Shareholders Joint Venture Agreement - Communications Ventures India Pvt. Ltd. and Fusion Telecommunications International Inc.
SHAREHOLDERS JOINT VENTURE AGREEMENT
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This Agreement is made on this the 11th day of March 2000 between:
1. Communications Ventures India Pvt. Ltd., a Company organized and
existing under the laws of India and having its registered office at
B-115, Sarvodya Enclave, New Delhi - 110 017, India (the "HOLDING
COMPANY"):
2. and Fusion Telecommunications International Inc. a, corporation
organized and existing under the laws of the State of Delaware, U.S.A
and having its offices at 15 Exchange Place, Suite 530, Jersey City, NJ
07302, U.S.A. ("FUSION").
WHEREAS
A. Estel Communication Private Limited, a Company organized and
existing under the laws of India and having its registered
office at B-115, Sarvodya Enclave, New Delhi - 110017 (the
ESTEL") is a wholly owned and subsidiary of the HOLDING
COMPANY.
B. ESTEL has been granted by the Ministry of Communications
Government of India, a licence No. 820-184/99-LR dated 9th
June 1999 (the "Licence") to set up, establish and operate an
ISP operation including Earth Stations and Gateways as set out
in the Licence.
C. FUSION is engaged, inter alia, in the business of provision of
independent facilities based internet services including
establishment and operation of earth stations and gateways.
D. Parties have agreed to collaborate and to the participation of
FUSION in ESTEL with a view to emerging as a competitive
access and internet service provider in India.
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E. Pursuant to the foregoing the Parties wish to record their
agreement upon which ESTEL shall be managed and operated as a
jointly owned company and the Parties relationship therein;
and matters incidental thereto.
1 DEFINITIONS
1.1 As used in this Agreement the following terms shall have the respective
meanings set forth below:
(a) "Affiliate" of a Party shall mean a person which
(i) owns or controls a Party (directly or indirectly)
(ii) which is owned or controlled by a Party (directly or
indirectly)
(b) "Acquisition Project" means acquisition of business
undertaking owned by any Person and engaged in business
similar to that which ESTEL is authorized to undertake
pursuant hereto or which the parties may otherwise agree in
writing.
(c) "Audited Accounts" mean the auditors report and audited
accounts of ESTEL for any financial year of ESTEL.
(d) "Auditor' means such firm of Chartered Accountants as are
appointed statutory auditors of ESTEL for the time being.
(e) "Board" means the board of Directors of ESTEL.
(f) "Budget" means the annual operating budget of ESTEL as
approved and/or modified from time to time by the Board.
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(g) "Control" shall mean the power to elect a majority of the
Board of Directors (or governing body) of a person or the
direct or indirect ownership of more than half in nominal
value of its voting or equity share capital.
(h) "Directors" means the directors of ESTEL for the time being
and shall include their duly appointed alternates.
(i) "DOT" means Department of Telecommunications, Government of
India.
(j) "Encumbrance" means any mortgage, charge, lien, hypothecation,
pledge, or any other security interest or encumbrance.
(k) "Equity Capital" means the issued and paid up equity share
capital of ESTEL.
(l) "FIPB" means the Foreign Investment promotion Board of the
Government of India ("GOI").
(m) "Fair market Value" means in relation to any Shares of ESTEL,
the fair market value thereof certified by the Independent
Valuer (acting as expert and not arbitrator) on the following
assumptions and basis:
(i) that such Shares are the subject of an arm's length
sale between a willing vendor under no compulsion to
sell and a willing purchaser under no compulsion to
buy, each with full knowledge of all relevant facts
and on the footing that the control of ESTEL is with
the vendor;
(ii) that ESTEL shall at the time of such certification be
carrying on business as a going concern and will
continue to do so; and
(iii) that the available shares are capable of transfer
without restriction;
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If any difficulty shall arise in applying any of the
foregoing assumptions or basis then such difficulty
shall be resolved by the Independent Valuer in such
manner as it may in its absolute discretion deem fit.
(n) "Shares" mean the equity shares in the Equity Capital of ESTEL
(o) "System" shall mean ISP Network for the licence granted, as
described in recital (B) above.
1.2 Construction of certain references
Except as the context otherwise requires, references in this Agreement
to:
(i) any document on terms mutually agreed shall be to a document
in writing in the terms agreed between the Parties thereto and
signed by them or on their behalf by their duly authorised
representatives;
(ii) information means books, records or other information in any
form including in writing on paper, electronically stored
data, magnetic media, film and microfilm;
(iii) "this Agreement" shall be to this Agreement as from time to
time amended, modified or superseded and shall include its
Schedules.
(iv) a "Clause" or "Schedule" shall, unless otherwise stated, be to
a Clause or (as the case may be) Schedule of this Agreement.
(v) a time of day shall be to Indian time;
(vi) the words denoting singular shall include plural and vice
versa, and words denoting natural persons shall include firms,
partnerships, companies and other bodies corporate and
entities (whether or not having a separate legal entity);
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(vii) any agreement, consent, approval, authorisation, notice,
communication or information required under or pursuant to
this Agreement from or by any Party to the other of them shall
be valid and effectual only if it is in writing and under the
hands of duly authorised representative of such Party and not
otherwise; and
(viii) any reference to a statute or statutory provision shall
include such statute or provision as is from time to time
modified or re-enacted or consolidated so far as such
modification or re-enactment or consolidation applies or is
capable of applying to any transaction entered into hereunder
or pursuant hereto.
(ix) Headings are for convenience of reference only and shall be
ignored in the construction or interpretation of this
Agreement.
2. SUBSCRIPTION OF SHARES
2.1 At the date hereof the authorised share capital of ESTEL is Rs.1,00,000
divided into 10,000 shares of 10 Rupees each, of which the 20 Founder
Shares have been subscribed as under:
1. Mr. Raj Hajela 10 shares
2. Mrs. Suman Hajela 10 shares
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Upon closing each Party shall subscribe up to a maximum of number of
shares in ESTEL in cash indicated in the table below so that the
percentage shareholding in ESTEL upon such subscription is as
indicated:-
CAPITAL STRUCTURE FOR JOINT VENTURE - INVESTMENT AMOUNT
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Authorised Capital Rs.60,000,000
Paidup Capital Rs.56,941,170
Indian Holding Company - 51%
2,904,000 shares of Rs.10 each Rs.29,040,000
o Foreign Promoter (FUSION) - 49%
2,790,117 shares of Rs.10 each Rs.27,901,170
Share Premium (WILL GO TO GENERAL Rs.88,258,830
RESERVE ACCOUNT OF ESTEL )
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Fusion's Contribution Rs.116,160,000
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Total Shareholder's Fund Rs.145,200,000
2.2 FUSION will give an interest free loan of US Dollar one million to
ESTEL and the same will be converted into Equity Capital of ESTEL at a
future date when the capital of the Company is enhanced and FUSION is
called upto pay their 49% pro-rata contribution of Equity; this Clause
2.2 requires further approval of FUSION.
2.3 Each Party may seek third Party financing for its required capital
contributions provided that the Party retains "control" of the
financing vehicle.
2.4 ESTEL shall have an authorised Share Capital of Rs.60 millions and a
fully paid up share capital of Rs.56,941,170.
3. MEMORANDUM & ARTICLES OF ASSOCIATION OF ESTEL
Memorandum & Articles of Association of the ESTEL is currently in the
form shown in Appendix-2 and the Parties shall procure that the same be
amended as soon as possible after the date hereof to reflect the terms
and provisions of this Agreement to the extent permissible under
applicable Indian law. In the event of any conflict between the terms
of this Agreement and the memorandum & Articles of Association, then
the terms of this Agreement shall prevail as between the Parties and be
binding on them.
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4. MANAGEMENT OF ESTEL
4.1 ESTEL shall be managed by a Board of Directors appointed in accordance
with this Clause, read with Section 255 and 260 of the Companies Act.
The Board shall be responsible for the overall policy and the conduct
of the business, affairs and operations of ESTEL except to the extent
that applicable law, the Articles and this Agreement allocate
responsibility over any particular matter to any of its members or
officers or otherwise. The Board shall be entitled to delegate any of
its powers and functions to such of its committees or directors or to
such officers of ESTEL as may be deemed appropriate by the Board but
subject always to applicable laws and regulations, the Articles and
this Agreement. The number of Directors including the Chairman shall
not exceed 9 and shall not be less than 3.
