Exhibit 1
================================================================================
INVESTOR RIGHTS AGREEMENT
among
▇▇▇▇▇▇ COMPUTER SERVICES LIMITED
SAIF INVESTMENT COMPANY LIMITED
VENTURE TECH SOLUTIONS PVT. LTD.
and
▇▇▇▇▇▇ INFOWAY LIMITED
Dated: October 7, 2002
================================================================================
Table of Contents
PAGE
----
Article I DEFINITIONS AND INTERPRETATION 2
Article II RESTRICTIONS ON TRANSFER OF SHARES 10
Article III RIGHT OF FIRST OFFER, TAG-ALONG RIGHTS AND DRAG-ALONG RIGHTS 11
Article IV FUTURE ISSUANCE OF SHARES; PREEMPTIVE RIGHTS 15
Article V ADDITIONAL SHARE COVENANTS 18
Article VI THE ADR FACILITY AND PUBLIC OFFERS 19
Article VII CORPORATE GOVERNANCE 21
Article VIII TERM AND TERMINATION 28
Article IX MISCELLANEOUS 28
Article X GOVERNING LAW AND DISPUTE RESOLUTION 31
SCHEDULES
Schedule 1 Shareholders
Schedule 2 Reserved Matters
Schedule 3 Company Covenants
EXHIBITS
Exhibit A Restated Charter Documents
Exhibit B-1 Deed of Adherence (Transfers)
Exhibit B-2 Deed of Adherence (New Issuances)
INVESTOR RIGHTS AGREEMENT dated October 7, 2002, among:
1. ▇▇▇▇▇▇ COMPUTER SERVICES LIMITED, a company incorporated and validly existing
under the Laws of India and having its registered office is at Mayfair Centre,
S.P. Road, Secunderabad, Andhra Pradesh, India 500 003 a company based in
Hyderabad, India (hereinafter referred to as "SCS").
2. SAIF INVESTMENT COMPANY LIMITED, a company incorporated in Mauritius and
having its registered office at Suite ▇▇▇, ▇▇. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ Denis Street,
Port Louis, Republic of Mauritius (hereinafter referred to as "SAIF").
3. VENTURE TECH SOLUTIONS PVT. LTD., a company incorporated and validly existing
under the Laws of India and having its registered office is at ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ (hereinafter referred to as "VENTURETECH").
4. ▇▇▇▇▇▇ INFOWAY LIMITED, a company incorporated and validly existing under the
laws of India and having its principal office at Tidel Park, 2nd floor, ▇▇.▇,
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ - ▇▇▇▇▇▇ (the "COMPANY").
RECITALS
A. The Company is engaged in the business of providing connectivity to
corporates, network and communication solutions, security, network management,
hosting services, retail and public internet access services, portal offerings,
e-commerce and other related services.
B. Immediately following Closing (as defined herein), the Company shall have an
authorized share capital of 37,500,000 Equity Shares (as defined herein) of
which as of the date hereof 32,795,200 Equity Shares are issued and outstanding
and 13,491,543 ADSs (as defined herein) of the Company are listed and are traded
on The Nasdaq National Market and each ADS currently represents one Equity Share
after giving effect to the Reverse Split (as defined herein). The underlying
Equity Shares representing such ADSs are held by the Depositary Bank (as defined
herein) pursuant to the Deposit Agreement (as defined herein). Further details
of the particulars of the Company are set forth in Part A of SCHEDULE 1 of the
SAIF Subscription Agreement (as defined herein).
C. The Shareholders (as defined herein), as at the date hereof, collectively
own, legally and beneficially 66.4% of the issued share capital of the Company
on a non-diluted basis and 62.9% of the issued share capital of the Company on a
fully diluted basis. The share ownership of the Shareholders following the
VentureTech Second Tranche (as defined herein) is set forth in SCHEDULE 1.
D. The parties acknowledge that the Company and SCS are and will continue to be
parties to one or both of the SARF Stockholders Agreement and SARF Registration
Rights Agreement (defined herein).
E. The Shareholders wish to restrict the transfer of Shares (as hereinafter
defined) and to provide for, among other things, first offer, preemptive,
tag-along and drag-along rights, corporate governance rights and obligations and
certain other rights under certain conditions and to do so in compliance with
all applicable laws.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 DEFINITIONS. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"ADR FACILITY" means the ADR facility with the Depositary Bank as
established pursuant to the Deposit Agreement and subsequently as amended or
replaced from time to time.
"ADRS" mean American Depositary Receipts representing ADSs.
"ADSS" mean the American Depositary Shares, issued under the Deposit
Agreement, each of which as of the date hereof represents one Equity Share or
such other proportion of an Equity Share as may be specified in the Deposit
Agreement from time to time.
"ADS RIGHTHOLDER" has the meaning set forth in Section 3.1(e) of this
Agreement.
"AFFILIATE" shall mean in relation to a company ("SUBJECT COMPANY"), a
person directly or indirectly Controlling, Controlled by or under common Control
with that Subject Company and shall include any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"AGREEMENT" means this Agreement as the same may be amended, supplemented
or modified in accordance with the terms hereof.
"ARBITRATION BOARD" has the meaning set forth in Section 10.2(a) of this
Agreement.
"AUDIT COMMITTEE" has the meaning set forth in Section 7.5(c) of this
Agreement.
"BOARD OF DIRECTORS" means the board of Directors of the Company.
"BUSINESS" means the business of the Company of providing connectivity to
corporates, network and communication solutions, security, network management,
hosting services, retail and public internet access services, portal offerings,
e-commerce and other related services.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks in Chennai, India or the State of New York, United States
are closed for business.
"CLOSING" has the meaning set forth in the SAIF Subscription Agreement.
"COMMISSION" means the Securities and Exchange Commission of the United
States or any similar agency then having jurisdiction under the Securities Act.
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"COMPENSATION COMMITTEE" has the meaning set forth in Section 7.5(d) of
this Agreement.
2
"COMPETITOR" means an entity that is a material competitor of any part of
the Business from which the Company derives more than 5% of its revenue.
"CONDITION OF THE COMPANY" means the assets, business, properties,
operations and financial condition of the Company and its Subsidiaries taken as
a whole.
"CONTRACT DATE" has the meaning set forth in Section 3.1(d) of this
Agreement.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and includes (x) ownership directly or indirectly of 50% or more of the shares
in issue or other equity interests of such person, or (y) possession directly or
indirectly of 50% or more of the voting power of such person, and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"DEALING ACTIVITY" has the meaning set forth in Section 5.3 of this
Agreement.
"DEPOSIT AGREEMENT" means the agreement between the Company and the
Depositary Bank in relation to the establishment of the ADR Facility dated
October 18, 1999, as amended or replaced from time to time.
"DEPOSITARY BANK" means Citibank, N.A. and its Indian Affiliate which acts
as its domestic custodian bank as such depositary bank may be changed from time
to time in accordance with this Agreement.
"DIRECTORS" means the members of the Board of Directors.
"DIRECTOR DATA" has the meaning set forth in Section 7.7 of this Agreement.
"ENCUMBRANCE" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences).
"EQUITY SHARES" means the equity shares, par value Rupees Ten (Rs.10/-) per
share, of the Company or any other issued share capital of the Company into
which such shares are reclassified or reconstituted and any other equity shares
of the Company (including the equity shares held by the Depositary Bank under
the Deposit Agreement).
"EQUITY SHARE EQUIVALENTS" means any security or obligation which is by its
terms, directly or indirectly convertible into or, exchangeable or exercisable
for Equity Shares, and any option, warrant or other subscription or purchase
right with respect to the Equity Shares or any Equity Share Equivalent.
"EXCESS NEW SECURITIES" has the meaning set forth in Section 4.2(a) of this
Agreement.
"EXCESS OFFERED SECURITIES" has the meaning set forth in Section 3.1(b) of
this Agreement.
3
"EXEMPT ISSUANCES" has the meaning set forth in Section 4.1 of this
Agreement.
"FAMILY MEMBERS" has the meaning set forth in Section 2.2 of this
Agreement.
"FEMA" means the Indian FOREIGN EXCHANGE MANAGEMENT ACT of 1999 and the
rules and regulations thereunder as amended from time to time.
"GOVERNMENTAL AUTHORITY" means the government of any nation, state, city,
locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GROUP COMPANY" means the Company and any Subsidiary of the Company.
"ICC" has the meaning set forth in Section 10.2(a).
"INDIA" means the Republic of India.
"INDIAN COMPANIES ACT" means the COMPANIES ACT, 1956 of India as may be
amended or substituted from time to time.
"INDIAN GAAP" means generally accepted accounting principles in India from
time to time.
"INDIAN IPO" means the first bona fide firm commitment underwritten public
offering of Equity Shares and listing on an Indian Stock Exchange.
"INDIAN STOCK EXCHANGE" means (i) the Bombay Stock Exchange or (ii) the
National Stock Exchange.
"INDEPENDENT DIRECTOR" shall have the meaning specified by the NASD
Marketplace Rules from time to time.
"LOCK-UP" has the meaning set forth in Section 6.2(a).
"MANAGING DIRECTOR" has the meaning set forth in Section 7.3(b)(iv).
"NASD" means the National Association of Securities Dealers Inc. and its
subsidiary the Nasdaq Stock Market, Inc.
"NASDAQ" means The Nasdaq National Market.
"NEW ISSUANCE NOTICE" has the meaning set forth in Section 4.1 of this
Agreement.
"NEW SECURITIES" has the meaning set forth in Section 4.1 of this
Agreement.
"NON-PARTY SHAREHOLDERS" means a holder of Equity Shares who is not a party
to this Agreement.
"NOMINATING COMMITTEE" has the meaning set forth in Section 7.5(e).
"OFFER PRICE" has the meaning set forth in Section 3.1(a) of this
Agreement.
4
"OFFERED SECURITIES" has the meaning set forth in Section 3.1(a) of this
Agreement.
"OFFERING NOTICE" has the meaning set forth in Section 3.1(a) of this
Agreement.
"OTHER SHAREHOLDER" means (a) any transferee of a Shareholder (in each
case, other than a Permitted Transferee thereof who is not a Competitor or an
Affiliate of a Competitor), who has agreed to be bound by the terms and
conditions of this Agreement in accordance with Section 2.4 or to whom Shares
have been transferred in accordance with Section 3.1(d); (b) any person who has
agreed to be bound by the terms and conditions of this Agreement in accordance
with Section 5.2; and (c) a Permitted Transferee of a Shareholder who is a
Competitor or an Affiliate of a Competitor.
"PERMIT" means licenses, permits, approvals consents, or authorisations of
any Governmental Authority. "PERMITTED TRANSFEREE" has the meaning set forth in
Section 2.2 of this Agreement.
"PREEMPTIVE RIGHT SHAREHOLDER(S)" has the meaning set forth in Section 4.1
of this Agreement.
"PROPORTIONATE PERCENTAGE" has the meaning set forth in Section 4.2(a) of
this Agreement.
"PROPOSED PRICE" has the meaning set forth in Section 4.1 of this
Agreement.
"RBI" means the Reserve Bank of India.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated the date hereof in the form attached to the SAIF Subscription Agreement as
Exhibit A thereto among the Company and SAIF and as effective at, but subject to
the occurrence of, Closing.
"RELATED PARTY" of a person ("SUBJECT PERSON") means (a) any shareholder
holding more than 10% of the voting interests in the Subject Person or an
Affiliate of the Subject Person; (b) any director or officer of a person
referred to in paragraph (a); (c) any Relative of a natural person referred to
in paragraph (a) or (b); (d) any person in which a person referred to in
paragraph (a) or (b) or (c) has any interest, other than a passive shareholding
of less than 5% in a publicly listed company, and (e) any Company under
equivalent management to the Company or which is or whose management is
accustomed to act in accordance with the directions of one or more of the
Directors, Shareholders or any other Affiliate of the Company.
"RELATIVE" of a natural person means any spouse, parent, grandparent,
child, grandchild and sibling of such person.
"REQUIREMENT OF LAW" means, as to any person, any law, statute, treaty,
rule, regulation, right, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other governmental authority or
stock exchange (including, without limitation, the NASD), in each case
applicable or binding upon such person or any of its property or to which such
person or any of its property is subject or pertaining to any or all of the
transactions contemplated or referred to herein.
5
"RESTATED CHARTER DOCUMENTS" means the restated Memorandum and Articles of
Association of the Company and attached hereto as EXHIBIT A as adopted on or
prior to the Closing.
"RESTRICTED SHARES" means Shares other than Unrestricted Shares.
"REVERSE SPLIT" means the 1-for-4 reverse ratio change of the ADSs
effective September 24, 2002.
"RIGHTHOLDER OPTION PERIOD" has the meaning set forth in Section 3.1(b) of
this Agreement.
"RIGHTHOLDER(S)" has the meaning set forth in Sections 3.1(b) of this
Agreement.
"RULES" has the meaning set forth in Section 10.2(a) of this Agreement.
"RUPEES" or "RS." means the lawful currency of India.
"SAIF" has the meaning set forth in the preamble to this Agreement.
