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CUSIP NO. J24210-10-6 13D PAGE 1 OF 35 PAGES
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
INTERNET INITIATIVE JAPAN INC.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
J24210-10-6
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(CUSIP Number)
Norio Wada
Nippon Telegraph and Telephone Corporation
2-3-1 Otemachi
Chiyoda-ku, Tokyo 100-8116, Japan Tel: +81-3-5205-5481
Copy to:
Nobuhisa Ishizuka
Skadden, Arps, Slate, Meagher & Flom LLP
1-6-1 Roppongi
Minato-ku, Tokyo 106-6021, Japan Tel: +81-3-3568-2600
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
September 16, 2003
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
NOTE: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. SEE Rule 13d-7(b) for
other parties to whom copies are sent.
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CUSIP NO. J24210-10-6 13D PAGE 2 OF 35 PAGES
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
(No I.R.S. Identification No.)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS / /
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
JAPAN
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY -10,095-
OWNED BY -------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON - 2,040*-
WITH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-10,095-
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10 SHARED DISPOSITIVE POWER
- 2,040*-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,135 Common Shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES / /
CERTAIN SHARES
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
31.6%
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14 TYPE OF REPORTING PERSON
CO
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* Solely in its capacity as the sole and direct stockholder of NTT
Communications Corporation.
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CUSIP NO. J24210-10-6 13D PAGE 3 OF 35 PAGES
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-------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
NTT COMMUNICATIONS CORPORATION
(No I.R.S. Identification No.)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS / /
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
JAPAN
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY -2,040-
OWNED BY -------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON - 0-
WITH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-2,040-
-------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- 0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,040 Common Shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES / /
CERTAIN SHARES
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.3%
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14 TYPE OF REPORTING PERSON
CO
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CUSIP NO. J24210-10-6 13D PAGE 4 OF 35 PAGES
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ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D (this "Schedule 13D") relates to
shares of common stock, par value JPY50,000 per share (the "Common Shares"), of
Internet Initiative Japan Inc. (the "Company"). The Company is a corporation
organized under the laws of Japan, and its principal executive offices are
located at Jinbocho Mitsui Building, 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo
101-0051, Japan.
Information set forth in the Exhibits and Schedules attached
hereto is hereby expressly incorporated herein by reference and the response to
each item of this Schedule 13D is qualified in its entirety by the provisions of
such Exhibits and Schedules.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is being filed jointly by Nippon Telegraph and
Telephone Corporation, a corporation organized under the laws of Japan ("NTT"),
and NTT Communications Corporation, a corporation organized under the laws of
Japan ("NTT Communications" and, together with NTT, the "Reporting Persons").
(b) The principal business of NTT is to serve as a holding company for
subsidiaries engaged in providing telecommunications services. These services
fall into seven major classes: telephone services, telegraph services, leased
circuit services, data communication facility services, Integrated Services
Digital Network ("ISDN") services, sale of telecommunication equipment and other
services. The principal executive offices of NTT are located at 2-3-1 Otemachi,
Chiyoda-ku, Tokyo 100-8116, Japan.
(c) The principal business of NTT Communications is to provide
inter-prefectural telecommunications, multimedia network services and related
services, including providing local, long distance and other telecommunications
services outside of Japan. The principal executive offices of NTT Communications
are located at 1-1-6 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-8019, Japan.
(d) The name, business address, citizenship, present principal occupation
or employment, and the name, principal business and address of any corporation
or other organization in which such employment is conducted, of each executive
officer and director of each of NTT and NTT Communications are set forth on
Schedules A and B to this Schedule 13D, respectively.
(e) During the last five years, neither Reporting Person nor, to the best
of its knowledge, any of: (1) the Reporting Person's subsidiaries, executive
officers, directors; (2) the executive officers and directors of any person
controlled by such Reporting Person; or (3) the directors and executive officers
of any person ultimately in control of the Reporting Person has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(f) During the last five years, neither Reporting Person nor, to the best
of its knowledge, any of: (1) the Reporting Person's subsidiaries, executive
officers or directors; (2) the executive officers and directors of any person
controlled by such Reporting Person; or (3) the directors and executive officers
of any person ultimately in control of the Reporting Person was party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, United States federal or state securities laws or finding any
violation with respect to such laws.
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CUSIP NO. J24210-10-6 13D PAGE 5 OF 35 PAGES
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ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The aggregate amount of funds required for NTT to purchase 10,095
Common Shares (the "NTT Shares") pursuant to the Subscription Agreement, dated
September 16, 2003, between NTT and the Company (the "Subscription Agreement"),
an English translation of which is attached hereto as Exhibit 1, was
JPY9,603,373,500.
NTT acquired the NTT Shares in accordance with the terms and
conditions set forth in the Subscription Agreement under a registration
exemption under the Securities Act of 1933, as amended (the Securities Act").
The cash paid by NTT to the Company and certain arrangements with the Company
pursuant to the Subscription Agreement were the consideration for the NTT
Shares.
The funds used to purchase the NTT Shares were obtained from
working capital of NTT.
The aggregate amount of funds required for NTT Communications to
purchase 788 Common Shares (the "New NTTC Shares", and together with the NTT
Shares, the "Subject Shares") on September 16, 2003 in connection with a
third-party allotment of newly issued Common Shares under a registration
exemption under the Securities Act, was JPY749,624,400. As a result, NTT
Communications has an aggregate 2,040 Common Shares (the "NTTC Shares") after
the consummation of the third-party allotment.
The funds used to purchase the New NTTC Shares were obtained from
working capital of NTT Communications.
ITEM 4. PURPOSE OF TRANSACTION.
NTT entered into the Subscription Agreement and acquired the NTT
Shares to: (i) assist in stabilizing the management of the Company to enable the
Company to continue to provide network and platform services necessary for NTT
affiliates to maintain a high level of service to their customers; (ii) preserve
the Company's leading competitive position in the market by strengthening its
relationship with the Company in respect of business strategies for the
development of broadband services; and (iii) establish a strategic relationship
to, among other things, explore the joint development and marketing of IT
products and services through certain business collaboration arrangements with
the Company.
The Subscription Agreement provides that, of the members of the
board of directors and the statutory auditors of the Company to be elected at
the first shareholders' meeting after the execution of the Subscription
Agreement, a total of three shall be persons nominated by NTT, subject to
shareholders' approval. The Company's articles of association provides for up to
seven members on the board of directors and three or more statutory auditors,
respectively. To facilitate the election of NTT nominees as directors and
statutory auditors as described above, the Company has agreed to make amendments
to provisions in the Company's articles of association and bylaws relating to
the number of directors and statutory auditors and to take other steps, as
necessary. Until such time as the nominees are duly elected, NTT may appoint two
persons as observers having the right to attend all of the Company's board
meetings to assure timely arrangements for its business collaboration with the
Company.
Other terms of the Subscription Agreement that may relate to the
Company's business and corporate structure are set forth in Item 6, which are
incorporated herein by reference.
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CUSIP NO. J24210-10-6 13D PAGE 6 OF 35 PAGES
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NTT Communications' purpose for purchasing the New NTTC Shares is
to strengthen its business relationship with the Company.
Subject to the foregoing, each Reporting Person has acquired the
Subject Shares to which this Schedule 13D relates for investment purposes based
upon its evaluations of the Company's business prospects, market conditions,
future development and other factors. Subject to the foregoing, each Reporting
Person may from time to time acquire additional Common Shares, or sell or cause
to be sold all or a portion of the Common Shares over which each Reporting
Person exercises voting and dispositive power, whether in open market or
privately negotiated transactions or otherwise.
