Participation and Management Agreement - Wipro Ltd. and Wipro ePeripherals Ltd.
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PARTICIPATION AND MANAGEMENT AGREEMENT
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BY AND AMONG:
(1) WIPRO LIMITED
(2) WIPRO EPERIPHERALS LIMITED
(3) PROMOTERS
Dated August 30, 2000
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CONTENTS Page
Clause Heading
1 Definitions and Interpretation
1.1 Definitions
1.2 Interpretation
1.3 Coming into Force
2 Equity Share capital structure of the company
3 Allotment of shares and debentures
3.1 Issue and Allotment of Wipro Equity Initial Shares/Debentures
3.2 Subscription of equity shares by promoters and others
4 Completion
5 Category A Equity Shares held by Wipro
6 Category B Equity shares held by Wipro
7 Further issue of capital
8 Restrictions on promoter shareholding
9 Transfers
10 Board of Directors
11 Super majority items at Board and Shareholder meetings
12 Initial Public Offering by the Company
13 Mergers and Acquisitions/Investments by the Company
14 Company charter documents and overriding effect
15 Confidential Information
16 Term of the agreement and termination
17 Governing law and dispute resolution
18 Non compete obligations between Wipro and the Company
19 Relationship between Wipro and the Company
20 General provisions
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PARTICIPATION AND MANAGEMENT AGREEMENT
This PARTICIPATION AND MANAGEMENT AGREEMENT is entered into as of the 30th ____
day of August ____________, 2000 by and among:
1. WIPRO LIMITED, a company deemed to be incorporated under the Companies
Act, 1956, and having its registered office at Doddakannelli, Sarjapur
Road, Bangalore - 560 035 (hereinafter referred to as "WIPRO" which
expression shall unless it be repugnant to the context be deemed to
include its successors in title and permitted assigns);
2. WIPRO ePERIPHERALS LIMITED, a company incorporated under the Companies
Act, 1956, and having its registered office at 40/1A, Basappa Complex,
Lavelle Road, Bangalore] (hereinafter referred to as "COMPANY" which
expression shall unless it be repugnant to the context be deemed to
include its successors in title and permitted assigns);
3. THE PARTIES listed in Exhibit A to this Agreement (hereinafter
collectively referred to as "PROMOTERS", which expression shall unless
it be repugnant to the context be deemed to include its successors in
title and permitted assigns).
WHEREAS:
A. Wipro is a diversified company having a presence in a number of
businesses including the business of manufacture and marketing of
computer peripherals through its Peripherals Systems Division (PSD)
which forms part of Wipro Infotech business) of Wipro (also known as
Wipro Peripherals).
B. Wipro has decided to restructure the Peripherals Systems Division (PSD)
as a separate legal entity to allow entrepreneurial talent to get
strategic investment, to facilitate the growth of the volume driven
product business in the new entity and to create value for its
shareholders.
C. Consequent to this decision, Wipro has entered into the Memorandum of
Understanding dated June 30, 2000 with the Purchaser's promoters for the
transfer of PSD to the Purchaser (after its incorporation).
D. Consistent with the requirements of the MOU, the Purchaser has since
accepted the provisions of the MOU as valid and binding on itself, in
accordance with the provisions of the Companies Act, 1956, Specific
Relief Act.
E. In keeping with the terms of the MOU, Wipro and the Company have entered
into the Business Sale and Purchase Agreement to transfer the Business
(as defined in the Business Sale and Purchase Agreement) to the Company.
F. In consideration of the transfer of the Business, this Participation and
Management Agreement is being entered into by and between the Parties
hereto. In addition, WIPRO, the Promoters and the Company would also be
entering into the following agreements:
i. Participation and Management Agreement
ii. Trademark licence agreement
iii. Facilities and Services agreement
iv. Intellectual Property Assignment Agreement
v. Employee Transfer Agreement
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NOW THEREFORE, in consideration of the mutual promises of the parties hereto and
other good valuable considerations, the parties hereto agree as follows;
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions:
In this agreement, the terms listed below shall, unless the context requires
otherwise, have the meanings attached to them. These terms may be identified by
the capitalization of the first letter of each principal word thereof.
1.1.1 "Initial Wipro Equity Shares" means 5,460,000 fully paid up (Five
million forty six thousand) Equity Shares having a nominal value of Rs.
10/- each issued at par (representing 39% of the total issued and paid
up Equity Shares of the Company) to be issued and allotted by the
Company on a preferential basis to Wipro pursuant to the provisions of
this Agreement which is the aggregate of the Category A equity share and
Category B equity share.
1.1.2 "Articles of Association" refers to the articles of association of the
Company as set out in Exhibit B.
1.1.3 "Board of Directors" or "the Board" means the board of directors of the
Company.
1.1.4 "Business Associate" means
a. the dealers of PSD and Vendors of PSD each of whom have completed a
minimum of 2 years of continued association with PSD
b. persons whom the Board of Directors of the Company consider to be
appropriate with the prior written consent of WIPRO.
1.1.5 "Category A Equity Shares" refers to 2,100,000 fully paid up (Two
million One Hundred thousand) Equity Shares having a nominal value of
Rs. 10/-each (representing 15% of the total issued and paid up Equity
Shares of the Company) allotted by the Company to Wipro pursuant to the
provisions of this Agreement and which are subject to the right of first
refusal to be given by Wipro to the Promoter as per Clause 5 of this
Agreement.