"SAIF DIRECTORS" has the meaning set forth in Section 7.3(b)(ii) of this
Agreement.
"SAIF FUND" means SB Asia Infrastructure Fund L.P., a limited partnership
established under the laws of the Cayman Islands.
"SAIF SHAREHOLDERS" means (a) SAIF, (b) any Affiliate of SAIF that acquires
Shares and (c) any Permitted Transferee thereof to whom Shares are transferred
in accordance with Section 2.2 of this Agreement; and includes the Depositary
Bank solely to the extent the Depositary Bank holds Equity Shares on behalf of
such persons, and the term "SAIF SHAREHOLDER" shall mean any such person.
"SAIF SUBSCRIPTION AGREEMENT" means the share subscription agreement among
the Company and SAIF dated on or about the date hereof.
"SALE OR PURCHASE CONSTRAINT" means any Requirement of Law in India that
would prevent, inhibit, restrict or delay the sale or purchase of Equity Shares
by or issuance of Equity Shares to a SAIF Shareholder or a VentureTech
Shareholder under this Agreement including any limitation on the price or time
at which such Equity Shares may be bought, sold or issued under the FEMA or any
required Permit of the RBI or the SEBI or any other Governmental Authority in
relation to such sale, purchase or issuance.
"SARF" means South Asia Regional Fund Limited, a company incorporated and
validly existing under the Laws of Mauritius and having its registered office at
Les Cascades Building, ▇▇▇▇▇ ▇▇▇▇▇▇ Street, Port Louis, Mauritius.
"SARF DIRECTOR" has the meaning set forth in Section 7.3(c) of this
Agreement.
"SARF REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated September 14, 1999 among SARF, Sterling Commerce, Inc. and the
Company.
6
"SARF STOCKHOLDER AGREEMENT" means the Share Subscription and Shareholders
Agreement dated as of February 5, 1999 between SARF, SCS and the Company (as
amended on September 14, 1999) as at the date hereof.
"SCS" has the meaning set forth in the preamble to this Agreement.
"SCS DIRECTOR" has the meaning set forth in Section 7.3(a) of this
Agreement.
"SCS TAG-ALONG RIGHTHOLDER" has the meaning set forth in Section 3.1(f)(i)
of this Agreement.
"SEBI" means the Securities and Exchange Board of India.
"SEBI GUIDELINES" means the SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND
TAKEOVERS) REGULATIONS 1997, the SECURITIES AND EXCHANGE BOARD OF INDIA
(DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES 2000 and any other Indian
Requirements of Law in respect of any matter which may be the subject matter of
this Agreement.
"SECURITIES ACT" means the United States Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"SELLING SHAREHOLDER" has the meaning set forth in Section 3.1(a) of this
Agreement.
"SHARES" means, with respect to each Shareholder, all Equity Shares and
Equity Share Equivalents owned thereby.
"SHAREHOLDERS" means (a) SAIF, SCS, VentureTech and any transferee thereof
who has agreed to be bound by the terms and conditions of this Agreement in
accordance with Section 2.4; and (b) any person who has agreed to be bound by
the terms and conditions of this Agreement in accordance with Section 5.2, and
the term "SHAREHOLDER" shall mean any such person.
"SHAREHOLDERS MEETING" has the meaning set forth in Section 7.1 of this
Agreement.
"STOCK OPTION PLAN" means the employee stock ownership plan of the Company
pursuant to which Equity Shares and options to purchase Equity Shares are
reserved and available for grant to officers, directors and employees of the
Company, as approved by the Board of Directors from time to time in accordance
with this Agreement.
"SUBJECT PURCHASER" has the meaning set forth in Section 4.1 of this
Agreement.
"SUBSIDIARY" means any person that is a subsidiary of the Company as the
term "SUBSIDIARY" is defined by Section 4 of the Indian Companies Act.
"THIRD PARTY PURCHASER" has the meaning set forth in Section 3.1(a) of this
Agreement.
"TRANSFER" has the meaning set forth in Section 2.1 of this Agreement.
"UNRESTRICTED SHARES" means those Equity Shares issued under the SAIF
Subscription Agreement and all issued and outstanding ADSs from time to time.
7
"US$" means United States dollars, the lawful currency of the United States
of America.
"VENTURETECH" has the meaning set forth in the preamble to this Agreement.
"VENTURETECH DIRECTORS" has the meaning set forth in Section 7.3(b) of this
Agreement.
"VENTURETECH FIRST TRANCHE SHARES" has the meaning set forth in Section
3.2(a) of this Agreement.
"VENTURETECH SECOND TRANCHE" has the meaning set forth in Section 3.2(a) of
this Agreement.
"VENTURETECH SHAREHOLDERS" means (a) VentureTech, (b) any Affiliate of
VentureTech that acquires Shares; (c) any Permitted Transferee thereof to whom
Shares are transferred in accordance with Section 2.2 of this Agreement and
includes the Depositary Bank solely to the extent the Depositary Bank holds
Equity Shares on behalf of such persons and the term "VENTURETECH SHAREHOLDER"
shall mean any such person.
"VENTURETECH SUBSCRIPTION AGREEMENT" means the share subscription agreement
dated the date hereof between VentureTech as Subscriber and the Company as
seller in relation to the subscription for Equity Shares of the Company by
VentureTech.
"WRITTEN CONSENT" has the meaning set forth in Section 7.1 of this
Agreement.
Section 1.2 INTERPRETATION. In this Agreement, unless the context otherwise
requires:
(a) DIRECTLY OR INDIRECTLY. The phrase "DIRECTLY OR INDIRECTLY" means
directly, or indirectly through one or more intermediate persons or through
contractual or other legal arrangements, and "DIRECT OR INDIRECT" has the
correlative meaning.
(b) GENDER AND NUMBER. Unless the context otherwise requires, all words
(whether gender-specific or gender neutral) shall be deemed to include each of
the masculine, feminine and neuter genders, and words importing the singular
include the plural and vice versa.
(c) HEADINGS. Headings are included for convenience only and shall not
affect the construction of any provision of this Agreement.
(d) INCLUDE NOT LIMITING. "INCLUDE," "INCLUDING," "ARE INCLUSIVE OF" and
similar expressions are not expressions of limitation and shall be construed as
if followed by the words "WITHOUT LIMITATION."
(e) PERSONS. The term "PERSON" includes any individual, firm, corporation,
partnership, company, trust, association, joint venture, government (or agency
or political subdivision thereof) or other entity of any kind, whether or not
having separate legal personality. A reference to any person shall, where the
context permits, include such person's executors, administrators, legal
representatives and permitted successors and assignors.
8
(f) REFERENCES TO DOCUMENTS. References to this Agreement include the
Schedules and Exhibits, which form an integral part hereof. A reference to any
Section, Schedule or Exhibit is, unless otherwise specified, to such Section of,
or Schedule or Exhibit to, this Agreement. The words "HEREOF," "HEREUNDER" and
"HERETO," and words of like import, refer to this Agreement as a whole and not
to any particular Section hereof or Schedule or Exhibit hereto. A reference to
any document (including this Agreement) is to that document as amended,
consolidated, supplemented, novated or replaced from time to time.
(g) STATUTORY REFERENCES. A reference to a statute or statutory provision
includes, to the extent applicable at any relevant time:
(i) that statute or statutory provision as from time to time
consolidated, modified, re-enacted or replaced by any other statute or statutory
provision;
(ii) any repealed statute or statutory provision which it re-enacts
(with or without modification); and
(iii) any subordinate legislation or regulation made under the
relevant statute or statutory provision.
(h) TIME. If a period of time is specified and dates from a given day or
the day of a given act or event, such period shall be calculated exclusive of
that day. If the day on or by which something must be done is not a Business
Day, that thing must be done on or by the Business Day immediately following
such day.
(i) SHARE CALCULATIONS. In calculations of share numbers, (i) references to
a "FULLY DILUTED BASIS" mean that the calculation is to be made assuming that
all outstanding options, warrants and other Equity Share Equivalents convertible
into or exercisable or exchangeable for Equity Shares (whether or not by their
terms then currently convertible, exercisable or exchangeable), have been so
converted, exercised or exchanged, and (ii) references to a "NON-DILUTED BASIS"
mean that the calculation is to be made taking into account only Equity Shares
then in issue. In calculating the number or percentage of Equity Shares of a
Shareholder under this Agreement such calculation shall include all of the
Equity Shares held by the Depositary Bank on behalf of that Shareholder.
(j) DEPOSITARY BANK. Except as otherwise provided, all references in this
Agreement to the Equity Shares of a Shareholder shall be deemed to include the
Equity Shares beneficially owned by that Shareholder and held by the Depositary
Bank on behalf of that Shareholder or its Affilates in the ADR Facility. All
consents, approvals to be given by or rights exercisable pursuant to this
Agreement by a SAIF Shareholder by contract (as contrasted to its rights as a
holder of ADSs) in respect of Shares held by the Depositary Bank on behalf of
that SAIF Shareholder shall be given and exercisable by that SAIF Shareholder.
(k) PERCENTAGE RELATED RIGHTS. If this Agreement provides that a
Shareholder's right under this Agreement is subject to it holding more than a
specified percentage of Shares such percentage holding shall be calculated
taking into account the Shares held by that Shareholder and that Shareholder's
Permitted Transferees.
9
ARTICLE II
RESTRICTIONS ON TRANSFER OF SHARES.
Section 2.1 LIMITATION ON TRANSFER. No Shareholder shall sell, give,
assign, Encumber, grant a security interest in or otherwise dispose of (each a
"TRANSFER") any Restricted Shares or any right, title or interest therein or
thereto, except in accordance with the provisions of this Agreement, including,
without limitation, Section 2.4. Subject to and in compliance with applicable
Requirements of Law, each of the Shareholders and the Company shall use its
reasonable best efforts to ensure that any attempt to transfer any Restricted
Shares or any rights thereunder in violation of the preceding sentence shall not
take place or if it takes place shall be null and void AB INITIO.
Section 2.2 PERMITTED TRANSFERS. Notwithstanding anything to the contrary
contained in this Agreement, but subject to Sections 2.1, 2.3 and 2.4, and only
if permitted under all applicable Requirements of Law, at any time, (a) each of
the Shareholders who is an individual may transfer all or a portion of his or
its Restricted Shares to or among (i) a member of such Shareholder's immediate
family, which shall be his spouse, siblings, children or grandchildren ("FAMILY
MEMBERS") or (ii) a trust, corporation, partnership or limited liability
company, all of the beneficial interests in which shall be held by such
Shareholder or one or more Family Members of such Shareholder; PROVIDED,
HOWEVER, that during the period that any such trust, corporation, partnership or
limited liability company holds any right, title or interest in any Restricted
Shares, no person other than such Shareholder or one or more Family Members of
such Shareholder may be or may become beneficiaries, shareholders, limited or
general partners or members thereof, (b) (i) each of the Shareholders who are
corporations may transfer all or a portion of its Restricted Shares to any of
its Affiliates and (ii) a SAIF Shareholder may transfer its Restricted Shares to
the SAIF Fund, the limited partners or general partner of the SAIF Fund or any
Affiliate of any such partner (c) each Shareholder may transfer Restricted
Shares to the Depositary Bank in accordance with Section 6.1 to be held in the
Depositary Bank in accordance with Section 6.1 and the Depositary Bank may
transfer Shares to the Shareholder on whose behalf the Depositary Bank is
holding such Restricted Shares, and (d) Venture Tech may transfer shares to such
other persons who are affiliated with VentureTech to which SAIF may consent in
writing (and the persons referred to in the preceding clauses (a), (b), (c) and
(d) are each referred to hereinafter as a "PERMITTED TRANSFEREE"). A Permitted
Transferee of Restricted Shares pursuant to this Section 2.2 may transfer its
Restricted Shares pursuant to this Section 2.2 only to the transferor
Shareholder or to a person that is a Permitted Transferee of such transferor
Shareholder. No Shareholder shall avoid the provisions of this Agreement by
making one or more transfers to one or more Permitted Transferees and then
disposing of all or any portion of such party's interest in any subsequent
transaction to which such person becomes no longer a Permitted Transferee.
Subject to and in compliance with applicable Requirements of Law, each of the
Shareholders and the Company shall use its reasonable best efforts to ensure
that any transfer or attempted transfer in violation of this covenant shall be
null and void AB INITIO.
Section 2.3 PERMITTED TRANSFER PROCEDURES. If any Shareholder wishes to
transfer Restricted Shares to a Permitted Transferee under Section 2.2 such
Shareholder shall give notice to the other Shareholders of its intention to make
such a transfer not less than two (2) Business Day prior to effecting such
transfer, which notice shall state the name and address of each Permitted
Transferee to whom such transfer is proposed, the relationship of such Permitted
Transferee to such Shareholder, and the number of Restricted Shares proposed to
be transferred to such Permitted Transferee.
Section 2.4 TRANSFERS IN COMPLIANCE WITH LAW; SUBSTITUTION OF TRANSFEREE.