Except as disclosed in this Item 4, each Reporting Person has no
current plans or proposals which relate to or would result in any of the events
described in Items (a) through (j) of the instruction to Item 4 of Schedule 13D.
Each Reporting Person, however, expects to evaluate on an ongoing basis the
Company's financial condition, business, operations and prospects, the market
price of the Company's stock, conditions in the securities markets generally,
general economic and industry conditions and other factors. Accordingly, each
Reporting Person reserves the right to change its plans and intentions at any
time, as it deems appropriate, subject to relevant legal restrictions.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) NTT owns 10,095 Common Shares acquired on September 16, 2003 pursuant
to the Subscription Agreement. As the sole shareholder of NTT Communications,
NTT has the power to direct the management and the business affairs of NTT
Communications, which owns 2,040 Common Shares. Accordingly, NTT may be deemed
to be the beneficial owner of 12,135 Common Shares, or 31.6% of the Common
Shares. The percentage of Common Shares outstanding reported as beneficially
owned by NTT herein is based upon the Common Shares issued and outstanding as of
September 16, 2003, as represented by the Company in the Subscription Agreement.
NTT Communications owns 2,040 Common Shares, or 5.3% of the Common
Shares, after acquiring 788 Common Shares issued on September 16, 2003 pursuant
to a third-party allotment of newly issued Common Shares of the Company.
NTT Communications was a party to a shareholders' agreement among
certain shareholders of the Company dated March 12, 2001 (the "Shareholders'
Agreement") governing the disposition of the Company's Common Shares. By virtue
of the Shareholders' Agreement, NTT Communications may have been considered to
be part of a group with each of the other shareholders, holding shared
dispositive power over 13,222 shares, which was equivalent to 51.36% of the
Common Shares outstanding after June 27, 2003. As of September 16, 2003, the
Shareholders' Agreement terminated in accordance with its terms, and NTT
Communications currently does not hold any shared dispositive power with respect
to the Common Shares.
(b) NTT has sole power to vote and dispose of the NTT Shares and has, as
the sole and direct stockholder of NTT Communications, shared power to vote and
dispose, or direct the voting or disposition of, the NTTC Shares.
(c) There have been no transactions in the Common Shares of the Company
(except as described in Item 4 above) effected during the past 60 days or since
the most recent filing of a Schedule 13D, whichever is less, by either Reporting
Person.
(d) No other person is known by either NTT or NTT Communications to have
the right to receive or the power to direct the receipt of dividends from or
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CUSIP NO. J24210-10-6 13D PAGE 7 OF 35 PAGES
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the proceeds from the sale of the NTT Shares or the NTTC Shares.
(e) Not applicable.
References to, and descriptions of, the Subscription Agreement as
set forth in this Item 5 or in Item 4 are qualified in their entirety by
reference to the Subscription Agreement, the English translation of which is
included as Exhibit 1 to this Schedule 13D, and are incorporated in Items 4 and
5 in their entirety where such references and descriptions appear.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The information set forth, or incorporated by reference, in
Items 3 through 5 is incorporated hereby by reference.
The Subscription Agreement contains certain minority shareholder
protection provisions, such as a preemptive right provision which requires the
Company to give NTT notice of its intention to issue and sell any new
securities. Upon such notice, NTT may purchase a pro rata share of such
securities so as to maintain its percentage ownership interest in the Company.
"New securities" include any capital stock of the Company, rights, options or
warrants to purchase capital stock of the Company, and any other securities
which may be converted into capital stock of the Company, but exclude rights
represented by warrants or options (or capital stock to be issued upon the
exercise thereof) already granted pursuant to the Company's stock incentive plan
and the capital stock to be issued upon the exercise of certain convertible
bonds of the Company.
Under the Subscription Agreement, NTT has "piggy back" and demand
registration rights in respect of the NTT Shares.
The Subscription Agreement provides for indemnification of NTT by
the Company for any damages, losses and expenses NTT may suffer or incur
(including losses that NTT may suffer as a result of a decrease in the market
price of the NTT Shares) to the extent such damages, losses and expenses result
from or are related to: (i) untrue statements in any of the representations or
warranties of the Company in the Subscription Agreement; or (ii) the Company's
failure to perform or comply with any of the obligations on the part of the
Company under the Subscription Agreement.
NTT and the Company have agreed in the Subscription Agreement to
certain business collaboration arrangements to improve the business operations
of the Company and further the business relationship between NTT and the
Company. Specifically, NTT and the Company have agreed in principle that: (i)
when NTT and the Company find it necessary for the execution of the Company's
business plan, the Company shall draft a business improvement plan, which plan
shall be faithfully implemented by the Company; (ii) NTT and the Company shall
use good faith to jointly engage, where possible, in the development of
broadband and information technology and other related businesses; (iii) NTT and
the Company shall endeavor for the Company to expand its business relationship
with NTT and its subsidiaries and affiliates in connection with the Company's
new business opportunities; and (iv) NTT and the Company shall discuss
arrangements for seconding employees to each other to carry out the intention of
subparagraph (iii) above, provided that NTT shall not second any of its
employees to IIJ America Inc., a U.S. subsidiary of the Company, unless NTT and
the Company agree otherwise.
Except as provided in the Subscription Agreement or set forth in
this Item 6, the Reporting Persons have no contract, arrangement, understanding
or relationship (legal or otherwise) with any person with respect to the
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CUSIP NO. J24210-10-6 13D PAGE 8 OF 35 PAGES
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securities of the Company.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit Description.
1. Subscription Agreement (English translation), dated September 16, 2003,
by and between Nippon Telegraph and Telephone Corporation and Internet
Initiative Japan Inc.
2. Joint Filing Agreement, dated September 25, 2003, by and between Nippon
Telegraph and Telephone Corporation and NTT Communications Corporation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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CUSIP NO. J24210-10-6 13D PAGE 9 OF 35 PAGES
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 25, 2003
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
By: /s/ Norio Wada
------------------------------------------
Name: Norio Wada
Title: President
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CUSIP NO. J24210-10-6 13D PAGE 10 OF 35 PAGES
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 25, 2003
NTT COMMUNICATIONS CORPORATION
By: /s/ M. Suzuki
------------------------------------------
Name: Masanobu Suzuki
Title: President
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CUSIP NO. J24210-10-6 13D PAGE 11 OF 35 PAGES
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EXHIBIT INDEX
1. Subscription Agreement (English translation), dated September 16, 2003,
by and between Nippon Telegraph and Telephone Corporation and Internet
Initiative Japan Inc.
2. Joint Filing Agreement, dated September 25, 2003, by and between Nippon
Telegraph and Telephone Corporation and NTT Communications Corporation.
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CUSIP NO. J24210-10-6 13D PAGE 12 OF 35 PAGES
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EXHIBIT 1
(English translation)
Subscription Agreement
This Subscription Agreement (hereinafter referred to as the
"Agreement") made and entered into by and between Nippon Telegraph and Telephone
Corporation (hereinafter referred to as "NTT") and Internet Initiative Japan
Inc. (hereinafter referred to as "IIJ") for the purchase by NTT (or its nominee)
of shares in IIJ subject to and under the terms and conditions hereinafter set
forth.
WITNESSETH:
Chapter 1. Definitions
Article 1. (Definitions)
The following terms as used herein shall have the following meanings
ascribed to them:
(1) "IIJ Business" shall mean and include all lines of business which are
being operated by IIJ as of the date hereof;
(2) "New Shares" shall mean the 10,883 additional shares of common stock of
IIJ which shall be issued to and purchased by NTT (or its nominee)
pursuant to the "New Issuance" (as hereinafter defined);
(3) "New Issuance" shall mean issuance of New Shares by IIJ pursuant to
the terms and conditions set forth in Article 2; and
(4) "Closing Date" shall mean the date specified as such in Article 2.