4.2(a) HOLDING COMPANY shall be entitled to nominate the Chairman of the Board
and in addition 3 (three) Directors for a total of four (4). FUSION
shall be entitled to nominate four (4) Directors on the Board. No Party
other than HOLDING COMPANY and FUSION shall be entitled to nominate the
Directors on the Board unless their shareholding exceeds 15%. The Board
shall be entitled to appoint Additional Directors in accordance with
Section 260 of the Companies Act; provided that the respective votes of
the Directors appointed by each Party shall be in the same percentages
as that contemplated by the first sentence of this paragraph. Directors
need not be citizens or residents of India.
(b) Unless otherwise mutually agreed by the Parties and so long as HOLDING
COMANY and FUSION are Shareholders each together with its Affiliate and
Investor Affiliates holding not less than 15% of the issued and paidup
Equity Capital of ESTEL;
(i) each of them, shall be entitled to appoint one non-retiring
Director each with right to remove and replace or fill any
vacancy howsoever caused in their office by a communication in
writing to ESTEL;
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(ii) HOLDING COMANY and FUSION shall have the representation on the
Board in equal proportion.
(c) In the event either of HOLDING COMPANY or FUSION ceasing to hold 15% or
more of the issued and paidup Equity Capital of ESTEL, representation
of HOLDING COMANY and FUSION on the Board shall, subject to provisions
of Sub-Clause (d) below be in proportion to their respective share
holding in the issued and paidup Equity Capital.
(d) For the purposes of this Agreement the Share holding of HOLDING COMANY
or FUSION as the case may be shall mean the aggregate direct
shareholding of HOLDING COMANY or FUSION, as the case may be together
with the Share holding of its Affiliates and Investor Affiliate.
(e) In the event fractional entitlement under Sub-Clause (d) above if it is
equal to or more than 0.5 (zero point five) it shall be rounded up to
the nearest whole and if it is less than 0.5 (zero point five) it shall
be rounded down to the nearest whole.
(f) The Chairman shall be ex-officio Chairman of general meetings of ESTEL
in accordance with applicable provisions of the Act and the Articles of
Association. At all Board meetings if the Chairman be present he shall
preside, and in his absence the Managing Director shall be elected as
Chairman for that meeting and shall preside and in the absence of the
Managing Director, the Board may elect one of themselves to be the
Chairman for that meeting.
4.3 Subject to the provision of Clause 5 all decisions of the Board shall
be by majority vote.
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4.4 SENIOR MANAGEMENT
(a) HOLDING COMPANY shall be entitled to nominate the Managing Director of
ESTEL (the "MD") who shall be the Chief Executive Officer of ESTEL and
be delegated with such powers of day-to day running of ESTEL as the
Board may from time to time specify. FUSION shall be entitled to
nominate the Deputy Managing Director and the Chief Financial Officer
of ESTEL, who may at the option of FUSION be residents of India. The
terms of employment of all such appointees shall be determined by
mutual agreement of the HOLDING COMPANY and FUSION.
(b) Senior Managers and other direct reports of the MD in ESTEL ("Senior
Managers") shall be selected by the Executive Committee out of panel of
names proposed by the MD (minimum three) for each position.
(c) The MD shall be delegated by the Board adequate power and authority to
undertake, conduct and carryon the day to day management, business and
affairs of ESTEL and shall report to and function subject to the
supervision, direction and control of the Board. The Parties shall
procure that the Board delegates appropriate powers to the MD to
discharge his functions and duties.
(d) Senior Managers selected by the Executive Committee shall be appointed
by the MD and shall report to him. MD shall assign to the Senior
Managers their duties and functions.
4.5 The Secretary
(a) ESTEL shall have a Secretary as defined in the Companies Act. The
Executive Committee shall select the Secretary and recommend him to the
Board for appointment. The Board may appoint the person so recommended
as Secretary, if found suitable by it.
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(b) The responsibilities of the Secretary shall include compliances and
filings in accordance with the Companies Act and maintenance of
statutory records as required by the Companies Act.
(c) If any Party is not satisfied with the performance of the Secretary, it
shall be entitled to require his removal. On such requisition the
Parties shall cause their respective nominees on the Board to vote and
remove the Secretary from his office. In the event of such removal,
such person's replacement shall be appointed in accordance with the
procedure set out herein.
4.6 Nominee Director
(a) The right of nomination conferred on a Party hereunder shall include
the right to require the other Party to procure that the Board and
ESTEL shall remove at any time and from time to time from office such
person nominated by that Party as a Director and the right of that
Party at any time and from time to time to determine the period during
which such person shall hold the office of Director.
(b) Whenever a person ceases to be a Director or any vacancy shall occur in
his office for any reason whatsoever, the Party who had nominated him
shall be entitled to nominate forthwith another person for appointment
as Director in the vacancy so caused. The Parties shall procure the
appointment of such nominee as a Director.
4.7 Alternate Director
(a) Alternate Directors to be appointed for any nominee Director (the
"Original Director") of each Party shall be persons proposed by such
Party only and on such nomination the Parties shall cause their
respective nominee Directors to vote for and cause the Board to appoint
him as alternate Director for such Original Director. Such alternate
Director shall be entitled while holding office as such to receive
notices of meetings of the Board or any committee of the Board to which
such Director has been appointed and to attend and vote as a Director
at any such meetings of the Board or subject to provisions of Clause
4.10 at
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any such committee at which the Original Director is not present and
generally to exercise all the powers, rights, duties and authorities
and to perform all functions of the Original Director.
4.8 Sitting Fees
ESTEL may pay such sitting fees to Directors, not exceeding the maximum
permissible under the Companies Act, as may be determined by the Board.
In addition to or in substitution of the sitting fee Directors may be
paid commission not exceeding the maximum permissible under the
Companies Act. A Director shall in addition be entitled to receive such
remuneration for services performed for ESTEL not exceeding the maximum
permissible under the Companies Act.
4.9 Board Meetings and Resolutions
(a) The Board shall meet at such time or times and at such place or places
as it may deem appropriate provided at least one meeting of the Board
shall be held in each quarter.
(b) The Secretary shall as and when directed by the Chairman and/or the MD
or any Director call a meeting of the Board. Any Director may also
request the Chairman to call a meeting of the Board. Notice of every
Board meeting whether first convened or adjourned shall be sent to each
Director and his alternate so as to be received ordinarily not less
than 7 (seven) days before the day such meeting is scheduled to take
place unless such notice is waived.
(c) Except in emergent cases, (i) at least 7 (seven) days' written notice
shall be given to all Directors for convening a Board meeting; and (ii)
such notice shall be accompanied by an agenda of the matters to be
discussed. In the event the Chairman, the MD or any Director (acting
reasonably and in good faith) deems that circumstances exist which
require a meeting to be convened at shorter notice, the Chairman on his
own or at the request of such director direct the Secretary to call a
meeting of the Board as aforesaid at shorter notice.
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(d) Subject to the provisions of the Companies Act and Clause 5, a
resolution signed by a majority of the Directors for the time being
shall be valid and effectual as if it is a resolution passed at a
meeting of the Board of Directors duly convened and held. Any such
resolution may be contained in a single document or may consist of
several documents, all in like form. For the purposes of this Clause
"in writing" and "signed" shall include approval by facsimile.
4.10 Executive Committee
(a) The Board shall constitute a 2 (two) member Executive Committee of the
Board comprising of one nominee Director each of the HOLDING COMANY and
FUSION. It is agreed that normally no alternate Director shall be
permitted to participate in Executive Committee Meetings. However in
unavoidable circumstances alternate Directors may be allowed to
participate in place of original Directors with the consent of the
Parties.
(b) The Chairman of the Executive Committee will be on annual rotation
basis i.e. for first year HOLDING COMPANY nominee shall be the Chairman
of the Executive Committee and for following year FUSION nominee shall
be its Chairman and so on. Any member of the Executive Committee can
request the Chairman of the Executive Committee to convene a meeting of
Executive Committee and the Chairman of the Executive Committee shall
promptly convene a meeting but not later than 7 (seven) business days
of receipt of such request.
(c) The Executive Committee shall be generally responsible for,
finalisation of business plans and annual budgets, review of
operations, review of performance of personnel and HRD matters,
approval of general meeting notices etc. It shall also be responsible
for approval of appointment of the Secretary, Head (Operations), Head
(Marketing) and of such by disciplines (by whatever name called) as the
Parties may deem appropriate.