Notwithstanding any other provision of this Agreement, no transfer may be made
pursuant to this
10
Section 2 or Section 3 unless (a) the transferee has agreed in writing to be
bound by the terms and conditions of this Agreement pursuant to an instrument
substantially in the form attached hereto as Exhibit B, (b) the transfer
complies in all respects with the applicable provisions of this Agreement, (c)
the transfer complies in all respects with applicable Indian or United States
Requirements of Law. If requested by the Company or another Shareholder, an
opinion of counsel to such transferring Shareholder shall be supplied to the
other Shareholders, at such transferring Shareholder's expense, to the effect
that such transfer complies with applicable Indian or United States Requirements
of Law. Upon becoming a party to this Agreement, (i) the Permitted Transferee of
a Shareholder (other than one who is a Competitor) shall be substituted for, and
shall enjoy the same rights and be subject to the same obligations as, the
transferring Shareholder hereunder with respect to the Shares transferred to
such Permitted Transferee, (ii) an Other Shareholder shall be subject to the
same obligations as, but none of the rights of, the transferring Shareholder, as
the case may be, and (iv) the transferee of an Other Shareholder shall be
substituted for, and shall be subject to the same obligations as, the
transferring Other Shareholder hereunder with respect to the Shares transferred
to such transferee.
ARTICLE III
RIGHT OF FIRST OFFER, TAG-ALONG RIGHTS AND DRAG-ALONG RIGHTS.
Section 3.1 PROPOSED VOLUNTARY TRANSFERS.
(a) OFFERING NOTICE. Subject to Section 2 and all Requirements of Law, if
any Shareholder (a "SELLING SHAREHOLDER") wishes to transfer all or any portion
of its or his Restricted Shares to any person (other than to a Permitted
Transferee) (a "THIRD PARTY PURCHASER"), such Selling Shareholder shall offer
such Restricted Shares to the SAIF Shareholders and the VentureTech Shareholders
in accordance with Section 3.1(b), by sending written notice (an "OFFERING
NOTICE") to the other Shareholders, which shall state (a) the number of
Restricted Shares proposed to be transferred (the "OFFERED SECURITIES"); (b) the
proposed purchase price per Restricted Share for the Offered Securities (the
"OFFER PRICE"); and (c) the terms and conditions of such sale. Upon delivery of
the Offering Notice, such offer shall be irrevocable unless and until the rights
of first offer provided for herein shall have been waived or shall have expired.
(b) RIGHTHOLDER OPTION; EXERCISE.
(i) For a period of five (5) Business Days after the receipt of the
Offering Notice from the Selling Shareholder (the "RIGHTHOLDER OPTION PERIOD"),
each of the SAIF Shareholders and VentureTech Shareholders (who, in each case,
is not a Selling Shareholder) (for the purpose of Section 3.1, each, a
"RIGHTHOLDER" and collectively, the "RIGHTHOLDERS") shall have the right to
purchase all, but not less than all, of the Offered Securities at a purchase
price equal to the Offer Price and upon the terms and conditions set forth in
the Offering Notice. Each Rightholder shall have the right to purchase that
percentage of the Offered Securities determined by dividing (i) the total number
of Shares then owned by such Rightholder by (ii) the total number of Shares then
owned by all such Rightholders. If any Rightholder does not fully purchase the
number or amount of Offered Securities it or he is entitled to purchase, then
each other participating Rightholder shall have the right to purchase that
percentage of the Offered Securities not so purchased (for the purposes of this
Section 3.1(b), the "EXCESS OFFERED SECURITIES") determined by dividing (x) the
total number of Shares then owned by such fully participating Rightholder by (y)
the total number of Shares then owned by all fully participating Rightholders
who elected to purchase Offered Securities. The procedure described in the
preceding sentence shall be repeated until there are no remaining Excess Offered
Securities. If the Rightholders do not purchase all of the Offered Securities
pursuant to this
11
Section 3.1(b), then the Selling Shareholder may, subject to Section 3.1(e),
sell all of the Offered Securities to a Third Party Purchaser in accordance with
Section 3.1(d). Any of the Shareholders may assign to any of its Affiliates all
or any portion of its rights as a Rightholder pursuant to this Section 3(b).
(ii) The right of each Rightholder to purchase all of the Offered
Securities under subsection (i) above shall be exercisable by delivering written
notice of the exercise thereof, prior to the expiration of the Rightholder
Option Period, to the Selling Shareholder. Each such notice shall state (a) the
number of Shares held by such Rightholder and (b) the number of Shares that such
Rightholder is willing to purchase pursuant to this Section 3.1(b). The failure
of a Rightholder to respond within the Rightholder Option Period to the Selling
Shareholder shall be deemed to be a waiver of such Rightholder's rights under
subsection (i) above, PROVIDED that each Rightholder may waive its rights under
subsection (i) above prior to the expiration of the Rightholder Option Period by
giving written notice to the Selling Shareholder.
(c) CLOSING. The closing of the purchase of Offered Securities by the
Rightholders under Section 3.1(b) shall be held at the corporate office of the
Company at 11:00 a.m., local time, on the 30th day after the giving of the
Offering Notice pursuant to Section 3.1(a) or at such other time and place as
the parties to the transaction may agree. At such closing, the Selling
Shareholder shall deliver certificates representing the Offered Securities, duly
endorsed for transfer and such Offered Securities shall be free and clear of any
Encumbrances (other than those arising hereunder and those attributable to
actions by the purchasers thereof) and the Selling Shareholders warrant, and
shall further represent and warrant that it is the sole beneficial and record
owner of such Offered Securities. Each Rightholder purchasing Offered Securities
shall deliver at the closing payment in full in immediately available funds for
the Offered Securities purchased by it or him and the seller and purchaser shall
pay such transfer taxes as are imposed on them respectively by Indian
Requirements of Law. At such closing, all of the parties to the transaction
shall execute such additional documents as are otherwise reasonably necessary or
appropriate to complete such a closing, with representations and warranties
limited to those concerned with ownership or authority.
(d) SALE TO A THIRD PARTY PURCHASER. Unless the Rightholders elect to
purchase all, but not less than all, of the Offered Securities under Section
3.1(b), the Selling Shareholder may, subject to Section 3.1(f), sell all, but
not less than all, of the Offered Securities to a Third Party Purchaser on the
terms and conditions set forth in the Offering Notice; PROVIDED, HOWEVER, that
such sale is bona fide and made pursuant to a contract entered into within
thirty (30) days after the earlier to occur of (i) the waiver by all of the
Rightholders of their options to purchase the Offered Securities and (ii) the
expiration of the Rightholder Option Period (the "CONTRACT DATE"); and PROVIDED
FURTHER, that such sale shall not be consummated unless prior to the purchase by
such Third Party Purchaser of any of such Offered Securities, such Third Party
Purchaser shall become a party to this Agreement and shall agree to be bound by
the terms and conditions hereof in accordance with Section 2.4 hereof. If such
sale is not consummated on or before the Contract Date for any reason, then the
restrictions provided for herein shall again become effective, and no transfer
of such Offered Securities may be made thereafter by the Selling Shareholder
without again offering the same to the Rightholders in accordance with this
Section 3.1.
(e) ADS RIGHT. If a SAIF Shareholder or a VentureTech Shareholder holding
ADSs (a "Selling ADS Holder") wishes to sell in a single sale ADSs representing
500,000 or more Equity Shares other than to a Permitted Transferee it shall
offer to sell such ADS to the other SAIF Shareholders and VentureTech
Shareholders holding ADSs ("ADS Rightholder") and such offer shall
12
be in accordance with Section 3.1(a) and (b) except that each reference therein
to "Restricted Shares" shall be a reference to "ADSs" and each reference to a
"Rightholder" shall be to the ADS Rightholders and PROVIDED THAT such offer
shall be open for acceptance for 2 Business Days from the date of the Offering
Notice and the closing of such sale and purchase shall occur within 5 Business
Days of the date of the Offering Notice. Unless the ADS Rightholders purchase
all of such Offered Securities within such 5 Business Day period the Selling ADS
Holder may sell the Offered Securities to a Third Party Purchaser at any time in
whole or in part at a price no less than the Offer Price or, if the prevailing
bid price on the Nasdaq has fallen below the Offer Price since the date of the
Offering Notice at a price no less than such lower prevailing bid price. Section
5.3 shall not apply to any such offer and sale.
(f) TAG-ALONG RIGHTS.
(i) If VentureTech is transferring Offered Securities to a Third Party
Purchaser pursuant to Section 3.1(d), then SCS (a "TAG-ALONG RIGHTHOLDER") shall
have the right to sell to such Third Party Purchaser(s), upon the terms set
forth in the Offering Notice, that number of Shares held by such Tag-Along
Rightholder equal to that percentage of the Offered Securities determined by
dividing (i) the total number of Shares then owned by such Tag-Along Rightholder
by (ii) the sum of (x) the total number of Shares then owned by all such
Tag-Along Rightholders exercising their rights pursuant to this Section 3.1(f)
and (y) the total number of Shares then owned by the Selling Shareholder. The
Selling Shareholder and the Tag-Along Rightholder(s) exercising their rights
pursuant to this Section 3.1(e) shall effect the sale of the Offered Securities
and such Tag-Along Rightholder(s) shall sell the number of Offered Securities
required to be sold by such Tag-Along Rightholder(s) pursuant to this Section
3.1(e)(i), and the number of Offered Securities to be sold to such Third Party
Purchaser by the Selling Shareholder shall be reduced accordingly. It shall be a
condition of the sale to Third Party Purchaser that the Third Party Purchaser
shall be required to purchase all of the Offered Shares, including those of the
Tag Along Rightholder.
(ii) The Selling Shareholder shall give notice to each Tag-Along
Rightholder of each proposed sale by it of Offered Securities which gives rise
to the rights of the Tag-Along Rightholders set forth in this Section 3.1(e), at
least five (5) Business Days prior to the proposed consummation of such sale,
setting forth the name of such Selling Shareholder, the number of Offered
Securities, the name and address of the proposed Third Party Purchaser, the
proposed amount and form of consideration and terms and conditions of payment
offered by such Third Party Purchaser, the percentage of Shares that such
Tag-Along Rightholder may sell to such Third Party Purchaser (determined in
accordance with Section 3.1(e)(i)), and a representation that such Third Party
Purchaser has been informed of the "tag-along" rights provided for in this
Section 3.1(e) and has agreed to purchase Shares in accordance with the terms
hereof. The tag-along rights provided by this Section 3.1(f) must be exercised
by any Tag-Along Rightholder wishing to sell its Shares within five (5) Business
Days following receipt of the notice required by the preceding sentence, by
delivery of a written notice to the Selling Shareholder indicating such
Tag-Along Rightholder's wish to exercise its rights and specifying the number of
Shares (up to the maximum number of Shares owned by such Tag-Along Rightholder
required to be purchased by such Third Party Purchaser) it wishes to sell,
PROVIDED that any Tag-Along Rightholder may waive its rights under this Section
3.1(e) prior to the expiration of such 5-day period by giving written notice to
the Selling Shareholder, with a copy to the Company. The failure of a Tag-Along
Rightholder to respond within such 5-day period shall be deemed to be a waiver
of such Tag-Along Rightholder's rights under this Section 3.1(e). If a Third
Party Purchaser fails to purchase Shares from any Tag-Along Rightholder that has
properly exercised its tag-along rights pursuant to this Section 3.1(e)(ii),
then the Selling Shareholder shall not be
13
permitted to consummate the proposed sale of the Offered Securities, and any
such attempted sale shall be null and void AB INITIO.
(g) DRAG ALONG RIGHTS. If a SAIF Shareholder wishes to accept an offer for
that SAIF Shareholder to sell some or all of its Equity Shares or ADSs to one or
more Third Party Purchasers and to include some or all of the Equity Shares of
the other Shareholders in such sale and the consent to such a sale is given by
the holders of a three fourths majority of the aggregate of the Equity Shares
held by the SAIF Shareholders and the VentureTech Shareholders, then the SAIF
Shareholder may send a written notice (the "DRAG-ALONG NOTICE") to SCS and
VentureTech (the "DRAG-ALONG SELLERS") specifying (i) the name of the Third
Party Purchasers, (ii) the consideration payable per Equity Share (which shall
be the same for all Shareholders), (iii) the number of Equity Shares such Third
Party Purchasers wish to purchase, (iv) a summary of the material terms of such
purchase and the other material terms of such purchase applicable to the
Drag-Along Sellers, such material terms to be the same as the equivalent terms
applicable to the Drag-Along Seller ("DRAG-ALONG SHARES") and (iv) a certificate
signed by the SAIF Shareholder and the proposed Third Party Purchasers addressed
to the Drag-Along Sellers stating that such consideration has been negotiated on
an arms length basis and no other consideration for Equity Shares is payable by
the Third Party Purchasers to the SAIF Shareholder; and (v) a letter from an
independent internationally recognised investment bank retained by the SAIF
Shareholder confirming that the consideration payable per Equity Share is fair
and reasonable. Upon receipt of a Drag-Along Notice, each Drag-Along Seller
shall be obligated to (i) sell such a number of its Equity Shares determined by
(x) dividing the number of its Equity Shares by the aggregate of all Equity
Shares held by the Drag-Along Shareholders and the SAIF Shareholder, and (y)
multiplying that fraction by the Drag-Along Shares; free of any Encumbrance, in
the transaction contemplated by the Drag-Along Notice on the same terms and
conditions as the SAIF Shareholder (including payment of its pro rata share of
all costs associated with such transaction) and (ii) otherwise take all
necessary action to cause the consummation of such transaction, including voting
its Equity Shares in favor of such transaction and not exercising any approval
or voting rights in connection therewith in a manner contrary to the completion
of the transaction. Each Drag-Along Seller (i) further agrees to take all
actions (including executing documents) in connection with consummation of the
proposed transaction as may reasonably be requested of it by SAIF and (ii)
hereby appoints the SAIF Shareholder, as its attorney-in-fact to do the same on
its behalf. Subject to the execution of a reasonable confidentiality agreement
between the Company and the Third Party Purchaser(s) the Company and the Selling
Shareholders shall facilitate all reasonable due diligence by the Third Party
Purchaser(s) and their advisors in relation to such acquisition PROVIDED THAT
such due diligence by a Competitor shall be subject to such additional
restrictions as the Board may reasonably impose to protect the confidential
information of the Company from any misuse.
