hereunder to any
person or entity; provided, that each Purchaser may assign its right to enter
into a CPA with the Grantor to any present or future entity which is a
Subsidiary of such Purchaser or to the other
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Purchaser and either Purchaser can assign the Commitment to the other Purchaser.
The Purchasers shall give the Grantor notice of any such assignment.
(d) Any assignment, transfer or other disposition by any party hereto
which is in violation of this Section shall be void and of no force and effect.
8. NOTICES.
Each notice, demand, certification or other communication given or made
under this Agreement shall be in writing in English and shall be delivered by
hand or sent by registered mail or by facsimile transmission to the address of
the respective party as shown below (or such other address as may be designated
in writing to the other party hereto in accordance with the terms of this
Section):
If to Microsoft: Microsoft Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Softbank: Softbank Corp.
▇▇-▇, ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ 103-8501
Attn: Chief Executive Officer
Fax No. (▇▇▇) ▇▇▇▇-▇▇▇▇
and
Softbank Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Grantor: Global Crossing USA Inc.
▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Any change to the name, address and facsimile numbers may be made at any
time by giving fifteen (15) days prior written notice in accordance with this
Section. Any such notice, demand or other communication shall be deemed to have
been received, if delivered by hand, at the time of
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delivery or, if posted, at the expiration of seven (7) days after the envelope
containing the same shall have been deposited in the post maintained for such
purpose, postage prepaid, or, if sent by facsimile, at the date of transmission
if confirmed receipt is followed by postal notice.
9. SEVERABILITY .
If any provision of this Agreement is found by an arbitral, judicial or
regulatory authority having jurisdiction to be void or unenforceable, such
provision shall be deemed to be deleted from this Agreement and the remaining
provisions shall continue in full force and effect.
10. HEADINGS
The Section headings of this Agreement are for convenience of reference
only and are not intended to restrict, affect or influence the interpretation or
construction of provisions of such Section.
11. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when
executed and delivered shall be deemed an original. Such counterparts shall
together (as well as separately) constitute one and the same instrument.
12. ENTIRE AGREEMENT
This Agreement supersedes all prior or written understandings between the
parties hereto and, together with the Shareholders Agreement, constitutes the
entire agreement with respect to the subject matter herein. This Agreement shall
not be modified or amended except by a writing signed by authorized
representatives of the parties hereto.
13. PUBLICITY AND CONFIDENTIALITY.
The provisions of this Agreement and any non-public information, written
or oral, with respect to this Agreement ("Confidential Information") will be
kept confidential and shall not be disclosed, in whole or in part, to any person
other than affiliates, officers, directors, employees, agents or representatives
of a party (collectively, "Representatives") who need to know such Confidential
Information for the purpose of negotiating, executing and implementing this
Agreement. Each party agrees to inform each of its Representatives of the
non-public nature of the Confidential Information and to direct such persons to
treat such Confidential Information in accordance with the terms of this
Section. Nothing herein shall prevent a party from disclosing Confidential
Information (i) upon the order of any court or administrative agency, (ii) as
required by law or upon the request or demand of, or pursuant to any regulation
of, any regulatory agency or authority, (iii) to the extent reasonably required
in connection with the exercise of any remedy hereunder, (iv) to a party's legal
counsel or independent auditors, (v) to prospective lenders to the Grantor, (vi)
to the extent necessary, to the operator, maintain or and administrator of any
System and/or (vii) to any actual or proposed permitted assignee of all or part
of its rights hereunder
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provided that such actual or proposed assignee agrees in writing to be bound by
the provisions of this Section. Notwithstanding the foregoing, in the event that
either Purchaser intends to disclose any Confidential Information pursuant to
clause (i) or (ii) of the preceding sentence, such Purchaser agrees to (a)
provide the Grantor with prompt notice before such disclosure in order that the
Grantor may attempt to obtain a protective order or other assurance that
confidential treatment will be accorded such Confidential Information and (b)
cooperate with the Grantor in attempting to obtain such order or assurance.
14. LIMITATION OF LIABILITY.
In no event shall the Purchasers or the Grantor (or any of its affiliates)
be liable to the other for consequential, incidental, indirect or special
damages, including, but not limited to, loss of revenue, loss of business
opportunity, or the costs associated therewith.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
in the jurisdictions set forth beneath their signatures, effective on the date
first written above.
GLOBAL CROSSING USA INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
MICROSOFT CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior VIce President; Chief Financial Officer
SOFTBANK CORP.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇
Title: Chairman
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Exhibit A
Form of Capacity Purchase Agreement
[to come]
