<PAGE>
As filed with the Securities and Exchange Commission on February 11, 1999
Registration No. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM F-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
INFOSYS TECHNOLOGIES LIMITED
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
--------------
<TABLE>
<S> <C> <C>
Republic of India 7371 58-1760235
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
Electronics City, Hosur Road,
Bangalore, Karnataka
India 561 229
+91-80-852-0261
(Address and telephone number of Registrant's principal executive offices)
--------------
CT Corporation System
49 Stevenson Street, Suite 900
San Francisco, CA 94105
(415) 227-0763
(Name, address and telephone number of agent for service)
--------------
Copies to:
<TABLE>
<S> <C>
Jeffrey D. Saper, Esq. Mary Ellen Kanoff, Esq.
Michael J. Danaher, Esq. Anthony J. Richmond, Esq.
Raju S. Judge, Esq. Christopher T. Burt, Esq.
WILSON SONSINI GOODRICH & ROSATI LATHAM & WATKINS
Professional Corporation 633 West Fifth Street, Suite 4000
650 Page Mill Road Los Angeles, California 90071-2007
Palo Alto, California 94304-1050 (213) 485-1234
(650) 493-9300
</TABLE>
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
Calculation of Registration Fee
<TABLE>
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- ----------------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Title of Each Class of Maximum Maximum Amount of
Securities to be Amount to be Offering Price Aggregate Registration
Registered Registered (1) per Share (2) Offering Price (2) Fee
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Shares, par value
Rs.10 per share, each
represented by two
American Depositary
Shares (3)............ 1,035,000 $55.76 $57,711,600 $16,044
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Includes 135,000 Equity Shares represented by 270,000 American Depositary
Shares that the Underwriters have the option to purchase to cover over-
allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee, in accordance with Rule 457(a) promulgated under the
Securities Act of 1933.
(3) American Depositary Shares evidenced by American Depositary Receipts
issuable upon deposit of the Equity Shares registered hereby are being
registered pursuant to a separate Registration Statement on Form F-6.
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This Prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any jurisdiction in which such offer, solicitation or sale +
+would be unlawful prior to the registration or qualification under the +
+securities laws of any such jurisdiction. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 11, 1999
1,800,000 American Depositary Shares
[INFOSYS LOGO]
Representing 900,000 Equity Shares
Each American Depositary Share ("ADS") offered hereby (the "Offering")
represents one-half of one Equity Share, par value Rs.10 per share, of Infosys
Technologies Limited, a public company with limited liability incorporated in
the Republic of India ("Infosys" or the "Company"). The ADSs are evidenced by
American Depositary Receipts ("ADRs"). See "Description of Equity Shares" and
"Description of American Depositary Shares."
All of the ADSs offered hereby are being sold by the Company. The Company's
Equity Shares are traded in India on the Stock Exchange, Mumbai, the Bangalore
Stock Exchange and the National Stock Exchange (collectively, the "Indian Stock
Exchanges"). On February 8, 1999, the last reported sale price per Equity Share
was $55.76 (as adjusted to reflect a 2-for-1 stock split declared by the
Company on December 20, 1998, with a record date of March 5, 1999) on the Stock
Exchange, Mumbai, equivalent to a price of $27.88 per ADS, assuming an exchange
rate of Rs.42.50 per dollar. See "Price Range of Equity Shares" and "Exchange
Rates." Prior to the Offering, there has been no public market for the ADSs or
the Equity Shares of the Company in the United States. See "Underwriting" for a
discussion of the factors considered in determining the public offering price.
The ADSs have been approved for quotation on the Nasdaq National Market,
subject to official notice of issuance, under the symbol "INFY."
See "Risk Factors" commencing on page 10 for a discussion of certain factors
that should be considered by prospective purchasers of the ADSs offered hereby.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount (1) (2) Company (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per American Depositary Share............. $ $ $
Total (3)................................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $1,750,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 270,000 additional ADSs solely to cover over-allotments, if any. If the
Underwriters exercise this option in full, the Price to Public will total
$ , the Underwriting Discount will total $ and the Proceeds to Company
will total $ . See "Underwriting."
The ADSs are offered by the several Underwriters named herein, subject to
receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of the ADRs evidencing the
ADSs will be made against payment therefor at the office of NationsBanc
Montgomery Securities LLC, on or about , 1999.
----------
NationsBanc Montgomery Securities LLC
BancBoston Robertson Stephens
BT Alex. Brown
Thomas Weisel Partners LLC
, 1999
<PAGE>
[INFOSYS LOGO]
A map of the world with India highlighted and brought to the foreground
appears here. The map shows the locations of the Company's corporate
headquarters, development centers and marketing offices. Pictures of two
satellites, a notebook computer and computer keyboards appear in the
background. A legend of the countries and cities where the Company's offices
are located appears below the map.
----------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE AMERICAN
DEPOSITARY SHARES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
AMERICAN DEPOSITARY SHARES TO COVER SYNDICATE SHORT POSITIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS
In this Prospectus, all references to "Indian rupees," "rupees" and "Rs."
are to the legal currency of India and all references to "U.S. dollars,"
"dollars" and "$" are to the legal currency of the United States. For the
convenience of the reader, this Prospectus contains translations of certain
Indian rupee amounts into U.S. dollars which should not be construed as a
representation that such Indian rupee or U.S. dollar amounts referred to
herein could have been, or could be, converted into U.S. dollars or Indian
rupees, as the case may be, at any particular rate, the rates stated below, or
at all. Except as otherwise stated herein, all translations from Indian rupees
to U.S. dollars contained in this Prospectus have been based on the noon
buying rate in the City of New York for cable transfers in Indian rupees as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate") on the date stated. The Noon Buying Rate on February 8,
1999 was Rs.42.50 per $1.00. The exchange rates used herein for translations
of Indian rupee amounts into U.S. dollars for convenience purposes differ from
the actual rates used in the preparation of the Company's consolidated
financial statements, and U.S. dollar amounts used in this Prospectus differ
from the actual U.S. dollar amounts that were translated into Indian rupees in
the preparation of such financial statements. Except as otherwise stated
herein, all monetary amounts in this Prospectus are presented in U.S. dollars.
For historical information regarding rates of exchange between Indian rupees
and U.S. dollars, see "Exchange Rates."
The Company's financial statements are presented in Indian rupees and
translated into U.S. dollars and are prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP"). In this Prospectus,
any discrepancies in any table between totals and the sums of the amounts
listed are due to rounding. In this Prospectus, references to a particular
"fiscal" year are to the Company's fiscal year ended March 31 of such year.
In this Prospectus, unless the context otherwise requires, references to
"Infosys" and the "Company" are to Infosys Technologies Limited. References to
"U.S." or "United States" are to the United States of America, its territories
and its possessions. References to "India" are to the Republic of India, and
references to the "Government of India" are to the Government of the Republic
of India. References to "Indian GAAP" are to Indian generally accepted
accounting principles. Infosys is a registered Indian trademark of the
Company. Yantra Corporation, a Delaware corporation ("Yantra"), in which the
Company holds a minority interest, is considered a subsidiary of the Company
for purposes of Indian GAAP. All other trademarks or trade names used in this
Prospectus are the property of their respective owners.
ENFORCEMENT OF CIVIL LIABILITIES
The Company is a limited liability company under the laws of the Republic of
India. Substantially all of the Company's directors and executive officers
(and certain experts named in this Prospectus) reside outside the United
States, and a substantial portion of the assets of the Company and of such
persons are located outside the United States. As a result, it may be
difficult for investors to effect service of process upon such persons within
the United States or to enforce against the Company or such persons in U.S.
courts judgments obtained in U.S. courts, including judgments predicated upon
the civil liability provisions of the federal securities laws of the United
States.
India is not a party to any international treaty in relation to the
recognition or enforcement of foreign judgments. The Company has been advised
by its Indian legal counsel, Crawford Bayley & Co., that in India the
statutory basis for recognition of foreign judgments is found in Section 13 of
the Indian Code of Civil Procedure 1908 (the "Civil Code") which provides that
a foreign judgment shall be conclusive as to any matter directly adjudicated
upon except: (i) where the judgment has not been pronounced by a court of
competent jurisdiction; (ii) where the judgment has not been given on the
merits of the case; (iii) where the judgment appears on the face of the
proceedings to be founded on an incorrect view of international law or a
refusal to recognize the law of India in cases where such law is applicable;
(iv) where the proceedings in which the judgment was obtained were opposed to
natural justice; (v) where the judgment has been obtained by fraud; or (vi)
where the judgment sustains a claim founded on a breach of any law in force in
India. Section 44A of the Civil Code provides that
3
<PAGE>
where a foreign judgment has been rendered by a court in any country or
territory outside India which the Government of India has by notification
declared to be a reciprocating territory, it may be enforced in India by
proceedings in execution as if the judgment had been rendered by the relevant
court in India. The United States has not been declared by the Government of
India to be a reciprocating territory for purposes of Section 44A.
Accordingly, a judgment of a court in the United States may be enforced in
India only by a suit upon the judgment, not by proceedings in execution. The
suit must be brought in India within three years from the date of the judgment
in the same manner as any other suit filed to enforce a civil liability in
India. It is unlikely that a court in India would award damages on the same
basis as a foreign court if an action is brought in India. Furthermore, it is
unlikely that an Indian court would enforce foreign judgments if it viewed the
amount of damages awarded as excessive or inconsistent with Indian practice. A
party seeking to enforce a foreign judgment in India is required to obtain
approval from the Reserve Bank of India (the "RBI") under the Foreign Exchange
Regulation Act, 1973 ("FERA") to execute such a judgment or to repatriate any
amount recovered. The Company has also been advised by its Indian counsel that
a party may file suit in India against the Company, the directors or the
executive officers as an original action predicated upon the provisions of the
federal securities laws of the United States. To the Company's knowledge, no
such suit has ever been brought in Indian courts.
REPORTS TO SECURITY HOLDERS
Upon consummation of the Offering, the Company will be subject to the
information requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), applicable to foreign private issuers, and in accordance
therewith will file reports, including annual reports on Form 20-F, reports on
Form 6-K and other information with the Securities and Exchange Commission
(the "Commission"). In addition, the Company has agreed in the Underwriting
Agreement relating to the Offering to submit to the Commission quarterly
reports, which will include unaudited quarterly consolidated financial
information, on Form 6-K for the first three quarters of each fiscal year and
to file its annual report on Form 20-F within the time periods prescribed
under Section 13 of the Exchange Act for the filing by domestic issuers of
quarterly reports on Form 10-Q and annual reports on Form 10-K, respectively.
Such reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the regional offices of the Commission at Seven World Trade Center,
13th Floor, New York, New York 10048; Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. The
Commission also maintains a web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants, such as the Company, that make electronic filings with the
Commission. As a foreign private issuer, the Company will be exempt from the
rules under the Exchange Act prescribing the furnishing and content of proxy
statements, and its executive officers, directors and principal shareholders
are exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act.
The Company will furnish the Depositary referred to under "Description of
American Depositary Shares" with annual reports, which will include annual
audited consolidated financial statements prepared in accordance with U.S.
GAAP, and quarterly reports, which will include unaudited quarterly
consolidated financial information prepared in accordance with U.S. GAAP. The
Depositary has agreed with the Company that, upon the Company's request, it
will promptly mail such reports to all registered holders of ADSs. The Company
will also furnish to the Depositary all notices of shareholders' meetings and
other reports and communications that are made generally available to
shareholders. The Depositary will arrange for the mailing of such documents to
record holders of ADSs. See "Description of American Depositary Shares" and
"Additional Information."
4
<PAGE>
SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
Prospectus. The following summary is qualified in its entirety by the more
detailed information, including "Risk Factors" and consolidated financial
statements and notes thereto, appearing elsewhere in this Prospectus. Except as
otherwise indicated, the information contained in this Prospectus makes certain
assumptions. First, this Prospectus assumes the effectiveness of the Company's
2-for-1 stock split by means of a stock dividend which the Company declared on
December 20, 1998, with a record date of March 5, 1999. The Company's Equity
Shares will trade on the Indian Stock Exchanges on a post-stock split basis
beginning February 20, 1999. Second, this Prospectus assumes that all stock
purchase rights issued under the Company's Employees Stock Offer Plan have been
exercised. Such exercises are scheduled to occur prior to the effective date of
the Offering. Third, this Prospectus assumes no exercise of the Underwriters'
over-allotment option.
The Company
Infosys Technologies Limited ("Infosys" or the "Company"), one of India's
leading information technology ("IT") services companies, utilizes an extensive
non-U.S. based ("offshore") infrastructure to provide managed software
solutions to clients worldwide. Headquartered in Bangalore, India, the Company
has 11 state-of-the-art offshore software development facilities located
throughout India that enable it to provide high quality, cost-effective
services to clients in a resource-constrained environment. The Company's
services, which may be offered on a fixed-price, fixed-time frame or time-and-
materials basis, include custom software development, maintenance (including
Year 2000 conversion) and re-engineering services as well as dedicated offshore
software development centers ("OSDCs") for certain clients. In each of its
service offerings, the Company assumes full project management responsibility
in order to strengthen client relationships, offer higher value-added services
and enhance its profitability. In addition, the Company develops and markets
certain Company-owned software products. As a result of its extensive network
of offshore software development facilities, its quality systems, its
disciplined processes and its significant investment in people, the Company has
built a platform from which it has been able to achieve significant growth to
date. The Company completed its initial public offering on the Bangalore Stock
Exchange in 1993. From fiscal 1994 to fiscal 1998, the Company experienced
compound annual revenue and net income growth rates of 63.6% and 46.8%,
respectively, and grew from approximately 480 IT professionals to approximately
2,200.
Through its worldwide sales headquarters in Fremont, California and 16 other
sales offices located in the United States, Canada, the United Kingdom,
Germany, Japan and India, the Company markets its services to large IT-
intensive businesses. During the fiscal year ended March 31, 1998, the Company
derived 82.3% of its revenues from North America, 9.0% from Europe and 2.6%
from India. While the Company derives its revenues primarily from the United
States, Infosys maintains a diversified client base, with its largest client
representing 10.5% of fiscal 1998 revenues. As of December 31, 1998, the
Company had approximately 130 clients. This diversified client base is
comprised primarily of Fortune 500 companies and other multinational companies.
Clients include Bell Atlantic Corporation, NCR Corporation, Nordstrom, Inc.,
Southern California Edison Company, Goldman, Sachs & Co., Northern Telecom
Limited, Salomon S.A. and Toshiba Corporation. During fiscal 1998 and for the
nine months ended December 31, 1998, these clients accounted for 34.8% and
28.7%, respectively, of the Company's revenues. As a result of its commitment
to quality and client service, the Company enjoys a high level of repeat
business. For fiscal 1997 and 1998, existing clients from the previous fiscal
year generated approximately 82.3% and 83.1%, respectively, of the Company's
revenues.
5
<PAGE>
The Company was incorporated in 1981 by seven founders who shared a vision to
build a world class IT services organization based upon the principles of
leadership, innovation and integrity. Six of these original founders have
remained with the Company and, together with other members of the Company's
management council, have pursued their vision by focusing on the following key
strategies:
. Pursue World Class Operating Model. Management believes that one of the
most critical factors to the Company's success has been its commitment to
pursue the highest quality standards in all aspects of its business. In
its services and operations, the Company achieves quality through
rigorous adherence to highly evolved processes, having been certified
under ISO 9001 and TickIT. In addition, the Company has been measured
against the Capability Maturity Model, a software specific total quality
management model that was developed by the Software Engineering Institute
of Carnegie Mellon University (the "Capability Maturity Model") and
defines five levels of process maturity for a software organization.
Infosys has been certified at Level 4, a level achieved by only 2% of the
more than 1,000 software companies tested under the Capability Maturity
Model. Similarly, Infosys also adheres to high quality standards in its
investor relations. For example, the Company was one of the first public
Indian companies to adopt U.S. GAAP reporting in fiscal 1995 and
quarterly audited Indian financial statements in fiscal 1998. In
recognition of its efforts, the Company was voted "Best Managed Company"
in India by Asiamoney in each of the last two years, was selected as the
"Company of the Year" by The Economic Times Awards for Corporate
Excellence and was awarded the Silver Shield in each of the last three
years by the Institute of Chartered Accountants of India as the Indian
company with the best presentation of financial statements by a non-
financial company.
. Invest Heavily in Human Resources. The Company invests heavily in its
personnel by adopting progressive employee-oriented practices, fostering
a collegial atmosphere and informal culture, offering challenging
assignments and ongoing training and providing one of the first stock
option plans adopted by a public Indian company. As a result, management
believes the Company has become one of the most sought after employers
for Indian engineering graduates and that its attrition rate is
significantly below the industry average. As evidence of this, during
fiscal 1998, the Company received approximately 70,870 job applications,
tested approximately 21,350 applicants, interviewed approximately 5,800
and extended job offers to approximately 1,790, of whom approximately
1,300 accepted. Since India is home to the world's second largest
population of English-speaking technical talent, management believes that
its ability to recruit is a significant competitive advantage.
. Focus on Managed Software Solutions. The Company is dedicated to
providing managed software solutions, many of which are offered on a
fixed-price, fixed-time frame basis. By taking full project management
responsibility on every project, the Company enables its clients to
receive high quality, cost-effective solutions with lower risk. Such
services offer the Company the opportunity to build client confidence
with the potential benefit of enhanced margins.
. Capitalize on Well-Established Offshore Development Model. As one of the
pioneers of the offshore development model, the Company has made
significant investments in its infrastructure and has developed the
advanced processes and expertise necessary to manage and successfully
execute projects in multiple locations. As a result, the Company is able
to execute approximately 80% of its project work in India while
maintaining high levels of client satisfaction.
. Maintain Disciplined Focus on Business and Client Mix. Infosys provides a
wide range of IT services and maintains a disciplined focus on its
business mix in an effort to avoid service or client concentration.
. Pursue Growth Opportunities. As part of its growth strategy, the Company
intends to: (i) broaden its service offerings by continuously evaluating
emerging technologies, particularly in the areas of packaged applications
implementation, e-commerce and Internet/intranet services; (ii) increase
business with existing clients by both increasing the volume and scope of
its projects and expanding the breadth of its service offerings; (iii)
develop new clients; (iv) increase revenue per IT professional by
building expertise in vertical markets and refining its software
development tools and methodologies; (v) expand and diversify its base of
IT professionals by building new facilities near large pools of talent
and expanding its recruiting from other disciplines; and (vi) pursue
selective strategic acquisitions.
6
<PAGE>
Worldwide and Indian Software Services Market
Dataquest has estimated that the worldwide market for IT consulting,
development, integration and outsourcing will increase to $291 billion in 2001
from $177 billion in 1998. Simultaneously with this significant increase in
demand for IT services, the supply of qualified IT professionals has decreased
in most developed countries, particularly the United States, Western Europe and
Japan. According to the United States Department of Education, from 1986 to
1995, the number of bachelor degrees in computer science awarded annually at
U.S. universities fell by 41.7%, from 41,889 to 24,404. This shortage of IT
professionals, along with recent advances in telecommunications, has led to the
increasing acceptance and use of offshore IT service providers and to the
growing globalization of the IT services market.
According to a survey of U.S. software services vendors conducted by the
World Bank, India is the leading offshore destination for companies seeking to
outsource software development or other IT projects. The increased popularity
of and rapid growth in India's software services market can be attributed to
three key factors. First, India has a large, highly skilled labor pool that is
available at a relatively low labor cost. With over four million engineers,
India ranks second only to the United States as the country with the largest
population of English-speaking technical personnel. In contrast to the
declining number of computer science degrees awarded annually in the United
States, according to India's National Association of Software and Service
Companies ("NASSCOM"), approximately 68,000 engineers graduate annually from
the more than 1,800 engineering and technical institutes in India. Furthermore,
according to Software Productivity Research, the average annual wage for
software professionals in India is approximately 15% of the average U.S. rate.
Second, Indian IT firms have developed the capability to deliver a high quality
product. Many of India's leading software and IT services companies have been
measured against international quality standards and have received
certification and recognition for their processes and quality controls.
Finally, recent Indian governments have recognized the importance of the IT
sector to the Indian economy and have implemented policies and a variety of
incentives to stimulate growth in this sector. As a result of these factors,
according to NASSCOM, India's export revenues from software, including software
services, are projected to reach $4.0 billion in fiscal 2000, up from
approximately $1.8 billion in fiscal 1998.
The Company was organized under the laws of India in July 1981 as Infosys
Consultants Private Limited. The Company's principal executive offices are
located at Electronics City, Hosur Road, Bangalore, Karnataka, India 561 229,
and its telephone number at that address is +91-80-852-0261.
The Offering
<TABLE>
<S> <C>
Securities offered by
the Company............ 1,800,000 ADSs representing 900,000 Equity Shares
Equity Shares to be
outstanding after the
Offering............... 32,934,400 Equity Shares (1)
Use of proceeds......... For capital expenditures to expand the Company's
facilities and telecommunications infrastructure and
for other general corporate purposes, including working
capital. See "Use of Proceeds."
Dividend policy......... Consistent with many Indian public companies, the
Company has declared and paid dividends. The
declaration, payment and amount of dividends are
subject to the recommendation of the Company's Board of
Directors and the approval of its shareholders. Holders
of Equity Shares or ADSs will be entitled to dividends
paid in respect thereof. See "Dividend Policy" and
"Description of American Depositary Shares--Dividends,
Other Distributions and Rights."
Proposed Nasdaq National
Market symbol.......... INFY
</TABLE>
- --------
(1) Based on the number of Equity Shares outstanding as of February 8, 1999.
Includes 668,700 Equity Shares allocated to employees subject to vesting
provisions and 208,800 Equity Shares held by the trust responsible for
management of the Company's 1994 Employees Stock Offer Plan (the "ESOP")
which are reserved for issuance upon the exercise of stock purchase rights
to be granted by such trust in the future. See "Management--Benefit Plans."
7
<PAGE>
The following summary consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The information
presented below assumes the effectiveness of the Company's 2-for-1 stock split
by means of a stock dividend which the Company declared on December 20, 1998,
with a record date of March 5, 1999. The Company's Equity Shares will trade on
the Indian Stock Exchanges on a post-stock split basis beginning February 20,
1999.
Summary Consolidated Financial Data
(In thousands, except per Equity Share data)
<TABLE>
<CAPTION>
Nine Months
Fiscal Year Ended March 31, Ended December 31,
-------------------------------------- -------------------
1994 1995 1996 1997 1998 1997 1998
------ ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income
Data (1):
Revenues................ $9,534 $18,105 $26,607 $39,586 $68,330 $ 48,412 $ 86,101
Cost of revenues........ 5,621 10,606 15,638 22,615 40,157 28,280 47,002
------ ------- ------- ------- ------- --------- ---------
Gross profit............ 3,913 7,499 10,969 16,971 28,173 20,132 39,099
Operating expenses:
Selling, general and
administrative
expenses............. 1,315 3,344 4,350 7,010 13,225 9,108 13,707
Amortization of
deferred stock
compensation expense
(2).................. -- 46 361 768 2,567 2,105 2,404
------ ------- ------- ------- ------- --------- ---------
Total operating ex-
penses.............. 1,315 3,390 4,711 7,778 15,792 11,213 16,111
------ ------- ------- ------- ------- --------- ---------
Operating income........ 2,598 4,109 6,258 9,193 12,381 8,919 22,988
Other income, net....... 322 747 1,460 769 801 606 1,212
------ ------- ------- ------- ------- --------- ---------
Income before income
taxes.................. 2,920 4,856 7,718 9,962 13,182 9,525 24,200
Provision for income
taxes (3).............. 250 893 894 1,320 770 977 3,532
Subsidiary preferred
stock dividends (4).... -- -- -- -- 68 34 151
------ ------- ------- ------- ------- --------- ---------
Net income.............. $2,670 $ 3,963 $ 6,824 $ 8,642 $12,344 $ 8,514 $ 20,517
====== ======= ======= ======= ======= ========= =========
Earnings per Equity
Share (5):
Basic................. $0.10 $0.14 $0.24 $0.30 $0.41 $0.29 $0.67
Diluted............... $0.10 $0.14 $0.23 $0.29 $0.41 $0.28 $0.67
Equity Shares used in
computing earnings per
Equity Share (5):
Basic................. 26,816 28,292 29,034 29,036 29,788 29,416 30,540
Diluted............... 26,816 28,376 29,284 29,704 30,404 30,260 30,625
Cash dividend per Equity
Share (6).............. $0.03 $0.04 $0.04 $0.04 $0.07 $0.02 $0.03
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-----------------------
Actual As Adjusted (7)
------- ---------------
<S> <C> <C>
Balance Sheet Data (1):
Cash and cash equivalents............................... $22,798 $ 68,729
Total assets............................................ 76,582 122,513
Total long-term debt.................................... -- --
Total shareholders' equity.............................. 63,265 109,196
</TABLE>
- --------
(1) The functional currency of the Company is the Indian rupee. For U.S. GAAP
reporting, the Company's financial statements that are prepared in rupees
are translated into U.S. dollars using the average monthly exchange rate
for revenues and expenses and the exchange rate at the end of the reporting
period for assets and liabilities. In addition, the consolidated financial
statements through the nine months ended December 31, 1998 include the
results of the Company's formerly majority-owned subsidiary, Yantra. Prior
to October 20, 1998, the Company owned a majority of
8
<PAGE>
Footnotes continued from previous page
the voting stock of Yantra. As a result, all of Yantra's operating losses
through October 20, 1998 were recognized in the Company's consolidated
financial statements. For fiscal 1998 and for the nine months ended
December 31, 1998, the Yantra losses recognized in the Company's
consolidated financial statements were $1.6 million and $2.0 million,
respectively. On October 20, 1998, the Company sold a portion of the Yantra
shares held by the Company, thereby reducing the Company's interest to less
than one-half of the voting stock of Yantra. As a result, Yantra's results
after October 20, 1998 are not recognized in the Company's consolidated
financial statements under U.S. GAAP. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Investment in
Yantra Corporation " and "--Principles of Currency Translation."
(2) In September 1994, the Company adopted the ESOP. Indian GAAP does not
require the Company to recognize a compensation expense in connection with
the grant of stock purchase rights to purchase Equity Shares under the ESOP
with an exercise price less than the market price of the Equity Shares on
the date of grant. However, under U.S. GAAP, the difference between the
exercise price and the market price on the date of grant is required to be
treated as a non-cash compensation expense and amortized over the
applicable vesting period of the Equity Shares underlying the stock
purchase rights. In fiscal 1998, the Company recognized $2.6 million in
compensation expense in connection with stock purchase rights granted under
the ESOP, including a compensation expense of $1.6 million recognized in
the third quarter of fiscal 1998. Charges were higher in that quarter
because Equity Shares issued to participants in the ESOP as part of a
declared stock dividend were not subject to vesting, and accordingly, the
compensation expense for such Equity Shares was accelerated in one quarter
rather than amortized over the remaining vesting period. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Deferred Stock Compensation Expense."
(3) The Company benefits from certain significant tax incentives provided to
software firms under the Indian tax laws, which have historically resulted
in an effective tax rate for the Company well below statutory rates. See
"Risk Factors--Effect of Deferred Stock Compensation Expense Under U.S.
GAAP; Loss Expected to be Reported for Fourth Quarter of Fiscal 1999," "--
Risks Related to Investments in Indian Securities" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Income Tax Matters."
(4) Represents accrued dividends on preferred stock issued in September 1997 by
the Company's formerly majority-owned subsidiary, Yantra. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Investment in Yantra Corporation."
(5) All earnings per share calculations have been computed per Equity Share,
each of which is equivalent to two of the ADSs offered hereby. As of
December 31, 1998, after giving effect to the Company's stock dividend
declared in December 1998, the Company's outstanding Equity Shares included
877,500 Equity Shares held by the trust responsible for management of the
ESOP. Of such shares, 668,700 were allocated to employees subject to
vesting provisions and 208,800 were reserved for future grants. None of
such shares have been included in the basic earnings per share
calculations, and only the 668,700 Equity Shares allocated to employees
have been included in the diluted earnings per share calculations.
(6) It is customary for public companies in India to pay cash dividends,
although the amount may vary. Dividends are declared in Indian rupees.
Amounts presented have been translated into U.S. dollars, and historical
amounts reflect dividends paid per Equity Share, each of which is
equivalent to two ADSs offered hereby. See "Dividend Policy."
(7) Adjusted to give effect to the sale by the Company of 1,800,000 ADSs
(representing 900,000 Equity Shares) offered hereby and the application of
the estimated net proceeds therefrom at an assumed offering price per ADS
of $27.88. The Company has sought and received approval from its
shareholders and the Government of India for an offering with aggregate
proceeds of up to $75 million, inclusive of the Underwriters' over-
allotment option. See "Use of Proceeds" and "Capitalization."
9
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus. The following risk factors should be considered carefully
in evaluating the Company and its business before purchasing the ADSs offered
hereby.
Management of Growth
The Company has experienced significant growth in recent periods. The
Company's revenues increased 77.9% in the nine months ended December 31, 1998
as compared to the nine months ended December 31, 1997. As of December 31,
1998, the Company employed approximately 3,000 IT professionals worldwide with
11 software development facilities in India as compared to approximately 2,050
with nine facilities as of December 31, 1997 and 1,240 with six facilities as
of December 31, 1996. In fiscal 1998, the Company approved major expansions to
its existing facilities and the building of new facilities. The Company's
growth is expected to place significant demands on its management and other
resources and will require the Company to continue to develop and improve its
operational, financial and other internal controls, both in India and
elsewhere. In particular, continued growth increases the challenges involved
in: recruiting and retaining sufficient skilled technical, marketing and
management personnel; providing adequate training and supervision to maintain
the Company's high quality standards; and preserving the Company's culture and
values and its entrepreneurial environment. The Company's inability to manage
its growth effectively could have a material adverse effect on the quality of
the Company's services and projects, its ability to attract clients as well as
skilled personnel, its business prospects and its results of operations and
financial condition. See "Use of Proceeds," "Business--Growth Strategy" and
"--Facilities."
Potential Fluctuations in Future Operating Results
The Company's operating results historically have fluctuated and may
fluctuate in the future depending on a number of factors, including: the size,
timing and profitability of significant projects; the proportion of services
that are performed at client sites rather than at the Company's offshore
facilities; the accuracy of estimates of resources and time required to
complete ongoing projects, particularly projects performed under fixed-price,
fixed-time frame contracts; a change in the mix of services provided to its
clients or in the relative proportion of services and product revenues; the
timing of tax holidays and other Government of India incentives; the effect of
seasonal hiring patterns and the time required to train and productively
utilize new employees; the size and timing of facilities expansion;
unanticipated increases in wage rates; the Company's success in expanding its
sales and marketing programs; and currency exchange rate fluctuations and
other general economic factors. A high percentage of the Company's operating
expenses, particularly personnel and facilities, are fixed in advance of any
particular quarter. As a result, unanticipated variations in the number and
timing of the Company's projects or in employee utilization rates may cause
significant variations in operating results in any particular quarter. The
Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. Due to all of the foregoing factors, it is
possible that in some future quarter the Company's operating results may be
below the expectations of public market analysts and investors. In such event,
the market price of the Equity Shares and ADSs would likely be materially
adversely affected. See "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Effect of Deferred Stock Compensation Expense Under U.S. GAAP; Loss Expected
to be Reported for Fourth Quarter of Fiscal 1999
The Company's reported income under U.S. GAAP (but not Indian GAAP) has been
and will continue to be affected by the grant of stock purchase rights under
the Company's ESOP. Under the terms of the ESOP, employees are granted rights
to purchase Equity Shares at a substantial discount to the current market
value. Such grants require the Company to record non-cash compensation
expenses under U.S. GAAP, amortized over
10
<PAGE>
the vesting period of the stock purchase rights. As of December 31, 1998,
208,800 stock purchase rights remained to be granted. If the market price of
the Equity Shares increases materially, the Company would be required to
record a significantly increased compensation expense in connection with the
grant of future stock purchase rights to purchase Equity Shares under the
ESOP, which would adversely affect the Company's reported operating results
under U.S. GAAP.
Stock dividends declared by the Company affect the timing for the
recognition of deferred stock compensation expense. Historically, when the
Company has declared a stock dividend, the dividend shares distributed to ESOP
participants have not been subject to vesting. As a result, a portion of the
compensation expense recognized under U.S. GAAP is accelerated into the period
in which the stock dividend is made rather than amortized over the vesting
period. This occurred in the third quarter of fiscal 1998, when the Company
declared a stock dividend and consequently recognized a substantial
compensation expense for such quarter. This will occur again in the fourth
quarter of fiscal 1999, pursuant to a scheduled stock dividend declared on
December 20, 1998. As a result, the Company expects to recognize a deferred
stock compensation expense in the approximate amount of $13.7 million for the
fourth quarter of fiscal 1999 and $16.1 million for fiscal 1999. The size of
this charge may cause the Company to report negative operating income and
negative net income for the fourth quarter of fiscal 1999 for purposes of U.S.
GAAP. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Deferred Stock Compensation Expense."
Risks Related to Investments in Indian Securities
The Company is incorporated in India, and substantially all of its assets
and a substantial majority of employees are located in India. Consequently,
the Company's performance and the market price of the ADSs will be affected by
changes in exchange rates and controls, interest rates, Government of India
policies, including taxation policy, as well as political, social and economic
developments affecting India.
Political and Economic Environment. During the past decade and in particular
since 1991, the Government of India has pursued policies of economic
liberalization, including significantly relaxing restrictions on the private
sector. Nevertheless, the role of the Indian central and state Governments in
the Indian economy as producers, consumers and regulators has remained
significant. Additionally, since 1996, the Government of India has changed
three times. The current Government of India, formed in March 1998, has
announced policies and taken initiatives that support the continued economic
liberalization policies that have been pursued by the previous governments and
has set up a special IT task force to promote the IT industry. However, the
rate of economic liberalization could change, and specific laws and policies
affecting IT companies, foreign investment, currency exchange rates and other
matters affecting investment in the Company's securities could change as well.
Further, there can be no assurance that the liberalization policies will
continue in the future. A significant change in the Government of India's
economic liberalization and deregulation policies could adversely affect
business and economic conditions in India generally and the Company's business
in particular. On May 13, 1998, the United States imposed economic sanctions
against India in response to India's testing of nuclear devices. While the
economic sanctions imposed on India to date have not had a material impact on
the Company, there can be no assurance that additional economic sanctions of
this nature will not be imposed, or that such sanctions will not have a
material adverse effect on the Company's business or on the markets for its
Equity Shares in India and ADSs in the United States. Furthermore, financial
turmoil in certain Asian countries, Russia and elsewhere in the world has
affected market prices in the world's securities markets, including the United
States and Indian markets. Continued or increased financial downturns in these
countries could cause further decreases in securities prices on the United
States and Indian exchanges, including the market prices of the Company's
Equity Shares and the ADSs. Southeast Asia has from time to time experienced
instances of civil unrest and hostilities among neighboring countries. Events
of this nature in the future could influence the Indian economy and could have
a material adverse effect on the market for securities of Indian companies and
on the business of the Company.
Government of India Incentives and Regulation. The Company benefits from a
variety of incentives given to software firms in India, such as relief from
import duties on hardware, a tax exemption for income derived from software
exports, and tax holidays and infrastructure support for companies, such as
Infosys, operating in
11
<PAGE>
specially designated "Software Technology Parks." There can be no assurance
that these incentives will be provided in the future. Further, there is a risk
that changes in tax rates or laws affecting foreign investment, currency
exchange rates or other regulations will render the Government of India's
regulatory scheme less favorable to the Company and could adversely affect the
market price of the ADSs. Should the regulations and incentives promulgated by
the Government of India become less favorable to the Company, the Company's
results of operations and financial condition could be adversely affected. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Income Tax Matters."
Restrictions on Foreign Investment. Foreign investment in Indian securities
is generally regulated by FERA. In certain emerging markets, including India,
Global Depositary Shares and ADSs may trade at a discount or premium, as the
case may be, to the underlying shares, in part because of restrictions on
foreign ownership of the underlying shares. In addition, under current Indian
laws and regulations, the Depositary cannot accept deposits of outstanding
Equity Shares and issue ADRs evidencing ADSs representing such Equity Shares.
Therefore, a holder of ADSs who surrenders ADSs and withdraws Equity Shares is
not permitted subsequently to deposit such Equity Shares and obtain ADSs nor
would a holder to whom such Equity Shares are transferred be permitted to
deposit such Equity Shares. This inability to convert Equity Shares into ADSs
increases the probability that the price of the ADSs will not trade on par
with the price of the Equity Shares as quoted on the Indian Stock Exchanges.
Holders who seek to sell in India any Equity Shares withdrawn from the
depositary facility and to convert the rupee proceeds from such sale into
foreign currency and repatriate such foreign currency from India will have to
obtain RBI approval for each such transaction. Further, under current Indian
regulations and practice, the approval of the RBI is required for the sale of
Equity Shares underlying ADSs by a non-resident of India to a resident of
India as well as for renunciation of rights to a resident of India. There can
be no assurance that any such approval can be obtained. See "Description of
American Depositary Shares," "Restrictions on Foreign Ownership of Indian
Securities" and "Government of India Approvals."
Exchange Rate Fluctuations. The exchange rate between the rupee and the U.S.
dollar has changed substantially in recent years and may fluctuate
substantially in the future. During the four-year period from December 31,
1994 through December 31, 1998, the value of the rupee against the U.S. dollar
declined by approximately 39.5%. For fiscal 1998 and the nine months ended
December 31, 1998, the Company's U.S. dollar-denominated revenues represented
90.0% and 89.2%, respectively, of total revenues. The Company expects that a
majority of its revenues will continue to be generated in U.S. dollars for the
foreseeable future and that a significant portion of the Company's expenses,
including personnel costs as well as capital and operating expenditures, will
continue to be denominated in rupees. Consequently, the Company's results of
operations will be adversely affected to the extent the rupee appreciates
against the U.S. dollar. The Company has sought to reduce the effect of
exchange rate fluctuations on operating results by periodically purchasing
foreign exchange forward contracts to cover a portion of outstanding accounts
receivable. For the first three quarters of fiscal 1999, the Company purchased
foreign exchange forward contracts in an aggregate notional amount of $5.5
million. As of December 31, 1998, the Company had no such forward contracts
outstanding. These contracts typically mature within three months, must be
settled on the day of maturity and may be canceled subject to the payment of
any gains or losses in the difference between the contract exchange rate and
market exchange rate on the date of cancellation. The Company uses these
instruments only as a hedging mechanism and not for speculative purposes.
There can be no assurance that the Company will purchase contracts adequate to
insulate itself from foreign exchange currency risks or that any such
contracts will perform adequately as a hedging mechanism. Devaluations of the
rupee will result in foreign currency translation losses. For example, for
fiscal 1998 and the nine months ended December 31, 1998, the Company's foreign
currency translation losses were approximately $3.5 million and $2.3 million,
respectively. Fluctuations in the exchange rate between the rupee and the U.S.
dollar also will affect the U.S. dollar conversion by the Depositary of any
cash dividends paid in rupees on the Equity Shares represented by the ADSs. In
addition, fluctuations in the exchange rate between the Indian rupee and the
U.S. dollar will affect the U.S. dollar equivalent of the Indian rupee price
of Equity Shares on the Indian Stock Exchanges and, as a result, are likely to
affect the market prices of the ADSs in the United States, and vice versa.
Such fluctuations will also affect the dollar value of the proceeds a holder
would receive upon the sale in India of any Equity Shares withdrawn from the
Depositary under the Depositary Agreement. There can be no assurance that
holders will be able to convert rupee proceeds into U.S. dollars or any other
currency or with respect to the rate at which any such conversion could occur.
See "Exchange Rates" and "Government of India Approvals."
12
<PAGE>
Substantial Investment in New Facilities
The Company has budgeted aggregate capital expenditures of $32.4 million for
the fourth quarter of fiscal 1999 through fiscal 2000 to acquire, build and
equip new facilities. As of December 31, 1998, the Company had contractual
commitments of $6.3 million for such capital expenditures. Since such an
expansion will significantly increase the Company's fixed costs, the Company's
results of operations will be materially adversely affected if the Company is
unable to grow its business proportionately. Although the Company has
successfully developed new facilities in the past, there can be no assurance
that the Company will not encounter cost overruns or project delays in
connection with any or all of the new facilities. Furthermore, there can be no
assurance that future financing for additional facilities, whether within
India or elsewhere, would be available on attractive terms or at all. See "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Business--
Facilities."
Restrictions on U.S. Immigration
The Company's professionals that work on-site at client facilities in the
United States on temporary and extended assignments are typically required to
obtain visas. As of December 31, 1998, substantially all of the Company's
personnel in the United States were working pursuant to H-1B visas (231
persons) or L-1 visas (111 persons). Although there is no limit to new L-1
petitions, there is a limit to the number of new H-1B petitions that the
United States Immigration and Naturalization Service may approve in any
government fiscal year. In years in which this limit is reached, the Company
may be unable to obtain H-1B visas necessary to bring critical Indian IT
professionals to the United States on an extended basis. This limit was
reached in May 1998 for the U.S. government's fiscal year ending September 30,
1998. While the Company anticipated that such limit would be reached prior to
the end of the U.S. government's fiscal year and made efforts to plan
accordingly, there can be no assurance that the Company will continue to be
able to obtain a sufficient number of H-1B visas. Changes in existing U.S.
immigration laws that make it more difficult for the Company to obtain H-1B
and L-1 visas could impair the Company's ability to compete for and provide
services to clients and could have a material adverse effect on the Company's
results of operations and financial condition. See "Business--Human
Resources."
Risks Related to International Operations
While to date all of the Company's software development facilities are
located in India, the Company intends to develop new software development
facilities in other regions, including potentially Southeast Asia, Latin
America and Europe. The Company has not yet made substantial contractual
commitments to develop such new software development facilities, and there can
be no assurance that the Company will not significantly alter or reduce its
proposed expansion plans. The Company's lack of experience with facilities
outside of India subject the Company to further risk with regard to foreign
regulation and overseas facilities management. Increasing the number of
software development facilities and the scope of operations outside of India
subjects the Company to a number of risks, including, among other things,
difficulties relating to administering its business globally, managing foreign
operations, currency exchange rate fluctuations, restrictions against the
repatriation of earnings, export requirements and restrictions, and multiple
and possibly overlapping tax structures. Such developments could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Business--Facilities."
Dependence on Skilled Personnel; Risks of Wage Inflation
The Company's ability to execute project engagements and to obtain new
clients depends, in large part, on its ability to attract, train, motivate and
retain highly skilled IT professionals, particularly project managers,
software engineers and other senior technical personnel. An inability to hire
and retain additional qualified personnel will impair the Company's ability to
bid for or obtain new projects and to continue to expand its business. The
Company believes that there is significant competition for IT professionals
with the skills necessary to perform the services offered by the Company.
There can be no assurance that the Company will be
13
<PAGE>
able to assimilate and manage new IT professionals effectively. Any increase
in the attrition rates experienced by the Company, particularly the rate of
attrition of experienced software engineers and project managers, would
adversely affect the Company's results of operations and financial condition.
There can be no assurance that the Company will be successful in recruiting
and retaining a sufficient number of replacement IT professionals with the
requisite skills to replace those IT professionals who leave. Further, there
can be no assurance that the Company will be able to redeploy and retrain its
IT professionals to keep pace with continuing changes in IT, evolving
standards and changing client preferences. Historically, the Company's wage
costs in India have been significantly lower than wage costs in the United
States for comparably skilled IT professionals. However, wage costs in India
are presently increasing at a faster rate than those in the United States. In
the long-term, wage increases may have an adverse effect on the Company's
profit margins unless the Company is able to continue increasing the
efficiency and productivity of its professionals. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Effects of
Inflation."
Client Concentration
The Company has derived and believes that it will continue to derive a
significant portion of its revenues from a limited number of large corporate
clients. For fiscal 1998 and the nine months ended December 31, 1998, the
Company's largest client accounted for 10.5% and 6.7%, respectively, of the
Company's revenues and its five largest clients accounted for 35.1% and 29.2%,
respectively, of the Company's revenues. The volume of work performed for
specific clients is likely to vary from year to year, particularly since the
Company is usually not the exclusive outside service provider for its clients.
Thus, a major client in one year may not provide the same level of revenues in
any subsequent year. The loss of any large client could have a material
adverse effect on the Company's results of operations and financial condition.
Since many of the contracted projects are critical to the operations of its
clients' businesses, any failure to meet client expectations could result in a
cancellation or nonrenewal of a contract. However, there are a number of
factors other than the Company's performance that could cause the loss of a
client and that may not be predictable. For example, in 1995, the Company
chose to reduce significantly the services provided to its then-largest client
rather than to accept the price reductions and increased Company resources
sought by such client. In other circumstances, the Company reduced
significantly the services provided to its client when the client either
changed its outsourcing strategy by moving more work in-house and reducing the
number of its vendors, or replaced its existing software with packaged
software supported by the licensor. There can be no assurance that the same
circumstances may not arise in the future.
Fixed-Price, Fixed-Time Frame Contracts
As a core element of its business strategy, the Company continues to offer a
significant portion of its services on a fixed-price, fixed-time frame basis,
rather than on a time-and-materials basis. Although the Company uses specified
software engineering processes and its past project experience to reduce the
risks associated with estimating, planning and performing fixed-price, fixed-
time frame projects, the Company bears the risk of cost overruns, completion
delays and wage inflation in connection with these projects. The Company's
failure to estimate accurately the resources and time required for a project,
future rates of wage inflation and currency exchange rates or its failure to
complete its contractual obligations within the time frame committed could
have a material adverse effect on the Company's results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview."
Infrastructure and Potential Disruption in Telecommunications
A significant element of the Company's business strategy is to continue to
leverage its various software development centers in Bangalore, Bhubaneshwar,
Chennai, Mangalore and Pune, India and to expand the number of such centers in
India as well as outside India. The Company believes that the use of a
strategically located network of software development centers will provide the
Company with cost advantages, the ability to attract highly skilled personnel
in various regions, the ability to service clients on a regional and global
basis and the ability to provide 24-hour service to its clients. Pursuant to
its service delivery model, the Company must
14
<PAGE>
maintain active voice and data communications between its main offices in
Bangalore, the offices of its clients and its other software development
facilities. Although the Company maintains redundant software development
facilities and satellite communications links, any significant loss of the
Company's ability to transmit voice and data through satellite and telephone
communications would have a material adverse effect on the Company's results
of operations and financial condition. See "--Year 2000 Compliance,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance" and "Business--The Infosys Offshore
Development Model."
Expected Decrease in Demand for Year 2000 Services
Year 2000 conversion projects represented 23.3% and 21.4% of the Company's
revenues for fiscal 1998 and the nine months ended December 31, 1998,
respectively. The Company expects that Year 2000 conversion projects will
continue to represent a material portion of the Company's business in the
remainder of fiscal 1999 and 2000. The high demand for these time-sensitive
projects results in pricing and margins that are favorable to the Company. The
Company believes that demand for Year 2000 conversion services will begin to
diminish rapidly after fiscal 1999 as many Year 2000 conversion solutions are
implemented and tested. There can be no assurance that the Company will be
successful in generating additional business from its Year 2000 clients for
other services, that the Company will be successful in replacing Year 2000
conversion projects with other projects as the Year 2000 business declines or
that margins from any such future projects will be comparable to those
obtained from Year 2000 conversion projects. There is an additional risk that
the Company may be unable to retrain and redeploy IT professionals who are
currently assigned to Year 2000 conversion projects involving legacy computer
systems after such projects are completed. Furthermore, as Year 2000
conversion projects are completed, there is a likelihood of increased
competition for other types of projects from firms formerly dependent on Year
2000 business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview" and "Business--Services and
Products."
Competition
The market for IT services is highly competitive. Competitors include IT
services companies, large international accounting firms and their consulting
affiliates, systems consulting and integration firms, temporary employment
agencies, other technology companies and client in-house MIS departments.
Competitors include international firms as well as national, regional and
local firms located in the United States, Europe and India. The Company
expects that future competition will increasingly include firms with
operations in other countries, potentially including countries with lower
personnel costs than those prevailing in India. Part of the Company's
competitive advantage has historically been a cost advantage relative to
service providers in the United States and Europe. Since wage costs in India
are presently increasing at a faster rate than those in the United States, the
Company's ability to compete effectively will become increasingly dependent on
its reputation, the quality of its services and its expertise in specific
markets. Many of the Company's competitors have significantly greater
financial, technical and marketing resources and generate greater revenue than
the Company, and there can be no assurance that the Company will be able to
compete successfully with such competitors and will not lose existing clients
to such competitors. The Company believes that its ability to compete also
depends in part on a number of factors outside its control, including the
ability of its competitors to attract, train, motivate and retain highly
skilled IT professionals, the price at which its competitors offer comparable
services and the extent of its competitors' responsiveness to client needs.
See "Business--Competition."
Dependence on Key Personnel
The Company's success depends to a significant degree upon the continued
contributions of members of the Company's senior management and other key
research and development and sales and marketing personnel. The Company
generally does not enter into employment agreements with its senior management
and other key personnel that provide for substantial restrictions on such
persons leaving the Company. The loss of any of such persons could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management--Employment Agreements."
15
<PAGE>
Potential Liability to Clients; Risk of Exceeding Insurance Coverage
Many of the Company's contracts involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be
difficult to quantify. Any failure in a client's system could result in a
claim for substantial damages against the Company, regardless of the Company's
responsibility for such failure. Although the Company attempts to limit its
contractual liability for damages arising from negligent acts, errors,
mistakes or omissions in rendering its services, there can be no assurance the
limitations of liability set forth in its service contracts will be
enforceable in all instances or will otherwise protect the Company from
liability for damages. The Company maintains general liability insurance
coverage, including coverage for errors or omissions; however, there can be no
assurance that such coverage will continue to be available on reasonable terms
or will be available in sufficient amounts to cover one or more large claims,
or that the insurer will not disclaim coverage as to any future claim. The
successful assertion of one or more large claims against the Company that
exceed available insurance coverage or changes in the Company's insurance
policies, including premium increases or the imposition of large deductible or
co-insurance requirements, could adversely affect the Company's results of
operations and financial condition.
Risks Associated with Possible Acquisitions
The Company intends to evaluate potential acquisitions and strategic
investments on an ongoing basis. As of the date of this Prospectus, however,
the Company has no understanding, commitment or agreement with respect to any
material future acquisition or investment. Since the Company has not made any
acquisitions in the past, there can be no assurance that the Company will be
able to identify suitable acquisition candidates available for sale at
reasonable prices, consummate any acquisition or successfully integrate any
acquired business into the Company's operations. Further, acquisitions may
involve a number of special risks, including diversion of management's
attention, failure to retain key acquired personnel and clients, unanticipated
events or circumstances, legal liabilities and amortization of acquired
intangible assets, some or all of which could have a material adverse effect
on the Company's results of operations and financial condition. Under Indian
law, except in certain limited circumstances, the Company may not make any
acquisition of or investment in a non-Indian company without RBI and, in most
cases, Government of India approval. Even if the Company does encounter an
attractive acquisition candidate, there can be no assurance that RBI and, if
required, Government of India approval can be obtained.
Risks Related to Software Product Sales
In fiscal 1998, the Company derived 5.9% of its revenues from the sale of
software products. The development of the Company's software products requires
significant investment costs. The markets for the Company's primary software
product are competitive and currently located in developing countries, and
there can be no assurance that such product will continue to be commercially
successful. In addition, there can be no assurance that any new products
developed by the Company will be commercially successful or that the costs of
developing such new products will be recouped. A decrease in the Company's
product revenues or margins could adversely affect the Company's results of
operations and financial condition. Additionally, software product revenues
typically occur in periods subsequent to the periods in which the costs are
incurred for development of such products. There can be no assurance that such
delayed revenues will not cause periodic fluctuations of the Company's results
of operations and financial condition.
Restrictions on Exercise of Preemptive Rights by ADS Holders
Under the Indian Companies Act, 1956 (the "Indian Companies Act"), a company
incorporated in India must offer its holders of Equity Shares preemptive
rights to subscribe and pay for a proportionate number of shares to maintain
their existing ownership percentages prior to the issuance of any new Equity
Shares, unless such preemptive rights have been waived by three-fourths of the
Company's shareholders. U.S. holders of ADSs may be unable to exercise
preemptive rights for Equity Shares underlying ADSs unless a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
is effective with respect to such rights or an exemption
16
<PAGE>
from the registration requirements of the Securities Act is available. The
Company's decision to file a registration statement will depend on the costs
and potential liabilities associated with any such registration statement as
well as the perceived benefits of enabling the holders of ADSs to exercise
their preemptive rights and any other factors the Company considers
appropriate at the time. No assurance can be given that the Company would file
a registration statement under these circumstances. If the Company issues any
such securities in the future, such securities may be issued to the
Depositary, which may sell such securities for the benefit of the holders of
the ADSs. There can be no assurance as to the value, if any, the Depositary
would receive upon the sale of such securities. To the extent that holders of
ADSs are unable to exercise preemptive rights granted in respect of the Equity
Shares represented by their ADSs, their proportional interests in the Company
would be reduced. See "Description of American Depositary Shares."
Intellectual Property Rights
The Company relies upon a combination of non-disclosure and other
contractual arrangements and copyright, trade secret and trademark laws to
protect its proprietary rights in technology. Ownership of software and
associate deliverables created for clients is generally retained by or
assigned to the client, and the Company does not retain an interest in such
software and deliverables. The Company also develops foundation and
application software products, or software "tools," which are licensed to
clients and remain the property of the Company. The Company has obtained
registration of INFOSYS as a trademark in India but not in the United States,
and does not have any patents or registered copyrights in the United States.
The Company currently requires its IT professionals to enter into non-
disclosure and assignment of rights agreements to limit use of, access to and
distribution of its proprietary information. There can be no assurance that
the steps taken by the Company in this regard will be adequate to deter
misappropriation of proprietary information or that the Company will be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights.
Although the Company believes that its services and products do not infringe
upon the intellectual property rights of others, there can be no assurance
that such a claim will not be asserted against the Company in the future.
Assertion of such claims against the Company could result in litigation, and
there can be no assurance that the Company would prevail in such litigation or
be able to obtain a license for the use of any infringed intellectual property
from a third party on commercially reasonable terms. There can be no assurance
that the Company will be able to protect such licenses from infringement or
misuse, or prevent infringement claims against the Company in connection with
its licensing efforts. The Company expects that the risk of infringement
claims against the Company will increase if more of the Company's competitors
are able to obtain patents for software products and processes. Any such
claims, regardless of their outcome, could result in substantial cost to the
Company and divert management's attention from the Company's operations. Any
infringement claim or litigation against the Company could, therefore, have a
material adverse effect on the Company's results of operations and financial
condition. See "Business--Intellectual Property."
Control by Principal Shareholders, Officers and Directors; Anti-Takeover
Provisions
Following the Offering, the Company's officers and directors, together with
members of their immediate families, in the aggregate, will beneficially own
approximately 30.8% of the Company's issued Equity Shares. As a result, such
persons, acting together, will likely still have the ability to exercise
significant control over most matters requiring approval by the shareholders
of the Company, including the election and removal of directors and
significant corporate transactions. Such control by the Company's officers and
directors could delay, defer or prevent a change in control of the Company,
impede a merger, consolidation, takeover or other business combination
involving the Company, or discourage a potential acquiror from making a tender
offer or otherwise attempting to obtain control of the Company. See
"Management" and "Principal Shareholders."
The Indian Companies Act and the Company's Articles of Association (the
"Articles") require that: (i) at least two-thirds of the Company's directors
shall serve for a specified term and shall be subject to re-election by the
Company's shareholders at the expiration of such terms; and (ii) at least one-
third of the Company's directors who are subject to re-election shall be up
for re-election at each annual meeting of the Company's shareholders.
17
<PAGE>
In addition, the Company's Articles provide that Mr. N.R. Narayana Murthy, one
of the Company's principal founders and its Chairman of the Board and Chief
Executive Officer, shall serve as the Company's Chairman of the Board and
shall not be subject to re-election as long as he and his relatives, own at
least 5% of the Company's outstanding equity securities. Furthermore, any
amendment to the Company's Articles would require the affirmative vote of
three-fourths of the Company's shareholders. Finally, foreign investment in
Indian companies is highly regulated. These provisions could delay, defer or
prevent a change in control of the Company, impede a business combination
involving the Company or discourage a potential acquiror from attempting to
obtain control of the Company. See "Risks Related to Investments in Indian
Securities--Restrictions on Foreign Investment," "Management," "Principal
Shareholders" and "Restrictions on Foreign Ownership of Indian Securities."
Year 2000 Compliance
Many existing computer systems, software applications and other control
devices use only two digits to identify a year in the date field, without
considering the impact of the upcoming change in the century. Others do not
correctly process "leap year" dates. As a result, such systems and
applications could fail or create erroneous results unless modified so that
they can correctly process data related to the year 2000 and beyond. While the
Company has evaluated each of its IT services and software products and
believes that each is substantially Year 2000 compliant, there can be no
assurance that the Company's IT services and products are or will ultimately
be Year 2000 compliant. The Company relies on its systems, computer
applications and devices to operate and monitor all major aspects of its
business, including financial systems (such as general ledger, accounts
payable and payroll), customer services, infrastructure, materials requirement
planning, master project scheduling, networks and telecommunications systems.
Although the Company has converted its financial applications software to
programs certified by the suppliers as Year 2000 compliant and is currently in
the process of modifying and upgrading all other affected systems, there can
be no assurance that such modifications and upgrades will be completed in a
timely manner at reasonable costs, or that such modifications and upgrades
will be able to anticipate all of the problems resulting from the actual
impact of the year 2000. The Company relies directly and indirectly on systems
utilized by its suppliers for telecommunications, utilities, electronic
hardware and software applications. Although the Company maintains redundant
software facilities and satellite communications links, any significant loss
of the Company's ability to transmit voice and data through satellite and
telephone communications would have a material adverse effect on the Company's
business, results of operations and financial condition. Any failure of these
third party suppliers to resolve their Year 2000 problems in a timely manner
could disrupt the Company's operations, which could have a material adverse
effect on the Company's business, results of operations and financial
condition. See "--Infrastructure and Potential Disruption in
Telecommunications" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance."
Possible Volatility of ADS Price
Future announcements concerning the Company or its competitors, government
regulations, litigation, quarterly variations in the Company's operating
results or changes in earnings estimates by analysts as well as market
conditions in the technology and emerging growth company sectors, may cause
the ADS market price to fluctuate substantially. For example, stock prices for
many technology companies have fluctuated widely for reasons unrelated to
their operating results. These fluctuations as well as currency fluctuations
and general economic, political and market conditions in both the United
States and India, such as recessions or international currency fluctuations,
may adversely affect the ADS market price. See "Price Range of Equity Shares."
The Indian securities markets are smaller than the securities markets in the
United States and Europe and have experienced volatility from time to time.
The regulation and monitoring of the Indian securities market and the
activities of investors, brokers and other participants differs, in some cases
significantly, from those in the United States and certain European countries.
Indian stock exchanges have experienced problems, including temporary exchange
closures, broker defaults, settlement delays and strikes by brokerage firm
employees, which, if such or similar problems were to continue or recur, could
affect the market price and liquidity of the securities of Indian companies,
including the Equity Shares, in both domestic and international markets.
18
<PAGE>
Absence of Prior U.S. Public Market; Potential Limited Liquidity
Prior to the Offering, there has been no public market for the ADSs or the
Equity Shares in the United States. After the Offering, there will be no
public market for the Equity Shares in the United States. Although ADS holders
are entitled to withdraw the Equity Shares underlying the ADSs from the
Depositary at any time, under current Indian law, Equity Shares may not be re-
deposited into the Depositary. Therefore, the number of outstanding ADSs will
decrease to the extent that Equity Shares are withdrawn from the Depositary,
which may adversely affect the market price and the liquidity of the market
for the ADSs. The public offering price was determined by negotiation between
the Company and the Representatives of the Underwriters and may bear no
relationship to the price at which the ADSs will trade upon completion of the
Offering. Although the ADSs have been approved for quotation on the Nasdaq
National Market subject to official notice of issuance, there can be no
assurance that any active trading market for the ADSs will develop or be
sustained after the Offering, or that the public offering price will
correspond to the price at which the ADSs will trade in the public market
subsequent to the Offering. See "Underwriting."
Equity Shares Eligible for Future Sale
Sales of a substantial number of Equity Shares into the public market
following the Offering (whether on the Indian Stock Exchanges or into the
United States market by conversion of outstanding Equity Shares into ADSs, if
permitted in the future by the Government of India) could adversely affect the
market price of the ADSs. Upon consummation of the Offering, 32,934,400 Equity
Shares will be issued and outstanding, including 900,000 Equity Shares
represented by 1,800,000 ADSs issued in connection with the Offering. Of the
32,034,400 Equity Shares issued and outstanding prior to the issuance of the
ADSs, holders of approximately 10,144,200 Equity Shares (including all shares
held by directors and their families and executive officers) have agreed not
to offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of, or agree to dispose of, any such Equity Shares for a period of 180
days following the date of this Prospectus. NationsBanc Montgomery Securities
LLC may release such shares from the lock-up in its sole discretion at any
time and without prior public announcement. Substantially all of the Equity
Shares that are not subject to such lock-ups will be freely tradeable in India
immediately after the Offering. Upon expiration of the lock-up period (or
earlier with such consent), substantially all of the Equity Shares will be
available for sale on the Indian Stock Exchanges. Sales of substantial amounts
of Equity Shares, or the availability of such shares for sale, could adversely
affect the market price of the ADS. See "Equity Shares Eligible for Future
Sale" and "Underwriting."
Dividend Policy; Effect on Equity Shares Underlying ADSs
Under Indian law, a corporation pays cash dividends upon a recommendation by
the Board of Directors and approval by a majority of the shareholders, who
have the right to decrease but not increase the amount of the dividend
recommended by the Board of Directors. With respect to Equity Shares issued by
the Company during a particular fiscal year (including the Equity Shares
underlying the ADSs issued to the Depositary in connection with the Offering),
cash dividends declared and paid for such fiscal year generally will be
prorated from the date of issuance to the end of such fiscal year. As a
result, holders of ADSs will receive little or no dividend for fiscal 1999.
This disparity in dividend treatment increases the probability that the price
of the ADSs will not trade on par with the price of the Equity Shares as
quoted on the Indian Stock Exchanges and may adversely affect the liquidity of
the ADSs. Although the Company has typically paid cash dividends and has no
current intention to discontinue such dividend payments, there can be no
assurance that any future dividends will be declared or paid or the amount
thereof. See "Dividend Policy," "Description of Equity Shares--Dividends" and
"Taxation--United States Federal Taxation--Dividends."
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,800,000 ADSs to be
sold in the Offering are estimated to be $45.9 million ($53.1 million if the
Underwriters' over-allotment option is exercised in full), assuming a public
offering price of $27.88 per ADS and after deducting the underwriting discount
and estimated offering expenses. The Company has sought and received approval
from its shareholders and the Government of India for an offering with
aggregate proceeds of up to $75 million, inclusive of the Underwriters' over-
allotment option.
The Company currently intends to use the net proceeds from the Offering to
partially fund the expansion of its existing Indian facilities and
telecommunications infrastructure in Bangalore, Bhubaneshwar, Chennai,
Mangalore and Pune and to develop new facilities. For these purposes, the
Company has budgeted for the fourth quarter of fiscal 1999 through fiscal
2000, capital expenditures of $22.4 million to fund the expansion of existing
facilities and additional telecommunications infrastructure in India and $10.0
million to fund development of new facilities outside India. The Company has
not yet made contractual commitments for the majority of its budgeted capital
expenditures, and there can be no assurance that the Company will not
significantly alter or reduce its proposed expansion plans. The Company
intends to use the remaining net proceeds, if any, from the sale of the ADSs
primarily for general corporate purposes, including working capital. Pending
application of the net proceeds as described above, the Company intends to
invest the net proceeds from the Offering in short-term, interest-bearing,
investment-grade securities or interest-bearing deposit accounts. See "Risk
Factors--Substantial Investment in New Facilities" and "Business--Facilities."
DIVIDEND POLICY
Although the amount varies, it is customary for public companies in India to
pay cash dividends. Under Indian law, a corporation pays dividends upon a
recommendation by the Board of Directors and approval by a majority of the
shareholders, who have the right to decrease but not increase the amount of
the dividend recommended by the Board of Directors. Under the Indian Companies
Act, dividends may be paid out of profits of a company in the year in which
the dividend is declared or out of the undistributed profits of previous
fiscal years. In the last three fiscal years, the Company declared an
aggregate of approximately $0.15 per Equity Share, as adjusted to reflect the
Company's stock dividend in December 1998, in cash dividends (equivalent to
approximately $0.075 per ADS). Although the Company has no current intention
to discontinue dividend payments, there can be no assurance that any future
dividends will be declared or paid or that the amount thereof will not be
decreased. Owners of ADSs will be entitled to receive dividends payable in
respect of the Equity Shares represented by such ADSs. The Equity Shares
represented by ADSs will rank pari passu with existing Equity Shares of the
Company in respect of dividends. Cash dividends in respect of the Equity
Shares represented by the ADSs will be paid to the Depositary in rupees and,
except as otherwise described under "Description of American Depositary
Shares--Dividends, Other Distributions and Rights," will be converted by the
Depositary into U.S. dollars and distributed, net of Depositary fees and
expenses, to the holders of such ADSs.