(h) SARF DRAG-ALONG. SAIF and VentureTech shall not be entitled to exercise
their rights of first offer under sections 3.1(a) to (d) to the extent SCS's
compliance with sections 3.1(a) to (d) in respect of a sale of Equity Shares by
SCS to comply with clause 16.2.2 of the SARF Stockholders Agreement would cause
SCS to be in breach of the SARF Stockholders Agreement PROVIDED THAT each such
transfer under clause 16.2.2 of the SARF Stockholders Agreement must comply with
Section 2.4 of this Agreement.
Section 3.2 VENTURETECH SECOND TRANCHE. Subject to the closing of the
Venture Tech Subscription Agreement and the SAIF Subscription Agreement, Venture
Tech directly or through a Permitted Transferee shall on or prior to April 30,
2003 subscribe for and the Company shall allot and issue 2,034,883 Equity Shares
of a par value of Rs.10 each (or an equivalent number of
14
ADSs) at the Rs. equivalent of US$1.72 per Equity Share comprising US$3,500,000
in aggregate using the US$ to Rs. exchange rate adopted for the acquisition of
the VentureTech First Tranche Shares ("VENTURE TECH SECOND TRANCHE"). If
VentureTech or its Permitted Transferees do not close the subscription for the
Venture Tech Second Tranche by 1 May 2003 in accordance with the VentureTech
Subscription Agreement then, at the election of SAIF:
(a) To the extent permitted under applicable Requirements of Law the
Company shall buyback and VentureTech shall sell to the Company 66% of
VentureTech's Shares ("VENTURETECH FIRST TRANCHE SHARES") for an aggregate
consideration of Rs.10 for all such Shares; or
(b) Venture Tech shall sell to the other Shareholders pro rata the
VentureTech First Tranche Shares for an aggregate consideration of Rs.10 each
for all such Shares; or
(c) SAIF may waive in writing Venture Tech's obligations under this Section
3.2 and in that event Venture Tech shall have no further obligation under this
Section 3.2.
(d) In the event that SAIF makes an election under Section 3.2(a) or (b),
the closing of the purchase of VentureTech First Tranche Shares under such
section shall be held at the corporate office of the Company at 11:00 a.m.,
local time, on the fifth Business Day after 1 May 2003 or at such other time and
place as the parties to the transaction may agree. At such closing, VentureTech
shall deliver certificates representing the VentureTech First Tranche Shares,
duly endorsed for transfer and such VentureTech First Tranche Shares shall be
free and clear of any Encumbrances (other than those arising hereunder and those
attributable to actions by the purchasers thereof) and VentureTech shall
warrant, and shall further represent and warrant that it is the sole beneficial
and record owner of such VentureTech First Tranche Shares. Each purchaser
purchasing VentureTech First Tranche Shares shall deliver at the closing payment
in full in immediately available funds for the VentureTech First Tranche Shares
purchased by it or him and the seller and purchaser shall pay such transfer
taxes as are imposed on them respectively by Indian Requirements of Law. At such
closing, all of the parties to the transaction shall execute such additional
documents as are otherwise reasonably necessary or appropriate to complete such
a closing, with representations and warranties limited to those concerned with
ownership or authority.
PROVIDED THAT VentureTech shall have no obligation to sell any Shares in
the manner set out in this Section 3.2 if, as at 1 May 2003, SAIF and its
Permitted Transferees hold less than 90% of the ADRs issued under the SAIF
Subscription Agreement.
ARTICLE IV
FUTURE ISSUANCE OF SHARES; PREEMPTIVE RIGHTS.
Section 4.1 OFFERING NOTICE. Except for (a) options to purchase Equity
Shares which may be issued pursuant to the Stock Option Plan in accordance with
this Agreement, (b) share capital of the Company issued in consideration of an
acquisition of assets or shares of another company, approved by the Board of
Directors in accordance with the terms of this Agreement, by the Company of
another person, (c) Equity Shares issued in the amount specified in Section 3.2
pursuant to the VentureTech Subscription Agreement; or (d) subject to Section
7.10, for an Indian IPO or a follow-on public offering in a public market in the
United States, pursuant to a resolution of the Board of Directors; ((a)-(d)
being referred to collectively as "EXEMPT ISSUANCES"), if the Company wishes to
issue any share capital or any other securities convertible into or exchangeable
for share capital (collectively, "NEW SECURITIES") to any person (the "SUBJECT
PURCHASER"), then the Company shall,
15
subject to the passing of any special resolutions of shareholders of the Company
necessary to comply with applicable Requirements of Law, offer such New
Securities first to each of the Shareholders (each, a "PREEMPTIVE RIGHT
SHAREHOLDER" and collectively, the "PREEMPTIVE RIGHT SHAREHOLDER") by sending
written notice (the "NEW ISSUANCE NOTICE") to the Preemptive Right Shareholders,
which New Issuance Notice shall state (x) the number of New Securities proposed
to be issued and (y) the proposed purchase price per security of the New
Securities (the "PROPOSED PRICE"). Upon delivery of the New Issuance Notice,
such offer shall be irrevocable unless and until the rights provided for in
Section 4.2 shall have been waived or shall have expired.
Section 4.2 PREEMPTIVE RIGHTS; EXERCISE.
(a) For a period of 5 Business Days after the giving of the New Issuance
Notice pursuant to Section 4.1 and subject to compliance with any applicable
Requirements of Law , each of the Preemptive Right Shareholders shall have the
right to elect to purchase its Proportionate Percentage (as hereinafter defined)
of the New Securities at a purchase price equal to the Proposed Price and upon
the same terms and conditions set forth in the New Issuance Notice. Each
Preemptive Right Shareholder shall have the right to purchase that percentage of
the New Securities determined by dividing (x) the total number of Equity Shares
then owned by such Preemptive Right Shareholder exercising its rights under this
Section 4.2 by (y) the total number of Equity Shares owned by all of the
Preemptive Right Shareholders exercising their rights under this Section 4.2
plus the number of Equity Shares held by Non-Party Shareholders of the Company
entitled to participate in such an issuance pursuant to Requirements of Law the
"PROPORTIONATE PERCENTAGE"). If any Preemptive Right Shareholder does not fully
subscribe for the number or amount of New Securities that it or he is entitled
to purchase pursuant to the preceding sentence, then each Preemptive Right
Shareholder which elected to purchase New Securities shall have the right to
purchase that percentage of the remaining New Securities not so subscribed for
(for the purposes of this Section 4.2(a), the "EXCESS NEW SECURITIES")
determined by dividing (x) the total number of Shares then owned by such fully
participating Preemptive Right Shareholder by (y) the total number of Shares
then owned by all fully participating Preemptive Right Shareholders who elected
to purchase Excess New Securities plus the number of Equity Shares held by any
Non-Party Shareholders also entitled to participate in such issuance of Excess
New Securities pursuant to Requirements of Law. Any of the Shareholders may
assign to any of its Affiliates all or any portion of its rights to acquire
Shares as a Preemptive Right Shareholder pursuant to this Section 4.2, subject
to applicable Requirements of Law and provided that all notices given by the
Company and consents given by the Preemptive Right Shareholder shall be given to
and by the relevant Shareholder and not its Associate. Unless the Preemptive
Right Shareholders or their Permitted Transferees agree to acquire 80% or more
of the New Securities the Company shall be under no obligation to sell any New
Securities to the Preemptive Right Shareholders.
(b) The right of each Preemptive Right Shareholder to purchase the New
Securities under subsection (a) above shall be exercisable by delivering written
notice of the exercise thereof, prior to the expiration of the 5 Business Day
period referred to in subsection (a) above, to the Company, which notice shall
state the amount of New Securities that such Preemptive Right Shareholder elects
to purchase pursuant to Section 4.2(a). The failure of a Preemptive Right
Shareholder to respond within such 5 Business Day period shall be deemed to be
an irrevocable waiver of such Preemptive Rightholder's rights under Section
4.2(a), PROVIDED that each Preemptive Rightholder may waive its rights under
Section 4.2(a) prior to the expiration of such 5 Business Day period by giving
written notice to the Company.
16
(c) To the extent permitted by Requirements of Law, each Shareholder waives
all pre-emptive and similar rights in relation to new issuances of Equity Shares
and Equity Share Equivalents held by it under Requirements of Law which are
inconsistent with this Section 4.2 and, if such rights cannot be waived, such
Shareholder agrees not to exercise such rights to the extent they are
inconsistent with this Section 4.2. Each non-participating Preemptive
Rightholder shall assign its rights to receive New Securities under Indian
Requirements of Law to participating Preemptive Rigthholders if such assignment
shall assist such participating Preemptive Rightholder to increase its
participation in the issuance of New Securities.
Section 4.3 CLOSING. The closing of the purchase of New Securities
subscribed for by the Preemptive Rightholders under Section 4.2 shall be held at
the corporate office of the Company at 11:00 a.m., local time, on (a) the 20th
day after the giving of the New Issuance Notice pursuant to Section 4.1, if the
Preemptive Rightholders elect to purchase all of the New Securities under
Section 4.2, (b) the date of the closing of the sale to the Subject Purchaser
made pursuant to Section 4.4 if the Preemptive Rightholders elect to purchase
some, but not all, of the New Securities under Section 4.2 or (c) at such other
time and place as the parties to the transaction may agree. At such closing, the
Company shall deliver certificates representing the New Securities, and the
Company shall so represent and warrant, and further represent and warrant that
such New Securities shall be, upon issuance thereof to the Preemptive
Rightholders and after payment therefor, duly authorized, validly issued and
fully paid. Each Preemptive Rightholder purchasing the New Securities shall
deliver at the closing payment in full in immediately available funds for the
New Securities purchased by him or it. At such closing, all of the parties to
the transaction shall execute such additional documents as are otherwise
necessary or appropriate to close such a transaction.
Section 4.4 SALE TO SUBJECT PURCHASER. The Company may sell to the Subject
Purchaser all of the New Securities not purchased by the Preemptive Right
Shareholders pursuant to Section 4.2 on terms and conditions that are no more
favorable to the Subject Purchaser than those set forth in the New Issuance
Notice; PROVIDED that (a) such sale is bona fide and made pursuant to a contract
entered into within ninety (90) days following the earlier to occur of (i) the
waiver by the Preemptive Rightholders of their option to purchase New Securities
pursuant to Section 4.2, and (ii) the expiration of the 10-day period referred
to in Section 4.2; (b) if the New Issuance Notice prescribed a price calculated
by reference to the trading price of the ADS on the Nasdaq over a period of
time, the price offered to the Subject Purchaser shall be calculated on the same
basis but in respect of the relevant period of time immediately, prior to the
sale to the Subject Purchaser (which could be higher or lower). The Parties
acknowledge that the ultimate issue price of the offering could be above or
below the price offered to the Preemptive Right Shareholders but that such
future fluctuation shall be irrelevant for purposes of determining proper
compliance with this Article IV. If such sale is not consummated within such 90
day period for any reason, then the restrictions provided for herein shall again
become effective, and no issuance and sale of New Securities may be made
thereafter by the Company without again offering the same in accordance with
this Section 4. The closing of any issuance and purchase pursuant to this
Section 4.4 shall be held at a time and place as the parties to the transaction
may agree within such 90 day period.
Section 4.5 COMPLIANCE WITH THE COMPANIES ACT: The provisions contained in
this Article 4 shall be subject to due compliance with the provisions of the
Companies Act including passing of the appropriate resolutions by the
shareholders of the Company at the general meeting. The Shareholders shall
exercise their voting rights as a shareholder in support of the implementation
of the provisions of this Article.
17
ARTICLE V
ADDITIONAL SHARE COVENANTS.
Section 5.1 AFTER-ACQUIRED SECURITIES. Except as otherwise provided, all of
the provisions of this Agreement shall apply to all of the Shares and Equity
Share Equivalents now owned or which may be issued or transferred hereafter to a
Shareholder in consequence of any additional issuance, purchase, exchange or
reclassification of any of such Shares or Equity Share Equivalents, corporate
reorganization, or any other form of recapitalization, consolidation, merger,
share split or share dividend, or which are acquired by a Shareholder in any
other manner, except for Shares or ADSs acquired on a stock exchange.