Chapter 2. New Issuance
Article 2. (New Issuance)
IIJ hereby agrees to offer, sell and issue to NTT (or its nominee) by
third party allotment, and NTT hereby agrees to subscribe, purchase and pay for
the New Shares, subject to and under the terms and conditions of this Agreement.
o Method of placement: 10,883 new shares shall be
allotted to NTT (or its nominee)
by third party allotment;
o Issue price: JPY951,300 per share;
o Portion of the issue price not JPY475,650 per share;
credited to IIJ's capital
account:
o Date by which the New Shares September 16, 2003;
must be subscribed for:
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CUSIP NO. J24210-10-6 13D PAGE 13 OF 35 PAGES
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o Closing Date: September 16, 2003;
o Escrow Bank: The Mizuho Corporate Bank, Ltd.,
Otemachi Sales Division; and UFJ
Bank Limited, Nihonbashi Branch;
and
o The New Shares shall entitle April 1, 2003
the holder thereof to receive
all dividends declared on or
after:
Chapter 3. Representations and Warranties
Article 3. (Representations and Warranties of IIJ)
IIJ hereby represents and warrants to NTT that the following statements
are true and correct as of the date hereof and as of the Closing Date or as of
any other date or dates specified:
3.1 Group Companies
IIJ and its subsidiaries (the "IIJ Group Companies" which
shall mean collectively or individually the companies thereof as the
context requires, provided, that such term does not include Crosswave
Communications, Inc., Crosswave Facilities, Inc., Crosswave Services
Inc. and Crosswave Communications America Inc.) are as set forth in the
"List of IIJ Group Companies" attached hereto as Exhibit 3-1.
3.2 Lawful Formation and Existence of IIJ Group Companies
The IIJ Group Companies are duly organized and validly
existing under the laws of Japan or their jurisdiction of formation and
have full and complete legal right, power and authority to own and use
their assets and to carry on their present businesses.
3.3 Share Capital of IIJ
IIJ is authorized to issue 75,520 shares of common stock, out
of which 25,745 shares have been duly and validly issued and are now
outstanding. Except for those outstanding shares, the New Shares and
those shares disclosed in Exhibit 3-3 attached hereto, there exist no
outstanding shares issued by IIJ, nor there exist any outstanding
subscription rights, stock acquisition rights, bonds with stock
acquisition rights or other rights or options granted or issued by IIJ
which are convertible or exchangeable into shares of IIJ or other
rights which entitle the holders thereof to purchase or acquire shares
of IIJ. IIJ's shareholders registry to be delivered to NTT pursuant to
the third paragraph of the Article 6 hereof is true and correct as of
March 31, 2003 and, to IIJ's knowledge, IIJ's beneficial shareholders'
list to be delivered to NTT pursuant to the third paragraph of the
Article 6 hereof shows the beneficiary shareholders who hold American
Depository Receipts ("ADRs") in an amount equal to 5% or more of IIJ's
shares outstanding as of December 31, 2002.
3.4 Issuance of New Shares
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CUSIP NO. J24210-10-6 13D PAGE 14 OF 35 PAGES
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Upon the payment of the purchase price on the Closing Date
prescribed in Article 7, as of the day following the date thereof, NTT
will have full and complete ownership of the New Shares, free of any
and all encumbrances, and all of the New Shares will be validly and
legally issued by IIJ.
3.5 Lawful Execution of this Agreement
The execution and performance of this Agreement (including,
but not limited to, the New Issuance) by IIJ are within the its
business purposes and have been duly authorized under all applicable
laws and regulations of Japan or elsewhere (including but not limited
to the Japanese Telecommunications Business Law, anti-monopoly laws,
U.S. Securities Act of 1933, Communications Act, anti-trust laws and
Exon-Florio Act), other governmental rules (including but not limited
to the Federal Communications Commission rules and regulations),
notifications, guidelines, orders and directives having the force of
law and stock exchange rules including, but not limited to, the
regulations of the NASDAQ National Market which are applicable to IIJ
(hereinafter collectively referred to as the "Applicable Laws and
Regulations") and the articles of association, by-laws, or other
internal rules of IIJ.
3.6 Validity and Enforceability of this Agreement
This Agreement has been duly executed by a duly authorized
officer of IIJ and upon its execution by or on behalf of IIJ, this
Agreement constitutes legal, valid and binding obligations of IIJ
enforceable against it in accordance with its terms.
3.7 Legality of this Agreement and No Contractual or Other
Violations
Except those disclosed in the "List of Licenses, Approvals,
Authorizations, Declarations, Filings and Registrations Required for
the Execution and Performance of this Agreement" attached hereto as
Exhibit 3-7, no consents, licenses, approvals or filings are required
by any governmental agency of Japan or elsewhere ("Applicable
Government Agencies") under Applicable Laws and Regulations with
respect to IIJ for the due execution and performance by NTT and IIJ, of
this Agreement, nor will any governmental agency of Japan or elsewhere
likely to prevent this Agreement from being executed or performed. The
execution and performance by IIJ of this Agreement will neither
conflict with any Applicable Laws and Regulations or its articles of
association, by-laws or other internal rules or any law, regulation or
agreement by which it or any of its assets is bound nor constitute a
cause for cancellation or termination of such agreement or acceleration
of any of its obligations thereunder nor in any way infringe any of the
rights or interests of any other persons or entities who have any
relationship with IIJ.
3.8 Approvals and Permits of the IIJ Group Companies
None of the IIJ Group Companies is in breach of any Applicable
Laws and Regulations or its articles of association, by-laws or other
internal rules in carrying on its business. Each of the IIJ Group
Companies has all approvals, permits and licenses from the Applicable
Government Agencies which is required to carry on its business, and
there exists no event or circumstance which will cause invalidation,
cancellation, termination, revocation or non-renewal of any such
approval, permit or license. Consummation of the New Issuance as
contemplated hereby will not cause nor is likely to cause invalidation,
cancellation, termination, revocation or non-renewal of any such
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CUSIP NO. J24210-10-6 13D PAGE 15 OF 35 PAGES
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approval, permit or license, nor is it likely that any fine, penalties
or conditions will be imposed by any Applicable Government Agency.
3.9 No Event of Default
All contracts, agreements and promises, whether written or
oral, to which any of the IIJ Group Companies is a party, are valid
contracts, agreements or undertakings enforceable against their
respective parties in accordance with their respective terms and
conditions. No event of default by either party thereto, whether an IIJ
Group Company or otherwise, has occurred or is existing under any such
contract, agreement or promise.
3.10 Financial Statements of IIJ
The financial statements delivered by IIJ to NTT pursuant to
the fourth paragraph of Article 6 are true and correct copies of IIJ's
unconsolidated balance sheet, profit and loss statement and other
financial statements (including the accounts of business and the
supplementary statements thereto) and IIJ's consolidated balance sheet,
profit and loss statement and other financial statements as of March
31, 2003 (hereinafter, collectively, referred to as the "Financial
Statements"). The consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles, accounting
standards and auditing standards in the U.S., the unconsolidated
Financial Statements have been prepared and audited in accordance with
those in Japan, such Financial Statements accurately and fairly present
the financial conditions and the results of operations of IIJ as of the
date stated therein. Since March 31, 2003 to the date hereof there have
been no developments which may have a material adverse effect on the
financial condition or results of operations of IIJ except for any
adverse effects caused by the petitioning for Corporate Reorganization
Procedure by Crosswave Communications, Inc. ("Crosswave") and its
subsidiaries or any other adverse effects related thereto.