With respect to Equity Shares issued by the Company during a particular
fiscal year (including the Equity Shares underlying the ADSs issued to the
Depositary in connection with the Offering), dividends declared and paid for
such fiscal year generally will be prorated from the date of issuance to the
end of such fiscal year. Once a cash dividend is declared, Equity Shares
entitled to prorated dividends are quoted on the Indian Stock Exchanges at the
same price as Equity Shares entitled to full dividends. However, upon sale of
and payment for Equity Shares entitled to a prorated dividend, the selling
broker will deduct the difference between the full dividend and the prorated
dividend from the sale price of such shares. Holders of ADSs will only receive
dividends prorated from the date of issuance of the underlying Equity Shares
to the end of the fiscal year for which such dividends are declared and paid.
As a result, holders of ADSs will receive little or no dividend for fiscal
1999. Until dividends for fiscal 1999 have been paid, this disparity in
dividend treatment increases the probability that the price of the ADSs will
not trade on par with the price of the Equity Shares as quoted on the Indian
Stock Exchanges. ADSs withdrawn from the Depositary in exchange for the
underlying Equity Shares will receive proceeds reduced by the difference
between the full dividend and the prorated dividend, upon sale of and payment
for such Equity Shares. See "Risk Factors--Dividend Policy; Effect on Equity
Shares Underlying ADSs" and "Description of Equity Shares--Dividends."
20
<PAGE>
PRICE RANGE OF EQUITY SHARES
The Equity Shares are listed and traded on the Indian Stock Exchanges. The
prices for Equity Shares as quoted in the official list of each of the Indian
Stock Exchanges are expressed in Indian rupees. The ADSs to be issued hereby,
each representing one-half of one Equity Share, have been approved for
quotation on the Nasdaq National Market subject to notice of issuance. The
information presented in the table below is adjusted to reflect the Company's
2-for-1 stock splits by means of stock dividends which the Company declared in
October 1997 and December 1998 and represents, for the periods indicated: (i)
the reported high and low sales prices quoted in Indian rupees for the Equity
Shares on the Stock Exchange, Mumbai; (ii) the imputed high and low sales
prices for the Equity Shares based on such high and low sales prices,
translated into U.S. dollars based on the Noon Buying Rate on the last date of
each period presented; and (iii) the average trading volume for the Equity
Shares on the Stock Exchange, Mumbai.
<TABLE>
<CAPTION>
Price per Price per
Equity Share (1) Equity Share
----------------------- ------------- Average Daily
Fiscal Year Ended March Equity Share
31, High Low High Low Trading Volume(2)
- ----------------------- ----------- ----------- ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
1997
First Quarter......... Rs. 179.56 Rs. 117.50 $ 5.07 $ 3.33 5,918
Second Quarter........ 178.94 158.00 5.00 4.42 3,862
Third Quarter......... 191.25 157.75 5.32 4.44 3,644
Fourth Quarter........ 294.06 191.25 8.20 5.33 7,508
1998
First Quarter......... Rs. 478.50 Rs. 253.25 $13.35 $ 7.07 18,224
Second Quarter........ 798.50 481.06 22.07 13.30 17,402
Third Quarter......... 798.50 559.50 20.32 14.24 43,180
Fourth Quarter........ 913.88 540.38 23.12 13.67 38,908
1999
First Quarter......... Rs.1,253.50 Rs. 948.38 $29.50 $22.32 128,918
Second Quarter........ 1,375.00 1,088.88 31.92 25.51 149,324
Third Quarter......... 1,486.88 1,104.88 34.92 26.06 124,890
Fourth Quarter
(through February 8,
1999)................ 2,487.50 1,488.13 58.53 35.75 102,599
</TABLE>
- --------
(1) Data from the Stock Exchange, Mumbai, as reported by Bloomberg. The prices
quoted on the Bangalore Stock Exchange and National Stock Exchange may be
different.
(2) Data from the Stock Exchange, Mumbai, as reported by the Center for
Monitoring the Indian Economy. The average trading volumes reported on the
Bangalore Stock Exchange and National Stock Exchange may be different.
On February 8, 1999, the closing price of Equity Shares on the Stock
Exchange, Mumbai was Rs.2,370.00, equivalent to $55.76 per Equity Share
($27.88 per ADS on an imputed basis), translated at the Noon Buying Rate of
Rs.42.50 per $1.00 on February 8, 1999. See "Risk Factors--Possible Volatility
of ADS Price" for a discussion of factors that may adversely affect the market
price of the ADSs.
As of December 31, 1998, there were approximately 6,600 holders of record of
Equity Shares of the Company, of which 31 had registered addresses in the
United States and held an aggregate of approximately 3,200,000 Equity Shares.
Trading Practices and Procedures on the Indian Stock Exchanges
The Stock Exchange, Mumbai ("BSE") and The National Stock Exchange ("NSE")
together account for more than 80% of the total trading volume on the Indian
stock exchanges. Trading on both of these exchanges is accomplished through
on-line execution. These two stock exchanges handle over 100,000 trades per
day with volumes in excess of Rs.20 billion. Trading is done on a five-day
fixed settlement basis on most of the exchanges, including the BSE and NSE.
Any outstanding amount at the end of the settlement period is settled by
delivery and payment. However, institutional investors are not permitted to
"net out' their transactions and must trade on a delivery basis only.
21
<PAGE>
The BSE permits carry forwards of trades in certain securities by non-
institutional investors with an associated charge. In addition, orders can be
entered with a specified term of validity that may last until the end of the
session, day or settlement period. Dealers must specify whether orders are for
a proprietary account for a client. The BSE specifies certain margin
requirements for trades executed on the exchange, including margins based on
the volume or quantity of exposure that the broker has on the market, as well
as mark-to-market margins payable on a daily basis for all outstanding trades.
Trading on the BSE takes place from 10:00 a.m. to 3:30 p.m. on all weekdays,
except holidays. The NSE does not permit carry forwards of trades. It has
separate margin requirements based on the net exposure of the broker on the
exchange. The NSE trades from 9:30 a.m. until 4:00 p.m. on weekdays, except
holidays. The NSE and BSE also have separate online trading systems and
separate clearing houses.
The BSE was closed from January 11 through January 13, 1993 due to a riot in
Mumbai. It was also closed on March 12, 1993 due to a bomb explosion within
the premises of the BSE. From December 14 through December 23, 1993 the BSE
was closed due to a broker's strike, and from March 20 through March 22, 1995,
the Governing Board of the BSE closed the market due to a default of one of
the broker members. There have been no closures of the Indian Stock Exchanges
in response to "panic" trading or large fluctuations. Most of the Indian Stock
Exchanges do, however, have a specific price band for each security listed.
When a price fluctuation exceeds the specified limits of the price band,
trading of the security is stopped. Such price volatility controls and the
specific price bands are decided by each individual exchange and may differ.
EXCHANGE RATES
Fluctuations in the exchange rate between the Indian rupee and the U.S.
dollar will affect the U.S. dollar equivalent of the Indian rupee price of the
Equity Shares on the Indian Stock Exchanges and, as a result, will likely
affect the market price of the ADSs in the United States, and vice versa. Such
fluctuations will also affect the U.S. dollar conversion by the Depositary of
any cash dividends paid in Indian rupees on the Equity Shares represented by
the ADSs.
The Company's operations are conducted in 20 countries around the world. As
a result, the Company's net income in Indian rupee terms and the presentation
thereof in U.S. dollars can be significantly affected by movements in currency
exchange rates, in particular the movement of the Indian rupee against the
U.S. dollar. See "Risk Factors--Risks Related to Investments in Indian
Securities" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Principles of Currency Translation."
The following table sets forth, for the fiscal years indicated, certain
information concerning the exchange rates between Indian rupees and U.S.
dollars based on the Noon Buying Rate:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, Period End (1) Average (1) (2) High Low
- --------------------------- -------------- --------------- -------- --------
<S> <C> <C> <C> <C>
1994 (3)..................... Rs.31.37 Rs.31.52 Rs.31.75 Rs.31.37
1995 (3)..................... 31.43 31.38 31.90 31.37
1996......................... 34.35 33.47 38.05 31.36
1997......................... 35.88 35.70 36.85 34.15
1998......................... 39.53 37.37 40.40 35.71
1999 (through February 8,
1999)....................... 42.50 42.21 42.95 39.41
</TABLE>
- --------
(1) The Noon Buying Rate at each period end and the average rate for each
period differed from the exchange rates used in the preparation of the
Company's consolidated financial statements.
(2) Represents the average of the Noon Buying Rate on the last day of each
month during the period.
(3) From March 1, 1992 through August 19, 1994, the rupee was not permitted to
fully float and convert on the current account. Instead, a dual exchange
rate mechanism made the rupee partially convertible by permitting
conversion of 60% of the foreign exchange received on a trade or revenue
account at a market-determined rate and the remaining 40% at the official
Government of India rate.
22
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1998, the consolidated
short-term borrowings and capitalization of the Company and the short-term
borrowings and capitalization of the Company adjusted to give effect to the
sale of the 1,800,000 ADSs (representing 900,000 Equity Shares) offered hereby
at an assumed public offering price of $27.88 per ADS and application of the
estimated net proceeds therefrom.
<TABLE>
<CAPTION>
December 31, 1998
--------------------
Actual As Adjusted
------- -----------
(In thousands)
<S> <C> <C>
Short-term borrowings..................................... $ -- $ --
======= ========
Long-term debt, net of current maturities................. $ -- $ --
Shareholders' equity:
Equity Shares, par value $0.32, 50,000,000 shares autho-
rized, 32,034,400 shares issued and outstanding
(32,934,400 shares as adjusted) (1).................... 4,546 4,834
Additional paid-in capital.............................. 44,802 90,445
Deferred compensation--Employees Stock Offer Plan....... (25,814) (25,814)
Accumulated other comprehensive income.................. (9,385) (9,385)
Retained earnings....................................... 49,942 49,942
Loan to Trust........................................... (826) (826)
------- --------
Total shareholders' equity............................ 63,265 109,196
------- --------
Total capitalization................................ $63,265 $109,196
======= ========
</TABLE>
- --------
(1) Based on the number of Equity Shares outstanding as of February 8, 1999,
and assuming effectiveness of (i) the Company's stock split declared on
December 20, 1998 and (ii) the increase to the Company's authorized Equity
Shares from 30,000,000 to 50,000,000 Equity Shares on January 20, 1999.
Includes 668,700 Equity Shares allocated to employees subject to vesting
provisions and 208,800 Equity Shares held by the trust responsible for
management of the Company's ESOP which are reserved for issuance upon the
exercise of stock purchase rights to be granted by such trust in the
future. See "Management--Benefit Plans."
23
<PAGE>
DILUTION
The net tangible book value of the Company as of December 31, 1998 under
U.S. GAAP was $63.3 million, or $0.99 per ADS. "Net tangible book value" per
ADS represents the amount of total tangible assets less total liabilities,
divided by the number of Equity Shares outstanding and adjusting for the ratio
of two ADSs per Equity Share. After giving effect to the net proceeds from the
sale by the Company of the 1,800,000 ADSs representing 900,000 Equity Shares
offered hereby at an assumed public offering price of $27.88 per ADS, the net
tangible book value as of December 31, 1998 would have been $109.2 million, or
$1.66 per ADS. This represents an immediate increase in net tangible book
value of $0.67 per ADS to existing shareholders and an immediate dilution of
$26.22 per ADS to new investors purchasing ADSs. The following table
illustrates the per ADS dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per ADS.......................... $27.88
Net tangible book value per ADS before the Offering.......... $0.99
Increase per ADS attributable to new investors............... 0.67
-----
Pro forma net tangible book value per ADS after the Offering... 1.66
------
Dilution per ADS to new investors.............................. $26.22
======
</TABLE>
The following table sets forth as of December 31, 1998, the number of Equity
Shares purchased from the Company, the total consideration and the average
price per Equity Share paid by the existing holders of Equity Shares and the
price to be paid by the new investors (before deducting the underwriting
discount and estimated offering expenses payable by the Company) on an as
adjusted basis:
<TABLE>
<CAPTION>
ADSs Purchased (1) Total Consideration
------------------- --------------------- Average Price
Number Percent Amount Percent per ADS (1)
--------- --------- ---------- ---------- -------------
(In thousands, except per ADS data)
<S> <C> <C> <C> <C> <C>
Existing shareholders... 64,069 97.3% $ 17,388 25.7% $ 0.27
New investors........... 1,800 2.7 50,184 74.3 27.88
--------- -------- ---------- --------
Total................. 65,869 100.0% $ 67, 572 100.0%
========= ======== ========== ========
</TABLE>
- --------
(1) Prior to the Offering, the Company issued only Equity Shares that have not
been represented by ADSs. Equity Shares purchased and the average price
paid per Equity Share have been converted into ADS equivalents for
comparison purposes.
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per Equity Share data)
The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The consolidated
statements of income data for the fiscal years ended March 31, 1996, 1997 and
1998 and the consolidated balance sheet data as of March 31, 1997 and 1998
have been derived from the consolidated financial statements of the Company
included elsewhere in this Prospectus which have been audited by KPMG Peat
Marwick, India, independent accountants. The consolidated statements of income
data for the years ended March 31, 1994 and 1995 and the consolidated balance
sheet data as of March 31, 1994, 1995 and 1996 were derived from the unaudited
consolidated financial statements, which are not included herein, which were
prepared in accordance with Indian GAAP and have been restated in accordance
with U.S. GAAP. The consolidated balance sheet data as of December 31, 1998
and the consolidated statements of income data for the nine months ended
December 31, 1997 and 1998 are derived from the unaudited consolidated
financial statements included elsewhere in this Prospectus. The unaudited
consolidated financial statements have been prepared on substantially the same
basis as the audited consolidated financial statements and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations
for such periods. Historical results are not necessarily indicative of the
results to be expected in the future, and results of interim periods are not
necessarily indicative of results for the entire year. The information
presented below assumes the effectiveness of the Company's 2-for-1 stock split
by means of a stock dividend which the Company declared on December 20, 1998,
with a record date of March 5, 1999. The Company's Equity Shares will trade on
the Indian Stock Exchanges on a post-stock split basis beginning February 20,
1999.
<TABLE>
<CAPTION>
Nine Months
Ended
Fiscal Year Ended March 31, December 31,
-------------------------------------- ---------------
1994 1995 1996 1997 1998 1997 1998
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income
Data (1):
Revenues................ $9,534 $18,105 $26,607 $39,586 $68,330 $48,412 $86,101
Cost of revenues........ 5,621 10,606 15,638 22,615 40,157 28,280 47,002
------ ------- ------- ------- ------- ------- -------
Gross profit............ 3,913 7,499 10,969 16,971 28,173 20,132 39,099
Operating expenses:
Selling, general and
administrative
expenses............. 1,315 3,344 4,350 7,010 13,225 9,108 13,707
Amortization of
deferred stock
compensation expense
(2).................. -- 46 361 768 2,567 2,105 2,404
------ ------- ------- ------- ------- ------- -------
Total operating ex-
penses.............. 1,315 3,390 4,711 7,778 15,792 11,213 16,111
------ ------- ------- ------- ------- ------- -------
Operating income........ 2,598 4,109 6,258 9,193 12,381 8,919 22,988
Other income, net....... 322 747 1,460 769 801 606 1,212
------ ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 2,920 4,856 7,718 9,962 13,182 9,525 24,200
Provision for income
taxes (3).............. 250 893 894 1,320 770 977 3,532
Subsidiary preferred
stock dividends (4).... -- -- -- -- 68 34 151
------ ------- ------- ------- ------- ------- -------
Net income.............. $2,670 $ 3,963 $ 6,824 $ 8,642 $12,344 $ 8,514 $20,517
====== ======= ======= ======= ======= ======= =======
Earnings per Equity
Share (5):
Basic................. $0.10 $0.14 $0.24 $0.30 $0.41 $0.29 $0.67
Diluted............... $0.10 $0.14 $0.23 $0.29 $0.41 $0.28 $0.67
Equity Shares used in
computing earnings per
Equity Share (5):
Basic................. 26,816 28,292 29,034 29,036 29,788 29,416 30,540
Diluted............... 26,816 28,376 29,284 29,704 30,404 30,260 30,625
Cash dividend per Equity
Share (6).............. $0.03 $0.04 $0.04 $0.04 $0.07 $0.02 $0.03
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31, 1998
-------------------------------------- -----------------------
1994 1995 1996 1997 1998 Actual As Adjusted (7)
------ ------- ------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (1):
Cash and cash equiva-
lents.................. $2,885 $ 8,046 $ 7,769 $ 8,320 $15,419 $22,798 $ 68,729
Total assets............ 9,400 23,051 27,261 32,948 49,718 76,582 122,513
Total long-term debt.... -- 1,398 526 -- -- -- --
Total shareholders' eq-
uity................... 8,852 19,668 23,925 30,640 41,146 63,265 109,196
</TABLE>
- --------
(1) The functional currency of the Company is the Indian rupee. For U.S. GAAP
reporting, the Company's financial statements that are prepared in rupees
are translated into U.S. dollars using the average monthly exchange rate
for revenues and expenses and the exchange rate at the end of the
reporting period for assets and liabilities. In addition, the consolidated
financial statements through the nine months ended December 31, 1998
include the results of the Company's formerly majority-owned subsidiary,
Yantra. Prior to October 20, 1998, the Company owned a majority of the
voting stock of Yantra. As a result, all of Yantra's operating losses
through October 20, 1998 were recognized in the Company's consolidated
financial statements. For fiscal 1998 and for the nine months ended
December 31, 1998, the Yantra losses recognized in the Company's
consolidated financial statements were $1.6 million and $2.0 million,
respectively. On October 20, 1998, the Company sold a portion of the
Yantra shares held by the Company, thereby reducing the Company's interest
to less than one-half of the voting stock of Yantra. As a result, Yantra's
results after October 20, 1998 are not recognized in the Company's
consolidated financial statements under U.S. GAAP. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Investment in Yantra Corporation " and "--Principles of Currency
Translation."
(2) In September 1994, the Company adopted the ESOP. Indian GAAP does not
require the Company to recognize a compensation expense in connection with
the grant of stock purchase rights to purchase Equity Shares under the
ESOP with an exercise price less than the market price of the Equity
Shares on the date of grant. However, under U.S. GAAP, the difference
between the exercise price and the market price on the date of grant is
required to be treated as a non-cash compensation expense and amortized
over the applicable vesting period of the Equity Shares underlying the
stock purchase rights. In fiscal 1998, the Company recognized $2.6 million
in compensation expense in connection with stock purchase rights granted
under the ESOP, including a compensation expense of $1.6 million
recognized in the third quarter of fiscal 1998. Charges were higher in
that quarter because Equity Shares issued to participants in the ESOP as
part of a declared stock dividend were not subject to vesting, and
accordingly, the compensation expense for such Equity Shares was
accelerated in one quarter rather than amortized over the remaining
vesting period. See "Risk Factors--Effect of Deferred Stock Compensation
Expense Under U.S. GAAP; Loss Expected to be Reported for Fourth Quarter
of Fiscal 1999," "--Risks Related to Investments in Indian Securities" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Deferred Stock Compensation Expense."
(3) The Company benefits from certain significant tax incentives provided to
software firms under the Indian tax laws, which have historically resulted
in an effective tax rate for the Company well below statutory rates. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Income Tax Matters."
(4) Represents accrued dividends on preferred stock issued in September 1997
by the Company's subsidiary, Yantra. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Investment in
Yantra Corporation."
(5) All earnings per share calculations have been computed per Equity Share,
each of which is equivalent to two of the ADSs offered hereby. As of
December 31, 1998, after giving effect to the Company's stock dividend
declared in December 1998, the Company's outstanding Equity Shares
included 877,500 Equity Shares held by the trust responsible for
management of the ESOP. Of such shares, 668,700 were allocated to
employees subject to vesting provisions and 208,800 were reserved for
future grants. None of such shares have been included in the basic
earnings per share calculations, and only the 668,700 Equity Shares
allocated to employees have been included in the diluted earnings per
share calculations.
(6) It is customary for public companies in India to pay cash dividends,
although the amount may vary. Dividends are declared in Indian rupees.
Amounts presented have been translated into U.S. dollars and historical
amounts reflect dividends paid per Equity Share, each of which is
equivalent to two ADSs offered hereby. See "Dividend Policy."
(7) Adjusted to give effect to the sale by the Company of 1,800,000 ADSs
(representing 900,000 Equity Shares) offered hereby and the application of
the estimated net proceeds therefrom at an assumed offering price per ADS
of $27.88. The Company has sought and received approval from its
shareholders and the Government of India for an offering with aggregate
proceeds of up to $75 million, inclusive of the Underwriters' over-
allotment option. See "Use of Proceeds" and "Capitalization."
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus and those set forth below.
Overview
Infosys is an India-based IT services company formed in 1981 that utilizes
an extensive offshore infrastructure to provide managed software solutions to
clients worldwide. The Company's services include custom software development,
maintenance (including Year 2000 conversion) and re-engineering services as
well as dedicated OSDCs for certain clients. From fiscal 1994 through fiscal
1998, revenues increased from $9.5 million to $63.8 million, the number of the
Company's IT professionals worldwide increased from approximately 480 to
approximately 2,200, and the number of its India software development centers
increased from two to nine.
The Company's revenues are generated principally from software services
provided on either a time-and-materials or a fixed-price, fixed-time frame
basis. Revenues from services provided on a time-and-materials basis are
recognized in the month that services are provided and costs are incurred.
Revenues from services provided on a fixed-price, fixed-time frame basis are
recognized upon the achievement of specified milestones identified in the
related contracts, which approximates the percentage of completion method.
Cost of completion estimates are subject to periodic revisions. Although from
time to time the Company has revised its project completion estimates, to date
such revisions have not had a material adverse effect on the Company's
operating results or financial condition. Since the Company bears the risk of
cost overruns and inflation with respect to its fixed-price, fixed-time frame
projects, the Company's operating results could be adversely affected by
inaccurate estimates of contract completion costs and dates, including wage
inflation rates and currency exchange rates that may affect cost projections.
The Company also develops and markets certain software products, including
banking software licensed primarily to clients in Asia and Africa. Such
software products represented 5.9% of revenues in fiscal 1998 and 4.3% of
revenues for the nine months ended December 31, 1998. During fiscal 1998, the
Company derived 82.3% of its revenues from North America, 9.0% from Europe and
2.6% from India.
In the nine months ended December 31, 1998 and in fiscal 1998, the Company
derived 21.4% and 23.3% of its revenues, respectively, from Year 2000
conversion projects. The Company expects that Year 2000 conversion projects
will continue to be a significant source of revenue through fiscal 1999 but
thereafter will decline substantially. Since this was foreseen, the Company
has consistently limited its dependence on Year 2000 conversion projects and
has only accepted such projects where there were opportunities to create more
extensive client relationships. The Company currently expects that Year 2000
conversion projects will be replaced with other projects from the same and
other clients and that the decline in Year 2000 conversion projects will not
have a material adverse effect upon the Company's business, financial
condition and results of operations. There can be no assurance, however, that
the Company will be successful in generating additional business from its Year
2000 clients for other services, that the Company will be successful in
replacing Year 2000 conversion projects with other projects as the Year 2000
business declines or that margins from any such future projects will be
comparable to those obtained from Year 2000 conversion projects.
Cost of revenues consists primarily of salary and other compensation
expenses, depreciation, data communications expenses, computer maintenance,
cost of software for internal use, certain pre-opening expenses for new
software development centers and foreign travel expenses. The Company
depreciates personal computers and servers over two years and mainframe
computers over three years. Third party software is expensed in the period in
which it is acquired.
The Company assumes full project management for each project that it
undertakes. Approximately 80% of the work on a project is performed at the
Company's facilities in India, and the balance of the work is performed
27
<PAGE>
at the client site. The proportion of work performed at Company facilities and
at client sites varies from quarter to quarter. The Company charges higher
rates and incurs higher compensation expenses for work performed at the client
site. Services performed at a client site typically generate higher revenues
per capita but at a lower gross margin than the same amount of services
performed at Company facilities in India. As a result, revenues, cost of
revenues and gross profit in absolute terms and as a percentage of revenues
fluctuate from quarter to quarter based on the proportion of work performed
offshore at Company facilities and at client sites.
Revenues and gross profit are affected by the rate at which employees are
utilized. Utilization rates are reduced by employee training, particularly
during the initial 14-week training course provided to new employees. Since a
large percentage of new hires begin initial training in the second quarter,
utilization rates historically have tended to be lower in the second and third
quarters of a fiscal year.
Selling, general and administrative expenses consist primarily of salary and
other compensation expenses, travel, marketing, telecommunications,
management, finance, administrative and occupancy costs.
Other income includes interest income and income from the sale of Special
Import Licenses. Under current export-import policy, exports by Indian
companies generate credits for the exporter called "Special Import Licenses."
These credits can be sold and also used for the import of goods included on a
"restricted list" maintained by the Government of India. The value of Special
Import Licenses has declined over time, as the restricted list has been
shortened. The Company's general policy is to sell Special Import Licenses in
the period in which it receives such credits.
Deferred Stock Compensation Expense; Anticipated Effect on Fourth Quarter of
Fiscal 1999
In 1994, the Company established the ESOP, one of the first employee stock
option plans in India. Aspects of the ESOP differ significantly from typical
U.S. option plans. To administer the ESOP, the Company created an employee
welfare trust (the "Trust") and issued to the Trust warrants to purchase
750,000 Equity Shares (2,000,000 Equity Shares after giving effect to the
Company's 1997 and 1998 stock dividends). In turn, the Trust from time to time
grants to Company employees stock purchase rights to purchase Equity Shares
held by or reserved for issuance to the Trust. Each stock purchase right
entitles the holder to purchase one Equity Share at a price of Rs.100
(representing $2.35 at the Noon Buying Rate in effect on February 8, 1999),
which is substantially below the market price of the Equity Shares. Neither
the Company nor the Trust may increase the exercise price of the stock
purchase rights. The stock purchase rights and the underlying Equity Shares
are subject to five-year vesting.
Indian GAAP does not require the Company to recognize a non-cash
compensation expense in connection with the grant of stock purchase rights
with an exercise price less than the market price of the underlying Equity
Shares on the date of grant. However, under U.S. GAAP and APB No. 25, the
difference between the exercise price and the market price on the date of
grant is required to be treated as a non-cash compensation expense and
amortized over the vesting period of the Equity Shares underlying the stock
purchase rights. Under U.S. GAAP, since fiscal 1995 the Company has recognized
non-cash compensation expense in connection with the grant of stock purchase
rights under the ESOP. In fiscal 1998, the Company recognized $2.6 million in
non-cash compensation expense in connection with stock purchase rights granted
under the ESOP, including a non-cash compensation expense of $1.6 million
recognized in the third quarter. Charges were higher in that quarter because
additional Equity Shares were issued to participants in the ESOP as part of
the Company's 1997 stock dividend. Since these additional Equity Shares were
not subject to vesting, the non-cash compensation expense for such shares was
accelerated in one quarter rather than amortized over the remaining vesting
period.
The Company expects to recognize substantial deferred stock compensation
expense in the fourth quarter of fiscal 1999, primarily as a result of the
stock dividend declared in December 1998 with a record date of March 5, 1999.
As in fiscal 1998, the Equity Shares issued to ESOP participants in connection
with the stock dividend will not be subject to vesting, and, as a result, one-
half of the deferred stock compensation expense that would have been amortized
over the remaining vesting periods for the Equity Shares issued under the ESOP
will be
28
<PAGE>
accelerated in the fourth quarter of fiscal 1999. As a result, the Company
expects to recognize deferred stock compensation expense in the approximate
amounts of $13.7 million for the fourth quarter of fiscal 1999 and $16.1
million for fiscal 1999. The size of this charge may cause the Company to
report negative operating income and negative net income for the fourth
quarter of fiscal 1999 for purposes of U.S. GAAP.
The Company may recognize additional deferred stock compensation expense in
the fourth quarter of fiscal 1999 to the extent that additional stock purchase
rights are granted in that quarter. As of December 31, 1998, the Trust held
208,800 Equity Shares reserved for issuance upon the exercise of stock
purchase rights which had not yet been granted but are expected to be granted
in the future. Any such grants will cause the Company to recognize deferred
stock compensation expense in amounts that will depend on the market value of
the Equity Shares on the dates such grants are made. See "Risk Factors--Effect
of Deferred Stock Compensation Expense Under U.S. GAAP; Loss Expected to be
Reported for Fourth Quarter of Fiscal 1999."
The grant of stock purchase rights under the ESOP does not generate any tax
benefit or deduction under Indian or U.S. law.
Investment in Yantra Corporation
Prior to October 20, 1998, the Company owned a majority of the voting stock
of Yantra which develops and markets an open system software package for
warehouse management. As a result, all of Yantra's operating losses through
October 20, 1998 were recognized in the Company's consolidated financial
statements. For fiscal 1998 and for the nine months ended December 31, 1998,
the Yantra losses recognized in the Company's consolidated financial
statements were $1.6 million and $2.0 million, respectively. On October 20,
1998, the Company sold a portion of the Yantra shares held by the Company,
thereby reducing the Company's interest to less than one-half of the voting
stock of Yantra. As a result, Yantra's results after October 20, 1998 will not
be recognized in the Company's consolidated financial statements under U.S.
GAAP. Yantra's revenues were $1.3 million and $2.0 million for fiscal 1998 and
the nine months ended December 31, 1998, respectively, while gross profits
were $574,000 and $546,000, respectively, for these same periods. Yantra's
revenues and gross profits were 1.9% and 2.0% respectively, of the Company's
consolidated revenues for fiscal 1998, and 2.3% and 1.4%, respectively of the
Company's consolidated gross profits for the nine months ended December 31,
1998. No minority interest has been recorded because all of the common stock
is owned by the Company.
Principles of Currency Translation
In fiscal 1998, over 90% of the Company's revenues were generated in U.S.
dollars and European currencies. A majority of the Company's expenses were
incurred in rupees, and the balance was incurred in U.S. dollars and European
currencies. The functional currency of the Company is the Indian rupee.
Revenues generated in foreign currencies are translated into Indian rupees
using the exchange rate prevailing on the date the revenue is recognized.
Expenses of overseas operations incurred in foreign currencies are translated
into Indian rupees at either the monthly average exchange rate or the exchange
rate on the date the expense is incurred, depending on the source of payment.
Assets and liabilities of foreign branches held in foreign currency are
translated into Indian rupees at the end of the applicable reporting period.
For U.S. GAAP reporting, the financial statements are translated into U.S.
dollars using the average monthly exchange rate for revenues and expenses and
the period end rate for assets and liabilities. The gains or losses from such
translation are reported as other comprehensive income, a separate component
of shareholders' equity.
The Company expects that a majority of its revenues will continue to be
generated in U.S. dollars for the foreseeable future and that a significant
portion of the Company's expenses, including personnel costs as well as
capital and operating expenditures, will continue to be denominated in rupees.
Consequently, the Company's results of operations will be adversely affected
to the extent the rupee appreciates against the U.S. dollar. See "Risk
Factors--Risks Related to Investments in Indian Securities."
29
<PAGE>
Results of Operations
The following table sets forth certain operating data as a percentage of
revenues for the periods indicated:
<TABLE>
<CAPTION>
Nine Months
Ended
Fiscal Year Ended March 31, December 31,
--------------------------------- --------------
1994 1995 1996 1997 1998 1997 1998
----- ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............ 59.0 58.6 58.8 57.1 58.8 58.4 54.6
----- ----- ----- ----- ----- ------ ------
Gross profit................ 41.0 41.4 41.2 42.9 41.2 41.6 45.4
Operating expenses:
Selling, general and
administrative expenses.. 13.8 18.5 16.4 17.7 19.3 18.8 15.9
Amortization of deferred
stock compensation
expense.................. 0.0 0.3 1.4 1.9 3.8 4.4 2.8
----- ----- ----- ----- ----- ------ ------
Total operating ex-
penses................. 13.8 18.8 17.8 19.6 23.1 23.2 18.7
----- ----- ----- ----- ----- ------ ------
Operating income............ 27.2 22.6 23.4 23.3 18.1 18.4 26.7
Other income, net........... 3.4 4.1 5.5 1.9 1.2 1.3 1.4
----- ----- ----- ----- ----- ------ ------
Income before income taxes.. 30.6 26.7 28.9 25.2 19.3 19.7 28.1
Provision for income taxes.. 2.6 4.9 3.4 3.3 1.1 2.0 4.1
Subsidiary preferred stock
dividends.................. -- -- -- -- 0.1 0.1 0.2
----- ----- ----- ----- ----- ------ ------
Net income.................. 28.0% 21.8% 25.5% 21.9% 18.1% 17.6% 23.8%
===== ===== ===== ===== ===== ====== ======
</TABLE>
Nine Months Ended December 31, 1998 Compared to Nine Months Ended December 31,
1997
Revenues. Revenues were $86.1 million for the nine months ended December 31,
1998, representing an increase of 77.9% over revenues of $48.4 million for the
nine months ended December 31, 1997. Revenues continued to increase in all
aspects of the Company's services. Custom software development, maintenance
and software development through OSDCs represented a substantial majority of
the Company's revenues. The increase in revenues was attributable in part to a
substantial increase in revenues from certain existing clients and revenues
from new clients, particularly in the manufacturing and financial services
industries. The revenue growth was also attributable to increases in revenues
from Year 2000 conversion projects, which represented 21.4% of revenues for
the nine months ended December 31, 1998 as compared to 23.0% of revenues for
the nine months ended December 31, 1997. This revenue increase was partially
offset by a reduction in sales of the BANCS 2000 product resulting from a
slow-down of computerization activities by Indian banks. Net sales of BANCS
2000 and other products represented 4.3% of revenues for the nine months ended
December 31, 1998 as compared to 7.0% for the nine months ended December 31,
1997. Revenues from services represented 95.7% of revenues for the nine months
ended December 31, 1998 as compared to 93.0% for the nine months ended
December 31, 1997. Revenues from fixed-price, fixed-time frame contracts and
from time-and-materials contracts represented 36.3% and 63.7%, respectively,
of revenues for the nine months ended December 31, 1998 as compared to 33.2%
and 66.8%, respectively, for the same period in fiscal 1997. Revenues from
North America and Europe represented 82.5% and 9.6%, respectively, of revenues
for the nine months ended December 31, 1998 as compared to 80.9% and 9.0%,
respectively, for the same period in fiscal 1997.
Cost of Revenues. Cost of revenues was $47.0 million for the nine months
ended December 31, 1998, representing an increase of 66.2% over cost of
revenues of $28.3 million for the nine months ended December 31, 1997. Cost of
revenues represented 54.6% and 58.4% of revenues for the nine months ended
December 31, 1998 and 1997, respectively. This marginal decrease as a
percentage of revenues was attributable to a favorable business mix and a
decrease in depreciation and software expenses, which represented 9.3% of
total revenues in the nine months ended December 31, 1998 as compared to 12.0%
of total revenues for the
30
<PAGE>
same period in fiscal 1997. The decrease was partially offset by an increase
in compensation rates. Cost of revenues for services represented 53.9% and
57.9% of revenues for services for the nine months ended December 31, 1998 and
1997, respectively. Cost of revenues for product sales represented 70.8% and
65.9% of revenues for product sales for the nine months ended December
31, 1998 and 1997, respectively.
Gross Profit. As a result of the foregoing, gross profit was $39.1 million
for the nine months ended December 31, 1998, representing an increase of 94.2%
over gross profit of $20.1 million for the same period in 1997. This increase
was attributable to a favorable business mix and a decrease in depreciation
and software expenses as a percentage of revenues due to improved
infrastructure utilization. As a percentage of revenues, gross profit
increased to 45.4% for the nine months ended December 31, 1998 from 41.6% for
the same period in fiscal 1997. Gross profit from sales of BANCS 2000 and
other products was $1.1 million for the nine months ended December 31, 1998, a
decrease of 6.4% from gross profit of $1.2 million for the nine months ended
December 31, 1997. Gross profit from services was $38.0 million for the nine
months ended December 31, 1998, an increase of 100.3% over gross profit of
$18.9 million for the nine months ended December 31, 1997. As a percentage of
product revenues, gross profit from product sales decreased 4.9% for the nine
months ended December 31, 1998 from 34.1% for the nine months ended
December 31, 1997. As a percentage of service revenues, gross profit from
services increased 4.0% for the nine months ended December 31, 1998 from 42.1%
for the nine months ended December 31, 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $13.7 million for the nine months ended
December 31, 1998, an increase of 50.5% over selling, general and
administrative expenses of $9.1 million for the nine months ended December 31,
1997. Selling, general and administrative expenses were 15.9% and 18.8% of
revenues for the nine months ended December 31, 1998 and 1997, respectively.
This decrease as a percentage of revenues was a result of the Company's
ability to leverage its higher revenues in 1998 without a proportionate
increase in management, finance, administrative and occupancy costs. Salaries
for support staff represented 4.4% of revenues and rent and office maintenance
represented 2.5% of revenues for the nine months ended December 31, 1998 as
compared to 5.1% and 3.7%, respectively, for the same period in fiscal 1997.
Amortization of Deferred Stock Compensation Expense. Amortization of
deferred stock compensation expense was $2.4 million for the nine months ended
December 31, 1998, an increase of 14.2% over amortization of deferred stock
compensation expense of $2.1 million for the nine months ended December 31,
1997. Compensation expense increased for new grants of stock purchase rights
in part because of the rising market price of the Equity Shares and in part
because of an increase in the number of stock purchase rights that were
granted. The increase in deferred stock compensation expense also reflects the
continued amortization of compensation expense from stock purchase rights
granted in prior periods.
Operating Income. As a result of the foregoing, operating income was $23.0
million for the nine months ended December 31, 1998, an increase of 157.7%
over operating income of $8.9 million for the nine months ended December 31,
1997. As a percentage of revenues, operating income increased to 26.7% for the
nine months ended December 31, 1998 from 18.4% for the same period in 1997.
Excluding the amortization of deferred stock compensation expense, the
operating margin would have been 29.5% for the nine months ended December 31,
1998 as compared to 22.7% for the same period in fiscal 1997.
Other Income. Other income was $1.2 million for the nine months ended
December 31, 1998 as compared to $606,000 for the nine months ended
December 31, 1997. This increase in other income was due to an increase in
interest income resulting from investment of larger cash balances and income
from the sale of Yantra preferred stock, offset in part by a decrease in
income from the sale of Special Import Licenses in the nine months ended
December 31, 1998, as compared to the nine months ended December 31, 1997.
Provision for Income Taxes. Provision for income taxes was $3.5 million for
the nine months ended December 31, 1998 as compared to $977,000 for the nine
months ended December 31, 1997. The Company's effective tax rate increased to
14.6% for the nine months ended December 31, 1998 as compared to 10.3% for the
same period in 1997. The effective tax rate increased due to an increase in
foreign tax liabilities, offset in
31
<PAGE>
part by a decrease resulting from a higher proportion of the Company's
operations qualifying for Indian tax exemptions applicable to designated
Software Technology Parks.
Net Income. As a result of the foregoing, net income was $20.5 million for
the nine months ended December 31, 1998, an increase of 141.0% over net income
of $8.5 million for the nine months ended December 31, 1997. As a percentage of
revenues, net income increased to 23.8% for the nine months ended December 31,
1998 from 17.6% for the same period in 1997.
Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997
Revenues. Revenues were $68.3 million for fiscal 1998, representing an
increase of 72.6% over revenues of $39.6 million for fiscal 1997. This increase
was attributable in part to significant increases in revenues from Year 2000
conversion projects, which represented 23.3% of revenues for fiscal 1998 as
compared to 7.5% of revenues for fiscal 1997. The revenue growth in fiscal 1998
included a substantial increase in revenues from existing clients, particularly
in the retail industry, as well as revenues from new clients, particularly in
the financial services and telecommunications industries. This increase was
partially offset by a reduction in sales of the BANCS 2000 product resulting
from a slow-down of computerization activities by Indian banks. Net sales of
BANCS 2000 and other products represented 5.4% of revenues for fiscal 1998 as
compared to 12.7% for fiscal 1997. Revenues from services represented 94.6% of
revenues for fiscal 1998 as compared to 87.3% for fiscal 1997. Revenues from
fixed-price, fixed-time frame contracts and from time-and-materials contracts
represented 35.8% and 64.2%, respectively, of revenues for fiscal 1998 as
compared to 37.0% and 63.0%, respectively, for fiscal 1997. North America and
Europe represented 82.3% and 9.0%, respectively, of revenues for fiscal 1998 as
compared to 78.5% and 8.2%, respectively, for fiscal 1997.
Cost of Revenues. Cost of revenues was $40.2 million for fiscal 1998,
representing an increase of 77.6% over cost of revenues of $22.6 million for
fiscal 1997. Cost of revenues represented 58.8% and 57.1% of revenues for
fiscal 1998 and 1997, respectively. This marginal increase as a percentage of
revenues is attributable to an increase in depreciation and software expenses,
which represented 12.5% of total revenues for fiscal 1998 as compared to 10.4%
for fiscal 1997. The increase was partially offset by a favorable business mix,
especially in certain fixed-price, fixed-time frame services. Cost of revenues
for services represented 58.9% and 57.1% of revenues for services for fiscal
1998 and 1997, respectively. Cost of revenues for product sales represented
57.2% and 57.3% of revenues for product sales for fiscal 1998 and 1997,
respectively.
Gross Profit. As a result of the foregoing, gross profit was $28.2 million
for fiscal 1998, representing an increase of 66.0% over gross profit of $17.0
million for fiscal 1997. As a percentage of revenues, gross profit decreased to
41.2% for fiscal 1998 from 42.9% for fiscal 1997. Gross profit from sales of
BANCS 2000 and other products was $1.7 million for fiscal 1998, a decrease of
22.7% from gross profit of $2.2 for fiscal 1997. Gross profit from services was
$26.4 million for fiscal 1998, an increase of 78.4% over gross profit of
$14.8 million for fiscal 1997. As a percentage of product revenues, gross
profit from product sales increased 0.1% for fiscal 1998 from 42.7% for fiscal
1997. As a percentage of service revenues, gross profit from services decreased
1.8% for fiscal 1998 from 42.9% for fiscal 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $13.2 million for fiscal 1998, an increase of
88.7% over selling, general and administrative expenses of $7.0 million for
fiscal 1997. Selling, general and administrative expenses were 19.4% and 17.7%
of revenues for fiscal 1998 and 1997, respectively. This increase as a
percentage of revenues was a result of an increase in salaries for
administrative and support staff and an increase in rent and other expenses as
the Company expanded the number of sales offices and offshore software
development facilities. Salaries for support staff represented 5.5% of revenues
and rent and office maintenance represented 3.6% of revenues for fiscal 1998 as
compared to 4.7% and 2.9%, respectively, for fiscal 1997.
Amortization of Deferred Stock Compensation Expense. Amortization of deferred
stock compensation expense was $2.6 million for fiscal 1998, an increase of
234.2% over amortization of deferred stock compensation expense of $768,000 for
fiscal 1997. The expense recorded in fiscal 1998 included a charge of $1.6
million recognized in the third quarter of the year. Compensation expense was
higher in that quarter because
32
<PAGE>
Equity Shares issued to participants in the ESOP in connection with the
Company's 1997 stock dividend were not subject to vesting, and accordingly, the
compensation expense related to such shares was recognized in one quarter
rather than amortized over five years. Amortization of deferred stock
compensation expense was 3.8% of revenues in fiscal 1998 as compared to 1.9% of
revenues in fiscal 1997.
Operating Income. As a result of the foregoing, operating income was $12.4
million for fiscal 1998, an increase of 34.7% over operating income of $9.2
million for fiscal 1997. As a percentage of revenues, operating income
decreased to 18.0% for fiscal 1998 from 23.3% for fiscal 1997. Excluding the
amortization of deferred stock compensation expense, the operating margin would
have been 21.8% for fiscal 1998 as compared to 25.2% for fiscal 1997.
Other Income. Other income was $801,000 for fiscal 1998 as compared to
$769,000 for fiscal 1997 as a result of an increase in interest income.
Provision for Income Taxes. Provision for income taxes was $770,000 for
fiscal 1998 as compared to $1.3 million for fiscal 1997. The Company's
effective tax rate decreased to 5.8% for fiscal 1998 as compared to 13.3% for
fiscal 1997. The effective tax rate declined as a higher proportion of the
Company's operations qualified for Indian tax exemptions applicable to
designated Software Technology Parks.
Net Income. As a result of the foregoing, net income was $12.4 million for
fiscal 1998, an increase of 43.6% over net income of $8.6 million for fiscal
1997. As a percentage of revenues, net income decreased to 18.1% for fiscal
1998 from 21.9% for fiscal 1997.
Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31, 1996
Revenues. Revenues were $39.6 million for fiscal 1997, representing an
increase of 48.8% over revenues of $26.6 million for fiscal 1996. This increase
was attributable to: the commencement of Year 2000 conversion projects, which
represented approximately 7.5% of revenues for fiscal 1997; a substantial
increase in revenues, from 21.9% to 27.4% of total revenues, from certain
existing clients using the Company's dedicated OSDCs; and an increase in the
number of new clients. This increase was partially offset by a reduction in
sales to the Company's then largest client, from 21.5% of revenues for fiscal
1996 to 6.7% of revenues for fiscal 1997, as the Company chose to reduce its
services rather than to accept price reductions and increases in Company
resources sought by the client. Net sales of BANCS 2000 and other products
represented 12.7% of total revenues for fiscal 1997, as compared to 10.2% for
fiscal 1996. Revenues from services represented 87.3% of total revenues for
fiscal 1997 as compared to 89.8% for fiscal 1996. Revenues from fixed-price,
fixed-time frame contracts and from time-and materials contracts represented
37.0% and 63.0%, respectively, of revenues for fiscal 1997 as compared to 24.0%
and 76.0%, respectively for fiscal 1996. Revenues from North America and Europe
represented 78.5% and 8.2%, respectively, of revenues for fiscal 1997 as
compared to 76.0% and 10.8%, respectively, for fiscal 1996.
Cost of Revenues. Cost of revenues was $22.6 million for fiscal 1997,
representing an increase of 44.6% over cost of revenues of $15.6 million for
fiscal 1996. Cost of revenues represented 57.1% and 58.8% of revenues for
fiscal 1997 and 1996, respectively. This marginal decrease as a percentage of
revenues was attributable to a decrease in depreciation and software expenses
which represented 10.4% of total revenues for fiscal 1997 and 13.6% of total
revenues for fiscal 1996. The decrease was partially offset by an increase in
certain lower margin businesses. Cost of revenues for services represented
57.1% and 57.6% of revenues for services for fiscal 1997 and 1996,
respectively. Cost of revenues for product sales represented 57.3% and 69.0% of
revenues for product sales for fiscal 1997 and 1996, respectively.
Gross Profit. As a result of the foregoing, gross profit was $17.0 million
for fiscal 1997, representing an increase of 54.7% over gross profit of $11.0
million for fiscal 1996. As a percentage of revenues, gross profit increased to
42.9% for fiscal 1997 from 41.2% for fiscal 1996. Gross profit from sales of
BANCS 2000 and other products was $2.2 million for fiscal 1997, an increase of
161.9% over gross profit of $841,000 for fiscal 1996. Gross profit from
services was $14.8 million for fiscal 1997, an increase of 46.5% over gross
profit of
33
<PAGE>
$10.1 million for fiscal 1996. As a percentage of product revenues, gross
profit from product sales increased 11.7% for fiscal 1997 from 31.0% for fiscal
1996. As a percentage of service revenues, gross profit from services increased
0.5% for fiscal 1997 from 42.4% for fiscal 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $7.0 million for fiscal 1997, an increase of 61.1%
over selling, general and administrative expenses of $4.4 million for fiscal
1996. Selling, general and administrative expenses were 17.7% and 16.4% of
revenues for fiscal 1997 and 1996, respectively. This increase as a percentage
of revenues was due to rental increases and other expenses resulting from
growth in the number of sales offices. This increase was partially offset by
increased leverage of support staff. Salaries for support staff were 4.7% of
revenues and rent and office maintenance were 2.9% of revenues for fiscal 1997
as compared to 6.4% and 1.8%, respectively, for fiscal 1996.
Amortization of Deferred Stock Compensation Expense. Amortization of deferred
stock compensation expense was $768,000 for fiscal 1997, an increase of 112.7%
over amortization of deferred stock compensation expense of $361,000 for fiscal
1996. Compensation expense increased for new grants of stock purchase rights in
part because of the rising market price of the Equity Shares and in part
because of an increase in the number of stock purchase rights that were
granted. The increase in deferred stock compensation expense also reflects the
continued amortization of compensation expense from stock purchase rights
granted in prior periods.
Operating Income. As a result of the foregoing, operating income was $9.2
million for fiscal year 1997, an increase of 46.9% over operating income of
$6.3 million for fiscal 1996. As a percentage of revenues, operating income
remained relatively constant at 23.2% for fiscal 1997 from 23.5% for fiscal
1996. Excluding the amortization of deferred stock compensation expense, the
operating margin would have been 25.2% for fiscal 1997 as compared to 24.9% for
fiscal 1996.
Other Income. Other income was $769,000 for fiscal 1997 as compared to $1.5
million for fiscal 1996. This decrease was attributable to a decline in
interest rates on cash investments.
Provision for Income Taxes. Provision for income taxes was $1.3 million for
fiscal 1997 as compared to $894,000 for fiscal 1996. The Company's effective
tax rate increased to 13.3% for fiscal 1997 as compared to 11.6% for fiscal
1996. This increase in the effective tax rate was attributable to an increase
in the proportion of income subject to U.S. taxes as well as an increase in
Indian tax assessments for prior years.
Net Income. As a result of the foregoing, net income was $8.6 million for
fiscal 1997, an increase of 26.6% over net income of $6.8 million for fiscal
1996. As a percentage of revenues, net income decreased to 21.9% for fiscal
1997 from 25.5% for fiscal 1996.
34
<PAGE>
Quarterly Results of Operations
The following table presents certain unaudited quarterly statements of
operations data for each of the ten quarters from July 1, 1996 through
December 31, 1998. The information relating to these quarters is qualified by
reference to the audited Consolidated Financial Statements appearing elsewhere
in this Prospectus and, in the opinion of management, includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of that information. The results of operations for any quarter are
not necessarily indicative of the results to be expected for any future period.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------------
Fiscal 1997 Fiscal 1998 Fiscal 1999
------------------------ ---------------------------------- -------------------------
Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $9,515 $10,326 $12,302 $12,791 $16,849 $18,773 $19,917 $23,939 $28,874 $33,289
Cost of revenues........ 5,513 5,801 6,417 7,548 9,901 10,832 11,876 13,839 16,500 16,664
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 4,002 4,525 5,885 5,243 6,948 7,941 8,041 10,100 12,374 16,625
Operating expenses:
Selling, general and
administrative
expenses.............. 1,235 2,200 2,272 2,481 3,168 3,458 4,118 4,419 4,547 4,741
Amortization of
deferred stock
compensation expense.. 167 234 234 234 234 1,637 462 462 461 1,481
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 1,402 2,434 2,506 2,715 3,402 5,095 4,580 4,881 5,008 6,222
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income........ 2,600 2,091 3,379 2,528 3,546 2,846 3,461 5,219 7,366 10,403
Other income, net....... 179 390 32 135 348 123 195 241 149 821
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 2,779 2,481 3,411 2,663 3,894 2,969 3,656 5,460 7,515 11,224
Provision (benefit) for
income taxes........... 390 217 442 493 260 224 (207) 650 1,280 1,602
Subsidiary preferred
stock dividends........ -- -- -- -- -- 34 34 34 76 41
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.............. $2,389 $ 2,264 $ 2,969 $ 2,170 $ 3,634 $ 2,711 $ 3,829 $ 4,776 $ 6,159 $ 9,581
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
The following table sets forth certain quarterly financial information as a
percentage of revenues:
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------------
Fiscal 1997 Fiscal 1998 Fiscal 1999
------------------------ ---------------------------------- -------------------------
Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........ 57.9 56.2 52.2 59.0 58.8 57.7 59.6 57.8 57.1 50.1
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 42.1 43.8 47.8 41.0 41.2 42.3 40.4 42.2 42.9 49.9
Operating expenses:
Selling, general and
administrative
expenses.............. 13.0 21.3 18.5 19.4 18.8 18.4 20.7 18.5 15.7 14.2
Amortization of
deferred stock
compensation expense.. 1.8 2.3 1.9 1.8 1.4 8.7 2.3 1.9 1.6 4.5
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating ex-
penses................ 14.8 23.6 20.4 21.2 20.2 27.1 23.0 20.4 17.3 18.7
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income........ 27.3 20.2 27.4 19.8 21.0 15.2 17.4 21.8 25.6 31.2
Other income, net....... 1.9 3.8 0.3 1.1 2.1 0.7 1.0 1.0 0.5 2.5
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 29.2 24.0 27.7 20.9 23.1 15.9 18.4 22.8 26.1 33.7
Provision (benefit) for
income taxes........... 4.1 2.1 3.6 3.9 1.5 1.3 (1.0) 2.7 4.4 4.8
Subsidiary preferred
stock dividends........ -- -- -- -- -- 0.2 0.2 0.1 0.3 0.1
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.............. 25.1% 21.9% 24.1% 17.0% 21.6% 14.4% 19.0% 20.0% 21.4% 28.8%
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
35
<PAGE>
The Company's operating results historically have fluctuated and may in the
future continue to fluctuate depending on a number of factors, including: the
size, timing and profitability of significant projects; the proportion of
services that are performed at client sites rather than at the Company's
offshore facilities; the accuracy of estimates of resources and time required
to complete ongoing projects, particularly projects performed under fixed-
price, fixed-time frame contracts; a change in the mix of services provided to
its clients or in the relative proportion of services and product revenues;
the timing of tax holidays and other Government of India incentives; the
effect of seasonal hiring patterns and the time required to train and
productively utilize new employees; the size and timing of facilities
expansion; unanticipated increases in wage rates; the Company's success in
expanding its sales and marketing programs; and currency exchange rate
fluctuations and other general economic factors. A high percentage of the
Company's operating expenses, particularly personnel and facilities, are fixed
in advance of any particular quarter. As a result, unanticipated variations in
the number and timing of the Company's projects or in employee utilization
rates may cause significant variations in operating results in any particular
quarter. The Company believes that period-to-period comparisons of its results
of operations are not necessarily meaningful and should not be relied upon as
indications of future performance.
Fluctuations in "other income, net" are caused by the timing of the sale of
Special Import Licenses and by changes in interest income which are influenced
by the amount under investment as well as by interest rates. For example,
other income declined from the third to the fourth quarter of fiscal 1997 due
to a decrease of $136,000 of income from the sale of Special Import Licenses
and a decrease of $211,000 in interest income. Fluctuations in income taxes
are caused not only by the timing of Indian tax exemptions and the proportion
of services performed in Software Development Parks, but also by the
proportion of domestic income and non-operating income, which is not subject
to tax exemptions, to export income. For example, income taxes increased from
a benefit of $207,000 for the fourth quarter of fiscal 1998 to a provision of
$3.5 million for the nine months ending December 31, 1998 as a result of an
increase in domestic sales of the BANCS 2000 product, an increase in non-
operating income and a higher provision for foreign taxes in the amount of
$300,000, $675,000 and $2.7 million relating to fiscal 1997, fiscal 1998 and
the nine months ended December 31, 1998, respectively.
Liquidity and Capital Resources
The Company has been financed by cash generated from operations and, to a
lesser extent, the proceeds of equity issuances and borrowings. In 1993, the
Company raised approximately $4.4 million in gross aggregate proceeds from the
sale of the Company's Equity Shares in its initial public offering on the
Indian Stock Exchanges. In 1994, the Company raised an additional $7.7 million
through private placements of its Equity Shares with foreign institutional
investors. At December 31, 1998, the Company had $22.8 million in cash and
cash equivalents, $36.1 million in working capital and no outstanding bank
borrowings. At December 31, 1998, the Company had an aggregate of $1.2 million
in working capital lines of credit from two commercial banks.
Net cash provided by operating activities was $9.4 million, $17.2 million
and $25.0 million in fiscal 1997, fiscal 1998 and the nine months ended
December 31, 1998, respectively. Net cash provided by operations consisted
primarily of net income, offset in part by an increase in accounts receivable.
In recent years, accounts receivable have increased at a rate faster than
sales. Accounts receivable as a percentage of revenues, represented 12.6%,
15.0% and 18.5%, for fiscal 1997, fiscal 1998 and the nine months ended
December 31, 1998, respectively. In recent years, the average days outstanding
of accounts receivable has increased in the 31-60, 61-90 and greater than 90
day aging periods and decreased in the 0-30 day aging period. The Company
believes that this is due to an increasing portion of its revenues being
represented by large accounts with large companies, which tend to have better
cash management practices than smaller accounts. The Company believes these
large companies utilize their cash management expertise to take advantage of
the entire payment period. The Company does not expect significant additional
increases in the average days outstanding of its accounts receivable. The
Company's policy on accounts receivable includes a periodic review of all
outstanding accounts receivable. The Company examines, among other things: the
age, amount and quality of the account receivable; the relationship with, size
of and history of the client; and the quality of service performed for a
client to determine the classification of an account receivable. Upon its
review, the Company will classify the accounts into secured and unsecured or
doubtful accounts. The Company makes provisions for all accounts receivable
classified as unsecured or doubtful and for all accounts receivable that are
outstanding more than 180 days.
36
<PAGE>
Prepaid expenses and other current assets increased by $1.2 million,
$925,000 and $1.6 million during fiscal 1997, fiscal 1998 and the nine months
ended December 31, 1998. The increase during fiscal 1997 was primarily due to
an increase in rental deposits for new software development centers. The
increases during fiscal 1998 and the nine months ended December 31, 1998 were
primarily due to loans to employees, which increased by $481,000 and $708,000,
respectively.
Unearned revenue during the nine months ended December 31, 1998 consists
primarily of advance client billings on fixed-price, fixed-time frame
contracts for which related costs were not incurred in such period.
Net cash used in investing activities was $4.6 million, $8.4 million and
$11.9 million in fiscal 1997, fiscal 1998 and the nine months ended December
31, 1998, respectively. Net cash used in investing activities in fiscal 1997
consisted primarily of $7.2 million for property, plant and equipment offset
by sales of equity investments in other companies and in mutual funds. Net
cash used in investing activities in fiscal 1998 and the nine months ended
December 31, 1998 consisted primarily of $7.9 million and $11.3 million,
respectively, for property, plant and equipment. Since the planned facilities
expansion will significantly increase the Company's fixed costs, the Company's
results of operations will be materially adversely affected if the Company is
unable to grow its business proportionately.
Publicly-traded Indian companies customarily pay dividends. The Company
declared dividends of $1.1 million for fiscal 1997, which were paid partly in
fiscal 1997 and partly in fiscal 1998; declared dividends of $1.5 million for
fiscal 1998, which were paid partly in fiscal 1998 and partly in fiscal 1999;
and to date have declared dividends of $1.0 million for fiscal 1999. See
"Dividend Policy."
As of December 31, 1998, the Company had contractual commitments for capital
expenditures of $6.3 million and had budgeted aggregate capital expenditures
of $32.4 million for the fourth quarter of fiscal 1999 through fiscal 2000, to
acquire, build and equip new facilities in India and other regions including
potentially Southeast Asia, Latin America and Europe. The Company has not yet
made contractual commitments for the majority of its budgeted capital
expenditures and there can be no assurance that the Company will not
significantly alter or reduce its proposed expansion plans. See "Business--
Facilities." The Company believes that the proceeds of the Offering together
with existing cash and cash equivalents and funds generated from operations
will be sufficient to meet the Company's operating requirements through fiscal
2000. See "Use of Proceeds."
Income Tax Matters
The Company benefits from certain significant tax incentives provided to
software firms under the Indian tax laws. These incentives presently include:
(i) an exemption from payment of Indian corporate income taxes for a period of
ten consecutive years of operation of software development facilities
designated as "Software Technology Parks" (the "STP Tax Holiday"); and (ii) a
tax deduction for profits derived from exporting computer software (the
"Export Deduction"). Under present law, the Export Deduction remains available
after expiration of the STP Tax Holiday. All but one of the Company's software
development facilities are located in a designated Software Technology Park.
The benefits of these tax incentive programs have historically resulted in an
effective tax rate for the Company well below statutory rates, and the Company
expects this trend to continue absent a change in policy by the Government of
India. There is no assurance that the Government of India will continue to
provide these incentives. The Company pays corporate income tax in foreign
countries on income derived from operations in those countries. See "Risk
Factors--Risks Related to Investments in Indian Securities--Government of
India Incentives and Regulation."
Effects of Inflation
The Company's most significant costs are the salaries and related benefits
for its employees. Competition in India and the United States for IT
professionals with the advanced technological skills necessary to perform the
services offered by the Company have caused wages to increase at a rate
greater than the general rate of inflation. As with other IT service
providers, the Company must adequately anticipate wage increases and other
cost
37
<PAGE>
increases, particularly on its long-term contracts. Historically, the Company's
wage costs in India have been significantly lower than prevailing wage costs in
the United States for comparably-skilled employees, although wage costs in
India are presently increasing at a faster rate than in the United States.
There can be no assurance that the Company will be able to recover cost
increases through increases in the prices that it charges for its services in
the United States. See "Risk Factors--Dependence on Skilled Personnel; Risks of
Wage Inflation" and "--Fixed-Price, Fixed-Time Frame Contracts."
Year 2000 Compliance
Many existing computer systems, software applications and other control
devices use only two digits to identify a year in the date field, without
considering the impact of the upcoming change in the century. Others do not
correctly process "leap year" dates. As a result, such systems and applications
could fail or create erroneous results unless modified so that they can
correctly process data related to the year 2000 and beyond. As a result, during
the last three years, the Company has continued to assess the impact that the
Year 2000 problem may have on its operations and has identified the following
areas of its business that may be affected:
Client IT Services and Products. The Company has evaluated each of its IT
services and software products and believes that each is substantially Year
2000 compliant. In making such evaluations, the Company has utilized its
experience in providing Year 2000 compliance services to its clients.
Internal Infrastructure. The Year 2000 problem could affect the systems,
transaction processing, computer applications and devices used by the Company
to operate and monitor all major aspects of its business, including financial
systems (such as general ledger, accounts payable and payroll), customer
services, infrastructure, materials requirement planning, master project
scheduling, networks and telecommunications systems. The Company believes that
it has identified the major systems, software applications and related
equipment used in connection with its internal operations that must be modified
or upgraded in order to minimize the possibility of a material disruption to
its business. The Company has converted its financial applications software to
programs certified by the suppliers as Year 2000 compliant and is currently in
the process of modifying and upgrading all other affected systems. The Company
expects to complete this process by early 1999. All costs associated with
carrying out the Company's plan for the Year 2000 problem are being expensed as
incurred and have not been significant to date. The Company believes the total
of such costs will not have a material adverse effect on the Company's
business, results of operations and financial condition.
Third Party Suppliers. The Company relies directly and indirectly on systems
utilized by its suppliers for telecommunications, utilities, electronic
hardware and software applications. Pursuant to its service delivery model, the
Company must maintain active voice and data communications between its main
offices in Bangalore, the offices of its clients and its other software
development facilities. Although the Company maintains redundant software
facilities and satellite communications links, any sustained disruption of the
Company's ability to transmit voice and data through satellite and telephone
communications would have a material adverse effect on the Company's business,
results of operations and financial condition. To assess supplier Year 2000
readiness, the Company has sent two separate questionnaires to a majority of
its third party suppliers and believes that it will complete this assessment
process by early 1999. While the Company expects to resolve any significant
Year 2000 problems with its suppliers in a timely manner, there can be no
assurance that these suppliers will not encounter delays or unforeseen problems
that affect their service to the Company. The Company currently believes that
any required upgrades, modifications or replacements of these third party
systems will be fulfilled without cost to the Company and will not have a
material adverse effect on the Company's business, results of operations and
financial condition.
Facilities. Systems such as air conditioning and security systems at the
Company's facilities may also be affected by the Year 2000 problem. The Company
is currently assessing the potential effects of and costs of upgrading and
modifying these systems. The Company estimates that the total cost to the
Company of completing any required upgrades, modifications or replacements of
these systems will not have a material adverse effect on the Company's
business, results of operations and financial condition.
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The Company is currently developing contingency plans to address the Year
2000 issues that may pose a risk to its operations and expects such plans to be
completed by mid-1999. Such plans may include accelerated replacement of
affected systems or software, temporary use of redundant or back-up systems or
the implementation of manual procedures. The Company believes that the most
reasonably likely worst case scenario should Infosys not achieve Year 2000
Compliance is the intermittent or temporary disruption in telecommunications,
which could cause inefficiencies and delays, particularly, delays in providing
support services to clients. To minimize the impact of any potential
telecommunications disruptions, the Company is also considering temporary
measures such as placing additional IT professionals at client sites. In
assessing the worst case scenario, the Company has taken into account the
nature of its operations as well as the availability of its IT professionals to
attend to any internal problems that may arise. There can be no assurance that
any contingency plans implemented by the Company would be adequate to meet the
Company's needs without materially impacting its operations, that any such plan
would be successful or that the Company's business, results of operations and
financial condition would not be materially adversely affected by the delays
and inefficiencies inherent in conducting operations in an alternative manner.