Section 5.2 AGREEMENT TO BE BOUND. The Company shall not issue any
Restricted Shares to any person not a party to this Agreement if that person is
a Permitted Transferee of a Shareholder, unless such person has agreed in
writing to be bound by the terms and conditions of this Agreement pursuant to an
instrument substantially in the form attached hereto as Exhibit B-2. Subject to
and in compliance with applicable Requirements of Law, each of the Shareholders
and the Company shall use its reasonable best efforts to ensure that any
issuance of Shares by the Company in violation of this Section 5.2 shall not
take place or if it takes place be null and void AB INITIO.
Section 5.3 SALE OR PURCHASE CONSTRAINTS FOR ISSUANCES AND SALES. If a Sale
or Purchase Constraint adversely affects the ability of a SAIF Shareholder or a
Venture Tech Shareholder to participate in the acceptance of an offer to acquire
Equity Shares or the making of an offer to sell Equity Shares, the payment or
receipt of a price for Equity Shares or the completion of a sale or purchase of
Equity Shares or a subscription for or an issue or an allotment of Equity Shares
under this Agreement (each a "DEALING ACTIVITY") then in the event that such
constraint affects the ability of a SAIF Shareholder or a Venture Tech
Shareholder to participate in the Dealing Activity:
(a) the Company shall take such steps as may be reasonably required to
assist the SAIF Shareholder or Venture Tech Shareholder in the making of an
application to the relevant Governmental Authority seeking any necessary Permit
to allow such SAIF Shareholder or Venture Tech Shareholder to participate in the
Dealing Activity in the manner contemplated hereby;
(b) if the SAIF Shareholder or Venture Tech Shareholder is unable to fully
participate in the Dealing Activity in the manner contemplated by this Agreement
at the relevant time then completion of that process by the SAIF Shareholder or
Venture Tech Shareholder and all other Shareholders shall be extended until the
earlier of (x) 15 days from the date otherwise contemplated by this Agreement
(PROVIDED THAT if the offer comprises an issuance pursuant to a public offer
such date shall not be later than the closing date of the public offer); and (y)
the date the SAIF Shareholder or Venture Tech Shareholder is so entitled to
participate; and
(c) if the SAIF Shareholder or the VentureTech Shareholder continues to be
subject to the Sale or Purchase Constraint, the SAIF Shareholder and Venture
Tech Shareholder shall then be entitled to participate in a subsequent closing
and, accordingly, final completion of that process by such SAIF Shareholder or
Venture Tech Shareholder shall be subject to a condition precedent that the Sale
or Purchase Constraint no longer exists (such condition precedent to be for such
SAIF Shareholder or Venture Tech Shareholder and able to be waived by it only)
and the completion date for such SAIF Shareholder or Venture Tech Shareholder
shall be extended until 5 Business Days after satisfaction of that condition
precedent PROVIDED THAT (i) if that SAIF
18
Shareholder's or Venture Tech Shareholder's Sale or Purchase Constraint
continues for a period of 2.5 months or such other extended period, as may be
justified, it shall no longer be entitled to participate in that Dealing
Activity; and (ii) the SAIF Shareholder or Venture Tech Shareholder shall not
unreasonably withhold its consent to a waiver of its rights if it is advised
that such Sale or Purchase Constraint is not likely to be removed;
(d) each of the Shareholders and the Company shall co-operate in good faith
and in accordance with Requirements of Law to use its reasonable commercial
efforts to give effect to the Share transfer and issuance provisions of this
Agreement in a manner that is legally permissible, and does not materially
disadvantage a SAIF Shareholder or cause a Sale or Purchase Constraint to apply
in respect of any SAIF Shareholder and seeks to ensure that a SAIF Shareholder
is able to participate in such Dealing Activity in the manner contemplated by
this Agreement; and
(e) the above provisions shall apply to and notwithstanding the provisions
of Sections 2, 3 and 4.
Section 5.4 ASSISTANCE. For the purpose of giving effect to Sections 2, 3
and 4 of this Agreement, the Company shall use all reasonable efforts to obtain
or assist a Shareholder to obtain such consents, authorisations, approvals or
permits of Governmental Authorities necessary for that Shareholder to
participate in the issue, sale or purchase of Shares as contemplated by Sections
2, 3 or 4 of this Agreement and shall provide to that Shareholder copies of all
confirmations and correspondence from Governmental Authorities received by the
Company and relating thereto. For the avoidance of doubt such assistance shall
not include seeking registration of Shares under the Securities Act. If a
Shareholder elects to participate in an issuance by the Company of Shares but is
unable to participate because of a lack of such consents, approvals,
authorisations or permits and suffers dilution of its percentage holding as a
result then it shall be assumed that it participated pro-rata in that offering
for the purpose of determining whether it has fallen below a threshold equity
percentage to exercise a right hereunder.
ARTICLE VI
THE ADR FACILITY, PUBLIC OFFERS AND SCS COVENANTS.
Section 6.1 ADRS.
(a) Subject to compliance with all applicable Requirements of Law and the
terms of the Deposit Agreement, if a SAIF Shareholder so elects, the Equity
Shares held by that SAIF Shareholder at any time or any further Equity Shares
that are issued or issuable to that SAIF Shareholder shall be deposited in the
ADR Facility.
(b) Subject to compliance with applicable Requirements of Law, a SAIF
Shareholder or Venture Tech Shareholder that holds ADRs may at any time withdraw
part or all of the Equity Shares held by the Depositary Bank on its behalf
without any restriction in accordance with the Deposit Agreement and the terms
of this Agreement.
(c) The Company covenants with SAIF that:
(i) it shall not amend the Deposit Agreement or vary the terms of
issuance of the ADSs without the written consent of SAIF (not to be unreasonably
withheld) if (A) such action materially discriminates against SAIF in comparison
to other ADR holders; or (B) if such
19
action would materially and adversely affect the SAIF Shareholders and is not an
action taken by the Company strictly to ensure it complies with applicable
Requirements of Law.
Section 6.2 PUBLIC OFFER.
(a) If in the event of an Indian IPO the Shares of a SAIF Shareholder may
be subject to any "close periods", "lock-ups" or other restrictions on transfer
under the rules of the relevant stock exchange on which the Equity Shares are to
be listed or any other Requirement of Law ("LOCK UP") then if VentureTech or SCS
or the Company may, in accordance with all Requirements of Law, take any actions
that would result in the SAIF Shareholders no longer being subject to such a
Lock-Up or which would allow the SAIF Shareholders to obtain the economic
benefit of being able to sell their Equity Shares in the absence of such a
Lock-Up then VentureTech and SCS and the Company, as the case may be, shall take
such actions or cause such actions to be taken.
(b) VentureTech shall undertake to be named as the promoter for the
purposes of the Indian IPO and offer its shares for restriction on transfer, as
applicable to promoters under the SEBI Guidelines and, if additional Equity
Shares are required to satisfy any other Lock-Up requirements all Shareholders
holding Restricted Shares shall offer their shares pro rata for such Lock-Up
requirements. The Company and the other Shareholders shall use all reasonable
efforts, at or prior to the time of an Indian IPO and pass all necessary and
reasonable resolutions and do all acts or things that are reasonably necessary
to ensure that the promoters shall avail of any benefits conferred on them by
law by reason of being named as a promoter in the Indian IPO.
(c) Subject to applicable Requirements of Law, the Company shall use its
reasonable best efforts to ensure that the SAIF Shareholders are not classified
as a promoter of the Company for any purpose whatsoever PROVIDED THAT it is a
acknowledged that the Company may not be able to prevent the SAIF Shareholders
becoming promoters pursuant to the operation of law. Nothing in this Agreement
shall require a SAIF Shareholder to do or omit to do anything that may result in
them becoming a promoter of the Company under the SEBI Guidelines. The Company
undertakes that it shall not name any SAIF Shareholder as a promoter in any
prospectus or other document relating to the issuance of Equity Shares.
(d) The Company and the other Shareholders agree that the SAIF
Shareholders, shall not, upon Listing or sale of the Equity Shares held by it,
be required to give any warranties or indemnities to any underwriter, broker,
Indian Stock Exchange, any Governmental Authority or any other person except in
relation to title of its Shares and such other warranties and indemnities as a
Requirement of Law imposed on that SAIF Shareholder requires to be given by that
SAIF Shareholder.
Section 6.3 LISTING OF UNDERLYING SHARES AND RELATED MATTERS. The Company
agrees that if the Company applies to have its Equity Shares or other securities
traded on any stock exchange or market other than the Nasdaq, it will include in
such application the Equity Shares held by the Shareholders (if eligible) and
will take such other action as is necessary to cause such Equity Shares to be so
listed. The parties acknowledge SARF's rights under clause 13 of the SARF
Shareholders Agreement and the SARF Registration Rights Agreement.
Section 6.4 NASDAQ. For so long as SAIF Shareholders own ADSs, the Company
shall, subject to Requirements of Law, use its reasonable best efforts to (a)
continue the listing and trading of its ADSs on the Nasdaq and (b) comply with
the Company's reporting, filing and other
20
obligations under the bylaws or rules of such exchange, as applicable, to ensure
the continued eligibility for trading of the ADSs thereon.
Section 6.5 SCS COVENANTS. SCS shall continue to grant to the Company the
right to use as a trade and service ▇▇▇▇ and business name the word "▇▇▇▇▇▇" and
the associated marks and logos of ▇▇▇▇▇▇ and its subsidiaries used by the
Company at the date of this Agreement until 24 months after the date of Closing
it being acknowledged by the Company that it intends to complete a rebranding
program by an earlier date and such a right shall terminate on any earlier
completion of such a rebranding program by the Company.
ARTICLE VII
CORPORATE GOVERNANCE.
Section 7.1 GENERAL. From and after the execution of this Agreement, at any
annual or extraordinary general meeting of shareholders of the Company (a
"SHAREHOLDERS MEETING") or in any written consent executed in lieu of such a
meeting of Shareholders (a "WRITTEN CONSENT") (a) each Shareholder shall vote
its Shares, and each Shareholder and the Company shall take all other actions
reasonably necessary, to give effect to the provisions of this Agreement
(including, without limitation, Sections 7.3 and 7.10 hereof) and to ensure that
the Restated Charter Documents do not, at any time hereafter, conflict in any
respect with the provisions of this Agreement or any Requirement of Law; (b)
each Shareholder shall vote his or its Shares, upon any matter submitted for
action by the Company's shareholders or with respect to which such Shareholder
may vote or act by Written Consent, in conformity with the specific terms and
provisions of this Agreement, any Requirement of Law or the Restated Charter
Documents; and (c) no Shareholder shall vote his or its Shares in favor of any
amendment of the Restated Charter Documents which would conflict with, or
purport to amend or supercede, any of the provisions of this Agreement
(including, without limitation, Sections 7.3 and 7.10 hereof).
Section 7.2 SHAREHOLDER ACTIONS. In order to effectuate the provisions of
this Agreement, each Shareholder (a) hereby agrees that when any action or vote
is required to be taken by such Shareholder pursuant to this Agreement, such
Shareholder shall use his or its reasonable commercial efforts to call, or cause
the appropriate officers and directors of the Company to call, a Shareholders
Meeting, or to execute or cause to be executed a Written Consent to effectuate
such Shareholder action, and (b) shall use his or its reasonable commercial
efforts (consistent with Requirements of Law applicable to the Company,
Directors or Shareholders) to cause the Board of Directors to adopt, either at a
meeting of the Board of Directors or by unanimous written consent of the Board
of Directors, all the resolutions necessary to effectuate the provisions of this
Agreement.
Section 7.3 ELECTION OF DIRECTORS - NUMBER AND COMPOSITION.
(a) Each Shareholder shall vote its Shares at any Shareholders Meeting, or
act by Written Consent with respect to such Shares, and take all other actions
necessary to ensure that the number of directors constituting the entire Board
of Directors shall not exceed nine (9).