1.1.6 "Category B Equity Shares" refers to 3,360,000 fully paid up (Three
Million Thirty Six Thousand) Equity Shares having a nominal value of Rs.
10/- each (representing 24% of the total issued and paid up Equity
shares of the Company )allotted by the Company to Wipro pursuant to the
provisions of this Agreement and which are subject to a lock in as per
Clause 6 of this agreement
1.1.7 "Completion" shall have the meaning assigned to it under Clause 4.4 of
this Agreement.
1.1.8 "Debentures" refers to the 1,000,000 12.5% 5 Year redeemable secured
debentures having a nominal value of Rs. 100/- each issued and allotted
to Wipro pursuant to the provisions of this Agreement.
1.1.9 "Effective Date" means the close of business on August 31, 2000 or such
other date as the parties may mutually agree in writing.
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1.1.10 "Confidential Information" means all information relating to the Company
which might fairly be considered to be of a confidential nature and
identified as confidential at the time of disclosure and includes, but
is not limited to:
a. any business or technical information whether or not stored in any
medium, relating to the business of the Company (and/or those of its
customers) including but not limited to financial information,
equipment, documentation, strategies, marketing plans, pricing
information, information relating to existing, previous and
potential customers and contracts disclosed to either Party or its
Representatives (as defined hereinbelow);
b. information relating to the Company which is obtained whether
(without limitation) in writing, pictorially, in machine - readable
form, on floppy diskettes or orally, by any Party or its
Representatives from either the Company or its Representatives, in
each case in connection with the business relationship between
Wipro, the and the Promoters;
c. information derived from information falling within this definition;
d. original information supplied by the Company;
Notwithstanding the above, however, no information constitutes
confidential information if it is generic information or general
knowledge which the Promoter would have learnt in the course of similar
employment elsewhere in the trade or if it is otherwise publicly known
and in the public domain;
1.1.11 "Corporate Approvals" means the internal approvals to be obtained by the
Shareholders and the Company to execute, deliver and perform their
obligations under this Agreement including the Related Agreements and
related documents and all proceedings required under applicable
corporate law to be taken to authorize the execution, delivery and
performance of this Agreement including the Related Agreements and
related documents.
1.1.12 "Equity Shares" or "Shares" means fully paid up equity shares of the
Company having a nominal value of Rs.10/- each.
1.1.13 "Final IPO Deadline" shall refer to March 31, 2004;
1.1.14 "Initial Public Offering" or "IPO" means
a. listing of the Company's shares on a stock exchange in India or
overseas
or
b. merging of the Company with any other company listed on a stock
exchange in India or overseas
1.1.15 "New IPO Deadline" shall refer to March 31, 2003;
1.1.16 "New Business Activity" shall have the meaning assigned to it under
Clause 11.1(b) of this Agreement.
1.1.17 "Original IPO Deadline" shall refer to March 31, 2002
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1.1.18 "Parties" means WIPRO, the Company and the Promoters collectively and
the term "Party" shall be construed accordingly.
1.1.19 "Premium" means either issue of shares at a price higher than face value
of the shares or issue of shares which is mandatorily linked to
subscription of preference shares along with the subscription for the
Equity shares.
1.1.20 "Promoter Nominated Directors" shall refer to the director nominated by
the Promoters prior to the Effective Date and subsequently in accordance
with Clause 10.3 of this Agreement.
1.1.21 "Promoters" means all the Company employees who are either;
a. shareholders of the Company each of whom individually or along with
their Relatives or through any other legal entity or body corporate
hold more than 2%% of the equity share capital of the Company.
b. holding equity stock options which upon vesting of such options
would constitute more than 2% of the equity share capital of the
Company
It is clarified that for (b) above, mere vesting and not exercise of
options is relevant.
1.1.22 "PSD" means the Peripherals Systems Division (which forms part of the
Wipro Infotech business) of the WIPRO (also known as Wipro Peripherals).
1.1.23 "PSD Employees" means all the employees of Wipro who were as on July 15,
2000 employed by Wipro in PSD
1.1.24 "Physical incapacity" means either;
a. "Permanent Disability" of whatsoever nature be it physical, mental
or otherwise which incapacitates or prevents or handicaps an
employee from performing any specific job , work or task which the
said employee was capable of performing immediately before such
disablement.
b. total disablement as a result of any action by any person in any
manner whatsoever
1.1.25 "Wipro Employees" means all the employees of Wipro other than the
employees who has completed a minimum of 2 years of service in Wipro.
1.1.26 "Related Agreements" shall refer to Business Sale and Purchase
Agreement, Trade Mark Licence Agreement, Facilities and Services
Agreement and Intellectual Property Assignment Agreement
1.1.27 "Relatives" means all the relatives as defined under Section 6 of the
Companies Act, 1956.
1.1.28 "Shareholders" means WIPRO, the Promoters and the individuals set out in
Clause 3.2 of this Agreement, who will hold shares in the Company
pursuant to this Agreement and the Related Agreements.
1.1.29 "Shareholding" means the Shares held by any Shareholder.
1.1.30 "Strategic Investor" means an investor as proposed by the Company who
would bring significant value to the Company with the prior written
consent of Wipro as long as Wipro holds at least 10%..