The information above contains forward-looking statements which reflect the
current views of the Company with respect to Year 2000 compliance of the
Company's internal systems and third party suppliers, and the related costs and
potential impact on the Company's financial performance. As indicated above,
these assessments may ultimately prove to be inaccurate. See "Risk Factors--
Infrastructure and Potential Disruption in Telecommunications" and "--Year 2000
Compliance."
Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") recently issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activity." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Company is currently evaluating
the impact of SFAS No. 133 on its consolidated financial statements.
The American Institute of Certified Public Accountants recently issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that
certain costs related to the development of internal-use software be
capitalized or amortized over the estimated useful life of the software. SOP
98-1 is effective for financial statements issued for fiscal years beginning
after December 15, 1998. The Company estimates that all software acquired for
internal use has a relatively short useful life, usually less than one year.
The Company, therefore, currently charges to income the cost of acquiring such
software entirely at the time of acquisition. The Company does not believe that
adopting the provisions of SOP 98-1 will have a significant impact on its
consolidated financial statements.
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BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
Overview
The Company, one of India's leading IT services companies, utilizes an
extensive offshore infrastructure to provide managed software solutions to
clients worldwide. Headquartered in Bangalore, India, the Company has 11 state-
of-the-art offshore software development facilities located throughout India
that enable it to provide high quality, cost-effective services to clients in a
resource-constrained environment. The Company's services, which may be offered
on a fixed-price, fixed-time frame or time-and-materials basis, include custom
software development, maintenance (including Year 2000 conversion) and re-
engineering services as well as dedicated OSDCs for certain clients. In each of
its service offerings, the Company assumes full project management
responsibility in order to strengthen client relationships, offer higher value-
added services and enhance its profitability. In addition, the Company develops
and markets certain Company-owned software products. As a result of its
extensive network of offshore software development facilities, its quality
systems, its disciplined processes and its significant investment in people,
the Company has built a platform from which it has been able to achieve
significant growth to date. The Company completed its initial public offering
on the Bangalore Stock Exchange in 1993. From fiscal 1994 to fiscal 1998, the
Company experienced compound annual revenue and net income growth rates of
63.6% and 46.8%, respectively, and grew from approximately 480 IT professionals
to approximately 2,200.
Through its worldwide sales headquarters in Fremont, California and 16 other
sales offices located in the United States, Canada, the United Kingdom,
Germany, Japan and India, the Company markets its services to large IT-
intensive businesses. During fiscal 1998, the Company derived 82.3% of its
revenues from North America, 9.0% from Europe and 2.6% from India. While the
Company derives its revenues primarily from the United States, Infosys
maintains a diversified client base, with its largest client representing 10.5%
of fiscal 1998 revenues. As of December 31, 1998, the Company had approximately
130 clients. This diversified client base is comprised primarily of Fortune 500
companies and other multinational companies. Clients include Bell Atlantic
Corporation, NCR Corporation, Nordstrom, Inc., Southern California Edison
Company, Goldman, Sachs & Co., Northern Telecom Limited, Salomon S.A. and
Toshiba Corporation. During fiscal 1998 and for the nine months ended December
31, 1998, these clients accounted for 34.8% and 28.7%, respectively, of the
Company's revenues. As a result of its commitment to quality and client
service, the Company enjoys a high level of repeat business. For fiscal 1997
and 1998, existing clients from the previous fiscal year generated 82.3% and
83.1%, respectively, of the Company's revenues.
The Company was incorporated in 1981 by seven founders who shared a vision to
build a world class IT services organization based upon the principles of
leadership, innovation and integrity. Six of these original founders have
remained with the Company and, together with other members of the Company's
management council, have pursued their vision to pioneer the offshore software
development model, adopt progressive employee-oriented practices and set new
standards in India for investor relations. In recognition of its efforts, the
Company was voted "Best Managed Company" in India by Asiamoney in each of the
last two years was selected as the "Company of the Year" by the Economic Times
Awards for Corporate Excellence and was awarded the Silver Shield in each of
the last three years by the Institute of Chartered Accountants of India as the
Indian company with the best presentation of financial statements by a non-
financial company. Management believes that this reputation for leadership and
innovation and the recognition it has received has been and will continue to be
a key competitive advantage, particularly in attracting and retaining the
highest quality IT professionals. As evidence of this, during fiscal 1998, the
Company received approximately 70,870 job applications, tested approximately
21,350 applicants, interviewed approximately 5,800 and extended job offers to
approximately 1,790, of whom approximately 1,300 accepted.
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Industry Overview
In today's increasingly competitive business environment, companies have
become dependent on IT not only to maintain day-to-day operations, but also as
a strategic tool to enable them to re-engineer business processes, restructure
organizations and react quickly to competitive, regulatory and technological
changes. For these reasons, IT capabilities are particularly critical in
certain vertical markets, such as financial services, utilities and
telecommunications, that are undergoing rapid deregulation and globalization.
As corporations have become increasingly reliant on their IT systems, the
technological challenge of managing such systems has also increased. IT
departments must not only implement new technologies such as client/server
systems and advanced databases, but also maintain and update legacy systems to
work with the latest software and hardware, to expand functionality, to
recognize and process dates that begin in the year 2000 and to handle other
developments, such as the conversion to Eurocurrency.
As businesses have become more dependent on IT, corporate budgets for IT
services have grown dramatically. Dataquest has estimated that the worldwide
market for IT consulting, development, integration and outsourcing will
increase to $291 billion by 2001 from $177 billion in 1998, as businesses
concentrate on their core competencies and attempt to minimize fixed costs and
control the size of their internal IT departments. The need to outsource is
particularly acute for companies whose IT staffs lack the requisite skill set
and project management abilities to implement new technologies, yet are
reluctant to work solely with outdated technology. As a result, such companies
seek third-party IT service providers to implement new technology and support
existing legacy systems. Additionally, in many cases, businesses are being
forced to outsource IT projects due to the difficulty and expense of
recruiting and training sufficient IT staff in a resource-constrained
environment. Outsourcing enables businesses to minimize the risks and reduce
the time-to-completion of large IT projects by shifting some or all of their
IT responsibilities to capable service organizations. In addition to this
trend towards outsourcing, the IT services industry has also benefited
recently from the significant demand for Year 2000 conversion services.
Simultaneously with this significant increase in demand for IT services, the
supply of qualified IT professionals has decreased in most developed
countries, particularly the United States, Western Europe and Japan. According
to the United States Department of Education, from 1986 to 1995, the number of
bachelor degrees in computer science awarded annually at U.S. universities
fell by 41.7% from 41,889 to 24,404. One result of this downward trend is a
growing shortage of IT professionals in the United States; the Information
Technology Association of America reports that at U.S. companies with more
than 100 employees the number of unfilled positions for IT professionals was
346,000 in January 1998. Furthermore, the United States Department of Commerce
has estimated that between 1994 and 2005, U.S. companies will require more
than one million new IT professionals to fill newly created positions and
replace workers who are retiring or are otherwise leaving the IT sector.
This shortage of IT professionals, along with recent advances in
telecommunications and the growing acceptance of telecommuting has led to the
globalization of the market for IT services. It is now well accepted that
effective project management techniques combined with satellite links, video
conferencing, the Internet, e-mail and other communications capabilities can
enable efficient coordination of ways to manage IT projects between domestic
and overseas facilities. By outsourcing software development and maintenance
projects to offshore IT service providers, establishing overseas facilities or
joint venturing with foreign partners, companies have been able to access
skilled IT professionals, often in lower cost environments with a large
population of English-speaking technical talent.
India: A Source for Software Services
According to a survey of U.S. software service vendors conducted by the
World Bank, India is the leading offshore destination for companies seeking to
outsource software development or IT projects. NASSCOM estimates that India's
export revenue from software, including software services, was approximately
$1.8 billion in fiscal 1998 and will reach $4.0 billion by fiscal 2000,
contributing to total Indian software industry revenues of approximately $5.9
billion by fiscal 2000.
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There are three key factors contributing to this rapid growth of India's
software market. First, India has a large, highly skilled labor pool that is
available at a relatively low labor cost. With over four million engineers,
India ranks second only to the United States as the country with the largest
population of English-speaking technical personnel. According to NASSCOM, the
number of software professionals employed by the Indian software industry has
grown from approximately 56,000 in fiscal 1990 to approximately 200,000 in
fiscal 1998. In addition, India has more than 1,800 engineering colleges and
technical institutes that train approximately 68,000 graduates annually in IT.
This sizable pool of IT talent in India is available to companies worldwide at
relatively low labor costs. According to Software Productivity Research, the
average annual wage for software professionals in India is approximately 15%
of the average U.S. rate. Although wages in India are rising faster than in
the United States, the labor rate differential is anticipated to remain a
competitive advantage for Indian companies into the foreseeable future.
A second key factor driving the Indian software market is the capability of
Indian IT firms to deliver a product that satisfies the requirements of
clients who expect high quality standards. A NASSCOM analysis of international
quality standards of the top 300 Indian software companies showed that 109 had
already acquired ISO 9000 or SEI certification, with an additional 76
anticipated to acquire such certification by December 1999. These capabilities
have led to a recognition of India's IT talent by companies worldwide. To take
advantage of India's high quality IT services at attractive prices, companies
worldwide have outsourced their software services needs to India unrestrained
by distances or transportation limitations that often handicap Indian
manufacturing firms. In fact, the approximate 10- to 12-hour time difference
between India and its largest market, the United States, allows work to be
carried on by Indian teams on a 24-hour basis, shortening cycle times and
improving productivity and service quality.
A final factor driving the Indian software market is the recognition by
recent Indian governments of the importance of the IT sector to the Indian
economy. In 1991, the Government of India introduced a number of measures to
address the economic and financial difficulties that India had been facing.
The package contained policies to stimulate investment in infrastructure
industries and included favorable incentives designed to foster the growing
Indian software industry. This commitment to the software sector has been and
continues to be pursued by each successive government since 1991. For example,
the current Government of India established the National Task Force on
Information Technology with a mandate to make recommendations that detail
policies designed to increase India's IT exports. In addition, software firms
benefit from a variety of incentives, such as relief from import duties on
hardware, a tax deduction for income derived from software exports, and tax
holidays and infrastructure support for companies operating in Software
Technology Parks. See "Risk Factors--Risks Related to Investments in Indian
Securities" and "Management's Discussion and Analysis of Financial Condition--
Income Tax Matters."
Business Strategy
The Company's objective is to become one of the leading worldwide providers
of IT services by utilizing a global network of resources to offer a broad
array of managed software solutions. In order to achieve this goal, the
Company focuses on the following key elements of its business strategy:
Pursue World Class Operating Model. Management believes that one of the most
critical factors to the Company's success has been its commitment to pursue
high quality standards in all aspects of its business, including the quality
of its services, operations, investor relations and management of human
resources. In its services and operations, the Company achieves quality
through rigorous adherence to highly evolved processes, including a detailed
approach to planning and execution, multi-level testing and careful tracking
and analysis of quality control. The Company is certified under ISO 9001 and
TickIT. In addition, the Company has recently been measured against the
Capability Maturity Model, a software specific total quality management model
that was developed by the Software Engineering Institute of Carnegie Mellon
University and defines five levels of process maturity for a software
organization. Infosys has been certified at Level 4, a level achieved by only
2% of the more than 1,000 software companies tested under the Capability
Maturity Model. Infosys also adheres to high quality standards in its investor
relations. For example, the Company was one of the first public Indian
companies to adopt U.S. GAAP reporting in fiscal 1995 and quarterly audited
Indian financial statements in fiscal 1998.
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Invest Heavily in Human Resources. The Company believes that its continued
success will depend upon its ability to recruit, train, deploy and retain
highly talented IT professionals. Even as the field of software engineering
has been attracting the best and brightest Indian students, management
believes the Company has become, for Indian engineering graduates, one of the
most sought after employers. The Company focuses its recruiting efforts on the
top 20% of the students from the engineering departments of Indian
universities and uses a series of interviews and tests to identify the best
applicants. In an effort to attract the most highly qualified candidates, the
Company has spent significant resources in creating a quality work
environment. For example, its main facility in Bangalore, which spans five
acres, encompasses not only 160,000 square feet of office space but also
150,000 square feet of landscaping, a cafeteria, outdoor sitting area, library
and gymnasium as well as tennis, volleyball and basketball courts. Through
this campus-like environment, the Company fosters a collegial atmosphere and
informal culture, which is further promoted by its "open door" operating
philosophy where communication and ideas flow freely irrespective of title or
tenure. The Company also offers its IT professionals challenging assignments,
competitive salaries and benefits and one of the first stock option plans
adopted by a public Indian company. In addition, the Company invests heavily
in training, including 14-week training sessions for newly recruited IT
professionals as well as a variety of two-week continuing education courses in
technology and management skills conducted by a 33-person faculty. As a result
of this high level of investment in its people, management believes that the
Company has become one of the most attractive employers for Indian software
professionals and that its attrition rate is significantly below the industry
average.
Focus on Managed Software Solutions. Since its inception, the Company has
dedicated itself to providing managed software solutions, many of which are
offered on a fixed-price, fixed-time frame basis. By taking full project
management responsibility on every project, the Company enables its clients to
receive high quality, cost-effective solutions with lower risk. Such services
offer the Company the opportunity to build client confidence with the
potential benefit of enhanced margins. Management believes that by
demonstrating the ability to manage and successfully execute large projects,
the Company is better positioned to become a long-term partner to its clients
for all of their IT needs. For example, after the Company managed two IT pilot
projects for Nordstrom, Inc. ("Nordstrom"), Nordstrom engaged Infosys to
establish a dedicated OSDC to provide it with IT services on an ongoing basis.
In addition, by retaining project management responsibility, the Company
accumulates significant industry expertise and continues to develop and refine
its software development tools and proprietary methodologies.
Capitalize on Well-Established Offshore Development Model. As one of the
pioneers of the offshore software development model, the Company has made
significant investments in its infrastructure and has developed the advanced
processes and expertise necessary to manage and successfully execute projects
in multiple locations with seamless integration. The Company has high levels
of project management skills and rigid controls as evidenced by its Level 4
Capability Maturity Model certification. This commitment to quality allows the
Company to successfully execute approximately 80% of its project work in India
while maintaining high levels of client satisfaction. These capabilities not
only provide significant cost advantages but also shorten the time to deliver
a solution to the client. With 11 development facilities and approximately
3,000 IT professionals worldwide as of December 31, 1998 and with plans to
expand significantly its available facilities and hire additional IT
professionals, the Company believes that it is well-positioned to serve
clients globally in a resource-constrained environment.
Maintain Disciplined Focus on Business and Client Mix. The Company provides
a wide range of IT services and maintains a disciplined focus on its business
mix in an effort to avoid service or client concentration. Beginning in fiscal
1996, the Company aggressively sought to minimize its client concentration and
to accept as clients only those that met strict guidelines for overall revenue
potential and profitability. For fiscal 1997, fiscal 1998 and the nine months
ended December 31, 1998, the Company's largest client accounted for 15.6%,
10.5% and 6.7%, respectively, of revenues and its five largest clients
accounted for 43.1%, 35.1% and 29.2%, respectively, of revenues. Similarly,
the Company has endeavored to maintain a balance among its service offerings
despite certain trends in the marketplace, in particular the Year 2000
problem. This balance is key to ensuring that the technology skill sets of the
Company's IT professionals remain diversified. Such diversification is
critical in not only providing the Company the flexibility to adapt to
changing market conditions but also attracting and retaining highly skilled
professionals who seek the opportunity to continue to learn new technologies.
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Growth Strategy
From fiscal 1994 to fiscal 1998, the Company experienced compound annual
revenue and net income growth rates of 63.6% and 46.8%, respectively, and grew
from approximately 480 IT professionals to approximately 2,200. The following
are the key elements of the Company's growth strategy:
Broaden Service Offerings. In order to meet all of its clients' IT needs,
the Company strives to offer a comprehensive range of services by continuously
evaluating new and emerging technologies. As a full-service provider, the
Company believes that it can increase its revenues from existing clients as
well as attract new clients. Toward this end, the Company has
opportunistically expanded its services beyond its core development,
maintenance and re-engineering services. For example, the Company recently has
begun initiatives to develop practices focused on packaged applications
implementation, e-commerce and Internet/intranet services. Management believes
that these services will increasingly become a significant part of the
Company's portfolio of services.
Increase Business with Existing Clients. In fiscal 1998, the Company
performed services for more than 60 clients in the United States and Europe. A
key objective of the Company's growth strategy is to expand the nature and
scope of its engagements with existing clients by both increasing the volume
of its projects and expanding the breadth of services offered. Establishing
broad, long-term relationships potentially increases the quality and
efficiency of the Company's service to a particular client since each project
performed for a client increases the Company's understanding of the client's
systems, requirements and business practices. For the same reason,
establishing broad, long-term relationships with a client also reduces the
Company's marketing costs, increases the client's reliance on the Company and
creates barriers to entry for competitors. The Company seeks to foster such
relationships by delivering high quality services on time and on budget and,
over the course of a relationship, by increasing the integration of its
services with the client's internal IT operations. To date, this approach has
been highly effective. Despite the Company's rate of growth during the last
three years, over 80% of the revenues in fiscal 1997 and 1998 and over 90% of
the revenues in the nine months ended December 31, 1998 were generated from
companies who were clients in the prior fiscal year.
Develop New Clients. The Company pursues several new client development
strategies. First, the Company offers a broad array of managed software
solutions which provide an initial entry into a new client. For example, the
Company has used its Year 2000 conversion services and its recently introduced
Internet/ intranet-related services to establish relationships with 13 new
clients during fiscal 1998. Second, Infosys believes that it can leverage the
industry-specific expertise it has developed in key vertical markets
(financial services, manufacturing and distribution, retail,
telecommunications and technology) to further develop its portfolio of clients
in these targeted markets. This vertical market orientation continues to help
Infosys design and develop re-usable software tools and processes which have
specific applications to clients in these markets and which can improve the
Company's efficiency and productivity. Finally, the Company intends to expand
its global sales and marketing infrastructure by hiring new sales and
marketing personnel, opening additional regional sales offices and increasing
its marketing expenditures. Infosys currently maintains sales and marketing
offices in 17 locations and intends to add new offices in Europe. Management
believes that increasing the Company's geographic presence will enhance its
ability to establish and support new client relationships.
Increase Revenue per IT Professional. In order to increase its revenue per
IT professional, the Company continually focuses on building expertise in
vertical markets, refining its software development tools and methodologies,
and storing and disseminating institutional knowledge in order to improve
efficiency and productivity. Additionally, to enhance productivity per IT
professional, Infosys continually monitors client accounts for profitability
and seeks to select new clients and maintain relationships with existing
clients that maximize the Company's long-term profit margins. The Company's
policy is to decline or discontinue projects that do not offer the potential
to meet the Company's profit margin targets. Finally, the Company is seeking
to increase the proportion of projects that are undertaken on a fixed-price,
fixed-time frame rather than a time-and-materials basis. Management believes
that effectively structured fixed-price, fixed-time frame projects benefit the
client by reducing the client's risk, while offering the Company the potential
benefit of enhanced margins for projects that are performed efficiently.
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Expand and Diversify Base of IT Professionals. Management believes that a
critical element of the Company's growth strategy is its ability to increase
its base of IT professionals. To address this issue, the Company plans to
build new software development facilities in locations where it can access
local pools of talent as well as increase the number of professionals employed
at its existing locations. In addition, the Company is looking to other fields
of expertise, such as business school graduates and accountants, for
recruiting. Accordingly, the Company has approved plans to expand its
facilities in Bangalore, Bhubaneshwar, Chennai, Mangalore, Pune and elsewhere.
The Company is also contemplating the addition of facilities in the United
States, Europe and Asia. The approved expansions, which are currently
scheduled to be completed in the next two to three years, are expected to add
approximately 890,000 square feet of office space to provide for approximately
6,000 employees in India.
Pursue Selective Strategic Acquisitions. The Company believes that pursuing
selective acquisitions of IT services and software applications firms could
potentially expand the Company's technical expertise, facilitate expansion
into new vertical markets and increase the penetration of new clients.
Although no acquisitions are currently being contemplated, the Company
anticipates that it will seek to identify and acquire companies that have
well-developed applications in vertical markets, extensive client bases or
proprietary technical expertise and would otherwise complement the Company's
business.
The Infosys Offshore Development Model
The Indian offshore development model was initiated in the mid-1980's as a
method of dividing IT project activities between a service provider's offshore
software development facility and a client's on-site location. This model
contains many features that are attractive to IT consumers who are primarily
located in the United States, Europe and Japan, including: (i) access to a
large pool of highly skilled, English-speaking IT professionals;
(ii) relatively low labor costs of IT professionals offshore; (iii) the
ability to provide high quality IT services at internationally recognized
standards; (iv) the capability to work on specific projects on a 24-hour basis
by exploiting time zone differences between India and client sites; and (v)
the ability to accelerate the delivery time of larger projects by parallel
processing different phases of a project's development. While some U.S. and
European companies have commenced their own operations in India, most large
corporations have opted to form strategic alliances with local Indian IT
companies to reduce the risks and start-up costs of operations in India.
As one of the pioneers of the offshore development model, Infosys has a long
history of successfully executing projects between its clients' sites in North
America, Europe and Asia and the Company's offshore software development
facilities in India. In a typical software development or re-engineering
assignment, the Company assigns a small team of two to five IT professionals
to visit a client's site and determine the scope and requirements of the
project. Once the initial specifications of the engagement have been
established, the project managers return to India to supervise a much larger
team of 10 to 50 IT professionals dedicated to the development of the required
software or system. A small team remains at the client's site to track changes
in scope and address new requirements as the project progresses. The client's
systems are then linked via satellite to the Company's facilities enabling
simultaneous processing in as many as four offshore software development
facilities. Once the development stage of the assignment is completed and
tested in India, a team returns to the client's site to install the newly
developed software or system and ensure its functionality. At this phase of
the engagement, the Company will often enter into an ongoing agreement to
provide the client with comprehensive maintenance services from one of its
offshore software development facilities. In contrast to development projects,
a typical maintenance assignment requires a larger team of 10 to 20 IT
professionals to travel to the client's site to gain a thorough understanding
of all aspects of the client's system. The majority of the maintenance team
subsequently returns to the offshore software development facility, where it
assumes full responsibility for day-to-day maintenance of the client's system,
while coordinating with a few maintenance professionals who remain stationed
at the client's site. By pursuing this model, the Company completes
approximately 80% of its project work at its offshore software development
facilities in India.
The Company's project management techniques, risk management processes and
quality control measures enable the Company to complete projects seamlessly
across multiple locations with a high level of client satisfaction.
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Certified under ISO 9001, TickIT and at Level 4 of the Capability Maturity
Model, the Company rigorously adheres to highly evolved processes. These
processes govern all aspects of the software product life cycle, from
requirements to testing and maintenance. The Company seeks to prevent defects
through its quality program, which includes obtaining early sign off on
acceptance test scripts, project specifications and design documents,
assigning software quality advisors to help each team set up appropriate
processes for each project and adhering to a multi-level testing strategy.
Defects are documented, measured, tracked and analyzed, and feedback is
provided to the project manager. The Company compiles metrics for not only
defect density and size, but also actual effort as compared to project
estimates, adherence to schedule and productivity. Frequent internal and
external audits are conducted to assure compliance with procedures. All of
these procedures have been continuously refined throughout the Company's
history of providing its clients with offshore software development services.
In addition to the processes and methodologies necessary to successfully
execute the offshore model, the Company has invested significant resources in
its infrastructure to ensure uninterrupted service to its clients. The Company
has invested in redundant infrastructure with "warm" backup sites and
redundant telecommunication capabilities with alternate routings to provide
its clients with high service levels. Additionally, the Company utilizes two
telecommunications carriers in India and has installed in its principal
facilities multiple international satellite links connecting with network hubs
in Fremont, California and in Dedham, Massachusetts. A different ocean cable
connecting Europe and the United States serves each of these hubs. Moreover,
the Company has installed wireless links among its facilities in Bangalore and
intends to install wireless links among its other Indian facilities by the end
of 1999.
Services and Products
The Company's services include software development, maintenance and re-
engineering services as well as dedicated OSDCs for certain clients. In each
of its service offerings the Company assumes full project management
responsibility for each project it undertakes rather than providing
supplemental personnel to work under a client's supervision. In addition to
its IT services, the Company as well as its formerly majority-owned
subsidiary, Yantra, also develop and market certain packaged applications
software.
Software Development. The Company provides turnkey software development,
typically pursuant to fixed-price, fixed-time frame contracts. The projects
vary in size and may involve the development of new applications or new
functions for existing software applications. Each development project
typically involves all aspects of the software development process, including
definition, prototyping, design, pilots, programming, testing, installation
and maintenance. In the early stage of a development project, Infosys
personnel often work at a client's site to help determine project definition
and to estimate the scope and cost of the project. Infosys then performs
design review, software programming, program testing, module testing,
integration and volume testing, primarily at its own facilities in India. For
example, for a telecommunications client facing deregulation and subsequent
declining market share, the Company partnered with a specialty marketing firm
to design and implement a customer rewards program. Infosys was able to work
with both the marketing firm and the client to complete this project within
six months, ensuring the system's technical proficiency and enabling the
client to reverse the trend of declining market share.
Software Maintenance. The Company provides maintenance services for large
legacy software systems. Maintenance services include minor and major
modifications and enhancements (including Year 2000 and Eurocurrency
conversion) and production support. Such systems are either mainframe-based or
client/server and are typically essential to a client's business, though over
time they become progressively more difficult and costly for the client's
internal IT department to maintain. By outsourcing the maintenance
responsibilities to Infosys, clients can control costs and free their IT
departments for other work. The Company's IT professionals take an engineering
approach to software maintenance, focusing on the long-term functionality and
stability of the client's overall system and attempting to avoid problems
stemming from "quick-fix" solutions. The Company performs most of the
maintenance work at its own facilities using satellite-based links to the
client's system. In addition, the Company maintains a small team at the
client's facility to coordinate support functions. Infosys was a pioneer in
managing time-zone differences between India and the United States to provide
near 24-hour
46
<PAGE>
maintenance services. As an example, the IT department of a large retailer
with inadequate and inflexible systems was overburdened by both building new
systems and maintaining the current legacy infrastructure. The Company was
able to assume maintenance responsibilities for these systems in a short time
frame and reduce maintenance costs to the client by utilizing its offshore
facilities.
Software Re-engineering. The Company's re-engineering services assist
clients in migrating to new technologies while extending the life cycle of
existing systems that are rich in functionality. Projects include re-
engineering software to migrate applications from mainframe to client/server
architectures, to extend existing applications to the Internet, to migrate
from existing operating systems to UNIX or Windows NT or to update from a non-
relational to a relational database technology. For companies with extensive
proprietary software applications, implementing such technologies may require
rewriting and testing millions of lines of software code. As with its other
services, the Company has developed proven methodologies that govern the
planning, execution and testing of the software re-engineering process. For
instance, for a nationwide manufacturer and distributor experiencing operating
inefficiency with a legacy system installed in its two call centers, the
Company re-engineered the system to run in a distributed processing
environment with front-end Internet browser-based capabilities allowing 24-
hour Internet access to the client's distribution systems. As a result, the
client was able to consolidate its call center workforce into one location and
reduce its workforce by over 50%.
Dedicated Offshore Software Development Centers. The Company has pioneered
the concept of dedicated OSDCs in which a software development team that is
dedicated to a single client uses technology, tools, processes and
methodologies unique to that client. Each dedicated OSDC is located at a
Company facility in India and is staffed and managed by the Company. Once the
project priorities are established by the client, the Company, in conjunction
with the client's IT department, manages the execution of the project. By
focusing on a single client over an extended time frame, the dedicated OSDC
team gains a deeper understanding of the client's business and technology and
can begin to function as a virtual extension of the client's software team.
The Company has established dedicated OSDCs providing a range of services for
Ascend Communications, Inc., NCR Corporation and Nortel Networks, a division
of Northern Telecom Limited ("Nortel"). The Company's first OSDC, for Nortel,
was established in July 1993.
Software Products. In addition to the IT services described above, the
Company develops and markets certain proprietary software applications. BANCS
2000 is an on-line, retail and corporate banking system that offers rich
functionality, scalability and flexibility for automation of banking
operations. This product is used by banks in emerging markets that seek to
implement state-of-the-art banking technology and achieve high levels of
client service. BANCS 2000 has been installed at more than 300 bank branches
in India, Sri Lanka, Nepal, Indonesia and Tanzania. Through Yantra, the
Company also develops and markets WMSYantra, an open system software package
for warehouse management.
47
<PAGE>
Markets, Clients and Representative Engagements
The Company markets its services primarily to large IT-intensive
organizations in North America, Europe and Japan. The Company focuses on
certain market segments, including financial services, manufacturing and
distribution, retail, telecommunications and technology. During fiscal 1998
and for the nine months ended December 31, 1998, the following representative
clients accounted for 60.8% and 59.8% of the Company's revenues, respectively:
<TABLE>
<CAPTION>
Financial Services _Manufacturing and Distributio__n
------------------ --------------------------------
<S> <C>
Avco Financial Services, Inc. ConAgra, Inc.
Bank of America N.T. & S.A. Cooper Industries, Inc.
BankBoston, N.A. Kent Electronics Company
Goldman, Sachs & Co. Levi Strauss & Co.
Northwestern Mutual Life Insurance
Co. Quest International
The Western and Southern Life Reebok International Ltd.
Insurance Company
Visa International Service
Association Salomon S.A.
Toshiba Corporation
<CAPTION>
Telecommunications and Technology Retail
--------------------------------- --------------------------------
<S> <C>
Apple Computer, Inc. Ann Taylor, Inc.
Ascend Communications, Inc. B.J.'s Wholesale Club, Inc.
AST Research, Inc. Sainsbury's Supermarkets Limited
Belgacom Mobile N.V./S.A. J.C. Penney Company Corporation
Bell Atlantic Corporation Nordstrom, Inc.
NCR Corporation Staples, Inc.
Northern Telecom Limited The Gap, Inc.
Epson Software Development
Laboratory, Inc. The TJX Companies, Inc.
</TABLE>
The Company provides a wide range of IT services and maintains a disciplined
focus on its business mix in an effort to avoid service or client
concentration. Beginning in fiscal 1996, the Company aggressively sought to
minimize its client concentration and to accept as clients only those that met
strict guidelines for overall revenue potential and profitability. For fiscal
1997, fiscal 1998 and the nine months ended December 31, 1998, the Company's
largest client accounted for 15.6%, 10.5% and 6.7%, respectively, of revenues
and its five largest clients accounted for 43.1%, 35.1% and 29.2%,
respectively, of revenues.
While each engagement differs, the following case studies describe the
Company's relationship with several of its largest clients:
Northern Telecom Limited. In 1993, the Company established its first
dedicated OSDC for Nortel, a division of Northern Telecom Limited, a leading
global supplier of telecommunications products and networks. The Company
provides a variety of IT services for Nortel through a team of Infosys
professionals assigned to work on long-term projects for Nortel in a separate
dedicated secure area within the Company's Bangalore facility. Nortel helped
train the Infosys team in its technology and products, invested in
communication links and provided certain equipment, including a
telecommunications switch, so that the Company's development facilities would
replicate the work environment of Nortel. As the Company's understanding of
Nortel's needs and technologies has developed, the scope of projects performed
by Infosys for Nortel has gradually increased from software maintenance
projects to the development of critical software for Nortel products. As of
December 31, 1998, approximately 245 Company personnel were assigned to the
OSDC dedicated to Nortel.
Apple Computer, Inc. In 1993, Apple Computer, Inc. ("Apple"), a leading
developer and manufacturer of personal computers, decided to restructure
certain areas of its internal IT services operations. After an
48
<PAGE>
extensive selection process, Apple chose the Company as a major outside IT
services provider. In order to demonstrate the benefits of the offshore
development model, the Company initially began with one project. The Company
was subsequently awarded numerous additional projects including re-engineering
services, custom software development and maintenance services. One
illustrative project on which Infosys assisted Apple was modernizing Apple's
legacy system, which handles orders for finished goods and services. The
Company re-engineered the legacy system, implementing modern technology and
making the system more responsive to Apple's market needs. Since 1993, the
Company has been able to meet Apple's IT services needs through its flexible,
scalable workforce that can ramp up quickly to tackle new projects.
Nordstrom, Inc. Nordstrom, a high-end retailer located in most major
metropolitan areas across the United States, expanded rapidly in the 1990s.
This rapid expansion created heavy demands on its internal resources. These
resources were primarily responsible for a business critical system that was
difficult to maintain and expensive to service. The Company approached
Nordstrom in 1994 and offered its services as a long-term solution to meet
Nordstrom's internal IT needs. At the outset of the relationship, 25 Infosys
IT professionals were trained by Nordstrom in PacBase, a specialized case
tool, at the Company's headquarters in India. The Company's IT professionals
performed the requirements definition and prototype work at Nordstrom's site,
then moved offshore to execute the testing and programming phases of the
project. Nordstrom estimates that this approach saved it $750,000 in
consulting fees. The Company has since provided Nordstrom with a high quality
workforce, trained in PacBase and able to be deployed quickly to meet
Nordstrom's needs. The Company has played a major role in reducing Nordstrom's
application development schedule. Nordstrom considers the Company to be an
extension of its in-house IT services department and has even adopted the
Company's software quality practices. The Company is the exclusive offshore
software services provider for Nordstrom.
Sales and Marketing
The Company sells and markets its services and products from 17 sales
offices located in five countries. In the United States, the Company presently
has sales offices located in Atlanta, Boston, Chicago, Dallas, Detroit,
Fremont, Los Angeles, New York and Seattle. Additionally, the Company's
international sales offices are located in Canada, India, Japan, Germany and
the United Kingdom. With its global sales headquarters in Fremont, California
and its corporate marketing group in Bangalore, India, the Company's sales and
marketing efforts are targeted toward IT-intensive organizations in North
America, Europe and Japan. As of December 31, 1998, the Company had 21 sales
and marketing employees outside of India. To continue this focus on countries
with sophisticated IT services needs, the Company intends to expand its global
sales and marketing infrastructure by opening additional regional sales and
marketing offices in Europe. In addition, the Company has partnered with
Teksels S.A., a Swiss firm, to assist its efforts in Switzerland.
From its offices located around the world, the Company's sales professionals
contact prospective clients in developed markets and position the Company as a
leading IT services provider with operations in India. In many cases,
potential clients in their search for offshore IT services providers submit a
request for proposal from the leading Indian software firms, including the
Company. The Company's superior management team, quality of work and IT
professionals and competitive prices are often cited as reasons for the award
of competitive contracts. In addition, the Company's impressive client
references and endorsements as well as its willingness to participate in trade
shows and speaking engagements, have helped the Company to generate greater
awareness for its services. The Company believes that the Offering and its
profile as a public company in the United States will further enhance its
corporate marketing efforts. Moreover, the Company intends to use a portion of
the proceeds from the Offering to bolster its marketing efforts in the United
States and Europe.
The Company has focused its sales and marketing efforts on expanding the
scope and depth of its relationships with existing clients. Although initially
the Company may only provide one service to a client, the Company seeks to
convince the client to expand and diversify the type of services it outsources
to the Company. As a result, the Company strengthens its relationships with
its clients by closely integrating its services with its clients' IT
operations. The success of this targeted strategy is reflected in the
Company's high "repeat" rate of business. Over 80% of the Company's revenues
in each of the last three fiscal years have been generated from pre-existing
clients.
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<PAGE>
In marketing certain services, the Company has pursued a "branded services"
strategy. For example, the Company markets its Year 2000 conversion services
under the brand name "In2000," so as to highlight the well-developed toolset
and proprietary methodology used to deliver these services. By establishing
branded services, the Company's objective is to enhance the credibility and
facilitate the marketing of such services. These brand names also enable the
Company to market its services to new clients who may already recognize the
brand name.
Human Resources
As of December 31, 1998, the Company had approximately 3,500 employees,
including approximately 3,000 IT professionals, up from approximately 2,440
and approximately 2,050, respectively, as of December 31, 1997. The Company
invests heavily in its programs to recruit, train and retain qualified
employees, and management believes the Company has established a reputation as
one of the most desirable employers for software engineers in India.
The Company focuses its recruiting efforts on the top 20% of students from
engineering departments of Indian schools and relies on a rigorous selection
process involving a series of tests and interviews to identify the best
applicants. Because the Company emphasizes flexibility and innovation,
applicants are selected on the basis of their ability to learn as well as
their academic achievement, conceptual knowledge and their temperament for,
and fit with, the Company's culture. The Company's reputation as a premier
employer enables it to select from a large pool of qualified applicants. For
example, in fiscal 1998, the Company received approximately 70,870 job
applications, tested approximately 21,350, interviewed approximately 5,800 and
extended job offers to approximately 1,790, of whom approximately 1,300
accepted.
The Company seeks to attract and motivate IT professionals by offering: an
entrepreneurial environment that empowers IT professionals; programs that
recognize and reward performance; challenging assignments; a continuous
updating of skills; and a culture that emphasizes openness, integrity and
respect for the employee. IT professionals receive competitive salaries and
benefits and are eligible to participate in the Company's stock option plans.
In addition, the Company spends significant resources on training and
continuing education. To conduct training, the Company employs a 33-person
faculty, including 20 with doctorate or master's degrees. The faculty conducts
14-week training sessions for new recruits and a variety of two-week
continuing education courses in technology and management skills.
At any given time, approximately 15% of the Company's IT professionals are
working on-site at client facilities in the United States and elsewhere while
the balance are working off-site in India. On average, approximately 190, 330
and 510 of the Company's IT professionals worked on-site in the United States
and elsewhere per month in fiscal 1997, fiscal 1998 and the nine months ended
December 31, 1998, respectively. On average, approximately 1,210, 1,780 and
2,510 of the Company's IT professionals and support staff worked off-site in
India per month in fiscal 1997, fiscal 1998 and the nine months ended December
31, 1998, respectively.
The Company's professionals that work on-site at client facilities in the
United States on temporary and extended assignments are typically required to
obtain visas. As of December 31, 1998, substantially all of the Company's
personnel in the United States were working pursuant to H-1B visas (231
persons) or L-1 visas (111 persons). Both H-1B and L-1 visas require that
recipients meet certain education requirements; however, only employees who
have worked for the Company for at least one year are eligible to obtain L-1
visas. The Company is generally able to obtain H-1B and L-1 visas within two
to four months of applying for such visas, which remain valid for three years.
Although there is no limit to new L-1 petitions, there is a limit to the
number of new H-1B petitions that the United States Immigration and
Naturalization Service may approve in any government fiscal year. In years in
which this limit is reached, the Company may be unable to obtain H-1B visas
necessary to bring critical Indian IT professionals to the United States on an
extended basis. The H-1B limit was reached in May 1998 for the U.S.
government's fiscal year ending September 30, 1998. The Company planned for
the H-1B limit being reached prior to the end of the U.S. government's current
fiscal year primarily by forecasting its annual needs for such visas early in
the U.S. government's fiscal year and applying for such visas
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<PAGE>
as soon as practicable. In addition, the Company utilizes L-1 visas whenever
available and redeploys existing H-1B visa holders in order to minimize the
number of new H-1B visas needed by the Company. While the Company anticipated
that such limit would be reached prior to the end of the U.S. government's
fiscal year and has made efforts to plan accordingly, there can be no
assurance that the Company will continue to be able to obtain a sufficient
number of H-1B visas. See "Risk Factors--Restrictions on U.S. Immigration."
The market for hiring software professionals is highly competitive.
Competing employers include multinational corporations that perform software
development in India through subsidiaries and joint ventures with Indian
companies, a number of well-known Indian IT services and software product
companies and a large number of small and medium regional companies, many with
affiliates or parent companies in the United States and Europe. See "Risk
Factors--Dependence on Skilled Personnel; Risks of Wage Inflation."
Facilities
As part of its strategy to provide high quality services to its clients, the
Company has a detailed facility management plan. First, the Company seeks to
provide its Indian IT professionals with facilities that are comparable to
those used by software companies in the United States and Europe. Second, the
Company seeks to establish facilities near large sources of technical talent.
Third, the Company equips its facilities to minimize vulnerability to
interruptions in local utility and telecommunication services.
The Company's headquarters facility in Bangalore is a 160,000 square foot
building located on approximately five acres in a Software Technology Park in
Electronics City. The Company acquired the land from the State of Karnataka in
1993 and has subsequently acquired parcels for various other offices, pursuant
to certain lease cum sale agreements (the "Conditional Purchase Agreements"),
which are used by the State of Karnataka to make land available to private
companies for specific purposes. Under the Conditional Purchase Agreements,
property is sold subject to a long-term (typically 25-year), rental-free lease
which transfers ownership to the buyer at the end of the period provided that
the buyer uses the land for specified purposes. The Conditional Purchase
Agreements require the Company to use the various parcels for software
development facilities. Typically, the Company pays 99% of the purchase price
at the time the agreement is signed and pays the remaining 1% when the term is
concluded.
The Company has its worldwide sales headquarters in Fremont, California and
branch sales offices in Atlanta, Bangalore, Boston, Chennai, Chicago, Dallas,
Detroit, Frankfurt, London, Los Angeles, Mumbai, New Delhi, New York, Seattle,
Tokyo and Toronto. All sales offices, except the Mumbai office, are in leased
facilities.
The Company plans to expand its facilities to meet its anticipated growth.
Currently the Company is planning new facilities in Bangalore, Bhubaneswar,
Chennai, Mangalore and Pune to provide an additional 890,000 square feet of
office space. As of December 31, 1998, the Company had contractual commitments
for capital expenditures of $6.3 million and had budgeted aggregate capital
expenditures of $32.4 million for the fourth quarter of fiscal 1999 through
fiscal 2000 to acquire, build and equip new facilities in India and other
regions including potentially Southeast Asia, Latin America and Europe. The
Company has not yet made contractual commitments for the majority of its
budgeted aggregate capital expenditures and there can be no assurance that the
Company will not significantly alter or reduce its proposed expansion plans.
51
<PAGE>
The following table sets forth certain information as of December 31, 1998
relating to the Company's principal facilities and proposed developments:
<TABLE>
<CAPTION>
Approximate
Location Square Feet Status Type of Facility
- ------------------------ ----------- ----------- ----------------------------
<S> <C> <C> <C>
Bangalore, India 300,000 Conditional Proposed Software
(Plots 45, 46, 97C, 97D Purchase Development Facility
and 97E, Hosur Road)
Bangalore, India 150,000 Conditional Proposed Software
(Plots 4/1, 4/2, 4/3, Purchase Development Facility
4/4, 26/1, 26/2, Hosur
Road)
Bangalore, India 160,000 Conditional Corporate Headquarters,
(Plots 44 and 97A, Purchase Software Development
Hosur Road) Facility
Bangalore, India 7,000 Owned Software Development
(Dickenson Road) Facility
Bangalore, India 11,300 Leased Software Development
(BTM Layout) Facility
Bangalore, India 18,700 Leased Software Development
(Koramangala) Facility
Bangalore, India * Owned Proposed Office Premises
(J.P. Nagar, Phase II)
Bangalore, India 59,500 Leased Software Development
(J.P. Nagar, Phase III) Facility
Bangalore, India 78,700 Owned Employee Residence Flats
(Adarsh Gardens)
Mangalore, India 14,100 Leased Software Development
Facility
Mangalore, India 5,100 Owned Employee Residence Flats
Mumbai, India 1,200 Owned Sales and Marketing Office
Pune, India 43,700 Leased Software Development
Facility
Pune, India 160,000 Conditional Proposed Software
Purchase Development Facility
Pune, India 3,300 Owned Employee Residence Flats
Bhubaneswar, India 52,900 Leased Software Development
Facility
Bhubaneswar, India 150,000 Leased Proposed Software
Development Facility
Chennai, India 26,600 Leased Software Development
Facility
Chennai, India 23,200 Leased Software Development
Facility
Fremont, California 6,200 Leased Worldwide Sales Headquarters
</TABLE>
- --------
* The Company has not yet determined the aggregate square feet of the proposed
development. The land parcel is approximately 16,500 square feet.
Competition
The market for IT services is highly competitive. Competitors include IT
services companies, large international accounting firms and their consulting
affiliates, systems consulting and integration firms, temporary employment
agencies, other technology companies and client in-house MIS departments.
Competitors include international firms as well as national, regional and
local firms located in the United States, Europe and India. The Company
expects that future competition will increasingly include firms with
operations in other countries,
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<PAGE>
potentially including countries with lower personnel costs than those
prevailing in India. Part of the Company's competitive advantage has
historically been a cost advantage relative to service providers in the United
States and Europe. Since wage costs in India are presently increasing at a
faster rate than those in the United States, the Company's ability to compete
effectively will become increasingly dependent on its reputation, the quality
of its services and its expertise in specific markets. Many of the Company's
competitors have significantly greater financial, technical and marketing
resources and generate greater revenue than the Company, and there can be no
assurance that the Company will be able to compete successfully with such
competitors and will not lose existing clients to such competitors. The
Company believes that its ability to compete also depends in part on a number
of factors outside its control, including the ability of its competitors to
attract, train, motivate and retain highly skilled IT professionals, the price
at which its competitors offer comparable services and the extent of its
competitors' responsiveness to client needs.
Intellectual Property
Ownership of software and associated deliverables created for clients is
generally retained by or assigned to the client, and the Company does not
retain an interest in such software or deliverables. The Company also develops
software products and software tools which are licensed to clients and remain
the property of the Company. The Company relies upon a combination of non-
disclosure and other contractual arrangements and copyright, trade secret and
trademark laws to protect its proprietary rights in technology. The Company
currently requires its IT professionals to enter into non-disclosure and
assignment of rights agreements to limit use of, access to and distribution of
its proprietary information. The source code for the Company's proprietary
software is generally protected as trade secrets and as unpublished
copyrighted works. The Company has obtained registration of INFOSYS as a
trademark in India but not in the United States. The Company does not have any
patents or registered copyrights in the United States. The Company generally
applies for trademarks and service marks to identify its various service and
product offerings.
The laws of India may not, under some circumstances, permit the protection
of the Company's proprietary rights in the same manner or to the same extent
as the laws of the United States. India is a member of the Berne Convention
and the Universal Copyright Convention, as revised at Paris (1971), both
international treaties. As a member of the Berne Convention, the Government of
India has agreed to extend copyright protection under its domestic laws to
foreign works, including works created or produced in the United States. The
Company believes that laws, rules, regulations and treaties in effect in the
United States and India are adequate to protect it from misappropriation or
unauthorized use of its copyrights. However, there can be no assurance that
such laws will not change in ways that may prevent or restrict the protection
of the Company's proprietary rights. There can be no assurance that the steps
taken by the Company to protect its proprietary rights will be adequate to
deter misappropriation of any of its proprietary information or that the
Company will be able to detect unauthorized use and take appropriate steps to
enforce its intellectual property rights.
Although the Company believes that its services and products do not infringe
on the intellectual property rights of others, there can be no assurance that
such a claim will not be asserted against the Company in the future. Assertion
of such claims against the Company could result in litigation, and there is no
assurance that the Company would prevail in such litigation or be able to
obtain a license for the use of any infringed intellectual property from a
third party on commercially reasonable terms. There can be no assurance that
the Company will be able to protect such licenses from infringement or misuse,
or prevent infringement claims against the Company in connection with its
licensing efforts. The Company expects that the risk of infringement claims
against the Company will increase if more of the Company's competitors are
able to obtain patents for software products and processes. Any such claims,
regardless of their outcome, could result in substantial cost to the Company
and divert management's attention from the Company's operations. Any
infringement claim or litigation against the Company could, therefore, have a
material adverse effect on the Company's results of operations and financial
condition. See "Risk Factors--Intellectual Property Rights."
Legal Proceedings
The Company is not currently a party to any material legal proceedings.
53
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company, their respective ages
as of December 31, 1998, and their respective positions with the Company are
as follows:
<TABLE>
<CAPTION>
Name Age Position
------------------------------- --- ------------------------------------------
<C> <C> <S>
N.R. Narayana Murthy........... 52 Chairman of the Board and Chief Executive
Officer
Nandan M. Nilekani............. 43 Managing Director (Director, President and
Chief Operating Officer)
N.S. Raghavan.................. 55 Director and Head--Human Resources and
Education
S. Gopalakrishnan.............. 43 Director and Head--Client Delivery and
Technology
K. Dinesh...................... 44 Director and Head--Quality, Productivity
and MIS
S.D. Shibulal.................. 43 Director, Head--Manufacturing and
Distribution Business Unit and Head--
Internet and Intranet Business Unit
Dr. P. Balasubramanian......... 49 Senior Vice President and Head--Financial
Services and Transportation Business Unit
Srinath Batni.................. 44 Senior Vice President and Head--Retail and
Telecommunications Business Unit
Ashwani K. Khurana............. 48 Senior Vice President and Head--Banking
Business Unit (Sales and Support)
Phaneesh Murthy................ 35 Senior Vice President and Head--Worldwide
Sales
T.V. Mohandas Pai.............. 40 Senior Vice President and Head--Finance
and Administration
Dr. M.S.S. Prabhu.............. 50 Senior Vice President and Head--
Engineering Services Business Unit
Hema Ravichandar............... 38 Senior Vice President and Head--Human
Resources
Raghupati G. Bhandi............ 38 Vice President--Enterprise Resource
Planning
Vasudeva L. Rao................ 37 Vice President--Manufacturing and
Distribution
Rajiv Kuchal................... 33 Associate Vice President and Head--Nortel
OSDC Business Unit
Dr. S. Yegneshwar.............. 38 Associate Vice President and Head--
Education and Research
Susim M. Datta (1)............. 62 Director
Deepak Satwalekar (1).......... 50 Director
Dr. Marti G. Subrahmanyam (1).. 52 Director
Ramesh Vangal (1).............. 44 Director
</TABLE>
- --------
(1) Member of the Audit and Compensation Committees.
N.R. Narayana Murthy has served as Chairman of the Board and Chief Executive
Officer of Infosys since 1981, when he founded the Company with six software
professionals. Mr. Murthy also served as Managing Director of Infosys until
February 1999. While at Infosys, from 1992 to 1994, Mr. Murthy also served as
the President of National Association of Software and Service Companies
("NASSCOM"). Mr. Murthy is on the Governing Council of the National
Information Technology Task Force of India and was voted "IT Man of the Year"
for 1996 by Dataquest India. In 1998, Mr. Murthy was awarded the prestigious
J.R.D. Tata Corporate Leadership Award. Since August 1998, Mr. Murthy has
served as a director of the Industrial Credit and Investment Corporation of
India ("ICICI") and since 1998, he has served as a director of Videsh Sanchar
Nigam Limited ("VSNL"). He is a Fellow of the All India Management Association
("AIMA") and the Computer Society of India ("CSI"). Mr. Murthy received a B.E.
in Electrical Engineering from the University of Mysore and a M.Tech. from the
Indian Institute of Technology ("IIT"), Kanpur.
54
<PAGE>
Nandan M. Nilekani is a co-founder of Infosys and has served as a Director
since 1981, Head--Marketing and Sales of Infosys since 1987, Head--Banking
Business Unit since 1997 and Managing Director (President and Chief Operating
Officer) since February 1999. From 1981 to 1987, Mr. Nilekani was in the
United States managing the marketing and development efforts of Infosys. Mr.
Nilekani is a co-founder of NASSCOM and received a B.Tech. in Electrical
Engineering from IIT, Mumbai.
N.S. Raghavan is a co-founder of Infosys and has served as a Director since
1981 Head--Human Resources and Education of Infosys since 1996. From 1981 to
1996, he served in various senior management positions within Infosys.
Mr. Raghavan received a B.E. in Electrical Engineering from Andhra University.
S. Gopalakrishnan is a co-founder of Infosys and has served as a Director
since 1981 and Head--Client Delivery and Technology of Infosys since 1996.
From 1994 and 1996, Mr. Gopalakrishnan was head of Technical Support Services
for Infosys. From 1987 to 1994, he was Technical Vice President and managed
all projects at the U.S.-based KSA/Infosys, a former joint venture between the
Company and Kurt Salmon Associates. Prior to that, Mr. Gopalakrishnan was
Technical Director of Infosys, responsible for the technical direction of the
Company. Mr. Gopalakrishnan received a M.Sc. in Physics and an M.Tech. in
Computer Science from IIT, Chennai.
K. Dinesh is a co-founder of Infosys and has served as a Director since
1985. He has served as Head--Quality, Productivity and MIS of Infosys since
1996. From 1991 to 1996, Mr. Dinesh served in various project management
capacities and was responsible for worldwide software development efforts for
Infosys. From 1981 to 1990, he managed projects for Infosys in the United
States. Mr. Dinesh received a M.Sc. degree in Mathematics from Bangalore
University.
S.D. Shibulal is a co-founder of Infosys and has served as a Director from
1984 to 1991 and since 1997. He has served as Head--Manufacturing,
Distribution and Year 2000 Business Unit and Head--Internet and Intranet
Business Unit of Infosys since 1997. From 1991 to 1996, Mr. Shibulal was on
sabbatical from Infosys and served as Senior Information Resource Manager at
Sun Microsystems, Inc. From 1981 to 1991, he worked for Infosys in the United
States on projects in the retail and manufacturing industries. Mr. Shibulal
received a M.Sc. in Physics from the University of Kerala and a M.S. in
Computer Science from Boston University.
Dr. P. Balasubramanian has served as Senior Vice President and Head--
Financial Services and Transportation Business Unit of Infosys since 1995.
From 1989 to 1992, Dr. Balasubramanian was Chief Executive Officer and
Technical Director of Hitek Software Engineers Limited ("Hitek"), Jamaica,
West Indies. From 1992 to 1994, he was a Technical Director of Hitek. From
1986 to 1989, Dr. Balasubramanian was Chief Executive Officer of Cholamandalam
Software Limited, Chennai. Dr. Balasubramanian has been invited as guest
faculty to several executive training programs in India as well as at the
University of West Indies. Dr. Balasubramanian received a B.Tech. and M.Tech
from IIT, Chennai and a Ph.D. in Operations Research and Financial Management
from Purdue University.
Srinath Batni has served as Senior Vice President and Head--Retail and
Telecommunications Business Unit of Infosys since 1996. After joining Infosys
in 1992, Mr. Batni was a Project Manager. From 1990 to 1992, he was Manager of
Technical Support for PSI Bull, an Indian software development subsidiary of
Bull, S.A., a French company. Mr. Batni received a B.E. in Mechanical
Engineering from Mysore University and a M.E. in Mechanical Engineering from
the Indian Institute of Science, Bangalore.
Ashwani K. Khurana has served as Senior Vice President and Head--Banking
Business Unit (Sales and Support) of Infosys since 1994. He joined the Company
in 1992 as Managing Director of Infosys Digital Systems Pvt. Ltd., formerly a
subsidiary of the Company. Prior to that, for 14 years, Mr. Khurana was a
Regional Manager for WIDIA India Limited, an Indian subsidiary of KRUPP WIDIA
of Germany, an industrial product manufacturer. Mr. Khurana received a B.Tech.
from IIT, Delhi.
Phaneesh Murthy has served as Senior Vice President and Head--Worldwide
Sales of Infosys since 1996. From 1992 to 1996, Mr. Murthy was a Marketing
Manager for Infosys based in the United States. From 1987 to 1992, he worked
in sales and marketing for Sonata, a software division of Indian Organic
Chemicals Ltd. Mr. Murthy received a B.Tech. in Mechanical Engineering from
IIT, Chennai and a post graduate diploma in business administration from IIM,
Ahmedabad.
55
<PAGE>
T.V. Mohandas Pai has served as Senior Vice President and Head--Finance and
Administration of Infosys since 1996. From 1994 to 1996, he served as Vice
President of Finance at Infosys. From 1988 to 1994, Mr. Pai was Executive
Director of Prakash Leasing Limited. He was also a member of the Capital
Markets Committee of the Institute of Chartered Accountants of India. Mr. Pai
received a B.Com. from St. Joseph's College of Commerce, Bangalore and a LL.B.
from the University Law College, Bangalore. Mr. Pai is a Fellow Member of the
Institute of Chartered Accountants of India.
Dr. M.S.S. Prabhu has served as Senior Vice President and Head--Engineering
Services Business Unit of Infosys since 1997. From 1994 to 1997, Dr. Prabhu
served as head of CAD/CAM group at Tata Consultancy Services. From 1972 to
1994, he served in various capacities for the Indian Satellite Research
Organization. Dr. Prabhu received a B.E. in Civil Engineering from Bangalore
University and a Ph.D. in Aeronautical Engineering from Indian Institute of
Science, Bangalore.
Hema Ravichandar has served as Senior Vice President and Head--Human
Resources of Infosys since 1998. From 1996 to 1998, Ms. Ravichandar was an
independent consultant. From 1992 to 1995, she served as Head--Human Resources
at Infosys. From 1983 to 1992, Ms. Ravichandar was employed by Motor
Industries Company Limited as Deputy Manager--Human Resource Development. Ms.
Ravichandar received a B.A. in Economics and a post graduate diploma in
management from IIM, Ahmedabad.
Raghupati G. Bhandi has served as Vice President of Infosys since April
1998. From 1995 to 1998, he started and developed the Company's first software
development facility outside of Bangalore. From 1991 to 1995, Mr. Bhandi
worked in the Quality Department of Infosys with attention to ISO 9000
certification. From 1988 to 1991, he was an Assistant Manager on projects in
the United States and Europe. Mr. Bhandi received a B.E. from Mysore
University and a M.Tech. in Industrial Management and Engineering from IIT,
Kanpur.
Vasudeva L. Rao has served as Vice President of Infosys since April 1998,
operating in the distribution and logistics domains of the Manufacturing and
Distribution Business Unit. From 1994 to 1996, he was an Associate Vice
President working in the Manufacturing and Distribution Unit. From 1991 to
1994, he served as a project manager in the retail industry at Software
Sourcing Company, formerly KSA/Infosys. From 1985 to 1991, Mr. Rao was a
software engineer for Infosys based in the United States. Mr. Rao received a
B.E. in Mechanical Engineering from Bangalore University.
Rajiv Kuchal has served as Associate Vice President of Infosys since 1998
and Head--Nortel OSDC Business Unit of Infosys since April 1998. From 1990 to
1998, Mr. Kuchal served in various capacities for the Company, including
projects relating to an electronic telex interface and management of the
Nortel OSDC before it became a separate business unit. Mr. Kuchal received a
B.Tech. in Electrical and Electronics Engineering from IIT, Delhi.
Dr. S. Yegneshwar has served as Associate Vice President and Head--Education
and Research of Infosys since 1996. From 1993 to 1996, Dr. Yegneshwar was a
group leader of the Software Engineering group in the Education and Research
Department of Infosys. From 1990 to 1993, he was an Assistant Professor of
Computers and Information Systems at IIM, Ahmedabad, where he taught courses
in software engineering and management to postgraduate and doctoral students.
Dr. Yegneshwar received a B.E. in Mechanical Engineering from the Birla
Institute of Technology and Science, Pilani and a Ph.D. in Computer Science
and Engineering from IIT, Mumbai.
Susim M. Datta has served as a Director of Infosys since 1997. He is
Chairman of Castrol India Ltd. and IL&FS Venture Corporation Ltd. He is a
Director of Philips India Ltd., Tata Trustee Company Ltd. and various other
publicly-held corporations in India. From 1990 to 1996, he was Chairman of
Hindustan Lever Ltd. and all Unilever Group Companies in India and Nepal. Mr.
Datta is a Trustee of the government-sponsored India Brand Equity Fund Trust
and a member of the Advisory Board of the Council for Fair Business Practices,
Mumbai. He is also Chairman of the Board of Governors of IIM, Bangalore and
the Goa Institute of Management. Mr. Datta received a M.Sc. from Calcutta
University.
56
<PAGE>
Deepak M. Satwalekar has served as a Director of Infosys since 1997. He has
been Managing Director of Housing Development Finance Corporation Ltd. since
1993, and was Deputy Managing Director since 1990. He has been a member of the
Managing Committee of the Bombay Chamber of Commerce and Industry from 1996 to
1998. Mr. Satwalekar was also a Member of the Economic Affairs Committee of
the Indo-American Chamber of Commerce from 1993 to 1994 and 1996 to 1997. He
is a Director of several companies in India and elsewhere. Mr. Satwalekar
received a B.Tech. in Mechanical Engineering from IIT, Mumbai and a M.B.A.
from the American University.
Dr. Marti G. Subrahmanyam has served as a Director of Infosys since April
1998. He has served as the Charles E. Merrill Professor of Finance and
Economics at the Stern School of Business at New York University since 1991
and has been a visiting professor at IIT, Chennai, INSEAD, IIM, Ahmedabad and
Manchester Business School, among other academic institutions. Dr.
Subrahmanyam has written several books and published numerous articles in the
areas of finance and economics. He is a Director of ICICI Limited, Nomura
Asset Management Inc. and Deutsche Software India Ltd., a subsidiary of
Deutsche Bank AG. Dr. Subrahmanyam received a B.Tech. from IIT, Chennai, a
Diploma in Business Administration, from IIM, Ahmedabad and a Ph.D. in Finance
and Economics from the Massachusetts Institute of Technology.
Ramesh Vangal has served as a Director of Infosys since 1997. He has served
as the President of Seagram Asia Pacific since 1997. From 1994 to 1997, he was
a member of the Worldwide Operating Council of PepsiCo and was President of
PepsiCo Foods International, Asia Pacific. From 1985 to 1994, he served in
various management capacities for PepsiCo. Mr. Vangal received a B.Tech. from
IIT, Mumbai and a M.Sc. in Business from the London Business School. He also
holds a Certificate Diploma, Accounting and Finance from the Institute of
Chartered Accountants, London.
Board Composition
The Company's Articles set the minimum number of directors at three and the
maximum number of directors at 12. The Company presently has 10 directors. The
Indian Companies Act and the Company's Articles require that: (i) at least
two-thirds of the Company's directors shall be subject to re-election by the
Company's shareholders; and (ii) at least one-third of the Company's directors
who are subject to re-election shall be up for re-election at each annual
meeting of the Company's shareholders. The Company's Articles provide that
Mr. N.R. Narayana Murthy shall serve as the Company's Chairman of the Board
and shall not be subject to re-election as long as Mr. Murthy, together with
his relatives, owns at least 5% of the Company's outstanding equity
securities. There are no family relationships between any of the directors or
executive officers of the Company.
Director Compensation
In fiscal 1998, the Company's three non-employee directors were paid an
aggregate of $24,148. Directors who are also employees of the Company do not
receive any additional compensation for their service on the Board of
Directors. Directors are also reimbursed for certain expenses in connection
with their attendance at Board and Committee meetings.
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<PAGE>
Executive Compensation
The following sets forth certain summary information with respect to the
compensation paid by the Company to the Company's Chief Executive Officer.
Except for one executive officer whose cash compensation exceeded $100,000
during fiscal 1997 and fiscal 1998 due to overseas assignment, none of the
Company's executive officers earned a combined annual salary and bonus in
excess of $100,000 during any of the last three fiscal years. The amounts in
the following table are in dollars based on the Noon Buying Rate of 39.53
Indian Rupees per U.S. Dollar on March 31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation Number of
----------------------------- Securities
Name and Principal Fiscal Other Annual Underlying All Other
Position Year Salary Bonus Compensation(1) Options Compensation
- ------------------------ ------ ------- ----- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
N. R. Narayana Murthy... 1998 $22,739 -- $4,104 -- --
Chairman and Chief Ex- 1997 23,013 -- 3,439 -- --
ecutive Officer 1996 24,293 -- 2,987 -- --
</TABLE>
- --------
(1) Includes amounts paid pursuant to Company-sponsored pension and retirement
funds.
Option Grants in Last Fiscal Year
There were no options granted to the Chief Executive Officer during fiscal
1998.
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
The Chief Executive Officer did not exercise or hold any options during
fiscal 1998.
Employment Agreements
Under the Indian Companies Act, the Company's shareholders must approve the
salary, bonus and benefits of all employee directors at an Annual General
Meeting of Shareholders. Each employee director of the Company has signed an
agreement containing the terms and conditions of employment, including a
monthly salary, performance bonus and benefits including vacation, medical
reimbursement and pension fund contributions. These agreements are made for a
five year period, but either the Company or the employee director may
terminate the agreement upon six months notice to the other party.
Benefit Plans
1994 Employees Stock Offer Plan. The ESOP was approved by the shareholders
on June 25, 1994 and adopted by the Board of Directors on September 15, 1994.
The ESOP provides for the grant of rights to purchase Equity Shares to
eligible employees. Each stock purchase right provides the right to acquire
one Equity Share of the Company.
The ESOP is administered by an advisory board which consists of three
Company directors and two independent members. The Company has created an
employee welfare trust (the "Trust") to hold the Equity Shares eligible for
future issuance and subject to vesting under the ESOP. The advisory board
selects eligible full-time employees for the grant of stock purchase rights
from the Trust. The advisory board, in its discretion, selects employees based
upon various factors, including, without limitation: employee performance,
period of service and status in the Company. Founders of the Company are not
eligible to participate in the ESOP.