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(d) All matters to be put up to the Board and specified in Clauses 5.2 and
5.3 shall in the first instance be put up for consideration of the
Executive Committee. The Executive Committee shall also act as a forum
for inter-action and resolving all matters inter se between the
Parties.
(e) All decisions of the Executive Committee shall be by unanimous vote. In
the absence of unanimity in respect of any matter, the same shall be
referred to the Board for its decision.
(f) The Chairman of the Executive Committee shall be entitled to invite
such of the Senior Managers of ESTEL as he may determine.
4.11 Annual Budgets And Business Plans
During each Financial Year, the Board shall adopt an annual Budget for
the next Financial Year and a Business Plan for the succeeding two (2)
Financial Years. Each such annual Budget and Business Plan shall be
prepared under the direction and supervision of the MD and submitted to
the Executive Committee for its consideration. upon the approval
thereof by the Executive Committee or in the event of there being no
unanimity at the Executive Committee in respect thereof, the same shall
be submitted to the Board for its approval at least one (1) month prior
to the end of each Financial Year.
4.12 ESTEL shall not, under any circumstances, purport to oblige director(s)
of ESTEL to guarantee and/or indemnify any loan or other financial
facility of ESTEL which ESTEL seeks to obtain.
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5. DECISIONS OF ESTEL
5.1 The following decisions of ESTEL shall require an affirmative vote of
shareholders holding not less than 75% equity in aggregate of the share
capital of ESTEL at a meeting at which a quorum of shareholders
representing at least 75% of the shares of ESTEL and representatives of
HOLDING COMPANY and FUSION are present:-
(a) Amendments to the Memorandum & Articles of Associations
(including the issue of any new classes of shares or rights
attaching to shares).
(b) Winding up or dissolution of ESTEL
(c) Merger or amalgamation or reorganisation of ESTEL
(d) Any change in the authorised share capital of ESTEL or
preferential issue of Shares to any party or person.
5.2 Without prejudice to the specific powers which may be delegated by the
Board to the following decisions of ESTEL (the "Policy Matters") shall
not be taken unless supported by an Affirmative vote of at least 1(one)
nominee Director of HOLDING COMPANY and 1(one) nominee Director of
FUSION:
(i) Any change or modification in the rights of the Shareholders;
(ii) Any amendment to the Memorandum and/or Articles of Association
of ESTEL;
(iii) Any increase in authorized or issued Share capital of ESTEL;
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(iv) Any consolidation of or reduction in the Share capital of
ESTEL or creation of new classes of shares, whether voting or
non-voting;
(v) Any issue of debentures, bonds or other instrument convertible
into equity Shares by ESTEL;
(vi) Any proposal for placing of ESTEL in voluntary dissolution or
winding up;
(vii) Any proposal for amalgamation or merger of ESTEL with any
other company;
(viii) Any sale, lease or transfer of the whole or substantial part
of the Undertaking or assets of ESTEL;
(ix) the giving of any guarantee, indemnity or security in respect
of the obligations of any third party other than for the
business of ESTEL;
(x) taking of any loan or other borrowing carrying right or option
to convert whole or any part thereof or accrued interest
thereon into shares of ESTEL or conversion of any debt or
obligation of ESTEL into shares of ESTEL;
(xi) Any diversification or establishment of any subsidiary;
(xii) Investments in shares or securities of or loans or guarantees
to other firms, companies and bodies corporate and other
entities excluding guarantees to Governmental authorities for
tax/levy purposes or for the business of ESTEL;
(xiii) the entering into of any profit sharing, share option or
similar other scheme for the benefit of the officers or
employees of ESTEL or any material variation of any such
scheme;
(xiv) Grant of any option over any shares in the share capital of
ESTEL;
(xv) Entering into of any Contract with a Party or Affiliate of a
Party;
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(xvi) the entering into, termination or variation of any contract or
arrangement (whether legally binding or not) by ESTEL with a
Party or any company which is a Affiliate of any Party;
(xvii) Agreements or material transactions between ESTEL and any
Director or shareholder of ESTEL or an Affiliate of such
shareholder or any service contracts with any Party or its
Affiliate(s) for provision of any service or management
support or consultancy to ESTEL;
(xviii) Creation of any Encumbrance on the assets or Undertaking of
ESTEL in favour of any person other than banks and financial
institutions lending moneys for the business of ESTEL;
(xix) any material change in the nature of ESTEL's business as
carried on from time to time by ESTEL;
(xx) Change in the name of ESTEL;
(xxi) Sale or any disposition surrender or licensing or acquisition
(whether by purchase or licence) of any trade mark(s) or brand
names(s).
(xxii) appointing any Committee of Directors for any purpose;
(xxiii) Delegation by the Board of power to any Committee of the Board
or to any person in respect of any matter falling within the
scope of Clause 5.2.
(xxiv) The making of appropriations out of profits including the
distribution of dividends of ESTEL.
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(xxv) The acquisition by ESTEL of more than 20% of the share capital
of any OTHER company.
(xxvi) Entering into any joint venture or partnership by ESTEL.
(xxvii) The providing of loan facilities or financial guarantees to
other companies.
(xxviii) Any material change in ESTEL's business.
(xxix) Induction of any new partner into ESTEL.
(xxx) Any grant of any general increase in rates of pay or any
increase in total compensation (including bonuses) or other
remuneration to the Management staff of ESTEL .
5.3 No action or decision in respect of any of the following matters
("Special Matters") shall be valid and effective unless part of or
contemplated by an annual Budget or Business Plan or approved by a
resolution passed by the Board or any Committee thereof by majority of
the entire Board or Committee.
(i) entering into of any material contract (over a value of US$
150,000 or equivalent sum Indian Rupees) outside the ordinary
course of its business;
(ii) the incurring of any material expenditure or liability of a
capital or operating nature exceeding in aggregate US$_150,000
or equivalent sum in Indian Rupees outside the annual Budget
(including for this purpose the acquisition of any asset under
lease or hire purchase);
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(iii) Borrowings and creation of charge on the assets of ESTEL in
favour of lenders;
(iv) Any proposal to confess any judgment of a value in excess of
US$_150,000 or equivalent sum in Indian Rupees against ESTEL;
(v) approval of transfer of shares.
(vi) consenting to the assignment of, or the granting of options
over any debentures or other securities (other shares in the
capital) of ESTEL;
(vii) any delegation by the Board of any of its powers to a
committee of the Board or to any other person whatsoever save
except as otherwise expressly provided in this Agreement;
(viii) Approval of annual budgets and business plans;
(ix) commencement of any material (US$ 150,000 or equivalent sum in
Indian Rupees) legal or arbitration proceedings (other than
routine debt collection or claims of ESTEL against any vendor
or purchaser of goods from ESTEL);
(x) remuneration and terms of employment of Senior Managers.
5.4 In the event that any resolution proposed at a meeting of the Board or
any Committee thereof is not passed as a result of the operation of the
provisions of Clause 5.2, the matter shall be referred to ESTEL in
general meting and if passed as a special resolution, the same shall be
binding and effective notwithstanding anything to the contrary
contained herein.
5.5 Resolution by Circulation
Except as otherwise required by this Agreement, the Articles, or the
Companies Act, all resolutions and decisions of Directors shall be by
vote of a majority of the Directors at a duly convened meeting may also
be taken by a resolution by circulation signed by all or a
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majority of the Directors. Subject to the provisions of Clause 5.4,
Policy Matters set forth in Clause 5.2 above can be approved only by
the Board with the affirmative vote of at least one nominee Director
each of HOLDING COMANY and FUSION. No Director shall have a second or a
casting vote.
6. Any Party may if it so desires waive in part or in whole its right to
nominate a Director on the Board and the Board shall be deemed to be
properly constituted notwithstanding such non-nominations.
7. No business shall be transacted at any Board meeting unless a quorum is
present at the meeting. In the first instance the quorum for meetings
of the Board shall be at least one third of the Board including at
least one Director each nominated by the Parties hereto. A Director
represented by his alternate shall be deemed to be present for the
purpose of determining quorum. If within half an hour from the time
appointed for a meeting a quorum as aforesaid is not present, the
meeting shall stand adjourned to the same day in the next week at the
same time and place or to such other later day and at such other time
and place as the Directors may determine. If at such adjourned meeting
also, a quorum is not present, the meeting shall stand adjourned for
further half an hour and if the quorum as aforesaid is still not
present but the Directors present are at least one third of the Board,
they shall constitute a quorum Provided however, no matter referred to
in Clause 5.2 shall be considered at such adjourned meeting and the
business at such adjourned meeting shall be confined only to the
remaining items as specified in the agenda for such meeting and no
matter not forming part of the agenda circulated for the meeting shall
be considered at such adjourned Board meeting.