(b) Each Shareholder shall vote its Shares at any Shareholders Meeting
called for the purpose of filling the positions on the Board of Directors, or in
any Written Consent executed for such purpose, and take all other actions
necessary to ensure the election to the Board of Directors of:
(i) two individuals designated by SCS (for so long as SCS and its
Permitted Transferees hold in aggregate at least 10% of the outstanding Equity
Shares) and one
21
individual designated by SCS (for so long as SCS and its Permitted Transferees
hold in aggregate at least 5% of the outstanding Equity Shares (the "SCS
DIRECTORS");
(ii) two individuals designated by each of the following, comprising 4
in aggregate, (for so long as that Shareholder and its Permitted Transferees
hold in aggregate at least 10% of the outstanding Equity Shares) and one
individual designated by each of the following (for so long as that Shareholder
and its Permitted Transferees hold in aggregate at least 5% of the outstanding
Equity Shares):
(1) VentureTech (the "VENTURETECH DIRECTORS"); and
(2) the SAIF Shareholders (the "SAIF DIRECTORS");
(iii) Zone individual designated by SARF (for so long as SARF is
entitled to appoint one Director pursuant to the SARF Stockholder Agreement)
(the "SARF DIRECTOR");
(iv) one individual appointed as the Managing Director on the Board
pursuant to a resolution of the shareholders of the Company, such individual to
be a senior executive of the Company who is not a Related Person of SCS (the
"MANAGING DIRECTOR"); and
(v) the remaining Directors required to increase the number of
Directors to nine (9) or to comply with Section 7.3(f) shall be suitably skilled
independent Directors qualifying as independent directors under Indian and
United States Requirements of Law who shall initially be ▇▇. ▇. ▇▇▇▇▇▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇▇ (or such other individuals as the Shareholders shall agree) until
such time as VentureTech is entitled to appoint two Directors under Section
7.3(b)(ii)(1). Thereafter such independent Directors shall be appointed as
follows:
(1) each of SCS, SAIF, VentureTech and the chief executive
officer of the Company may nominate up to 2 individuals each and, if requested
by the Board of Directors the Company shall retain an executive search firm
appointed in accordance with a resolution of the Board and such search firm
shall be instructed to provide a list of independent Directors to be so
appointed or nominated by the Board.
(2) All relevant information regarding the individuals identified
by any executive search firm shall be provided to the Board together with
information regarding such other suitable potential Directors as the chief
executive officer of the Company shall identify.
(3) The Board shall by majority vote of the 8 Directors appointed
under paragraph (b)(i) to (iv) appoint the independent Directors from amongst
those nominated on the list provided under paragraph (1) and, if such majority
cannot be obtained in respect of a sufficient number of Directors, then
information regarding further potential individuals shall be submitted to the
Board in accordance with paragraph (1) until a sufficient number of independent
Directors are so approved.
(c) ALTERNATE DIRECTORS. The Board shall appoint in respect of each
Director an alternate Director in accordance with the Indian Companies Act that
has been designated by that Director and such alternate Director may attend all
Board meetings and exercise all voting rights of the appointing Director where
such appointing Director is not in attendance. If an alternate Director attends
a physical meeting the Director in respect of which that alternate Director is
appointed may, at
22
the election of the Company, participate in that meeting by telephone or video
conference as an observer.
(d) CHAIRMAN. The Chairman of the Company shall be appointed from among the
Board of Directors by a majority vote of the VentureTech Directors and the SAIF
Directors, prior to the Indian IPO PROVIDED THAT (a) the combined holding of the
VentureTech Shareholders and the SAIF Shareholders in the Company does not fall
below 15% of the issued and outstanding Equity Shares of the Company; and (b)
VentureTech has an agreement with the Company to be named as a promoter of the
Company at the time of the Indian IPO. After the Indian IPO the VentureTech
Shareholders shall be entitled to appoint the Chairman for so long as it has
undertaken promoter responsibilities subsequent to the Indian IPO. The Chairman
shall not have an additional deciding vote in the event of a tied vote.
(e) COMPETITOR DIRECTORS. A Shareholder shall not designate for appointment
as a Director any person who is a director, employee or consultant or holder of
more than 25% of the voting power of a Competitor unless such appointment is
approved by a majority of Directors not designated by that Shareholder.
(f) ADJUSTMENT. If at any time following the appointment of Directors under
this section 7.3 there are insufficient Independent Directors appointed to the
Board of Directors to comply with United States Requirements of Law then the
number of directors shall be increased by such a number of Independent Directors
as is necessary to comply with United States Requirements of Law and such
additional Directors shall be appointed under Section 7.3(b)(v) and shall remain
as Directors but shall be removed at such time as it is possible to comply with
such Requirements of law by adopting a Board of Directors comprising (9)
Directors appointed under section 7.3(b).
Section 7.4 REMOVAL AND REPLACEMENT OF DIRECTOR.
(a) REMOVAL OF DIRECTORS. If at any time a Shareholder notifies the other
Shareholders of their wish to remove at any time and for any reason (or no
reason) a Director appointed by that Shareholder, then each Shareholder shall
vote all of its Shares so as to remove such Director.
(b) REPLACEMENT OF DIRECTORS.
(i) If at any time, a vacancy is created on the Board of Directors by
reason of the incapacity, death, removal or resignation of any of the Directors
designated pursuant to
(1) Section 7.3(b)(i) to (iv) hereof, then the Shareholder or
Company management that appointed that Director pursuant to Section 7.3(b)(i) to
(iv) shall designate an individual who shall be elected to fill the vacancy
until the next Shareholders Meeting; and
(2) Section 7.3(b)(v) hereof then a replacement Director shall be
appointed pursuant to Section 7.3(b)(v).
(ii) Upon receipt of notice of the designation of a nominee pursuant
to Section 7.4(b)(i) to (iv), each Shareholder shall, as soon as practicable
after the date of such notice, take all reasonable actions, including the voting
of its Shares, to elect the Director so designated to fill the vacancy; PROVIDED
that no resolution of the Shareholders removing any such Director shall be
23
approved unless the Shareholder that has nominated such Director has approved in
writing the removal or replacement of such Director.
(c) LOSS OF DIRECTOR RIGHTS. If any Shareholder no longer holds the right
to appoint the maximum number of Directors referred to in Section 7.3(b)(i) to
(iii) then it shall nominate which of its nominated Directors is to resign and
shall ensure that such Director so resigns and the Shareholders shall replace
that Director with an Independent Director appointed under Section 7.3(b)(v).
Any such termination of a right to designate a director shall be permanent.
Section 7.5 AUTHORITY OF BOARD OF DIRECTORS AND CERTAIN COMMITTEES. Subject
only to the provisions of this Agreement and applicable Requirements of Law:
(a) The Board of Directors shall have ultimate responsibility for
management and control of the Company.
(b) The Board of Directors shall be required to make all major decisions of
the Company and all decisions outside the day to day business of the Company
(including, without limitation, those referred to in Section 7.10). All matters
in respect of such decisions must be referred to the Board of Directors, and no
Shareholder or officer shall take any actions purporting to commit the Company
in relation to any such matters without the approval of the Board of Directors.
(c) The Board shall establish and maintain an audit committee that shall
have responsibility for the oversight functions of financial and accounting
matters of the Company, including but not limited to, budget approval and
internal auditing, and such other matters as specified in any applicable
Requirements of Law ("AUDIT COMMITTEE").
(d) The Board shall establish and maintain a compensation committee which
shall have responsibility for the oversight functions of establishing and
approving employee compensation policies and administering the Stock Option
Plan, and such other matters as specified in any applicable Requirements of Law
("COMPENSATION Committee").
(e) If required by applicable Requirements of Law the Board shall establish
and maintain a nominating committee which shall have the responsibility for such
matters as are specified in any applicable Requirements of Law ("NOMINATING
COMMITTEE").
(f) The Company shall, and each Shareholder shall cause the Board of
Directors to, cause each of the Audit Committee, the Compensation Committee and
the Nominating Committee of the Board of Directors to comprise 3 individuals one
of which will be SAIF Director (who shall be the chairman of the committee), one
a VentureTech Director and one an independent Director approved under Section
7.3(b)(iv) (or if required by the SARF Stockholders Agreement the SARF
Director), subject to compliance with Section 7.14 and all such appointments
complying with all Indian and United States Requirements of Law (and for that
purpose the parties shall use their reasonable best efforts to apply for any
available consents, permits, authorisations and approvals that would facilitate
the constitution of the Audit Committee, the Compensation Committee and the
Nominating Committee in the manner contemplated by this Section 7.3). If at any
time the Audit Committee, Compensation Committee or Nominating Committee cannot
be so constituted then SAIF shall nominate the members of such committees from
amongst the Independent Directors and a SAIF Director shall have non-voting
observer status on such committees. The persons nominated to the
24
Audit or Compensation Committee must qualify for appointment to such committees
pursuant to Requirements of Law.
Section 7.6 BOARD MEETINGS.
(a) FREQUENCY AND LOCATION. Meetings of the Board of Directors shall take
place at least once during a three month period. Meetings shall be held in a
location approved by a majority of the Directors. The audit committee shall meet
at least once in every quarter.
(b) NOTICE. A meeting may be called by the Chairman of the Board of
Directors or Managing Director or any two other Directors giving notice in
writing to the Company Secretary specifying the date, time and agenda for such
meeting. The Company Secretary shall upon receipt of such notice give a copy of
such notice to all Directors of such meeting, accompanied by a written agenda
specifying the business of such meeting and copies of all papers relevant for
such meeting. Not less than 7 days' notice shall be given to all Directors;
provided, however, that such notice period (i) shall not apply in the case of an
adjourned meeting pursuant to Section 7.6(c) and (ii) may be reduced with the
written consent of all of the Directors.
(c) QUORUM. All meetings of the Board of Directors, other than Adjourned
Meetings (as defined below), shall require a quorum of at least four Directors;
PROVIDED, however, that such a quorum must include at least one of a SAIF
Director or a VentureTech Director and the Managing Director; PROVIDED further,
that notwithstanding any other provisions of this Agreement, such a quorum must
include a SAIF Director in order for the Board of Directors to vote on any of
the matters described in SCHEDULE 2 hereof. If such a quorum is not present
within one hour from the time appointed for the meeting, the meeting shall
adjourn to such place and time as those Directors who did attend shall decide
or, if no such decision is reached, at the same place and time seven days later,
at which meeting a quorum of Directors as required under the Companies Act shall
constitute a valid quorum even though the Directors required at the proceeding
meeting are not present, provided that notice of such Adjourned Meeting shall
have been delivered to all Directors at least five days prior to the date of
such Adjourned Meeting.
(d) VOTING. Subject to Section 7.10 at any Board of Directors meeting, each
Director may exercise one vote. Subject to Section 7.10, the adoption of any
resolution of the Board of Directors shall require the affirmative vote of a
majority of the Directors present at a duly constituted meeting of the Board of
Directors.
(e) ELECTRONIC PARTICIPATION. At such time as the Indian Companies Act
allows board meetings to be held by electronic means, the Directors may
participate in Board of Directors meetings by such electronic means (including
by and in conference, video conference or such other means by which all of the
participating Directors may hear each other at the same time), and such
participation shall constitute presence for purposes of the quorum provisions of
Section 7.6(c).
(f) CIRCULAR RESOLUTION BY WRITTEN CONSENT. Except as otherwise provided in
the Indian Companies Act, any action that may be taken by the Directors at a
meeting may be taken by a written resolution but only if it is signed by all of
the Directors including, but not limited to, a resolution of a type referred to
in Section 7.10.
Section 7.7 DIRECTORS' ACCESS. Each Director shall be entitled to examine
the books and accounts of the Company and take copies thereof and shall have
free access, at all
25
reasonable times and with prior written notice, to any and all properties and
facilities of the Company or any Subsidiary. The Company shall provide such
information relating to the business affairs and financial position of the
Company as any Director may require and a Director shall be entitled to discuss
Company matters with employees of the Company through and with the management of
the Company and the Company shall facilitate such discussion. Unless prohibited
by a contractual or other legal requirement applicable to the Company, any
Director may provide any information he holds in relation to the Company (along
with any related compliations, analyses or other information based on such data,
the "DIRECTOR DATA") to the Shareholder that designated that Director under
Section 7.3 PROVIDED that a Shareholder receiving such information from a
Director shall observe its obligations under Section 9.3 in relation to such
information and shall observe all of its obligations in respect of such
information under U.S. Requirements of Law including, without limitation,
compliance with Rule 10b-5 and all other Requirements of Law relating to ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇. Each Shareholder acknowledges that the Company has implemented the
written policies in relation to securities trading in listed securities of the
Company that the Board of Directors has deemed appropriate for the Company to
comply with its obligations under Requirements of Law in relation to ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and the prevention of the misuse of material non-public information
regarding the Company.
Section 7.8 REIMBURSEMENT OF EXPENSES; D&O INSURANCE. The Company shall
reimburse the Directors for all reasonable travel and accommodation expenses
incurred by him in connection with attending Board meetings and committee
meetings as director of the Company upon presentation of appropriate
documentation therefor. The Company shall, and each Shareholder shall use
reasonable commercial efforts to cause the Board of Directors to cause, the
Company to, maintain a directors' liability insurance policy that is reasonably
acceptable to the Board of Directors and at a minimum provides coverage
comprising US$25 million or such other amount as shall be agreed to by the Board
and consented to by SAIF, such consent not to be unreasonably withheld. To the
extent permissible under applicable Requirements of Law the parties shall
include a provision in the Restated Articles to the effect that the Company
shall indemnify each Director under the Restated Articles for all costs, loss,
damages and expenses suffered or incurred by a Director for any claim,
proceeding or suit in connection with the Directors capacity as a director of
the Company.
Section 7.9 FUTURE FUNDING. Subject to Section 7.10, the Board of Directors
shall have the authority to determine the extent of, and the means of
satisfying, any future funding needs of the Company and shall have the
discretion to determine the terms of any future issuance of securities or
incurring of indebtedness by the Company; provided, however, that no Shareholder
shall have any obligation to provide any indemnity, guarantee or other security
to any other Shareholder or any third party in support of loans, overdraft
facilities, borrowings or other financial arrangements entered into, required by
or otherwise procured for the Company.