58
<PAGE>
Stock purchase rights granted under the ESOP are generally non-transferable
by the employee. However, if the employee terminates employment by
resignation, dismissal or severance, his or her stock purchase rights are
canceled and his or her Equity Shares subject to vesting are transferred back
to the Trust. If the employee terminates employment by death or retirement,
his or her stock purchase rights and Equity Shares subject to vesting are
transferred to the employee's legal heirs or shall continue to be held by the
employee, as the case may be. Each purchase right entitles the holder to
purchase one Equity Share at an exercise price of Rs.100 (representing 2.35
per Equity Share at the Noon Buying Rate in effect on February 8, 1999). The
stock purchase rights issued under the ESOP are exercisable for a period of
five years after the date of issuance of the stock purchase right to the
employee from the Trust. Equity Shares received by an employee under the ESOP
are non-transferable for a period of five years from the date the stock
purchase right was issued to the employee. After the expiration of this lock-
in period, the employee shall become the absolute owner of the Equity Shares.
If the Company declares a stock dividend, the dividend shares distributed to
ESOP participants would not be subject to vesting. The ESOP is subject to all
applicable laws, rules, regulations and to such approvals by any governmental
agencies as may be required.
As of February 8, 1999, the Trust held 208,800 Equity Shares which are
reserved for issuance upon exercise of stock purchase rights to be granted by
the Trust in the future.
1998 Stock Option Plan. The Company's 1998 Stock Option Plan (the "1998
Plan") provides for the grant of nonstatutory stock options and incentive
stock options (within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code")), to employees of the
Company. The establishment of the 1998 Plan was approved by the Board of
Directors in December 1997 and by the shareholders in January 1998. The
Government of India has approved the 1998 Plan, subject to a $50 million limit
on the aggregate market value of the Equity Shares reserved pursuant to the
1998 Plan. Accordingly, the total Equity Shares reserved for issuance may be
reduced by the Board of Directors from time to time to comply with the
Government of India's $50 million limit. A total of 800,000 Equity Shares are
currently reserved for issuance pursuant to the 1998 Plan. Unless terminated
sooner, the 1998 Plan will terminate automatically in January 2008. All
options under the 1998 Plan will be exercisable for ADSs represented by ADRs.
The 1998 Plan may be administered by the Board of Directors or a committee
of the Board (the "Committee"). The Committee has the power to determine the
terms of the options granted, including the exercise price, the number of ADSs
subject to each option, the exercisability thereof, and the form of
consideration payable upon such exercise. In addition, the Committee has the
authority to amend, suspend or terminate the 1998 Plan, provided that no such
action may affect any ADS previously issued and sold or any option previously
granted under the 1998 Plan.
Options granted under the 1998 Plan are not generally transferable by the
optionee, and each option is exercisable during the lifetime of the optionee
only by such optionee. Options granted under the 1998 Plan must generally be
exercised within three months of the end of optionee's status as an employee
of the Company, but in no event later than the expiration of the option's
term. In the event of optionee's termination as a result of death or
disability, the vesting and exercisability of the optionee's option will
accelerate in full and the option must be exercised within 12 months after
such optionee's termination by death or disability, but in no event later than
the expiration of the option's term. The exercise price of incentive stock
options granted under the 1998 Plan must be at least equal to the fair market
value of the ADSs on the date of grant. The exercise price of nonstatutory
stock options granted under the 1998 Plan must be at least equal to 90% of the
fair market value of the ADSs on the date of grant. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of the Company's outstanding capital stock, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market
value on the grant date and the term of such incentive stock option must not
exceed five years. The term of all other options granted under the 1998 Plan
may not exceed 10 years.
The 1998 Plan provides that in the event of a merger of the Company with or
into another corporation, a sale of substantially all of the Company's assets
or a like transaction involving the Company, each option shall be assumed or
an equivalent option substituted by the successor corporation. If the
outstanding options are not assumed or substituted as described in the
preceding sentence, the vesting and exercisability of each option will
accelerate in full.
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<PAGE>
Indemnification Agreements
The Company has entered into agreements to indemnify its directors and
officers for certain claims brought under U.S. laws to the fullest extent
permitted by Indian law. These agreements, among other things, indemnify
directors and officers for certain expenses (including attorneys' fees),
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of the Company,
arising out of such person's services as a director or officer of the Company.
The Company believes that these provisions and agreements are necessary to
attract and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company as to which
indemnification will be required or permitted. The Company is unaware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.
60
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Equity Shares as of February
8, 1999 (as adjusted to reflect the Company's stock dividend declared in
December 1998) by: (i) each shareholder known by the Company to be the
beneficial owner of more than 5% of the Company's Equity Shares; (ii) each
director; (iii) the Chief Executive Officer; and (iv) all executive officers
and directors as a group.
<TABLE>
<CAPTION>
Percentage of Equity Shares
Shares Beneficially Owned (2)
Beneficially --------------------------------
Name of Beneficial Owner Owned (1) Prior to Offering After Offering
- -------------------------------- ------------ ----------------- --------------
<S> <C> <C> <C>
N.R. Narayana Murthy (3) (4).... 2,523,600 7.9% 7.7%
N.S. Raghavan (3) (5)........... 1,765,600 5.5 5.4
Nandan M. Nilekani (3) (6)...... 1,716,200 5.4 5.2
S. Gopalakrishnan (3) (7)....... 1,594,800 5.0 4.8
K. Dinesh (3) (8)............... 1,172,200 3.7 3.6
S.D. Shibulal (3) (9)........... 1,074,200 3.4 3.3
Susim M. Datta (10)............. -- -- --
Deepak Satwalekar (11).......... -- -- --
Marti G. Subrahmanyam (12)...... -- -- --
Ramesh Vangal (13).............. -- -- --
All directors and executive of-
ficers as a group (21 per-
sons).......................... 10,144,200 31.7% 30.8%
</TABLE>
- --------
(1) Beneficial ownership is determined in accordance with rules of the
Commission that deem shares to be beneficially owned by any person who
has or shares voting or investment power with respect to such shares. All
information with respect to the beneficial ownership of any principal
shareholder has been furnished by such shareholder and, unless otherwise
indicated below, the Company believes that persons named in the table
have sole voting and sole investment power with respect to all shares
shown as beneficially owned, subject to community property laws where
applicable.
(2) Percentage ownership is calculated based on an aggregate of 32,034,400
Equity Shares issued and outstanding prior to the Offering and 32,934,400
Equity Shares issued and outstanding after the Offering, in each case
adjusted to reflect the Company's stock dividend declared in December
1998.
(3) The address of Messrs. Murthy, Raghavan, Nilekani, Gopalakrishnan, Dinesh
and Shibulal is c/o Infosys Technologies Limited, Electronics City, Hosur
Road, Bangalore, Karnataka, India 561 229.
(4) Shares beneficially owned by Mr. Murthy include 2,188,400 Equity Shares
owned by members of Mr. Murthy's immediate family. Mr. Murthy disclaims
beneficial ownership of such shares.
(5) Shares beneficially owned by Mr. Raghavan include 1,369,600 Equity Shares
owned by members of Mr. Raghavan's immediate family. Mr. Raghavan
disclaims beneficial ownership of such shares.
(6) Shares beneficially owned by Mr. Nilekani include 964,000 Equity Shares
owned by members of Mr. Nilekani's immediate family. Mr. Nilekani
disclaims beneficial ownership of such shares.
(7) Shares beneficially owned by Mr. Gopalakrishnan include 1,018,080 Equity
Shares owned by members of Mr. Gopalakrishnan's immediate family. Mr.
Gopalakrishnan disclaims beneficial ownership of such shares.
(8) Shares beneficially owned by Mr. Dinesh include 737,600 Equity Shares
owned by members of Mr. Dinesh's immediate family. Mr. Dinesh disclaims
beneficial ownership of such shares.
(9) Shares beneficially owned by Mr. Shibulal include 869,240 Equity Shares
owned by members of Mr. Shibulal's immediate family. Mr. Shibulal
disclaims beneficial ownership of such shares.
(10) The address of Mr. Datta is c/o Peerless General Finance and Investment
Co. Ltd., 11-A, Mittal Towers, "A' Wing, First Floor, Nariman Point,
Mumbai, India 400 021.
(11) The address of Mr. Satwalekar is 9 Nutan Alka Co-op Housing Society,
Relief Road, Santa Cruz (W), Mumbai, India 400 054.
(12) The address of Mr. Subrahmanyam is c/o New York University, Leonard N.
Stern School of Business, 44 West Fourth Street #9-15, New York, NY
10003.
(13) The address of Mr. Vangal is 72 Belmont Road, Singapore 269 903.
61
<PAGE>
CERTAIN TRANSACTIONS
Yantra Corporation
In December 1996, the Company transferred all rights, title and interest in
and to the WMSYantra (formerly known as EAGLE) software product to Yantra,
then a majority-owned subsidiary of the Company. Yantra granted Infosys a non-
exclusive right to reproduce, distribute and service the product to the extent
necessary to fulfill the Company's pre-existing contractual obligations for
the product. In consideration for this transaction Infosys received 5,000,000
shares of common stock of Yantra, which had a fair market value at the time of
$0.20 per share. In September 1997, the Company purchased 2,000,000 shares of
Series A Preferred Stock of Yantra at $0.75 per share. Certain of the
Company's directors or officers are directors of Yantra. As of December 31,
1998, Mr. Phaneesh Murthy, an executive officer of the Company, held options
to purchase 100,000 shares of common stock of Yantra at an exercise price of
$0.10 per share, all of which were granted on September 29, 1997. Other than
Mr. Phaneesh Murthy, none of the Company's directors or officers beneficially
owns any shares or options of Yantra.
On October 20, 1998, the Company sold 1,363,637 shares of Series A Preferred
Stock of Yantra for $1.10 per share to an unaffiliated purchaser. As a result,
the Company reduced its interest in Yantra to less than one-half of voting
stock of Yantra.
Employment Agreements
The Company has entered into agreements with its employee directors
containing a monthly salary, performance bonus and benefits including
vacation, medical reimbursement and pension fund contributions. These
agreements are made for a five-year period, but either the Company or the
employee director may terminate the agreement upon six months notice to the
other party. See "Management--Employment Agreements."
Loans to Employees
Pursuant to an employee loan program, the Company grants loans to employees
to acquire certain assets such as property or vehicles. Such loans are made at
interest rates ranging from 0% to 4% and are repayable over fixed periods
ranging from one to 100 months. The loans generally are secured by the assets
acquired by the employees. As of December 31, 1998, there were $4.2 million in
loans outstanding to employees, of which $277,000 were loans receivable from
executive officers of the Company in amounts less than $60,000.
62
<PAGE>
DESCRIPTION OF EQUITY SHARES
Set forth below is the material information concerning the Company's share
capital and a brief summary of the material provisions of the Company's
Articles and the Indian Companies Act, all as currently in effect. The
following description of the Equity Shares of the Company and the material
provisions of the Company's Articles does not purport to be complete and is
qualified in its entirety by the Articles of Association and Memorandum of
Association of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.
General
The Company's authorized share capital is 50,000,000 shares, par value Rs.10
per share. As of February 8, 1999, 32,034,400 Equity Shares (as adjusted to
reflect the Company's stock dividend declared in December 1998) were issued
and outstanding.
The Equity Shares are the only class of share capital of the Company. There
are no convertible debentures or warrants of the Company currently in
existence. For the purposes of this Prospectus, "shareholder" means a
shareholder who is registered as a member in the register of members of the
Company.
Dividends
Under the Indian Companies Act, unless the Board of Directors of the Company
(the "Board") recommends the payment of a dividend, the Company has no power
to declare a dividend. Similarly, under the Articles, although the
shareholders may, at the Annual General Meeting, approve a dividend in an
amount less than that recommended by the Board, they cannot increase the
amount of the dividend. Dividends generally are declared as a percentage of
the par value of the Company's shares. The dividend recommended by the Board,
and subject to the limitations described above, is distributed and paid to
shareholders in proportion to the paid up value of their shares within 42 days
of the approval by the shareholders at the Annual General Meeting. Pursuant to
the Company's Articles, the Board has discretion to declare and pay interim
dividends without shareholder approval. With respect to Equity Shares issued
by the Company during a particular fiscal year (including the Equity Shares
underlying the ADSs issued to the Depositary in connection with the Offering),
cash dividends declared and paid for such fiscal year generally will be
prorated from the date of issuance to the end of such fiscal year. Under the
Indian Companies Act, dividends can only be paid in cash to the registered
shareholder at a record date fixed on or prior to the Annual General Meeting
or to his order or his banker's order. See "Risk Factors--Dividend Policy;
Effect on Equity Shares Underlying ADSs" and "Dividend Policy."
Under the Indian Companies Act, dividends may be paid out of profits of a
company in the year in which the dividend is declared or out of the
undistributed profits of previous fiscal years. Before declaring a dividend
greater than 10%, a company is required under the Indian Companies Act to
transfer to its reserves a minimum percentage of its profits for that year,
ranging from 2.5% to 10% depending upon the dividend percentage to be declared
in such year. The Indian Companies Act further provides that, in the event of
an inadequacy or absence of profits in any year, a dividend may be declared
for such year out of the Company's accumulated profits, subject to the
following conditions: (i) the rate of dividend to be declared shall not exceed
10% of its paid up capital or the average of the rate at which dividends were
declared by the Company in the prior five years, whichever is less; (ii) the
total amount to be drawn from the accumulated profits earned in the previous
years and transferred to the reserves shall not exceed an amount equivalent to
10% of its paid up capital and free reserves, and the amount so drawn is to be
used first to set off the losses incurred in the fiscal year before any
dividends in respect of preference or Equity Shares are declared; and (iii)
the balance of reserves after withdrawals shall not fall below 15% of its paid
up capital. A dividend tax of 10% of the total dividend declared, distributed
or paid for a relevant period is payable by the Company.
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Bonus Shares
In addition to permitting dividends to be paid out of current or retained
earnings as described above, the Indian Companies Act permits the Company to
distribute an amount transferred from the general reserve or surplus in the
Company's profit and loss account to its shareholders in the form of bonus
shares (similar to a stock dividend). The Indian Companies Act also permits
the issuance of bonus shares from a share premium account. Bonus shares are
distributed to shareholders in the proportion recommended by the Board.
Shareholders of record on a fixed record date are entitled to receive such
bonus shares.
Preemptive Rights and Issue of Additional Shares
The Indian Companies Act gives shareholders the right to subscribe for new
shares in proportion to their respective existing shareholdings unless
otherwise determined by a special resolution passed by a General Meeting of
the shareholders. Under the Indian Companies Act, in the event of an issuance
of securities, subject to the limitations set forth above, the Company must
first offer the new shares to the shareholders on a fixed record date. The
offer must include: (i) the right, exercisable by the shareholders of record,
to renounce the shares offered in favor of any other person; and (ii) the
number of shares offered and the period of the offer, which may not be less
than 15 days from the date of offer. If the offer is not accepted it is deemed
to have been declined. The Board is authorized under the Indian Companies Act
to distribute any new shares not purchased by the preemptive rights holders in
the manner that it deems most beneficial to the Company. See "Risk Factors--
Restrictions on Exercise of Preemptive Rights by ADS Holders."
Annual General Meetings of Shareholders
The Company must convene an Annual General Meeting of its shareholders
within six months after the end of each fiscal year and may convene an
Extraordinary General Meeting of shareholders when necessary or at the request
of a shareholder or shareholders holding at least 10% of the Company's paid up
capital carrying voting rights. The Annual General Meeting of the shareholders
is generally convened by the Company Secretary pursuant to a resolution of the
Board. Written notice setting out the agenda of the meeting must be given at
least 21 days (excluding the days of mailing and receipt) prior to the date of
the General Meeting to the shareholders of record. Shareholders who are
registered as shareholders on the date of the General Meeting are entitled to
attend or vote at such meeting.
The Annual General Meeting of shareholders must be held at the Registered
Office of the Company or at such other place within the city in which the
Registered Office is located; meetings other than the Annual General Meeting
may be held at any other place if so determined by the Board. The Company's
registered office is located at Electronics City, Hosur Road, Bangalore, 561
229, Karnataka, India.
The Articles provide that a quorum for a General Meeting is the presence of
at least five shareholders in person.
Voting Rights
At any General Meeting, voting is by show of hands unless a poll is demanded
by a shareholder or shareholders present in person or by proxy holding at
least 10% of the total shares entitled to vote on the resolution or by those
holding shares with an aggregate paid up capital of at least Rs.50,000. Upon a
show of hands, every shareholder entitled to vote and present in person has
one vote and, on a poll, every shareholder entitled to vote and present in
person or by proxy has voting rights in proportion to the paid up capital held
by such shareholders. The Chairman of the Board has a deciding vote in the
case of any tie. For a description of voting of ADSs, see "Description of
American Depositary Shares--Voting of Deposited Securities."
Any shareholder of the Company may appoint a proxy. The instrument
appointing a proxy must be delivered to the Company at least 48 hours prior to
the meeting. A proxy may not vote except on a poll. A corporate shareholder
may appoint an authorized representative who can vote on behalf of the
shareholder, both upon a show of hands and upon a poll.
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Ordinary resolutions may be passed by simple majority of those present and
voting at any General Meeting for which the required period of notice has been
given. However, certain resolutions such as amendments of the Articles and the
Memorandum of Association, commencement of a new line of business, the waiver
of preemptive rights for the issuance of any new shares and a reduction of
share capital, require that votes cast in favor of the resolution (whether by
show of hands or poll) are not less than three times the number of votes, if
any, cast against the resolution.
Register of Shareholders; Record Dates; Transfer of Shares
The Company maintains a register of shareholders of the Company. For the
purpose of determining the shares entitled to annual dividends, the register
is closed for a specified period prior to the Annual General Meeting.
To determine which shareholders are entitled to certain shareholder rights,
the Company, pursuant to a Board resolution, may close the register of
shareholders. The Indian Companies Act and each of the Company's listing
agreements with the Indian Stock Exchanges require the Company to give at
least 42 days' prior notice to the Indian Stock Exchanges and at least seven
days' prior notice to the public. The Company may not close the register of
shareholders for more than 30 consecutive days, and in no event more than 45
days in a year. Trading of Equity Shares may, however, continue while the
register of shareholders is closed.
Following the introduction of the Depositories Act, 1996, and the repeal of
Section 22A of the Securities Contracts (Regulation) Act, 1956, which enabled
companies to refuse to register transfers of shares in certain circumstances,
the shares of the Company are freely transferable, subject only to the
provisions of Section 111A of the Indian Companies Act. The Articles currently
contain provisions which give the directors discretion to refuse to register a
transfer of shares in certain circumstances. In accordance with the provisions
of Section 111A(2) of the Indian Companies Act, the directors may exercise
this discretion if they have sufficient cause to do so. Pursuant to Section
111A(3), if the transfer of shares contravenes any of the provisions of the
Securities and Exchange Board of India Act, 1992 or the regulations issued
thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 or
any other similar laws, the Company Law Board (the "CLB") may, on application
made by the Company, a depositary incorporated in India, an investor, the SEBI
or certain other parties, direct the rectification of the register of records.
The CLB may, in its discretion, issue an interim order suspending the voting
rights attached to the relevant shares before making or completing its
investigation into the alleged contravention. Notwithstanding such
investigation, the rights of a shareholder to transfer the shares will not be
restricted.
Under the Indian Companies Act, a transfer of shares is effected by an
instrument of transfer in the form prescribed by the Indian Companies Act and
the Rules thereunder together with delivery of the share certificates. The
transfer agent of the Company is Karvy Consultants Limited, Bangalore,
Karnataka, India.
The Company has entered into listing agreements with each of the Indian
Stock Exchanges. Clause 40A of each of the listing agreements provides that if
an acquisition of a listed company's shares results in the acquiror and its
associates holding 5% or more of the company's outstanding Equity Shares or
voting rights, the acquiror must report its holding to the company and the
relevant stock exchange(s). If an acquisition results in the acquiror and its
associates holding Equity Shares that have 15% or more of the voting rights,
then the acquiror must, before acquiring such Equity Shares, make an offer (in
accordance with Clause 40B of the listing agreements) on a uniform basis to
all remaining shareholders of the company to acquire Equity Shares that have
at least an additional 20% of the voting rights of the total Equity Shares of
the company at a prescribed price. The acquisition of shares of a company
listed on an Indian stock exchange beyond certain threshold amounts is subject
to regulations governing takeovers of Indian companies. Although clauses 40A
and 40B and such regulations will not apply to the Equity Shares so long as
they are represented by ADSs, holders of ADSs may be required to comply with
such notification and disclosure obligations pursuant to the provisions of the
Deposit Agreement to be entered into by such holders, the Company and a
depositary. See "Description of American Depositary Shares."
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Disclosure of Ownership Interest
Section 187C of the Indian Companies Act requires beneficial owners of
shares of Indian companies who are not holders of record to declare to the
company details of the holder of record and the holder of record to declare
details of the beneficial owner. Any person who fails to make the required
declaration within 30 days may be liable for a fine of up to Rs.1,000 for each
day the declaration is not made. Any lien, promissory note or other collateral
agreement created, executed or entered into with respect to any share by the
registered owner thereof, or any hypothecation by the registered owner of any
share, pursuant to which a declaration is required to be made under Section
187C, shall not be enforceable by the beneficial owner or any person claiming
through the beneficial owner if such declaration is not made. Failure to
comply with Section 187C will not affect the obligation of the Company to
register a transfer of shares or to pay any dividends to the registered holder
of any shares pursuant to which such declaration has not been made. While it
is unclear under Indian law whether Section 187C applies to holders of ADSs of
the Company, investors who exchange ADSs for the underlying Equity Shares of
the Company will be subject to the restrictions of Section 187C. Additionally,
holders of ADSs may be required to comply with such notification and
disclosure obligations pursuant to the provisions of the Deposit Agreement to
be entered into by such holders, the Company and a depositary. See
"Description of American Depositary Shares."
Audit and Annual Report
At least 21 days before the Annual General Meeting of shareholders, the
Company must distribute a detailed version of the Company's audited balance
sheet and profit and loss account and the reports of the Board and the
auditors thereon. Under the Indian Companies Act, the Company must file the
balance sheet and annual profit and loss account presented to the shareholders
within 30 days of the conclusion of the Annual General Meeting with the
Registrar of Companies. The Company must also file an annual return containing
a list of the Company's shareholders and other Company information, within 60
days of the conclusion of the meeting.
Company Acquisition of Equity Shares
Under the Indian Companies Act, the Company may not acquire its own Equity
Shares because of the resulting reduction in the Company's capital. Such a
reduction in capital is permitted only in certain circumstances and requires
compliance with specific buy-back regulations, a special resolution passed by
the shareholders and approval by the High Court of the state in which the
registered office of the Company is situated. The Government of India has
recently published guidelines that would permit a company to form a separate
trust specifically for the purpose of buying odd lots of shares and disposing
of such shares through a stock exchange.
Liquidation Rights
Subject to the rights of creditors, employees and the holders of any shares
entitled by their terms to preferential repayment over the Equity Shares, if
any, in the event of the winding-up of the Company, the holders of the Equity
Shares are entitled to be repaid the amounts of paid up capital or credited as
paid up on such Equity Shares. All surplus assets after payments due to the
holders of any preference shares at the commencement of the winding-up shall
be paid to holders of Equity Shares in proportion to their shareholdings.
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
The following is a summary of the material provisions of the Deposit
Agreement (the "Deposit Agreement") to be entered into by the Company, Bankers
Trust Company, as depositary (the "Depositary"), and the registered holders
("Holders") of, and owners of a beneficial interest (the "Beneficial Owners")
in, ADSs evidenced by ADRs issued pursuant to the terms thereof.
Terms used herein and not otherwise defined will have the meanings set forth
in the Deposit Agreement. Copies of the Deposit Agreement and the Articles of
the Company will be available for inspection at the Corporate Trust Office of
the Depositary, currently located at Four Albany Street, New York, New York
10006, and at the principal office of the custodian appointed by the
Depositary (the "Custodian"), currently ICICI Limited ("ICICI"), 163 Backbay
Reclamation Road No. 3, Mumbai, India 400 020.
American Depositary Receipts
ADRs evidencing ADSs are issuable by the Depositary pursuant to the Deposit
Agreement. Each ADS will represent one-half of one Equity Share (the Equity
Shares at any time deposited under the Deposit Agreement and any and all other
securities, cash and property received by the Depositary or the Custodian in
respect thereof and at such time held under the Deposit Agreement, "Deposited
Securities"). Only persons in whose names ADRs are registered on the books of
the Depositary will be treated by the Depositary and the Company as the owners
of ADSs evidenced by such ADRs.
Withdrawal of Equity Shares
Under current Indian laws and regulations, the Depositary cannot accept
deposits of outstanding Equity Shares (except for Equity Shares issued as
bonus shares or pursuant to rights offerings) and issue ADRs evidencing ADSs
representing such Equity Shares. A holder of ADSs who surrenders ADSs and
withdraws Equity Shares is not permitted subsequently to deposit such Equity
Shares and obtain ADSs. The Depositary has agreed, subject to the terms of the
Deposit Agreement, to accept deposits of outstanding Equity Shares in the
event current Indian laws and regulations are amended to permit such deposits.
See "Risk Factors--Risks Related to Investments in Indian Securities--
Restrictions on Foreign Investment" and "Deposit and Pre-Release."
Upon surrender at the Corporate Trust Office of the Depositary of an ADS
evidenced by an ADR for the purpose of withdrawal of the Deposited Securities
represented by the ADSs evidenced by such ADR, and upon payment of the fees of
the Depositary for the surrender of such ADS and the governmental charges and
taxes provided for in the Deposit Agreement, and subject to the terms and
conditions of the Deposit Agreement, the Holder of such ADS will be entitled
to delivery, to him or upon his order, of the amount of Deposited Securities
at the time represented by the ADS or ADSs evidenced by such ADR. The
forwarding of share certificates, other securities, property, cash and other
documents of title for such delivery will be at the risk and expense of the
Holder.
A holder of ADSs who surrenders ADSs and withdraws Equity Shares will have
to take such Equity Shares in electronic dematerialized form. The holder will
be required to establish an account with an Indian affiliate of the Depositary
to hold or sell Equity Shares in electronic dematerialized form and may incur
customary fees and expenses in connection therewith. Upon the acquisition of
Equity Shares from the Depositary in exchange for ADSs, the holder will be
liable for Indian stamp duty at the rate of 0.5% of the market value of the
ADSs or Equity Shares exchanged. In addition, RBI approval will be required
for the sale of withdrawn Equity Shares by a non-resident of India to a
resident of India. See "Government of India Approvals" and "Taxation--Indian
Taxation."
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Dividends, Other Distributions and Rights
Subject to any restrictions imposed by Indian law, regulations or applicable
permits, the Depositary or its agent for this purpose is required, as promptly
as practicable, to convert or cause to be converted into dollars, to the
extent that in its judgment it can do so on a reasonable basis and can
transfer the resulting dollars to the United States, all cash dividends and
other cash distributions denominated in a currency other than dollars,
including rupees ("Foreign Currency"), that it receives in respect of the
Deposited Securities, and, as promptly as practicable, to distribute the
resulting dollar amount (net of reasonable and customary expenses incurred by
the Depositary in converting such Foreign Currency) to the Holders entitled
thereto, in proportion to the number of ADSs representing such Deposited
Securities evidenced by ADRs held by them, respectively. Such distribution may
be made upon an averaged or other practicable basis without regard to any
distinctions among Holders on account of exchange restrictions or the date of
delivery of any ADS or ADSs or otherwise. The amount distributed to the
Holders of ADSs will be reduced by any amount on account of taxes to be
withheld by the Company or the Depositary. See "Liability of Holders and
Beneficial Owners for Taxes."
If the Depositary determines that in its reasonable judgment any Foreign
Currency received by the Depositary or the Custodian cannot be converted on a
reasonable basis into dollars transferable to the United States, or if any
approval or license of any government or agency thereof which is required for
such conversion is denied or in the reasonable opinion of the Depositary is
not obtainable, or if any such approval or license is not obtained within a
reasonable period as determined by the Depositary, the Depositary may
distribute the Foreign Currency received by the Depositary or the Custodian
to, or in its discretion may hold such Foreign Currency uninvested and without
liability for interest thereon for the respective accounts of, the Holders
entitled to receive the same. If any such conversion of Foreign Currency, in
whole or in part, cannot be effected for distribution to some of the Holders
entitled thereto, the Depositary may in its discretion make such conversion
and distribution in dollars to the extent permissible to the Holders entitled
thereto, and may distribute the balance of the Foreign Currency received by
the Depositary to, or hold such balance uninvested and without liability for
interest thereon for, the respective accounts of, the Holders entitled
thereto.
If the Company declares a dividend in, or free distribution of, Equity
Shares, the Depositary may, and shall if the Company so requests, as promptly
as practicable, distribute to the Holders of outstanding ADSs entitled
thereto, in proportion to the number of ADSs evidenced by the ADRs held by
them, respectively, additional ADRs evidencing an aggregate number of ADSs
that represent the amount of Equity Shares received as such dividend or free
distribution, subject to the terms and conditions of the Deposit Agreement
with respect to the deposit of Equity Shares and the issuance of ADSs
evidenced by ADRs, including the withholding of any tax or other governmental
charge and the payment of fees and expenses of the Depositary. The Depositary
may withhold any such distribution of ADRs if it has not received from the
Company satisfactory documentation that such distribution does not require
registration under the Securities Act or is exempt from registration under the
provisions of such Act. The RBI has granted general approval for holders of
ADSs to receive stock dividends and participate in rights offerings. In lieu
of delivering ADRs for fractional ADSs in the event of any such dividend or
free distribution, the Depositary will sell the amount of Equity Shares
represented by the aggregate of such fractions and distribute the net proceeds
in accordance with the Deposit Agreement. If additional ADRs are not so
distributed, each ADS will thenceforth also represent the additional Equity
Shares distributed upon the Deposited Securities represented thereby.
If the Company offers or causes to be offered to the holders of any
Deposited Securities any rights to subscribe for additional Equity Shares or
any rights of any other nature, the Depositary, after consultation with the
Company, and subject to the Company's Articles and applicable laws, will have
discretion as to the procedure to be followed in making such rights available
to any Holders of ADSs or in disposing of such rights for the benefit of any
Holders and making the net proceeds available in dollars to such Holders or,
if by the terms of such rights offering or for any other reason, the
Depositary may not either make such rights available to any Holders or dispose
of such rights and make the net proceeds available to such Holders, then the
Depositary shall allow the rights to lapse; provided, however, if at the time
of the offering of any rights the Depositary determines in its discretion that
it is lawful and feasible to make such rights available to certain Holders but
not to other
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Holders, the Depositary may distribute to any Holder to whom it determines the
distribution to be lawful and feasible, in proportion to the number of ADSs
held by such Holder, warrants or other instruments therefor in such form as it
deems appropriate. If the Depositary determines in its discretion that it is
not lawful and feasible to make such rights available to certain Holders, it
may sell the rights, warrants or other instruments in proportion to the number
of ADSs held by the Holders to whom it has determined it may not lawfully or
feasibly make such rights available, and allocate the net proceeds of such
sales for the account of such Holders otherwise entitled to such rights,
warrants or other instruments, upon an averaged or other practical basis
without regard to any distinctions among such Holders because of currency
exchange restrictions or the date of delivery of any ADS(s) evidenced by
ADR(s), or otherwise. The Depositary will not be responsible for any failure
to determine that it may be lawful or feasible to make such rights available
to Holders in general or any Holder in particular.
In circumstances in which rights would not otherwise be distributed, if a
Holder of ADSs requests the distribution of warrants or other instruments in
order to exercise the rights allocable to the ADSs of such Holder, the
Depositary will, to the extent permitted by law, make such rights available to
such Holder upon written notice from the Company to the Depositary that the
Company has elected in its sole discretion to permit such rights to be
exercised. Upon instruction to the Depositary from such Holder to exercise
such rights, upon payment by such Holder to the Depositary for the account of
such Holder of an amount equal to the purchase price of the Equity Shares to
be received in exercise of the rights, and upon payment of the fees and
expenses of the Depositary, the Depositary will, on behalf of such Holder,
exercise (or cause the Custodian to exercise) the rights and purchase the
Equity Shares, and the Company shall cause the Equity Shares so purchased to
be delivered to the Depositary on behalf of such Holder. As agent for such
Holder, the Depositary will, to the extent permitted by law and not
inconsistent with the terms of the Deposit Agreement, cause the Equity Shares
so purchased to be deposited, and will execute and deliver ADSs evidenced by
ADRs to such Holder, pursuant to the Deposit Agreement.
The Depositary will not offer rights to Holders having an address in the
United States unless both the rights and the securities to which such rights
relate are either exempt from registration under the Securities Act with
respect to a distribution to all Holders or are registered under the
provisions of such Act; provided, that nothing in the Deposit Agreement will
create any obligation: (i) on the part of the Company to file a registration
statement with respect to such rights or underlying securities or to endeavor
to have such a registration statement declared effective; or (ii) on the part
of the Depositary to accept for deposit any Equity Shares which are Restricted
Securities (as defined in the Deposit Agreement). If a Holder of ADSs requests
the distribution of warrants or other instruments, notwithstanding that there
has been no such registration under such Act, the Depositary will not effect
such distribution unless it has received an opinion from recognized counsel in
the United States for the Company upon which the Depositary may rely that such
distribution to such Holder is exempt from such registration. The Depositary
will not be responsible for any failure to determine that it may be lawful or
feasible to make such rights available to Holders in general or any Holder in
particular.
Whenever the Depositary receives any distribution other than cash, Equity
Shares or rights in respect of the Deposited Securities, the Depositary will
cause the securities or property received by it to be distributed, as promptly
as practicable, to the Holders entitled thereto, after deduction or upon
payment of any fees and expenses of the Depositary or any taxes or other
governmental charges, in proportion to their holdings, respectively, in any
manner that the Depositary may reasonably deem equitable and practicable for
accomplishing such distribution; provided, however, that if in the opinion of
the Depositary such distribution cannot be made proportionately among the
Holders entitled thereto, or if for any other reason (including, but not
limited to, any requirement that the Company or the Depositary withhold an
amount on account of taxes or other governmental charges or that such
securities must be registered under the Securities Act in order to be
distributed to Holders or Beneficial Owners) the Depositary deems such
distribution not to be feasible, the Depositary may adopt such method as it
may deem equitable and practicable for the purpose of effecting such
distribution, including, but not limited to, the public or private sale of the
securities or property thus received, or any part thereof, and the net
proceeds of any such sale (net of the fees and expenses of the Depositary)
will be distributed by the Depositary to the Holders entitled thereto as in
the case of a distribution received in cash.
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If the Depositary determines that any distribution of property (including
Equity Shares and rights to subscribe therefor) is subject to any taxes or
other governmental charges which the Depositary is obligated to withhold, the
Depositary may, by public or private sale, dispose of all or a portion of such
property in such amount and in such manner as the Depositary deems necessary
and practicable to pay such taxes or charges and the Depositary will
distribute the net proceeds of any such sale after deduction of such taxes or
charges to the Holders entitled thereto in proportion to the number of ADSs
held by them, respectively.
Upon any change in nominal or par value, split-up, consolidation or any
other reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting the
Company or to which it is a party, any securities which shall be received by
the Depositary or Custodian in exchange for, in conversion of, or in respect
of Deposited Securities will be treated as new Deposited Securities under the
Deposit Agreement, and the ADSs will, to the extent permitted by law,
represent, in addition to the existing Deposited Securities, the right to
receive the new Deposited Securities so received in exchange or conversion,
unless additional ADSs evidenced by ADRs are delivered pursuant to the
following sentence. In any such case the Depositary may, and will if the
Company requests, in each case to the extent permitted by law, execute and
deliver additional ADSs evidenced by ADRs as in the case of a distribution in
Equity Shares, or call for the surrender of outstanding ADSs evidenced by ADRs
to be exchanged for new ADSs evidenced by ADRs specifically describing such
new Deposited Securities.
Record Dates
Whenever any cash dividend or other cash distribution shall become payable
or any distribution other than cash shall be made, or whenever rights shall be
issued with respect to the Deposited Securities, or whenever for any reason
the Depositary causes a change in the number of Equity Shares that are
represented by each ADS, or whenever the Depositary shall receive notice of
any meeting of holders of Equity Shares or other Deposited Securities, or
whenever the Depositary shall find it necessary or convenient, the Depositary
will fix a record date applicable to the ADSs, after obtaining, if
practicable, the consent of the Company if such record date is different from
the record date applicable to the Equity Shares or other Deposited Securities:
(i) for the determination of the Holders who will be (a) entitled to receive
such dividend, distribution or rights, or the net proceeds of the sale
thereof, or (b) entitled to give instructions for the exercise of voting
rights at any such meeting; or (ii) on or after which each ADS will represent
the changed number of Equity Shares or other Deposited Securities, all subject
to the provisions of the Deposit Agreement.
Voting of Deposited Securities
Under Indian law, voting of the Equity Shares is by show of hands unless a
poll is demanded by a member or members present in person or by proxy holding
at least one-tenth of the total shares entitled to vote on the resolution or
by those holding an aggregate paid up capital of at least Rs.50,000. A proxy
may not vote except on a poll. See "Description of Equity Shares--Voting
Rights."
As soon as practicable after receipt of notice pursuant to the Deposit
Agreement of any meeting of holders of Equity Shares or other Deposited
Securities, the Depositary shall fix a record date for determining the Holders
entitled to give instructions for the exercise of voting rights, if any, as
provided in the Deposit Agreement and shall mail to the Holders of a record
notice which shall contain: (i) such information as is contained in such
notice of meeting; (ii) a statement that the Holders of record at the close of
business on a specified record date will be entitled, subject to any
applicable provisions of Indian law and of the Memorandum and Articles of the
Company governing the Deposited Securities represented by their respective
ADSs evidenced by their respective ADRs; (iii) a brief statement as to the
manner in which such instructions may be given including (a) an express
indication that the Depositary should demand a poll or instruct the Chairman
of the Meeting (the "Chairman") or a person designated by the Chairman to
demand a poll in the event that a poll is not otherwise demanded pursuant to
Indian law and (b) an express indication that instructions may be given to the
Depositary to give a discretionary proxy to a person designated by the
Company; and (iv) a statement that if the Depositary does not receive
instructions from a Holder, such Holder may under certain circumstances be
deemed to have instructed
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the Depositary to give a discretionary proxy to a person designated by the
Company to vote such Deposited Securities. Upon the written request of a
Holder on such record date, received on or before the date established by the
Depositary for such purpose, the Depositary shall endeavor, insofar as is
practicable and permitted under the applicable provisions of Indian law and of
the Memorandum and Articles of the Company governing the Deposited Securities,
to vote or cause to be voted the amount of Deposited Securities represented by
such ADSs evidenced by such ADRs in accordance with the instructions set forth
in such request. In the event that the Depositary receives express
instructions from Holders to demand a poll with respect to any matter to be
voted on by Holders, the Depositary may notify the Chairman or a person
designated by the Chairman of such instructions and request the Chairman or
such designee to demand a poll with respect to such matters and the Company
agrees that the Chairman or such designee will make their reasonable best
efforts to so demand a poll at the meeting at which such matters are to be
voted on and to vote such Equity Shares in accordance with such Holders'
instructions; provided, however, that prior to any demand of a poll or request
to demand a poll by the Depositary upon the terms set forth herein, the
Company is required, at its own expense, to use its best efforts to obtain and
deliver to the Depositary an opinion of Indian counsel, reasonably
satisfactory to the Depositary, stating that such action is in conformity with
all applicable laws and regulations and that such demand for a poll by the
Depositary or a person designated by the Depositary will not expose the
Depositary to any liability to any person. The Depositary shall not have any
obligation to demand a poll or request the demand of a poll if the Company
shall not have delivered to the Depositary the local counsel opinion set forth
in this paragraph.
The Depositary agrees not to, and shall ensure that the Custodian and each
of their nominees does not vote, attempt to exercise the right to vote, or in
any way make use of, for purposes of establishing a quorum or otherwise, the
Equity Shares or other Deposited Securities represented by the ADSs evidenced
by an ADR other than in accordance with such instructions from the Holder or
as provided below. The Depositary may not itself exercise any voting
discretion over any Equity Shares. If the Depositary does not receive
instructions from any Holder with respect to any of the Deposited Securities
represented by the ADSs evidenced by such Holder's ADRs on or before the date
established by the Depositary for such purpose, such Holder shall be deemed,
and the Depositary shall deem such Holder, to have instructed the Depositary
to give a discretionary proxy to a person designated by the Company to vote
such Deposited Securities; provided that: (i) no such discretionary proxy
shall be given with respect to any matter as to which the Company informs the
Depositary (and the Company agrees to provide such information as promptly as
practicable in writing) that (a) the Company does not wish such proxy given,
(b) substantial opposition exists or (c) the rights of the holders of Equity
Shares will be adversely affected; and (ii) the Depositary shall not have any
obligation to give such discretionary proxy to a person designated by the
Company if the Company shall not have delivered to the Depositary the local
counsel opinion and representation letter set forth in the next paragraph.
Prior to each request for the delivery of a discretionary proxy upon the
terms set forth herein, the Company shall, at its own expense, deliver to the
Depositary: (i) an opinion of Indian counsel, reasonably satisfactory to the
Depositary, stating that such action is in conformity with all applicable laws
and regulations; and (ii) a representation letter from the Company (executed
by a senior officer of the Company) which (a) designates the person to whom
any discretionary proxy should be given, (b) confirms that the Company wishes
such discretionary proxy to be given and (c) certifies that the Company has
not and shall not request the discretionary proxy to be given as to any matter
as to which substantial opposition exists or which may adversely affect the
rights of holders of Equity Shares.
Deposit and Pre-Release
The Depositary has agreed, subject to the terms and conditions of the
Deposit Agreement, that upon delivery to the Custodian of Equity Shares and
appropriate instruments of transfer in a form satisfactory to the Custodian
and all certifications as may be required by the Deposit Agreement, the
Depositary will, upon payment of the fees, charges and taxes provided in the
Deposit Agreement, execute and deliver at its Corporate Trust Office to, or
upon the written order of, the person or persons named in the notice of the
Custodian delivered to the Depositary or requested by the person depositing
such Equity Shares with the Depositary, an ADS or ADSs, registered in the name
or names of such person or persons representing the Equity Shares so
deposited.
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Each person depositing Equity Shares will be deemed to represent and warrant
that: (i) such Equity Shares are validly issued, fully paid and non-assessable
and free of any pre-emptive rights of holders of outstanding Equity Shares;
and (ii) such person is duly authorized to deposit such Equity Shares. After
the initial deposit of Equity Shares pursuant to the Deposit Agreement, each
such person shall also be deemed to represent that the deposit of such Equity
Shares or the sale of the ADSs issued in respect thereof by such person is not
restricted under the Securities Act or applicable Indian law.
The Depositary and the Custodian will refuse to accept Equity Shares for
deposit whenever the Depositary is notified that the Company has restricted
transfer of Equity Shares if such transfer would result in the ownership of
the Equity Shares being in violation of any applicable laws or the Articles of
the Company.
Subject to the terms and conditions of the Deposit Agreement and any
limitations established by the Depositary, and unless the Company requests the
Depositary to cease doing so, the Depositary may deliver ADSs prior to the
receipt of Equity Shares (a "Pre-Release") and deliver Equity Shares upon the
receipt and cancellation of ADSs which have been Pre-Released, whether or not
such cancellation is prior to the termination of such Pre-Release or the
Depositary knows that such ADS has been Pre-Released. The Depositary may
receive ADSs in lieu of Equity Shares in satisfaction of a Pre-Release. Each
Pre-Release must be: (i) preceded or accompanied by a written representation
from the person to whom the ADSs or Equity Shares are to be delivered that
such person, or its customer, (a) owns the Equity Shares or ADSs to be
remitted, as the case may be, (b) assigns all beneficial rights, title and
interest in such Equity Shares to the Depositary for the benefit of the
Holders, and (c) agrees to hold such Equity Shares for the account of the
Depositary until delivery of such Equity Shares upon the request of the
Depositary; (ii) at all times fully collateralized with cash or such other
collateral as the Depositary deems appropriate; (iii) terminable by the
Depositary on not more than five business days' notice; and (iv) subject to
such further indemnities and credit regulations as the Depositary deems
appropriate.
Reports and Other Communications
The Company will furnish to the Depositary English-language versions of
communications generally distributed to holders of Equity Shares, including
its annual reports to shareholders together with its annual audited
consolidated financial statements prepared in conformity with U.S. GAAP. In
addition, the Company currently intends to furnish to the Depositary its
quarterly interim reports in English which will include unaudited interim
consolidated financial information prepared in conformity with U.S. GAAP. The
Depositary will make available for inspection by Holders and Beneficial Owners
at its Corporate Trust Office any receipts evidencing the payment of any taxes
imposed on Holders in respect of distributions or gains and notices, reports
and communications, including any proxy soliciting material, received from the
Company that are both (i) received by the Depositary as the holder of the
Deposited Securities and (ii) made generally available to the holders of such
Deposited Securities by the Company. The Depositary will also, if so requested
by the Company, send to Holders copies of such reports when furnished by the
Company pursuant to the Deposit Agreement.
On or before the first date on which the Company gives notice, by
publication or otherwise, of any meeting of holders of Equity Shares or other
Deposited Securities, or of any adjourned meeting of, or solicitation of
proxies or consents from, such holders, or of the taking of any action in
respect of any cash or other distributions or of the offering of any rights,
the Company agrees to transmit to the Depositary and the Custodian a copy of
the notice thereof in the form given or to be given to holders of Equity
Shares or other Deposited Securities. The Company will arrange for the
translation into English and the prompt transmittal to the Depositary and the
Custodian of such notices and other reports and communications which are made
generally available by the Company to the holders of its Equity Shares. The
Depositary will arrange for the mailing of copies of such notices, reports and
communications to all Holders if requested in writing by the Company.
Amendment and Termination of the Deposit Agreement
The form of ADRs which evidence ADSs and any provisions of the Deposit
Agreement may at any time and from time to time be amended by agreement
between the Company and the Depositary in any respect which
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they may deem necessary or desirable without the prior consent of the Holders
or Beneficial Owners of ADSs; provided, however, that any amendment that
imposes or increases any fees or charges (other than taxes and other
governmental charges, registration fees, cable, telex or facsimile
transmission costs, delivery costs or other such expenses), or which otherwise
prejudices any substantial existing right of Holders, will not take effect as
to outstanding ADSs until the expiration of 30 days after notice of any
amendment has been given to the Holders of outstanding ADSs. Every Holder and
Beneficial Owner of an ADS, at the time any amendment so becomes effective,
will be deemed, by continuing to hold such ADS, to consent and agree to such
amendment and to be bound by the Deposit Agreement as amended thereby. In no
event will any amendment impair the right of the Holder of any ADS to
surrender such ADS evidenced by an ADR and receive therefor the Deposited
Securities represented thereby, except to comply with mandatory provisions of
applicable law.
Whenever so directed by the Company, subject to the provisions of the
Deposit Agreement, the Depositary will terminate the Deposit Agreement by
mailing notice of such termination to the Holders of the ADSs then outstanding
at least 30 days prior to the date fixed in such notice for such termination.
The Depositary may likewise terminate the Deposit Agreement by mailing notice
of such termination to the Company and the Holders of all ADSs then
outstanding if, any time after 30 days have expired after the Depositary will
have delivered to the Company a written notice of its election to resign, a
successor depositary will not have been appointed and accepted its
appointment, in accordance with the terms of the Deposit Agreement. If any
ADSs remain outstanding after the date of termination of the Deposit
Agreement, the Depositary thereafter will discontinue the registration of
transfers of ADSs, will suspend the distribution of dividends to the Holders
thereof and will not give any further notices or perform any further acts
under the Deposit Agreement, except the collection of dividends and other
distributions pertaining to the Deposited Securities, the sale of rights and
other property and the delivery of underlying Equity Shares, together with any
dividends or other distributions received with respect thereto and the net
proceeds of the sale of any rights or other property, in exchange for
surrendered ADSs (after deducting, in each case, the fees of the Depositary
for the surrender of an ADS and other expenses set forth in the Deposit
Agreement and any applicable taxes or governmental charges). At any time after
the expiration of one year from the date of termination, the Depositary may
sell the Deposited Securities then held thereunder and hold uninvested the net
proceeds of such sale, together with any other cash, unsegregated and without
liability for interest, for the pro rata benefit of the Holders that have not
theretofore surrendered their ADSs, such Holders thereupon becoming general
creditors of the depositary with respect to such net proceeds. After making
such sale, the Depositary will be discharged from all obligations under the
Deposit Agreement, except to account for net proceeds and other cash (after
deducting, in each case, the fee of the Depositary and other expenses set
forth in the Deposit Agreement for the surrender of an ADS and any applicable
taxes or other governmental charges).
Charges of Depositary
The Depositary will charge any party depositing or withdrawing Equity Shares
or any party surrendering ADSs or to whom ADSs are issued (including, without
limitation, issuance pursuant to a stock dividend or stock split declared by
the Company or an exchange of stock regarding the ADRs or Deposited Securities
or a distribution of ADRs pursuant to the Deposit Agreement) where applicable:
(i) taxes and other governmental charges; (ii) such registration as may from
time to time be in effect for the registration of transfers of Equity Shares
generally on the share register of the Company or the appointed agent of the
Company for transfer and registration of Equity Shares and applicable to
transfers of Equity Shares to the name of the Depositary or its nominee or the
Custodian or its nominee on the making of deposits or withdrawals; (iii) such
cable, telex and facsimile transmission expenses as are expressly provided in
the Deposit Agreement to be at the expense of persons depositing Equity Shares
or Holders; (iv) such expenses as are incurred by the Depositary in the
conversion of Foreign Currency pursuant to the Deposit Agreement; (v) a fee
not in excess of $5.00 per 100 ADSs (or portion thereof) for the issuance and
surrender, respectively, of ADRs pursuant to the Deposit Agreement; (vi) a fee
not in excess of $0.02 per ADS (or portion thereof) held for any cash
distribution made pursuant to the Deposit Agreement; and (vii) a fee for the
distribution of securities pursuant to the Deposit Agreement, such fee being
in an amount equal to the fee for the execution and delivery of ADSs referred
to above which would have been charged as a result of the deposit of such
securities (for purposes of this clause (vii) treating all such securities as
if they were Equity Shares), but which securities are instead distributed by
the Depositary to Holders.
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The Depositary, pursuant to the Deposit Agreement, may own and deal in any
class of securities of the Company and its affiliates and in ADSs or ADRs.
Liability of Holders and Beneficial Owners for Taxes
If any tax or other governmental charge shall become payable by the
Custodian or the Depositary with respect to any ADS or any Deposited
Securities represented by the ADSs evidenced by such ADR, such tax or other
governmental charge will be payable by the Holder or Beneficial Owner of such
ADS to the Depositary. The Depositary may refuse to effect any transfer of
such ADS or any withdrawal of Deposited Securities underlying such ADS until
such payment is made, and may withhold any dividends or other distributions,
or may sell for the account of the Holder or Beneficial Owner thereof any part
or all of the Deposited Securities underlying such ADS and may apply such
dividends, distributions or the proceeds of any such sale to pay any such tax
or other governmental charge and the Holder and Beneficial Owner(s) of such
ADS will remain liable for any deficiency.
Withholding Taxes
Before making any distribution or other payments in respect of any Deposited
Securities, the Company will make such deductions (if any) which, by any
applicable laws or regulations, the Company is required to make in respect of
any income, capital gains or other taxes (including interest and penalties)
and the Company may also deduct the amount of any tax or governmental charges
payable by the Company or for which the Company might be made liable in
respect of such distribution or gains or other payment or any document signed
in connection therewith or any capital gains or other taxes payable by the
Holders. The Company or its agent will remit to the appropriate governmental
authority or agency any amounts withheld and owing to such authority or
agency. The Depositary will forward to the Company or its agent such
information from its records as the Company may reasonably request to enable
the Company or its agent to file necessary reports with governmental
authorities or agencies or to file reports necessary to obtain benefits or
reliefs under the applicable tax treaties for the Holders. In the event the
Company, the Depositary or the Custodian endeavors to obtain treaty relief for
the Holders or Beneficial Owners pursuant to a tax treaty, such Holder or
Beneficial Owner shall indemnify the Company, the Depositary or the Custodian
and any of their respective Directors or employees, against any claims by any
governmental agency with respect to taxes (including interest and penalties)
arising from any refund of taxes or reduced rate of withholding obtained for
such Holder or Beneficial Owner.
General
Neither the Depositary nor the Company nor any of their respective
directors, employees, agents or affiliates will be liable to any Holder or
Beneficial Owner of ADSs, if by reason of any provision of any present or
future law or regulation of the United States, India or any other country, or
of any other governmental or regulatory authority or stock exchange, or by
reason of any provision, present or future, of the Articles of the Company, or
any offering or distribution thereof, or by reason of any act of God or war or
other circumstances beyond its control, the Depositary or the Company shall be
prevented, delayed or forbidden from, or be subject to any civil or criminal
penalty on account of, doing or performing any act or thing which by the terms
of the Deposit Agreement or the Deposited Securities it is provided will be
done or performed; nor will the Depositary or the Company or any of their
respective directors, employees, agents, or affiliates incur any liability to
any Holder or Beneficial Owner of any ADS by reason of any nonperformance or
delay, caused as aforesaid, in the performance of any act or thing which by
the terms of the Deposit Agreement it is provided will or may be done or
performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for under the Deposit Agreement. Where, by the terms of a
distribution pursuant to the Deposit Agreement, or an offering or distribution
pursuant to the Deposit Agreement, or for any other reason, such distribution
or offering may not be made available to Holders, and the Depositary may not
dispose of such distribution or offering on behalf of such Holders and make
the net proceeds available to such Holders, then the Depositary will not make
such distribution or offering, will give notice to the Company to this effect,
and will allow the rights, if applicable, to lapse.
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Except for liabilities under applicable U.S. federal securities laws, the
Company and the Depositary assume no obligation nor will they be subject to
any liability under the Deposit Agreement to Holders or Beneficial Owners of
ADSs, except that they agree to perform their respective obligations
specifically set forth under the Deposit Agreement without negligence or bad
faith.
The ADSs evidenced by ADRs are transferable on the books of the Depositary,
provided that the Depositary may close the transfer books at any time or from
time to time when deemed expedient by it in connection with the performance of
its duties or at the written request of the Company. As a condition precedent
to the execution and delivery, registration of transfer, split-up, combination
or surrender of any ADS evidenced by an ADR or withdrawal of any Deposited
Securities, the Depositary, the Custodian or the Registrar may require payment
from the person presenting the ADS evidenced by an ADR or the depositor of the
Equity Shares of a sum sufficient to reimburse it for any tax or other
governmental charge and any stock transfer or registration fee with respect
thereto (including any such tax or charge and fee with respect to Equity
Shares being deposited or withdrawn) and payment of any applicable fees
payable by the Holders and Beneficial Owners of ADSs. The Depositary may
refuse to deliver ADSs, to register the transfer of any ADS or to make any
distribution on, or related to, Equity Shares until it has received such proof
of citizenship or residence, exchange control approval or other information as
it may deem necessary or proper. The delivery, transfer, registration of
transfer of outstanding ADSs and surrender of ADSs generally may be suspended
or refused during any period when the transfer books of the Depositary, the
Company or the foreign registrar are closed or if any such action is deemed
necessary or advisable by the Depositary or the Company, at any time or from
time to time.
Notwithstanding anything to the contrary in the Deposit Agreement, the
surrender of outstanding ADSs and withdrawal of Deposited Securities may not
be suspended except for: (i) temporary delays caused by closing the transfer
books of the Depositary or the Company or the deposit of Equity Shares in
connection with voting at a shareholders' meeting, or the payment of
dividends; (ii) the payment of fees, taxes and similar charges; and
(iii) compliance with any U.S. or foreign laws or governmental regulations
relating to the ADSs or to the withdrawal of the Deposited Securities.
The Depositary will keep books, at its Corporate Trust Office, for the
registration and transfer of ADSs, which at all reasonable times will be open
for inspection by the Holders, provided that such inspection will not be for
the purpose of communicating with Holders in the interest of a business or
object other than the business of the Company or a matter related to the
Deposit Agreement or the ADSs.
The Depositary may appoint one or more co-transfer agents for the purpose of
effecting transfers, combinations and split-ups of ADSs at designated transfer
offices on behalf of the Depositary. In carrying out its functions, a co-
transfer agent may require evidence of authority and compliance with
applicable laws and other requirements by Holders or persons entitled to ADSs
and will be entitled to protection and indemnity to the same extent as the
Depositary.
Governing Law
The Deposit Agreement will be governed by the laws of the State of New York.
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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Foreign investment in Indian securities is generally regulated by the
Foreign Exchange Regulation Act, 1973 ("FERA"). Under Section 29(1)(b) of
FERA, no person or company resident outside India that is not incorporated in
India (other than a banking company) can purchase the shares of any company
carrying on any trading, commercial or industrial activity in India without
the permission of the RBI. Also, under Section 19(1)(d) of FERA, the transfer
and issuance of any security of any Indian company to a person resident
outside India requires the permission of the RBI. Under Section 19(5) of FERA,
no transfer of shares in a company registered in India by a non-resident to a
resident of India is valid unless the transfer is confirmed by the RBI upon
application filed by the transferor or the transferee. Under guidelines issued
by the RBI, the RBI will approve such transfers if such transfer is transacted
on an Indian stock exchange through a registered stock broker. Furthermore,
the issuance of rights and other distributions of securities to a non-resident
also requires the prior consent of the RBI. The RBI has granted an exemption
from application of certain of these provisions in connection with the
Offering. See "Government of India Approvals."
General
Shares of Indian companies represented by ADSs may be approved for issuance
to foreign investors by the Government of India under the Issue of Foreign
Currency Convertible Bonds and Equity Shares (through Depositary Receipt
Mechanism) Scheme, 1993 (the "1993 Regulation"), as modified from time to
time, promulgated by the Government of India. The 1993 Regulation is distinct
from other policies or facilities, as described below, relating to investments
in Indian companies by foreign investors. The issuance of ADSs pursuant to the
1993 Regulation also affords to holders of the ADSs the benefits of Section
115AC of the Indian Income Tax Act, 1961 for purposes of the application of
Indian tax law. See "Taxation--Indian Taxation."
Foreign Direct Investment
In July 1991, the Government of India raised the limit on foreign equity
holdings in Indian companies from 40% to 51% in certain high priority
industries. The RBI gives automatic approval for such foreign equity holdings.
The Foreign Investment Promotion Board (the "FIPB"), currently under the
Ministry of Industry, was thereafter formed to negotiate with large foreign
companies wishing to make long-term investments in India. Foreign equity
participation in excess of 51% in such high priority industries or in any
other industries up to Rs. six billion is currently allowed only with the
approval of the FIPB. Proposals in excess of Rs. six billion require the
approval of the Cabinet Committee on Foreign Investment. Proposals involving
the public sector and other sensitive areas require the approval of Cabinet
Committee on Economic Affairs. These facilities are designed for direct
foreign investments by non-residents of India who are not NRIs, OCBs or FIIs
(as each term is defined below) ("Foreign Direct Investors"). The Department
of Industrial Policy and Promotion, a part of the Ministry of Industry, issued
detailed guidelines in January 1997 for consideration of foreign direct
investment proposals by the FIPB (the "Guidelines"). Under the Guidelines,
sector specific guidelines for foreign direct investment and the levels of
permitted equity participation have been established. In January 1998, the RBI
issued a notification that foreign ownership of up to 50%, 51% or 74%,
depending on the category of industry, would be allowed without prior
permission of the RBI. The issues to be considered by the FIPB and the FIPB's
areas of priority in granting approvals are also set out in the Guidelines.
The basic objective of the Guidelines is to improve the transparency and
objectivity of the FIPB's consideration of proposals. However, because the
Guidelines are administrative guidelines and have not been codified as either
law or regulations, they are not legally binding with respect to any
recommendation made by the FIPB or with respect to any decision taken by the
Government of India in cases involving foreign direct investment.
In May 1994, the Government of India announced that purchases by foreign
investors of ADSs as evidenced by ADRs and foreign currency convertible bonds
of Indian companies will be treated as direct foreign investment in the equity
issued by Indian companies for such offerings. Therefore, offerings that
involve the issuance of equity that results in Foreign Direct Investors
holding more than the stipulated percentage of direct foreign investments
(which depends on the category of industry) would require approval from the
FIPB. In addition, in
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connection with offerings of any such securities to foreign investors,
approval of the FIPB is required for Indian companies whether or not the
stipulated percentage limit would be reached, if the proceeds therefrom are to
be used for investment in non-high priority industries. With respect to the
activities of the Company, FIPB approval is required for any direct foreign
investment in the Company which exceeds 51% of the total issued share capital
of the Company.
In July 1997, the Government of India issued guidelines to the effect that
foreign investment in preferred shares will be considered as part of the share
capital of a company and will be processed through the automatic RBI route or
will require the approval of the FIPB as the case may be. Investments in
preferred shares are included as foreign direct investment for the purposes of
sectoral caps on foreign equity, if such preferred shares carry a conversion
option. If the preferred shares are structured without a conversion option,
they would fall outside the foreign direct investment limit but would be
treated as debt and would be subject to special Government of India guidelines
and approvals.
Investment by Non-Resident Indians and Overseas Corporate Bodies
A variety of special facilities for making investments in India in shares of
Indian companies is available to individuals of Indian nationality or origin
residing outside India ("NRIs") and to overseas corporate bodies ("OCBs"), at
least 60% owned by such persons. These facilities permit NRIs and OCBs to make
portfolio investments in shares and other securities of Indian companies on a
basis not generally available to other foreign investors. These facilities are
different and distinct from investments by Foreign Direct Investors described
above.
Investment by Foreign Institutional Investors
In September 1992, the Government of India issued guidelines which enable
foreign institutional investors ("FIIs"), including institutions such as
pension funds, investment trusts, asset management companies, nominee
companies and incorporated/institutional portfolio managers, to invest in all
the securities traded on the primary and secondary markets in India. Under the
guidelines, FIIs are required to obtain an initial registration from the SEBI
and a general permission from the RBI to engage in transactions regulated
under FERA. FIIs must also comply with the provisions of the SEBI Foreign
Institutional Investors Regulations, 1995. When it receives the initial
registration, the FII also obtains general permission from the RBI to engage
in transactions regulated under FERA. Together, the initial registration and
the RBIs general permission enable the registered FII to buy (subject to the
ownership restrictions discussed below) and sell freely securities issued by
Indian companies, to realize capital gains on investments made through the
initial amount invested in India, to subscribe or renounce rights offerings
for shares, to appoint a domestic custodian for custody of investments held
and to repatriate the capital, capital gains, dividends, income received by
way of interest and any compensation received towards sale or renunciation of
rights offerings of shares.
Ownership Restrictions
SEBI and RBI regulations restrict investments in Indian companies by FIIs,
NRIs and OCBs (collectively, "Foreign Direct Investors"). Under current SEBI
regulations applicable to the Company, Foreign Direct Investors in aggregate
may hold no more than 30% of the Company's Equity Shares, excluding the Equity
Shares underlying the ADSs, and NRIs and OCBs in aggregate may hold no more
than 10% of the Company's Equity Shares, excluding the Equity Shares
underlying the ADSs. Furthermore, SEBI regulations provide that no single FII
may hold more than 10% of the Company's total Equity Shares and no single NRI
or OCB may hold more than 5% of the Company's total Equity Shares.
FIIs may only purchase securities of public Indian companies (other than the
ADSs) through a procedure known as a "preferential allotment of shares," which
is subject to certain restrictions. These restrictions will not apply to
Equity Shares issued as stock dividends or in connection with rights offerings
applicable to the Equity Shares underlying the ADSs.
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There is uncertainty under Indian law about the tax regime applicable to
FIIs which hold and trade ADSs. FIIs are urged to consult with their Indian
legal and tax advisers about the relationship between the FII guidelines and
the ADSs and any Equity Shares withdrawn upon surrender of ADSs.
More detailed provisions relating to FII investment have been introduced by
the SEBI with the introduction of the SEBI Foreign Institutional Investors
Regulations, 1995. These provisions relate to the registration of FIIs, their
general obligations and responsibilities and certain investment conditions and
restrictions. One such restriction is that the total investment in equity and
equity-related instruments should not be less than 70% of the aggregate of all
investments of an FII in India. The SEBI has also permitted private placements
of shares by listed companies with FIIs, subject to the prior approval of the
RBI under FERA. Such private placement must be made at the average of the
weekly highs and lows of the closing price over the preceding six months or
the preceding two weeks, whichever is higher.
Under the Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997 approved by the SEBI in January 1997
and promulgated by the Government of India in February 1997 (the "Takeover
Code"), which replaced the 1994 Takeover Code (as defined herein), upon the
acquisition of more than 5% of the outstanding shares of a public Indian
company, a purchaser is required to notify the company and all the stock
exchanges on which the shares of the Company are listed. Upon the acquisition
of 15% or more of such shares or a change in control of the company, the
purchaser is required to make an open offer to the other shareholders offering
to purchase at least 20% of all the outstanding shares of the Company at a
minimum offer price as determined pursuant to the rules of the Takeover Code.