3.11 No Other Debts
(1) The IIJ Group Companies have lawfully and properly
prepared and filed all tax and other returns with respect to any and
all taxes and other assessments including, but not limited to,
corporate income tax and social security taxes that have accrued before
the Closing Date and have paid all such accrued taxes and assessments
when due.
(2) Except those liabilities which accrue during the
course of its normal business operations, there are no liabilities of
IIJ that are not reflected in the Financial Statements.
3.12 Intellectual Property
The IIJ Group Companies own or otherwise control all patent
rights, utility model rights, trademark rights, copyrights, design
patent rights, trade secrets, domain names, know-how and other
intellectual property rights, whether granted or pending (hereinafter
collectively referred to as "Intellectual Property Rights") that are
necessary to properly and efficiently carry out its business. None of
the Intellectual Property Rights is presently subject to or is likely
to become subject to any lien or other encumbrance, whether statutory,
contractual or otherwise. To IIJ's knowledge and belief, none of such
rights is presently infringed upon by any third party. The IIJ Group
Companies have not infringed upon any Intellectual Property Right owned
or controlled by any third party nor have received or are likely to
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CUSIP NO. J24210-10-6 13D PAGE 16 OF 35 PAGES
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receive from any third party notice that they are infringing upon any
Intellectual Property Rights owned or controlled by such third party.
3.13 No Labor Disputes
The IIJ Group Companies are not in breach of any of the terms
and conditions of any employment agreement with any of its employees
and are in full compliance with the Labor Standards Act, as amended,
and all applicable labor laws. The IIJ Group Companies do not and are
not likely to have any labor dispute with any of its present or past
employees. The IIJ Group Companies have not experienced during the past
five (5) years and are not likely to experience in the foreseeable
future any labor disputes including, but not limited to, strikes,
pickets, walkouts and slow-downs.
3.14 No Adverse Changes in Business Operations
Since March 31, 2003 to the Closing Date, no material changes
have occurred in the business operations of the IIJ Group Companies,
except for any adverse effects caused by the petitioning for Corporate
Reorganization Procedure by Crosswave and its subsidiaries or any other
adverse effects related thereto.
3.15 All contracts and agreements, whether written or oral, now
existing between IIJ and any of the IIJ Group Companies including those
between IIJ and Crosswave, are on arm's length terms and conditions.
3.16 No Lawsuits
The IIJ Group Companies are not, with respect to their
business operations, except as disclosed in Exhibit 3-16 hereto, (i)
parties to any pending lawsuit or other legal proceedings (including
but not limited to petitions for provisional attachment or
disposition), reconciliation or arbitration proceedings or any other
governmental investigation or proceedings (hereinafter collectively
referred to as "Legal Proceedings"); (ii) likely to become parties to
any Legal Proceedings, except for the Legal Proceedings that may arise
out of or in connection with the petitioning for Corporate
Reorganization Procedure by Crosswave and its subsidiaries; and (iii)
no Legal Proceedings that have been instituted and are pending or are
threatened against the IIJ Group Companies, except for the Legal
Proceedings that may arise out of or in connection with the petitioning
for Corporate Reorganization Procedure by Crosswave and its
subsidiaries;
3.17 True and Correct Disclosure
No data or information heretofore disclosed by IIJ to NTT
hereunder for the purpose of entering into this Agreement to NTT
hereunder, whether disclosed in writing or orally, with respect to the
IIJ Group Companies includes any material data or information which is
incorrect or untrue. All material data and information with respect to
the IIJ Group Companies that NTT or its agents considered material in
respect of the New Issuance contemplated hereby and have requested have
been fully disclosed to NTT or its agents. The IIJ Group Companies have
properly made all disclosures and other filings and reports that are
required under Applicable Laws and Regulations. No material data or
information included in such disclosures, filings or reports include
any incorrect data or information. For the purpose of this Section
3.17, material data or information shall mean such information as to
which NTT, in its reasonable judgment, would have decided not to
execute this Agreement or would have determined that the terms and
conditions of this
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CUSIP NO. J24210-10-6 13D PAGE 17 OF 35 PAGES
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Agreement, including, but not limited to, the purchase price of the New
Shares, would be materially affected thereby, if it had been made aware
of the incorrectness or existence thereof.
3.18 No Material Adverse Changes
There exist no events or circumstances which are likely to
have any adverse effect on the business, operations, financial
conditions, profitability or business prospect of the IIJ Group
Companies or otherwise may likely cause damage to NTT, except for any
adverse effects caused by the petitioning for Corporate Reorganization
Procedure by Crosswave and its subsidiaries or any other adverse
effects related thereto.
Chapter 4. Obligations and Covenants of IIJ Applicable
up to the Closing Date
Article 4. (Covenants of IIJ Applicable during the Period of the Date Hereof
to and Including the Closing Date)
IIJ hereby covenants to NTT that during the period between the date
hereof up to and including the Closing Date:
4.1 Business Operations
The IIJ Group Companies shall continue to operate their
businesses, with the duty of care of a good manager, substantially in
the same manner as they were operated during the period up to the date
hereof, and they shall not do or permit to be done any act, deed or
thing that is likely to result in having a material adverse effect on
the operations, assets, financial condition, profitability or prospects
of their businesses.
4.2 Consent of NTT
It shall not cause or permit the IIJ Group Companies to do any
act, deed or thing which is out of the ordinary course of business
without NTT's prior consent. It shall not cause or permit the IIJ Group
Companies to do or promise to do any act, deed or thing which, under
Applicable Laws and Regulations and/or their articles of association or
by-laws, require approval or authorization of or reporting to their
shareholders or board of directors, including but not limited to:
(i) amending or modifying the articles of association or by-laws;
(ii) transferring, leasing, mortgaging or otherwise disposing of
any of their assets other than in the ordinary course of their
business;
(iii) acquiring any additional asset other than in the ordinary
course of their business;
(iv) borrowing funds or incurring guaranty or other obligations or
liabilities other than for the purpose of raising funds for
working capital in the normal course of their business;
(v) merging, assigning shares, transferring assets, exchanging
shares, transferring shares, spinning off, consolidating with
another company or entering into any equity tie-up with any
other entity; and
(vi) issuing or promising to issue additional shares, stock
options, warrants or any other instrument convertible into or
exchangeable with their shares, retiring their shares,
reducing their share capital or otherwise changing their share
capital.
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4.3 Obligation to Fulfill the Conditions Precedent
IIJ shall exercise its best efforts to fulfill all the
conditions precedent to NTT's obligation to pay the purchase price of
the New Shares set forth in Article 5.
4.4 Access to Information
IIJ shall cause the IIJ Group Companies to give to NTT and its
authorized agents reasonable access to their accounting books, other
records, offices, other facilities and assets so that they can inspect
the same and/or make copies thereof as necessary at any time during
IIJ's normal business hours.
4.5 Acquisition of Licenses and Permits
IIJ shall obtain or make all approvals, permits, licenses,
confirmations, filings and registrations that may be required under
Applicable Laws and Regulations, and to abide by the rules and
regulations of Applicable Laws and Regulations, for the consummation of
the New Issuance contemplated hereby, including, but not limited to,
those required under the laws of the U.S. and those which NTT believes
would be appropriate and beneficial to obtain or make and so reasonably
requests, so that all the conditions precedent to the lawful
consummation of the New Issuance contemplated hereby can be fulfilled
on or before the Closing Date.
4.6 Other Procedures pursuant to Applicable Laws and Regulations
IIJ shall use its best efforts to cooperate with NTT with
respect to all other procedures as may be reasonably requested by NTT
pursuant to Applicable Laws and Regulations; provided, however, that
this Section 4.6 shall survive after the Closing Date while IIJ remains
to be a consolidated affiliate of NTT under the equity method.