Section 7.10 ACTIONS OF THE SHAREHOLDERS AND BOARD OF DIRECTORS; RESERVED
MATTERS. Notwithstanding anything to the contrary contained in this Agreement,
neither the Company, whether by action or written consent of the Shareholders or
the Board of Directors, nor the Shareholders shall take, approve or otherwise
ratify any of the actions described in Schedule 2 without the prior consent of
the holders of three quarters of the aggregate number of Equity Shares held by
the SAIF Shareholders and VentureTech Shareholders PROVIDED THAT the SAIF
Shareholders shall not be included in that aggregate number if together they
hold less than 7.5% of the non-diluted Equity Shares and the VentureTech
Shareholders shall not be included in that aggregate number if together they
hold less than 7.5% of the non-diluted Equity Shares.
26
Section 7.11 RESTATED CHARTER DOCUMENTS. Any amendment, modification or
restatement of the Restated Charter Documents or the constituent documents of a
Subsidiary in any manner affecting SAIF, VentureTech or SCS rights as owners of
Shares, if such amendment, modification or restatement would directly or
indirectly result in a material adverse change to the rights, preferences, or
privileges of the Equity Shares held by that Shareholder or which may adversely
affect any of the rights, preferences, or privileges of that Shareholder
relative to the other Shareholders or the indemnification of a Director
nominated by it under any indemnification agreement entered into between the
Company and that Director shall only occur with the consent of that Shareholder.
Section 7.12 COMPANY COVENANTS. The Company covenants with SAIF that the
Company shall comply with its obligations under Schedule 3.
Section 7.13 STOCK OPTION PLAN.
(a) The Compensation Committee shall be solely entitled to approve the
number, exercise or sale price or issuance of Shares under the Stock Option Plan
and to propose variations to the Stock Option Plan.
(b) The Stock Option Plan may comprise Equity Shares reserved for issuance
as well as current options outstanding, which in aggregate comprise no more than
5.0% of the Company's fully diluted Equity Shares as at the date hereof.
(c) All Equity Shares and Equity Share Equivalents issued after the Closing
to employees, and directors shall be subject to vesting as follows (unless
different vesting is approved by the majority consent of the Board of
Directors)(i) 1/6th to vest at the end of the first 12 months following such
issuance, (ii) the remaining 5/6th to vest evenly on a quarterly basis over the
next 24 months.
Section 7.14 REQUIREMENTS OF LAW. If at any time the rights of a
Shareholder under Section 7 of this Agreement are materially in contravention of
any material Requirement of Law (including, without limitation, the requirements
of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the requirements of the Company's listing
on the Nasdaq), the parties shall:
(a) negotiate in good faith and seek to agree and implement amendments to
this Agreement that prevent such a contravention of law while preserving all of
the rights and obligations of the parties hereunder to the fullest extent
reasonably possibly; and
(b) use their reasonable best efforts to apply for all available consents,
exemptions authorisations and permits from relevant Governmental Authorities
that would allow the rights of a party hereunder to be effected to the fullest
extent reasonably possible; and
(c) if they are unable to reach agreement in relation to the amendments
referred to in Section 7.14(a) or to acquire the consents, exemptions
authorisations and permits referred to in Section 7.14(b) within 20 Business
Days of the date of commencement of the negotiations (or such longer period as
may be required to secure such consents, exemptions authorisations and permits)
then such a dispute may be referred to an arbitrator under Section 10 and the
arbitrator shall have the right to delete or add provisions to this Agreement to
prevent such a contravention of law while preserving all of the rights and
obligations of the parties hereunder to the fullest extent reasonably possible.
27
ARTICLE VIII
TERM AND TERMINATION.
Section 8.1 TERM OF AGREEMENT. This Agreement shall become effective upon
the date of Closing and shall terminate upon the earlier of (a) the date one
Shareholder holds all of the Equity Shares or (b) the twentieth anniversary of
the date hereof. The provisions contained in Sections 2, 3 and 4 shall terminate
following the Indian IPO. A Shareholder shall have no rights hereunder at such
time as its percentage holding of Equity Shares is less than 5% on a non-diluted
basis.
ARTICLE IX
MISCELLANEOUS.
Section 9.1 SHARE CERTIFICATE LEGEND. A copy of this Agreement shall be
filed with the Secretary of the Company and kept with the records of the
Company. In addition to any other legend required by any Requirement of Law,
each certificate representing Restricted Shares now held or hereafter acquired
by any Shareholder shall for as long as this Agreement is effective bear legends
substantially in the following forms:
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE INVESTOR RIGHTS
AGREEMENT, DATED [date], AMONG THE COMPANY AND THE SHAREHOLDERS NAMED THEREIN, A
COPY OF WHICH MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE. THE COMPANY
WILL NOT REGISTER THE TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY
UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE
INVESTOR RIGHTS AGREEMENT.
Section 9.2 NOTICES. All notices, demands or other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to SAIF:
c/o SB Asia Infrastructure Fund, L.P.
Suite 2115-2118, Two ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ H.P. ▇▇▇, Esq.
(b) if to VentureTech:
Venture Tech Solutions Pvt. Ltd.
▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
Telecopy:
Attention:
28
(c) if to SCS:
c/o ▇▇▇▇▇▇ Computer Services Limited
Mayfair Centre, S.P. Road, Secunderabad,
Andhra Pradesh,
India 500 003
Telecopy:
Attention:
(d) if to the Company:
▇▇▇▇▇▇ Infoway Limited
Tidel Park, 2nd floor, ▇▇.▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ - ▇▇▇▇▇▇
Telecopy:
Attention:
(e) if to any other Shareholder, at its address as it appears on the
record books of the Company.
All such notices, demands and other communications shall be deemed to have been
duly given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if telecopied. Any party may by notice given in
accordance with this Section 10.3 designate another address or person for
receipt of notices hereunder.
Section 9.3 PUBLICITY; CONFIDENTIALITY. Each Shareholder covenants with the
Company that it shall not issue a publicity release or public announcement or
otherwise directly or indirectly make any disclosure concerning this Agreement
or the business, technology, proprietary data or financial affairs of the
Company (which shall include all Director Data, without prior written approval
of the Board (which it may grant or withhold in its sole discretion); PROVIDED,
HOWEVER, that nothing in this Agreement shall restrict any of the Shareholders
from disclosing information (a) that is already publicly available through no
breach by such Shareholder or any of its Affiliates, (b) that may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation, PROVIDED that such Shareholder will use reasonable efforts to notify
the Company in advance of such disclosure so as to permit the Company to seek a
protective order or otherwise contest such disclosure, and such Shareholder will
use reasonable efforts to cooperate, at the expense of the Company, with the
Company in pursuing any such protective order, (c) to the extent that such
Shareholder reasonably believes it appropriate in order to protect its
investment in its Shares or in order to comply with any Requirement of Law (such
disclosure not to include any Director Data under any circumstances), or (d) to
such Shareholder's or the Company's officers, directors, shareholders,
investors, advisors, employees, members, partners, controlling persons, auditors
or counsel (provided that the Shareholder shall be responsible for ensuring that
any subsequent disclosure by such person complies with this Section 9.3 and
shall be responsible for any breach hereof by any such Person) or (e) to
Government Authorities from whom releases, consents or approvals are required,
or to whom notice is required to be provided, pursuant to any Requirement of Law
provided that such applications for any release, consent or approval shall (i)
not include any Director Data and (ii) shall be made confidentially or under
request for confidential treatment unless such a procedure is not provided for
by the Government Authority; and PROVIDED FURTHER, that a Shareholder may
disclose that it is an investor in the Company and include on its worldwide web
page, the name of the Company, the name of the Chief Executive Officer of the
Company, a brief
29
description of the business of the Company, the Company's logo and the aggregate
amount of its investment in the Company. If any announcement is required by any
Requirement of Law to be made by any party hereto (other than the Company),
prior to making such announcement such party will deliver a draft of such
announcement to the other parties (including the Company) and shall give the
other parties reasonable opportunity to comment thereon.
Section 9.4 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARY. This Agreement
shall inure to the benefit of and be binding upon successors and permitted
assigns of the parties hereto. This Agreement is not assignable except in
connection with a transfer of Shares in accordance with this Agreement. No
person other than the parties hereto and their successors and permitted assigns
is intended to be a beneficiary of this Agreement.
Section 9.5 AMENDMENT AND WAIVER.
(a) No failure or delay on the part of any party hereto in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the parties hereto at law, in equity or
otherwise.
(b) Any amendment, supplement or modification of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by any party from the terms of any provision of this Agreement,
shall be effective only if it is made or given in writing and signed by (i) the
Company and (ii) the Shareholders.
Section 9.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Section 9.7 SPECIFIC PERFORMANCE. The parties hereto intend that each of
the parties have the right to seek damages or specific performance in the event
that any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
Section 9.8 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
Section 9.9 SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired.
Section 9.10 RULES OF CONSTRUCTION. Unless the context otherwise requires,
references to sections or subsections refer to sections or subsections of this
Agreement.
Section 9.11 ENTIRE AGREEMENT. This Agreement, together with the exhibits
hereto, is intended by the parties as a final expression of their agreement and
intended to be a
30
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, representations, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits hereto, supersede all prior agreements and
understandings among the parties with respect to such subject matter (including
the Original Shareholders Agreements).
Section 9.12 FURTHER ASSURANCES. Each of the parties shall, and shall cause
their respective Affiliates to, execute such documents and perform such further
acts as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
ARTICLE X
GOVERNING LAW AND DISPUTE RESOLUTION.
Section 10.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF INDIA, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS TO LAW OF ANY JURISDICTION.
Section 10.2 ARBITRATION.
(a) Any dispute or claim arising out of or in connection with or relating
to this Agreement, or the breach, termination or invalidity hereof (including
the validity, scope and enforceability of this arbitration provision), shall be
finally resolved by arbitration by the International Chamber of Commerce ("ICC")
or its successor pursuant to the ICC's then prevailing Rules of Arbitration of
the International Chamber of Commerce (the "RULES") and as are in force at the
time of any such arbitration and as may be amended by the rest of this Section
10.2. For the purpose of such arbitration, there shall be three arbitrators
appointed in accordance with the Rules ("ARBITRATION BOARD").
(b) The place of arbitration shall be in Singapore. All arbitration
proceedings shall be conducted in the English language. The arbitrators shall
decide any such dispute or claim strictly in accordance with the governing law
specified in Section 10.1. Judgment upon any arbitral award rendered hereunder
may be entered in any court having jurisdiction, or application may be made to
such court for a judicial acceptance of the award and an order of enforcement,
as the case may be.
(c) The parties agree to facilitate the arbitration by (i) cooperating in
good faith to expedite (to the maximum extent practicable) the conduct of the
arbitration, (ii) making available to one another and to the Arbitration Board
for inspection and extraction all documents, books, records, and personnel under
their control or under the control of a person controlling or controlled by such
party if determined by the Arbitration Board to be relevant to the dispute,
(iii) conducting arbitration hearings to the greater extent possible on
successive business days and (iv) using their best efforts to observe the time
periods established by the rules of the ICC or by the Arbitration Board for the
submission of evidence and briefs.
(d) The costs and expenses of the arbitration, including, without
limitation, the fees of the arbitration, including, without limitation, the fees
of the Arbitration Board, shall be borne equally by each party to the dispute or
claim, and each party shall pay its own fees, disbursements and other charges of
its counsel.
31
(e) Any award made by the Arbitration Board shall be final and binding on
each of the parties that were parties to the dispute. The parties expressly
agree to waive the applicability of any laws and regulations that would
otherwise give the right to appeal the decisions of the Arbitration Board so
that there shall be no appeal to any court of law for the award of the
Arbitration Board, and a Party shall not challenge or resist the enforcement
action taken by any other Party in whose favor an award of the Arbitration Board
was given.
Section 10.3 EFFECTIVE DATE. This Agreement (other than this Section 10.3
and Section 1) shall become effective on and from the date of Closing. Section
10.3 and Section 1 are effective on and from the date hereof. If the
Subscription Agreement is terminated this Agreement shall be void ab initio.
32
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Shareholders Agreement on the date first written above.