Upon conversion of ADSs into Equity Shares, an ADS holder will be subject to
the Takeover Code.
Open market purchases of securities of Indian companies in India by Foreign
Direct Investors or investments by NRIs, OCBs and FIIs above the ownership
levels set forth above require Government of India approval on a case-by-case
basis.
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GOVERNMENT OF INDIA APPROVALS
India's Ministry of Finance (the "MOF") and the RBI must approve the
Offering. In addition, the Company must obtain approval of the MOF to enter
into the Depositary Agreement and the Underwriting Agreement referred to in
"Underwriting." The Company has received preliminary approval from the MOF and
expects to receive the required final approval from the MOF and the RBI prior
to effectiveness of the Offering. Pursuant to such approvals and consistent
with the Company's request, the maximum aggregate proceeds of the Offering are
limited to $75 million (including the Underwriters' over-allotment option).
Various tax concessions are expected to be available with respect to the
Offering in accordance with the provisions of Section 115AC of the Indian
Income Tax Act. Copies of the approvals from the MOF and the RBI will be made
available for public inspection at the registered office of the Company or
provided upon written request to the Chief Financial Officer of the Company.
See "Taxation--Indian Taxation."
The RBI has granted general approvals which permit: (i) foreign investors to
acquire ADSs and Equity Shares; (ii) the issue of the ADSs and the transfer
and registration of the Equity Shares in the name of the Depositary or its
nominee; (iii) remittance of dividends on the Equity Shares represented by
ADSs at market rates, as and when due subject to the payment of any applicable
Indian taxes; (iv) issue of any rights or bonus Equity Shares represented by
the ADSs; (v) repatriation in free foreign exchange of the proceeds of a sale
of the Equity Shares (received upon surrender of ADSs) and any rights or
bonuses that may accrue in respect of the Equity Shares, subject to applicable
Indian taxes; (vi) export of Equity Shares from India for transfer thereof
outside of India upon withdrawal from the depositary facility; and (vii) the
free transfer of ADSs outside India between non-residents of India. Specific
approval of the RBI will have to be obtained, however, for the sale of the
underlying Equity Shares by a non-resident of India to a resident of India as
well as for any renunciation of rights to a resident of India. Pursuant to
FERA, a resident of India is: (i) a citizen of India who has not left India
with an intention of staying outside India; and (ii) a non-citizen of India
who stays in India for a purpose indicating an intention to stay in India. A
"non-resident" of India is a person who is not a resident of India. Currently,
such sales or renunciations will be permitted by the RBI if made through a
registered Indian broker or through a recognized stock exchange in India at
prevailing market rates, and the sale proceeds may be repatriated after
payment of applicable taxes and stamp duties. See "Taxation--Indian Taxation--
Taxation of Distributions."
Any person resident outside India desiring to sell Equity Shares received
upon surrender of ADSs or otherwise transfer such Equity Shares within India,
whether or not through any of the Indian Stock Exchanges, should seek the
advice of Indian counsel as to the requirements applicable at that time.
Transfers of shares of an Indian company between non-residents generally
require the approval of the RBI (such approvals having been obtained by the
Company as described above). Transfers of securities in Indian companies from
a person resident outside India to a person resident in India require
confirmation from the RBI under Section 19(5) of FERA. Accordingly, under
current Indian law, the sale and transfer of Equity Shares withdrawn from the
Depositary to any person resident in India would require additional approvals
to be obtained from the RBI. Under current regulations and practice, a person
resident outside of India intending to sell Indian securities within India or
to a resident of India would generally apply for RBI approval by submitting a
Form TS1, which requires information as to the transferor, transferee, the
shareholding structure of the Indian company whose shares are to be sold, the
highest and lowest quotation shares on the stock exchange where the shares
have been listed during each of the preceding three calendar years and the
latest available quotation, the proposed sale price per share and other
information. Applications for transfer of Equity Shares by non-resident
investors to residents should be submitted to the RBI on Form TS1 together
with the documents mentioned therein. The RBI will generally permit such sales
or renunciation if made through a registered Indian broker or through a
recognized stock exchange in India at prevailing market rates. The proceeds
from such transfers may be transferred outside India after payment of
applicable taxes and stamp duties. The RBI will also consider applications for
transfer of shares by private arrangement (i.e., other than through a stock
exchange) to a person resident in India. In such cases, the RBI will need to
satisfy itself that the shares are proposed to be sold at a price arrived at
by taking the average of quotations on the date of application or the price
paid by the applicant whichever is lower. The RBI is not required to respond
to a Form TS1 application within any specific time period and may grant or
deny the application in its discretion.
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The Company will file prior to the effectiveness of this Registration
Statement an application with the Department of Company Affairs to the effect
that it is not required to file this Prospectus under the Indian Companies
Act. The MOF may request that a copy of this Prospectus be filed with the
SEBI, the Registrar of Companies in Bangalore and the relevant Indian Stock
Exchanges for record purposes.
The Company's outstanding Equity Shares are listed on the Indian Stock
Exchanges. Upon effectiveness of the Offering, the Company will make the
appropriate filings with the Indian Stock Exchanges to approve the Equity
Shares underlying the ADSs offered hereby for trading on The Indian Stock
Exchanges.
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TAXATION
Indian Taxation
General. The following is the opinion of Crawford Bayley & Co. on the
principal Indian tax consequences for holders of ADSs and Equity Shares
received upon withdrawal of such Equity Shares who are not resident in India
whether of Indian origin or not ("Non-resident Holders") and is based on the
provisions of the Income Tax Act, 1961 (the "Indian Tax Act"), including the
special tax regime contained in Section 115AC (the "Section 115AC Regime") and
the 1993 Regulation. The Indian Tax Act is amended every year by the Finance
Act of the relevant year. Some or all of the tax consequences of the Section
115 AC Regime may be amended or changed by future amendments of the Indian Tax
Act.
This opinion is not intended to constitute a complete analysis of the
individual tax consequences to Non-resident Holders under Indian law for the
acquisition, ownership and sale of ADSs and Equity Shares by Non-resident
Holders. Personal tax consequences of an investment may vary for investors in
various circumstances and potential investors should therefore consult their
own tax advisers on the tax consequences of such acquisition, ownership and
sale, including specifically the tax consequences under the law of the
jurisdiction of their residence and any tax treaty between India and their
country of residence.
Residence. For purposes of the Indian Tax Act, an individual is considered
to be a resident of India during any financial year if he: (i) is in India in
that year for a period or periods amounting to 182 days or more; or (ii) is in
India in that year for 60 days or more and, in case of a citizen of India or a
person of Indian origin, who, being outside India, comes on a visit to India,
is in India for more than 182 days effective April 1, 1995 and in each case
within the four preceding years has been in India for a period or periods
amounting to 365 days or more. A company is resident in India if it is
registered in India or the control and the management of its affairs is
situated wholly in India.
Taxation of Distributions. Pursuant to the Finance Act, 1997, withholding
tax on dividends paid to shareholders no longer applies. Distributions to Non-
resident Holders of additional ADSs or Equity Shares or rights to subscribe
for Equity Shares ("Rights") made with respect to ADSs or Equity Shares are
not subject to Indian tax.
Taxation of Capital Gains. Any gain realized on the sale of ADSs or Equity
Shares by a Non-resident Holder to another Non-resident Holder outside India
is not subject to Indian capital gains tax. However, as Rights are not
expressly covered by the Indian Income Tax Act, 1961, it is unclear, and
Crawford Bayley & Co. is therefore unable to opine, as to whether capital gain
derived from the sale of Rights by a Non-resident Holder (not entitled to an
exemption under a tax treaty) to another Non-resident Holder outside India
will be subject to Indian capital gains tax. If such Rights are deemed by the
Indian tax authorities to be situated within India, the gains realized on the
sale of such Rights will be subject to customary Indian taxation as discussed
below.
Since the Offering has been approved by the Government of India under the
Section 115AC Regime, Non-resident Holders of the ADSs will have the benefit
of tax concessions available under the Section 115AC Regime. The Section 115AC
Regime provides that if the Equity Shares are sold on an Indian Stock Exchange
against payment in Indian rupees, they will no longer be eligible for such
concessional tax treatment. However, the Section 115AC Regime is unclear, and
Crawford Bayley & Co. is therefore unable to opine, as to whether such tax
treatment is available to a non-resident who acquires Equity Shares outside
India from a Non-resident Holder of Equity Shares after receipt of the Equity
Shares upon surrender of the ADSs. If concessional tax treatment is not
available, gains realized on the sale of such Equity Shares will be subject to
customary Indian taxation as discussed below.
Subject to any relief provided pursuant to an applicable tax treaty, any
gain realized on the sale of Equity Shares to an Indian resident or inside
India generally will be subject to Indian capital gains tax which is to be
deducted at the source by the buyer. For the purpose of computing capital
gains tax, the cost of acquisition of Equity Shares received in exchange for
ADSs will be determined on the basis of the prevailing price of the shares
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on any of the Indian Stock Exchanges on the date that the Depositary gives
notice to the custodian of the delivery of the Equity Shares in exchange for
the corresponding ADSs. A Non-resident Holder's holding period (for purposes
of determining the applicable Indian capital gains tax rate) in respect of
Equity Shares received in exchange for ADSs commences on the date of the
notice of the redemption by the Depositary to the Custodian. The Indian-U.S.
Treaty does not provide an exemption from the imposition of Indian capital
gains tax.
Taxable gain realized in respect of Equity Shares held (calculated in the
manner set forth in the prior paragraph) for more than 12 months (long-term
gain) is subject to tax at the rate of 10%. Taxable gain realized in respect
of Equity Shares held for 12 months or less (short-term gain) is subject to
tax at variable rates with a maximum rate of 48%. The actual rate of tax on
short-term gain depends on a number of factors, including the legal status of
the Non-resident Holder and the type of income chargeable in India.
Stamp Duty and Transfer Tax. Upon issuance of the Equity Shares, the Company
is required to pay a stamp duty of 0.1% per share of the issue price of the
underlying Equity Shares. A transfer of ADSs is not subject to Indian stamp
duty. However, upon the acquisition of Equity Shares from the Depositary in
exchange for ADSs, the holder will be liable for Indian stamp duty at the rate
of 0.5% of the market value of the ADSs or Equity Shares exchanged. A sale of
Equity Shares by a registered holder will also be subject to Indian stamp duty
at the rate of 0.5% of the market value of the Equity Shares on the trade
date, although customarily such tax is borne by the transferee.
Gift and Wealth Tax. The holding of the ADSs in the hands of Non-resident
Holders and the holding of the underlying Equity Shares by the Depositary as a
fiduciary and the transfer of ADSs between Non-resident holders and the
Depositary will be exempt from Indian gift tax and Indian wealth tax. Although
Indian gift tax was abolished effective October 1, 1998, a gift tax may apply
to transfers by way of gift of Equity Shares or ADSs in the future. Investors
are advised to consult their own tax advisers in this context.
Estate Duty. Under current Indian law, there is no estate duty applicable to
a Non-resident Holder of ADSs or Equity Shares.
United States Federal Taxation
The following is a summary of the material U.S. federal income and estate
tax matters that may be relevant with respect to the acquisition, ownership
and disposition of Equity Shares or ADSs. This summary addresses only the U.S.
federal income and estate tax considerations of holders that are citizens or
residents of the United States, partnerships or corporations created in or
under the laws of the United States or any political subdivision thereof or
therein, estates, the income of which is subject to U.S. federal income
taxation regardless of its source and trusts ("U.S. Holders") or are not U.S.
Holders ("Non-U.S. Holders") and that will hold Equity Shares or ADSs as
capital assets. This summary does not address tax considerations applicable to
holders that may be subject to special tax rules, such as banks, insurance
companies, dealers in securities or currencies, tax-exempt entities, persons
that will hold Equity Shares or ADSs as a position in a "straddle" or as part
of a "hedging" or "conversion" transaction for tax purposes, persons that have
a "functional currency" other than the U.S. dollar or holders of 10% or more
(by voting power or value) of the stock of the Company. This summary is based
on the tax laws of the United States as in effect on the date of this
Prospectus and on United States Treasury Regulations in effect (or, in certain
cases, proposed) as of the date of this Prospectus, as well as judicial and
administrative interpretations thereof available on or before such date and is
based in part on representations of the Depositary and the assumption that
each obligation in the Depositary Agreement and any related agreement will be
performed in accordance with its terms. All of the foregoing are subject to
change, which change could apply retroactively and could affect the tax
consequences described below.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT
TO THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING,
OWNING OR DISPOSING OF EQUITY SHARES OR ADSs.
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Ownership of ADSs. For U.S. federal income tax purposes, holders of ADSs
will be treated as the owners of Equity Shares represented by such ADSs.
Dividends. Distributions of cash or property (other than Equity Shares, if
any, distributed pro rata to all shareholders of the Company, including
holders of ADSs) with respect to Equity Shares will be includible in income by
a U.S. Holder as foreign source dividend income at the time of receipt, which
in the case of a U.S. Holder of ADSs generally will be the date of receipt by
the Depositary, to the extent such distributions are made from the current or
accumulated earnings and profits of the Company. Such dividends will not be
eligible for the dividends received deduction generally allowed to corporate
U.S. Holders. To the extent, if any, that the amount of any distribution by
the Company exceeds the Company's current and accumulated earnings and profits
as determined under U.S. federal income tax principles, it will be treated
first as a tax-free return of the U.S. Holder's tax basis in the Equity Shares
or ADSs and thereafter as capital gain.
A U.S. Holder will not be eligible for a foreign tax credit against its U.S.
federal income tax liability for Indian taxes paid by the Company and deemed
under Indian law to have been paid by the shareholders of the Company, unless
it is a U.S. company holding at least 10% of the Indian company paying the
dividends.
U.S. Holders should be aware that dividends paid by the Company generally
will constitute "passive income" for purposes of the foreign tax credit. The
Internal Revenue Code applies various limitations on the amount of foreign tax
credit that may be available to a U.S. taxpayer. U.S. Holders should consult
their own tax advisors with respect to the potential consequences of those
limitations.
A Non-U.S. Holder of Equity Shares or ADSs generally will not be subject to
U.S. federal income tax or withholding tax on dividends received on Equity
Shares or ADSs unless such income is effectively connected with the conduct by
such Non-U.S. Holder of a trade or business in the United States
Sale or Exchange of Equity Shares or ADSs. A U.S. Holder generally will
recognize gain or loss on the sale or exchange of Equity Shares or ADSs equal
to the difference between the amount realized on such sale or exchange and the
U.S. Holder's tax basis in the Equity Shares or ADSs, as the case may be. Such
gain or loss will be capital gain or loss, and will be long-term capital gain
or loss if the Equity Shares or ADSs, as the case may be, were held for more
than one year. Gain, if any, recognized by a U.S. Holder generally will be
treated as U.S. source passive income for U.S. foreign tax credit purposes.
A Non-U.S. Holder of Equity Shares or ADSs generally will not be subject to
U.S. federal income or withholding tax on any gain realized on the sale or
exchange of such Equity Shares or ADSs unless: (i) such gain is effectively
connected with the conduct by such Non-U.S. Holder of a trade or business in
the U.S.; or (ii) in the case of any gain realized by an individual Non-U.S.
Holder, such holder is present in the United States for 183 days or more in
the taxable year of such sale and certain other conditions are met.
If dividends are paid in Indian rupees, the amount of the dividend
distribution includible in the income of a U.S. Holder will be in the U.S.
dollar value of the payments made in Indian rupees, determined at a spot
exchange rate between Indian rupees and U.S. dollars applicable to the date
such dividend is includible in the income of the U.S. Holder, regardless of
whether the payment is in fact converted into U.S. dollars. Generally, gain or
loss (if any) resulting from currency exchange fluctuations during the period
from the date the dividend is paid to the date such payment is converted into
U.S. dollars will be treated as ordinary income or loss.
Estate Taxes. An individual shareholder who is a citizen or resident of the
United States for U.S. federal estate tax purposes will have the value of the
Equity Shares or ADSs owned by such holder included in his or her gross estate
for U.S. federal estate tax purposes. An individual holder who actually pays
Indian estate tax with respect to the Equity Shares will, however, be entitled
to credit the amount of such tax against his or her U.S. federal estate tax
liability, subject to certain conditions and limitations.
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Backup Withholding Tax and Information Reporting Requirements. Under current
U.S. Treasury Regulations, dividends paid on Equity Shares, if any, generally
will not be subject to information reporting and generally will not be subject
to U.S. backup withholding tax. Information reporting will apply to payments
of dividends on, and to proceeds from the sale or redemption of, Equity Shares
or ADSs by a paying agent (including a broker) within the United States to a
U.S. Holder (other than an "exempt recipient," including a corporation, a
payee that is a Non-U.S. Holder that provides an appropriate certification and
certain other persons). In addition, a paying agent within the United States
will be required to withhold 31% of any payments of the proceeds from the sale
or redemption of Equity Shares or ADSs within the United States to a holder
(other than an "exempt recipient") if such holder fails to furnish its correct
taxpayer identification number or otherwise fails to comply with such backup
withholding requirements.
Passive Foreign Investment Company. A non-U.S. corporation will be
classified as a passive foreign investment company (a "PFIC") for U.S. Federal
income tax purposes if it satisfies either of the following two tests: (i) 75%
or more of its gross income for the taxable year is passive income; or (ii) on
average for the taxable year (by value or, if the Company so elects, by
adjusted basis) 50% or more of its assets produce or are held for the
production of passive income.
The Company does not believe that it satisfies either of the tests for PFIC
status. If the Company were to be a PFIC for any taxable year, U.S. Holders
would be required to either: (i) pay an interest charge together with tax
calculated at maximum ordinary income rates on certain "excess distributions"
(defined to include gain on a sale or other disposition of Equity Shares); or
(ii) if a Qualified Electing Fund election is made, to include in their
taxable income their pro rata share of certain undistributed amounts of the
Company's income.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL
TAX CONSEQUENCES RELATING TO OWNERSHIP OF REGISTERED SHARES OR ADSs.
PROSPECTIVE PURCHASERS OF ADSs OFFERED HEREBY SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.
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EQUITY SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of Equity Shares into the public market
following the Offering (whether on the Indian Stock Exchanges or into the
United States market by conversion of outstanding Equity Shares into ADSs, if
permitted in the future by the Government of India) could adversely affect the
market price of the ADSs. Upon completion of the Offering, 32,934,400 Equity
Shares will be issued and outstanding, including 900,000 Equity Shares
represented by 1,800,000 ADSs issued in connection with the Offering. Of the
32,034,400 Equity Shares issued and outstanding prior to the issuance of the
ADSs, holders of approximately 10,144,200 Equity Shares (including all shares
held by directors and their families and executive officers) have agreed not
to offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of, or agree to dispose of, any such Equity Shares for a period of 180
days following the date of this Prospectus. NationsBanc Montgomery Securities
LLC may release such shares from the lock-up in its sole discretion at any
time and without prior public announcement. Substantially all of the Equity
Shares that are not subject to such lock-ups, will be freely tradeable in
India immediately after the Offering. Upon expiration of the lock-up period
(or earlier with such consent), substantially all of the Equity Shares will be
available for sale on the Indian Stock Exchanges. Sales of substantial amounts
of Equity Shares, or the availability of such shares for sale, could adversely
affect the market price of the ADSs. See "Risk Factors--Risks Related to
Investments in Indian Securities" and "--Absence of Prior U.S. Public Market;
Potential Limited Liquidity" for information on the limitations on conversion
of Equity Shares into ADSs.
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UNDERWRITING
The Underwriters named below, represented by NationsBanc Montgomery
Securities LLC, BancBoston Robertson Stephens, BT Alex. Brown and Thomas
Weisel Partners LLC (the "Representatives"), have severally agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
from the Company the number of ADSs indicated below opposite their respective
names at the initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus. The Underwriting Agreement
provides that the obligations of the Underwriters are subject to certain
conditions precedent and that the Underwriters are committed to purchase all
of the ADSs if they purchase any.
<TABLE>
<CAPTION>
Number
Underwriter of ADSs
----------- ---------
<S> <C>
NationsBanc Montgomery Securities LLC..............................
BancBoston Robertson Stephens......................................
BT Alex. Brown.....................................................
Thomas Weisel Partners LLC.........................................
---------
Total............................................................ 1,800,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters initially
propose to offer the ADSs to the public on the terms set forth on the cover
page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per ADS, and the Underwriters may allow,
and such dealers reallow, a concession of not more than $ per ADS to
certain other dealers. The Company also will reimburse the Representatives for
certain travel and other expenses incurred in connection with the Offering.
After the Offering, the offering price and other selling terms may be changed
by the Representatives. The ADSs are offered subject to receipt and acceptance
by the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 270,000 additional ADSs to cover over-allotments, if any, at the
same price per ADS as the initial ADSs to be purchased by the Underwriters. To
the extent that the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
such additional ADSs, in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such ADSs only to cover over-
allotments made in connection with the Offering.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in request thereof.
All of the Company's directors (other than directors who do not own Equity
Shares or rights to purchase Equity Shares) and executive officers, and
certain family members of the Company's directors, have agreed that, subject
to certain exceptions, for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent of NationsBanc
Montgomery Securities LLC, directly or indirectly, offer, sell, contract or
grant any option to sell, pledge, transfer, establish an open put position or
otherwise dispose of, or agree to dispose of, any Equity Shares or ADSs, any
options or warrants to purchase Equity Shares or ADSs, or any securities
convertible into, exercisable or exchangeable for Equity Shares or ADSs. In
addition, the Company has agreed that for a period of 180 days after the date
of this Prospectus, it will not, without the prior written consent of
NationsBanc Montgomery Securities LLC, directly or indirectly, offer, issue,
sell, contract or grant any option to sell, pledge, transfer, establish an
open put position or otherwise dispose of, or agree to dispose of, any Equity
Shares or ADSs, any options or warrants to purchase any Equity Shares or ADSs
or any securities convertible into, exercisable or exchangeable for Equity
Shares or ADSs, other than the grant of options and issuance of shares under
the ESOP and the 1998 Plan. See "Equity Shares Eligible for Future Sale."
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The Representatives have advised the Company that the Underwriters do not
expect to make sales to accounts over which they exercise discretionary
authority in excess of 5% of the number of ADSs offered hereby.
The Company's Equity Shares are traded on the Indian Stock Exchanges.
However, prior to the Offering, there has been no public market for the ADSs
offered hereby or for the underlying Equity Shares in the United States.
Consequently, the public offering price for the ADSs will be determined
through negotiations among the Company and the Representatives. The primary
factor to be considered in such negotiations will be the price of the
Company's Equity Shares on the Indian Stock Exchanges. Among the other factors
to be considered in such negotiations will be the history of, and the
prospects for, the Company and the industry in which it competes, an
assessment of the Company's management, its past and present earnings and the
trend of such earnings, the prospects for future earnings of the Company,
applicable regulatory limitations on foreign investment in the Equity Shares,
the present state of the Company's business, the general condition of the
securities markets at the time of the Offering and the market prices of
publicly traded stock of comparable companies in recent periods.
The Underwriters are permitted to engage in certain transactions that
stabilize the price of the ADSs. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
ADSs. If the Underwriters create a short position in the ADSs in connection
with the Offering, i.e., if they sell more ADSs than are set forth on the
cover page of this Prospectus, the Underwriters may reduce that short position
by purchasing ADSs in the open market. The Underwriters may also elect to
reduce any short position by exercising all or part of the over-allotment
option described above. In addition, the Representatives may impose "penalty
bids" under contractual arrangements with the Underwriters whereby they may
reclaim from an Underwriter (or dealer participating in the Offering) for the
account of the other Underwriters, the selling concession with respect to the
ADSs that are distributed in the Offering but subsequently purchased for the
account of the Underwriters in the open market.
In general, purchases of ADSs for the purpose of stabilization or to reduce
a short position could cause the price of the ADSs to be higher than it might
be in the absence of such purchases. Neither the Company nor the Underwriters
make any representation or predictions as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
ADSs. In addition, neither the Company nor the Underwriters make any
representation that the Representatives will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
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LEGAL MATTERS
The validity of the ADSs offered hereby will be passed upon for the Company
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. The validity of the Equity Shares represented by the ADSs offered
hereby will be passed upon by Crawford Bayley & Co., Mumbai, India, Indian
counsel for the Company. Certain matters in connection with the Offering will
be passed upon on behalf of the Underwriters by Latham & Watkins, Los Angeles,
California, and Nishith Desai Associates, Mumbai, India, counsel for the
Underwriters. Wilson Sonsini Goodrich & Rosati may rely upon Crawford Bayley &
Co. with respect to certain matters governed by Indian law.
INDIA FINANCIAL ADVISOR
In connection with certain matters in the Offering, Enam Financial
Consultants Pvt. Ltd. has acted as the India financial advisor to the Company.
EXPERTS
The U.S. GAAP consolidated financial statements of Infosys Technologies
Limited as of March 31, 1997 and 1998, and for each of the years in the three-
year period ended March 31, 1998, have been included herein in reliance upon
the report of KPMG Peat Marwick, India, independent accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in auditing
and accounting.
CHANGE OF ACCOUNTANTS
Effective April 1997, Bharat S. Raut and Company was engaged as the
principal independent accountants for the Company for Indian GAAP reporting,
replacing Mr. A.M. Bhatkal, who resigned at that time. The change was approved
by the Audit Committee of the Company's Board of Directors and at the Annual
General Meeting held on June 7, 1997.
In connection with the audits of the three fiscal years in the period ended
March 31, 1997, and for the interim period from April 1, 1997 through June 7,
1997 there were no disagreements with Mr. Bhatkal on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures, which disagreements, if not resolved to Mr. Bhatkal's satisfaction
would have caused him to make reference to the matter in his report. The audit
reports of Mr. Bhatkal for the financial statements of the Company as of and
for the fiscal years ended March 31, 1996 and 1997 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty or audit scope.
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ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
F-1 (including all amendments thereto, the "Registration Statement"), of which
this Prospectus constitutes a part, under the Securities Act, with respect to
the ADSs and the underlying Equity Shares offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description of the
matter involved, and each such statement is qualified in its entirety by such
reference.
Upon declaration by the Commission of the effectiveness of the Registration
Statement, the Company will be subject to the periodic reporting and other
informational requirements of the Exchange Act, and in accordance therewith
will be required to file reports and other information with the Commission.
The Registration Statement (with exhibits), as well as such reports and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549; and at the regional
offices of the Commission at Seven World Trade Center, 13th Floor, New York,
New York 10048; and at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, such as
the Company, that make electronic filings with the Commission.
As a foreign private issuer, the Company will be exempt from the rules under
the Exchange Act prescribing the furnishing and content of proxy statements,
and its executive officers, directors and principal shareholders are exempt
from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. Under the Exchange Act, the Company will not
be required to publish consolidated financial statements as frequently or as
promptly as United States companies. However, the Company intends to furnish
the Depositary with annual reports, which will include annual audited
consolidated financial statements prepared in accordance with U.S. GAAP, and
quarterly reports, which will include unaudited quarterly consolidated
financial information prepared in accordance with U.S. GAAP. The Depositary
has agreed with the Company that, upon the Company's request, it will promptly
mail such reports to all registered holders of ADSs. The Company will also
furnish to the Depositary all notices of shareholders' meetings and other
reports and communications that are made generally available to its
shareholders. The Depositary will arrange for the mailing of such documents to
record holders of ADSs. In addition, the Company has agreed in the
Underwriting Agreement relating to the Offering to submit to the Commission
quarterly reports, which will include unaudited quarterly condensed
consolidated financial information, on Form 6-K for the first three quarters
of each fiscal year and to file its annual report on Form 20-F within the time
period prescribed under Section 13 of the Exchange Act for the filing by
domestic issuers of quarterly reports on Form 10-Q and annual reports on
Form 10-K, respectively.
89
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of KPMG Peat Marwick, Independent Auditors....................... F-2
Balance Sheets.......................................................... F-3
Statements of Income.................................................... F-4
Statements of Shareholders' Equity...................................... F-5
Statements of Cash Flows................................................ F-6
Notes to Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Infosys Technologies Limited:
We have audited the accompanying consolidated balance sheets of Infosys
Technologies Limited and its subsidiary as of March 31, 1997 and 1998, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three year period ended March 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Infosys
Technologies Limited and its subsidiary as of March 31, 1997 and 1998 and the
results of their operations and their cash flows for each of the years in the
three year period ended March 31, 1998, in conformity with accounting
principles generally accepted in the United States.
KPMG Peat Marwick
Bangalore, India
April 10, 1998
F-2
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
As of
As of March 31, December
------------------------ 31,
1997 1998 1998
----------- ----------- --------
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 8,320,331 $15,419,265 $22,797,989
Trade accounts receivable, net of al-
lowances.............................. 4,994,607 10,263,084 21,270,407
Inventories............................ 11,458 -- --
Prepaid expenses and other current as-
sets.................................. 2,826,506 3,751,289 5,302,824
Prepaid income taxes................... 983,859 536,969 --
----------- ----------- -----------
Total current assets.................. 17,136,761 29,970,607 49,371,220
Property, plant and equipment--net...... 14,930,862 16,695,503 22,795,198
Deferred tax assets..................... 382,395 1,089,948 1,642,311
Investments............................. 362 362 177,938
Other assets............................ 473,079 1,025,605 2,595,128
----------- ----------- -----------
Total assets............................ $32,923,459 $48,782,025 $76,581,795
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 125,579 $ 149,086 $ 81,400
Customer deposits...................... 196,710 190,173 109,809
Other accrued liabilities.............. 1,960,941 4,979,306 6,186,528
Provision for income taxes............. -- -- 1,582,516
Unearned revenue....................... -- -- 5,356,200
----------- ----------- -----------
Total current liabilities............. 2,283,230 5,318,565 13,316,453
Non-current liabilities................. -- -- --
----------- ----------- -----------
Total liabilities....................... 2,283,230 5,318,565 13,316,453
----------- ----------- -----------
Preferred stock of subsidiary........... -- 2,317,500 --
Shareholders' equity:
Common stock, $0.32 par value;
50,000,000 Equity Shares
authorized as of 1997 and 1998; Issued
and outstanding
Equity Shares--29,038,400 and
32,034,400 as of 1997
and 1998, respectively ............... 2,310,270 4,545,811 4,545,811
Additional paid-in capital............. 15,712,247 24,415,920 44,802,455
Accumulated other comprehensive in-
come.................................. (3,531,811) (7,042,229) (9,384,666)
Deferred compensation--Employees Stock
Offer Plan............................ (3,507,715) (7,831,445) (25,813,924)
Retained earnings...................... 19,681,740 27,994,268 49,942,298
Loan to Trust.......................... (24,502) (936,365) (826,632)
----------- ----------- -----------
Total shareholders' equity.............. 30,640,229 41,145,960 63,265,342
----------- ----------- -----------
Total liabilities and shareholders' eq-
uity................................... $32,923,459 $48,782,025 $76,581,795
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended March 31, December 31,
----------------------------------- -------------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues................ $26,607,009 $39,585,919 $68,329,961 $48,412,398 $ 86,101,258
Cost of revenues........ 15,637,577 22,615,070 40,156,509 28,280,589 47,001,970
----------- ----------- ----------- ----------- -------------
Gross profit............ 10,969,432 16,970,849 28,173,452 20,131,809 39,099,288
----------- ----------- ----------- ----------- -------------
Operating expenses:
Selling, general and
administrative
expenses.............. 4,350,710 7,010,211 13,225,492 9,107,747 13,706,594
Amortization of
deferred stock
compensation expense.. 360,853 767,926 2,566,613 2,105,036 2,404,056
----------- ----------- ----------- ----------- -------------
Total operating
expenses............... 4,711,563 7,778,137 15,792,105 11,212,783 16,110,650
----------- ----------- ----------- ----------- -------------
Operating income........ 6,257,869 9,192,712 12,381,347 8,919,026 22,988,638
Other income, net....... 1,460,329 769,560 800,799 606,324 1,211,520
----------- ----------- ----------- ----------- -------------
Income before income
taxes.................. 7,718,198 9,962,272 13,182,146 9,525,350 24,200,158
Provisions for income
taxes.................. 894,561 1,320,270 770,458 977,865 3,532,000
Subsidiary preferred
stock dividends........ -- -- 67,500 33,750 151,331
----------- ----------- ----------- ----------- -------------
Net income.............. $ 6,823,637 $ 8,642,002 $12,344,188 $ 8,513,735 $ 20,516,827
=========== =========== =========== =========== =============
Earnings per Equity
Share:
Basic.................. $0.24 $0.30 $0.41 $0.29 $0.67
=========== =========== =========== =========== =============
Diluted................ $0.23 $0.29 $0.41 $0.28 $0.67
=========== =========== =========== =========== =============
Weighted Equity Shares
used in computing basic
earnings per
Equity Share:
Basic.................. 29,034,400 29,036,394 29,787,144 29,416,886 30,540,000
Diluted................ 29,283,514 29,704,060 30,403,904 30,260,320 30,624,604
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Equity Shares
---------------------
Accumulated Deferred
Additional Other Compensation--
Paid-In Comprehensive Comprehensive Employee Stock Loan to Retained
Shares Par Value Capital Income Income Offer Plan Trust Earnings
---------- ---------- ----------- ------------- ------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
March 31, 1995.. 29,034,400 $2,309,991 $12,403,865 $ (131,438) $ (1,330,622) -- $ 6,416,483
Cash dividends
declared........ -- -- -- -- -- (1,068,955)
Compensation
related to stock
option grants... -- -- 1,283,275 -- (1,283,275) --
Amortization of
compensation
related to stock
option grants... -- -- -- -- 360,853 --
Comprehensive
income
Net income...... -- -- -- 6,823,627 -- -- -- 6,823,627
Other comprehen-
sive income
Translation ad-
justment....... -- -- -- (1,438,382) -- -- -- --
Unrealized loss
on investments,
net............ -- -- -- (420,876) -- -- --
-----------
Other comprehen-
sive income.... -- -- -- (1,859,258) (1,859,258) -- -- --
-----------
Comprehensive
income.......... -- -- -- 4,964,369 -- -- -- --
---------- ---------- ----------- =========== ----------- ------------ --------- -----------
Balance as of
March 31, 1996.. 29,034,400 2,309,991 13,687,140 (1,990,696) (2,253,044) -- 12,171,165
Cash dividends
declared........ -- -- -- -- -- -- (1,131,427)
Common stock
issued upon
exercise of
warrants........ 4,000 279 2,510 -- -- (24,502) --
Compensation
related to stock
option grants... -- -- 2,022,597 -- (2,022,597) -- --
Amortization of
compensation
related to stock
option grants... -- -- -- -- 767,926 -- --
Comprehensive
income
Net income...... -- -- -- 8,642,002 -- -- -- 8,642,002
Other comprehen-
sive income
Translation ad-
justment....... -- -- -- (1,902,597) -- -- -- --
Unrealized gain
on invest-
ments--net..... -- -- -- 361,482 -- -- -- --
-----------
Other comprehen-
sive income.... -- -- -- (1,541,115) (1,541,115) -- -- --
-----------
Comprehensive
income.......... -- -- -- 7,100,887 -- -- -- --
---------- ---------- ----------- =========== ----------- ------------ --------- -----------
Balance as of
March 31, 1997.. 29,038,400 2,310,270 15,712,247 (3,531,811) (3,507,715) (24,502) 19,681,740
Stock split...... -- 2,028,521 -- -- -- -- (2,028,521)
Cash dividends
declared........ -- -- -- -- -- -- (2,003,139)
Common stock
issued upon
exercise of
warrants........ 2,996,000 207,020 1,813,330 -- -- (911,863) --
Compensation
related to stock
option grants... -- -- 6,890,343 -- (6,890,343) -- --
Amortization of
compensation
related to stock
option grants... -- -- -- -- 2,566,613 --
Comprehensive
income
Net income...... -- -- -- 12,344,188 -- -- -- 12,344,188
Other comprehen-
sive income--
translation ad-
justment....... -- -- -- (3,510,418) (3,510,418) -- -- --
-----------
Comprehensive
income.......... -- -- -- 8,833,770 -- -- -- --
---------- ---------- ----------- =========== ----------- ------------ --------- -----------
Balance as of
March 31, 1998.. 32,034,400 4,545,811 24,415,920 (7,042,229) (7,831,445) (936,365) 27,994,268
Cash dividends
declared
(unaudited)..... -- -- -- -- -- -- (1,037,628)
Compensation
related to stock
option grants
(unaudited)..... -- -- 20,386,535 -- (20,386,535) -- --
Amortization of
compensation
related to stock
option grants
(unaudited)..... -- -- -- -- 2,404,056 -- --
Comprehensive
income
(unaudited)
Net income (un-
audited)....... -- -- -- 20,516,827 -- -- -- 20,516,827
Other comprehen-
sive income--
Translation ad-
justment ...... -- -- -- (2,342,437) (2,342,437) -- -- --
-----------
Comprehensive
income
(unaudited)..... -- -- -- 18,174,390 -- -- -- --
===========
Adjustment on
deconsolidation
of subsidiary
(unaudited)..... -- -- -- -- -- -- 2,468,831
Repayment on loan
to Trust
(unaudited)..... -- -- -- -- -- 109,733 --
---------- ---------- ----------- ----------- ------------ --------- -----------
Balance as of
December 31,
1998
(unaudited)..... 32,034,400 $4,545,811 $44,802,455 $(9,384,666) $(25,813,924) $(826,632) $49,942,298
========== ========== =========== =========== ============ ========= ===========
<CAPTION>
Total
Shareholders'
Equity
-------------
<S> <C>
Balance as of
March 31, 1995.. $19,668,279
Cash dividends
declared........ (1,068,955)
Compensation
related to stock
option grants... --
Amortization of
compensation
related to stock
option grants... 360,853
Comprehensive
income
Net income...... 6,823,627
Other comprehen-
sive income
Translation ad-
justment....... (1,438,382)
Unrealized loss
on investments,
net............ (420,876)
Other comprehen-
sive income.... --
Comprehensive
income.......... --
-------------
Balance as of
March 31, 1996.. 23,924,556
Cash dividends
declared........ (1,131,427)
Common stock
issued upon
exercise of
warrants........ (21,713)
Compensation
related to stock
option grants... --
Amortization of
compensation
related to stock
option grants... 767,926
Comprehensive
income
Net income...... 8,642,002
Other comprehen-
sive income
Translation ad-
justment....... (1,902,597)
Unrealized gain
on invest-
ments--net..... 361,482
Other comprehen-
sive income.... --
Comprehensive
income.......... --
-------------
Balance as of
March 31, 1997.. 30,640,229
Stock split...... --
Cash dividends
declared........ (2,003,139)
Common stock
issued upon
exercise of
warrants........ 1,108,487
Compensation
related to stock
option grants... --
Amortization of
compensation
related to stock
option grants... 2,566,613
Comprehensive
income
Net income...... 12,344,188
Other comprehen-
sive income--
translation ad-
justment....... (3,510,418)
Comprehensive
income.......... --
-------------
Balance as of
March 31, 1998.. 41,145,960
Cash dividends
declared
(unaudited)..... (1,037,628)
Compensation
related to stock
option grants
(unaudited)..... --
Amortization of
compensation
related to stock
option grants
(unaudited)..... 2,404,056
Comprehensive
income
(unaudited)
Net income (un-
audited)....... 20,516,827
Other comprehen-
sive income--
Translation ad-
justment ...... (2,342,437)
Comprehensive
income
(unaudited)..... --
Adjustment on
deconsolidation
of subsidiary
(unaudited)..... 2,468,831
Repayment on loan
to Trust
(unaudited)..... 109,733
-------------
Balance as of
December 31,
1998
(unaudited)..... $63,265,342
=============
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended March 31, December 31,
------------------------------------- ------------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income............. $ 6,823,637 $ 8,642,002 $12,344,188 $ 8,513,735 $20,516,827
Adjustments to recon-
cile net income to net
cash provided by oper-
ating activities:
Gain on sale of proper-
ty, plant and equip-
ment.................. -- -- (2,929) -- --
Depreciation........... 2,679,577 3,034,984 6,121,650 3,944,096 5,101,293
Deferred tax benefit... (391,532) (249,220) (707,553) (109,744) (552,363)
Gain on sale of invest-
ment in deconsolidated
subsidiary............ -- -- -- -- (620,958)
(Gain)/Loss on sale of
short-term invest-
ments................. -- 374,380 -- -- --
Amortization of de-
ferred stock compensa-
tion expense.......... 360,853 767,926 2,566,613 2,105,036 2,404,056
Loss relating to
deconsolidated subsid-
iary.................. -- -- -- -- 1,934,556
Subsidiary preferred
stock dividend........ -- -- 67,500 33,750 151,331
Changes in assets and
liabilities:
Accounts receivables.. (1,139,150) (1,534,731) (5,268,477) (4,959,368) (11,327,154)
Inventories........... 3,104 40,022 11,458 9,024 --
Prepaid expenses and
other current as-
sets................. (718,442) (1,200,316) (924,783) (309,856) (1,602,704)
Prepaid income taxes.. (234,383) (591,147) 446,890 214,341 536,969
Accounts payable...... (3,488) 62,203 23,507 77,549 (18,364)
Customer deposits..... 233,367 (65,304) (6,537) (119,120) (80,364)
Unearned revenue...... -- -- -- -- 5,356,200
Other accrued liabili-
ties................. 528,544 134,397 2,482,653 962,448 3,165,538
----------- ----------- ----------- ----------- -----------
Net cash provided by
operating activities.. 8,142,087 9,415,196 17,154,180 10,361,891 24,964,863
----------- ----------- ----------- ----------- -----------
Cash flows from invest-
ing activities:
Expenditure on proper-
ty, plant and equip-
ment.................. (4,003,108) (7,201,749) (7,891,441) (5,273,833) (11,598,726)
Proceeds from sale of
property, plant and
equipment............. 57,599 33,453 8,079 667 5,704
Loans to employees..... (196,789) (418,790) (552,526) (667,100) (1,579,837)
Proceeds from sale of
investment in
deconsolidated
subsidiary............ -- -- -- -- 1,500,000
Proceeds from sale of
investments in affili-
ates.................. -- 78,819 -- -- --
Purchases of short-term
investments........... (1,274,018) -- -- -- --
Proceeds from sale of
short-term invest-
ments................. -- 2,859,420 -- -- --
Purchase of investments
in affiliates......... -- -- -- -- (177,576)
----------- ----------- ----------- ----------- -----------
Net cash used in in-
vesting activities.... (5,416,316) (4,648,847) (8,435,888) (5,940,266) (11,850,435)
----------- ----------- ----------- ----------- -----------
Cash flows from financ-
ing activities:
Repayment of long-term
borrowings............ (759,613) (1,253,125) -- -- --
Net proceeds from issu-
ance of Equity
Shares................ -- 2,789 2,020,350 2,020,350 --
Net proceeds from issu-
ance of preferred
stock by
subsidiary............ -- -- 2,250,000 2,250,000 --
Payment of cash divi-
dends................. (804,688) (1,062,475) (1,467,427) (534,269) (1,037,628)
Loan to trust.......... -- -- (911,863) (944,335) 109,733
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities............ (1,564,301) (2,312,811) 1,891,060 2,791,746 (927,895)
----------- ----------- ----------- ----------- -----------
Effect of exchange rate
changes on cash........ (1,438,382) (1,902,597) (3,510,418) (3,462,515) (2,342,437)
Effect of
deconsolidation on
cash................... -- -- -- -- (2,465,372)
Net increase/(decrease)
in cash and cash equiv-
alents during
the year............... (276,912) 550,941 7,098,934 3,750,856 7,378,724
Cash and cash equiva-
lents at the beginning
of the year........... 8,046,302 7,769,390 8,320,331 8,320,331 15,419,265
----------- ----------- ----------- ----------- -----------
Cash and cash equiva-
lents at the end of the
year................... $ 7,769,390 $ 8,320,331 $15,419,265 $12,071,187 $22,797,989
=========== =========== =========== =========== ===========
Supplementary informa-
tion:
Cash paid for inter-
est................... $ 217,650 $ 172,268 -- -- --
Cash paid for taxes.... $ 1,306,358 $ 1,856,548 $ 323,568 $ 840,073 $ 1,412,515
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
1. Summary of Significant Accounting Policies
The Company
Infosys Technologies Limited is one of India's leading information
technology ("IT") services companies. Infosys utilizes an extensive offshore
infrastructure to provide managed software solutions to clients worldwide.
Headquartered in Bangalore, India, the Company has 11 state-of-the-art
offshore software development facilities located throughout India that enable
it to provide high quality, cost-effective services to clients in a resource-
constrained environment. The Company's services, which may be offered on a
fixed-price, fixed-time frame or time-and-materials basis, include custom
software development, maintenance (including Year 2000 conversion) and re-
engineering services as well as dedicated offshore software development
centers for certain clients. In addition, the Company develops and markets
certain software products.
Basis of preparation of financial statements
The accompanying consolidated financial statements have been prepared in
accordance with United States Generally Accepted Accounting Principles ("U.S.
GAAP"). All amounts are stated in U.S. dollars.
Principles of consolidation
The financial statements of the Company were consolidated with the accounts
of its wholly-owned subsidiary, Yantra Corporation ("Yantra"), until October
20, 1998 at which date the Company's voting control of Yantra declined to
approximately 47%. Yantra was incorporated in the United States in fiscal 1996
for the development of software products in the retail and distribution areas.
The Company has followed the equity method of accounting for Yantra since
October 20, 1998 (see note 10). Although the Company continues to own all of
the outstanding common stock of Yantra, it has no financial obligations or
commitments to Yantra and does not intend to provide Yantra with financial
support. Accordingly, the Company has credited to retained earnings the excess
of its previously recognized losses over the basis of its investment in Yantra
through and as of October 20, 1998. No recognition will be given to future
losses of Yantra.
All inter-company transactions between Infosys and Yantra have been
eliminated.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Examples of such estimates include
estimates of expected contract costs to be incurred to complete software
development, allowance for doubtful accounts, future obligations under
employee benefit plans and useful lives of property, plant and equipment.
Actual results could differ from those estimates.
Revenue recognition
The Company derives its revenues primarily from software services and also
from the licensing of software products. Revenue with respect to time-and-
material contracts is recognized as related costs are incurred. Revenue with
respect to fixed-price, fixed-time frame contracts is recognized upon the
achievement of specified milestones identified in the related contracts, which
approximates the percentage of completion method. Selling, general and
administrative expenses are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are recorded in the period in which
such losses become probable based on the current contract estimates. The
Company provides its customers with a three month warranty for corrections of
errors and telephone support for all its fixed-price, fixed-time frame
contracts. Costs associated with such services are accrued at the time the
related revenue is recorded.
F-7
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
1. Summary of Significant Accounting Policies (Continued)
Revenue from licensing of software products is recognized upon shipment of
products and fulfillment of acceptance terms, if any, provided that no
significant vendor obligations remain and the collection of the related
receivable is probable. When the Company receives advance payments for
software products, such payments are reported as customer deposits until all
conditions for revenue recognition are met. Maintenance revenue arising due to
the sale of software products is deferred and recognized ratably over the term
of the agreement, generally 12 months. Revenue from client training, support,
and other services arising due to the sale of software products is recognized
as the service is performed.
Cash, cash equivalents and short-term investments
The Company considers all highly liquid investments with a remaining
maturity at the date of purchase/ investment of three months or less to be
cash equivalents. Cash and cash equivalents consist of cash, cash on deposit
with banks, marketable securities and deposits with corporations. Management
determines the appropriate classification of investment securities at the time
of purchase and re-evaluates such designation as of each balance sheet date.
As of March 31, 1997 and 1998 and December 31, 1998 all investment securities
were designated as "available-for-sale." Available-for-sale securities are
carried at fair value based on quoted market prices, with unrealized gains and
losses, net of deferred income taxes, reported as a separate component of
stockholders' equity. Realized gains and losses and declines in value judged
to be other than temporary on available-for-sale securities are included in
the consolidated statements of income. The cost of securities sold is based on
the specific identification method. Interest and dividend on securities
classified as available-for-sale are included in interest income.
Property, plant and equipment
Property, plant and equipment are stated at cost. The Company computes
depreciation for all property, plant and equipment using the straight-line
method. The estimated useful lives of assets are as follows:
<TABLE>
<S> <C>
Buildings
--Software Development Centers................................. 28 years
--Others....................................................... 58 years
Furniture and fixtures........................................... 5 years
Computer equipment............................................... 2-5 years
Plant and equipment.............................................. 5 years
Vehicles......................................................... 5 years
</TABLE>
The cost of software purchased for use in software development and services
is charged to the cost of revenues at the time of acquisition. The amount of
third party software expensed in fiscal 1996, 1997, and 1998 and in the nine
months ended December 31, 1997 and 1998 was $875,407, $1,102,733, and
$2,381,626, $1,889,715 and $2,899,070, respectively.
Deposits paid towards the acquisition of property, plant and equipment
outstanding at each balance sheet date and the cost of property, plant and
equipment not put to use before such date are disclosed under Capital work-in-
progress.
Impairment of long-lived assets and long-lived assets to be disposed of
The Company evaluates the recoverability of its long-lived assets and
certain identifiable intangibles, if any, whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future undiscounted net cash flows expected
to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets
F-8
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
1. Summary of Significant Accounting Policies (Continued)
exceed the fair value of the assets. Assets to be disposed are reported at the
lower of the carrying amount and fair value less cost to sell.
Research and development
Research and development costs are expensed as incurred. Software product
development costs are expensed as incurred until technological feasibility is
achieved. Software product development costs incurred subsequent to the
achievement of technological feasibility have not been significant and have
been expensed as incurred.
Foreign currency translation
The functional currency of the Company is the Indian rupee. The functional
and reporting currency of the Company's subsidiary, Yantra, is the U.S.
dollar.
The accompanying consolidated financial statements are reported in U.S.
dollars. The translation of the Indian rupee into U.S. dollars is performed
for balance sheet accounts using the exchange rate in effect at the balance
sheet date and for revenue and expense accounts using a monthly simple average
exchange rate for the respective periods. The gains or losses resulting from
such translation are reported in other comprehensive income, a separate
component of shareholders' equity. The method for translating expenses of
overseas operations depends upon the funds used. If the payment is made from a
rupee denominated bank account, the exchange rate prevailing on the date of
the payment would apply. If the payment is made from a foreign currency, i.e.,
non-rupee denominated account, the translation into rupees is made at the
average monthly exchange rate.
Foreign currency transactions
The Company enters into foreign exchange forward contracts to limit the
effect of exchange rate changes on its foreign currency receivables. Gains and
losses on these contracts are recognized as income or expense in the
consolidated statements of income as incurred, over the life of the contract.
Earnings per share
On January 1, 1998, the Company adopted SFAS No. 128, "Earnings Per Share."
In accordance with SFAS No. 128, basic earnings per share is computed using
the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period,
using the treasury stock method for options and warrants, except where the
results would be anti-dilutive.
Income taxes
Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance for any tax benefits of which future realization is
uncertain.
F-9
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
1. Summary of Significant Accounting Policies (Continued)
Fair value of financial instruments
The carrying amounts reflected in the consolidated balance sheets for cash,
cash equivalents, accounts receivable and accounts payable approximate their
respective fair values due to the short maturities of these instruments.
Concentration of risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash equivalents and trade receivables.
The Company's cash resources are invested with corporations, financial
institutions and banks with high investment grade credit ratings. Limitations
have been established by the Company as to the maximum amount of cash that may
be invested with any such single entity. To reduce its credit risk, the
Company performs ongoing credit evaluations of customers.
Retirement benefits to employees
Gratuity. In accordance with Indian law, the Company provides for gratuity,
a defined benefit retirement plan (the "Gratuity Plan") covering all
employees. The plan provides a lump sum payment to vested employees at
retirement or termination of employment in an amount based on the respective
employee's salary and the years of employment with the Company. Until March
31, 1997, the Company contributed each year to a gratuity fund maintained by
the Life Insurance Corporation of India based upon actuarial valuations. No
additional contributions were required to be made by the Company in excess of
the unpaid contributions to the plan.
Effective April 1, 1997, the Company established the Infosys Technologies
Limited Employees' Group Gratuity Fund Trust. Liabilities with regard to the
gratuity plan are determined by actuarial valuation, based upon which the
Company makes contributions to the gratuity fund trust. Trustees administer
the contributions made to the gratuity fund trust. The funds contributed to
the trust are invested in specific securities as mandated by law and generally
consist of federal and state government bonds and the debt instruments of
government-owned corporations.
Superannuation. Apart from being covered under the gratuity plan described
above, the senior officers of the Company are also participants in a defined
contribution benefit plan maintained by the Company. The plan is termed the
superannuation plan to which the Company makes monthly contributions based on
a specified percentage of each covered employee's salary. The Company has no
further obligations under the plan beyond its monthly contributions.
Provident Fund. In addition to the above benefits, all employees receive
benefits from a provident fund, which is a defined contribution plan. Both the
employee and employer each make monthly contributions to the plan equal to 12%
of the covered employee's salary. Until July 1996, Infosys contributed to the
employees' provident fund maintained by the Government of India. Effective
August 1996, the Company established a provident fund trust to which a part of
the contributions are made each month. The remainder of the contributions are
made to the Government's provident fund. The Company has no further
obligations under the plan beyond its monthly contributions.
F-10
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
1. Summary of Significant Accounting Policies (Continued)
Stock-based compensation
The Company uses the intrinsic value-based method of APB Opinion No. 25 to
account for its employee stock-based compensation plan. The Company has
therefore adopted the pro forma disclosure provisions of SFAS No. 123.
Unaudited interim financial statements
The accompanying unaudited interim financial statements as of December 31,
1998, and for the nine months ended December 31, 1997 and 1998, have been
prepared on substantially the same basis as the audited financial statements
and include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial information set forth
herein.
2. Cash and Cash Equivalents
The cost and fair values for cash and cash equivalents as of March 31, 1997
and 1998 and December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Cost and
Fair Value
-----------
<S> <C>
1997
Cash and cash equivalents:
Cash and bank deposits....................................... $4,484,684
Deposits in corporations..................................... 3,835,647
-----------
$8,320,331
===========
1998
Cash and cash equivalents:
Cash and bank deposits....................................... $13,576,206
Deposits in corporations..................................... 1,843,059
-----------
$15,419,265
===========
December 31, 1998 (unaudited)
Cash and cash equivalents:
Cash and bank deposits....................................... $22,797,989
Deposits in corporations..................................... --
-----------
$22,797,989
===========
</TABLE>
3. Accounts Receivable
The accounts receivable as of March 31, 1997 amounted to $4,994,607, net of
allowance for doubtful accounts of $169,976. The accounts receivable as of
March 31, 1998 amounted to $10,263,084, net of allowance for doubtful accounts
of $393,799. The accounts receivable as of December 31, 1998 amounted to
$21,270,407 net of allowance for doubtful accounts of $317,325. The age
profile is as given below.
F-11
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
3. Accounts receivable (Continued)
<TABLE>
<CAPTION>
Period in days 1997 1998 December 31, 1998
-------------- ----- ----- -----------------
(Unaudited)
<S> <C> <C> <C>
0-30....................................... 69.5% 61.5% 50.1%
31-60...................................... 22.0 29.4 34.9
61- 90..................................... 0.1 6.3 11.0
More than 90............................... 8.4 2.8 4.0
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Accounts receivable, as a percentage of revenue for fiscal 1997 and 1998,
and the nine months ended December 31, 1998 amount to 12.6%, 15.0%, and 18.5%
respectively.
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
<TABLE>
<CAPTION>
December 31,
1997 1998 1998
---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Rent deposits......................... $1,219,201 $1,364,372 $1,383,499
Deposits with government
organizations........................ 103,348 53,675 82,421
Loans to employees.................... 415,063 895,971 1,603,769
Prepaid expenses...................... 513,758 434,999 2,078,932
Other deposits........................ 575,136 1,002,272 154,203
---------- ---------- ----------
$2,826,506 $3,751,289 $5,302,824
========== ========== ==========
</TABLE>
Other deposits represent advance payments to vendors for the supply of goods
and rendering of services. Deposits with government organizations relate
principally to leased telephone lines and electricity supplies.
5. Property, Plant and Equipment--Net
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
1997 1998 1998
----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
Land............................... $ 660,827 $ 1,215,973 $ 2,564,102
Buildings.......................... 5,162,950 4,903,049 6,075,633
Furniture and fixtures............. 2,220,551 3,331,759 4,287,533
Computer equipment................. 8,755,719 12,499,330 15,852,251
Plant and equipment................ 3,133,487 4,955,100 6,702,198
Vehicles........................... 35,354 44,493 41,546
Capital work-in-progress........... 1,964,361 1,854,440 3,577,410
----------- ----------- -----------
21,933,249 28,804,144 39,100,673
Accumulated depreciation........... (7,002,387) (12,108,641) (16,305,475)
----------- ----------- -----------
$14,930,862 $16,695,503 $22,795,198
=========== =========== -----------
</TABLE>
Depreciation expense amounted to $2,679,577, $3,034,984, $6,121,650,
$3,944,046 and $5,185,071 for fiscal years 1996, 1997 and 1998 and for the
nine months ended December 31, 1997 and 1998, respectively.
F-12
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
6. Other Assets
Other assets mainly represent the non-current portion of loans to employees.
7. Related Parties
The Company grants loans to employees for acquiring assets such as property
and cars. Such loans are repayable over fixed periods ranging from one to 100
months. The rates at which the loans have been made to employees vary between
0% to 4%. None of the loans have been made to employees in connection with
equity issuances. The loans generally are secured by the assets acquired by
the employees. As of March 31, 1997 and 1998, and December 31, 1998, amounts
receivable from officers were $68,019 and $227,242, and $276,849, and are
included in prepaid expenses and other current assets and other assets in the
accompanying consolidated balance sheets.
The required repayments of loans by employees are as detailed below.
<TABLE>
<CAPTION>
December 31,
1997 1998 1998
-------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
1998...................................... $415,063 $ -- $ --
1999...................................... 114,797 895,971 1,603,769
2000...................................... 101,541 294,215 779,478
2001...................................... 84,459 241,304 628,652
2002...................................... 63,060 147,898 421,730
2003...................................... -- 104,415 310,974
Thereafter................................ 109,222 237,773 454,294
-------- ---------- ----------
Total................................... $888,142 $1,921,576 $4,198,897
======== ========== ==========
</TABLE>
The estimated fair value amounts of the related party receivables at the
balance sheet date, amounted to $761,495, $1,653,373, and $3,940,938 as of
March 31, 1997 and 1998 and December 31, 1998. These amounts have been
determined using available market information and appropriate valuation
methodologies. Considerable judgement is required to develop the estimates of
fair value, thus, the estimates provided herein are not necessarily indicative
of the amounts that the Company could realize in the market.
8. Other Accrued Liabilities
<TABLE>
<CAPTION>
December 31,
1997 1998 1998
---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Accrued compensation to employees..... $ 790,196 $1,853,974 $2,418,987
Accrued dividends..................... 829,137 1,364,849 597,252
Provision for post sales customer
support.............................. -- 311,799 827,216
Others................................ 341,608 1,448,684 2,343,073
---------- ---------- ----------
$1,960,941 $4,979,306 $6,186,528
========== ========== ==========
</TABLE>
Accrued dividends represent dividends recommended and proposed by the Board
of Directors, subject to the approval of the shareholders.
F-13
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
9. Employee Post-Retirement Benefits
Gratuity benefits. The following table sets forth the plan's funded status
and amounts recognized in the Company's consolidated balance sheet as of March
31, 1998:
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Change in benefit obligation
Projected Benefit Obligations (PBO) as of April 1, 1997..... $1,356,650
Service cost................................................ 330,318
Interest cost............................................... 189,931
Benefits paid............................................... (72,395)
-----------
PBO as of March 31, 1998.................................... $1,804,504
Change in plan assets
Fair value of plan assets as of April 1, 1997............... $301,232
Actual return on plan assets................................ 41,892
Employer contributions...................................... 409,770
Benefits paid............................................... (72,395)
-----------
Plan assets as of March 31, 1998............................ $680,499
Funded status............................................... $(1,124,005)
Excess of actual over estimated return on plan assets....... (129,192)
Unrecognized actuarial gain................................. (7,219)
Unrecognized transition obligation.......................... 985,058
-----------
Net amount recognized....................................... $ (275,358)
Amounts recognized in the statement of financial position
consist of:
Accrued benefit cost....................................... $275,358
</TABLE>
Net gratuity cost for 1998 included the following components:
<TABLE>
<CAPTION>
1998
--------
<S> <C>
Service cost..................................................... $330,318
Interest cost.................................................... 189,931
Expected return on assets........................................ (49,111)
Amortization..................................................... 70,361
--------
Net gratuity cost................................................ $541,499
========
</TABLE>
Assumptions used in accounting for the Gratuity Plan as of March 31, 1998
were a discount rate of 14.0%, a long-term sustainable rate for the increase
in compensation levels of 7.5% and an expected long-term rate of return on
assets of 12.0%. As the assumed rates used above have a significant effect on
the amounts reported, the Company has assessed these rates as compared with
prevalent industry standards and its projected long-term plans of growth.
F-14
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
9. Employee Post-Retirement Benefits (Continued)
Contributions to the gratuity plan managed by the Life Insurance Corporation
of India in fiscal 1996 and 1997 were $114,903 and $161,606.
Super-annuation benefits.
The Company contributed $39,408, $64,695, $99,206, $76,286 and $108,784 to
the superannuation plan in fiscal 1996, 1997 and 1998 and in the nine months
ended December 31, 1997 and 1998.
Provident fund benefits.
In addition the Company contributed $144,785, $237,833, $537,663, $397,558
and $585,358 to the provident fund plan in fiscal 1996, 1997 and 1998 and in
the nine months ended December 31, 1997 and 1998.
10. Preferred Stock of Subsidiary
In September 1997, the Company's subsidiary company, Yantra, sold 5,000,000
shares of Series A Convertible Preferred Stock, par value $0.01 per share
("Series A Convertible Preferred") at $0.75 per share for $3,750,000 in cash.
The related offering costs of $49,853 were offset against the proceeds of the
issue. Of these, 2,000,000 shares were issued to the Company and 3,000,000
shares were issued to third party investors. The preferred stock issued to the
Company is eliminated upon consolidation. Preferred stock issued to third
party investors is reported on the balance sheet as preferred stock of
subsidiary.
In August 1998, Yantra sold 4,800,000 shares of Series B Convertible
Preferred Stock, par value $0.01 per share ("Series B Convertible Preferred")
at $1.25 per share for $6,000,000 in cash to a third party investor. The
related offering costs of $44,416 were offset against the proceeds of the
issue. In connection with this sale, Yantra issued warrants to purchase
810,811 shares of Series C Convertible Preferred Stock, par value $0.01 per
share ("Series C Convertible Preferred"), at $0.01 per share for $8,108 in
cash. Such warrants are immediately exercisable and expire in seven years. The
exercise price of the warrants is based upon the then current market price of
the Series C Convertible Preferred at the time of exercise.
The holders of Series A Convertible Preferred are entitled to the following
rights, privileges and restrictions:
Holders of Series A Convertible Preferred vote with holders of common stock
on an as-converted basis, except as otherwise required by Delaware law. The
Series A Convertible Preferred is convertible into common stock at a 1:1 ratio
(subject to certain adjustments): (i) automatically in the event of an initial
public offering with gross proceeds of $10,000,000 or more; or (ii) at any
time at the holder's option. The Series A Convertible Preferred is entitled to
a 6% cumulative dividend ($0.045 per share) and to receive additional
dividends at the same rate as dividends, if any, declared and paid on the
common stock, calculated on an as-converted basis. Upon a liquidation or sale
of the Company, holders of the Series A Convertible Preferred are entitled to
a liquidation preference of $0.75 per share plus accrued and unpaid dividends;
and any remaining assets will be distributed to holders of the common stock.
The Series A Convertible Preferred is redeemable at the election of holders of
75% of the outstanding shares of Series A Convertible Preferred at any time
after September 29, 2004 at a redemption price of $0.75 per share plus accrued
but unpaid dividends.
The holders of Series B and C Convertible Preferred are entitled to similar
rights, privileges and restrictions as that of Series A Convertible Preferred.
F-15
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
In October 1998, Infosys sold 1,363,637 shares of Series A Convertible
Preferred in Yantra having a cost basis of $879,042 to a third party investor
for $1,500,000 thereby recognizing a gain of $620,958 and reducing its voting
interest in Yantra to approximately 47%. The Company has subsequently
accounted for Yantra by the equity method. Deconsolidation of Yantra has
resulted in a credit to the Company's retained earnings in the amount of
$2,468,831 representing the excess of Yantra's previously consolidated losses,
amounting to $4,445,903, over the Company's residual investment basis in
Yantra amounting to $1,977,072. The net assets and liabilities of Yantra as of
March 31, 1998 and October 20, 1998 (unaudited) respectively, are presented
below.