4.7 Other Acts and Assistance
In addition to the above matters, during the period from the
date hereof up to and including the Closing Date, the IIJ Group
Companies shall do such acts as NTT may reasonably request and
cooperate with NTT.
Chapter 5. Conditions Precedent
Article 5. (Conditions Precedent to NTT's Obligation to Pay the Purchase Price)
NTT's obligation hereunder to pay for the New Shares on the Closing
Date is specifically conditioned upon fulfillment of the following conditions
precedent, which NTT may, in its sole discretion, waive in whole or in part:
5.1 The representations and warranties made or given by IIJ in
Article 3 are true and correct on the Closing Date;
5.2 IIJ shall have fully performed or complied with on or before
the Closing Date all the agreements and covenants under this Agreement;
5.3 No event or circumstance shall have occurred at any time
during the period between the date hereof and the Closing Date which is
likely to have any material adverse effect on the business, operations,
financial conditions, management results, creditworthiness or
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CUSIP NO. J24210-10-6 13D PAGE 19 OF 35 PAGES
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profitability of IIJ or prospect of IIJ Business, except for any
adverse effects caused by the petitioning for Corporate Reorganization
Procedure by Crosswave and its subsidiaries or any other adverse
effects related thereto;
5.4 No cease and desist order, request, instruction or directive
shall have been issued by any Applicable Government Agency to prevent
NTT from subscribing for or acquiring the New Shares; and
5.5 As of the Closing Date, there exists no shareholder of IIJ
who owns shares of capital stock of IIJ at a shareholding ratio in
excess of the shareholding ratio that will be owned by NTT after the
consummation of the New Issuance contemplated hereby.
Chapter 6. Payment for the New Shares and Share Certificate
Article 6. (Documents to Be Delivered by IIJ to NTT on the Closing Date)
By the Closing Date, IIJ shall deliver to NTT the following documents:
(1) A copy of the minutes of the meeting of IIJ's board of
directors at which the consummation and implementation of the New
Issuance was duly authorized;
(2) A copy of each of the approvals, permits, licenses, filings
and registrations obtained or made prior to the Closing Date by IIJ to
lawfully consummate and implement the New Issuance;
(3) IIJ's shareholders registry as of March 31, 2003 and IIJ's
beneficial shareholders list as of December 31, 2002;
(4) A copy of IIJ's Financial Statements;
(5) A certificate signed by a representative director of IIJ in
a form and substance satisfactory to NTT certifying that all the
representations and warranties made or given by IIJ in this Agreement
are true and correct and that no breach or event of default has
occurred or is existing; and
(6) Any other documents that NTT may reasonably request.
Article 7. (Payment of the Purchase Price of the New Shares)
Subject to fulfillment of all the conditions precedent set forth in the
prior Article and in exchange for the delivery by IIJ to NTT of the documents
and certificates listed in the prior Article, NTT shall, on the Closing Date,
pay to the Escrow Bank specified in Article 2 the full purchase price of the New
Shares.
Article 8. (Non-Issuance of Share Certificate)
Upon payment under Article 7 above, NTT shall convey to IIJ its desires
not to hold share certificates pursuant to Article 226-2 of the Commercial Code
of Japan. IIJ shall, on the date immediately following the Closing Date,
register NTT's name as a shareholder and provide for the non-issuance of share
certificates to NTT in its shareholder registry.
Article 9. (Use of Funds Raised by the Issuance of the New Shares)
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Out of the funds raised by it as a result of issuance of new shares
pursuant to the third party allotment announced on September 1, 2003, IIJ shall
put in place an effective fund management, and endeavor for smooth redemption of
the Yen-denominated, unsecured convertible bonds due March 31, 2005 (hereinafter
referred to as the "Convertible Bonds") issued by IIJ.
Chapter 7. Management of IIJ
Article 10. (Board of Directors and Statutory Auditors)
10.1 After the consummation of the New Issuance, IIJ will be a
consolidated affiliate under the equity method and, therefore, IIJ
agrees as follows with respect its directors:
(1) of the members of IIJ's board of directors and statutory
auditors to be first elected after the execution of this
Agreement, three (3) shall be nominees of NTT, subject to
their successful election at a meeting of shareholders of IIJ
pursuant to the relevant provisions of the Commercial Code of
Japan, as amended; provided that, the identities of the three
(3) nominees and their positions shall be further discussed
and agreed by IIJ and NTT; and
(2) at the first meeting of its shareholders, whether annual or
special, to be held after the consummation of the New
Issuance, IIJ shall amend the provisions related to the number
of directors and statutory auditors in its articles of
association and take or cause to be taken all other actions
necessary for the election of a total of three (3) directors
and statutory auditors as set forth in the above subparagraph.
10.2 Notwithstanding anything to the contrary in this Agreement,
IIJ and NTT hereby acknowledge that NTT shall not have any right to
nominate any nominees to the board of directors of IIJ America Inc.
Article 11. (Attendance of Observers)
11.1 During the period from the Closing Date to and including the
date when the NTT director(s) and statutory auditor(s) are elected as
provided in preceding Article 10.1, NTT shall have the right to appoint
two (2) observers (hereinafter referred to as the "Observers") to
attend all meetings of the board of directors of IIJ.
11.2 In order to make sure that the Observer attends IIJ's meeting
of the board of directors, IIJ shall, whenever it sends out a notice of
meeting of its board of directors pursuant to the rules of its board of
directors, at any time during the period from the Closing Date to and
including the date the NTT director(s) and statutory auditor(s) are
elected as provided in Article 10.1, concurrently send a copy of such
notice to NTT.
Article 12. (Submission of Financial Statements)
12.1 IIJ shall furnish NTT with copies of the following documents
specified in the following paragraphs within the respective periods
therein specified:
(1) within two (2) months after the end of each fiscal year:
the audited consolidated and unconsolidated balance sheet as
of the end of the fiscal year, its audited consolidated and
unconsolidated profit and loss statement, the accounts of
business (audited insofar as it relates to financial matters),
its audited
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CUSIP NO. J24210-10-6 13D PAGE 21 OF 35 PAGES
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statement of appropriation and such additional financial
information as requested by NTT with respect to such fiscal
year; provided, however, that the foregoing shall have been
prepared in accordance with generally accepted accounting
principles, accounting standards and auditing standards in
Japan and the United States; and provided, further, that, with
respect to the audited consolidated balance sheet as of the
end of the fiscal year, the audited consolidated profit and
loss statement, the accounts of business (audited insofar as
it relates to financial matters) and the audited statement of
appropriation with respect to such fiscal year prepared in
accordance with generally accepted accounting principles,
accounting standards and auditing standards in Japan, this
paragraph shall not apply until such time as IIJ is required
to prepare such statements pursuant to the Applicable Law and
Regulations, and with respect to the audited consolidated
balance sheet as of the end of the fiscal year, the audited
consolidated profit and loss statement, the accounts of
business (audited insofar as it relates to financial matters)
and the audited statement of appropriation with respect to
such fiscal year prepared in accordance with generally
accepted accounting principles, accounting standards and
auditing standards in the United States, this paragraph shall
not be breached so long as such statements are furnished as
promptly as possible after the preparation thereof;
(2) within forty five (45) days after the end of the second fiscal
quarter of each fiscal year: the unaudited semi-annual balance
sheet (both consolidated and unconsolidated) as of the end of
such second fiscal quarter of the fiscal year, its unaudited
semi-annual profit and loss statement (both consolidated and
unconsolidated) for the semi-annual fiscal period then ended
and such additional financial data and reports as NTT may
request; provided, that it is sufficient to provide reports
which comply with the accounting regulations, auditing
principles and generally accepted accounting principles in the
U.S.; and
(3) within forty five (45) days after the end of each fiscal
quarter: its unaudited quarterly balance sheet (both
consolidated and unconsolidated) as of the end of such fiscal
quarter, its unaudited quarterly profit and loss statement
(both consolidated and unconsolidated) for the fiscal quarter
and such additional financial data and reports as NTT may
request; provided, that it is sufficient to provide reports
which comply with the accounting regulations, auditing
principles and generally accepted accounting principles in the
U.S.