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1.1.31 "Transfer" in relation to Shares shall mean the sale, assignment,
transfer, alienation of, or the grant of any option or right to purchase
Shares.
1.1.32 "Wipro Nominated Directors" shall refer to the directors nominated by
Wipro in accordance with Clause 10 of this Agreement.
1.2 Interpretation:
Unless otherwise stated or unless the context otherwise requires, in this
Agreement:
(a) References to any document or agreement including this Agreement shall
be deemed to include any references to such documents or agreement as
amended, supplemented or replaced from time to time in accordance with
its terms and (where applicable) subject to compliance with the
requirements set forth therein.
(b) References to a statute, ordinance or other law shall be deemed to
include regulations and other instruments under it and consolidations,
amendments, re-enactments or replacements of any of them.
(c) References herein to Clauses Exhibits and Schedules are to clauses in
and schedules to this Agreement unless the context requires otherwise
and the Exhibits and Schedules to this Agreement shall be deemed to form
part of this Agreement. The headings are inserted for convenience only
and shall not affect the construction of this Agreement.
(d) Unless the context requires otherwise, words importing the singular
include the plural and vice versa and words importing a gender include
every gender.
1.3 Coming into Force
This Agreement shall come into force and become effective on the
Effective Date.
2 EQUITY SHARE CAPITAL STRUCTURE OF THE COMPANY
2.1 The Authorised Equity share capital of the Company shall initially be
Rs.150 Mn dividend into 15,000,000 equity shares of Rs.10/- each.
2.2 The initial issued, subscribed and paid up Equity share capital of the
Company shall be Rs.140,000,000 divided into 14,000,000 equity shares of
Rs.10/-each.
3 ALLOTMENT OF SHARES AND DEBENTURES
3.1 ISSUE AND ALLOTMENT OF WIPRO EQUITY INITIAL SHARES / DEBENTURES
3.1.1 Consistent with the requirements of Clause 3.01 of the Business Sale and
Purchase Agreement and in consideration of the sale of the Business (as
defined in the Business Sale and Purchase Agreement):
(a) Wipro shall be issued and allotted the Initial Wipro Equity Shares
on the Completion Date.
(b) Wipro shall be allotted the Debentures on the Completion Date. The
Debentures are to be redeemed in 10 quarterly installments with a
moratorium of 10 quarters from the Effective Date. Interest will be
payable quarterly on a rear-ended basis.
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3.1.2 The Company shall be liable for payment of stamp duties in respect of
the issue of the Initial Wipro Equity Shares and the Debentures.
3.2 SUBSCRIPTION OF EQUITY SHARES BY PROMOTERS AND OTHERS
3.2.1 The Promoters and PSD employees shall as of the Completion Date
subscribe to, and be allotted, such number of Equity Shares representing
26% of the total issued and paid up Equity Shares of the Company. This
allotment shall be at par.
3.2.2 Wipro Employees, Business Associates and Strategic Investors shall as of
the Completion Date subscribe to, and be allotted, such number of Equity
Shares representing 35% of the total issued and paid up Equity Shares of
the Company. This allotment shall be at a premium.
4. COMPLETION
4.1 Completion shall take place at Wipro's offices on the August 31, 2000 or
such other date as the parties may mutually agree.
4.2 Prior to completion, the Company shall ensure that the following actions
are undertaken:
(a) Obtaining of Corporate Approvals by the Company and the delivery of
true copies of the same to Wipro;
(b) Receipt by Wipro from the Company of a certified true copy of the
resolution of the board of directors of the Company authorizing the
issue of the
i. Initial Wipro Equity Shares
ii. Equity shares to Promoters, PSD employees, Wipro employees,
Business Associates and Strategic Investors in terms of clauses
3.2.1 and 3.2.2 herein
4.3 Prior to completion, Wipro shall obtain its Corporate Approvals and
deliver true copies of the same to the Company.
4.3 Completion of the allotment of the Allotment Shares and the Debentures
referred to in Clause 2.1(a) and (b) shall take place at Wipro's offices
on the Effective Date or such other date as the parties may mutually
agree .
4.4 It is hereby agreed that on Completion all (and not part only) of the
following business shall be transacted:
(a) The consideration referred to in clause 3.02 of the Business Sale
and Purchase Agreement has been paid by the Company to Wipro.
(b) The Promoter Nominated Director of the Company and the Company shall
procure a Board meeting of the Company to be held on the Completion
Date for transacting the following business:
(i) Allotment of initial Wipro Equity Shares and the Debentures
to Wipro;
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(ii) Appointment of the Wipro Nominated Directors on the Board
and the re-constitution of the Board in accordance with the
provisions of this Agreement;
(c) The Parties shall procure the holding of an Extra-Ordinary General
Meeting of the shareholders of the Company to adopt the amendments
to the Articles of Association of the Company as provided in
Schedule B to this Agreement.
(d) Immediately after the conclusion of the Extra-Ordinary General
Meeting of the shareholders of the Company, the Parties shall
procure another meeting of the Board to be held for transacting the
following business:
(i) to note the adoption of the amendments of the Articles of
Association of the Company as set out in Schedule B to this
Agreement.
(ii) To take on record the duly executed Related Agreements.