<TABLE>
<CAPTION>
As of
-------------------------------
March 31, 1998 October 20, 1998
-------------- ----------------
(Unaudited)
<S> <C> <C>
Preferred stock (net of Infosys'
holdings).............................. $2,317,500 $ 9,485,228
Current liabilities..................... 325,947 1,288,913
---------- -----------
Total liabilities................... 2,643,447 10,774,141
---------- -----------
Current assets.......................... 2,836,372 7,422,303
Property, plant and equipment........... 243,196 491,044
Other assets............................ 10,314 391,963
---------- -----------
Total Assets........................ $3,089,882 $8,305,310
---------- -----------
Net (Assets)/Liabilities................ $ (446,435) $2,468,831
========== ===========
</TABLE>
11. Shareholders' Equity
The Company has only one class of capital stock referred to herein as Equity
Shares. In fiscal 1998 and 1999, the Board of Directors authorized a two-for-
one stock split of the Company's Equity Shares effected in the form of a stock
dividend. All references in the consolidated financial statements to number of
shares, per share amounts and market prices of the Company's Equity Shares
have been retroactively restated to reflect the increased number of shares
outstanding resulting from the stock split.
12. Common Stock
Voting. Each holder of Equity Shares is entitled to one vote per share.
Dividends. Should the Company declare and pay dividends, such dividends will
be paid in Indian rupees.
Indian law mandates that any dividend declared out of distributable profits
only after the transfer of up to 10% of net income computed in accordance with
current regulations to a general reserve. Also, the remittance of dividends
outside India is governed by Indian law on foreign exchange. Such dividend
payments are also subject to applicable withholding taxes. The Company
declared a cash dividend of $1,068,955, $1,131,427, $2,003,139, $534,269 and
$1,037,628 for the fiscal years 1996, 1997 and 1998 and for the nine months
ended December 31, 1997 and 1998.
Liquidation. In the event of the liquidation of the Company, the holders of
common stock shall be entitled to receive all of the remaining assets of the
Company, after distribution of all preferential amounts, if any. Such amounts
will be in proportion to the number of shares of common stock held by the
shareholders.
Stock options. There are no voting, dividend or liquidation rights to the
holders of warrants issued under the Company's stock option plan.
F-16
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
13. Other Income, Net
Other income, net, consists of the following:
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-------------------
1996 1997 1998 1997 1998
---------- ---------- -------- -------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Interest income and oth-
er....................... $1,337,643 $1,035,749 $526,508 $326,664 $ 590,562
Gain on sale of investment
in subsidiary............ -- -- -- -- 620,958
Income from sale of spe-
cial import licenses..... 122,686 280,459 274,291 279,660 --
Interest expense.......... -- (172,268) -- -- --
Realized loss on sale of
investments.............. -- (374,380) -- -- --
---------- ---------- -------- -------- ----------
$1,460,329 $ 769,560 $800,799 $606,324 $1,211,520
========== ========== ======== ======== ==========
</TABLE>
14. Accumulated Other Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
of reporting and display of comprehensive income and its components of net
income and "other comprehensive income" in a full set of general purpose
financial statements. "Other comprehensive income" refers to revenues,
expenses, gains and losses that are not included in net income but rather are
recorded directly in shareholders' equity. SFAS No. 130 is effective for
annual and interim periods beginning after December 15, 1997 and for periods
ended before that date when presented for comparative purposes. SFAS No. 130
was adopted by the Company in its quarter ended June 30, 1998 and for prior
comparative periods. Net income adjusted for total comprehensive income was
$4,964,369, $7,100,887, $8,833,770, $5,051,220 and $18,174,390 for the years
ended March 31, 1996, 1997, and 1998, and for the nine months ended December
31, 1997 and 1998, respectively. As of March 31, 1998, the accumulated other
comprehensive income consists entirely of foreign currency translation
adjustments.
15. Operating Leases
The Company has various operating leases for office buildings that are
renewable on a periodic basis at its option. Rental expense for operating
leases for fiscal years 1996, 1997 and 1998 and for the nine months ended
December 31, 1997 and 1998 is $186,165, $679,705, $1,432,447, $1,037,838 and
$1,287,611. The operating leases are cancelable at the Company's option.
16. Research and Development
Selling, general and administrative expenses in the accompanying
consolidated statements of income include research and development expenses of
$955,529, $2,092,368, $1,777,703, $1,333,277 and $2,227,225 for fiscal years
1996, 1997 and 1998 and for the nine months ended December 31, 1997 and 1998.
17. Employees Stock Offer Plan
In September 1994, the Company established the Employees Stock Offer Plan
("ESOP") which provides for the issuance of 3,000,000 warrants (as adjusted
for the stock split effective June 1997 and December 1998) to eligible
employees. The warrants were issued to an employee welfare trust (the "Trust")
at Rs.1 each. The warrants were purchased by the Trust using the proceeds of a
loan obtained from the Company. The Trust holds the warrants and transfers
them to eligible employees over a period of years. The warrants are
transferred to
F-17
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
17. Employees Stock Offer Plan (Continued)
employees at Rs.1 each and each warrant entitles the holder to purchase one of
the Company's Equity Shares at a price of Indian Rs.100 per share. The
warrants and the Equity Shares received upon the exercise of warrants are
subject to a five-year aggregate vesting period from the date of issue of
warrants to employees. The warrants expire upon the earlier of five years from
the date of issue or September 1999. The fair market value of each warrant is
the market price of the underlying Equity Shares on the date of the grant.
In 1997, in anticipation of a share dividend to be declared by the Company,
the Trust exercised all warrants held by it and converted them into Equity
Shares with the proceeds obtained from a loan obtained from the Company. In
connection with the warrant exercise and the share dividend, on an adjusted
basis, 1,505,600 Equity Shares were issued to employees of the Company who
exercised stock purchase rights and 1,494,400 Equity Shares were issued to the
Trust for future issuance to employees pursuant to the ESOP. Following such
exercise, there were no longer any rights to purchase Equity Shares from the
Company in connection with the ESOP; there remained only Equity Shares held by
the Trust for future issuances to employees, subject to vesting provisions.
The Equity Shares acquired upon the exercise of the warrants vests 100% upon
the completion of five years of service. The warrant holders were entitled to
exercise early, but the shares received are subject to the five year vesting
period. As of March 31, 1998 the Company's outstanding Equity Shares included
1,494,400 shares held by the Trust of which 518,600 allocated to employees
subject to vesting provisions have been included in the calculation of diluted
earnings per share and 975,800 reserved for future grants have not been
considered outstanding in the earnings per share calculations. The warrants
allotted and the underlying Equity Shares are not subject to any repurchase
obligations by the Company.
The Company has elected to use the intrinsic value-based method of APB
Opinion No. 25 to account for its employee stock-based compensation plan.
During the years ended March 31, 1996, 1997 and 1998, the Company recorded
deferred compensation of $1,283,275, $2,022,597 and $6,890,343, respectively,
for the difference at the grant date between the exercise price and the fair
value as determined by quoted market prices of the common stock underlying the
warrants. For the nine months ended December 31, 1998, the Company recorded
deferred compensation of $20,386,535 for the difference at the grant date,
October 13, 1998, between the exercise price, $2.36, and the fair value so
determined by quoted market prices of the common stock underlying the
warrants, $52.16. The deferred compensation is being amortized on a straight-
line basis over the vesting period of the warrants/Equity Shares. In fiscal
1998 and fiscal 1999, the Company declared a share dividend of one Equity
Share for each Equity Share outstanding to all its shareholders including
participants in the ESOP. Under the terms of the ESOP, the additional Equity
Shares issued to ESOP participants as a result of the share dividend were not
subject to vesting. Consequently, the amortization of deferred stock
compensation of $1,519,739 relating to these shares was accelerated at the
time of the share dividend.
The Company has adopted the pro forma disclosure provisions of SFAS No. 123.
Had compensation cost for the Company's stock-based compensation plan been
determined in a manner consistent with the fair value approach described in
SFAS No. 123, the Company's net income and basic earnings per share as
reported would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Net income:
As reported............................ $6,823,637 $8,642,002 $12,344,688
Adjusted pro forma..................... 6,584,901 8,488,121 12,067,107
Basic earnings per
share:
As reported............................ $0.24 $0.30 $0.42
Adjusted pro forma..................... $0.23 $0.29 $0.41
</TABLE>
F-18
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
17. Employees Stock Offer Plan (Continued)
The fair value of each warrant is estimated on the date of grant using the
Black-Scholes model with the following assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Dividend yield %................................... 0.1% 0.1% 0.1%
Expected life...................................... 5 years 5 years 5 years
Risk free interest rates........................... 10.8% 10.8% 10.8%
Volatility......................................... 90.0% 90.0% 90.0%
</TABLE>
Activity in the warrants/Equity Shares held by the ESOP during the periods
is as follows:
<TABLE>
<CAPTION>
As of
December 31, 1998
1996 1997 1998 (unaudited)
-------------------- -------------------- --------------------- --------------------
Shares Weighted- Shares Weighted- Shares Weighted- Shares Weighted-
Arising average Arising average Arising average Arising average
Out of Exercise Out of Exercise Out of Exercise Out of Exercise
Options Price Options Price Options Price Options Price
--------- --------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 470,000 1,024,400 1,501,600 518,600
Granted................ 632,000 $0.75 498,400 $0.71 553,600 $0.69 828,200 $ 0.59
Forfeited.............. (77,600) 0.75 (17,200) 0.71 (35,000) 0.69 (9,400) 0.59
Exercised.............. -- -- (4,000) -- (1,501,600) --
--------- --------- ---------- ---------
Outstanding at end of
year................... 1,024,400 1,501,600 518,600 1,337,400
========= ========= ========== =========
Exercisable at end of
year................... -- -- -- --
Weighted-average fair
value of grants during
the year at less than
market................. $2.39 $4.78 $7.33 $26.08
===== ===== ===== ======
</TABLE>
The following table summarizes information about stock options outstanding
as of March 31, 1998:
<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------------------- ---------------------------------
Range of Number of Weighted-average Weighted- Number of Weighted-
Exercise Shares Arising Remaining average Shares Arising average
Price Out of Options Contractual Life Exercise Price Out of Options Exercise Price
-------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$0.59 - $0.75 518,600 3.13 years $0.71 518,600 $0.71
</TABLE>
The following table summarizes information about stock options outstanding
as of December 31, 1998:
<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------------------- ---------------------------------
Range of Number of Weighted-average Weighted- Number of Weighted-
Exercise Shares Arising Remaining average Shares Arising average
Price Out of Options Contractual Life Exercise Price Out of Options Exercise Price
-------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$0.59 - $0.75 1,337,400 2.88 years $0.67 1,337,400 $0.67
</TABLE>
F-19
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
17. Employees Stock Offer Plan (Continued)
Yantra Stock Option Plan
Apart from the above, effective September 29, 1997, Yantra implemented the
1997 Stock Plan, which provides for the issuance of up to 2,500,000 stock
options, as defined in the Plan. Stock options granted under the Plan will
allow eligible participants to purchase Yantra's common stock at a price
determined by Yantra's Board of Directors on the date of grant. The purchase
price per share of Incentive Stock Options ("ISO's"), as defined under
Internal Revenue Code Section 422(b), shall not be less than 100% (110%, in
the case of ISO's granted to a greater-than-10% shareholder) of the fair
market value of Yantra's common stock on the date of grant. The Plan also
allows for the issuance of options which do not qualify as ISO's ("Non-
Qualified Options").
Under the above Plan, on September 29, 1997, Yantra granted certain officers
options to purchase a maximum of 700,000 shares of its common stock, $0.01 par
value, at the price of $0.10 per share, which represented the fair market
value of the common stock at that time. Shares of common stock issuable under
these options vest as follows:
<TABLE>
<CAPTION>
Non-Qualified Incentive Stock
December 31, Stock Options Options
------------ ------------- ---------------
<S> <C> <C>
1997........................................ 10,000 60,000
1998........................................ 15,000 90,000
1999........................................ 20,000 120,000
2000........................................ 25,000 150,000
2001........................................ 30,000 180,000
------- -------
100,000 600,000
======= =======
</TABLE>
The above options expire on September 29, 2007. As of March 31, 1998, no
options were exercised.
18. Income Taxes
The provision for income taxes was composed of:
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
---------- ---------- ---------- ---------------------
1996 1997 1998 1997 1998
---------- ---------- ---------- --------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Current taxes
Domestic taxes..... $1,206,093 $1,269,490 $ 803,116 $ 579,681 1,416,049
Foreign taxes...... 80,000 300,000 674,895 507,928 2,668,314
---------- ---------- ---------- --------- ----------
1,286,093 1,569,490 1,478,011 1,087,609 4,084,363
Deferred taxes
Domestic taxes..... (391,988) (249,220) (707,553) (109,744) (552,363)
Foreign taxes...... 456 -- -- -- --
---------- ---------- ---------- --------- ----------
(391,532) (249,220) (707,553) (109,744) (552,363)
---------- ---------- ---------- --------- ----------
Aggregate taxes..... $ 894,561 $1,320,270 $ 770,458 $ 977,865 $3,532,000
========== ========== ========== ========= ==========
</TABLE>
F-20
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
18. Income Taxes (Continued)
The tax effects of significant temporary differences that resulted in
deferred tax assets and liabilities and a description of the financial
statement items that created these differences are:
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-------- -------- ---------- -------------------
1996 1997 1998 1997 1998
-------- -------- ---------- -------- ----------
Deferred tax assets: (Unaudited)
<S> <C> <C> <C> <C> <C>
Property, plant and equip-
ment...................... $133,175 $382,395 $1,089,948 $492,139 $1,642,311
Cash, cash equivalents and
short-term investments.... 307,929 -- -- -- --
Net operating loss in
Yantra.................... -- 94,000 558,000 -- --
-------- -------- ---------- -------- ----------
441,104 476,395 1,647,948 492,139 1,642,311
Less: Valuation allowance... -- (94,000) (558,000) -- --
-------- -------- ---------- -------- ----------
441,104 382,395 1,089,948 492,139 1,642,311
Deferred tax liabilities:
Foreign taxes.............. 456 -- -- -- --
-------- -------- ---------- -------- ----------
Net deferred tax
assets/(liabilities)..... $440,648 $382,395 $1,089,948 492,139 1,642,311
======== ======== ========== ======== ==========
</TABLE>
The difference in net deferred tax expenses/(benefit) during fiscal years
1996, 1997 and 1998 has been allocated as follows:
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
--------- ---------- --------- --------------------
1996 1997 1998 1997 1998
--------- ---------- --------- --------- ---------
Deferred tax
expense/(benefit)
allocated to: (Unaudited)
<S> <C> <C> <C> <C> <C>
Continuing operations.. $(391,532) $(249,220) $(707,553) ($109,744) ($552,363)
Shareholders equity--
unrealized investment
(loss)/gain........... (358,524) 307,473 -- -- --
--------- ---------- --------- --------- ---------
$(750,056) $ 58,253 $(707,553) ($109,744) ($552,363)
========= ========== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
----------- ----------- ----------- -----------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ---------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income before tax-
es..................... $ 7,718,198 $ 9,962,272 $13,182,146 $9,525,350 $24,200,158
Enacted tax rates in In-
dia.................... 46.0% 43.0% 35.0% 35.0% 35.0%
Computed expected tax
expense................ 3,550,371 4,283,777 4,613,751 3,333,873 8,470,055
Less: Tax effect due to
non-taxable export in-
come................... (3,221,241) (3,816,452) (4,493,920) (3,241,094) (8,359,751)
Others................ 271,313 277,594 (355,821) 416,529 753,382
Effect of tax rate
change................. -- (28,738) (71,143) (39,371) --
Effect of prior period
tax adjustments........ 214,118 304,089 402,696 -- --
----------- ----------- ----------- ---------- -----------
Provision for Indian in-
come tax............... 814,561 1,020,270 95,563 469,937 863,686
Effect of tax on foreign
income................. 80,000 300,000 674,895 507,928 2,668,314
----------- ----------- ----------- ---------- -----------
Total current taxes..... $ 894,561 $ 1,320,270 $ 770,458 $ 977,865 $ 3,532,000
=========== =========== =========== ========== ===========
</TABLE>
F-21
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
18. Income Taxes (Continued)
The provision for foreign taxes is due to income taxes payable overseas,
principally in the United States.
At present, in India, profits from export activities are deductible from
taxable income. Further, most of the Company's operations come from "Hundred
percent export oriented units," which are entitled to a tax holiday during any
consecutive five years in a block of eight years from the date of commencement
of operations.
19. Earnings per Equity Share
The following is a reconciliation of the Equity Shares used in the
computation of basic and diluted earnings per Equity Share:
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
---------- ---------- ---------- ---------------------
1996 1997 1998 1997 1998
---------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Basic earnings per
Equity Share--weighted
average number of
common shares
outstanding............ 29,034,400 29,036,394 29,787,144 29,416,886 30,540,000
Effect of dilutive com-
mon equivalent shares--
stock options outstand-
ing.................... 249,114 667,666 616,760 834,434 84,604
---------- ---------- ---------- ---------- ----------
Diluted earnings per Eq-
uity Share--weighted
average number of com-
mon shares and common
equivalent shares out-
standing............... 29,283,514 29,704,060 30,403,904 30,260,320 30,624,604
========== ========== ========== ========== ==========
</TABLE>
20. Lines of Credit
The Company has a line of credit from its bankers for its working capital
requirement of $1,380,000, bearing interest at prime lending rates as
applicable from time to time. As of March 31, 1998, the prime lending rate was
13.5%. This facility is secured by inventories and accounts receivable. The
line of credit contains certain financial covenants and restrictions on
indebtedness and is renewable every 12 months. As of March 31, 1998, the
Company had no balance outstanding under this facility.
21. Financial Instruments
Foreign exchange forward contracts. The Company enters into foreign exchange
forward contracts to offset the foreign currency risk arising from accounts
receivable denominated in currencies other than the Indian rupee, primarily
the U.S. dollar.
The counterparty to the Company's foreign currency forward contracts is
generally a bank. The Company considers that risks or economic consequences of
non-performance by the counterparty are not material.
F-22
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
21. Financial Instruments (Continued)
There were no significant foreign exchange gains and losses for fiscal years
1996, 1997 and 1998 and for the nine months ended December 31, 1997 and 1998.
The table below summarizes by currency the contractual amounts of the
Company's open foreign exchange forward contracts as of March 31, 1997 and
1998. There were no open foreign exchange forward contracts as of December 31,
1998. The "sell" amounts represent the Indian rupee equivalent of contracts to
sell foreign currencies.
<TABLE>
<CAPTION>
Fiscal Year Ended Type of Contract Currency Contract Amount
----------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
1997 Sell U.S. dollars $2,400,000
1998 Sell U.S. dollars $3,800,000
</TABLE>
All the above contracts mature within a period of one year. The fair value
of the foreign currency contracts as of March 31, 1997 and 1998 was $2,434,000
and $3,716,000 respectively.
22. Segment Reporting
Revenues from export sales by geographic area are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
----------- ----------- ----------- -----------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Export sales
North America.......... $20,223,422 $31,057,917 $56,211,753 $39,188,673 $70,992,304
Europe................. 2,879,434 3,256,502 6,179,621 4,347,166 8,282,475
India.................. 2,459,499 3,921,741 1,799,368 1,363,878 1,108,598
Rest of the world...... 1,044,654 1,349,759 4,139,219 3,512,681 5,717,881
----------- ----------- ----------- ----------- -----------
$26,607,009 $39,585,919 $68,329,961 $48,412,398 $86,101,258
=========== =========== =========== =========== ===========
</TABLE>
Significant customers. One customer accounted for 15.1% and 10.5% of
revenues in 1996 and 1998, respectively, while another customer accounted for
21.4% of revenues in 1996. As of March 31, 1998, the accounts receivable from
the former customer was $1,033,061. One customer accounted for approximately
12% of revenue in the nine months ended December 31, 1997. As of December 31,
1997, the accounts receivable from that customer was $1,622,449.
23. Year 2000
Certain organizations anticipate that they will experience operational
difficulties at the beginning of the Year 2000 as a result of computer
programs being written using two digits rather than four to define the
applicable year. The Company's plan for the Year 2000 calls for compliance
verification with external vendors supplying the Company software, testing in-
house engineering and manufacturing software tools, testing software in the
Company's products for the Year 2000 and communication with significant
suppliers to determine the readiness of third parties' remediation of their
own Year 2000 issues.
Any Year 2000 compliance problems of the Company or its customers or
suppliers could have a material adverse effect on the Company's business,
financial condition and results of operations. During the past three years,
the Company completed an effort to convert its financial applications to
commercial products that, according to their suppliers, are Year 2000
compliant. The Company has received confirmations from its primary suppliers
indicating that they are either Year 2000 compliant or have plans in place to
ensure readiness. As part
F-23
<PAGE>
INFOSYS TECHNOLOGIES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)
23. Year 2000 (Continued)
of the Company's assessment, it is evaluating the level of validation it will
require of third parties to ensure their Year 2000 readiness.
To date, the Company has not encountered any material Year 2000 issues
concerning its respective computer programs. The Company plans to complete its
Year 2000 research and testing by early 1999. All costs associated with
carrying out the Company's plan for the Year 2000 problem are being expensed
as incurred. The costs associated with preparation for the Year 2000 are not
expected to have a material adverse effect on the Company's business,
financial condition and results of operations. Nevertheless, there is
uncertainty concerning the potential costs and effects associated with any
Year 2000 compliance.
24. Commitments and Contingencies
The Company has various letters of credit outstanding to different vendors
totaling $948,583, $100,324 and $15,587 as of March 31, 1997, and December 31,
1997 and 1998 respectively. The letters of credit are generally established
for the import of hardware, software and other capital items.
The Company has outstanding performance guarantees for various statutory
purposes totaling $194,212, $556,393, $438,429, $457,978 and $552,040 as of
March 31, 1996, 1997 and 1998 and December 31, 1997 and 1998 respectively.
These guarantees are generally provided to governmental agencies.
25. Litigation
The Company is subject to legal proceedings and claims, which have arisen in
the ordinary course of its business. These actions, when ultimately concluded
and determined, will not, in the opinion of management, have a material effect
on the results of operations or the financial position of the Company.
26. Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") recently issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activity." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. The Company is currently
evaluating the impact of SFAS No. 133 on its consolidated financial
statements.
The American Institute of Certified Public Accountants recently issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that
certain costs related to the development of internal-use software be
capitalized or amortized over the estimated useful life of the software. SOP
98-1 is effective for financial statements issued for fiscal years beginning
after December 15, 1998. The Company estimates that all software acquired for
internal use has a relatively short useful life, usually less than one year.
The Company therefore currently charges to income the cost of acquiring such
software entirely at the time of acquisition. The Company does not believe
that adopting the provisions of SOP 98-1 will have a significant impact on its
consolidated financial statements.
F-24
<PAGE>
[INFOSYS LOGO]
ILLUSTRATIONS OF THE COMPANY'S FACILITIES AND PERSONNEL APPEAR HERE.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with the Of-
fering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been au-
thorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any securi-
ties other than the American Depositary Shares to which it relates or an offer
to, or a solicitation of, any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company or that the information
contained herein is correct as of any time subsequent to the date hereof.
--------------------
TABLE OF CONTENTS
--------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Currency of Presentation and Certain Defined Terms....................... 3
Enforcement of Civil Liabilities......................................... 3
Reports to Security Holders.............................................. 4
Summary.................................................................. 5
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Price Range of Equity Shares............................................. 21
Exchange Rates........................................................... 22
Capitalization........................................................... 23
Dilution................................................................. 24
Selected Consolidated Financial Data..................................... 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 27
Business................................................................. 40
Management............................................................... 54
Principal Shareholders................................................... 61
Certain Transactions..................................................... 62
Description of Equity Shares............................................. 63
Description of American Depositary Shares................................ 67
Restrictions on Foreign Ownership of Indian Securities................... 76
Government of India Approvals............................................ 79
Taxation................................................................. 81
Equity Shares Eligible For Future Sale................................... 85
Underwriting............................................................. 86
Legal Matters............................................................ 88
India Financial Advisor.................................................. 88
Experts.................................................................. 88
Change of Accountants.................................................... 88
Additional Information................................................... 89
Index to Consolidated Financial Statements............................... F-1
</TABLE>
Until , 1999 (25 days after the date of this Prospectus), all dealers ef-
fecting transactions in the American Depositary Shares offered hereby, whether
or not participating in this distribution, may be required to deliver a Pro-
spectus. This is in addition to the obligation of dealers to deliver a Prospec-
tus when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,800,000
American Depositary Shares
[INFOSYS LOGO]
Representing 900,000
Equity Shares
---------------
PROSPECTUS
---------------
NationsBanc Montgomery Securities LLC
BancBoston Robertson Stephens
BT Alex. Brown
Thomas Weisel Partners LLC
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the securities being registered. All amounts shown are estimates
except for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 16,044
NASD filing fee.................................................. 6,913
NASDAQ National Market Fees...................................... 50,000
Blue Sky qualification fees and expenses......................... 7,500
Printing and engraving expenses.................................. 300,000
Accountant's fees and expenses................................... 250,000
Legal fees and expenses.......................................... 650,000
Reimbursement of offering expenses by Depositary................. (275,000)
India financial advisor fees..................................... 300,000
Travel and other transaction expenses............................ 300,000
Miscellaneous.................................................... 144,543
----------
Total.......................................................... $1,750,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers.
The Company's Articles provide that the directors and officers of the
Company shall be indemnified by the Company against loss in defending any
proceeding brought against officers and directors in their capacity as such,
if the indemnified officer or director receives judgment in his favor or is
acquitted in such proceeding. In addition, the Company's Articles provide that
the Company shall indemnify its officers and directors in connection with any
application pursuant to Section 633 of the Indian Companies Act, 1956 in which
relief is granted by the court.
Reference is made to the form of indemnification agreements filed as Exhibit
10.4, pursuant to which the Company has agreed to indemnify directors and
officers of the Company against certain liabilities and expenses incurred by
such persons in connection with claims made by reason of their being such a
director or officer.
The form of Underwriting Agreement to be filed as Exhibit 1.1 to this
Registration Statement will also provide for indemnification of the Company
and its officers and directors.
The Company intends to obtain directors and officers insurance providing
indemnification for certain of the Company's directors, officers, affiliates,
partners or employees for certain liabilities.
Item 15. Recent Sales of Unregistered Securities.
The Company has not issued any securities in the past three years, except
for issuances of Equity Shares upon exercise of stock purchase rights pursuant
to the Company's Employees Stock Offer Plan. Proceeds from the sale of such
shares have not been material. Such sales of Equity Shares were made by the
Company outside the United States to foreign persons and were therefore not
subject to Section 5 of the Securities Act. During the past three years, all
issuances of Equity Shares to U.S. employees of the Company under the
Company's Employees Stock Offer Plan were made in reliance on Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act").
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Articles of Association of the Registrant, as amended.
3.2 Memorandum of Association of the Registrant, as amended.
3.3 Certificate of Incorporation of the Registrant, as currently in
effect.
4.1 Form of Deposit Agreement among the Registrant, Bankers Trust
Company, and holders from time to time of American Depositary
Receipts issued thereunder (including as an exhibit, the form of
American Depositary Receipt).
4.2 Registrant's Specimen Certificate for Equity Shares.
5.1 Opinion of Crawford Bayley & Co.
8.1 Opinion of Crawford Bayley & Co. as to certain Indian tax matters
(see Exhibit 5.1).
10.1 Registrant's 1998 Stock Option Plan.
10.2 Registrant's Employees Stock Offer Plan.
10.3 Employees Welfare Trust Deed of Registrant Pursuant to Employees
Stock Offer Plan.
10.4 Form of Indemnification Agreement.
16.1 Letter from A.M. Bhatkal regarding Change in Certifying Accountant.
23.1 Consent of KPMG Peat Marwick, India, Independent Auditors.
23.2 Consent of Crawford Bayley & Co. (see Exhibit 5.1).
23.3 Consent of Wilson Sonsini Goodrich & Rosati.
24.1 Powers of Attorney. Reference is made to page II-4.
27.1 Financial Data Schedule.
</TABLE>
(b) Financial Statement Schedules.
Schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the Consolidated Financial
Statements or the Notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, ADRs representing the
ADSs in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a
II-2
<PAGE>
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bangalore, India on February 11, 1999.
Infosys Technologies Limited
/s/ N.R. Narayana Murthy
By: _________________________________
N.R. Narayana Murthy,
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints N.R. Narayana Murthy his attorney-in-fact, with
the power of substitution, for him in any and all capacities, to sign any
amendment or post-effective amendment to this Registration Statement on Form
F-1 or abbreviated registration statement (including, without limitation, any
additional registration filed pursuant to Rule 462 under the Securities Act of
1933) with respect hereto and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ N.R. Narayana Murthy Chairman of the Board and February 11, 1999
____________________________________ Chief Executive Officer
N.R. Narayana Murthy (Principal Executive
Officer)
/s/ T.V. Mohandas Pai Senior Vice President and February 11, 1999
____________________________________ Head-Finance and
T.V. Mohandas Pai Administration (Principal
Financial and Accounting
Officer)
/s/ Nandan M. Nilekani Managing Director February 11, 1999
____________________________________ (Director, President and
Nandan M. Nilekani Chief Operating Officer)
/s/ K. Dinesh Director (Director and February 11, 1999
____________________________________ Executive Officer)
K. Dinesh
/s/ S. Gopalakrishnan Deputy Managing Director February 11, 1999
____________________________________ (Director and Executive
S. Gopalakrishnan Officer)
/s/ N.S. Raghavan Joint Managing Director February 11, 1999
____________________________________ (Director and Executive
N.S. Raghavan Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ S.D. Shibulal Director February 11, 1999
____________________________________ (Director and Executive Officer)
S.D. Shibulal
/s/ Susim M. Datta Director February 11, 1999
____________________________________
Susim M. Datta
/s/ Deepak Satwalekar Director February 11, 1999
____________________________________
Deepak Satwalekar
/s/ Marti G. Subrahmanyam Director February 11, 1999
____________________________________
Marti G. Subrahmanyam
/s/ Ramesh Vangal Director February 11, 1999
____________________________________
Ramesh Vangal
/s/ Phaneesh Murthy Authorized Representative in the February 11, 1999
____________________________________ United States (Executive
Phaneesh Murthy Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Articles of Association of the Registrant, as amended.
3.2 Memorandum of Association of the Registrant, as amended.
3.3 Certificate of Incorporation of the Registrant, as currently in
effect.
4.1 Form of Deposit Agreement among the Registrant, Bankers Trust Company,
and holders from time to time of American Depositary Receipts issued
thereunder (including as an exhibit, the form of American Depositary
Receipt).
4.2 Registrant's Specimen Certificate for Equity Shares.
5.1 Opinion of Crawford Bayley & Co.
8.1 Opinion of Crawford Bayley & Co. as to certain Indian tax matters (see
Exhibit 5.1).
10.1 Registrant's 1998 Stock Option Plan.
10.2 Registrant's Employees Stock Offer Plan.
10.3 Employees Welfare Trust Deed of Registrant Pursuant to Employees Stock
Offer Plan.
10.4 Form of Indemnification Agreement.
16.1 Letter from A.M. Bhatkal regarding Change in Certifying Accountant.
23.1 Consent of KPMG Peat Marwick, India, Independent Auditors.
23.2 Consent of Crawford Bayley & Co. (see Exhibit 5.1).
23.3 Consent of Wilson Sonsini Goodrich & Rosati.
24.1 Powers of Attorney. Reference is made to page II-4.
27.1 Financial Data Schedule.
</TABLE>
<PAGE>
Exhibit 1.1
Infosys Technologies Limited
American Depositary Shares
Each Representing
One-Half of One Equity Share
par value Rs. 10 per share
Underwriting Agreement
[____________], 1999
<PAGE>
Table of Contents
Section 1. Representations and Warranties of the Company.
(a) Compliance with Registration Requirements.................................2
(b) Offering Materials Furnished to Underwriters..............................2
(c) Distribution of Offering Material By the Company..........................3
(d) The Underwriting Agreement................................................3
(e) The Deposit Agreement.....................................................3
(f) Authorization of the Offered ADS, Equity Shares and ADRs..................3
(g) No Applicable Registration or Other Similar Rights........................4
(h) No Material Adverse Change................................................4
(i) Independent Accountants...................................................4
(j) Preparation of the Financial Statements...................................4
(k) Incorporation and Good Standing of the Company and its Subsidiaries.......5
(l) Capitalization and Other Capital Stock Matters............................5
(m) Stock Exchange Listing....................................................6
(n) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required............................................................6
(o) Non-Contravention of Indian law...........................................6
(p) No Actions or Proceedings.................................................7
(q) Intellectual Property Rights..............................................7
(r) All Necessary Permits, etc................................................7
(s) Title to Properties.......................................................7
(t) Tax Law Compliance........................................................8
(u) Company Not an "Investment Company".......................................8
(v) Insurance.................................................................8
(w) No Price Stabilization or Manipulation....................................8
(x) Related Party Transactions................................................8
(y) No Unlawful Contributions or Other Payments...............................9
(z) Company's Accounting System...............................................9
(aa) Compliance with Environmental Laws.......................................9
(bb) ERISA Compliance........................................................10
(cc) Form of Equity Share Certificates.......................................10
(dd) Stamp Duty and Other Transfer Taxes.....................................10
(ee) No Taxes With Respect to Dividends......................................10
(ff) Enforceability of Offered ADSs..........................................11
(gg) No Immunity from Suit in India..........................................11
(hh) Indemnification and Contribution........................................11
Section 2. Purchase, Sale and Delivery of the Offered ADSs...................11
(a) The Firm ADSs............................................................11
(b) The First Closing Date...................................................11
(c) The Optional ADSs; the Second Closing Date...............................12
(d) Public Offering of the Offered ADSs......................................12
(e) Payment for the Offered ADSs.............................................12
(f) Delivery of ADRs Evidencing the Offered ADSs.............................13
(g) Delivery of Prospectus to the Underwriters...............................13
i
<PAGE>
Section 3. Additional Covenants of the Company...............................13
(a) Review by Representatives of Proposed Amendments and Supplements.........13
(b) Securities Act Compliance................................................13
(c) Amendments and Supplements to the Prospectus and Other Securities Act
Matters......................................................................14
(d) Copies of any Amendments and Supplements to the
Prospectus...................................................................14
(e) Blue Sky Compliance......................................................14
(f) Use of Proceeds..........................................................15
(g) Transfer Agent...........................................................15
(h) Earnings Statement.......................................................15
(i) Periodic Reporting Obligations; Maintenance of Listing...................15
(j) Agreement Not To Offer or Sell Additional Securities.....................15
(k) Future Reports to the Representatives....................................16
(l) Company to Provide Copy of the Prospectus in Form That May be Downloaded
from the Internet............................................................16
Section 4. Payment of Expenses...............................................16
Section 5. Conditions of the Obligations of the Underwriters.................17
(a) Accountants' Comfort Letter..............................................17
(b) Compliance with Registration Requirements; No Stop Order; No Objection
from NASD....................................................................17
(c) No Material Adverse Change or Ratings Agency
Change.......................................................................18
(d) Opinion of U.S. Counsel for the Company.................................18
(e) Opinion of Indian Counsel for the Company...............................18
(f) Opinion of U.S. Counsel for the Underwriters............................18
(g) Opinion of Indian Counsel for the Underwriters..........................18
(h) Opinion of Counsel to Depository.........................................19
(i) Officers' Certificate....................................................19
(j) Bring-down Comfort Letter................................................19
(k) Lock-Up Agreement from Certain Stockholders of the Company...............19
(l) Deposit Agreement........................................................19
(m) Additional Documents.....................................................20
Section 6. Reimbursement of Underwriters' Expenses...........................20
Section 7. Effectiveness of this Agreement...................................20
Section 8. Indemnification...................................................20
(a) Indemnification of the Underwriters......................................21
(b) Indemnification of the Company, its Directors and Officers...............22
(c) Notifications and Other Indemnification Procedures.......................22
(d) Settlements..............................................................23
Section 9. Contribution......................................................24
Section 10. Default of One or More of the Several Underwriter................25
Section 11. Termination of this Agreement....................................25
Section 12. Representations and Indemnities to Survive Delivery..............26
ii
<PAGE>
Section 13. Notices..........................................................26
Section 14. Successors.......................................................27
Section 15. Partial Unenforceability.........................................27
Section 16. .................................................................27
(a) Governing Law Provisions.................................................27
(b) Consent to Jurisdiction..................................................28
(c) Waiver of Immunity.......................................................28
Section 17. Judgment Currency................................................28
Section 18. General Provisions...............................................29
iii
<PAGE>
Underwriting Agreement
[__________________], 1999
NATIONSBANC MONTGOMERY SECURITIES LLC
BANCBOSTON ROBERTSON STEPHENS
BT ALEX. BROWN INCORPORATED
THOMAS WEISEL PARTNERS LLC
As Representatives of the several Underwriters
c/o NATIONSBANC MONTGOMERY SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
Introductory. Infosys Technologies Limited, a public company
incorporated under the laws of the Republic of India (the "Company"), proposes
to issue and sell to the several Underwriters named in Schedule A hereto (the
----------
"Underwriters"), an aggregate of [___] American Depositary Shares ("ADSs")
representing one-half of one Equity Share Rs. 10 per share (the "Equity
Shares"). The [____] ADSs to be sold by the Company are collectively referred
to herein as the "Firm ADSs." In addition, the Company has granted to the
Underwriters an option to purchase up to an additional [___] ADSs (the "Optional
ADSs") as provided in Section 2. The Firm ADSs and, if and to the extent such
option is exercised, the Optional ADSs are collectively referred to herein as
the "Offered ADSs." NationsBanc Montgomery Securities LLC, BancBoston Robertson
Stephens, BT Alex. Brown Incorporated and Thomas Weisel Partners LLC have agreed
to act as representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the ADSs.
Each Offered ADS will be evidenced by an American Depositary Receipt
(an "ADR") to be issued by Bankers Trust Company, as depositary (the
"Depositary"), pursuant to a Deposit Agreement dated as of [_______________],
1999 (the "Deposit Agreement") among the Company, the Depositary and the holders
and beneficial holders from time to time of the ADRs.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form F-1 (File No.
333-[_____]) which contains a form of prospectus to be used in connection with
the public offering and sale of the Offered ADSs. Such registration statement,
as amended, including the financial statements, exhibits and schedules thereto,
in the form in which it was declared effective by the Commission under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Securities Act"), including any information
deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A
or Rule 434 under the Securities Act, is called the "Registration Statement."
Any registration statement filed by the Company pursuant to Rule 462(b) under
the Securities Act is called the "Rule 462(b) Registration Statement," and from
and after the date and time of filing of any such Rule 462(b) Registration
Statement the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The Company and the Depositary have also prepared and
filed with the Commission in accordance with the
1
<PAGE>
provisions of the Securities Act a registration statement on Form F-6 (File No.
333-[_________]) relating to the ADSs and ADRs. Such registration statement, as
amended at the time it becomes effective, is hereinafter referred to as the "ADS
Registration Statement." The prospectus in the form first used by the
Underwriters to confirm sales of the Offered ADSs, is hereinafter referred to as
the "Prospectus"; provided, however, if the Company has, with the consent of
NationsBanc Montgomery Securities LLC, elected to rely upon Rule 434 under the
Securities Act, the term "Prospectus" shall mean the Company's prospectus
subject to completion (each, a "preliminary prospectus") dated [________], 1999
(such preliminary prospectus is called the "Rule 434 preliminary prospectus"),
together with the applicable term sheet (the "Term Sheet") prepared and filed by
the Company with the Commission under Rules 434 and 424(b) under the Securities
Act and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet. All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, the ADS
Registration Statement, a preliminary prospectus, the Prospectus or the Term
Sheet, or any amendments or supplements to any of the foregoing, shall include
any copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR").
Section 1. Representations and Warranties of the Company. The
Company hereby represents, warrants and covenants to each Underwriter as
follows:
(a) Compliance with Registration Requirements. The Registration
Statement, the ADS Registration and any Rule 462(b) Registration
Statement have been declared effective by the Commission under the
Securities Act. The Company has complied to the Commission's satisfaction
with all requests of the Commission for additional or supplemental
information. No stop order suspending the effectiveness of the
Registration Statement, the ADS Registration Statement or any Rule 462(b)
Registration Statement is in effect and no proceedings for such purpose
have been instituted or are pending or, to the best knowledge of the
Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-
T under the Securities Act), was identical to the copy thereof delivered to
the Underwriters for use in connection with the offer and sale of the
Offered ADSs. Each of the Registration Statement, the ADS Registration
Statement, any Rule 462(b) Registration Statement and any post-effective
amendment thereto, at the time it became effective and at all subsequent
times, complied and will comply in all material respects with the
Securities Act and the rules, regulations and other requirements of the
Ministry of Finance of India (the "MOF"), the Reserve Bank of India (the
"RBI"), the Department of Company Affairs of India (the "DCA"), the Company
Law Board (the "CLB") and the Securities Exchange Board of India ("SEBI"),
as applicable, and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, as of its date and at all
subsequent times, did not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. The representations and warranties set forth in
the two immediately preceding sentences do not apply to statements in or
omissions from the
2
<PAGE>
Registration Statement, the ADS Registration Statement, any Rule 462(b)
Registration Statement, or any post-effective amendment thereto, or the
Prospectus, or any amendments or supplements thereto, made in reliance
upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by the Representatives expressly for
use therein. There are no statutes, regulations, contracts, agreements,
or other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement or the ADS Registration Statement that are not
described or filed as required.
A registration statement on Form 8-A has been filed with and declared
effective by the Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives three complete manually signed copies of
the Registration Statement, the ADS Registration Statement and of each
consent and certificate of experts filed as a part thereof, and conformed
copies of the Registration Statement and the ADS Registration Statement
(without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company
has not distributed and will not distribute, prior to the later of the
Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Offered ADSs, any offering material in
connection with the offering and sale of the Offered ADSs other than a
preliminary prospectus, the Prospectus, the Registration Statement or the
ADS Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
equitable principles of general applicability.
(e) The Deposit Agreement. The Deposit Agreement has been duly
authorized, and, upon execution and delivery by the Company and the
Depositary, will be a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles of general
applicability.
(f) Authorization of the Offered ADS, Equity Shares and ADRs. The
Equity Shares to be issued in connection with the offering and sale of
the Offered ADSs have been duly authorized for issuance and sale pursuant
to this Agreement and, when issued and delivered by the Company pursuant
to this Agreement, will be validly issued, fully paid and nonassessable
and will not be subject to any preemptive rights, rights of first
3
<PAGE>
refusal or other similar rights to subscribe for or purchase securities
of the Company. The Equity Shares may be freely deposited with the
Depositary against issuance of ADRs evidencing the Offered ADSs, although
there are restrictions on the future deposits of Equity Shares which are
fully and accurately disclosed in the Prospectus. The Offered ADSs are
freely transferable by the Company to the Underwriters in the manner
contemplated in this Agreement. Upon deposit of the underlying Equity
Shares with the custodian named in the Deposit Agreement pursuant to the
Deposit Agreement in accordance with the terms thereof, all right, title
and interest in such Equity Shares, free and clear of any security
interest, mortgage, pledge, claim, lien or other encumbrance (each, a
"Lien"), will be transferred to the Depositary on behalf of the
Underwriters. Upon issuance by the Depositary of the ADRs evidencing the
Offered ADSs against deposit of the underlying Equity Shares in
accordance with the provisions of the Deposit Agreement, such ADRs will
be duly and validly issued and will entitle the holders thereof to the
rights specified in the ADRs and the Deposit Agreement. There are no
restrictions on the transfer of such Equity Shares or the Offered ADSs,
except as described in the Prospectus. Immediately following the offering
and sale of the Offered ADSs pursuant to this Agreement, the ownership of
the Company will be as set forth in the Prospectus under "Principal
Shareholders."
(g) No Applicable Registration or Other Similar Rights. There are
no persons with registration or other similar rights to have any equity
or debt securities registered for sale under the Registration Statement
or the ADS Registration Statement or included in the offering
contemplated by this Agreement.
(h) No Material Adverse Change. Except as otherwise disclosed in
the Prospectus, subsequent to the respective dates as of which
information is given in the Prospectus (without giving effect to any
amendment or supplement thereto): (i) there has been no material adverse
change, or any development that could reasonably be expected to result in
a material adverse change, in the condition, financial or otherwise, or
in the earnings, business, operations or prospects, whether or not
arising from transactions in the ordinary course of business, of the
Company and its subsidiaries, considered as one entity (any such change
is called a "Material Adverse Change"); (ii) the Company and its
subsidiaries, considered as one entity, have not incurred any material
liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has
been no dividend or distribution of any kind declared, paid or made by
the Company.
(i) Independent Accountants. KPMG Peat Marwick India Ltd. who have
expressed their opinion with respect to the financial statements (which
term as used in this Agreement includes the related notes thereto) filed
with the Commission as a part of the Registration Statement and included
in the Prospectus, are independent public or certified public accountants
as required by the Securities Act and the applicable published rules and
regulations of the Commission thereunder.
(j) Preparation of the Financial Statements. The financial
statements filed with the Commission as a part of the Registration
Statement and included in the Prospectus present fairly the consolidated
financial position of the Company and its subsidiaries as of and at the
dates indicated and the results of their operations and cash
4
<PAGE>
flows for the periods specified. Such financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis throughout the periods involved,
except as may be expressly stated in the related notes thereto. No other
financial statements or supporting schedules are required to be included
in the Registration Statement. The financial data set forth in the
Prospectus under the captions "Summary--Summary Consolidated Financial
Data," "Selected Consolidated Financial Data" and "Capitalization" fairly
present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration
Statement.
(k) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and, in the case of
the Company, to enter into and perform its obligations under this
Agreement and the Deposit Agreement. Each of the Company and each
subsidiary is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except to the extent that the
failure to so qualify or to be in good standing would not, individually
or in the aggregate, result in a Material Adverse Change. All of the
issued and outstanding capital stock of each subsidiary has been duly
authorized and validly issued, is fully paid and nonassessable and,
except for 9,163,637 shares of Preferred Stock, par value $0.01 per
share, of Yantra owned by other investors as described in the Prospectus,
is owned by the Company, directly or through subsidiaries, free and clear
of any Lien. The Company does not own or control, directly or indirectly,
any corporation, association or other entity other than the subsidiaries
listed in Exhibit 22 to the Registration Statement.
(l) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company (including the Equity
Shares, the ADSs and the ADRs) is as set forth in the Prospectus under
the caption "Capitalization" (other than for subsequent issuances, if
any, pursuant to employee benefit plans described in the Prospectus). The
terms, rights and preferences related to the authorized and issued
capital stock of the Company conform as to legal matters to the
description thereof contained in the Prospectus. No class of authorized
capital stock of the Company, other than the Equity Shares, exists. The
Equity Shares (including the Equity Shares represented by the Offered
ADSs) conform in all material respects to the description thereof
contained in the Prospectus. All of the issued and outstanding Equity
Shares have been duly authorized and validly issued, are fully paid and
nonassessable and have been issued in compliance with all applicable U.S.
and Indian Legal Requirements. None of the outstanding Equity Shares were
issued in violation of any preemptive rights, rights of first refusal or
other similar rights to subscribe for or purchase securities of the
Company. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase,
or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company or any of its
subsidiaries other than those described in the Prospectus. The
description of the Company's stock option, stock bonus and other stock
plans or arrangements, and the
5
<PAGE>
options or other rights granted thereunder, set forth in the Prospectus
accurately and fairly describes the material terms of such plans,
arrangements, options and rights.
(m) Stock Exchange Listing. The Offered ADSs have been duly
approved for quotation on the Nasdaq National Market and the underlying
Equity Shares have been approved for the listing on the the Stock
Exchange, Mumbai, the Bangalore Stock Exchange and the National Stock
Exchange of India (collectively, the "Indian Exchanges"), subject only to
official notice of issuance.
(n) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation,
Articles of Association, by-laws, Memorandum of Association or other such
charter documents (collectively, the "Charter Documents") or is in
default (or, with the giving of notice or lapse of time, would be in
default) ("Default") under any indenture, mortgage, loan or credit
agreement, note, contract, franchise, lease or other instrument to which
the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the
Company or any of its subsidiaries is subject (each, an "Existing
Instrument"), except for such Defaults as would not, individually or in
the aggregate, result in a Material Adverse Change and would not impair
the performance by the Company of, or the validity or binding nature of,
this Agreement or the Deposit Agreement. The Company's execution,
delivery and performance of this Agreement and the Deposit Agreement and
consummation of the transactions contemplated hereby, thereby and by the
Prospectus (including, without limitation, the issuance of the Equity
Shares, their deposit under the Deposit Agreement and the issuance, sale
and delivery of the Offered ADSs and the related ADRs): (i) have been
duly authorized by all necessary corporate action (including, without
limitation, any required shareholder action) and will not result in any
violation of the provisions of the Charter Documents of the Company or
any subsidiary; (ii) will not conflict with or constitute a breach of, or
Default under, or result in the creation or imposition of any Lien upon
any property or assets of the Company or any of its subsidiaries pursuant
to, or require the consent of any other part to, any Existing Instrument,
except for such conflicts, breaches, Defaults, Liens, charges or
encumbrances as would not, individually or in the aggregate, result in a
Material Adverse Change and would not impair the performance by the
Company of, or the validity or binding nature of, this Agreement or the
Deposit Agreement; and (iii) will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to
the Company or any subsidiary. No consent, approval, authorization or
other order of, or registration or filing with, any court or other
governmental or regulatory authority or agency, is required for the
Company's execution, delivery and performance of this Agreement and the
Deposit Agreement and consummation of the transactions contemplated
thereby and by the Prospectus, except such as have been obtained or made
by the Company and are in full force and effect under the Securities Act,
applicable state securities or blue sky laws, from the National
Association of Securities Dealers, Inc. (the "NASD") and any applicable
Indian governmental or regulatory authority or agency (including, without
limitation, the required approvals of the MOF, the RBI, the CBL, the DCA
and the SEBI).
(o) Non-Contravention of Indian law. The issuance by the Company of
the Equity Shares and the sale of Offered ADSs to purchasers outside of
India as
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contemplated by this Agreement will not contravene any applicable law of
India (including, without limitation, any such applicable law limiting
foreign ownership of the Company or any Subsidiary) or constitute a
breach of or a default under any of the Licenses.
(p) No Actions or Proceedings. There are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company's
knowledge, threatened: (i) against or affecting the Company or any of its
subsidiaries; (ii) which has as the subject thereof any officer or
director of, or property owned or leased by, the Company or any of its
subsidiaries; or (iii) relating to environmental or employment
discrimination matters, where in any such case (A) there is a reasonable
possibility that such action, suit or proceeding might be determined
adversely to the Company or such subsidiary and (B) any such action, suit
or proceeding, if so determined adversely, would reasonably be expected
to result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement and the
Deposit Agreement. No material labor dispute with the employees of the
Company or any of its subsidiaries, or with the employees of any
principal supplier of the Company, exists or, to the best of the
Company's knowledge, is threatened or imminent.
(q) Intellectual Property Rights. Except as otherwise disclosed in
the Prospectus, the Company and its subsidiaries own or possess
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
businesses as now conducted; and the expected expiration of any of such
Intellectual Property Rights would not result in a Material Adverse
Change. The Intellectual Property Rights used by the Company and its
subsidiaries in the conduct of their business do not infringe on the
rights of any third party, except for any such infringement which would
not result in a Material Adverse Change. Neither the Company nor any of
its subsidiaries has received any notice of infringement or conflict with
asserted Intellectual Property Rights of others, which infringement or
conflict, if the subject of an unfavorable decision, would result in a
Material Adverse Change.
(r) All Necessary Permits, etc. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits
issued by the appropriate Indian federal, state or foreign regulatory
agencies or bodies (including, without limitation, any United States
federal, state or local regulatory agencies or bodies) necessary to
conduct their respective businesses, and neither the Company nor any
subsidiary has received any notice of proceedings relating to the
revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Change.
(s) Title to Properties. Except as otherwise disclosed in the
Prospectus, The Company and each of its subsidiaries has good and
marketable title to all the properties and assets reflected as owned in
the financial statements referred to in Section 1(j) above (or elsewhere
in the Prospectus), in each case free and clear of any Liens, equities
and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use
made or proposed to be made of such property by the Company or such
subsidiary. The real property, improvements,
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equipment and personal property held under lease by the Company or any
subsidiary are held under valid and enforceable leases, with such
exceptions as are not material and do not materially interfere with the use
made or proposed to be made of such real property, improvements, equipment
or personal property by the Company or such subsidiary.
(t) Tax Law Compliance. The Company and its subsidiaries have filed
all necessary Indian federal, state and foreign income and franchise tax
returns (including, without limitation, those required by United States
federal, state and local authorities) or have properly requested
extensions thereof and have paid all taxes required to be paid by any of
them and, if due and payable, any related or similar assessment, fine or
penalty levied against any of them except as may be being contested in
good faith and by appropriate proceedings. The Company has made adequate
charges, accruals and reserves in the applicable financial statements
referred to in Section 1(j) above in respect of all Indian federal, state
and foreign income and franchise taxes (including, without limitation,
those required by United States federal, state and local authorities) for
all periods as to which the tax liability of the Company or any of its
subsidiaries has not been finally determined.
(u) Company Not an "Investment Company". The Company has been
advised of the rules and requirements under the United States Investment
Company Act of 1940, as amended (the "Investment Company Act"). The
Company is not, and after receipt of payment for the Offered ADSs will
not be, an "investment company" within the meaning of Investment Company
Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(v) Insurance. Each of the Company and its subsidiaries are insured
by recognized, financially sound and reputable institutions with policies
in such amounts and with such deductibles and covering such risks as are
generally deemed adequate and customary for their businesses including,
but not limited to, policies covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage,
destruction, acts of vandalism and earthquakes. The Company has no reason
to believe that it or any subsidiary will not be able (i) to renew its
existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a cost
that would not result in a Material Adverse Change. Neither of the
Company nor any subsidiary has been denied any insurance coverage which
it has sought or for which it has applied.
(w) No Price Stabilization or Manipulation. The Company has not
taken and will not take, directly or indirectly, any action designed to
or that might be reasonably expected to cause or result in stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Offered ADSs or the related ADRs.
(x) Related Party Transactions. There are no business relationships
or related-party transactions involving the Company or any subsidiary or
any other person which have not been fully and accurately described in
the Prospectus. Each such transaction is on terms no less favorable to
the Company or such subsidiary, as the case may be, as could be obtained
on an arm's length basis from an unaffiliated third party.
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(y) No Unlawful Contributions or Other Payments. Neither the
Company nor any of its subsidiaries nor, to the best of the Company's
knowledge, any employee or agent of the Company or any subsidiary, has
made any contribution or other payment to any official of, or candidate
for, any U.S. or Indian federal, state or foreign office in violation of
any law or of the character required to be disclosed in the Prospectus.
(z) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with United
States generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets
at reasonable intervals and appropriate action is taken with respect to
any differences.
(aa) Compliance with Environmental Laws. Except as would not,
individually or in the aggregate, result in a Material Adverse Change:
(i) neither the Company nor any of its subsidiaries is in violation of
any U.S. or Indian federal, state, local or foreign law or regulation
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, petroleum and petroleum
products (collectively, "Materials of Environmental Concern"), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environment Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of
the Company or its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company
or any of its subsidiaries received any written communication, whether
from a governmental authority, citizens group, employee or otherwise,
that alleges that the Company or any of its subsidiaries is in violation
of any Environmental Law; (ii) there is no claim, action or cause of
action filed with a court or governmental authority, no investigation
with respect to which the Company has received written notice, and no
written notice by any person or entity alleging potential liability for
investigatory costs, cleanup costs, governmental responses costs, natural
resources damages, property damages, personal injuries, attorneys' fees
or penalties arising out of, based on or resulting from the presence, or
release into the environment, of any Material of Environmental Concern at
any location owned, leased or operated by the Company or any of its
subsidiaries, now or in the past (collectively, "Environmental Claims"),
pending or, to the best of the Company's knowledge, threatened against
the Company or any of its subsidiaries or any person or entity whose
liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by operation
of law; and (iii) to the best of the Company's knowledge, there are no
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission,
discharge, presence or disposal of any Material of Environmental Concern,
that reasonably could result in a violation of any Environmental Law or
form the basis of a
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potential Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained
or assumed either contractually or by operation of law.
(bb) ERISA Compliance. Except as otherwise disclosed in the
Prospectus, The Company and its subsidiaries and any "employee benefit
plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations
thereunder (collectively, "ERISA")) established or maintained by the
Company, its subsidiaries or their "ERISA Affiliates" (as defined below)
are in compliance in all material respects with ERISA. "ERISA Affiliate"
means, with respect to the Company or a subsidiary, any member of any
group of organizations described in Sections 414(b),(c),(m) or (o) of the
Internal Revenue Code of 1986, as amended, and the regulations and
published interpretations thereunder (the "Code") of which the Company or
such subsidiary is a member. No "reportable event" (as defined under
ERISA) has occurred or is reasonably expected to occur with respect to
any "employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates. No "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of
their ERISA Affiliates, if such "employee benefit plan" were terminated,
would have any "amount of unfunded benefit liabilities" (as defined under
ERISA). Neither the Company, its subsidiaries nor any of their ERISA
Affiliates has incurred or reasonably expects to incur any liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal
from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained
by the Company, its subsidiaries or any of their ERISA Affiliates that is
intended to be qualified under Section 401(a) of the Code is so qualified
and nothing has occurred, whether by action or failure to act, which
would cause the loss of such qualification.
(cc) Form of Equity Share Certificates. The form of certificate for
the Equity Shares conforms to the requirements of Indian law, the Charter
Documents of the Company, the Indian Exchanges and the description
thereof contained in the Prospectus, and the Offered ADSs and the ADRs
conform to the requirements of the Deposit Agreement and the Nasdaq
National Market.
(dd) Stamp Duty and Other Transfer Taxes. Except as disclosed in
Prospectus, stamp duty is payable in India in connection with the
issuance of the Equity Shares in the name of the Depositary; however, no
stamp or other issuance or transfer taxes or duties and no capital gains,
income, withholding or other taxes are payable in India or any political
subdivision or taxing authority thereof or therein in connection with:
(i) the initial deposit with the Depositary of the Shares by the Company
against the issuance of the ADRs evidencing Offered ADSs; (ii) the sale
and delivery of the Offered ADSs to or for the respective accounts of the
Underwriters; (iii) the sale and delivery outside of India by the
Underwriters of the Offered ADSs or ADRs to the initial purchasers
thereof; or (iv) except as set forth in the Prospectus, the consummation
of any other transaction contemplated by this Agreement or the Deposit
Agreement in connection with the sale and delivery of the Offered ADSs or
the issuance of the ADRs.
(ee) No Taxes With Respect to Dividends. Except as disclosed in the
Prospectus, under applicable Indian laws and regulations, no taxes,
levies, imposts or
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charges are required to be deducted or withheld from any payment by the
Company of a dividend in respect of the Equity Shares (including, without
limitation, those represented by ADSs) to persons not resident in India.
(ff) Enforceability of Offered ADSs. It is not necessary in order to
enable any party to enforce any of its rights under this Agreement or in
order to enable any owner of Offered ADSs to enforce any of its rights
that all or any of such parties or owners of Offered ADSs be licensed,
qualified or entitled to do business in India. None of the Underwriters
is or will be deemed to be resident, domiciled, carrying on business or
subject to taxation in India by reason of the ownership of Offered ADSs
or the entry into, performance and/or enforcement of this Agreement and
the transactions contemplated hereby.
(gg) No Immunity from Suit in India. The Company is subject to civil
and commercial law with respect to its obligations under this Agreement,
the Deposit Agreement and the ADRs. The execution and delivery by the
Company and the performance by the Company of its obligations thereunder
constitute private and commercial acts rather than governmental or public
acts, and neither the Company, any subsidiary of the Company nor any of
their respective properties enjoys any right of immunity in any
jurisdiction in India from suit, judgment, execution on a judgment or
attachment (whether before judgment or in aid of execution) in respect of
such obligations.
(hh) Indemnification and Contribution. The Company has full power,
authority and legal right to enter into and perform its obligations of
indemnification and contribution set forth in Section 7 of this Agreement
and neither the indemnification nor the contribution provisions of such
Section 7 contravene current Indian law.
Any certificate signed by an officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
Section 2. Purchase, Sale and Delivery of the Offered ADSs.
(a) The Firm ADSs. The Company agrees to issue and sell to the
several Underwriters the Firm ADSs upon the terms herein set forth. On
the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set
forth, the Underwriters agree, severally and not jointly, to purchase
from the Company the respective number of Firm ADSs set forth opposite
their names on Schedule A. The purchase price per Firm ADS to be paid by
----------
the several Underwriters to the Company shall be US $[___].
(b) The First Closing Date. Delivery of certificates for ADRs
representing the Firm ADSs to be purchased by the Underwriters and
payment therefor shall be made at the offices of NationsBanc Montgomery
Securities LLC, 600 Montgomery Street, San Francisco, California (or such
other place as may be agreed to by the Company and the Representatives)
at 6:00 a.m. San Francisco time, on [___], 1999, or such other time and
date not later than 10:30 a.m. San Francisco time on [___], 1999, as the
Representatives shall designate by notice to the Company (the time and
date of such closing are called the
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"First Closing Date"). The Company hereby acknowledges that circumstances
under which the Representatives may provide notice to postpone the First
Closing Date as originally scheduled include, but are in no way limited
to, any determination by the Company or the Representatives to
recirculate to the public copies of an amended or supplemented Prospectus
or a delay as contemplated by the provisions of Section 10.
(c) The Optional ADSs; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of [___] Optional ADSs from
the Company at the purchase price per share to be paid by the
Underwriters for the Firm ADSs. The option granted hereunder is for use
by the Underwriters solely in covering any over-allotments in connection
with the sale and distribution of the Firm ADSs. The option granted
hereunder may be exercised at any time (but not more than once) upon
notice by the Representatives to the Company, which notice may be given
at any time within 30 days from the date of this Agreement. Such notice
shall set forth (i) the aggregate number of Optional ADSs as to which the
Underwriters are exercising the option, (ii) the names and denominations
in which the certificates for the Optional ADSs are to be registered and
(iii) the time, date and place at which such certificates will be
delivered (which time and date may be simultaneous with, but not earlier
than, the First Closing Date; and in such case the term "First Closing
Date" shall refer to the time and date of delivery of certificates for
ADRs representing the Firm ADSs and the Optional ADSs). Such time and
date of delivery, if subsequent to the First Closing Date, is called the
"Second Closing Date" and shall be determined by the Representatives and
shall not be earlier than three nor later than five full business days
after delivery of such notice of exercise. If any Optional ADSs are to be
purchased, each Underwriter agrees, severally and not jointly, to
purchase the number of Optional ADSs (subject to such adjustments to
eliminate fractional shares as the Representatives may determine) that
bears the same proportion to the total number of Optional ADSs to be
purchased as the number of Firm ADSs set forth on Schedule A opposite the
----------
name of such Underwriter bears to the total number of Firm ADSs. The
Representatives may cancel the option at any time prior to its expiration
by giving written notice of such cancellation to the Company.
(d) Public Offering of the Offered ADSs. The Representatives hereby
advise the Company that the Underwriters intend to offer for sale to the
public, as described in the Prospectus, their respective portions of the
Offered ADSs as soon after this Agreement has been executed and the
Registration Statement and the ADS Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
(e) Payment for the Offered ADSs. Payment for the Offered ADSs
shall be made at the First Closing Date (and, if applicable, at the
Second Closing Date) by wire transfer to the order of the Company of
immediately available federal funds in United States dollars.
It is understood that the Representatives have been authorized, for
their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for,
the Firm ADSs and any Optional ADSs
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the Underwriters have agreed to purchase. NationsBanc Montgomery
Securities LLC, individually and not as the Representative of the
Underwriters, may (but shall not be obligated to) make payment for any
Offered ADSs to be purchased by any Underwriter whose funds shall not
have been received by the Representatives by the First Closing Date or
the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from
any of its obligations under this Agreement.
(f) Delivery of ADRs Evidencing the Offered ADSs. The Company shall
deliver, or cause to be delivered, to the Representatives for the
accounts of the several Underwriters certificates for ADRs evidencing the
Firm ADSs at the First Closing Date, against the release of a wire
transfer of immediately available federal funds for the amount of the
purchase price therefor. The Company shall also deliver, or cause to be
delivered, to the Representatives for the accounts of the several
Underwriters, certificates for ADRs evidencing the Optional ADSs the
Underwriters have agreed to purchase at the First Closing Date or the
Second Closing Date, as the case may be, against the release of a wire
transfer of immediately available federal funds for the amount of the
purchase price therefor. The certificates for ADRs shall be in definitive
form and registered in such names and denominations as the
Representatives shall have requested at least one full business day prior
to the First Closing Date (or the Second Closing Date, as the case may
be) and shall be made available for inspection on the business day
preceding the First Closing Date (or the Second Closing Date, as the case
may be) at a location in New York City as the Representatives may
designate. Time shall be of the essence, and delivery at the time and
place specified in this Agreement is a further condition to the
obligations of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than
12:00 p.m. on the second business day following the date the Offered ADSs
are released by the Underwriters for sale to the public, the Company
shall delivery or cause to be delivered copies of the Prospectus in such
quantities and at such places as the Representatives shall request.
Section 3. Additional Covenants of the Company.
The Company further covenants and agrees with each Underwriter as
follows:
(a) Review by Representatives of Proposed Amendments and Supplements.