12.2 Notwithstanding anything to the contrary set forth in Section
12.1, IIJ shall promptly furnish NTT with such additional documents and
information as NTT may from time to time request which are necessary
for NTT to prepare its consolidated financial statements regarding IIJ.
12.3 In addition to the materials required under Sections 12.1 and
12.2, IIJ shall promptly furnish NTT with such additional documents and
information which are necessary for complying with required procedures
under applicable laws as NTT may from time to time reasonably request.
12.4 Whenever it furnishes NTT with any financial statement, report
or data in the performance of its obligations set forth in Sections
12.1 through 12.3, IIJ shall discuss with NTT any changes in fiscal
year,
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CUSIP NO. J24210-10-6 13D PAGE 22 OF 35 PAGES
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outside auditors and/or other necessary measures of the IIJ Group
Companies.
12.5 Whenever NTT has any questions with respect to any financial
statement, data or information furnished to it by IIJ hereunder, it may
raise such questions with IIJ, and IIJ shall promptly respond to such
questions.
12.6 In the event (i) any substantial change occurs in IIJ's
shareholder base, (ii) any event or circumstance occurs that is likely
to result in material adverse effect on IIJ's business operations, or
(iii) any other event or circumstance of which NTT reasonably requests
prompt notice from IIJ occurs, IIJ shall promptly notify NTT thereof.
Article 13. (Inspection of IIJ's Books of Account and Other Records)
NTT may, to the extent permitted by law, at any time and from time to
time during the normal business hours of the IIJ Group Companies, visit, either
directly or through its duly authorized agents including, but not limited to,
its outside auditors, the principal office and/or other offices or facilities of
the IIJ Group Companies and to inspect, make copies of and audit at its own
expense such offices, facilities, accounting books, documents and other records
of the IIJ Group Companies which NTT may reasonably request to be inspected,
copied or audited. IIJ shall cooperate, and cause the IIJ Group Companies to
cooperate, with above inspection, copying and audit.
Chapter 8. (NTT's Privileges)
Article 14. (Anti-Dilution Clause)
14.1 NTT shall have pre-emptive rights with respect to any and all
issuances of shares, stock acquisition rights, warrants and other
securities or instruments convertible into or exchangeable with shares
of IIJ that may be issued by IIJ at any time in the future (hereinafter
collectively referred to as "Additional Shares") in proportion to its
then current "Shareholding Ratio". The term "Shareholding Ratio" as
used herein with respect to NTT shall mean such ratio as may be
obtained by dividing the number of outstanding shares of IIJ then held
by NTT by the total number of issued and outstanding shares of IIJ. The
terms "number of outstanding shares of IIJ then held by NTT" and "total
number of shares of IIJ then issued and outstanding" as used herein
shall include, without limitation, the number of shares of common stock
of IIJ that may be issued upon conversion or exercise of convertible
securities, stock acquisition rights or warrants then owned by NTT or
upon conversion or exercise of the convertible securities, stock
acquisition rights or warrants then issued and outstanding, as the case
may be; provided, however, that the term "Additional Shares" as used
herein does not include both (i) incentive stock options and warrants
that have heretofore been granted, and incentive stock acquisition
rights that may hereafter be granted, by IIJ to its directors, officers
or employees or any third parties or shares that may be issued by IIJ
upon exercise of such stock options, warrants and stock acquisition
rights; and (ii) shares that may be issued by IIJ upon conversion of
the Convertible Bonds.
14.2 Whenever IIJ issues any Additional Shares as described above,
it shall first send to NTT written notice specifying the material terms
and conditions of such issuance including, but not limited to, the
number of Additional Shares to be issued and their issue price and
shall inquire if
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CUSIP NO. J24210-10-6 13D PAGE 23 OF 35 PAGES
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NTT is willing to exercise its pre-emptive right set forth in Section
14.1 with respect to such Additional Shares.
14.3 NTT shall, within 14 days from the date of its receipt of the
written notice described in Section 14.2, notify IIJ in writing whether
or not it is going to exercise such pre-emptive right. If it is, it
shall specify in such notice the number of Additional Shares for which
it is going to subscribe and purchase; provided, that such number shall
not exceed the product of the total number of Additional Shares to be
issued by IIJ and NTT's then current Shareholding Ratio.
Article 15. (Registration Rights)
15.1 NTT may, from time to time, request IIJ to file a registration
statement and/or any other filings with respect to the New Shares with
Applicable Government Agencies if such registration or filing is
necessary for NTT to be able to sell the New Shares in the Japanese or
the U.S. market
15.2 In the event IIJ files a registration statement and/or any
other filings with any Applicable Government Agency with respect to its
own shares, the New Shares shall, if necessary, also be registered at
the same time.
Article 16. (Understandings Regarding U.S. Securities Law)
16.1 NTT, its nominee prescribed in the Article 2 hereof and IIJ
hereby acknowledge that the New Issuance pursuant to this Agreement is
being conducted in reliance upon the safe harbor prescribed in Rule 903
of Regulation S under the United States Securities Act of 1933
(hereinafter referred to as "Securities Act") and that such shares are
not being registered with the United States Securities and Exchange
Commission (hereinafter referred to as "SEC") except as prescribed in
the Article 15 hereof. The aforesaid acknowledgment by NTT and IIJ
shall be based upon the respective representations and warranties as to
facts set forth in Sections 16.2 and 16.3.
16.2 NTT hereby represents and warrants that: (i) NTT and its
nominee by NTT as prescribed in Article 2 are Japanese corporations
duly incorporated under the laws of Japan and its principal office or
any other branch office located in Japan will subscribe for the New
Shares; and (ii) NTT is subscribing the New Shares on its own account
for its own benefit and is not subscribing for the account or benefit
of a person resident in the United States (as defined in Regulation S
under the Securities Act) or a U.S. Person (as defined in Regulation S
under the Securities Act). NTT hereby represents, warrants and
covenants that none of NTT, its nominee as prescribed in Article 2 or
any of their respective Affiliate (as defined in Rule 405 under the
Securities Act), or any person acting on behalf of the foregoing has
not and will not engage in any directed selling efforts (within the
meaning of Regulation S under the Securities Act) in the United States
with respect to the New Shares.
16.3 IIJ hereby represents, warrants and covenants that none of
IIJ, any of its Affiliate, or any person acting on behalf of the
foregoing has not and will not engage in any directed selling efforts
in the United States with respect to the New Shares. IIJ hereby
represents and warrants that it has satisfied all of the conditions set
forth in the safe harbor rule of Regulation S under the Securities Act;
provided, however, that the NTT's representations and warranties
provided in this Article 16 are true and accurate and that NTT will
comply with the covenants provided in this Article 16. Further, IIJ
hereby covenants
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CUSIP NO. J24210-10-6 13D PAGE 24 OF 35 PAGES
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that all other issuances of its shares to other entities scheduled to
be conducted simultaneous with the New Issuance shall also be conducted
in compliance with such safe harbor rules under Regulation S.