4.5 Within 30 days after completion or such other date as may be mutually
agreed upon between the parties, the Company shall pay Wipro the
adjusted consideration referred to in Clause 3.02. If such amount is not
paid by that date, interest @ 15% p.a. shall accrue on such amount from
the due to the date of payment.
5. CATEGORY A EQUITY SHARES HELD BY WIPRO
5.1 For a period of three years from Effective date, whenever Wipro desires
to sell the Category A Equity Shares, 1, the Promoters shall have a
right to purchase all of the Category A Equity Shares held by Wipro at
the highest of the following amounts :
a. Rs.54/- (Rupees Fifty Four only) per share provided the purchase of
the Category A Equity Shares is during the third year from the
Effective Date, or Rs.54 (Rupees Fifty four only) per share duly
discounted by 12% per annum provided if the purchase of the Category
A Equity Shares is earlier than in the third year
b. 75% of the price per share offered by any thirty party to the
Promoters for the shares
c. 75% of the market value. to be calculated on the basis of the
average closing price on the Bombay Stock Exchange / National
Stock Exchange (if listed in India) or any overseas exchange (if
listed abroad), whichever is higher, for the trading sessions of
the preceding 6 weeks.
5.2 After the expiry of three years from effective date, Wipro shall be free
to sell the Category A Equity Shares to any third party without any
right of first refusal as envisaged in Clause 5.1.
6. CATEGORY B EQUITY SHARES HELD BY WIPRO
6.1 The category B Equity shares held by Wipro shall be subject to a lock in
for a period of three years from Effective date and therefore Wipro
shall not be entitled to sell Category B Equity shares during this
period.
6.2 After the expiry of the lock in period of three years, Wipro shall be
entitled to sell the Category B Equity Shares subject to the provisions
of Clause 6.3
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6.3 Wipro shall, prior to the Transfer of any or all of the Category B
Equity Shares to any third party buyer, grant to the Promoters the
preemptive right to acquire all the Category B Equity Shares, on fixed
terms and conditions (including as to price).
6.4 Wipro shall offer the right to acquire the Category B Equity Shares by
service of a written notice, which shall contain details of the terms
and conditions (including as to price).
6.5 The Promoters shall communicate their acceptance of all the Category B
Equity shares offered by Wipro. Alternative the Promoters can reject the
right to acquire all the Category B Equity Shares, by service of a
written notice within 30 business days of receipt of the notice from
Wipro. If the Promoters fail to communicate their acceptance or
rejection of the right to acquire the Category B Equity Shares, they
shall be deemed to have rejected Wipro's offer.
6.6 In the event that the Promoters reject Wipro's offer, Wipro shall be
free to sell the Category B Equity Shares to any third party buyer on
terms and conditions (including as to price) that are no more favourable
than those set forth in its offer under Clause 6.3.
6.7 Notwithstanding the provisions of Clause 6.4, Wipro may at its sole
discretion permit the promoter to accept part of the category B Equity
Shares offered by Wipro to the Promoter.
7. FURTHER ISSUE OF CAPITAL
7.1 After the Effective Date, the Company shall be free to issue upto an
aggregate amount not exceeding 10% of the paid up equity share capital
of the Company
b. stock options to Employees
c. share warrants to dealers of PSD each of whom have completed
a minimum of two years of continued association with PSD.
However, in the case of issue of share warrants, Company shall collect
not less than 25% of the issue price of the share warrants at the time
of issue..
The restriction under this Clause shall not apply to the extent of stock
options granted by the Company in lieu of WERT awards or WESOPs given by
Wipro to PSD employees.
7.2 After the Effective Date, except as provided in Clause 7.1, the Company
shall not issue or allot any further Shares of the Company unless such
issue or allotment (and the terms and conditions in connection thereto)
has received the prior written consent of Wipro .
7.3 For a period of two years from the Effective Date, Wipro shall not
unreasonably withhold consent and shall not place any unreasonable terms
for such issue and allotment particularly if the valuation of such issue
is higher by 30% per annum than the initial issue (referred to in Clause
3.2). or the price at which the IPO is made by the Company.
7.4 After the period of two years from the Effective Date, Wipro shall be
free (at its own discretion and without assigning any reasons) to
withhold consent and to place any terms for such issue and allotment.
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8. RESTRICTIONS ON PROMOTER SHAREHOLDING
8.1 For a period of three years from the Effective Date or one year after
the IPO, whichever is later, and as long as Wipro holds at least 10% of
the Equity Share capital of the Company, the Promoters shall not be
entitled to transfer any of the Shares acquired by them pursuant to
Clause 3.2.1 without the prior written consent of Wipro.
8.2 After the lapse of the period referred to in Clause 8.1 and till the end
of the fifth year from the Effective Date, the Promoters shall not be
entitled to transfer any of the Shares acquired by them pursuant to
Clause 3.2.1 unless the proposed transferee of such Shares offers to
purchase, on a pro-rata basis, the Shares held by Wipro on the same
terms and conditions (including as to price) arrived at by and between
the Promoters and the proposed transferee.
8.3 In the event that Wipro refuses to accept the offer of the proposed
transferee as per Clause 8.2, the Promoters shall be entitled to
transfer their Shares to such proposed transferee. Wipro shall however
be required to purchase the said Shares of the Promoters on the same
terms and conditions (including as to price) arrived at by and between
the Promoters and the proposed transferee.