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8. ISSUE OF SHARE CAPITAL / FINANCING
8.1 In the event of any issue of share capital consequent upon an increase
of the authorised share capital of ESTEL the Board of Directors shall
notify HOLDING COMPANY and FUSION in writing and they shall have the
right to subscribe to the new shares in the proportion of their
respective shareholdings in ESTEL provided however that if one Parties
not exercise its right to subscribe for further share capital then the
other Party will have the right to subscribe for the shortfall in
accordance with Clause 8.3 below.
8.2. Rights Issue
Subject to the provisions of Clause 8.3:
8.2.1 In case of a Rights Issue of Shares ("Rights Issue") in
accordance with this Agreement, ESTEL shall offer Shares in
Rights Issue (the "Rights Shares") to the existing
shareholders in proportion to their existing share holding in
ESTEL. A Party shall be entitled to subscribe either itself to
its entitlement of such Rights shares or to renounce in favor
of its affiliates or Investor Affiliate as defined hereinafter
(who agree to be bound in writing by the terms of this
Agreement) or to any of the other Parties to subscribe to its
entitlement of such Rights Shares.
8.2.2 If a Party desires to get its entitlement of Rights Shares
(the "non-subscribing party") funded, it may renounce in favor
of any Banks, mutual funds and any other financiers (the
"Investor Affiliate") to subscribe to its entitlement of
Rights Shares (the "Loan Shares") provided (i) such Investor
Affiliate and the Non-Subscribing Party shall have entered
into a firm buy-back agreement whereby the Investor
Affiliate(s) has agreed to sell and the Non-Subscribing Party
has agreed to buy back such Loan Shares within a period not
exceeding 3 (three) years from the date of allotment of the
Loan Shares to such Investor Affiliate(s) by ESTEL (ii) the
Investor Affiliate(s) shall have executed a Deed of Adherence
in the form at Schedule "one" and (iii) the Investor
Affiliate(s) shall not be entitled to transfer,
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assign, sell or otherwise encumber or dispose off or transfer
such Loan Shares in any manner whatsoever during the said 3
(three) year period without giving to the other Parties the
right of first refusal in accordance with Clause 10 below.
During the said 3 (three) year period for so long as the
Investor Affiliate(s) holds the Loan Shares, for the purposes
of determining the rights of the Non-Subscribing Party under
this Agreement, the aggregate of the Shareholding of such
Non-Subscribing Party and Investor Affiliate(s) shall be
deemed to be the Share holding of such Non-Subscribing Party.
8.2 Should the Non-Subscribing Party fail to acquire the Loan Shares within
the 3 (three) year period referred to in Clause 1.2 above, unless
otherwise mutually agreed between the Parties, the Investor
Affiliate(s) shall be entitled to retain such Loan Shares in its own
right but subject always to the provisions of this Agreement including
Clause 8.4 below, and in such an event the Agreed Proportion shall be
adjusted by deduction of the Loan Shares so retained or sold to a
person other than the Non-Subscribing Party, and the rights of the
parties under this Agreement shall be adjusted accordingly.
8.3 Subscription to Additional Shares in Rights Issue. Notwithstanding
anything to the contrary contained in Clause 8.2 above if any of the
Parties shall fail to subscribe and pay or cause their Investor
Affiliate or Affiliates to subscribe and pay for any of the Rights
Shares offered to it in accordance with this Agreement (the "Rejected
Shares") within such period not being less than 60 (sixty) days from
the date of offer of Rights Shares by ESTEL as the Board may determine,
the following shall apply to the disposal of such Rejected Shares:
8.3.1 The Board shall offer the Rejected Shares to all the other
Shareholders (the "Other Shareholders") in proportion to their
respective Shareholding in ESTEL and such Shareholders shall
be entitled to subscribe to such Rejected Shares themselves,
or if such Shareholder is a Party to this Agreement, to cause
its Affiliates and Investor Affiliate(s), nominated in this
behalf by it and who agree(s) in writing to be
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bound by the terms of this Agreement, to subscribe to the same
within the period prescribed in this behalf by the Board.
8.3.2 The Other Shareholders receiving an offer pursuant to Clause
8.3.1 above shall be entitled to apply for issue and allotment
of additional shares i.e. for more Shares than the number of
Shares it is entitled in a Rights Issue on the basis of its
existing Share holding. In case of any Rejected Shares being
available after issue and allotment to the Other Shareholders
in proportion to their respective Share holding in ESTEL as on
the date of offer of Rejected Shares to them (the "Surplus
Shares"), such Surplus Shares shall be issued and allotted to
such of the Other Shareholders who had applied for additional
Shares in proportion to their existing Share holding as on the
date of offer pursuant to Clause 8.3.1.
8.3.3 Any Rejected Shares, not accepted by any Share holders and/or
their respective Investor Affiliate and/or Affiliates, may be
offered by the Board to any third party or parties on terms no
more favorable than those offered to the other Shareholders
or, in the alternative, the Board may in its discretion decide
to seek listing of Shares of ESTEL on one or more Stock
exchanges in India and/or abroad. In such an event the
provisions of Clause 8B shall apply.
8.3.4 For the purposes of Clauses 8.2,8.3 and 8.4 any offer to the
Shareholders to subscribe to any Shares must be made in
writing by the Board. Any Party or its Investor Affiliate(s)
and/or Affiliates, nominated in this behalf by such Party,
wishing to accept such offer from the Board must do so by
giving notice in writing and which notice must be received by
the Board no later than 30 (thirty) days after the date the
offer was made by the Board.
8.4 Additional Issue in Agreed Proportions. Unless otherwise agreed by the
Parties in writing, any additional issue of Shares by ESTEL in its
Equity Capital (other than a Rights Issue) shall be offered and issued
to the Parties in proportion to their shareholding (the "Agreed
Proportions").
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8A. Acquisitions
8A.1 Acquisition Funding and Shareholder Loan Ratios
8A.1.1 Any Shareholder loans by any Party to ESTEL will, except for
loans by FUSION alone in respect of Acquisition Project in
cases where HOLDING COMANY elects not to invest and FUSION has
lent to ESTEL such loan, rank pari-passu with the equity in
the event of insolvency of ESTEL; provided that FUSION loans
have a higher priority than the equity in the event of
insolvency of ESTEL. In case of Shareholder loans by FUSION
alone in respect of any Acquisition Projects, repayment of
such FUSION loan and interest and other outgoings in respect
thereof shall be by ESTEL alone and HOLDING COMANY or other
Shareholders shall have no liability or obligation in respect
thereof.
8A.1.2 In case of any opportunity for acquisitions of any Acquisition
Project the provisions of Clause 8A.4 shall apply. Upon the
Board deciding to proceed with any Acquisition Project, the
Board shall determine the investment amount for such
acquisition (the "Investment Amount"). For this purpose,
unless HOLDING COMANY electing not to participate in any
particular Acquisition Project, investments and specifically
designated loans will be made to ESTEL by FUSION and HOLDING
COMANY in the ratio of their respective Shareholding. In the
event of ESTEL proceeding with a Acquisition Project and
HOLDING COMANY electing not to invest in a particular
Acquisition Project, FUSION and the HOLDING COMANY will be
entitled to invest and provide Shareholder Loans bearing
interest at the rates not exceeding the State Bank of India
Prime Lending Rate then prevailing in India. In the event of
HOLDING COMANY not investing in the Shares issued for funding
any Acquisition Project, the provisions of Clauses 8.2 and 8.3
shall apply.
8A.2 Except as may otherwise expressly provided in this Agreement, no
Shareholder shall be obliged to subscribe for additional Shares or
provide Shareholder Loans to ESTEL in excess of the Investment Amount.
8A.3 The Parties acknowledge that it is neither necessary nor incumbent upon
them to agree on participation in any Acquisition project.
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8A.4 The following shall apply for participation of the parties in any
Acquisition Project:
(i) Whichever Party has identified any Acquisition Project, it
shall submit details of such Acquisition Project together with
the amount of investment estimated to be required to be made
by ESTEL for its participation in the Acquisition Project and
shall furnish to the other parties all such reasonable
clarifications as it may require;
(ii) The Parties shall within 60 days of the receipt of the
details/information pursuant to sub-paragraph (i) above,
communicate to ESTEL and to each other about their intent to
participate in the Acquisition Project.