16.4 NTT, its nominee prescribed in Article 2 hereof and any
transferee of the New Shares shall not sell the New Shares, except as
set forth below, in each case subject to state securities laws, if any:
(1) in the event the sale is conducted pursuant to an
effective registration statement filed with the SEC;
(2) in the event the sale is conducted in compliance
with Regulation S under the Securities Act; or
(3) in the event the sale is conducted in reliance on an
exemption from the registration requirements of the
Securities Act.
16.5 NTT, its nominee prescribed in Article 2 hereof and any
transferee of the New Shares shall not be deposited into the ADR
program in respect of IIJ's common stock; provided, however, that the
restrictions set forth herein shall not apply in the event that the New
Shares are sold in accordance with Rule 144(k) under the Securities
Act, the New Shares are no longer restricted securities pursuant to a
transaction conducted in reliance on an exemption from the resale
restrictions under the Securities Act, or the New Shares sold on a
securities exchange or an over-the- counter market in Japan.
16.6 Prior to NTT, its nominee prescribed in the Article 2 hereof
or any transferee of the New Shares selling the New Shares as
prescribed under Sections 16.4(2) or 16.4(3), it shall (i) notify IIJ
as to such intentions, (ii) upon a reasonable request by IIJ, notify
IIJ as to a legal opinion, certificates or any other information
reasonably satisfactory to IIJ and (iii) cause such transferee to
deliver a document to IIJ consenting to its compliance with the
provisions of Sections 16.4 and 16.5; provided, however, that the
restrictions set forth (iii) above shall not apply in the event that
the New Shares are sold in accordance with Rule 144(k) under the
Securities Act, the New Shares are no longer restricted securities
pursuant to a transaction conducted in reliance on an exemption from
the resale restrictions under the Securities Act, or the New Shares
sold on a securities exchange or an over-the- counter market in Japan.
Chapter 9. Business Collaboration
Article 17. (Agreement of Business Collaboration)
The parties hereto agree that, after the date hereof, they shall enter into
business collaboration arrangements based on the following framework, it being
agreed and understood that further details of such collaboration arrangements
shall be determined later by their mutual agreement:
(1) In the event the parties hereto find it necessary for the
execution of IIJ's business plan, IIJ shall draft a business
improvement plan and shall faithfully implement such plan.
(2) The parties hereto shall use good faith to jointly engage,
where possible, in the development of broadband and information
technology and other related businesses.
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(3) The parties hereto shall endeavor for IIJ to expand its
business relationship with NTT and its subsidiaries and
affiliates in connection with IIJ's new business opportunities.
(4) The parties hereto shall discuss arrangements for seconding
employees to each other to carry out the intention of
subparagraphs (1) through (3) above, provided that NTT shall
not second any of its employees to IIJ America, Inc., a U.S.
subsidiary of IIJ, unless NTT and IIJ agree otherwise.
(5) The parties hereto shall discuss and decide on the details of
the secondment arrangement specified in the above subparagraph.
Chapter 10. Termination
Article 18. (Termination)
18.1 In the event any of the following Events of Default occurs at
any time between the date hereof and the Closing Date, NTT may
terminate this Agreement effective immediately by written notice to
IIJ:
(1) NTT is made aware that any of the representations and
warranties made or given by IIJ in Article 3 is incorrect or
untrue;
(2) IIJ breaches any other term or condition of this Agreement; or
(3) prior to the Closing Date, the occurrence of any event or
circumstance which has a material adverse effect on the value
of the IIJ Group Companies regarding the business, business
operations, assets, profitability of the IIJ Group Companies.
18.2 In addition to the above subparagraphs, in the event the New
Shares are not fully issued to NTT on or before October 31, 2003, NTT
may terminate this Agreement effective immediately by written notice to
IIJ.
18.3 Termination by NTT of this Agreement pursuant to Sections 18.1
or 18.2 shall in no way limit NTT's right to recover losses and damages
sustained by it.
Chapter 11. General
Article 19. (No Public Announcement)
The parties hereto agree that neither party shall, without prior
consent of the other, make public by press release or otherwise the existence of
this Agreement or the transactions contemplated hereby and shall determine by
mutual agreement the content, timing and manner of any such publicity.
Article 20. (Indemnification)
IIJ shall indemnify and hold NTT harmless from and against any and all
losses(including but not limited to losses that NTT may suffer as a result of a
drop of the market price of the New Shares if and to the extent such drop is
caused by the occurrence of any of the following events), damages, costs and
expenses (including but not limited to reasonable attorneys' fees and expenses)
that NTT may suffer or incur as a result of or in connection with the occurrence
of any of the following events regardless of whether before or after the Closing
Date or the date of issuance of the New Shares:
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(1) any of the representations or warranties made or given by IIJ
hereunder is proven to be untrue; and
(2) IIJ breaches or fails to perform or comply with any of the
covenants or obligations on its part to be performed or
complied with under this Agreement.
Article 21. (Notice)
Any and all notices, consents, approvals, requests, demands and other
communications required or permitted to be made or given by one party to the
other hereunder shall be in writing or by facsimile and shall be addressed to
the party for which it is intended at its address shown below:
If to NTT:
Nippon Telegraph and Telephone Corporation
2-3-1 Otemachi
Chiyoda-ku, Tokyo 100-8116 Japan
Attention: Mr. Takashi Hiroi, Senior Manager, Department 1
Facsimile No.: 03-5205-5129
If to IIJ:
Internet Initiative Japan Inc.
Jinbocho Mitsui Bldg.
1-105 Kanda, Jinbocho
Chiyoda-ku, Tokyo 100-0051 Japan
Attention: Mr. Akihisa Watai, Manager, President Office
Facsimile No.: 03-5205-6441
Article 22. (Costs and Expenses)
22.1 IIJ shall be fully and solely liable for any and all stamp
duties and other taxes and public charges (except corporation income
tax payable on NTT's net income) payable in connection with the
execution of this Agreement, issuance of the New Shares and payment of
dividends declared and payable on the New Shares.
22.2 Except as otherwise expressly provided for herein, each party
hereto shall be fully and solely liable for any and all out-of-pocket
costs and expenses (including, but not limited to, attorneys' fees)
which may be incurred in connection with this Agreement (including its
preparation), the issuance of the New Shares and any other transactions
contemplated hereby.
Article 23. (Confidentiality)
At no time during the period of five (5) years from the date of
disclosure shall either party hereto disclose or permit to be disclosed to any
third party without the other party's prior consent, any confidential data or
information of the other party learned in conjunction with or in the course of
performance of this Agreement; provided, however, that the foregoing secrecy
obligation shall not apply to any data or information: (i) which is required to
be disclosed by Applicable Laws and Regulations; (ii) which is already a part of
the public domain when received from the other party or which subsequently
becomes publicly available without any fault on the recipient party; or (iii)
which the recipient party may at any time rightfully acquire from any third
party not owing any confidential obligations to such party.
Article 24. (Non-Assignability)
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CUSIP NO. J24210-10-6 13D PAGE 27 OF 35 PAGES
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Neither party hereto may assign, hypothecate or otherwise dispose of
its rights and/or obligations hereunder, whether in whole or in part, to or in
favor of any third party without the prior written consent of the other party.
Article 25. (Entire Agreement)
This Agreement, together with the Exhibits attached hereto and made a
part hereof, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and shall supersede any and all prior
agreements or understandings with respect thereto.
Article 26. (Governing Law)
This Agreement shall be governed by and construed in accordance with
the laws of Japan.
Article 27. (Court of Exclusive Jurisdiction)
The Tokyo District Court shall be the court of first instance having
exclusive jurisdiction over any and all disputes that may arise between the
parties hereto out of or in connection with this Agreement.
Article 28. (Amendments)
This Agreement may be amended or modified only by written agreement
signed by or on behalf of both parties hereto.