8.4 With respect to the Wipro's rights under Clause 8.2, the various
restrictions that apply to Wipro's ability to sell its Shares under
Clause 6 of this Agreement shall not apply.
8.5 After the lapse of the period referred to in Clause 8.2 i.e. the end of
the fifth year from the Effective Date, the Promoters shall be free to
sell their Shares to any third party.
8.6 For a period of three years from the Effective Date, or the date of IPO
whichever is later, in the event of Mr Ram N Agarwal being physically
incapacitated in discharging his duties or in the event of death of Mr
Ram N Agarwal , Mr Ram Agarwal or the legal heirs of Mr Ram Agarwal as
the case may be shall have either of the following two options:
1. to opt for selling all the shares held by Mr Ram Agarwal and his
relatives in the Company to Wipro at two times of the book value of
the shares
or
2. to opt for granting Wipro or its representatives an irrevocable and
unconditional power of attorney to enable Wipro or its
representatives to represent them at all General Body meetings of
the Company .
9. TRANSFERS
9.1 Subject to applicable law, the Board of the Company shall not make any
transfer of Shares, which does not meet with the following requirements:
(a) conflicts with the provisions of this Agreement and the obligations
of the Parties hereunder;
(b) the failure or refusal by the transferee to give a letter agreeing
to be bound by the provisions of this Agreement.
9.2 Consistent with the need to ensure compliance with the provisions of
this Agreement, the Parties hereto including any Promoters referred to
in Clause 20.5 shall not except with the prior written consent of Wipro
and on such terms and conditions which are agreeable to WIPRO, pledge,
charge or otherwise encumber any of the Shares of the Company nor
otherwise use such Shares as collateral for any purpose which could
result in an involuntary Transfer of such Shares in favour of any
person.
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10. BOARD OF DIRECTORS
10.1 The strength of the Board of Directors of the Company shall be five.
10.2 As long as Wipro holds more than 10% of the total issued and paid up
Equity Shares of the Company, there shall be two Wipro Nominated
Directors (one of whom shall be a permanent director) The remaining two
directors shall be Mr Ram N Agarwal and one external independent
Director.
10.3 In the event of Wipro's Shareholding being more than 5% and less than
10% of the total issued and paid up Equity Shares of the Company, there
shall be one Wipro Nominated Director (who shall be a permanent
director).
10.4 In the event of Wipro's shareholding dropping below 5% of the total
issued and paid up Equity Shares of the Company, Wipro shall not have
any right to nominate any director.
10.5 Upto the IPO of the Company, the Promoters shall have a right to
nominate one director as a Promoter Nominated Director.
10.6 The Company may increase the number of directors from five to seven. Any
increase in the number of Directors beyond 7 numbers shall be subject to
the the prior written consent of Wipro.
10.7 The Parties shall vote (or cause their representatives to vote) in
favour of the election / appointment of a person nominated by Wipro ) as
a Director.
10.8 The parties agree and undertake that the Company shall be managed by the
Board. The parties further acknowledge that the role of Wipro in the
management of the Company is one of a supporting and enabling nature.
Keeping in view this spirit, the Wipro Nominated Directors shall provide
guidance and advise while participating in the meetings of the Board and
Sub-Committees of the Board.
10.9 In the event of there being a conflict between Wipro Nominated Directors
and the other Directors on the Board on any item of business placed for
consideration before the Board (such business hereinafter referred to as
"the issue in conflict") , the Chairman of the Board shall forthwith
appoint a sub committee of the Board comprising of one Wipro Nominated
Director, the Managing Director of the Company and one independent
Director. The Sub Committee of the Board shall thereafter debate and
decide on the issue in conflict. The decision of such Sub committee
shall be by way of a simple majority. All decisions taken by the Sub
Committee shall be approved by the Board.
10.10 The parties agree and undertake that they will vote together at all
General Body meetings of the Company in accordance with the spirit of
the resolution passed by the Board.
11. SUPER-MAJORITY ITEMS AT BOARD AND SHAREHOLDER MEETINGS
11.1 Notwithstanding any other provisions of this Agreement and subject to
such approvals as may be required under applicable law, for a period of
three years from the Effect Date, any action with respect to the
following super-majority items shall require the positive affirmative
vote of Wipro Nominated Director appointed as a permanent Director at a
Board meeting and the positive affirmative vote of Wipro shareholder
representative at any meeting of the General Body where such item is
considered:
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(a) approval of the sale and registration of the transfer by the
Promoters of any or all of the shares alloted by the Company to the
Promoters in terms of clause 3.2.1.
(b) Company undertaking or proposing to undertake any New Business
Activity without the express written consent of Wipro. Provided
that Wipro will not unreasonably withhold consent unless in good
faith it is of the view that the New Business Activity conflicts
with, or is in competition with, its own business activities as of
such date.