(iii) If all the Parties decide to participate in Acquisition
Project, the Board shall determine and approve the Investment
Amount, and Parties shall invest in Share capital and if
required provide the Shareholders Loans to ESTEL for such
acquisition in agreed proportions.
(iv) If any of the Parties decide not to participate in and invest
in any Acquisition Project and the other parties decide to
participate and invest in such Acquisition Project, the
funding for the investment by ESTEL in such Acquisition
Project shall be provided by such parties to ESTEL through
additional investment in Shares and provision of Shareholder
Loans and in such an event Parties not participating in such
Acquisition Project may be diluted to the extent of non
subscription by it.
8A.5 Parties agree to contribute the Investment Amount for the Acquisition
Project(s) through ESTEL if they have agreed for participation, in the
agreed proportions.
8A.6 To the extent that raising any debt determined to be necessary for
funding any investment by ESTEL in any Acquisition Project, which the
Parties have agreed to fund or FUSION alone is funding, as the case may
be, requires guarantees of or other security from the Shareholders, the
same shall severally provided by the Parties where all of them are
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participating, and by FUSION only in case of Acquisition Project where
FUSION alone is participating, as the case may be. Prior to approving
or authorizing any debt or equity financing by ESTEL shall provide to
the Shareholders with all relevant documentation in respect of such
financing so that each of them may approve of the terms thereof.
8B. Listing of Shares on Stock Exchanges
8B.1 Circumstances for Listing
In the event of
8B.1.1 the Parties agreeing and the Board deciding in accordance with
the provisions of Clause 8.3 to seek listing of the shares on
one or more Stock Exchanges in India or listing abroad.
the provisions of Clause 8B.2 shall apply.
8B.2 Effect of decision to List the Shares In the event:
8B.2.1 The Parties mutually agree to seek listing of Shares for any
reason other than those setforth in Clauses 8B.1.2, and
8B.1.3, the Parties shall cause ESTEL to issue and offer such
number of additional shares as may be necessary to list the
Shares of ESTEL on one or more Stock Exchanges in India and/or
abroad in accordance with applicable laws and regulations and
to make public offer thereof for subscription at Fair Market
value determined by a Independent Valuer selected jointly by
HOLDING COMANY and FUSION.
8B.2.2 In the event of the Shares being required to be listed for the
reason setforth in Clause 8B.1.2 above, the Shares held by the
Selling Member not being less than the minimum number required
for securing listing on a Stock Exchange shall be offered by
such Selling Member to public for sale at such value as the
Selling Member may determine.
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8B.2.3 In the event of the Shares being required by the Board to be
listed for the reason setforth in Clause 8B.1.3, the Board
shall offer the Shares available pursuant to Clause 8.3 above
for subscription to public provided the number of Shares so
available are sufficient to meet the minimum number required
under applicable laws and regulation to secure listing of the
Shares on one or more Stock Exchanges in India and/or abroad.
8B.2.4 The Board shall determine the Stock Exchange or Exchanges on
which shall seek listing of its shares and shall offer the
shares, required to be offered for securing such listing, to
public through prospectus in accordance with the procedure
prescribed, and the applicable laws and regulations, for cash
at par or such premium as the Board may in its sole discretion
determine save and except in case of offer for the reason
setforth in Clause 8B.1.2 above, in which case, subject to
applicable regulations, the offer price shall be as determined
by the Selling Party.
8B.2.5 Costs of all public offer of Shares pursuant to this Clause
8B.2 shall be met and be borne by ESTEL
8B.3 Book Building for Listing
For the purposes of seeking listing of Shares of ESTEL on one or more
Stock Exchange(s) pursuant to this Agreement, the Parties agree to
cause (subject to it being feasible under applicable regulations) the
Board and ESTEL to undertake the same through book building process in
accordance with the applicable regulations and to seek listing of
Shares through such book building process not later than 3 (three)
months from the date the Board determines or the parties agree or a
Party requires listing, as the case may be, in accordance with the
provisions of this Agreement.
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8B.4 Amendment to the Articles for Listing
The Parties agree and covenant that in the event of shares of ESTEL
being required to be listed in one or more Stock Exchanges pursuant to
any provision of this Agreement, the Parties shall cause ESTEL to amend
its Articles to the extent necessary and required to permit listing of
the shares of ESTEL and to facilitate offer of Shares to public for the
said purpose. Parties agree to do all such acts, deeds and things as
may be necessary or required or incidental to secure listing of shares
of ESTEL on one or more Stock Exchanges in India and/or abroad
including for offer of shares to public for the purpose.
9. NON-COMPETITION
9.1 Each Party undertakes that so long as this agreement subsists they will
not enter into any business directly competing with the business of
ESTEL.
9.2 HAJELA is trying to develop a project for Domestic Long Distance High
Speed Digital Optical Fibre Backbone and over a period of time may
develop other Telecommunication Service Projects. During the period
that FUSION or its designee continues to hold at least 25% shareholding
in ESTEL HAJELA shall offer FUSION a right of first refusal with
respect to such license or telecommunications opportunity in India on
mutually agreed terms.
10. TRANSFER OF SHARES
10.1(a) No Party shall nor permit its Affiliates and Investor Affiliate to
sell, transfer, assign, gift or otherwise dispose of its shareholding
in ESTEL except in accordance with the provisions of this clause 10 or
as may otherwise be expressly provided elsewhere in this Agreement.
(b) A party and its Affiliate and Investor Affiliates may assign, or create
any Encumbrance on all or any of the Shares held by it/them in favor of
any financial institution or other lenders (the "Encumbrance Holder")
provided it is a term of such Encumbrance that the
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Encumbrance Holder thereof shall be bound by the terms of this
Agreement and in the event of any sale of any of the Shares which are
subject to any Encumbrance (the "Encumbered Shares") by such
encumbrance Holder, the same shall be deemed to be a sale by the Party
or its Affiliate or Investor Affiliate, as the case may be, who has
created such Encumbrance and shall always be subject to the right of
first refusal of the Remaining party under and in accordance with
Clauses 6.3 and 6.4.
(c) Parties covenant that they shall abide by the provisions of this
Agreement and agree and undertake that they shall cause ESTEL to not
register any transfer of Shares in contravention of any provision of
this Agreement.
10.2 Right of First Refusal.
subject to Clause 10.4 below, in the event of any Party or their
respective Investor Affiliate(s) or Affiliates holding Shares in the
Equity Capital desiring to sell or dispose of its/their share holding
in ESTEL, it shall give to the other of them the right of first refusal
in the manner as provided in Clause 10.3 hereinafter. If on account of
applicable laws or regulations any Party or its Affiliate are unable to
acquire shares so offered to it, such Party will be entitled to
designate a person of its choice to whom the shares in whole or in part
shall be transferred.
10.3 procedure for Exercise of Right of First Refusal.
(a) Subject to Clauses 10.1(b) and 10.4 neither FUSION and/or its
Investor Affiliate and/or Affiliates nor HOLDING COMANY and/or
its Affiliates and/or Investor Affiliate (the "Selling
Member") shall sell, transfer, gift, or otherwise dispose of
in any way or manner any of its Shares until (i) it has
delivered to ESTEL and to the other of them (the "Remaining
Parties") an irrevocable written offer to sell all or part of
its share holding (the "offer") in ESTEL ("Sale Shares") at a
price (the "Offer Price") stated in the offer and (ii) the
Remaining Parties shall have failed to accept the offer for
all of the Sale Shares within 90 (ninety) days after the
receipt
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of the offer. The Remaining Parties or such of them as accept
the offer as the case may be, (the "Remaining Party") shall
convey its acceptance, if any, to the Selling Member within 90
(ninety) days of receipt of the offer by it. If the Remaining
Party accepts the offer but does not agree to the Offer Price
and the Selling Member and the Remaining Party are unable to
mutually agree on the sale price within 60 (sixty) days of the
date of acceptance of the Offer by the Remaining Party, the
Selling Member shall be obliged to sell all the Sale shares to
a third Party selected by the Remaining Party at the Offer
Price and if the Remaining Party shall fail to procure any
third party to purchase the Sale Shares within 30 (thirty)
days of its failure to accept the Offer Price or to mutually
agree on the sale price with the Selling member, which ever is
later, the Selling Member shall be entitled to sell the Sale
Shares (i) to any third party at price and on terms not more
favorable than those setforth in the offer, or (ii) in its
discretion, sell on a Stock Exchange in India or abroad the
Sale Shares together with such further Shares from its Share
holding in ESTEL as is necessary or required to secure listing
of ESTEL's Shares on Stock Exchange(s) in India or abroad or
such additional Shares from its Share holding as the Selling
Member may deem appropriate. If the Selling Member shall fail
to sell the Sale Shares to a third party within 90 days of the
Remaining Party's failure to procure any third party to
purchase the Sale Shares, the Selling Member shall not be
entitled to sell the Sale Shares to any third party without
first offering the Sale Shares again to the Remaining Member
and following the procedure seforth in this clause 10.3(a). In
the event of the Selling Member deciding to sell the Sale
Shares on the Stock Exchange as setforth in the immediately
preceding sentence, the parties shall cause ESTEL to do all
such acts, deeds and things as are necessary under applicable
regulations including amendments to the articles to enable
such sale on the Stock Exchange(s) and the listing of the
Shares thereon. In case both the Remaining Parties shall
accept the Offer, they shall entitled to purchase the Sale
Shares in proportion to their Existing Shareholding and to
exercise the rights conferred by this Clause 10.3 in respect
of such Sales Shares to which they are entitled,
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provided however if one of the Remaining parties accepts the
offer but does not agree on the Offer Price and the other of
them accepts the Offer Price, then in that event the Sale
Shares to which the Remaining Party accepting the Offer but
not accepting the Offer Price is entitled shall be offered to
the Remaining Party which has accepted the Offer Price,
notwithstanding anything to the contrary contained
hereinabove.