Article 29. (Matters Subject to Further Negotiation and Agreement)
In the event any circumstance arises between the parties hereto which
is not provided for herein, the parties shall discuss and resolve the same in
accordance with the intent of this Agreement.
[No Further Text on This Page]
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CUSIP NO. J24210-10-6 13D PAGE 28 OF 35 PAGES
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate, so that each can retain one executed copy hereof.
September 16, 2003
NTT: Nippon Telegraph and Telephone Corporation
2-3-1 Otemachi
Chiyoda-ku, Tokyo 100-8116, Japan
Norio Wada, President
IIJ: Internet Initiative Japan Inc.
Jinbocho Mitsui Bldg.
1-105 Kanda, Jinbocho
Chiyoda-ku, Tokyo 100-0051, Japan
Koichi Suzuki, President
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CUSIP NO. J24210-10-6 13D PAGE 29 OF 35 PAGES
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Exhibit 3-1
List of IIJ Group Companies
Internet Initiative Japan Inc.
IIJ Technology Inc.
IIJ Media Communications Inc.
Net Care, Inc.
IIJ America Inc.
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CUSIP NO. J24210-10-6 13D PAGE 30 OF 35 PAGES
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Exhibit 3-3
List of Issued and Outstanding Stock Options, Warrants and
Securities Convertible into or Exchangeable with Common Shares of IIJ
o Unsecured Convertible Bonds Due March 31, 2005
o Stock options the grant of which was duly authorized by the shareholders at
the special and annual meetings held on April 7, 2000 and June 27, 2001,
respectively
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CUSIP NO. J24210-10-6 13D PAGE 31 OF 35 PAGES
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Exhibit 3-7
List of Licenses, Approvals, Authorizations, Declarations,
Filings and Registrations Required for the Execution and Performance of
this Agreement
1. Licenses, approvals, authorizations, declarations, filings and
registrations required for the execution and performance of this
Agreement by NTT
Schedule 13D
Form 6-K in respect of NTT's investment in IIJ
Current Report pursuant to the Current Report Regulations
of the Tokyo Stock Exchange
Report under Article 10-2 of the Law Related to Private
Monopoly and the Fair Trade Commission of Japan
2. Licenses, approvals, authorizations, declarations, filings and
registrations required for the execution and performance of this
Agreement by IIJ Group Companies
Japanese Securities Notice by IIJ
Form 6-K disclosing the details of the New Issuance and
the details regarding the execution of this Agreement
FCC Filing by IIJ America
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CUSIP NO. J24210-10-6 13D PAGE 32 OF 35 PAGES
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Exhibit 3-16
Class action lawsuit filed with the United States District Court, Southern
District of New York (Case No. 01-CV-10974) and lawsuits which may arise in the
future which are related thereto.
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CUSIP NO. J24210-10-6 13D PAGE 33 OF 35 PAGES
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EXHIBIT 2
Joint Filing Agreement
This JOINT FILING AGREEMENT, dated as of September 25, 2003,
is made by and between Nippon Telegraph and Telephone Corporation, a corporation
organized under the laws of Japan ("NTT"), and NTT Communications Corporation, a
corporation organized under the laws of Japan ("NTT Communications"). NTT and
NTT Communications are together referred to herein as the "Parties" and each
individually as a "Party". Pursuant to Rule 13d-1(k)(1)(iii) promulgated under
the Securities Exchange Act of 1934, as amended, the Parties hereby acknowledge
and agree that Schedule 13D is filed on behalf of each such Party and that all
subsequent amendments to the Statement on Schedule 13D shall be filed on behalf
of each Party without the necessity of filing additional joint acquisition
statements. The Parties hereby acknowledge that each Party shall be responsible
for timely filing of such amendments, and for the completeness and accuracy of
the information concerning such Party contained therein, but shall not be
responsible for the completeness and accuracy of the information concerning the
other Party, except to the extent that such Party knows or has reason to believe
that such information is inaccurate.
IN WITNESS WHEREOF, the Parties hereto have executed this
Joint Filing Agreement as of the day and year first above written.
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
By: /s/ Norio Wada
---------------------------------------
Name: Norio Wada
Title: President
NTT COMMUNICATIONS CORPORATION
By: /s/ M. Suzuki
---------------------------------------
Name: Masanobu Suzuki
Title: President
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CUSIP NO. J24210-10-6 13D PAGE 34 OF 35 PAGES
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SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF
NIPPON TELEGRAPH AND TELEPHONE CORPORATION
The name and present principal occupation or employment, and the name,
principal business and address of any corporation or other organization in which
such employment is conducted, of each executive officer and director of Nippon
Telegraph and Telephone Corporation are set forth below. Unless otherwise
indicated, each individual's business address is the address of Nippon Telegraph
and Telephone Corporation, 2-3-1 Otemachi, Chiyoda-ku, Tokyo 100-8116, Japan,
and each individual is a Japanese citizen.
NAME PRESENT PRINCIPAL OCCUPATION
Norio Wada President
Haruki Matsuno Senior Executive Vice President
Hiromi Wasai Senior Executive Vice President
Toyohiko Takabe Senior Executive Vice President
Satoru Miyamura Executive Vice President
Yuji Inoue Senior Vice President
Shin Hashimoto Senior Vice President
Masaki Mitsumura Senior Vice President
Hiroo Unoura Senior Vice President
Jun-ichiro Miyazu Senior Vice President
Takashi Imai Senior Vice President1
Yotaro Kobayashi Senior Vice President2
Takao Nakajima Statutory Auditor3
Masao Iseki Statutory Auditor
Yoshio Miwa Statutory Auditor
Keisuke Sada Statutory Auditor
Yasuchika Negoro Statutory Auditor3
-------------------
1 Outside board member; Chairman of Nippon Steel Corporation, 2-6-3, Otemachi,
Chiyoda-ku, Tokyo 100-8071, Japan.
2 Outside board member; Chairman of Fuji Xerox Co., Ltd., 2-17-22, Akasaka,
Minato-ku, Tokyo 107-0052, Japan.
3 Outside statutory auditor.
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CUSIP NO. J24210-10-6 13D PAGE 35 OF 35 PAGES
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SCHEDULE B
DIRECTORS AND EXECUTIVE OFFICERS OF
NTT COMMUNICATIONS CORPORATION
The name and present principal occupation or employment, and the name,
principal business and address of any corporation or other organization in which
such employment is conducted, of each executive officer and director of NTT
Communications Corporation are set forth below. Unless otherwise indicated, each
individual's business address is the address of NTT Communications Corporation,
1-1-6 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-8019, Japan, and each individual is a
Japanese citizen.
NAME PRESENT PRINCIPAL OCCUPATION
Masanobu Suzuki President & CEO
Mamoru Ishida Senior Executive Vice President
Shuji Tomita Senior Executive Vice President
Shunsuke Amiya Executive Vice President
Hisao Iizuka Executive Vice President
Masae Tamura Executive Vice President
Mitsuhiro Takase Senior Vice President
Masayuki Nomura Senior Vice President
Osamu Inoue Senior Vice President
Yo Yusa Senior Vice President
Yutaka Aoki Senior Vice President
Michio Tashiro Senior Vice President
Masayuki Nakagawa Senior Vice President
Hiroshi Nakagawa Senior Vice President1
Kikuo Mito Statutory Auditor2
Kenichi Shiraishi Statutory Auditor2
Teruaki Ohara Statutory Auditor2
-------------------
1 Outside board member; General Manager of Nippon Telegraph and Telephone
Corporation, 2-3-1 Otemachi, Chiyoda-ku, Tokyo 100-8116, Japan.
2 Outside statutory auditor.