11.2 For purposes of Clauses 11.1 (b), it is clarified that the term "New
Business Activity" shall not include any of the following business
activities ;
i. The business activity of computer/internet peripherals and
Software/Services in relation to such peripheral products.
ii. Software Services business , provided the turnover from
such Software services business shall not exceed 5% of the
total turnover of the Company
iii. Any business which conflicts or competes with the
businesses pursued by Wipro, provided the turnover of such
conflicting or competing business shall not exceed 30% of
the total turnover of the Company
11.3 In the event of the business referred to in clause 11.2(iii) above
exceeds 30% of the total turnover of the Company, then Wipro may, at its
sole discretion insist upon the following actions
a. revocation of the name "Wipro" from the name of the Company
b. purchase by the Promoters at the price referred to in clause 5.1
above, all the Category A Equity Shares as well as such percentage
of Category B Equtiy shares held by Wipro so as to bring the
shareholding of Wipro in the Company to less than 20% of paid up
Equity shares capital of the Company
11.4 In the event of there being a default by the Promoters to comply with
the conditions at Clause 11.3 (a) and (b) above, the Company would be
under an obligation to forthwith reduce the percentage of turnover from
such conflicting or competing business in the Company to not less than
30% of the total turnover of the Company.
11.5 For the purpose of Clause 11.1 and 11.2;
. Peripherals refers to all devices / equipments capable of connecting
to / with computers and networks including telecom / datacom
networks.
. Business activity includes design, development, manufacture,
marketing, sales, distribution, trading and support with or without
the help of web/internet.)
12. INITIAL PUBLIC OFFERING (IPO) BY THE COMPANY
12.1 The Company and the Promoters undertake to procure a public listing of
the Shares on a stock exchange in India or abroad and to make an IPO of
its Shares.
12.2 The IPO shall be made by the Original IPO Deadline. This deadline may be
extended to the New IPO Deadline in the event only that unfavourable
conditions for an IPO exist at and before the Original IPO Deadline.
However if such unfavourable market conditions for an IPO persist up to
<PAGE>
the New IPO Deadline, the Company shall procure the listing and IPO of
its shares on a stock exchange in India or abroad by the Final IPO
Deadline.
12.3 The Company and the Promoters shall ensure that the Wipro's name is not
used for any IPO related activity and that Wipro will not be treated as
a "promoter" in terms of any Guidelines / Regulations issued by the
Securities and Exchange Board of India.
12.4 Appropriate and adequate disclosure, with respect to Wipro's decision to
focus on its existing business, shall be made in any prospectus / offer
document for an IPO by the Company. In this connection, Wipro shall, be
entitled to vet and approve the draft of a prospectus for an IPO to the
Company within such reasonable time as may be mutually agreed by and
between the Parties.
12.5 At the time of IPO or prior to IPO by the Company, the parties to the
Agreement agree and undertake to mutually agree to do such amendments of
the various provisions of the Agreement so as to ensure that these terms
and conditions are not at conflict or variance with the Company Law or
regulations issued by SEBI or stock exchanges as the case may be.
13. MERGERS AND ACQUISITIONS / INVESTMENTS BY THE COMPANY
13.1 For a period of three years from the effective date and as long as Wipro
holds atleast 10% of the Equity share capital of the Company, the
Company shall be entitled to acquire and / or invest in any company,
provided that such a company is not engaged in any New Business
Activity.
13.2 Notwithstanding Clause 13.1, the Company shall be entitled to make any
acquisitions / investments in any company / engaged in any new business
activity subject to the limit of 19% of the total issued and paid up
equity capital of the investee Company or Rupees 40 Million (whichever
is lower) .
13.3 Notwithstanding Clauses 13.1 and 13.2, the Company shall be entitled to
make acquisitions / investments in any company only if:
(a) There has been no default in any payments to Wipro due under this
Agreement or under any Related Agreement;
(b) In case of default, at Wipro's option, all the Initial Wipro Equity
Shares and the Debentures are transferred / bought back before the
acquisition / investment;
(c) The provisions of this Agreement and the rights and obligations of
the Parties hereunder are not affected in any way, without the
prior written consent of Wipro.
13.4 Notwithstanding Clauses 13.1, 13.2 and 13.3 the Company shall be
entitled to restructure itself in any legal form including demerger and
slump sale subject however to the condition that;
a. That there has been no default in any payments by the Company to
Wipro in terms of the Agreement as well as the Trade Mark licence
agreement or under any other agreement or understanding whatsoever.
b. The percentage of shareholding of Wipro in the legal entity arising
out of such demerger or slump sale shall not be lower that the
percentage of shareholding of Wipro in the Company
<PAGE>
14. COMPANY CHARTER DOCUMENTS AND OVERRIDING EFFECT
14.1 The Parties agree that the Memorandum and Articles of Association of the
Company shall as far as possible, incorporate and reflect the provisions
of this Agreement.
14.2 The Parties agree that their rights and obligations vis-a-vis the
Company including issues of operation and management of the Company
shall be interpreted, acted upon and governed in accordance with the
terms and conditions of this Agreement.
14.3 The Parties agree that as between themselves this Agreement shall govern
their contractual relationship and that this Agreement shall have an
overriding effect notwithstanding anything contained in any other
document and / or agreement (including the Memorandum and Articles of
Association of the Company).
14.4 In the event of any ambiguity or inconsistency between the provisions of
this Agreement and the Memorandum and Articles of Association, this
Agreement will prevail and such ambiguity / inconsistency will be
removed (and the Parties will so endeavour) to the extent permissible,
by carrying out necessary modifications to the Memorandum and Articles
of Association to ensure that the same are in conformity with the
provisions of this Agreement.