(b) In the event of Selling Member exercising pursuant to
sub-clause (a) above the option to sell the whole or any part
of its Share holding on Stock Exchange and provided the Shares
proposed to be offered for sale to public by the Selling
Member are sufficient in number to secure listing of ESTEL's
Shares on Stock Exchange(s), the provisions of clause 5 shall
apply.
(c) Parties shall cause ESTEL to take all procedural steps
necessary for making such sale by public offer on Stock
Exchange(s) pursuant to and in accordance with Clause 10.3(a)
read with Clause 5 expeditiously.
(d) On acceptance of the Offer, within 60 days thereof the sale
and purchase of the Sale Shares shall take place (the
"Completion"). At the Completion the Remaining Party shall pay
or cause the person or persons nominated by it to purchase and
pay the Offer Price for the Sale Shares in full in cash
against delivery of the Sale Shares together with such number
of duly executed share transfer deeds (with name of the
Transferee left blank) as the Remaining Member or its such
nominee may require.
(e) if the transfer of the Sale Shares requires any consent or
approval or notice, the period prescribed for Closing under
sub-clause (d) above shall be extended to the earlier of (i)
the date when the requisite consents/approvals are obtained
and/or expiry of the notice period, or (ii) the end of the 3
(three) calendar months immediately following the month in
which the Remaining Member conveyed its
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irrevocable written acceptance of the offer in accordance with
sub-clause (a) above. If within the said 3 (three) month
period described in the immediately preceding sentence the
Selling Member or the Remaining Member, as the case may be, is
unable to obtain any requisite consent/approval for transfer
or purchase of the Sale Shares and provided notice period, if
any, prescribed under any applicable regulations has expired,
the Selling Member's irrevocable written offer to sell the
Sale Shares shall, unless extended by mutual agreement of the
Parties, be deemed to have expired and the Selling Member
shall not be entitled to transfer the Shares to any person
except by again making an irrevocable written offer under and
in accordance with sub-clause (a) above.
10.4 Consequences of Sale Shares in contravention of the Agreement.
If any person purports to acquire any of the Shares, or any interest
therein, in a manner not specifically permitted by this Agreement (the
"Default Shares"), whether by operation of law or by voluntary act or
otherwise, the Remaining Party or any person(s) nominated by the
Remaining Party shall have the right, but not the obligation, to
purchase any or all of the Default Shares purported to have been thus
acquired, at lower of (i) the Fair Market Value minus 20% thereof, or
(ii) the apparent consideration paid therefor, However, the failure of
the Remaining Party to purchase the Default Shares at lower of the Fair
Market Value minus 20% thereof or the apparent consideration paid
therefor shall not be deemed or construed to validate the purported
transfer of the Default Shares in violation of this Agreement, which
purported transfer shall be null and void. As used in this Clause 10.4,
"Fair Market Value" shall mean fair value of Shares in question
determined by an Independent Valuer selected by the Board. Fair Market
Value so determined shall be final, conclusive, and binding on ESTEL,
the Parties and the person(s) purporting to have acquired the Default
Shares in violation of this Agreement, and their respective successors
in interest.
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10.5 Transfer to Affiliate etc.
Provisions of Clauses 10.1,10.2,10.3 and 10.4 above shall not apply to
any transfer of Shares inter-se between a Party and its Affiliate
and/or Investor Affiliates or inter se between its Affiliate and/or
between Investor Affiliates and Affiliate who have agreed to be bound
by the terms of this Agreement and the same shall not be subject to the
right of preemption and first refusal contained therein and no such
transfer shall be deemed to be nor shall it constitute a breach of this
Agreement. Notwithstanding anything in Clause 10 above the Parties
shall have the right to transfer its shares to a company which is
majority controlled by such Party ("Controlled Transferee") subject to
the prior written consent of the other Party. Such consent shall not be
unreasonably withheld subject to the conditions that prior to any such
transfer the controlled Transferee shall agree to be bound by the
provisions of this agreement and the Controlled Transferee and the
Original Party shall enter into a covenant with ESTEL and the other
Parties under which the shares in ESTEL held by the Controlled
Transferee shall automatically by re-transferred to the Original Party
if the Controlled Transferee ceases to be majority controlled by the
Original Party.
10.6 Consequences of Sales of Affiliate etc. holding Shares
Notwithstanding anything to the contrary contained in this Agreement a
party shall, before transferring to any third party its Share holding
or control in an Affiliate holding any Shares, cause such Affiliate to
transfer or otherwise assign its right, title and interest in the
shares to itself or to any other Affiliate who agrees in writing to be
bound by the terms of this Agreement. In the event of a Party
transferring to any third party its share holding or control in such
Affiliate in contravention of this clause 10.6 and such contravention
is not remedied by such defaulting Party within 30 days of the date of
receipt of notice in this behalf from any of the other parties, the
provision of Clause 10.4 shall apply to the shares of ESTEL held by
such Affiliate.
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10.7 Where FUSION exercises its rights pursuant to this clause, the payment
for and transfer of shares in ESTEL shall be made only after all
necessary Government approvals are obtained and HOLDING COMPANY will
render all necessary assistance required for obtaining such approvals.
No transfer of shares in ESTEL by any Party shall take place unless
proper procedure as per investment approval procedure or under the
Licence has been fully complied with. Subject to this, the full payment
must be made within 30 days of receipt of the aforesaid approvals
(unless the Parties agree otherwise).
10.8 No Party shall acquire through market purchases (whether directly or
indirectly through a company controlled by such Party) any shares in
ESTEL which may be listed in the Stock Exchange.
10.9 Notwithstanding the mutual right of disinvestment defined here above,
in the event of HOLDING COMPANY wishing to disinvest, FUSION together
with HOLDING COMPANY may jointly find a buyer(s) or go public for the
entire shareholding of the two partners.
10.10 All the provisions regarding transfer of shares will subject to
applicable law and regulations continue to be applicable in the event
of ESTEL becoming a public company quoted on the stock exchanges
11. ARMS LENGTH TRANSACTIONS
11.1 It is the intention of the Parties that they shall have a preferential
opportunity to enter into contracts with ESTEL to provide services or
material including expert and technical advice, in connection with the
deployment and operation of the business in accordance with ESTEL's
needs. Notwithstanding anything to the contrary in this Agreement all
contracts between ESTEL and the Parties and their Affiliates shall be
conducted on an arms length basis on normal commercial terms and
prices.
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11.2 The Parties acknowledge that their respective rights in ESTEL shall be
regulated by this Agreement and the Articles and agree and undertake to
be bound by and comply with the provisions of this Agreement and the
Articles. The Parties shall procure that ESTEL acts in accordance with
this Agreement and the Articles and that the business of ESTEL is
confined to the Business in accordance with the Business Plans and
Budgets.
11.3 The Parties shall at all times respectively endeavor to the best of
their ability to promote the Business of ESTEL.