SAIF INVESTMENT COMPANY LIMITED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇
Title: Executive Managing Director
VENTURE TECH SOLUTIONS PVT. LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Director
▇▇▇▇▇▇ COMPUTER SERVICES LIMITED
By: /s/ B. Rama Rajis
-----------------------------------
Name: B. Rama Rajis
Title: Managing Director
▇▇▇▇▇▇ INFOWAY LIMITED
By: /s/ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇. ▇▇▇▇▇▇▇
Title: Managing Director
33
SCHEDULE 1
SHAREHOLDERS AFTER THE VENTURETECH SECOND TRANCHE
-----------------------------------------------------------------------
SHAREHOLDER NUMBER OF SHARES PERCENTAGE FULLY DILUTED
-----------------------------------------------------------------------
SCS 12,182,600 33.2%
-----------------------------------------------------------------------
SAIF 7,558,140 20.6%
-----------------------------------------------------------------------
VentureTech 4,069,767 11.1%
-----------------------------------------------------------------------
-----------------------------------------------------------------------
OTHER HOLDERS OF SHARES NUMBER PERCENTAGE
-----------------------------------------------------------------------
SARF 3,600,000 9.8%
-----------------------------------------------------------------------
ADR Holders (other than SAIF) 5,933,403 16.2%
-----------------------------------------------------------------------
ESOP and ESOP Reserve 1,833,000 5.0%
-----------------------------------------------------------------------
Other 1,005,173 2.7%
-----------------------------------------------------------------------
Sterling Commerce 481,000 1.3%
-----------------------------------------------------------------------
Total 36,663,083 100%
-----------------------------------------------------------------------
SCHEDULE 2
RESERVED MATTERS
(a) Any change in the capital structure of the company or issue (other than
pursuant to the ESOP) of further Equity Shares or equity interests or the
creation of any Equity Share Equivalents or other rights to subscribe for,
acquire or call for shares or redemption or purchase by the Company of Shares or
a reduction in the Share capital of the company or in any way alteration of the
rights attaching to the Share capital of the Company or increase in the
authorised Share capital PROVIDED THAT the issuance of Equity Shares necessary
to effect an Indian IPO fully underwritten or subscribed pursuant to a book
build by an internationally recognised investment bank may occur with the
consent of SAIF, such consent not to be unreasonably withheld.
(b) The issue of any debenture or loan stock (secured or unsecured), the
making of any loan, creation, renewal or extension of any borrowings or
indebtedness by the Company or the granting of any credit or creation of any
mortgage, charge, lien, encumbrance or other third party right over any of the
Company's assets, or the entering into by the Company of any guarantee or
indemnity or becoming a surety for any third party except:
(i) in the ordinary course of the Business; and
(ii) as contemplated by a business plan of the company approved by
the Board of Directors; and
(iii) if the total of all such indebteness, guarantees and indemnities
of the Company does not exceed US$2,000,000 (or its equivalent in other
currencies).
(c) Appointing any Director of the Company or appointing any committee of
the Board of Directors or delegating any of the powers of the board to any
committee other than strictly in accordance with the Board of Directors and
committee composition specified in this Agreement (including, without
limitation, Section 7.14).
(d) The merger, acquisition or winding up of the Company or participation
in any scheme of reconstruction or any settlement whatsoever involving the
Company or liquidation or dissolution of the Company.
(e) Any acquisition of the whole or substantially the whole of the assets
and undertaking of the Company or an acquisition by the Company of any part of
(or the whole of) the issued share capital, stock, or interest or of the assets
and undertakings (or any rights over the same) of another company.
(f) The assignment, sale or other disposal, lease or lending in any 12
month period of any asset or related group of assets of the Company having a net
book value in aggregate of in excess of 10% of the net book value of the assets
of the Company.
(g) The declaration of any dividend, distribution of Company's share
capital or purchase, redemption or any kind of acquisition of any of the
Company's shares or capital stock or any Equity Share Equivalents (other than
pursuant to Section 3.2).
(h) The Company establishing or materially varying any share or share
option plan for any director or employee of the Company. Any loan to or
repayment of debts to directors, officers or Affiliates of the Company except as
may be agreed by SAIF prior to the date hereof and fully disclosed herein and
standard expense reimbursement policies for non-material expenses.
(i) Any transaction by the Company with any shareholder or any associated
Company of any shareholder or any directors of the Company and or the Related
Parties of any of them of involving consideration given or received in excess of
US$100,000.
(j) Any change in the nature or material modification of the business
undertaken by the Company.
2
SCHEDULE 3
COMPANY COVENANTS
1. FINANCIAL INFORMATION AND REPORTING.
1.1 ANNUAL BUDGET. Not less than thirty (30) days prior to the end of each
Financial Year, the Company shall prepare and submit to the Board of Directors
for its approval an annual operating budget of the Company for the next
succeeding Financial Year in reasonable detail, including such information as
may reasonably be requested by a SAIF Director or a VentureTech Director.
1.2 FINANCIAL STATEMENTS AND OTHER INFORMATION. For so long as the Shareholders
SAIF or the VentureTech Shareholders beneficially own in the aggregate not less
than 5% of the Equity Shares outstanding as of any date on a non diluted basis
(such amount, the "Minimum Ownership Percentage"), the Company shall deliver to
the SAIF Shareholders or VentureTech Shareholders (as the case may be) in form
and substance satisfactory to it:
(a) as soon as available to any Shareholder and not later than ninety (90)
days after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such fiscal year and the related statements of operations and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
summary and analysis of the operations of the Company for such fiscal year and
by the opinion of a nationally recognized independent certified public
accounting firm which report shall state without qualification that such
financial statements present fairly in all material respects the financial
condition as of such date and results of operations and cash flows for the
periods indicated in conformity with U.S. GAAP;
(b) as soon as available to any other Shareholder and not later than
forty-five (45) days after the end of each of the first three fiscal quarters of
each fiscal year, the unaudited consolidated balance sheet of the Company and
its Subsidiaries, and the related statements of operations for such quarter and
for the period commencing on the first day of the fiscal year and cash flows on
a year to date basis and ending on the last day of such quarter, all certified
by an appropriate officer of the Company as presenting fairly the consolidated
financial condition as of such date and results of operations and cash flows for
the periods indicated in conformity with U.S. GAAP, subject to normal year-end
adjustments and the absence of footnotes required by U.S. GAAP; and
(c) notwithstanding the foregoing, the Company's obligations under this
Sections 1.2 and 1.4 shall be deemed satisfied in full so long as the Company
remains a reporting company pursuant to the Exchange Act and files its periodic
and other public reports with the Commission by ▇▇▇▇▇ or any successor system
providing for public availability of such reports immediately upon filing and
such SEC reports provide in all material respects the information identified in
Sections 1.3(a) and (b) and there has been no earlier disclosure of such
information to any other shareholder of the Company that is commercially
material.
1.4 SECURITIES FILINGS. The Company shall provide to each of the SAIF
Shareholders and VentureTech Shareholders, promptly after the filing thereof,
copies of any registration statement, preliminary prospectus, final prospectus,
application for listing or other material document publicly filed with any
securities regulatory authority or securities exchange in any jurisdiction. If
such
document is available on ▇▇▇▇▇ or any similar system accessible over the
Internet at the same time that it is publicly filed, no separate delivery of
such document shall be required.
1.5 FINANCIAL RECORDS AND INSPECTION. The Company shall keep proper books of
record and account, in which full and correct entries shall be made of all
financial transactions and assets and business of the Group Companies in
accordance with US GAAP consistently applied. Subject to applicable Requirements
of Law, for so long the SAIF Shareholder and VentureTech Shareholders
respectively own the Minimum Ownership percentage at such time as the Company is
no longer a reporting entity under the Securities Exchange Act of 1934 a SAIF
Shareholder and a VentureTech Shareholder and its authorized representatives
shall have the right (a) during normal business hours and at their expense to
inspect the Company's books and accounting records and those of the
Subsidiaries, to make extracts and copies therefrom at its own expense, and to
discuss its affairs, finances and accounts with their respective directors,
officers and independent accountants, and to have full access to all of the
Company's and each Subsidiary's property and assets, and (b) the Company shall
furnish to the SAIF Shareholders and the VentureTech Shareholders and their
auditors such financial and other information relating to the Business of the
Company and its Subsidiaries as any of them may reasonably require. The SAIF
Shareholders and the VentureTech Shareholders acknowledge and agree that such
information is subject to Section 9.3 and all Requirements of Law that may apply
to holders of confidential information of the Company.
1.6 DEALINGS WITH GOVERNMENT. Neither a Group Company nor any officer,
director, employee, of a Group Company acting on behalf of a Group Company shall
make, directly or indirectly, any payment or promise to pay, or gift or promise
to gift, or authorized such a promise or gift, of any money or anything of
value, directly or indirectly to:
(a) any foreign official for the purpose of influencing any such official
or inducing him or her to use his or her influence to affect any act or decision
of a foreign government, or any agency or subdivision thereof; or
(b) any political party or official thereof or candidate for political
office for the purpose of influencing any official act or decision of such
party, official or candidate or influencing such party, official or candidate to
use his, her or its influence to affect any act or decision of a government or
agency or subdivision thereof,
in the case of both (a) and (b) above, in order to assist a Group Company to
obtain or retain business for, or direct business to, a Group Company.
2
EXHIBIT B1
DEED OF ADHERENCE made on the [____________] day of, [____________]
BETWEEN:
(1) [____________], a company incorporated in [____________] (the
"COMPANY"); and
(2) [Name of New Shareholder] (the "NEW INVESTOR").
RECITALS:
(A) On [ ] day of _____________, the Company and the Shareholders entered
into a Shareholders Agreement (the "SHAREHOLDERS AGREEMENT") to which a form of
this Deed is attached as Exhibit B1.
(B) The New Investor wishes to have transferred to it [number] Equity Shares
(the "SHARES") in the capital of the Company from [name] (the "OLD INVESTOR")
and in accordance with the Shareholders Agreement has agreed to enter into this
Deed.
(C) The Company enters this Deed on behalf of itself and as agent for all the
existing Shareholders of the Company.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION. In this Deed, except as the context may otherwise require,
all words and expressions defined in the Shareholders Agreement shall have the
same meanings when used herein.
2. COVENANT. The New Investor hereby covenants to the Company as trustee for all
other persons who are at present or who may hereafter become bound by the
Shareholders Agreement, and to the Company itself to adhere to and be bound by
all the duties, burdens and obligations of a Shareholder holding the same class
of shares as the Shares imposed pursuant to the provisions of the Shareholders
Agreement and all documents expressed in writing to be supplemental or ancillary
thereto as if the New Investor had been an original party to the Shareholders
Agreement since the date thereof.
3. ENFORCEABILITY. Each existing Shareholder and the Company shall be entitled
to enforce the Shareholders Agreement against the New Investor, and the New
Investor shall, subject to the Shareholders Agreement, be entitled to all rights
and benefits of the Old Investor under the Shareholders Agreement (other than
those rights which the Shareholders Agreement provides shall not be held by a
transferee) under the Shareholders Agreement in each case as if the New Investor
had been an original party to the Shareholders Agreement since the date thereof.
4. GOVERNING LAW. THIS DEED OF ADHERENCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF INDIA.
IN WITNESS WHEREOF, this Deed of Adherence has been executed as a deed on the
date first above written.
[ ]
-------------------------------
By:
--------------------------------
Name:
Title:
[NAME OF NEW INVESTOR]
By:
--------------------------------
Name: [ ]
---------------
Title: [ ]
--------------
[ ]
-------------------------------
By:
--------------------------------
Name:
Title:
[NAME OF NEW INVESTOR]
By:
--------------------------------
Name: [ ]
-------------
Title: [ ]
-------------
2
EXHIBIT B2
DEED OF ADHERENCE made on the [____________] day of, [____________]
BETWEEN:
(1) [____________], a company incorporated in [____________] (the "COMPANY");
and
(2) [Name of New Shareholder] (the "NEW INVESTOR").
RECITALS:
(A) On [ ] day of [ ], the Company and the Shareholders entered into a
Shareholders Agreement (the "SHAREHOLDERS AGREEMENT") to which a form of this
Deed is attached as Exhibit B2.
(B) The New Investor wishes to be allotted [number] Equity Shares (the "SHARES")
in the capital of the Company and in accordance with Section 3.2 of the
Shareholders Agreement has agreed to enter into this Deed.
(C) The Company enters this Deed on behalf of itself and as agent for all the
existing Shareholders of the Company.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION. In this Deed, except as the context may otherwise require,
all words and expressions defined in the Shareholders Agreement shall have the
same meanings when used herein.
2. COVENANT. The New Investor hereby covenants to the Company as trustee for all
other persons who are at present or who may hereafter become bound by the
Shareholders Agreement, and to the Company itself to adhere to and be bound by
all the duties, burdens and obligations of a Shareholder holding the same class
of shares as the Shares imposed pursuant to the provisions of the Shareholders
Agreement and all documents expressed in writing to be supplemental or ancillary
thereto as if the New Investor had been an original party to the Shareholders
Agreement since the date thereof.
3. ENFORCEABILITY. Each existing Shareholder and the Company shall be entitled
to enforce the Shareholders Agreement against the New Investor, and the New
Investor shall, subject to the Shareholders Agreement, be entitled to all rights
and benefits of a holder of Shares in each case as if the New Investor had been
an original party to the Shareholders Agreement since the date thereof.
4. GOVERNING LAW. THIS DEED OF ADHERENCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF INDIA.
IN WITNESS WHEREOF, this Deed of Adherence has been executed as a deed on the
date first above written.
[ ]
------------------------------
By:
--------------------------------
Name:
Title:
[NAME OF NEW INVESTOR]
By:
--------------------------------
Name: [ ]
-------------
Title: [ ]
-------------
2