14.5 The Parties agree that they will ensure that their duly authorised
representatives, proxies and / or agents representing it at a Board or
shareholders meeting of the company, shall exercise its votes in such a
manner as to comply with and to fully implement the provisions of this
Agreement.
15. CONFIDENTIAL INFORMATION
15.1 Any Confidential Information disclosed to any party hereto (a "Receiving
Party") by another party hereto (a "Disclosing Party") in connection
with the negotiation, execution or performance of this Agreement or the
Related Agreements or the management or operation of the Company shall
be deemed and treated by the Receiving Party as confidential, shall be
used only for the purposes of negotiating and implementing the joint
venture and related business purposes and shall not be disclosed to any
third party without the prior written consent of the Disclosing Party,
provided, however, that the foregoing restriction shall not apply to the
extent, but only to the extent, that any confidential information: (a)
becomes generally available to the public through no fault of the
Receiving Party or its agents; (b) is or has been disclosed to the
Receiving Party, directly or indirectly, by a person, firm or entity
having no obligation to the Disclosing Party; or (c) is required to be
disclosed under any applicable law, rule, regulation or governmental
order.
15.2 The Receiving Party shall take all steps necessary or appropriate to
protect the Confidential Information against unauthorised disclosure or
use, including, but not limited to, causing all employees of the
Receiving Party to execute confidentiality agreements or employment
agreements containing confidentiality provisions. The Receiving Party
shall immediately notify the Disclosing Party of any unauthorised
disclosure or use of any Confidential information that comes to the
Receiving Party's attention, and shall take all action that the
Disclosing Party may reasonable request to prevent any further
unauthorised disclosure or use of such Confidential information.
15.3 This Agreement including the Related Agreements, the related documents
and all aspects of the negotiation, preparation and operation of the
joint venture must be kept confidential and shall not be disclosed to
any third party except as agreed by and between the Parties hereto or as
may be required by the regulations of any stock exchange by which the
disclosing party may be bound. Except for any disclosures required by
law or the rules of any stock exchange, timing and content of any other
announcements, advertisements, press releases and public statements
concerning the joint venture negotiations and the joint venture will be
by mutual written agreement by and between the Parties hereto. Any
inquiries from the public regarding the joint
<PAGE>
venture or the relationships among the parties are to be referred to an
official spokesperson to be determined by the Parties, who shall also
make any announcements or releases of information required by law or the
rules of any stock exchange as mutually directed by both of the Parties.
15.4 The obligations set forth in this Clause 15 shall survive the expiration
or termination of this Agreement.
16. TERM OF THE AGREEMENT AND TERMINATION
This Agreement shall come into force in a manner provided in Clause 1.3
and shall remain in full force and effect until the termination of this
Agreement by the Parties hereto.
17. GOVERNING LAW AND DISPUTE RESOLUTION
17.1 This Agreement shall be governed by and construed and enforced in
accordance with the laws of India.
17.2 Any dispute, controversy or claim arising out of or in relation to this
Agreement or the breach, termination or invalidity thereof, if the same
cannot be settled amicably among the concerned parties hereto, shall be
settled by final and binding arbitration in accordance with the
Arbitration and Conciliation Act. The arbitration proceedings, shall
take place at Bangalore in India and the proceedings shall be
exclusively in English.
17.3 No party hereto shall be entitled to commence or maintain any action in
a court of law upon any matter in dispute until such matter shall have
been submitted to arbitration and determined as provided above, and then
only for the enforcement of the arbitral award.
17.4 Pending the resolution of a dispute by arbitration, the parties hereto
shall, except in the event of termination, continue to perform all their
obligations under this Agreement without prejudice to a final adjustment
in accordance with the arbitral award.
18. NON-COMPETE OBLIGATIONS BETWEEN WIPRO AND THE COMPANY
18.1 For a period of three years from the Effective date, Wipro confirms to
the Company that it will not enter into the business of manufacturing
dot matrix printers
18.2 In consideration of this confirmation, the Company agrees to pay Wipro a
non-compete fee of Rs.25.00 Mn (Rupees Twenty Five Million) per year for
a period of three years.
18.3 The amount specified in Clause 18.2 above shall be payable by the
Company to Wipro in the following manner:
<TABLE>
<S> <C> <C>
Quarter ending Amount payable Due date for payment
September 30, 2000 Rs.20,85,000 October 31, 2000
Dec 31, 2000 to June 30, 2003 Rs.6,252,000 per quarter Within 30 days from the
(11 quarters) (Rs.68,772,000 for 11 quarters) end of every quarter
September 30, 2003 Rs. 41,43,000 October 31, 2003
Total Rs.75,000,000
</TABLE>
<PAGE>
Any delay in payment beyond the above due dates shall be liable to an
interest @ 18% p.a. from the due date of payment.
18.4 Notwithstanding anything contained in Clause 18.3, in the event of
termination of this Agreement for any reason whatsoever, all monies
payable by the Company to Wipro shall become due and payable
immediately.
19. RELATIONSHIP BETWEEN WIPRO AND THE COMPANY
19.1 Wipro agrees to treat the Company as a most preferred vendor in
consideration of the Company treating Wipro as most preferred customer.
20. GENERAL PROVISIONS
20.1 This Agreement and the Related Agreements constitute the entire
understanding of the Parties with reference to the subject matter of
this Agreement and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations among
the Parties with respect to the subject matter hereof, including the
MOU.