During such period beginning on the date hereof and ending on the
later of the First Closing Date or such date, as in the opinion of counsel
for the Underwriters, the Prospectus is no longer required by law to be
delivered in connection with sales by an Underwriter or dealer (the
"Prospectus Delivery Period"), prior to amending or supplementing the
Registration Statement (including any registration statement filed under
Rule 462(b) under the Securities Act), the ADS Registration Statement or
the Prospectus, the Company shall furnish to the Representatives for review
a copy of each such proposed amendment or supplement, and the Company shall
not file any such proposed amendment or supplement to which the
Representatives reasonably object.
(b) Securities Act Compliance. After the date of this Agreement,
the Company shall promptly advise the Representatives in writing (i) of
the receipt of any
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comments of, or requests for additional or supplemental information from,
the Commission or any other regulatory authority, (ii) of the time and
date of any filing of any post-effective amendment to the Registration
Statement or the ADS Registration Statement or any amendment or
supplement to any preliminary prospectus or the Prospectus, (iii) of the
time and date that any post-effective amendment to the Registration
Statement or the ADS Registration Statement becomes effective and (iv) of
the issuance by the Commission or any other regulatory authority of any
stop order suspending the effectiveness of the Registration Statement,
the ADS Registration Statement or any post-effective amendment thereto or
of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Equity Shares, the Offered ADSs
or the ADRs from any securities exchange upon which the Equity Shares,
the Offered ADSs or the ADRs are listed for trading or included or
designated for quotation, or of the threatening or initiation of any
proceedings for any of such purposes. If a regulatory authority shall
enter any such stop order or simsilar order at any time, the Company will
use its best efforts to obtain the lifting of such order at the earliest
possible moment. Additionally, the Company agrees that it shall comply
with the provisions of Rules 424(b), 430A and 434, as applicable, under
the Securities Act and will use its reasonable efforts to confirm that
any filings made by the Company under such Rule 424(b) were received in a
timely manner by the Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. If, during the Prospectus Delivery Period, any event shall
occur or condition exist as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if in the opinion of the Representatives or
counsel for the Underwriters it is otherwise necessary to amend or
supplement the Prospectus to comply with law, the Company agrees to
promptly prepare (subject to Section 3(a) hereof), file with the
Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Representatives may request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register
the Offered ADSs and ADRs for sale under (or obtain exemptions from the
application of) the Blue Sky or securities laws of those jurisdictions
designated by the Representatives, shall comply with such laws and shall
continue such qualifications, registrations and exemptions in effect so
long as required for the distribution of the Offered ADSs and ADRs. The
Company shall not be required to qualify as a foreign corporation or to
take any action that would subject it to general service of process in
any such jurisdiction where it is not presently qualified or where it
would be subject to taxation as a foreign corporation. The Company will
advise the Representatives promptly of the suspension of the
qualification
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or registration of (or any such exemption relating to) the Offered ADSs
or ADRs for offering, sale or trading in any jurisdiction or any
initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts to
obtain the withdrawal thereof at the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds from
the sale of the Offered ADSs sold by it in the manner described under the
caption "Use of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Equity Shares, the
Offered ADSs and the ADRs and shall deposit the underlying Equity Shares
with the custodian named in the Depositary Agreement in accordance with
the terms of the Deposit Agreement so that ADRs evidencing the Offered
ADSs will be executed by the Depositary and delivered to the Underwriters
pursuant to this Agreement on the Closing Date and any Option Closing
Date.
(h) Earnings Statement. As soon as practicable, the Company will
make generally available to its security holders and to the
Representatives an earnings statement (which need not be audited)
covering the twelve-month period ending [___], 2000 that satisfies the
provisions of Section 11(a) of the Securities Act.
(i) Periodic Reporting Obligations; Maintenance of Listing. During
the Prospectus Delivery Period the Company shall file, on a timely basis,
with the Commission, the Nasdaq National Market and the Indian Exchanges
all reports and documents required to be filed under the Exchange Act. In
addition, the Company will submit to the Commission quarterly reports,
which will include unaudited quarterly condensed consolidated financial
information, on Form 6-K for the first three quarters of each fiscal year
and file its annual report on Form 20-F within the time period prescribed
under Section 13 of the Exchange Act for the filing by domestic issuers
of quarterly reports on Form 10-Q and annual reports on Form 10-K,
respectively. The Company shall use its best efforts to maintain the
listing of the ADSs on the Nasdaq National market or a national
securities exchange located in the United States.
(j) Agreement Not To Offer or Sell Additional Securities. During
the period of 180 days following the date of the Prospectus, the Company
will not, without the prior written consent of NationsBanc Montgomery
Securities LLC (which consent may be withheld at the sole discretion of
NationsBanc Montgomery Securities, Inc.), directly or indirectly, sell,
offer, contract or grant any option to sell, pledge, transfer or
establish an open "put equivalent position" within the meaning of Rule
16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or
announce the offering of, or file any registration statement under the
Securities Act in respect of, any Equity Shares, ADSs, ADRs, options or
warrants to acquire Equity Shares, ADSs, ADRs or securities exchangeable
or exercisable for or convertible into Equity Shares, ADSs, ADRs (other
than as contemplated by this Agreement and the Deposit Agreement with
respect to the Offered ADSs); provided, however, that the Company may
issue shares of its Equity Shares or options to purchase its Equity
Shares, or Equity Shares upon exercise of
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options, pursuant to any stock option, stock bonus or other stock plan or
arrangement described in the Prospectus.
(k) Future Reports to the Representatives. During the period of
five years hereafter the Company will furnish to the Representatives c/o
NationsBanc Montgomery Securities LLC at 600 Montgomery Street, San
Francisco, CA 94111, Attention: Mark Kuperschmid: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of
the close of such fiscal year and statements of income, stockholders'
equity and cash flows for the year then ended and the opinion thereon of
the Company's independent public or certified public accountants; (ii) as
soon as practicable after the filing thereof, copies of each Annual
Report on Form 20-F, Current Report on Form 6-K or other report filed by
the Company with the Commission, the NASD or any securities exchange; and
(iii) as soon as available, copies of any report or communication of the
Company mailed generally to holders of its capital stock.
(l) Company to Provide Copy of the Prospectus in Form That May be
Downloaded from the Internet. The Company shall cause to be prepared and
delivered, at its expense, within one business day from the effective
date of this Agreement, to NationsBanc Montgomery Securities LLC and any
other Representatives or Underwriters with the consent of NationsBanc
Montgomery Securities LLC an "electronic Prospectus" to be used by the
Underwriters in connection with the offering and sale of Offered ADSs. As
used herein, the term "electronic Prospectus" means a form of Prospectus,
and any amendment or supplement thereto, that meets each of the following
conditions: (i) it shall be encoded in an electronic format, satisfactory
to NationsBanc Montgomery Securities LLC that may be transmitted
electronically by NationsBanc Montgomery Securities LLC and the other
Underwriters to offerees and purchasers of the Offered ADSs; and (ii) it
shall disclose the same information as the paper Prospectus and
Prospectus filed pursuant to EDGAR, except to the extent that graphic
image material cannot be disseminated electronically, in which case such
graphic and image material shall be replaced in the electronic Prospectus
with a fair and accurate narrative description or tabular representation
of such material, as appropriate.
Section 4. Payment of Expenses. The Company agrees to pay all
costs, fees and expenses incurred in connection with the performance of its
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Offered ADSs and ADRs (including all printing and
engraving costs), (ii) all fees and expenses of the Depositary, and registrar
and transfer agent of the Equity Shares, Offered ADSs and ADRs (if different),
(iii) all necessary issue, transfer and other stamp taxes in connection with
the issuance and sale of the Equity Shares and related Offered ADSs and ADRs
to the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants, financial advisors and
other advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), the ADS Registration Statement, each preliminary
prospectus and the Prospectus, and all amendments and supplements thereto, and
this Agreement, (vi) all filing fees, attorneys' fees and expenses incurred by
the Company or the Underwriters in connection with qualifying or registering
(or obtaining exemptions from the qualification or registration of) all or any
part of the Offered ADSs or ADRs for offer and sale
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under the Blue Sky laws, and, if requested by the Representatives preparing
and printing a "Blue Sky Survey" or memorandum, and any supplements thereto,
advising the Underwriters of such qualifications, registrations and
exemptions, (vii) the filing fees incident to, and the reasonable fees and
expenses of counsel for the Underwriters in connection with, the NASD's review
and approval of the Underwriters' participation in the offering and
distribution of the Offered ADSs and ADRs, (viii) the fees and expenses
associated with including the Offered ADSs on the Nasdaq National Market and
the listing of the Equity Shares underlying the Offered ADSs on the Indian
Exchanges, (ix) all fees associated with review and approval of the Offering
by Indian federal, state and local authorities, (x) other out of pocket
expenses incurred by the Underwriters in connection with the transactions
contemplated by this Agreement provided that such expenses shall not exceed
$______ ($______ if the Underwriters' overallotment option is exercised) and
(xi) all other fees, costs and expenses referred to in Item 13 of Part II of
the Registration Statement. Except as provided in this Section 4, Section 6,
Section 8 and Section 9 hereof, the Underwriters shall pay their own expenses,
including the fees and disbursements of their counsel.
Section 5. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Offered
ADSs as provided herein on the First Closing Date and, with respect to the
Optional ADSs, the Second Closing Date, shall be subject to the accuracy of
the representations and warranties on the part of the Company set forth in
Section 1 hereof as of the date hereof and as of the First Closing Date as
though then made and, with respect to the Optional ADSs, as of the Second
Closing Date as though then made, to the timely performance by the Company of
its covenants and other obligations hereunder, and to each of the following
additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the
Representatives shall have received from KPMG Peat Marwick, independent
public or certified public accountants for the Company, a letter dated
the date hereof addressed to the Underwriters, in form and substance
satisfactory to the Representatives, containing statements and
information of the type ordinarily included in accountant's "comfort
letters" to underwriters, delivered according to Statement of Auditing
Standards No. 72 (or any successor bulletin), with respect to the audited
and unaudited financial statements and certain financial information
contained in the Registration Statement, the ADS Registration Statement
(if any) and the Prospectus (and the Representatives shall have received
an additional three conformed copies of such accountants' letter for each
of the several Underwriters).
(b) Compliance with Registration Requirements; No Stop Order; No
Objection from NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional ADSs, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by
Rule 424(b) under the Securities Act; or the Company shall have filed
a post-effective amendment to the Registration Statement containing
the information required by such Rule 430A, and such post-effective
amendment shall have become effective; or, if the Company elected to
rely upon Rule 434 under the Securities Act and obtained the
Representatives' consent thereto, the Company shall have filed a Term
Sheet with the Commission in the manner and within the time period
required by such Rule 424(b);
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<PAGE>
(ii) no stop order suspending the effectiveness of the
Registration Statement, the ADS Registration Statement, any Rule
462(b) Registration Statement, or any post-effective amendment to the
Registration Statement or the ADS Registration Statement, shall be in
effect and no proceedings for such purpose shall have been instituted
or threatened by the Commission or any other regulatory authority; and
(iii) the NASD shall have raised no objection to the fairness
and reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the
period from and after the date of this Agreement and prior to the First
Closing Date and, with respect to the Optional ADSs, the Second Closing
Date:
(i) in the judgment of the Representatives there shall not have
occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any
securities of the Company or any of its subsidiaries by any
"nationally recognized statistical rating organization" as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act.
(d) Opinion of U.S. Counsel for the Company. On each of the First
Closing Date and the Second Closing Date the Representatives shall have
received the favorable opinion of Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, U.S. counsel for the Company, dated as of such
Closing Date, the form of which is attached as Exhibit A (and the
---------
Representatives shall have received an additional three conformed copies
of such counsel's legal opinion for each of the several Underwriters).
(e) Opinion of Indian Counsel for the Company. On each of the
First Closing Date and the Second Closing Date the Representatives shall
have received the favorable opinion of Crawford Bayley & Co., Indian
counsel for the Company, dated as of such Closing Date, the form of which
is attached as Exhibit B (and the Representatives shall have received an
---------
additional three conformed copies of such counsel's legal opinion for
each of the several Underwriters).
(f) Opinion of U.S. Counsel for the Underwriters. On each of the
First Closing Date and the Second Closing Date the Representatives shall
have received the favorable opinion of Latham & Watkins, U.S. counsel for
the Underwriters, dated as of such Closing Date, the form of which is
attached as Exhibit C (and the Representatives shall have received an
---------
additional three conformed copies of such counsel's legal opinion for
each of the several Underwriters).
(g) Opinion of Indian Counsel for the Underwriters. On each of the
First Closing Date and the Second Closing Date the Representatives shall
have received the favorable opinion of Nishith Desai Associates, Indian
counsel for the Underwriters, dated as of such Closing Date, the form of
which is attached as Exhibit D (and the
---------
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Representatives shall have received an additional three conformed copies
of such counsel's legal opinion for each of the several Underwriters).
(h) Opinion of Counsel to Depository. On each of the First Closing
Date and the Second Closing Date the Representatives shall have received
the favorable opinion of Dewey Ballantine, counsel for the Depositary,
dated as of such Closing Date, the form of which is attached as Exhibit E
---------
(and the Representatives shall have received an additional three
conformed copies of such counsel's legal opinion for each of the several
Underwriters).
(i) Officers' Certificate. On each of the First Closing Date and
the Second Closing Date the Representatives shall have received a written
certificate executed by the Chairman and Managing Director (Chief
Executive Officer) of the Company and the Senior Vice President and Head -
Finance & Administration (Chief Financial Officer) of the Company, dated
as of such Closing Date, to the effect set forth in subsections (b)(ii)
and (c)(ii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement
and prior to such Closing Date, there has not occurred any Material
Adverse Change;
(ii) the representations, warranties and covenants of the
Company set forth in Section 1 of this Agreement are true and
correct with the same force and effect as though expressly made on
and as of such Closing Date; and
(iii) the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date.
(j) Bring-down Comfort Letter. On each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives
shall have received from KPMG Peat Marwick, independent public or
certified public accountants for the Company, a letter dated such date,
in form and substance satisfactory to the Representatives, to the effect
that they reaffirm the statements made in the letter furnished by them
pursuant to subsection (a) of this Section 5, except that the specified
date referred to therein for the carrying out of procedures shall be no
more than three business days prior to the First Closing Date or Second
Closing Date, as the case may be (and the Representatives shall have
received an additional three conformed copies of such accountants' letter
for each of the several Underwriters).
(k) Lock-Up Agreement from Certain Stockholders of the Company. On
or prior to the date hereof, the Company shall have furnished to the
Representatives an agreement in the form of Exhibit F hereto from each
---------
director (other than directors who do not own Equity Shares or rights to
purchase Equity Shares on the date of this Agreement) and executive officer
and certain family members of the Company's directors, and such agreement
shall be in full force and effect on each of the First Closing Date and the
Second Closing Date.
(l) Deposit Agreement. The Deposit Agreement shall be in full force
and effect. The Depositary shall have furnished or caused to be furnished
to you certificates
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<PAGE>
satisfactory to you evidencing: (x) the deposit with the custodian named
in the Deposit Agreement of the Equity Shares being so deposited against
issuance of ADRs evidencing Offered ADSs to be delivered by the Company
at the Closing Date; (y) the execution, issuance, signature and delivery
of ADRs evidencing the Offered ADSs pursuant to the Deposit Agreement;
and (z) such other matters related thereto as you may reasonably request.
(m) Additional Documents. On or before each of the First Closing
Date and the Second Closing Date, the Representatives and counsel for the
Underwriters shall have received such information, documents and opinions
as they may reasonably require for the purposes of enabling them to pass
upon the issuance and sale of the Offered ADSs as contemplated herein, or
in order to evidence the accuracy of any of the representations and
warranties, or the satisfaction of any of the conditions or agreements,
herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional ADSs, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
Section 6. Reimbursement of Underwriters' Expenses. If this
Agreement is terminated by the Representatives pursuant to Section 5, Section
7, Section 10 or Section 11 or if the sale to the Underwriters of the Offered
ADSs on the First Closing Date is not consummated because of any refusal,
inability or failure on the part of the Company to perform any agreement
herein or to comply with any provision hereof, the Company agrees to reimburse
the Representatives and the other Underwriters (or such Underwriters as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by the
Representatives and the Underwriters in connection with the proposed purchase
and the offering and sale of the Offered ADSs, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses,
postage, facsimile and telephone charges.
Section 7. Effectiveness of this Agreement. This Agreement shall
not become effective until the later of (i) the execution of this Agreement by
the parties hereto and (ii) notification by the Commission to the Company and
the Representatives of the effectiveness of the Registration Statement and the
ADS Registration Statement under the Securities Act. Prior to such
effectiveness, this Agreement may be terminated by any party by notice to each
of the other parties hereto, and any such termination shall be without
liability on the part (a) of the Company to any Underwriter, except that the
Company shall be obligated to reimburse the expenses of the Representatives
and the Underwriters pursuant to Sections 4 and 6 hereof, (b) of any
Underwriter to the Company, or (c) of any party hereto to any other party
except that the provisions of Section 8 and Section 9 shall at all times be
effective and shall survive such termination.
Section 8. Indemnification.
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(a) Indemnification of the Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter, its officers and employees,
and each person, if any, who controls any Underwriter within the meaning
of the Securities Act and the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other United States federal or state statutory law or
regulation or Indian federal or state statutory law or regulation, or at
United States or Indian common law or otherwise (including in settlement
of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such loss, claim, damage, liability
or expense (or actions in respect thereof as contemplated below) arises
out of or is based (i) upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
ADS Registration Statement or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434
under the Securities Act, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in
whole or in part upon any inaccuracy in the representations and
warranties of the Company contained herein; or (iv) in whole or in part
upon any failure of the Company to perform its obligations hereunder or
under law; or (v) any act or failure to act or any alleged act or failure
to act by any Underwriter in connection with, or relating in any manner
to, the Offered ADSs or the Offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability
or action arising out of or based upon any matter covered by clause (i)
or (ii) above, provided that the Company shall not be liable under this
clause (v) to the extent that a court of competent jurisdiction shall
have determined by a final judgment that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to
act undertaken or omitted to be taken by such Underwriter through its
gross negligence or willful misconduct; and to reimburse each Underwriter
and each such controlling person for any and all expenses (including the
fees and disbursements of counsel chosen by NationsBanc Montgomery
Securities LLC) as such expenses are reasonably incurred by such
Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing
indemnity agreement shall not apply to any loss, claim, damage, liability
or expense to the extent, but only to the extent, arising out of or based
upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representatives expressly for
use in the Registration Statement, the ADS Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the
benefit of any Underwriter from whom the person asserting any loss,
claim, damage, liability or expense purchased Offered ADSs, or any person
controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 2 and a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to
21
<PAGE>
have been delivered, at or prior to the written confirmation of the sale
of the Offered ADSs to such person, and if the Prospectus (as so amended
or supplemented) would have cured the defect giving rise to such loss,
claim, damage, liability or expense. The indemnity agreement set forth in
this Section 8(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers who
signed the Registration Statement or the ADS Registration Statement, and
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, against any loss, claim, damage,
liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the
Securities Act, the Exchange Act, other United States federal or state
statutory law or regulation or Indian federal or state statutory law or
regulation, or at United States or Indian common law or otherwise
(including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof
as contemplated below) arises out of or is based upon any untrue or
alleged untrue statement of a material fact contained in the Registration
Statement, the ADS Registration Statement, preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or arises out of or
is based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, the
ADS Registration Statement, any preliminary prospectus, the Prospectus
(or any amendment or supplement thereto), in reliance upon and in
conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company,
or any such director, officer or controlling person for any legal and
other expense reasonably incurred by the Company, or any such director,
officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. The Company hereby acknowledges that the
only information that the Underwriters have furnished to the Company
expressly for use in the Registration Statement, the ADS Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) are the statements set forth (A) as the last one
paragraph on the inside front cover page of the Prospectus concerning
stabilization and passive market making by the Underwriters and (B) in
the table in the first paragraph and as the second paragraph under the
caption "Underwriting" in the Prospectus; and the Underwriters confirm
that such statements are correct. The indemnity agreement set forth in
this Section 8(b) shall be in addition to any liabilities that each
Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 8 of notice of
the commencement of any action, such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
for contribution or otherwise than under the indemnity agreement
contained in this Section 8 or to the
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<PAGE>
extent it is not prejudiced as a proximate result of such failure. In
case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in, and, to
the extent that it shall elect, jointly with all other indemnifying
parties similarly notified, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional
to those available to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action
on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such
indemnifying party's election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will
not be liable to such indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to
the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the
indemnifying party (NationsBanc Montgomery Securities LLC in the case of
Section 8(b) and Section 9), representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement
of the action, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall
not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party against any loss, claim, damage, liability or
expense by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel as contemplated by Section 8(c) hereof, the
indemnifying party agrees that it shall be liable for any settlement of
any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with
such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement, compromise or consent to the entry of judgment in any
pending or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or
could have been sought hereunder by such indemnified party, unless such
settlement, compromise or consent includes an unconditional release of
such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
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Section 9. Contribution.
If the indemnification provided for in Section 8 is for any reason
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, from the offering of the Offered ADSs pursuant to this Agreement or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Underwriters, on the other hand, in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Underwriters, on the other hand, in connection with the offering of the
Offered ADSs pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Offered ADSs pursuant to this Agreement (before deducting expenses) received by
the Company, and the total underwriting discount received by the Underwriters,
in each case as set forth on the front cover page of the Prospectus (or, if Rule
434 under the Securities Act is used, the corresponding location on the Term
Sheet) bear to the aggregate initial public offering price of the Offered ADSs
as set forth on such cover. The relative fault of the Company, on the one hand,
and the Underwriters, on the other hand, shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact or any
such inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company, on the one hand, or the Underwriters, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Offered ADSs underwritten by
it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
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fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
Schedule A. For purposes of this Section 9, each officer and employee of an
- ----------
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement or the ADS Registration
Statement, and each person, if any, who controls the Company with the meaning of
the Securities Act and the Exchange Act shall have the same rights to
contribution as the Company.
Section 10. Default of One or More of the Several Underwriter. If,
on the First Closing Date or the Second Closing Date, as the case may be, any
one or more of the several Underwriters shall fail or refuse to purchase
Offered ADSs that it or they have agreed to purchase hereunder on such date,
and the aggregate number of Offered ADSs which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of
the aggregate number of the Offered ADSs to be purchased on such date, the
other Underwriters shall be obligated, severally, in the proportions that the
number of Firm ADSs set forth opposite their respective names on Schedule A,
----------
bears to the aggregate number of Firm ADSs set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Offered ADSs which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase on such date. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the Underwriters shall fail or refuse to purchase Offered ADSs and
the aggregate number of Offered ADSs with respect to which such default occurs
exceeds 10% of the aggregate number of Offered ADSs to be purchased on such
date, and arrangements satisfactory to the Representatives and the Company for
the purchase of such Offered ADSs are not made within 48 hours after such
default, this Agreement shall terminate without liability of any party to any
other party except that (i) the defaulting Underwriter shall bear liability
for its default and (ii) the provisions of Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
In any such case either the Representatives or the Company shall have the
right to postpone the First Closing Date or the Second Closing Date, as the
case may be, but in no event for longer than seven days in order that the
required changes, if any, to the Registration Statement, the ADS Registration
Statement and the Prospectus or any other documents or arrangements may be
effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 11. Termination of this Agreement. Prior to the First
Closing Date this Agreement maybe terminated by the Representatives by notice
given to the Company if at any time (i) trading or quotation in any of the
Company's securities shall have been suspended or limited by the Commission or
by the Nasdaq Stock Market or the Indian Exchanges, or trading in securities
generally on any of the Nasdaq Stock Market, the New York Stock Exchange or
one of the Indian Exchanges shall have been suspended or limited, or minimum
or maximum prices shall have been generally established on any of such stock
exchanges by the Commission, the NASD or any Indian regulatory authorities;
(ii) a general banking moratorium shall have been
25
<PAGE>
declared by any United States, Indian, New York or California authorities;
(iii) there shall have occurred any outbreak or escalation of United States,
Indian or other international hostilities or any crisis or calamity, or any
change in the United States, Indian or international financial markets, or any
substantial change or development involving a prospective substantial change
in United States, Indian or international political, financial or economic
conditions, as in the judgment of the Representatives is material and adverse
and makes it impracticable to market the Offered ADSs in the manner and on the
terms described in the Prospectus or to enforce contracts for the sale of
securities; (iv) in the judgment of the Representatives there shall have
occurred any Material Adverse Change; or (v) the Company shall have sustained
a loss by strike, fire, flood, earthquake, accident or other calamity of such
character as in the judgment of the Representatives may interfere materially
with the conduct of the business and operations of the Company regardless of
whether or not such loss shall have been insured. Any termination pursuant to
this Section 11 shall be without liability on the part of (a) the Company to
any Underwriter, except that the Company shall be obligated to reimburse the
expenses of the Representatives and the Underwriters pursuant to Sections 4
and 6 hereof, (b) any Underwriter to the Company, or (c) of any party hereto
to any other party except that the provisions of Section 8 and Section 9 shall
at all times be effective and shall survive such termination.
Section 12. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of its or their partners, officers or
directors or any controlling person, as the case may be, and will survive
delivery of and payment for the Offered ADSs sold hereunder and any
termination of this Agreement.
Section 13. Notices. All communications hereunder shall be in
writing and shall be mailed, hand delivered or telecopied and confirmed to the
parties hereto as follows:
If to the Representatives:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
USA
Facsimile: (415) 249-5558
Attention: Richard A. Smith
with a copy to:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
USA
Facsimile: (415) 913-6241
Attention: Jack Levin, Esq.
and a copy to:
26
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Latham & Watkins
75 Willow Road
Menlo Park, CA 94025
Facsimile: (650) 463-2600
Attention: Anthony J. Richmond, Esq.
If to the Company:
Infosys Technologies Limited
Electronics City, Hosur Road
Bangalore-561 229
INDIA
Facsimile: (91) 80-852-0362
Attention: Managing Director (Chief Executive Officer)
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Facsimile: (650) 493-6811
Attention: Jeffrey D. Saper, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 14. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 8 and Section 9,
and in each case their respective successors, and no other person will have
any right or obligation hereunder. The term "successors" shall not include any
purchaser of the Offered ADSs as such from any of the Underwriters merely by
reason of such purchase.
Section 15. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement
shall not affect the validity or enforceability of any other Section,
paragraph or provision hereof. If any Section, paragraph or provision of this
Agreement is for any reason determined to be invalid or unenforceable, there
shall be deemed to be made such minor changes (and only such minor changes) as
are necessary to make it valid and enforceable.
Section 16. (a) Governing Law Provisions. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, UNITED STATES OF AMERICA APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SUCH STATE.
27
<PAGE>
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions
contemplated hereby ("Related Proceedings") may be instituted in the
federal courts of the United States of America located in the City and
County of San Francisco or the courts of the State of California in each
case located in the City and County of San Francisco (collectively, the
"Specified Courts"), and each party irrevocably submits to the exclusive
jurisdiction (except for proceedings instituted in regard to the
enforcement of a judgment of any such court (a "Related Judgment"), as to
which such jurisdiction is non-exclusive) of such courts in any such
suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be
effective service of process for any suit, action or other proceeding
brought in any such court. The parties irrevocably and unconditionally
waive any objection to the laying of venue of any suit, action or other
proceeding in the Specified Courts and irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such
suit, action or other proceeding brought in any such court has been
brought in an inconvenient forum. Each party not located in the United
States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of America, as its agent to receive
service of process or other legal summons for purposes of any such suit,
action or proceeding that may be instituted in any state or federal court
in the City and County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding,
each party irrevocably waives, to the fullest extent permitted by
applicable law, all immunity (whether on the basis of sovereignty or
otherwise) from jurisdiction, service of process, attachment (both before
and after judgment) and execution to which it might otherwise be entitled
in the Specified Courts, and with respect to any Related Judgment, each
party waives any such immunity in the Specified Courts or any other court
of competent jurisdiction, and will not raise or claim or cause to be
pleaded any such immunity at or in respect of any such Related Proceeding
or Related Judgment, including, without limitation, any immunity pursuant
to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
Section 17. Judgment Currency. If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder into any
currency other than U.S. dollars, the parties hereto agree and subject to
receipt of any necessary approval of the Reserve Bank of India (which the
Company hereby agrees to use its best efforts to obtain at the earliest
possible date), to the fullest extent that they may effectively do so, that
the rate of exchange used shall be the rate at which in accordance with normal
banking procedures any Underwriter could purchase U.S. dollars with such other
currency in New York City on the business day preceding that on which final
judgment is given, net of any related fees on exchange.
The obligation of the Company in respect of any sum due from the
Company to any Underwriter, or of any Underwriter in respect of any sum due from
such Underwriter to the Company shall, notwithstanding any judgment in a
currency other than U.S. dollars, not be discharged until the first business
day, following receipt by such Underwriter or the Company, respectively, of any
sum adjudged to be so due in such other currency, on which (and only to the
extent that) such Underwriter or the Company, respectively, may in accordance
with normal banking procedures purchase U.S. dollars with such other currency;
if the U.S. dollars so
28
<PAGE>
purchased are less than the sum originally due to such Underwriter or the
Company, respectively, hereunder, the Company or any such Underwriter,
respectively, agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify such Underwriter or the Company, respectively, against
such loss. If the U.S. dollars so purchased are greater than the sum
originally due to such Underwriter or the Company, respectively, hereunder,
such Underwriter and the Company, respectively, agrees to pay to the Company
or such Underwriter, respectively, an amount equal to the excess of the U.S.
dollars to purchased over the sum originally due to such Underwriter or the
Company, respectively, hereunder.
Section 18. General Provisions. This Agreement constitutes the
entire agreement of the parties to this Agreement and supersedes all prior
written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may be
executed in two or more counterparts, each one of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement may not be amended or modified unless in
writing by all of the parties hereto, and no condition herein (express or
implied) may be waived unless waived in writing by each party whom the
condition is meant to benefit. The Table of Contents and the Section headings
herein are for the convenience of the parties only and shall not affect the
construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8, the contribution provisions of Section
9 and the governing law and consent to jurisdiction provisions of Section 16,
and is fully informed regarding said provisions. Each of the parties hereto
further acknowledges that the provisions of said Sections 8 and 9 hereto fairly
allocate the risks in light of the ability of the parties to investigate the
Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, the ADS Registration
Statement, any preliminary prospectus and the Prospectus (and any amendments and
supplements thereto), as required by the Securities Act and the Exchange Act.
* * * *
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
INFOSYS TECHNOLOGIES LIMITED
By:___________________________________
Managing Director (Chief Executive Officer)
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives in San Francisco, California as of the date first above
written.
NATIONSBANC MONTGOMERY SECURITIES LLC
BANCBOSTON ROBERTSON STEPHENS
BT ALEX. BROWN & SONS, INC.
THOMAS WEISEL PARTNERS LLC
Acting as Representatives of the
several U.S. Underwriters named in
the attached Schedule A.
By NATIONSBANC MONTGOMERY SECURITIES LLC
By:_____________________________
Authorized Signatory
S-1
<PAGE>
SCHEDULE A
Number of
U.S. Firm ADSs
U.S. Underwriters to be Purchased
NationsBanc Montgomery Securities LLC........... [___]
BancBoston Robertson Stephens................... [___]
BT Alex. Brown Incorporated..................... [___]
Thomas Weisel Partners LLC...................... [___]
Total........................................ [___]
S-2
<PAGE>
EXHIBIT A
The final form of the full opinion to be attached as
Exhibit A at the time this Agreement is executed.
Opinion of U.S. counsel for the Company to be delivered pursuant to
Section 5(d) of the Underwriting Agreement. Such opinion shall address the laws
of the United States and the laws of the State of New York. To the extent
required in providing such opinion and if permitted by the Representatives, such
U.S. counsel for the Company may rely on certain opinions of Indian counsel for
the Company.
References to the Prospectus in this Exhibit A include any supplements
---------
thereto at the Closing Date.
(i) The Underwriting Agreement has been duly executed and delivered by
the Company.
(ii) The Deposit Agreement has been duly executed and delivered by the
Company. Assuming the Deposit Agreement has been duly authorized by the
Company, the Deposit Agreement is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
as rights to indemnification thereunder may be limited by applicable law and
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(iii) Each of the Registration Statement, the ADS Registration Statement
and the Rule 462(b) Registration Statement, if any, has been declared
effective by the Commission under the Securities Act, and the Form 8-A
Registration Statement has been declared effective by the Commission under the
Exchange Act. No stop order suspending the effectiveness of either of the
Registration Statement, the ADS Registration Statement, the Rule 462(b)
Registration Statement, if any, or the Form 8-A Registration Statement has
been issued under the Securities Act or the Exchange Act, as applicable, and,
to the best knowledge of such counsel, no proceedings for such purpose have
been instituted or are pending or are contemplated or threatened by the
Commission. Any required filing of the Prospectus and any supplement thereto
pursuant to Rule 424(b) under the Securities Act has been made in the manner
and within the time period required by such Rule 424(b).
(iv) The Registration Statement, including any Rule 462(b) Registration
Statement, the ADS Registration Statement, the Prospectus, and each amendment
or supplement to the Registration Statement and/or the ADS Registration
Statement and the Prospectus, as of their respective effective or issue dates
(other than the financial statements and supporting schedules included therein
or in exhibits to the Registration Statement or the ADS Registration
Statement, as to which no opinion need be rendered) comply as to form in all
material respects with the applicable requirements of the Securities Act.
(v) The Offered ADSs have been approved for inclusion on the Nasdaq
National Market.
(vi) The statements in the Prospectus under the captions "Risk Factors--
Restrictions of U.S. Immigration," "Risk Factors--Intellectual Property
Rights," "Risk Factors--Equity
A-1
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Shares Eligible for Future Sale," "Management's Discussion and Analysis and
Results of Operations--Liquidity and Capital Resources," "Business--Legal
Proceedings," "Business--Intellectual Property," "Management--Benefit Plans--
1998 Stock Option Plan," "Certain Transactions," "Taxation--United States
Federal Taxation," "Equity Shares Eligible For Future Sale" and
"Underwriting," insofar as such statements constitute matters of United
States federal or state law, summaries of legal matters, documents or legal
proceedings, or legal conclusions, has been reviewed by such counsel and
fairly present and summarize, in all material respects, the matters referred
to therein.
(vii) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement or the ADS Registration
Statement, other than those disclosed therein.
(viii) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or the ADS Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed or incorporated by
reference as exhibits thereto; and the descriptions thereof and references
thereto are correct in all material respects.
(ix) No consent, approval, authorization or other order of, or
registration or filing with, any United Sates federal or state court or
other governmental authority or agency, is required for the Company's
execution, delivery and performance of the Underwriting Agreement and the
Deposit Agreement and consummation of the transactions contemplated thereby
and by the Prospectus, except as required under the Securities Act,
applicable United States state securities or blue sky laws and from the NASD
(all of which have been made or obtained and are in full force and effect).
(x) The execution and delivery of the Underwriting Agreement and the
Deposit Agreement by the Company and the performance by the Company of its
obligations thereunder (other than performance by the Company of its
obligations under the indemnification section of the Underwriting Agreement
and Deposit Agreement, as to which no opinion need be rendered) will not
result in any violation of any United States federal or state law,
administrative regulation or administrative or court decree applicable to the
Company.
(xi) The Company is not, and after receipt of payment for the Offered
ADSs will not be, an "investment company" within the meaning of Investment
Company Act.
(xii) The ADRs conform to the requirements of the Deposit Agreement and
the Nasdaq National Market.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement, the ADS Registration Statement, the Prospectus,
and any supplements or amendments thereto, and related matters were discussed
and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement, the ADS Registration Statement or the
Prospectus (other than as specified above), and any
A-2
<PAGE>
supplements or amendments thereto, on the basis of the foregoing, nothing has
come to their attention which would lead them to believe that either the
Registration Statement, the ADS Registration Statement or any amendments
thereto, at the time the Registration Statement, the ADS Registration
Statement or such amendments became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or at the First Closing Date or the Second Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements or schedules or other financial and statistical data
derived therefrom, included in the Registration Statement, the ADS
Registration Statement or the Prospectus or any amendments or supplements
thereto).
A-3
<PAGE>
EXHIBIT B
The final form of the full opinion to be attached as
Exhibit B at the time this Agreement is executed.
Opinion of Indian counsel for the Company to be delivered pursuant to
Section 5(e) of the Underwriting Agreement.
References to the Prospectus in this Exhibit B include any supplements
---------
thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly existing
and in good standing as a company under the laws of India and has all
corporate power and authority necessary to conduct its businesses and to
own, lease and operate its properties as described or contemplated in the
Prospectus.
(ii) The Company has a Equity and issued capitalization as set forth
in the Prospectus and such capitalization complies with Indian law. The
summary of the Charter Documents and Indian law set forth in the
Prospectus is accurate and complete in all material respects. The
authorized share capital of the Company (including the Equity Shares, the
ADSs and the ADRs) conforms to the description thereof under the heading
"Description of Equity Shares" in the Prospectus.
(iii) The shares of capital stock of the Company outstanding prior
to the issuance of the Equity Shares represented by the ADSs have been
duly and validly authorized, are validly issued and outstanding, are
fully paid and nonassessable, conform to the description thereof
contained in the Prospectus and, to the best of our knowledge after due
inquiry, have been issued in compliance with the registration and
qualification requirements of Indian securities laws. The Equity Shares
represented by the ADSs and deposited pursuant to the Deposit Agreement
in accordance with the Underwriting Agreement (the "Deposited Shares")
have been duly and validly authorized by the Company, and when such
Equity Shares are issued and delivered upon payment in accordance with
the terms of the Underwriting Agreement, such Equity Shares will be duly
and validly issued and outstanding, fully paid, and nonassessable, rank
pari passu with the other Equity Shares outstanding[, except as
specifically indicated to the contrary in the Prospectus,] and will not
be subject to any Lien, encumbrance, preemptive right, equity, call right
or other claim, and there are no restrictions on the voting or transfer
of the Deposited Shares, the ADSs or the ADRs, except as described in the
Prospectus. The Deposited Shares, when deposited pursuant to the Deposit
Agreement in accordance with the Underwriting Agreement, will continue to
be validly issued and outstanding and fully paid and nonassessable and
will entitle the holders thereof to the rights specified in the ADSs, the
ADRs and the Deposit Agreement. There are no restrictions on the transfer
of the Deposited Shares, the ADSs or the ADRs, except as fully and
accurately described in the Prospectus. The form of certificate for the
Equity Shares conforms to the requirements of Indian law and the Charter
Documents of the Company, and the ADSs and the ADRs conform to the
requirements of the Deposit Agreement and the Indian Exchanges. The ADSs
have been approved for listing on the Indian Exchanges.
B-1
<PAGE>
(iv) There are neither any preemptive nor other similar rights to
subscribe for or to purchase any of the Deposited Shares, the ADSs or the
ADRs, except for rights that have been validly waived, nor any restrictions
on the voting or transfer of any of the Equity Shares, in either case,
pursuant to the Charter Documents of the Company or any agreement known to
us to which the Company is a party, and the deposit of such Equity Shares
pursuant to the Deposit Agreement will not give rise to any such preemptive
or other similar rights or restrictions.
(v) The Company has full power and authority to enter into and
perform its obligations under the Underwriting Agreement and the Deposit
Agreement (together, the "Principal Agreements"). The Principal Agreements
have been duly authorized, executed and delivered by the Company and,
assuming they are valid and binding agreements under laws of the State of
New York by which they are expressed to be governed, the Principal
Agreements constitute valid and binding agreements of the Company,
enforceable in accordance with their terms subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles, save that the said Principal Agreements
will only be admissible in evidence in India for the purposes of
enforcement if they are duly stamped in accordance with the Indian Stamp
Act, 1899 and the Karnataka Stamp Act, 1957 within three months from the
date of their first receipt in India with the proper Stamp Duty chargeable
thereon. The Deposit Agreement, the ADSs and the ADRs conform to the
description thereof in the Prospectus. The Deposit Agreement is in proper
legal form for enforcement against the Company in India, subject to the
aforesaid qualification regarding payment of stamp duties. The ADSs and
the ADRs are in proper legal form for enforcement against the Company in
India. The Depositary and any holder or owner of ADSs or ADRs issued under
the Deposit Agreements are each entitled to sue as plaintiff in the Indian
courts for the enforcement of their respective rights against the Company
and such access will not be subject to any conditions which are not
applicable to Indian persons.
(vi) The execution, delivery and performance by the Company of
the Principal Agreements and the consummation of the transactions
contemplated thereby (including the issuance of the Equity Shares to be
represented by the ADSs, the deposit of such Equity Shares pursuant to the
Deposit Agreement, the issuance and sale of the ADSs and the issuance of
the ADRs) will not conflict with, result in the creation or imposition of
any lien, charge or encumbrance upon any of the assets of the Company
pursuant to the terms of, result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or by which the Company is bound or to which
any of the property or assets of the Company is subject, nor will such
action result in a violation of the Charter Documents of the Company or of
any Indian law or of any order, rule or regulation of any Indian court or
governmental body or agency having jurisdiction over the Company, or its
properties or assets or the rules and regulations of the Indian Exchanges.
(vii) No consent, approval, authorization or order of, or filing,
registration or qualification with, any Indian court or governmental
agency or body is required for the execution, delivery and performance of
the Principal Agreements, the issuance or sale of the Deposited Shares or
the ADSs, the issuance of the ADRs and the consummation of
B-2
<PAGE>
the transactions contemplated by the Principal Agreements, except such
consents, approvals, authorizations, orders, filings, registrations or
qualifications listed in Schedule I hereto (all of which have been
obtained or made and continue to be in full force and effect).
(viii) Each of the Registration Statement, the ADS Registration
Statement, the Rule 462(b) Registration Statement, if any, and the
Prospectus has been duly approved by the Board of Directors of the Company,
and each of the Registration Statement, the ADS Registration Statement and
the Rule 462(b) Registration Statement, if any, and the Prospectus has been
duly executed by the officers and directors of the Company set forth on the
signature pages thereto.
(ix) The execution and delivery by the respective parties to the
Principal Agreements and the performance by such parties of the obligations
thereunder and the consummation of the transactions contemplated by such
agreements will not result in a breach or violation of any of the terms and
provisions of, any applicable Indian law or, to the best of such counsel's
knowledge, any judgment, order or decree of any governmental agency or body
in India or any Indian court, stock exchange or self-regulatory
organization in India having jurisdiction over such parties or any of their
properties.
(x) Except as described in the Prospectus, no stamp or other
issuance or transfer taxes or duties and no capital gains, income,
withholding or other taxes are payable by or on behalf of the Underwriters
to India or to any political subdivision or taxing authority thereof or
therein in connection with (A) the deposit with the Depositary of the
Equity Shares against the issuance of ADSs or ADRs, (B) the purchase of the
ADSs by the Underwriters, (C) the sale and delivery by the Underwriters of
the ADSs or ADRs to the initial purchasers thereof, or (D) the consummation
of any other transactions contemplated in the Principal Agreements in
connection with the issuance and sale of the ADSs or the issuance of the
ADRs.
(xi) The indemnification and contribution provisions set forth in
Sections 8 and 9 of the Underwriting Agreement do not contravene Indian law
or public policy.
(xii) Except as described in the Prospectus, all dividends and
other distributions declared and payable on the Deposited Shares may under
current Indian laws and regulations be paid to the custodian of the
Depositary in Indian rupees that may be converted into foreign currency and
freely transferred out of India; all such dividends and other distributions
made to holders of Equity Shares, ADSs or ADRs who are non-residents of
India will not be subject to Indian income, withholding or other taxes
under Indian laws and regulations and are otherwise free and clear of any
other tax duty, withholding or deduction, without the necessity of
obtaining any Indian governmental authorization in India.
(xiii) The Indian courts will observe and give effect to the
choice of the law of the State of New York as the governing law of the
Principal Agreements.
(xiv) The Company has the power to submit, and has taken all
necessary action to submit, to the jurisdiction of any Specified Court and
to appoint CT Corporation
B-3
<PAGE>
System as its agent for service of process. The waiver by the Company of
any objection to venue of a proceeding in any Specified Court is valid
and legally binding. Service of process effected in the manner set forth
in the Underwriting Agreement, assuming it is valid under New York law,
will be effective, subject to the Indian procedural laws governing
service of process, to confer valid personal jurisdiction over the
Company. The Company and the holders of Equity Shares, ADSs or ADRs can
sue and be sued in their own names under the laws of India. The
irrevocable submission by the Company to the jurisdiction of any
Specified Court constitutes a valid and legally binding obligation of the
Company so long as such submission to jurisdiction is not contrary to
Indian public policy, and we have no reason to believe that such
submission to jurisdiction is contrary to Indian public policy. Any
judgment obtained in a Specified Court arising out of or in relation to
the obligations of the Company under the Principal Agreements, as the
case may be, or the transactions contemplated thereby will be recognized
and enforced by Indian courts subject to what is provided under the
caption "Enforceability of Civil Liabilities" in the Prospectus.
(xv) The Principal Agreements are in proper legal form for
enforcement against the Company in India, and any Underwriter in respect of
the Underwriting Agreement and each of the Depositary and any holder of
ADSs or ADRs in respect of the Deposit Agreements is entitled to sue as
plaintiff in the Indian courts for the enforcement of their respective
rights against the Company, and such access will not be subject to any
conditions which are not applicable to Indian persons. None of the
Underwriters is or will be deemed to be resident, domiciled, carrying on
business or subject to taxation in India by reason of the ownership of
Equity Shares, ADSs or ADRs or the entry into, performance and/or
enforcement of this Agreement.
(xvi) The Company is subject to civil and commercial law with
respect to its obligations under the Principal Agreements, the ADSs and the
ADRs. The execution and delivery by the Company and the performance by the
Company of its obligations thereunder constitute private and commercial
acts rather than governmental or public acts, and neither the Company, any
subsidiary of the Company nor any of their respective properties enjoys any
right of immunity in any jurisdiction in India from suit, judgment,
execution on a judgment or attachment (whether before judgment or in aid of
execution) in respect of such obligations.
(xvii) To the best of our knowledge after due inquiry and except
as described in the Prospectus, there are no litigation or governmental
proceedings pending or threatened against the Company or any subsidiary of
the Company which, if determined adversely to the Company, would
individually or in the aggregate have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company or on the ability of the Company to perform its obligations under
the Principal Agreements.
(xviii) To the best of our knowledge after due inquiry, the
Company and its subsidiaries have all material licenses, permits,
certificates, franchises and other approvals or authorizations from all
regulatory officials and bodies that are necessary to the conduct of their
businesses and to the ownership or lease of their properties as described
or contemplated in the Prospectus.
B-4
<PAGE>
(xix) To the best of such counsel's knowledge, after due inquiry,
the Company has complied in all material respects with its Charter
Documents and, except as described in the Prospectus, with each of its
documents of title to its properties, mortgages, deeds of trust, and loan
agreements and there exists no default under any such documents of title,
mortgages, deeds of trust or loan agreements which has not been waived
nor has the Company nor any such subsidiary received any notice of
default with respect thereto.
(xx) The statements (A) in the Prospectus under the captions
"Enforcement of Civil Liabilities," "Risk Factors--Risks Related to
Investments in Indian Securities," "Risk Factors--Risks Associated with
Possible Acquisitions," "Risk Factors--Restrictions on Exercise of
Preemptive Rights by ADS Holders," "Risk Factors--Control by Principal
Shareholders, Officers and Directors; Anti-Takeover Provisions,"
"Dividend Policy," "Price Range of Equity Shares," "Management's
Discussion and Analysis and Results of Operations--Liquidity and Capital
Resources," "Management's Discussion and Analysis and Results of
Operations--Income Tax Matters," "Business--Facilities," "Business--
Intellectual Property," "Business--Legal Proceedings," "Management,"
"Certain Transactions," "Description of Equity Shares," "Restrictions on
Foreign Ownership of Indian Securities," "Government of India Approvals"
and "Taxation--Indian Taxation," and (B) in Item 14 and Item 15 of the
Registration Statement, insofar as such statements constitute a summary
of legal documents or matters of Indian law or regulations or legal
conclusions with respect thereto, are complete and accurate and are
confirmed in all material respects.
(xxi) [To the best of our knowledge after due inquiry, there are
no persons with registration or other similar rights to have any equity or
debt securities Equity for sale under the Registration Statement or the ADS
Registration Statement or included in the offering contemplated by the
Underwriting Agreement, except for such rights as have been duly waived].
(xxii) It is not necessary (a) in order to enable the
Underwriters or any of them to exercise or enforce any of their rights
under the Underwriting Agreement; (b) to enable the Depositary or the
holders or owners of ADSs to exercise or enforce any of its rights under
the Deposit Agreement and (c) by reason of the entry into and/or
performance of the Underwriting Agreement or the Deposit Agreement that any
or all of the Underwriter's or the Depositary or the holders or owners of
ADSs should be licensed, qualified or entitled to do business in India.
(xxxiii) None of the Purchasers or the Depositary is or will be
resident, domiciled, carrying on business or subject to taxation in India
by reason only of the entry into, performance and/or enforcement of the
Principal Agreements.
In addition, we have participated in conferences with officers and other
representatives of the Company, representatives of the independent public or
certified public accountants for the Company and with representatives of the
Underwriters at which the contents of the Registration Statement, the ADS
Registration Statement, the Prospectus, and any supplements or amendments
thereto, and related matters were discussed and, although we are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement, the ADS
Registration Statement or the Prospectus (other than as specified above), and
any supplements or amendments thereto, on the
B-5
<PAGE>
basis of the foregoing, nothing has come to our attention which would lead us
to believe that either the Registration Statement, the ADS Registration
Statement or any amendments thereto, at the time the Registration Statement,
the ADS Registration Statement or such amendments became effective, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus, as of the date hereof, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that we express no
belief as to the financial statements or schedules or other financial and
statistical data derived therefrom, included in the Registration Statement,
the ADS Registration Statement or the Prospectus or any amendments or
supplements thereto).
B-6
<PAGE>
EXHIBIT C
The final form of the full opinion shall be attached as
Exhibit C at the time this Agreement is executed.
Opinion of U.S. counsel for the Underwriters to be delivered pursuant
to Section 5(f) of the Underwriting Agreement. Such opinion shall address the
laws of the United States and the laws of the State of New York. To the extent
required in providing and opinion and if permitted by the Representatives, such
U.S. counsel for the Underwriters may rely on certain opinions of Indian counsel
for the Underwriters.
References to the Prospectus in this Exhibit C include any supplements
---------
thereto at the Closing Date.
[to come]
C-1
<PAGE>
EXHIBIT D
The final form of the full opinion to be attached as
Exhibit D at the time this Agreement is executed.
Opinion of Indian counsel for the Underwriters to be delivered
pursuant to Section 5(g) of the Underwriting Agreement. Such opinion shall
address the federal and state laws of India.
References to the Prospectus in this Exhibit D include any supplements
---------
thereto at the Closing Date.
[To come]
D-1
<PAGE>
EXHIBIT E
The final opinion in draft form to be attached as
Exhibit E at the time this Agreement is executed.
Opinion of counsel for the Depositary to be delivered pursuant to
Section 5(h) of the Underwriting Agreement. Such opinion shall address the laws
of the United States.
(i) the ADRs, when issued against the deposit of Equity Shares which
at the time of such deposit are (i) duly authorized and validly issued, fully
paid and nonassessable and (ii) not subject to the registration provisions of
the Securities Act of 1933, as amended, or with respect to which there has been
compliance with such provisions, will be legally issued and will entitle the
holders thereof to the rights specified therein.
[additional opinions to come]
E-1
<PAGE>
LOCK UP AGREEMENT
EXHIBIT F
__________, 1999
NationsBanc Montgomery Securities LLC
As representative of the several underwriters
600 Montgomery Street
San Francisco, California 94111
Re: Infosys Technologies Limited
----------------------------
Ladies & Gentlemen:
Infosys Technologies Limited (the "Company") proposes to carry out a public
offering of American Depositary Shares (the "Offering") for which you will act
as representative of the underwriters (the "Underwriters"). The undersigned is
an owner of record or beneficial owner of certain equity shares of the Company
or securities convertible into or exchangeable or exercisable for equity shares
including, without limitation, any related American Depositary Shares or
securities convertible into or exchangeable or exercisable for such American
Depositary Shares (collectively, "Company Stock"), or is an executive officer or
director of the Company. The undersigned recognizes that the Offering will be
of benefit to the undersigned and will benefit the Company by, among other
things, raising additional capital for its operations. The undersigned
acknowledges that you are relying on the representations and agreements of the
undersigned contained in this letter in carrying out the Offering and in
entering into the underwriting arrangements with the Company with respect to the
Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of NationsBanc
Montgomery Securities LLC (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale) pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-1(h)
under the Securities Exchange Act of 1934, as amended, or otherwise dispose of
any Company Stock, currently or hereafter owned either of record or beneficially
(as defined in Rule 13d-3 under Securities Exchange Act of 1934, as amended) by
the undersigned, or publicly announce the undersigned's intention to do any of
the foregoing (all of the foregoing being collectively referred to herein as a
"Transfer"), for a period commencing on the date hereof and continuing to a date
180 days after the first date any of the American Depositary Shares to be sold
in the Offering are released by you for sale to the public. The undersigned also
agrees and consents to the entry of stop transfer instructions with the
Company's transfer agent and registrar against the transfer of Company Stock
held by the undersigned except in compliance with the foregoing restrictions.
It is expressly understood that this agreement applies to all transactions,
whether it be transactions related to equity shares in India or related to
American Depositary Shares in the United States, except transactions involving
shares of Company Stock purchased in the open market and not otherwise in breach
of this lock up agreement.
Notwithstanding the foregoing, (i) if the undersigned is an individual,
he or she may transfer any or all of the Company Stock either during his or her
lifetime or upon death, by gift, will or intestacy, to his
F-1
<PAGE>
or her immediate family or to a trust, the beneficiaries of which are
exclusively the undersigned and/or members of his or her immediate family, or
(ii) if the undersigned is a corporation or a partnership, it may transfer any
or all the Company Stock as a distribution to partners or shareholders of the
undersigned; provided, however, that in any such case it shall be a condition
-------- -------
to the transfer that the transferee execute an agreement stating that the
transferee is receiving and holding the Company Stock subject to the
provisions of this lock up agreement, and there shall be no further transfer
of such Company Stock except in accordance herewith.
This agreement shall be governed by the laws of the State of California
and is irrevocable and will be binding on the undersigned and the respective
successors, heirs, personal representatives and assigns of the undersigned.
The undersigned understands that the Company and the Underwriters will
proceed toward the proposed Offering in reliance upon this lock up agreement.
If the effective date of the Registration Statement (as such term is defined
in the Underwriting Agreement between the Company and the Underwriters
relating to the Offering) has not occurred on or before October 31, 1999, then
this lock up agreement shall be null and void.
Dated:_________________, 1999
__________________________________________
Printed Name of Holder
By:_______________________________________
Signature
__________________________________________
Printed Name of Person Signing
(and indicate capacity of person signing if signing as
custodian, trustee, or on behalf of an entity)
F-2
<PAGE>
EXHIBIT 3.1
THE COMPANIES ACT, 1956
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
INFOSYS TECHNOLOGIES LIMITED
CONSTITUTION
TABLE A NOT TO APPLY BUT COMPANY TO BE GOVERNED BY THESE ARTICLES
1. No regulations contained in Table A, in the first Schedule to the Companies
Act, 1956 shall apply to this Company, but the regulations for the
management of this Company and for the observance of the members thereof
and their representatives, shall, subject to any exercise of the statutory
powers of the Company with reference to the repeal or alteration of, or
addition to, its regulations by Special Resolution, as prescribed by the
Companies Act, 1956, be such as are contained in these Articles.
INTERPRETATION
INTERPRETATION CLAUSE
2. 1) In the Interpretation of these Articles, unless repugnant to the
subject or context:-
"THE ACT" AND THE SAID ACT"
"The Act" or the said Act" and reference to any section or provision
thereof respectively means and includes the Companies Act, 1956 (1 of
1956) and any statutory modification or re-enactment thereof for the
time being in force and reference to the section or provisions of the
said Act or such statutory modification.
"AUDITORS"
"Auditors" means and includes those persons appointed as such for the
time being by the Company.
"BOARD"
"Board" or "Board of Directors means a meeting of the Directors duly
called and constituted, or as the case may be, the Directors assembled
at the Board or the Directors of the Company collectively.
"CAPITAL"
"Capital" means the share capital for the time being raised or
authorised to be raised for the purpose of the Company.
<PAGE>
2
"THE COMPANY" OR "THIS COMPANY"
"The Company" or "This Company" means INFOSYS TECHNOLOGIES LIMITED.
"DIRECTORS"
"Directors" means the Directors for the time being of the Company or
as the case may be the Directors assembled at a Board.
"DIVIDEND"
"Dividend" includes bonus.
"GENDERS"
Words importing the masculine gender also include the feminine gender.
"IN WRITING"
"In writing" and "written" include printing or lithography or any
other modes of representing or reproducing words in visible form.
"MONTH"
"Month" means calendar month.
"OFFICE"
"Office" means the Registered Office for the time being of the
Company.
"PAID UP"
"Paid up" includes credited as paid-up.
"PERSONS"
"Persons" includes corporations as well as individuals.
"THE REGISTRAR"
"The Registrar" means the Registrar of Companies of the State in which
the office of the Company if for the time being situate.
"SEAL"
"Seal" means the common seal for the time being of the Company.
"SINGULAR NUMBER"
Words importing the singular number include where the context admits
or requires, the plural number and vice versa.
"YEAR" AND "FINANCIAL YEAR"
"Year" means the calendar year and "Financial Year" shall have the
meaning assigned thereto by Section 2(17) of the Act.
"THESE PRESENTS"
"These Presents" means these articles as modified from time to time.
2) Unless the context otherwise requires words and expressions contained in
the Articles shall bear the same meaning as in the Act.
3) The marginal notes used in these Articles shall not affect the construction
hereof. Save as aforesaid, any words or expressions defined in the Act,
shall, if not inconsistent with the subject or context, bear the same
meaning in these Articles.
a) That at the end of the existing Article 2(1) the following sub-clauses
shall be inserted namely:
"Beneficial owner" shall mean beneficial owner as defined in Clause
(a) of sub-Section (1) of Section 2 of the Depositories Act, 1996.
Depositories Act, 1996 shall include any statutory modification or re-
enactment thereof and Depository shall mean a Depository as defined
under Clause (e) of sub-section (1) of Section 2 of the Depositories
Act, 1996.
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON
JANUARY 6, 1998
b) That the following new definition be added at the end of Article 2(1)
"Shareholder" or "Member" means the duly registered holder of the
shares from time to time and includes the subscribers to the
Memorandum of Association of the company and the beneficial owner(s)
as defined in clause (a) of sub-section(1) of Section 2 of the
Depositories Act, 1996.
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON
JANUARY 6, 1998
CAPITAL AND INCREASE AND REDUCTION OF CAPITAL
3). "The Authorized Share Capital of the company is Rs. 50,00,00,000 (Rupees
fifty crores only) divided into 5,00,00,000 (five crores only) Equity
Shares of Rs. 10 each (Rupees ten only) with powers to increase or reduce
the same in accordance with the provisions of the Companies Act, 1956".
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 20,
1999
"The company shall be entitled to dematerialize its existing shares,
rematerialize its shares held in the Depositories and/or to offer its fresh
shares in a dematerialized form pursuant to the Depositories Act, 1996 and
the rules framed thereunder, if any".
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6,
1998
<PAGE>
3
INCREASE OF CAPITAL OF THE COMPANY AND HOW CARRIED INTO EFFECT
4. The Company in General Meeting, may from time to time, increase its capital
by the creation of new shares, such increase to be of such aggregate amount
and to be divided into shares of such amounts as the resolution shall
prescribe. Subject to the provisions of the act, any shares of the original
or increased capital shall be issued upon such terms and conditions and
with such rights and privileges annexed thereto, as the General Meeting
resolving upon the creation thereof shall prescribe and if no direction be
given, as the Directors shall determine and in particular, such shares may
be issued with a preferential or qualified right to dividends, and in the
distribution of assets of the Company and with a right of voting at General
Meetings of the Company, in conformity with Sections 87 and 88 of the Act.
Whenever the capital of the Company has been increased under the provisions
of these Articles, the Directors shall comply with the provisions of
Section 97 of the Act.
ALLOTMENT OTHERWISE THAN FOR CASH
5. Subject to the provisions of the Act and these Articles, the Directors may
allot and issue shares in the capital of the Company as payment or part-
payment for any property or assets of any kind whatsoever, sold or to be
sold or transferred or to be transferred or for goods or machinery supplied
or to be supplied or for services rendered or to be rendered or for
technical assistance or know-how made or to be made available to the
Company or the conduct of its business and shares which may be so allotted
may be issued as fully or partly paid-up otherwise than in cash and if so
issued, shall be deemed to be fully or partly paid as the case may be.
ADDITIONAL CAPITAL TO FORM PART OF EXISTING CAPITAL
6. Except so far as otherwise provided by the conditions of issue or by these
presents, any capital raised by the creation of new shares, shall be
considered as part of the existing capital, and shall be subject to the
provisions herein contained, with reference to the payment of calls and
installments, forfeiture, lien, surrender, transfer and transmission,
voting and otherwise.
REDEEMABLE PREFERENCE SHARES
7. Subject to the provisions of Section 80 of the Act, the Company shall have
the power to issue Preferential Shares which are or at the option of the
Company are to be liable to be redeemed and the resolution authorising such
issue shall prescribe the manner, terms and conditions of redemption.
REDUCTION OF CAPITAL
8. The Company may (subject to the provisions of Sections 78, 80, 100 to 105
inclusive, of the Act) from time to time by Special Resolution, reduce its
capital and any Capital Redemption Reserve Account or Share Premium Account
in any manner for the time being authorised by law, and in particular,
capital may be paid off on the footing that it may be called up again or
otherwise. This Article is not to derogate from any power the Company would
have if it were omitted.
VARIATION OF RIGHTS
9. If at any time the share capital is divided into different classes of
shares, all or any of the rights and privileges attached to the shares of
any class may subject to the provisions of Sections 106 and 107 be varied,
commuted, affected, dealt with or abrogated with the consent in writing of
the holders of not less than three-fourths of the issued shares of that
<PAGE>
4
class or with the sanction of a Special Resolution at a separate meeting of
the holders of the issued shares of that class.
ISSUE OF FURTHER PARI PASSU SHARES NOT TO AFFECT THE RIGHT OF SHARES
ALREADY ISSUED
10. The rights conferred upon the holders of the shares of any class issued
with preferred or any other rights shall not, unless, otherwise expressly
provided by the terms of issue of that class, be deemed to be varied by the
creation or issue of further shares ranking pari passu therewith.
SUB-DIVISION AND CONSOLIDATION OF SHARES
11. Subject to the provisions of Section 94 of the Act, the Company in General
Meeting may from time to time, sub-divide or consolidate its shares, or any
of them, and the resolution whereby any share is sub-divided, may determine
that, as between the holders of the shares resulting from such sub-division
one or more of such shares shall have some preference or special advantage
as regards dividend, capital or otherwise over or as compared with the
other or others. Subject as aforesaid the Company in General Meeting may
also cancel shares which have not been taken or agreed to be taken by any
person and diminish the amount of its share capital by the amount of shares
so cancelled. The cancellation of shares in pursuance of this Article shall
not be deemed to be a reduction of the share capital.
11A. The Directors are hereby authorised to issue Equity Shares or Debentures
(whether or not convertible into equity shares) for offer and allotment to
such of the officers, employees and workers of the Company as the Directors
may select or the trustees of such trust as may be set up for the benefit
of the officers; employees and workers in accordance with the terms and
conditions of such scheme, plan or proposal as the Directors may formulate.
Subject to the consent of the Stock Exchanges and of the Securities
Exchange Board of India, the Directors may impose the condition that the
shares in or debentures of the Company so allotted shall not be
transferable for a specified period.
SHARES AND CERTIFICATES
SHARES TO BE NUMBERED PROGRESSIVELY AND NO SHARES TO BE SUB-DIVIDED
12. The shares in the capital shall be numbered progressively according to
their several denominations and except in the manner hereinbefore mentioned
no share shall be sub-divided. Every forfeited or surrendered share shall
continue to bear the number by which the same was originally distinguished.
SHARES AT THE DISPOSAL OF THE DIRECTORS
13. Subject to the provisions of these Articles and the Act, the shares in the
capital of the Company for the time being (including any shares forming
part of any increased capital of the Company) shall be under the control of
the Directors who may issue, allot or otherwise dispose of the same or any
one of them to such persons in such proportion and on such terms and
conditions and either at a premium or at par or (subject to compliance with
the provisions of the Act) at a discount and at such times as they may from
time to time think fit and proper and with the sanction of the Company in
General Meeting to give to any person the option to call for or allotted
shares of any class of the Company either at par or at premium or subject
as aforesaid at a discount during such time and for such consideration and
such option being exercisable at such times as the Directors think fit; and
any shares which may be so allotted may be issued as fully paid-up shares
and if so issued shall be deemed to be fully paid-up shares. The Board
shall cause to be filed the returns as to allotment provided for in Section
75 of the Act. Provided that the option or right to call of
<PAGE>
5
shares shall not be given to any person except With the sanction of the
company in the General Meeting.