11.4 The Business of ESTEL shall at all times be conducted independently
from the business of the Parties, but subject thereto ESTEL may in its
discretion transact business with any of the Parties, including the
purchase of goods and/or provision of services supplied by any of the
Parties provided such goods or services are supplied on terms mutually
agreed between the HOLDING COMPANY and FUSION and are competitive.
11.5 Except as Parties may otherwise agree in writing or save as otherwise
provided or contemplated in this Agreement or in the Business Plan
and/or Budget, Parties shall exercise their rights and powers in
relation to ESTEL so as to ensure and procure that:
(a) ESTEL carries on and conducts its Business and affairs in a
proper and efficient manner and for its own benefit and in
accordance with the Business Plan and Budget;
(b) save as may be agreed between the HOLDING COMPANY and FUSION,
shall not enter into any agreement or arrangement with any
Party or its Affiliate restricting its competitive freedom to
take goods and services by such means and from such persons
and on such terms as it may think fit;
(c) the Business of ESTEL shall be carried on pursuant to policies
laid down from time to time by the Board;
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(d) ESTEL shall maintain adequate insurance against all risks
usually insured against by companies carrying on same or
similar business and (without prejudice to the generality of
the foregoing) for the full replacement or reinstatement value
of all its assets of an insurable value;
(e) ESTEL shall keep proper books of account and therein make true
and fair entries of all its dealings and transactions of and
in relation to its business so as to give true and fair view
of the business and affairs of ESTEL;
(f) ESTEL shall adopt such accounting policies consistent with the
Companies Act as may from time to time be generally acceptable
in India;
(g) ESTEL will provide to the Parties or to their respective
designated nominees on the Board within 4 weeks after the end
of each month with unaudited management accounts for such
month, and such other data and information regarding its
business and operations as may reasonably be requested by
them;
(h) ESTEL shall prepare such accounts in respect of each
accounting reference period and Financial year as are required
by statute and applicable regulations and procure that such
accounts are audited as soon as practicable and in any event
not later than the period permitted under the relevant
statute; and
(i) ESTEL will use its best endeavors to maintain in force and
effect the Operating Licences and such other approvals,
consents or licenses as may be required for carrying on its
business.
11.6 Furnishing of Financial Guarantees to DOT. The Parties agree to provide
to ESTEL all information and documentation reasonably necessary for the
preparation and submission of applications as required to the DOT for
grant of such other and further licences as ESTEL may require for its
business. Parties agree that if ESTEL is required to provide to the DOT
or any other GOI agency for grant of such licenses any financial or
bank guarantees, they shall endeavour that ESTEL provides the same from
its own resources
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provided however if ESTEL be not in a position to provide the same, the
Parties shall provide to ESTEL guarantees of payment to the extent of
each Party's proportionate economic interest in ESTEL so as to enable
it to provide the required financial or bank guarantees to DOT.
12. CO-OPERATION & AGREEMENTS WITH SHAREHOLDERS
12.1 Each of the Parties agree with to co-operate and exercise their rights
and do everything within their powers, including giving directions to
their appointed Directors and voting at general meetings of ESTEL to
procure that full effect to the spirit and intent of this Agreement is
given and to co-operate with each other to develop and promote the
business, of ESTEL.
12.2 Unless otherwise agreed to by HOLDING COMPANY and FUSION in writing in
each instance, HOLDING COMPANY and FUSION respectively shall not be
obliged to contribute any additional equity or provide any loan or
credit facility in ESTEL. If any additional capital is required HOLDING
COMPANY and FUSION will mutually decide to invite Additional Partner(s)
in terms of the provision of clause 5.2 (k) of this agreement.
12.3 The Parties agree that ESTEL's books and records shall be maintained as
per accounting standard prescribed under Indian Laws. Such accounts
shall also separately be reconciled to Generally Accepted Accounting
Principles in the United States and the Regulations of the U.S.
Securities and Exchange Commission to the extent consistent with
applicable Indian laws.
12.4 The auditors ESTEL shall be Price Waterhouse Coopers or, Deloitte &
Touche (or another internationally recognized auditing firm mutually
agreed by HOLDING COMPANY and FUSION), and an Indian audit firm,
recommended by HOLDING COMPANY, will also be taken as the co-auditors
of the Joint Venture.
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13. CONFIDENTIALITY
13.1 The Parties agree that all information, data and material whether
relating to the financial, technical, marketing or other matters
disclosed by any Party to any other Party ("Confidential information")
whether pursuant to this Agreement or otherwise is confidential. Such
information, data or other material shall not be utilised for any
purpose save for which it was disclosed except with prior written
consent of the disclosing Party and after complying with such
conditions as the disclosing Party may require in relation thereto.
13.2 The Parties shall keep the existence and contents of this Agreement
confidential except to their employees, directors and professional
advisors and those of their and those of their Affiliates and Investor
Affiliate who have a need to know or except as may be necessary to
select and secure the participation of other Parties, to professional
advisors or for performance or exercise of any of their obligations or
rights hereunder or for enforcement of this Agreement or as may
otherwise be required by law.
13.3 Each Party shall ensure that its employees and all other persons
involved in the application shall comply with the confidentiality
obligations contained in this clause.
13.4 The confidentiality obligations contained in this clause will survive
termination of this agreement.
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13.5 Notwithstanding anything to the contrary, this clause shall not apply
to information:-
(a) Which is in the public domain or becomes public knowledge
without the default of the receiving Party; or
(b) Was already known by the receiving Party prior to the date of
its receipt from the disclosing Party; or
(c) Is obtained by the receiving Party from a bonafide third Party
having free right of disposal of such information.
13.6 A Director shall be entitled to inform the Party appointing him of all
matters concerning ESTEL affairs. Each Director and each Party
receiving confidential or proprietary information regarding the affairs
of ESTEL, or any other shareholders, undertakes to keep such
information confidential and shall not use or disclose any confidential
information belonging to ESTEL to another shareholder or person for any
unauthorised purpose and shall take all reasonable precautions for the
safe custody of such confidential information for so long as it shall
remain confidential or proprietary.
14. TERMINATION AND REMEDIES FOR BREACH
14.1 This agreement may be terminated
(a) If so agreed in writing by all of the Parties hereto; or
(b) by a Party hereto if the other party (the "Defaulting Party"):
(i) shall fail to observe or perform or is in breach of
any of its material obligations under this agreement,
and fails to remedy the same within 60 days of
receipt of written notification in respect thereof
from the non-defaulting Party; or
(ii) is ordered to be wound-up or files for composition
with its creditors or seeks its dissolution or
windingup, other than for merger or amalgamation.
14.2 Upon termination of this Agreement or in accordance with Clause 14.1
(b) the following shall apply:-
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(a) The defaulting Party shall be liable to compensate ESTEL and the
non-defaulting Parties for any and all damage incurred by them as a
result of such default and/or such termination. The defaulting Party
shall not be entitled to dispose of its shares save as in accordance
with the provision of this agreement.
(b) Notwithstanding such termination of this agreement, the defaulting
Party shall not be discharged from any antecedent obligations or
liabilities to the other Party and/or ESTEL under this agreement unless
otherwise agreed to by such other Party or ESTEL, as the case may be in
writing.
14A. DURATION
14A.1 Consequences if Minimum Shareholding falls below 10%. In case the
voting Share holding of HOLDING COMANY or FUSION, as the case may be,
falls below 10% of the voting share capital of ESTEL, then such party
shall only have the right to appoint Directors on the Board of ESTEL in
proportion to its share holding but shall, cease to have any other
right or privilege whatsoever under this Agreement including right of
nomination of a member to the Executive Committee or affirmative vote
right under Clause 5.2 above.
14A.2 Consequences if Minimum Shareholding falls below 7.5%. In case the
voting share holding of HOLDING COMANY or FUSION, as the case may be,
falls below 7.5% of the voting share capital of ESTEL, then either of
them shall have the right to terminate this Agreement by communication
in writing to the other Party provided however the obligation under
provisions of Clause 5 shall survive such termination. Further in such
an event such Party will procure its nominee Directors to tender their
resignations from their respective offices as Directors of ESTEL
forthwith without any claim for compensation for loss of office or
otherwise except for salary (if any) and any other entitlements which
may have accrued upto the date of their resignation.
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14A.3 Computation of Shareholding. For the purposes of this Clause 14A the
Share holding of a party shall be determined in accordance with Clause
9.3(c) above.
14B. Tag along rights
14B.1 Tag-Along Sales.