20.2 This Agreement shall not be amended, modified, altered or changed in any
way except by a writing executed by a duly authorised representative of
each Party. A waiver by any Party of any provision of this Agreement or
a breach hereunder shall not be deemed to constitute a subsequent or
future waiver of the same or any other provision or a breach of this
Agreement.
20.3 No Party shall be held liable or responsible for any failure or delay in
performance of any or all of its obligations under this Agreement
directly or indirectly caused by any circumstances beyond the reasonable
control of the Party responsible or affected, including, but not limited
to, acts of God, governmental orders or restrictions, war, warlike
conditions, hostilities, sanctions, mobilisations, blockades, embargoes,
detentions, revolutions, riots, looting, strikes, stoppages of labour,
lockouts or other labour troubles, earthquakes, fires or accidents,
("force majeure"); provided, however, that the Party whose performance
is prevented by force majeure shall take all reasonable action within
its power to comply as fully as possible herewith and to preserve and
protect the respective interests of the other Parties. Immediately upon
the occurrence of any event or condition of force majeure which affects
the performance of a Party under this Agreement, the affected Party
shall notify the other Parties of the nature of the event or condition,
the effect of the event or condition on the Party's performance and the
estimated duration of the event or condition. The affected Party shall
also notify the other Parties immediately upon cessation of or changes
in the event or condition constituting force majeure.
20.4 This Agreement shall inure to the benefit of and be binding on the
respective successors and assigns of the Parties. The Parties agree and
undertake that this Agreement shall continue to be valid, binding and
enforceable against the Parties as well as their successors and assigns
notwithstanding any merger, acquisition, corporate reogranisation by way
of change in the ownership and/or management of the Parties or
otherwise. In the event of any such merger, acquisition or corporate
reorganisation of either of the Parties, the Parties agree and undertake
to ensure that the provisions of this Agreement including the Related
Agreements continue to remain valid, binding and enforceable against the
same management or successor management or entity.
<PAGE>
20.5 In the event of any of the PSD employees coming within the defintion of
Promoters as defined in Clause 1.1.21, at any point in time after the
execution of this Agreement, then Promoter and the Company agree and
undertake to ensure that they will take all such steps as may be
considered necessary including execution of such documents as may be
considered necessary by Wipro to be executed by and among Wipro,
Company, Promoters and such new PSD employees so as to ensure that each
and every provisions of this agreement including related agreements
shall be made valid, binding and enforceable against such promoter.
20.6 If any part of this Agreement is declared invalid or unenforceable, the
Parties shall, in good faith, consult with each other and adopt new
provisions that will to the greatest extent permitted by law, place the
Parties in the same economic position that they would have been in had
the invalid part of the Agreement continued in effect and those portions
of this Agreement that have not been declared invalid or unenforceable
shall remain in full force and effect.
20.7 All notices, communications and other correspondence required or
permitted by this Agreement shall be in writing and shall be sent by (a)
facsimile, with confirmation copy sent by registered first class
airmail, (b) by personal delivery with acknowledgement of receipt or (c)
by registered, first class air mail, return receipt requested and
postage prepaid, to the following address:
To WIPRO: Corporate Vice President - Legal and Company Secretary
Wipro Limited,
Doddakannelli, Sarjapur Road,
Bangalore - 560 035
Fax: (91-80) 8440051
To the Company: Chief Executive Officer
Wipro ePeripherals Limited
40/1A, Basappa Complex
Lavelle Road
Bangalore -
Fax: (91-80) 2270378
To the Promoter : Ram N Agarwal
209/1B, HAL II Stage
16 B Main
Bangalore 560 008
Any notice, demand or other communication so addressed to the relevant
Party shall be deemed to have been delivered (a) if given or made by
letter, when actually delivered to the relevant address and (b) if given
or made by fax, when despatched.
20.8 No failure or delay by either Party in exercising any right, power or
remedy under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of the same preclude any further exercise
thereof or the exercise of any other right, power or remedy. Without
limiting the foregoing, no waiver by either Party of any breach by the
other of any provision hereof shall be deemed to be a waiver of any
subsequent breach of that or any other provision hereof. If at any time
any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any respect, the legality, validity and enforceability
of the remaining provisions of this Agreement shall not be affected or
impaired thereby.
20.9 No Party shall without the prior written consent of the other Party
issue any press release or otherwise make any public announcement with
regard to this Agreement or the transactions
<PAGE>
contemplated herein, except upon mutual agreement or as may be required
by laws to which each Party is respectively subject to.
<PAGE>
20.10 This Agreement may be executed in counter-parts and each such counter
part shall be considered to be the original as if executed
simultaneously.
IN WITNESS WHEREOF this Agreement has been executed on the day and year first
above written.
SIGNED by Suresh C Senapaty
Corporate Executive VP-Finance )
for and on behalf of WIPRO Ltd. )
in the presence of: Satish Menon )
Corporate Vice President-Legal & Company Secretary
SIGNED by Mr Ram N Agarwal )
for and on behalf of THE COMPANY )
in the presence of: G Srinivasan )
SIGNED by Ram N Agarwal )
for and on behalf of THE PROMOTERS )
in the presence of: G Srinivasan )
<PAGE>
EXHIBIT A
LIST OF PROMOTERS
1. Mr Ram N Agarwal