(a) Subject to Clause 14B.2, in the event that a party hereto
directly or indirectly at any time or from time to time,
enters into an agreement (whether oral or written) to transfer
Shares (the "Existing party") to any Person other than a
stockholder of ESTEL (a "Third Party") which when taken
together with all prior transfers of Shares exceeds 5% (five
percent) of the then outstanding Shares (a "Tag-Along Sale"),
then the other remaining party (the "Other Party') shall have
the right, but not the obligation, to participate in such
Tag-Along Sale.
(b) Existing Party shall not consummate a Tag-Along Sale unless:
(i) it shall have given to the Other Party ("Tag Along
Shareholders") an opportunity to exercise the right
of first refusal described in Clause 10; and
(ii) the terms of such Tag Along-Sale shall include an
offer by the prospective purchaser or Existing party
to all Tag-Along Shareholders to purchase the Shares
held by such Tag- Along Shareholders at the same
price, and on the same terms and conditions offered
to Existing Party. The Third Party shall offer to
purchase from Tag - Along Shareholders the number of
Shares owned by such Tag-Along Shareholders equaling
the number derived by multiplying the total number of
Shares to be purchased by the Third Party by a
fraction, the numerator of which is the total number
of Shares in the issued and subscribed Equity Capital
of ESTEL owned by the Tag-Along Shareholders that
such Tag-Along Shareholders desire to require the
Third Party to purchase and the denominator of which
is the total number of ESTEL Shares then outstanding.
(c) Tag-Along Procedures.
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(i) At the time the Existing Party proposes to transfer
any Shares in a Tag-Along Sale subject to this
Section, it shall notify, or cause to be notified,
all Tag-Along Shareholders in writing of each such
proposed transfer. Such notice shall set forth: (i)
the name and address of the Third Party and the
number of ESTEL Shares proposed to be transferred,
(ii) the proposed amount and form of consideration
and terms and conditions of payment offered by the
Third Party (the "Third Party Terms") and (iii) that
the Third Party has been informed of the tag-along
right provided for in this Clause 14B, and has agreed
to, purchase Shares in accordance with the terms of
this Clause 14B; and
(ii) The tag-along right may be exercised by the Tag-Along
Shareholders by delivery of a written notice to the
Existing Party proposing the Tag-Along Sale (the
"Tag-Along Notice") within thirty (30) days following
receipt of the notice specified in the preceding
clause. The Tag-Along Notice shall state the number
of ESTEL Shares that the Tag-Along Shareholders
collectively wish to include in such transfer to the
Third Party, which number may exceed the total number
of shares proposed to be transferred but which may
not exceed the total number of shares owned by the
Tag-Along Shareholders.
(d) Subject to Sub-Clause (b) above limiting the number of Shares
the Third Party is required to purchase, upon the giving of a
Tag-Along Notice, each Tag-Along Shareholder shall be entitled
and obligated to sell the number of Shares set forth in the
Tag-Along Notice to the Third Party on the Third Party Terms.
After expiration of the 30-day period referred to above, if
the provisions of this Clause 14B Section have been complied
with in all respects, the Existing party shall have the right
for a 120 day period to transfer ESTEL Shares to the Third
Party on the Third Party Terms without further notice to the
Tag-Along Shareholders who have not given a Tag-Along Notice,
but after such 120 day period, no such transfer may be made
without again giving notice to all Tag-Along Shareholders of
the proposed transfer and complying with the requirements of
this Clause 14B.1
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(e) At the closing of the Tag-Along Sale to any Third Party (of
which the Existing party shall give the Tag-Along Shareholders
who have exercised tag-along rights at least ten business
days' prior written notice), the Third Party or the Existing
Party shall remit to each such Tag-Along Shareholder the
consideration (including a certified check for the cash
portion of such consideration) subject applicable Indian
regulations and grant of requisite approvals if any required
from concerned Indian authorities for the sales price of the
Shares of such Tag-Along Shareholders sold pursuant hereto,
against delivery by such Tag-Along Shareholders of
certificates for such shares together with duly executed share
transfer deeds and the compliance by such Tag-Along
Shareholders with any other conditions to closing generally
applicable to the Existing party and/or such sale.
15. The Parties agreed that Mr. Virendra Hajela, the first Chairman of
ESTEL and Mr. Raj Hajela, the Managing Director of ESTEL will be
included in the Employees Stock Option Plan of FUSION.
16. INDUCTION OF NEW PARTY
The Parties recognise the possibility of inviting other Parties to join
this Joint Venture. The induction of any Party to the Joint Venture
shall always require unanimous written consent by HOLDING COMPANY and
FUSION, as long as the aggregate shareholding of HOLDING COMPANY and
FUSION is more than 51%.
The newly inducted Joint Venture partner shall always be bound by the
terms and conditions of this Agreement. The new proposed Party(s) (if
inducted) would be entitled to nominate its Directors to the Board of
ESTEL only in the event its shareholding in ESTEL exceeds 15%.
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17. PUBLICITY
The Parties shall not issue any information, document or article for
publication in any news or communications media or make any public
statement in relation to this agreement without the prior written
consent of the other Parties unless required to do so by law or to
comply with the rules of a recognised stock exchange. Without prejudice
to the foregoing any information which is intended to be issued to the
media shall be coordinated between the Parties and through prior
consultation.
18. AMENDMENT
No modification, variation or amendment of this agreement shall be of
any force unless it is in writing and has been signed by all the
Parties.
19. ENTIRE AGREEMENT
This agreement comprises the entire agreement between the Parties with
respect to the subject matter hereof and supersedes all prior
representations, negotiations, writings, memorandum and agreements with
respect thereto and including without limitation the Memorandum of
Understanding between HAJELA and FUSION dated 24th August 1999.
20. NO ASSIGNMENT / NO PARTNERSHIP
20.1 No Party shall assign or agree to assign this agreement in whole or in
part without the prior written consent of all the other Parties.
20.2 No Party shall have the right or authority to bind any other Party or
to act as agent of any other Party.
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21. GOVERNING LAW & ARBITRATION
21.1 This agreement shall be governed by and construed in accordance with
the laws of England.
21.2 All disputes arising in connection with the present agreement shall be
finally settled under the rules of Conciliation & Arbitration of the
Singapore Center for International Arbitration by a Sole Arbitrator
appointed in accordance with the said Rules.
The venue of such arbitration shall be Singapore. The language of the
arbitration shall be English. The law applicable will be English Law.
22. FORCE MAJEURE
22.1 No Party shall be liable to any other for failure to perform any
obligations hereunder to the extent and for such period as such failure
is due to reasons outside that Party's reasonable control including
fire, flood or other natural catastrophe, war, riot or civil
disturbance or governmental action, order or decree. The Party so
affected shall continue to take all actions reasonably within its power
to comply as far as possible with its obligations. The affected Party
shall promptly notify the other Party after the occurrence of the
relevant event and shall use every reasonable effort to minimise the
effects of such event.
22.2 Nothing in this agreement shall require any Party to perform any act in
violation of any law or government regulation of any country.
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23. NOTICES
23.1 Any notice, request, consent or other communication to be given by a
Party under this agreement shall be in the English language in writing
addressed in accordance with the particulars for that Party appearing
in the statement of the names of the Party at the beginning of this
agreement or to such other address for a Party as may be notified in
writing by that Party to the other Party. All important notices should
be dispatched by such means where receipt is evidenced.
24. COUNTERPARTS
This agreement shall be executed in any number of counterparts, each of
which shall be deemed an original but all of which shall constitute one
and the same instrument.
25. EFFECTIVE DATE
The effective date of this agreement shall be the date forementioned.
26. WAIVER
No waiver by any Party at any time of any breach of any of the terms
and conditions of this agreement shall be incorporated as a waiver of
any subsequent breach, whether of the same or any other terms and
conditions of this Agreement.
27. SEVERABILITY
In the event any provision of this Agreement shall be determined to be
invalid or unenforceable under applicable law, all other provisions
shall continue to be in full force and effect, unless such invalidity
or enforceability causes substantial deviation from the underlying
intent of the Parties expressed in this Agreement.
28. EFFECTIVENESS
This agreement shall be effective subject to the approval of Government
of India and its various concerned departments.
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IN WITNESS WHEREOF the authorised representatives of the Parties have hereunto
duly executed and delivered this agreement the day and year first above written.
Signed ) .../s/..........................
for and on behalf of ) Duly authorised
HOLDING COMPANY ) Raj Hajela
Signed ) .../s/..........................
for and on behalf of ) Duly authorised
FUSION ) Eric D. Ram
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