ACCEPTANCE OF SHARES
14. Any application signed by, or on behalf of, an applicant for shares in the
Company followed by an allotment of any shares therein, shall be an
acceptance of shares within the meaning of these Articles; and every person
who thus or otherwise accepts any shares and whose name is entered in its
Register of Members shall, for the purpose of these Articles, be a member
of the Company.
DEPOSIT AND CALL, ETC. TO BE A DEBT PAYABLE IMMEDIATELY
15. The money (if any) which the Directors shall, on the allotment of any
shares being made by them, require or direct to be paid by way of deposits,
call or otherwise, in respect of any shares allotted by them, shall,
immediately on the inscription of the name of the allottee in the Register
of Members as the holder of such shares, become a debt due to and
recoverable by the Company from the allottee thereof and shall be paid by
him accordingly.
LIABILITY OF MEMBERS
16. Every member, or his heirs, executors, administrators or other
representatives, shall pay to the Company the portion of the capital
represented by his share or shares, which may, for the time being, remain
unpaid thereon, in such amounts, at such time or times, and in such manner
as the Directors shall, from time to time, in accordance with the Company's
Regulations require or fix for the payment thereof.
SHARE CERTIFICATE
17 a) The share certificates shall be issued in market lots and where share
certificates are issued in either more or less than market lots, sub-
division or consolidation of share certificates into market lots shall
be done free of charge.
b) Any two or more joint allottees of a share shall, for the purposes
of this Article, be treated as a single Member, and the certificate of
any share which may be the subject of joint ownership, may be
delivered to any one of such joint owners on behalf of all of them.
For any further certificate the Board shall be entitled but shall not
be bound, to prescribe a charge not exceeding Rupee One. The Company
shall comply with the provisions of Section 113 of the Act.
c) A Directors may sign a share certificate by affixing his signature
thereon by means of any machine, equipment or other mechanical means,
such as engraving in metal or lithography, but not by means of a
rubber stamp, provided that the Director shall be responsible for the
safe custody of such machine, equipment or other material used for the
purpose.
RENEWAL OF SHARE CERTIFICATE
18. a) No fee shall be charged for issue of new share certificates in
replacement of those which are old, decrepit, worn-out or where the
cages on the reverse of the share certificates for recording transfers
have been fully utilised.
b) When a new share certificate has been issued in pursuance of Clause
(a) of this Article, it shall state on the face of it and against the
stub or counterfoil to the effect
<PAGE>
6
that it is "Issued in lieu of Share Certificate No______
sub-divided/replaced/on consolidation of shares.
If a share certificate is lost or destroyed, a new certificate in lieu
thereof shall be issued only with the prior consent of the Board and
on payment of such fee, not exceeding Rupees two as the Board may from
time to time fix, and on such terms, if any, as to evidence and
indemnity as to payment of such out-of-pocket expenses incurred by the
Company in investigating evidence, as the Board thinks fit.
When a new share certificate has been issued in pursuance of Clause
(c) of this Article, it shall state on the face of it and against the
stub or counterfoil to the effect that it is "a duplicate issued in
lieu of share certificate No_________". The word "duplicate" shall be
stamped or punched in bold letters across the face of the share
certificate.
Where a new share certificate has been issued in pursuance of Clause
(a) or Clause (c) of this Article, particulars of every such share
certificate shall be entered in a Register of Renewed and Duplicate
Certificates indicating against the name or names of the person or
persons to whom the Certificate is issued the number and date of issue
of the share certificate in lieu of which the new certificate is
issued, and the necessary changes indicated in Register of Members by
suitable cross reference in the "Remarks" column.
All blank forms to be used for issue of share certificates shall be
printed and the printing shall be done only on the authority or a
resolution of the Board. The blank forms shall be consecutively
machine numbered and the forms and blocks, engravings, facsimiles and
hues relating to the printing of such forms shall be kept in the
custody of the Secretary or such other person as the Board may appoint
for the purposes; and the Secretary or the other person aforesaid
shall be responsible for rendering an account of these forms to the
Board.
The Managing Director of the Company for the time being or, if the
Company has no Managing Director, every Director of the Company shall
be responsible for the maintenance, preservation and safe custody of
all books an documents relating to the issue of share certificates
except the blank forms of share certificates referred to in sub-clause
(f).
h) All books referred to in sub-clause (9) shall be preserved in good
order permanently.
18(i) "The Shares in the Capital shall be numbered progressively according
to their several denominations, provided however, that the provisions
relating to progressive numbering shall not apply to the shares of the
company which are dematerialized or may be dematerialized in future or
issued in future in dematerialized form. Except in the manner hereinbefore
mentioned, no share shall be sub-divided. Every forfeited or surrendered
share held in material form shall continue to bear the number by which the
same was originally distinguished"
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6,
1998
DELIVERY OF SHARE/DEBENTURE CERTIFICATES
19. The Company shall within three months after the allotment of any of its
shares or debentures or debenture-stock and within one month after the
application for the registration of the transfer of any such shares or
debentures or debenture-stock, complete and have ready for delivery the
certificates of all shares, debentures or debenture stock allotted or
transferred unless the conditions of issue of shares or debentures or
debenture-stock otherwise provided. The expression "transfer" for the
purpose of this Article means, a transfer duly stamped and otherwise valid
and does not include any transfer which the Company is for any reason
entitled to refuse to register and does not register.
LIABILITY OF JOINT HOLDERS
20. If any share stands out in the names of two or more persons all the
joint holders of the share shall be severally as well as jointly liable
for the payment of all deposits, installments, and calls due in respect of
such shares, and for all incidents thereof according to the Company's
Regulations, but the person first named in the Register shall, as regards
receipt of dividend or bonus or service of notice, and all or any other
matters connected with the Company, except
<PAGE>
7
voting at meetings and the transfer of the shares, and any other matter by
the said Act or herein otherwise provided, be deemed the sole holder
thereof.
REGISTERED HOLDER ONLY THE OWNER OF THE SHARES
21. Except as ordered by a Court of competent jurisdiction or by law required,
the company shall be entitled to treat the person whose name appears on the
Register of Members as the holder of any share or whose name appears as the
beneficial owner of shares in the records of the Depository, as the
absolute owner thereof and accordingly shall not be bound to recognize any
benami, trust or equity or equitable, contingent or other claim to or
interest in such share on the part of any other person whether or not he
shall have express or implied notice thereof. The Board shall be entitled
at their discretion to register any shares in the joint names of any two or
more persons or the survivor or survivors of them.
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6,
1998
SHARE CERTIFICATE FOR JOINT MEMBERS
22. The Company shall not be bound to register more than three persons as the
joint holders of any share except in the case of executors or trustees of a
deceased member and in respect of a share held jointly by several persons
the Company shall not be bound to issue more than one certificate and
delivery of a certificate for a share to any one of the several joint
holders shall be sufficient delivery to all such holders.
FRACTIONAL CERTIFICATES
23. The Company may issue such fractional coupons as the Board may approve in
respect of any of the shares of the Company on such terms as the Board
thinks fit as to the period within which the fractional coupons are to be
converted into share certificates.
UNDERWRITING AND BROKERAGE - COMMISSION MAY BE PAID
24. Subject to the provisions of Section 76 of the Act, the Company may at any
time pay a commission to any person, in consideration of his subscribing or
agreeing to subscribe (whether absolutely or conditionally) for any shares
or debentures of the Company, or procuring, or agreeing to procure
subscriptions (whether absolute or conditional) for any shares or
debentures in the Company; But so that the commission shall not exceed in
case of shares five percent of the price at which the shares are issued and
in case of debentures two and a half percent of the price at which the
debentures are issued.
BROKERAGE
25. The Company may pay a reasonable sum for brokerage.
INTEREST OUT OF CAPITAL - INTEREST MAY BE PAID OUT OF CAPITAL
26. Where any shares are issued for purpose of raising money to defray the
expenses of the construction of any works or buildings or the provision of
any land, which cannot be made profitable for a lengthy period. the Company
may pay interest on so much of that share capital as is for the time being
paid up for the period, at the rate and subject to the conditions and
restrictions provided by Section 208 of the Act and may charge the same to
capital as part of the cost of construction of the works or buildings or
provision of plant.
<PAGE>
8
CALLS
DIRECTORS MAY MAKE CALLS
27. The Board may from time to time, subject to the terms on which any shares
may have been issued and subject to the conditions of allotment, by a
resolution passed at a meeting of the Board (and not by circular
resolution) make such calls as it thinks fit upon the Members in respect of
al! monies unpaid on the shares held by them respectively and each member
shall pay the amount of every call so made on him to the person or persons
and at the time and place appointed by the Board. A call may be made
payable by instalments.
NOTICE OF CALLS
28. Thirty days notice in writing of any call shall be given by the Company
specifying the time and place of payment, and the person or persons to whom
such calls shall be made.
CALLS TO DATE FROM RESOLUTION
29. A call shall be deemed to have been made at the time when the resolution
authorising such call was passed at a meeting of the Board.
CALL MAY BE REVOKED
30. A call may be revoked or postponed at the discretion of the Board.
LIABILITY OF JOINT HOLDERS
31. A joint-holder of a share shall be jointly and severally liable to pay all
calls in respect thereof.
DIRECTORS MAY EXTEND TIME
32. The Board may, from time to time at its discretion, extend the time fixed
for payment of any call, and may extend such time as to all or any of the
members who from residence at a distance or other cause, the Board may deem
fairly entitled to such extension save as a matter of grace and favour.
OVERDUE CALLS TO CARRY INTEREST
33. If any member fails to pay any call due from him on the day appointed for
payment thereof, or any such extension thereof as aforesaid, he shall be
liable to pay interest on the same from the day appointed for the payment
thereof to the time of actual payment at such rate as shall from time to
time be fixed by the Board but nothing in this Article shall render it
obligatory for the Board to demand or recover any interest from any such
member and the Board shall be at liberty to waive payment of such interest
either wholly or in part.
SUMS DEEMED TO BE CALLS
34. Any sum, which by the terms of issue of a share become payable on allotment
or at any fixed date, whether on account of the nominal value of the share
or by way of premium shall for the purposes of these Articles be deemed to
be a call duly made and payable on the date on which by the terms of issue
of the same becomes payable, and in the case of non-payment all the
relevant provisions of theses Articles as to payment of interest and
expenses, forfeiture or otherwise shall apply as if such sum had become
payable by virtue of a call duly made and notified.
<PAGE>
9
PART PAYMENT ON ACCOUNT OF CALL ETC. NOT TO PRECLUDE FORFEITURE
35. Neither a judgement nor a decree in favour of the company for calls or
other moneys due in respect of any shares nor any part payment or
satisfaction thereunder nor the receipt by the company of a portion of any
money which shall from time to time be due from any member to the company
in respect of his shares, either by way of principal or interest, nor any
indulgence granted by the Company in respect of payment of any such money,
shall preclude the company from thereafter.
PROOF ON TRIAL OR SUIT FOR MONEY ON SHARES
36. On the trial or hearing of any action or suit brought by the Company
against any member or his legal representative to recover any moneys
claimed to be due to the company for any call or other sum in respect of
his shares, it shall be sufficient to prove
a) that the name of the Member, in respect of whose shares the money is
ought to be recovered, appears entered in the Register of Members as
the holder Or one of the holders, at or subsequent to the date at
which the money sought to be recovered is alleged to have become due,
on the said shares;
b) that the resolution making the call is duly recorded in the minutes
books, and
c) that notice of such call was duly given to the Member or his legal
representatives issued in pursuance of these Articles; and that it
shall not be necessary to prove the appointment of the Directors who
made such call, nor that a quorum of Directors was present at the
Board at which such call was made, nor that the meeting at which such
call was made was duly convened or constituted nor any other matter
whatsoever, but the proof of the matters aforesaid shall be conclusive
evidence of the debt and the same shall be recovered by the company
against the Member or his representative from whom it is ought to be
recovered, unless it shall be proved, on behalf of such Member or his
representatives against the company that the name of such Member was
improperly inserted in the Register or that the money sought to be
recovered has actually been paid.
PAYMENT OF UNPAID SHARE CAPITAL IN ADVANCE
37. a) The Board may if it thinks fit, subject to the provisions of the Act,
agree to and receive from any Member willing to advance the same,
either in money or moneys worth the whole or any part of the amount
remaining unpaid on the shares held by him beyond the sum actually
called up and upon the moneys so paid or satisfied in advance, or so
much thereof, as from time to time and at any time thereafter exceeds
the amount of the calls then made upon and due in respect of the
shares on account of which such advances have been made, the Board may
pay or allow interest at such rate as the Member paying such advance
and the Board agree upon; provided always that if at any time after
the payment of any such money the rate of interest so agreed to be
paid to any such Member appears to the Board to be excessive, it shall
be lawful for the Board from time to time to repay to such Member so
much of such money as shall then exceed the amount of the calls made
upon such shares, unless there be an express agreement to the
contrary; and after such repayment such member shall be liable to pay,
and such shares shall be charged with the payment of all future calls
as if no such advance had been made; provided also that if at any time
after the payment of any money so paid in advance, the company shall
go into liquidation, either voluntary or otherwise, before the full
amount of the money so advanced shall have become due by the members
to the Company, on instalments or calls, or in any other manner, the
maker of such advance shall be entitled (as between himself and the
other Members) to receive back from the Company the full
<PAGE>
10
balance of such moneys rightly due to him by the Company in priority
to any payment to members on account of capital.
b) No Member paying any such sum in advance shall be entitled to any
voting rights, dividend or right to participate in profits in respect
of money so advanced by him until the same would but for such payment
become presently payable.
FORFEITURE AND SURRENDER OF AND LIEN ON SHARES
IF MONEY PAYABLE ON SHARE NOT PAID NOTICE TO BE GIVEN TO MEMBERS
38. If any Member fails to pay any call or instalment of call on or before the
day appointed for the payment of the same or any such extension thereof as
aforesaid, the Board may, at any time thereafter, during such time as the
call or instalment remains unpaid, give notice to him requiring him to pay
the same together with any interest that may have accrued and all expenses
that may have been incurred by the Company by reason of such non-payment.
TERMS OF NOTICE
39. The notice shall name a day (not being earlier than the expiry of fourteen
days from the date of service of notice) and a place or places on and at
which such call or instalment and such interest thereon at such rate as the
Directors shall determine from the day on which such call or instalment
ought to have been paid and expenses as aforesaid are to be paid. The
notice shall also state that, in the event of the non-payment at or before
the time and the place appointed, the share in respect of which the call
was made or instalment is payable will be liable to be forfeited:
IN DEFAULT OF PAYMENT, SHARES MAY BE FORFEITED
40. If the requirements of any such notice as aforesaid are not complied with,
every or any share in respect of which such notice has been given, may at
any time thereafter, but before payment of all calls or instalments,
interest and expenses due in respect thereof, be forfeited by a resolution
of the Board to that effect. Such forfeiture shall include all dividends
and bonuses declared in respect of the forfeited shares and not actually
paid before the forfeiture.
NOTICE OF FORFEITURE
41. When any share shall have been so forfeited, notice of the forfeiture shall
be given to the Member in whose name it stood immediately prior to the
forfeiture or to any of his legal representatives, or to any of the persons
entitled to the shares by transmission and an entry of the forfeiture, with
the date thereof, shall forthwith be made in the Register of Members but no
forfeiture, shall be in any manner invalidated by any omission or neglect
to give such notice or to make such entry as aforesaid.
FORFEITED SHARES TO BECOME PROPERTY OF THE COMPANY AND MAY BE SOLD, ETC.
42. Any share so forfeited shall be deemed to be the property of the Company
and may be sold, re-allotted or otherwise disposed of, either to the
original holder thereof or to any other person, upon such terms and in such
manner as the Board shall think fit.
MEMBERS STILL LIABLE TO PAY MONEY DUE NOTWITHSTANDING THE FORFEITURE
43. Any member whose shares have been forfeited shall, notwithstanding the
forfeiture, be liable to pay, and shall forthwith pay to the Company on
demand all calls, amounts, instalments,
<PAGE>
11
interest and expenses owing upon or in respect of such shares at the time
of the forfeiture, together with interest thereon from the time of the
forfeiture until payment, at such rate as the Board may determine and the
Board may enforce the payment thereof if it thinks fit.
EFFECT OF FORFEITURE
44. The forfeiture of a share shall involve extinction, at the time of the
forfeiture, of all interest in and of all claims and demands against the
Company, in respect of the share, and all other rights incidental to the
share, except only such of those rights as by these Articles are
expressly saved.
SURRENDER OF SHARES
45. The Directors may subject to the provisions of the Act, accept a
surrender of any shares from or by any Member desirous of surrendering
them on such terms as they think fit.
EVIDENCE OF FORFEITURE
46. A declaration in writing that the declarant is a Director or Secretary of
the Company and that a share in the Company has been duly forfeited in
accordance with these Articles on the date stated in the declaration,
shall be conclusive evidence of the facts therein stated as against all
persons claiming to be entitled to the share.
COMPANY'S LIEN ON SHARES
47. The Company shall have a first and paramount lien upon all the shares,
not being fully paid-up shares, registered in the name of each Member
(whether solely or jointly with another or others), and upon the proceeds
of sale thereof, for all moneys (whether presently payable or not) called
or payable at a fixed time in respect of such shares and no equitable
interest in any share shall be created except upon the footing and
condition that Article 21 hereof is to have full effect. Any such lien
shall extend to all dividends from time to time declared in respect of
such shares. Unless otherwise agreed, the registration of a transfer of
shares shall operate as a waiver of the Company's lien if any on such
shares. The Board of Directors may at any time declare any shares to be
exempt, wholly or partially from the provisions of this Article.
LIEN ENFORCED BY SALE
48. For the purpose of enforcing such lien, the Directors may sell the shares
subject thereto in such manner as they think fit and for that purpose may
cause to be issued a duplicate certificate in respect of such shares and
may authorise one of their member or some other person to execute a
transfer thereof on behalf of and in the name of such member. No such
sale shall be made until such time as the moneys in respect of which such
lien exists or some part thereof is presently payable or the liability in
respect of which such lien exists is liable to be presently fulfilled or
discharged and until notice in writing of the intention to sell shall
have been served on such Member, or his heirs, executors, administrators,
or other representatives or upon the persons (if any) entitled by
transmission to the shares or any one or more of such heirs, executors,
administrators, representatives or persons, and default shall have been
made by him or them in payment, fulfilment or discharge of such debts,
liabilities or engagements for fourteen days after such notice.
APPLICATION OF SALE PROCEEDS
49. The net proceeds of any such sale after payment of the costs of such sale
shall be applied in or towards the satisfaction of such debts,
liabilities or engagements and the residue (if any)
<PAGE>
12
paid to such Member, or any of his heirs, executors, administrators,
representatives or assigns or any of the persons (if any) entitled by
transmission to the shares sold.
VALIDITY OF SALE UNDER ARTICLES
50. Upon any sale after forfeiture or for enforcing a lien in purported
exercise of the powers hereinbefore given, the Board may appoint some
person to execute an instrument of transfer of the shares sold and cause
the purchaser's name to be entered in the Register in respect of the
Shares sold and the purchaser shall not be bound to see to the regularity
of the proceedings, or to the application of the purchase money and after
his name has been entered in the Register in respect of such shares, the
validity of the sale shall not be impeached by any person and the remedy
of any person aggrieved by the sale shall be in damages only in and
against the Company exclusively.
CANCELLATION OF SHARE CERTIFICATE IN RESPECT OF FORFEITED SHARES
51. Upon any sale, re-allotment or other disposal under the provisions of the
preceding Articles, the certificate or certificates originally issued in
respect of the relative shares shall (unless the same shall on demand by
the Company have been previously surrendered to it by the defaulting
Member) stand cancelled and become null and void and of no effect, and
the Directors shall be entitled to issue a new certificate or
certificates in respect of the said shares to the person or persons
entitled thereto.
POWER TO ANNUL FORFEITURE
52. The Board may at any time before any share so forfeited shall have been
sold, re-allotted or otherwise disposed of, annul the forfeiture thereof
upon such conditions as it thinks fit.
TRANSFER AND TRANSMISSION OF SHARES
REGISTER OF TRANSFERS
53. "The company shall keep a Register of Transfers and shall have recorded
therein fairly and distinctly particulars of every transfer or
transmission of any share held in material form".
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6,
1998 FORM OF TRANSFER
54. Shares in the Company shall be transferred by an instrument in writing in
such form as prescribed under Section 108 of the Companies Act, 1956, or
under rules made thereunder from time to time.
TO BE EXECUTED BY TRANSFEROR AND TRANSFEREE
55. The instrument of transfer duly stamped and executed by the transferor
and the transferee shall be delivered to the Company in accordance with
the provisions of the Act. The instrument of transfer shall be
accompanied by such evidence as the Board may require to prove the title
of the transferor and his right to transfer the shares and every
registered instrument of transfer shall remain in the custody of the
Company until destroyed by an order of the Board. The transferor shall be
deemed to be the holder of such shares until the name of the transferee
shall have been entered in the Register of Members in respect thereof.
Before the registration of a transfer, the certificate or certificates of
the shares must be delivered to the Company.
55 A "In the case of transfer or transmission of shares or other marketable
Securities where the company has not issued any certificates and where
such shares or Securities are being held in any electronic and fungible
form in a Depository, the provisions of the Depositories Act 1996 shall
apply"
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6,
1998
<PAGE>
13
DIRECTORS MAY REFUSE TO REGISTER TRANSFERS
56. Subject to the provisions of Section 111 of the Act, the Board, may at
its own absolute and uncontrolled discretion, and without assigning any
reason, decline to register or acknowledge any transfer of shares whether
fully paid or not, (notwithstanding that the proposed transferee be
already a Member), but in such cases it shall, within one month from the
date on which the instrument of transfer was lodged with the Company,
send to the transferee and the transferor notice of refusal to register
such transfer. Provided that registration of a transfer shall not be
refused on the ground that the transferor being either alone or jointly
with any other person or persons indebted to the Company on any account
whatsoever except on shares.
REFUSAL TO REGISTER TRANSFER
57. In particular and without prejudice to the generality of the above
powers, the Board may subject to the provisions of Section 111 of the
Companies Act, 1956 decline to register in exceptional circumstances when
it is felt that the transferee is not a desirable person from the larger
point of view of the interest of the Company as a whole subject to the
provisions of the clause (c) of subsection (4) of Section 22A of the
Securities Contract (Regulation) Act.
SUB-DIVISION/CONSOLIDATION IN MARKETABLE LOTS ONLY
58. Transfer of shares in whatever lot should not be refused, though there
would be no objection to the company refusing to split a share
certificate into several scrips of any small denominations or to consider
a proposal for transfer of shares comprised in a share certificate to
several parties, involving such splitting, if on the face of it such
splitting/transfer appears to be unreasonable or without a genuine need.
The Company should not, therefore, refuse transfer of shares in violation
of the Stock Exchange listing requirements on the ground that the number
of shares to be transferred is less than any specified number.
DEATH OF ONE OR MORE JOINT HOLDERS OF SHARES
59. In case of the death of any one or more of the persons named in the
Register of Members as the joint holders of any share, the survivor or
survivors shall be the only persons recognised by the Company as having
any title to or interest in such share, but nothing herein contained
shall be taken to release the estate or a deceased joint-holder for any
liability on shares held by him jointly with any other person.
TITLE TO SHARES OF DECEASED MEMBER
60. The executors or administrators or holders of a Succession Certificate or
the legal representatives of a deceased Member(not being one of two or
more joint-holders) shall be the only person recognised by the Company as
having any title to the shares registered in the name of such Member, and
the Company shall not be bound to recognise such executors or
administrators or holders of a Succession Certificate or the legal
representatives unless such executors or administrators or legal
representatives shall have first obtained Probate or Letter of
Administration or Succession Certificate, as the case may be, from a duly
constituted court in the Union of India provided that in case where the
Board in its absolute discretion think fit, the Board may dispense with
production of Probate or Letters of Administration or Succession
Certificate, upon such terms as to indemnity or otherwise as the Board in
its absolute discretion may think necessary and under Article 59 register
the name of any person who claims to be absolutely entitled to shares
standing in the name of a deceased Member, as a Member.
<PAGE>
14
NO TRANSFER TO INSOLVENT, ETC.
61. No share shall in any circumstances, be transferred to any insolvent or
person of unsound mind.
REGISTRATION OF PERSON ENTITLED TO SHARES OTHERWISE THAN BY TRANSFER
62. Subject to the provisions of the Act and Articles 59 end 60 any person
becoming entitled to shares in consequences of death, lunacy, bankruptcy
or insolvency of any Member, or by any lawful means other than by a
transfer in accordance with these Articles, may with the consent of the
Board (which it shall not be under any obligation to give) upon producing
such evidence that he sustains the character in respect of which he
proposes to act under this Article, or of his title, as the Board thinks
sufficient, either be registered himself as the holder of the shares or
elect to have some persons nominated by him and approved by the Board,
registered as such holder; provided nevertheless, that if such person
shall elect to have his nominee registered, he shall testify the election
by executing in favour of his nominee an instrument of transfer in
accordance with the provisions herein contained, and until he does so he
shall not be freed from any liability in respect of the shares.
PERSONS ENTITLED MAY RECEIVE DIVIDENDS WITHOUT BEING REGISTERED AS
MEMBERS
63. A person entitled to a share by transmission shall, subject to the right
of the Directors to retain such dividends or money as hereinafter
provided be entitled to receive, and may give a discharge for any
dividends or other moneys payable in respect of the shares.
FEE ON TRANSFER OR TRANSMISSION
64. No fee shall be charged for transfer and, transmission of Shares or for
registration of any of power of attorney, probate, letter of
administration or other similar documents.
THE COMPANY NOT LIABLE FOR DISREGARD OF A NOTICE PROHIBITING REGISTRATION
OF A TRANSFER
65. The Company shall incur no liability or responsibility whatever in
consequence of its registering or giving effect to any transfer of shares
made or purporting to be made by any apparent legal owner thereof (as
shown or appearing in the Register of Members) to the prejudice of a
person or persons having or claiming any equitable right, title or
interest to or in the said shares, notwithstanding that the Company may
have any notice of such equitable right, title or interest or notice
prohibiting registration of such transfer and may have entered such
notice or referred thereto, in any book of the company, and the Company
shall not be bound or required to regard or attend or give effect to any
notice which may be given to it of any equitable right, title or
interest, or be under any liability whatsoever for refusing or neglecting
so to do, though it may have been entered or referred to in some book of
the company, but the company shall nevertheless be at liberty to regard
and attend to any such notice, and give effect thereto if the Board shall
so think fit.
BORROWING POWERS
POWER TO BORROW
66. Subject to the provisions of Sections 58A, 292 and 293 of the Act and of
these Articles, the Board may, from time to time at its discretion, by a
resolution passed at a Meeting of the Board accept deposits from
Members, either in advance of call or otherwise, and generally raise or
borrow or secure the payment of any sum or sums of money for the purposes
of the company provided however, where the moneys to be borrowed together
with the moneys already borrowed (apart from temporary loans obtained
from the Company's bankers in the
<PAGE>
15
ordinary course of business) exceed the aggregate of the paid up capital
of the Company and its free reserves (that is to say, reserves not set
apart for any specific purpose) the Board shall not borrow such moneys
without the consent of the Company in General Meeting.
THE PAYMENT OR REPAYMENT OF MONIES BORROWED
67. The payment or repayment of moneys borrowed as aforesaid may be secured
in such manner and upon such terms and conditions in all respects as the
Board may think fit, and in particular by a resolution passed at a
meeting of the Board (and not by Circular Resolution) by the issue of
debentures of the Company, charged upon all or any part of the property
of the Company (both present and future) including its uncalled capital
for the time being, and debentures, and other securities may be made
assignable free from any equities between the Company and the person to
whom the same may be issued.
TERMS OF ISSUE OF DEBENTURES
68. Any debentures, debenture-stock or other securities may be issued at a
discount, premium or otherwise and maybe issued on condition that they or
any part of them shall be convertible into shares of any denomination,
and with any privileges and conditions as to redemption, surrender,
drawing, allotment of shares and attending (but not voting at) General
Meetings, appointment of Directors and otherwise. Debentures with a right
to conversion or allotment of shares shall be issued only with the
consent of the Company in General Meeting.
REGISTER OF MORTGAGES, ETC. TO BE KEPT
69. The Board shall cause a proper register to be kept in accordance with the
provisions of Section 143 of the Act of all mortgages, debentures and
charges specifically affecting the property of the Company; and shall
cause the requirements of Sections 118, 125, and 127 to 144 (both
inclusive) of the Act, in that behalf to be duly complied with (within
the time prescribed by the said sections of such extensions thereof as
may be permitted by the Company Law Board or the Court or the Registrar
as the case may be) so far as they fail to be complied with by the Board.
REGISTER AND INDEX OF DEBENTURE HOLDERS
70. The Company shall, if any time it issues debentures, keep a Register and
Index of Debenture holders in accordance with Section 152 of the Act. The
Company shall have the power to keep in any State or Country outside
India a Branch Register of Debenture-holders resident in that State or
Country.
SHARE WARRANT
POWER TO ISSUE SHARE WARRANTS
71. The Company may issue share warrants subject to, and in accordance with
the provisions of sections 114 and 115, and accordingly the Board may in
its discretion, with respect to any share which is fully paid-up on
application in writing signed by the persons registered as holder of the
share, and authenticated, by such evidence (if any) as the Board may,
from time to time, require as to the identity of the person signing the
application, and on receiving the certificate (if any) of the share, and
the amount of the stamp duty on the warrant and such fee as the Board may
from time to time require, issue a share warrant.
<PAGE>
16
DEPOSIT OF SHARE WARRANT
72. 1) The bearer of a share warrant may at any time deposit the warrant at
the office of the Company, and so long as the warrant remains so
deposited, the depositor shall have the same right of signing a
requisition for calling a meeting of the Company, and of attending,
and voting and exercising the other privileges of a Member at any
meeting held after the expiry of two clear days from the time of
deposit as if his name were inserted in the Register of Members as
the holder of the share included in the deposited warrant.
2) Not more than one person shall be recognised as depositor of the
share warrant.
3) The Company shall, on two days' written notice, return the deposited
share warrant to the depositor.
PRIVILEGES AND DISABILITIES OF THE HOLDERS OF SHARE WARRANT
73. 1) Subject as herein otherwise expressly provided, no person shall, as
bearer of a share warrant sign a requisition for calling a meeting
of the Company, or attend or vote or exercise any other privileges
of a Member at a meeting of the Company, or be entitled to receive
any notices from the Company.
2) The bearer of a share warrant shall be entitled in all other
respects to the same privileges and advantages as if he was named in
the Register of Members as the holder of the share included in the
warrant, and shall be a Member of the Company.
ISSUE OF NEW SHARE WARRANT OR COUPON
74. The Board may, from time to time, make rules as to the terms on which (if
it shall think fit) a new share warrant or coupon may be issued by way of
renewal in case of defacement, loss or destruction.
CONVERSION OF SHARE INTO STOCK AND RECONVERSION
SHARES MAY BE CONVERTED INTO STOCK
75. The Company in General Meeting may convert any paid-up shares into stock;
and when any shares have been converted into stock, the several holders
of such stock may thenceforth transfer their respective interest therein,
or any part of such interest, in the said manner and subject to the same
Regulations as, and subject to which shares from which the stock arose
might have been transferred if no such conversion had taken place, or as
near thereto as circumstance will admit. The Company may at any time
reconvert any stock into paid-up shares of any denomination.
RIGHT OF STOCKHOLDERS
76. The holders of stock shall, according to the amount of stock held by
them, have the same rights, privileges and advantages as regards
dividends, voting at meetings of the Company, and other matters, as if
they held the shares from which the stock arose, but no such privilege
advantage (except participation in the dividends and profits of the
Company and in the assets on winding-up) shall be conferred by an amount
of stock which would not, if existing in shares, have conferred that
privilege or advantage.
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17
MEMBERS' MEETINGS
ANNUAL GENERAL MEETING
77. Annual General Meeting of the company may be convened subject to Section
166 and Section 210 of the Act by giving not less than 21 days notice in
writing. Subject to the provisions of Section 171 (2) a meeting may be
convened after giving a shorter notice.
EXTRA ORDINARY GENERAL MEETING
78. The Board may, whenever it thinks fit, call an Extraordinary General
Meeting and it shall do so upon a requisition in writing by any Member or
Members holding in the aggregate not less than one tenth of such of the
paid-up capital; as at that date carried the right of voting in regard to
the matter in respect of which the requisition has been made.
REQUISITION OF MEMBERS TO STATE OBJECTS OF MEETING
79. Any valid requisition so made by the Members must state the object or
objects of the meeting proposed to be called, and must be signed by the
requisitionists and be deposited at the office; provided that such
requisition may consist of several documents in like form each signed by
one or more requisitionists.
ON RECEIPT OF REQUISITION, DIRECTORS TO CALL MEETING AND IN DEFAULT
REQUISITIONISTS MAY DO SO
80. Upon the receipt of any such requisition, the Board shall forthwith call
an Extraordinary General Meeting; and if it does not proceed within
twenty-one days from the date of the requisition being deposited at the
Office to cause a meeting to be called on a day not later than forty-five
days from the date of deposit of the requisition, the requisitionists, or
such of their number as represent either a majority in value of the paid-
up. share capital held by all of them or not less than one-tenth of such
of the paid-up share capital of the Company as is referred to in Section
169 (4) of the Act, whichever is less, may themselves call the meeting,
but in either case any meeting so called shall be held within three
months from the date of deposit of the requisition as aforesaid.
MEETING CALLED BY REQUISITIONISTS
81. Any meeting called under the foregoing Articles by the requisitionists
shall be called in the same manner, as nearly as possible, as that in
which meetings are to be called by the Board.
QUORUM AT GENERAL MEETING
82. Five members present in person shall be a quorum for a General Meeting.
BODY CORPORATE PERSONALLY PRESENT
83. A body corporate being a member shall be deemed to be personally present
if it is represented in accordance with Section 187 of the Act.
IF QUORUM NOT PRESENT MEETING TO BE DISSOLVED OR ADJOURNED
84. If, at the expiration of half an hour from the time appointed for holding
a meeting of the Company, a quorum shall not be present, the meeting it
convened by or upon the requisition of Members, shall stand dissolved,
but in any other case the meeting shall stand adjourned to
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18
the same day in the next week or if that day is a public holiday until
the next succeeding day which is not a public holiday at the same time
and place or to such other day at such other time and place within the
city or town in which the Office of the Company is situate as the Board
may determine, and if at such adjourned meeting a quorum is not present
at the expiration of half an hour from the time appointed for holding the
meeting, the Members present shall be a quorum, and may transact, the
business for which the meeting was called.
85. The Chairman (if any) of the Directors shall be entitled to take the
chair at every General Meeting, whether Annual or Extraordinary. If there
be no such Chairman of the Directors, or if at any meeting he shall not
be present within fifteen minutes of the time appointed for holding such
meeting then the members present shall elect another Director as Chairman
and if no Director be present or if all Directors present decline to take
the Chair, then the members present shall elect one of their members to
be the Chairman.
BUSINESS CONFINED TO ELECTION OF CHAIRMAN WHILST CHAIR VACANT
86. No business shall be discussed at any General Meeting except the election
of a Chairman, whilst the chair is vacant.
CHAIRMAN WITH CONSENT MAY ADJOURN MEETING
87. The Chairman with the consent of the meeting may adjourn any meeting from
time to time and from place to place within the city or town in which the
office of the Company is situated for the time being but no business
shall be transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place.
QUESTION AT GENERAL MEETING HOW DECIDED
88. At any General Meeting a resolution put to the vote of the meeting shall
be decided on a show of hands unless a poll is (before or on the
declaration of the result of the show of hands) demanded by a member or
members present in person or by proxy and holding shares in the Company
which confer a power to vote on the resolution not being less than 1/10th
of the total voting power in respect of the Resolution or on which an
aggregate sum of not less than Rs. 50,OOO/- has been paid up. The demand
for a poll may be withdrawn at any time by the person or persons who made
the demand.
CHAIRMAN'S CASTING VOTE
89. In the case of any equality of votes, the Chairman shall both on a show
of hands and at a poll (if any) have a casting vote in addition to the
votes to which he may be entitled as a Member.
DEMAND FOR POLL NOT TO PREVENT TRANSACTION OF OTHER BUSINESS
90. The demand for a poll except on the question of the election of the
Chairman and of an adjournment shall not prevent the continuance of a
meeting for the transaction of any business other than the question on
which the poll has been demanded.
MEMBER IN ARREARS NOT TO VOTE
91. No member shall be entitled to vote either personally or by proxy at any
General Meeting or meeting of a class of shareholders either upon a show
of hands or upon a poll in respect of any shares registered in his name
on which any calls or other sums presently payable by him have not been
paid or in regard to which the Company has, and has exercised, any right
of lien.
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19
NUMBER OF VOTES TO WHICH MEMBER ENTITLED
92. Subject to the provisions of these Articles and without prejudice to any
special privileges or restrictions as to voting for the time being
attached to any class of shares for the time being forming part of the
capital of the Company, every member, not disqualified by the last
preceding Article shall be entitled to be present and to speak and vote
at such meeting, and on a show of hands every member present in person
shall have one vote and upon a poll the voting rights of every member
whether present in person or by proxy, shall be in proportion to his
share of the paid-up equity capital of the Company.
CASTING OF VOTES BY A MEMBER ENTITLED TO MORE THAN ONE VOTE
93. On a poll taken at a meeting of the Company, a member entitled to more
than one vote, or his proxy, or other person entitled to vote for him as
the case may be, need not, if he votes, use all his votes or cast in the
same way all the votes he uses.
VOTES OF MEMBERS OF UNSOUND MIND AND MINORS
94. A member of unsound mind or in respect of whom an order has been made by
any court having jurisdiction in lunacy, may vote, whether on a show of
hand or on a poll, by his committee or other legal guardian, and any such
committee or guardian may, on a poll vote by proxy. If any member be a
minor, the votes in respect of his share or shares shall be by his
guardian or any of his guardians, if more than one, to be elected in case
of dispute by the Chairman of the meeting.
VOTES OF JOINT MEMBERS
95. If there be joint registered holders of any shares, any one of such
persons may vote at any meeting or may appoint another person (whether a
Member or not) as his proxy in respect of such shares as if he were
solely entitled therein but the proxy so appointed shall not have any
right to speak at the meeting and, if more than one of such joint-holders
be present at any meeting, that one of the said person so present whose
name stands higher on the Register shall alone be entitled to speak and
to vote in respect of such shares, but the other or others of the joint-
holders shall be entitled to be present at the meeting. Several executors
or administrators of a deceased member in whose names share stand shall
for the purpose of these Articles be deemed joint holders thereof.
VOTING IN PERSON OR BY PROXY
96. Subject to the provisions of these Articles votes may be given either
personally or by proxy. A body corporate being a member may vote either
by a proxy or by a representative duly authorised in accordance with
Section 187 of the Act and such representative shall be entitled to
exercise the same rights and powers (including the right to vote by
proxy) on behalf of the body corporate which he represents as the body
could exercise if it were an individual member.
VOTES IN RESPECT OF SHARES OF DECEASED OR INSOLVENT MEMBERS
97. Any person entitled under Article 62 to transfer any shares may vote at
any General Meeting in respect thereof in the same manner as if he were
the registered holder of such shares, provided that 48 hours, at least,
before the time of holding the meeting or adjourned meeting as the case
may be at which he proposed to vote he shall satisfy the Directors of his
right to transfer such shares and give such indemnity (if any) as the
Directors may require or the Directors shall have previously admitted his
right to vote at such meeting in respect thereof.
<PAGE>
20
APPOINTMENT OF PROXY
98. Every proxy (whether a member or not) shall be appointed in writing under
the hand of the appointer or his attorney, or if such appointer is a
corporation under the common seal of such corporation, or be signed by an
officer or an Attorney duly authorised by it and any committee or
guardian may appoint such proxy. The proxy so appointed shall not have
any right to speak at the meeting.
PROXY EITHER FOR A SPECIFIED MEETING OR FOR SPECIFIED PERIOD
99. An instrument of proxy may appoint a proxy either for purpose of a
particular meeting specified in the instrument and any adjournment
thereof or it may appoint for the purposes of every meeting of the
Company, or of every meeting to be held before the date specified in the
instrument and any adjournment of any such meeting.
NO PROXY EXCEPT FOR A BODY CORPORATE TO VOTE ON A SHOW OF HANDS
100. A member present by proxy shall be entitled to vote only on a poll but
not on a show of hands, unless such member is a body corporate present by
a representative in which case such proxy shall have a vote on the show
of hand as if he were a member.
DEPOSIT OF INSTRUMENT OF PROXY
101. The instrument appointing a proxy and the Power of Attorney or other
authority (if any) under which it is signed or a notarially certified
copy of that power or authority shall be deposited at the office not
later than forty eight hours before the time for holding the meeting at
which the person named in the instrument proposes to vote, and in default
the instrument of proxy shall not be treated as valid. No instrument
appointing a proxy shall be valid after the expiration of twelve months
from the date of its execution.
FORM OF PROXY
102. Every instrument of proxy whether for specified meeting or otherwise
shall, as nearly as circumstances will admit, be in any of the forms set
out in Schedule lX of the Act.
VALIDITY OF VOTES GIVEN BY PROXY NOTWITHSTANDING DEATH OF MEMBER
103. A vote given in accordance within the norms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the
Principal, or revocation of the proxy or of any power of attorney under
which such proxy was signed, or the transfer of the share in respect of
which the vote is given, provided that no intimation in writing of the
death or insanity, revocation or transfer shall have been received at the
office before the meeting.
TIME FOR OBJECTION TO VOTE
104. No objection shall be made to the validity of any vote; except at any
meeting or poll at which such vote shall be tendered and every vote,
whether given personally or by proxy, not disallowed at such meeting or
poll shall be deemed valid for all purposes of such meeting or poll
whatsoever.
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21
CHAIRMAN OF ANY MEETING TO BE THE JUDGE OF VALIDITY OF VOTE
105. The Chairman of any meeting shall be the sole judge of the validity of
every vote tendered at such meeting. The Chairman present at the taking of
a poll shall be the sole judge of the validity of every vote tendered at
such poll.
DIRECTORS
NUMBER OF DIRECTORS
106. Until otherwise determined by the company in a General Meeting and subject
to the provisions of Section 252 of the Act, the number of directors
(excluding Debenture Directors and Directors appointed under Article 111
hereof and Alternate Directors) shall not be less than three nor more than
twelve.
NON-RETIRING DIRECTORS
107. If and so long as Mr. N. R. Narayana Murthy and/or his relatives shall
hold not less than 5% of the issued equity share capital of the Company,
Mr. N. R. Narayana Murthy shall be the Managing Director of the Company
and shall not be liable to retire by rotation.
108. The Board may appoint, from time to time, one or more of their members to
be the Managing Director or Joint Managing Director or Wholetime Director
or Deputy Managing Director or Manager of the Company on such terms and on
such remuneration {whether by way of salary or commission, or partly in
one and partly in another) as they may think fit and the directors so
appointed shall not while holding that office, be subject to retirement by
rotation or taken into account in determining the rotation of retirement
of directors, but their appointment shall be subject to determination ipso
facto if they cease from any cause to be a director or if the company in
General Meeting resolve that their tenure of the office of Managing
Director or Joint Managing Director or Wholetime Director or Deputy
Managing Director or Manager be determined.
109. Subject to the provisions of the Act, the Directors, may from time to time
entrust and confer upon a Managing Director for the time being such of the
powers exercisable upon such terms and conditions and with such
restrictions as they may think fit either collaterally with or to the
exclusion of and in substitution for all or any of their own powers and
from time to time revoke, withdraw, alter or vary ail or any of such
powers.
APPOINTMENT OF SPECIAL DIRECTORS
110. On behalf of the Company, whenever Directors enter into a contract with
any Government, Central, State or Local, any Bank or Financial institution
or any person or persons (hereinafter referred to as "the appointer") for
borrowing any money or for providing any guarantee or security or for
technical collaboration or assistance or for underwriting or entering into
any other arrangement whatsoever the Directors shall have, subject to the
provisions of Section 255 of the Act, the power to agree that such
appointer shall have right to appoint or nominate by notice in writing
addressed to the Company one or more Directors on the Board for such
period and upon such conditions as may be mentioned in the agreement and
that such Director or Directors may not be liable to retire by rotation
nor be required to hold any qualification shares. The Directors may also
agree that any such Director or Directors may be removed from time to time
by the appointer entitled to appoint or nominate them and the appointer
may appoint another or others in his or their place and also fill in any
vacancy which may occur as a result of any such Director or Directors
ceasing to hold that office for any reason whatsoever. The Directors
appointed or nominated under this Article shall be entitled to exercise
and enjoy all or any of the rights and privileges exercised and enjoyed by
the
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22
Directors of the Company including payment of remuneration and travelling
expenses to such Director or Directors as may be agreed by the Company
with the appointer.
DEBENTURE DIRECTORS
111. If it is provided by any Trust Deed, security or otherwise, in connection
with any issue of debentures of the Company that any person or persons
shall have power to nominate a Director or Directors of the Company, then
in the case of any and every such issue of debentures, the person or
persons having such power may exercise such power from time to time and
appoint a Director or Directors accordingly. Any Director so appointed is
herein referred to as "Debenture Director". A Debenture Director may be
removed from office at any time by the person or persons in whom for the
time being is vested the power under which he was appointed and another
director may be appointed in his place. A debenture director shall not be
bound to hold any qualification shares. A debenture director shall not if
so agreed by the company be liable to retire by rotation; but shall
automatically cease to hold office as a director if and when the
debentures are fully discharged.
NOMINEE DIRECTORS
112. Nominee Directors: So long as any moneys remain owing by the Company to
The Industrial Development Bank of India, Industrial Finance Corporation
of India, The Industrial Credit and Investment Corporation of India
Limited, The Industrial Reconstruction Corporation of India Limited, Life
Insurance Corporation of India, General Insurance Corporation of India,
National Insurance Company Limited, The Oriental Fire & General Insurance
Company Limited, The New India Assurance Company Limited, United India
Insurance Company Ltd., Karnataka State Industrial Investment and
Development Corporation Ltd. or any State Financial Corporation or any
Financial Institution owned or controlled by the Central Government or any
State Government or the Reserve Bank of India or by two or more of them by
Central Government themselves (each of the above and Unit Trust of India
are hereinafter referred to as the Corporation) out of any
loans/debentures, assistance granted by them to the Company or so long as
the Corporation holds or continues to hold Debentures/Shares in the
Company as a result of any guarantee furnished by the Corporation on
behalf of the Company and remaining outstanding, the Corporation shall
have a right to appoint from time to time, any person as Director,
Wholetime or non-Wholetime (which Director or Directors, is/are
hereinafter referred to as 'Nominee Director/s') on the Board of the
Company and to remove from such office any person or persons so appointed
and to appoint any person in his or their places. The Board shall have no
power to remove from the office of the Nominee Directors. At the option of
the Corporation such Nominee Director/s shall not be liable to retirement
by rotation. Subject as aforesaid, Nominee Director/s shall be entitled to
the same rights and privileges and be subject to the same obligations as
any other Directors of the Company.
PERIOD OF HOLDING OF OFFICE BY NOMINEE DIRECTORS
113. The Nominee Director/s so appointed shall hold the said office only so
long as any moneys remain owing by the Company to the Corporation or so
long as the Corporation holds or continues to hold Debentures/shares in
the Company as a result of underwriting or by direct subscription or
private placement or the liability of the Company arising out of the
guarantee is outstanding and the Nominee Director/s so appointed in
exercise of the said powers shall ipso facto vacate such office
immediately the moneys owing by the Company to the Corporation are paid
off or on the Corporation ceasing to hold Debentures/ shares in the
Company or on the satisfaction of liability of the Company arising out of
any guarantee furnished by the Corporation.
<PAGE>
23
CO-OPTION OF DIRECTORS
114. Directors shall have power at any time and from time to time to co-opt any
other person as a director either to fill a casual vacancy or as an
additional director, so that the total number of directors shall not at
any time exceed the maximum fixed. Any director appointed to fill casual
vacancy shall hold office only upto the date upto which the director in
whose place he has been placed would have held the office if it had not
been vacated. Any additional director shall hold office only upto the date
of next Annual General Meeting of the Company but shall be eligible for
re-election at such meeting.
ALTERNATE DIRECTORS
115. The Board may appoint an alternate director to act for a director
(hereinafter called "original director during his absence for a period of
not less than three months from the State in which meetings of the Board
are ordinarily held. An alternate director appointed under this Article
shall not hold office as such for a period longer than that permissible to
the original director and shall vacate office if. and when the original
director returns to the State aforesaid. If the term of office of original
director is determined before he so returns to the State aforesaid any
provision for automatic re-appointment of retiring directors in default of
another appointment shall apply to the original and not to the alternate
director.
QUALIFICATION SHARES OF DIRECTORS
116. A Director shall not be required to hold any qualification shares.
REMUNERATION OF DIRECTORS
117. The remuneration of Directors and Executives of the Company, including the
fees payable to the Directors of the Company in attending the Meeting of
the Board or the Committees of the Board, shall be determined by the Board
of Directors from time to time, provided that the sitting fees payable to
the Directors as aforesaid shall be within the maximum limits of such fees
that may be prescribed under the proviso to Section 310 of the Companies
Act, 1956.
DIRECTORS' TRAVELLING EXPENSES
118. In addition to the remuneration payable to them, the Directors shall be
entitled to be paid all travelling, hotel and other incidental expenses
properly incurred by them in attending and returning from meetings of the
Board of Directors or any Committee thereof or General Meetings or in
connection with the business of the Company. The rules in this regard may
be framed by the Board of Directors from time to time.
SPECIAL REMUNERATION FOR PERFORMING EXTRA SERVICES
119. If any Director be called upon to perform extra services or special
exertions or efforts (which expression shall include work done by a
Director as a Member of any committee formed by the Director(s) the Board
may arrange with such Directors for such special remuneration for such
extra services or special exertions or efforts either by a fixed sum or
otherwise as may be determined by the Board and such remuneration may be
either in addition to or in substitution for his remuneration, subject to
provisions of the Act and confirmation by the Company in General Meeting.
DIRECTORS MAY ACT NOTWITHSTANDING ANY VACANCY
120. The continuing Directors may act notwithstanding any vacancy in their
body, but if and so long as their number is reduced below the quorum fixed
by the Act for a meeting of the Board
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24
of Directors, the continuing Director or Directors may act for the purpose
of increasing the number of Directors to that fixed for a quorum or for
summoning a General Meeting but for no other purpose.
TERMS OF OFFICE OF DIRECTORS
121. Not less than two-thirds of the total number of Directors shall be persons
whose period of office is liable to determination by retirement of
Directors by rotation.
RETIREMENT OF DIRECTORS BY ROTATION
122. At every annual general meeting of the Company one-third of such of the
Directors for the time being as are liable to retire by rotation, or if
their number is not three or a multiple of three, then the number nearest
to one third, shall retire from office.
ASCERTAINMENT OF DIRECTORS TO RETIRE
123. The Directors to retire by rotation under the foregoing article shall be
those who have been longest in office since their last appointment but as
between persons who become Directors on the same day, those who are to
retire shall, in default of and subject to any agreement among themselves,
be determined by lot. A retiring Director shall be eligible for re-
election.
COMPANY TO APPOINT SUCCESSORS
124. The Company, at the annual general meeting at which a Director retires in
manner aforesaid, may, fill up the vacated office by electing the retiring
Director or some other person thereto.
PROVISIONS IN DEFAULT OF APPOINTMENT
125. a) If the place of the retiring Director is not so filled up and the
meeting has not expressly resolved not to fill the vacancy, the
meeting shall stand adjourned till the same day in the next week at
the same time and place, or if that day is a public holiday, till the
next succeeding day which is not a public holiday at the same time and
place.
b) If at the adjourned meeting also, the place of the retiring Director
is not filled up and that meeting also has not expressly resolved not
to fill the vacancy, the retiring Director shall be deemed to have
been re-appointed at the adjourned meeting, unless:
i) at the meeting or at the previous meeting a resolution for the
re-appointment of such Director has been put to the meeting and
lost;
ii) the retiring Director has, by 5 notice in writing addressed to
the Company or its Board of Directors expressed his
unwillingness to be so re-appointed;
iii) he is not qualified or is disqualified for appointment;
iv) a resolution, whether special or ordinary is required for the
appointment or reappointment by virtue of any provisions of the
Act; or
v) the provision to sub-section (2) of Section 263 is applicable to
the case.
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25
COMPANY MAY INCREASE OR REDUCE NUMBER OF DIRECTORS
126. Subject to Sections 252, 256 and 259 of the Act, the Company in general
meeting may from time 10 time, increase or reduce the number of Directors,
within the limits fixed in that behalf by these Articles.
REMOVAL OF DIRECTORS
127. The Company may (subject to the provisions of Section 284 of the Act)
remove any Director before the expiration of his period of office and
appoint another person in his stead.
PROCEEDINGS OF THE BOARD OF DIRECTORS
MEETING OF DIRECTORS
128. The Directors may meet together as a Board for the dispatch of business
from time to time and shall so meet at least once in every three calendar
months and at least four such meetings shall be held in every year. The
Directors may adjourn and otherwise regulate their meetings as they may
think fit.
NOTICE OF BOARD MEETINGS
129. Notice of every meeting of the Board shall be given in writing to every
Director for the time being in India and at his address in India to every
other Director.
QUORUM
130. Subject to Section 287 of the Act, the quorum for a meeting of the Board
shall be one-third of its total strength (excluding Directors, if any,
whose places may be vacant at the time. and any fraction contained in that
one-third being rounded off as one), or two Directors whichever is higher.
Provided that where at any time the number of interested Directors exceeds
or is equal to two- thirds of the total strength, the number of the
remaining Directors, that is to say, the number of the Directors who are
not interested present at the meeting being not less than two, shall be
the quorum during such meeting.
ADJOURNMENT OF MEETINGS FOR WANT OF QUORUM
131. If a meeting of the .Board could not be held for want of quorum, then the
meeting shall automatically stand adjourned to such other time as may be
fixed by the Chairman.
SECRETARY TO CALL BOARD MEETING
132. The Secretary shall, and when directed by any Director to do so, convene a
meeting of the Board by giving a notice in writing to every other
Director.
CHAIRMAN OF DIRECTORS
133. The Directors shall choose one of their number to be the Chairman of the
Directors who shall hold such office until the Directors otherwise
determine. If at any meeting the Chairman of the Directors shall not be
present at the time appointed for holding the same, the Directors present
shall choose some one of their member to be the Chairman of such meeting.
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26
QUESTIONS HOW DECIDED
134. Questions arising at any meeting of the Board shall be decided by a
majority of votes and in the case of an equality of votes the Chairman
shall have second or a casting vote.
POWERS OF BOARD MEETING
135. A meeting of the Board for the time being at which a quorum is present,
shall be competent to exercise all or any of the authorities, power and
discretions which by or under the Act or the Articles of the Company are
for the time being vested in or exercisable by the Board generally.
APPOINTMENT OF SUB-COMMITTEE
136. The Board may appoint from time to time a sub-committee consisting of one
or more Director(s) and or one or more senior executive(s) of the Company
to deal with matters relating to transfer / transmission of shares /
debentures and such other matters incidental thereto with such powers and
duties, as the Board deems fit.
DIRECTORS MAY APPOINT COMMITTEES
137. Subject to the restrictions contained in Section 292 of the Act, the Board
may delegate any of its powers to committees of the Board consisting of
such members of its body as it thinks fit, and it may from time to time
revoke and discharge any such committee of the Board either wholly or in
part, and either as to persons or purposes but every committee of the
Board so formed shall in the exercise of the powers so delegated, confirm
to any Regulations that may from time to time be imposed on it by the
Board. All acts done by any such committee of the Board in conformity with
such Regulations and in fulfilment of the purpose of their appointment but
not otherwise shall have the like force and effect as if done by the
Board.
MEETINGS OF COMMITTEE HOW TO BE GOVERNED
138. The meetings and proceedings of any such committee of the Board consisting
of two or more members shall be governed by the provisions herein
contained for regulating the meetings and proceedings of the Directors so
far as the same are applicable thereto and are not superseded by any
Regulations made by the Directors under the last preceding Article. The
provisions of Article 134 shall mutatis mutandis apply to the meetings of
such committee.
CIRCULAR RESOLUTION
139. No resolution shall be deemed to have been duly passed by the Board or by
a Committee thereof by circulation, unless the resolution has been
circulated in draft, together with the necessary papers, if any, to all
the Directors or to ail the members of the committee then in India (not
being less in number than the quorum fixed for a meeting of the Board or
Committee, as the case may be), and to all other Directors or members of
the Committee, at their usual address in India and has been approved by
such of the Directors or members of the Committee as are then in India, or
by majority of such of them as are entitled to vote on the resolution.
VALIDITY OF DIRECTORS ACTS
140. All acts done by any meeting of the Board or by a Committee or by a sub-
committee of the Board, or by any person acting as a Director shall
notwithstanding that it shall afterwards be discovered that there was some
defect in the appointment of such Directors, or persons acting as
aforesaid, or that they or any of them were disqualified or had vacated
office or that
<PAGE>
27
the appointment of any of them were disqualified or had vacated office or
that the appointment of any of them had been terminated by virtue of any
provisions contained in the Act or in these Articles, be as valid as if
every such person had been duly appointed and was qualified to be a
Director and had not vacated his office or his appointment had not been
terminated. Provided that nothing in this Article shall be deemed to give
validity to acts done by a Director after his appointment has been shown
to the Company to be invalid or to have terminated.
POWERS OF DIRECTORS
141. The business of the Company shall be managed by the Board of Directors,
who may exercise all such powers of the Company and do all such acts and
things as are not, by the Act, or any other Act or by the Memorandum or by
the Articles of the Company required to be exercised by the Company in
General Meeting, subject nevertheless to the Regulations of these Articles
to the provisions of the Act, or any other Act and to such Regulations
being not inconsistent with the aforesaid Regulations or provisions as may
be prescribed by the Company in General Meeting but no Regulation made by
the Company in General Meeting shall invalidate any prior act of the Board
which would have been valid if that Regulation had not been made. Provided
that the Board of Directors shall not except with the consent of the
Company in General Meeting:-
a. sell, lease or otherwise dispose of the whole or substantially the
whole of the undertaking of the Company, or where the company owns
more than one undertaking, of the whole, or substantially the whole,
of any such undertaking;
b. remit or give time for the repayment of, any debt by a Director;
c. invest, otherwise than in trust securities, the amount of compensation
received by the company in respect of the compulsory acquisition of
any such undertaking as is referred to in Clause (a) or of any
premises or properties used for any such undertaking and without which
it cannot be carried on or can be carried on only with difficulty or
only after a considerable time;
d. borrow moneys, where the moneys to be borrowed together with the
moneys already borrowed by the company (apart from temporary loans
obtained from the company's Bankers in the ordinary course of
business) will exceed the aggregate of the paid-up capital of the
company and its free reserves, that is to say, reserves not set apart
for any specific purposes. Provided further that the powers specified
in Section 292 of the Act shall be exercised only at meetings of he
Board unless the same be delegated to the extent therein stated; or
e. contribute to Charitable and other funds not directly relating to the
business of the Company or the welfare of its employees any amounts,
the aggregate of which will in any financial year exceed Rupees Fifty
Thousand only or five percent of its average net profits as determined
in accordance with the provisions of Sections 349 and 350 of the Act
during the three financial years immediately preceding, whichever is
greater.
CERTAIN POWERS TO BE EXERCISED BY THE BOARD ONLY AT MEETINGS
142. The Board of Directors of the Company shall exercise the following powers
on behalf of the Company and it shall do so only by means of resolutions
passed at meetings of the Board:-
a. The power to make calls on share holders in respect of money unpaid on
their shares;
b. The power to issue debentures;
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28
c. The power to borrow money otherwise than on debentures;
d. The power to invest the funds of the Company;
e. The power to make loans;
Provided that the Board may, by a resolution passed at a meeting, delegate
to any committee of Directors, the Manager or any other principal officer
of the company or in the case of a branch office of the company, a
principal officer of the branch office, the powers specified in clauses
(c), (d) and (e) of this Article to the extent specified in sub-sections
(2), (3) and (4) respectively of Section 292 of the Act, on such condition
as the Board may prescribe. in respect of dealings between the company and
its bankers. the exercise by the company of the powers specified in Clause
(c) shall mean the arrangement made by the company with its bankers for
the borrowing of money by way of overdraft or cash credit or otherwise and
not the actual day to day operation on overdraft, cash credit or other
accounts by means of which the arrangement so made is actually availed of.
CERTAIN POWERS OF THE BOARD
143. Without prejudice 10 the general powers conferred by the last preceding
Article and so as not in any way to limit or restrict these powers, and
without prejudice to the other powers conferred by these Articles, but
subject to the restrictions contained in the last preceding Article, it is
hereby declared that the Directors shall have the following powers, that
is to say, power:
1) To pay the costs, charges and expenses preliminary and incidental to
the promotion, formation, establishment and registration of the
company.
PAYMENT OUT OF CAPITAL
2) To pay and charge to the capital account of the company any commission
or interest lawfully payable thereout under the provisions of Sections
76 and 208 of the Act,
TO ACQUIRE PROPERTY
3) Subject to Sections 292 and 297 of the Act to purchase or otherwise
acquire for the Company any property, rights, privileges which the
Company is authorised to acquire, at or for such price or
consideration and generally on such terms and conditions as they think
fit, and in any such purchases or other acquisition to accept such
title as the Directors may believe or may be advised to be reasonably
satisfactory,
TO PAY FOR PROPERTY, ETC.
4) At their discretion and subject to the provisions of the Act, to pay
for any property, rights, or privileges acquired or services rendered
in the Company either wholly or partially, in cash or in shares,
bonds, debentures, mortgages, or other securities of the such amount
credited as paid up thereon as may be agreed upon and any such bonds;
debentures, mortgages or other securities may be either, specifically
charged upon all or any part of the property of the Company and its
uncalled capital or not so charged.
TO SECURE CONTRACTS
5) To secure the fulfilment of any contracts or engagements entered into
by the Company by mortgage or charge of all or any of the property of
the Company and its uncalled capital for the time being or in such
manner as they may think fit.
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29
TO ACCEPT SURRENDER OF SHARES
6) To accept from any member, as far as may be permissible by law, a
surrender of his shares or any part thereof, on such terms and
conditions as shall be agreed.
TO APPOINT TRUSTEES
7) To appoint any person to accept and to hold in trust for the Company
any property belonging to the Company, or in which it is interested,
or for any other purposes; and to execute and do all such deeds and
things as may be required in relation to any such trust, and to
provide for the remuneration of such trustee or trustees.
TO BRING AND DEFEND ACTIONS
8) To institute, conduct, defend, compound, or abandon any legal
proceedings by or against the Company or its officers or otherwise
payment or satisfaction of any debts due, and of any claims or
demands by or against the Company, and to refer any differences to
arbitration, and observe and perform any awards made thereon.
TO ACT IN INSOLVENCY MATTERS
9) To act on behalf of the Company in all matters relating to bankrupts
and insolvents.
TO GIVE RECEIPTS
10) To make and give receipts, releases and other discharges for moneys
payable to the Company, and for the claims and demands of the
Company.
TO INVEST MONEYS
11) Subject to the provisions of Sections 292, 293 (1) (c), 295, 370 and
372 of the Act, to invest, deposit and deal with any moneys of the
Company not immediately required for the purpose thereof, upon such
security (not being shares of this Company), or without security and
in such manner as they may think fit, and from time to time to vary
or realise such investments. Save as provided in Section 49 of the
Act, all investments shall be made and held in the Company's own
name.
TO PROVIDE FOR PERSONAL LIABILITIES
12) To execute in the name and on behalf of the Company in favour of any
Director or other person who may incur or be about to incur any
personal liability whether as principal or surety; for the benefit of
the Company such mortgages of the Company's property (present and
future) as they think fit; and any such mortgage may contain a power
of sale, and such other powers, provisions, covenants and agreements
as shall be agreed upon.
TO AUTHORISE ACCEPTANCES
13) To determine from time to time who shall be entitled to sign, on the
Company's behalf, bills, notes, receipts, acceptances, endorsements,
cheques, dividend warrants, releases, contracts and documents and to
give necessary authority for such purpose.
TO DISTRIBUTE BONUS
14) To distribute by way of bonus amongst the staff of the Company a
share in the profits of the Company, and to give to any officer or
other person employed by the Company
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30
a commission on the profits of any particular business or transaction
and to charge such bonus or commission as part of the working
expenses of the Company.
TO PROVIDE FOR WELFARE OF EMPLOYEES
15) To provide for the welfare of Directors or Ex-Directors or employees
or ex-employees of the Company and their wives, widows and families
or the dependants or connections of such persons by building or
contributing to the building of houses, dwellings or chawls or by
grants of moneys, pensions, gratuities, allowances, bonus or other
payments; or by creating and from time to time subscribing or
contributing to provident and other associations, institutions or
funds or trusts and by providing or subscribing or contributing
towards places of instruction and recreation, hospitals and
dispensaries, medical and other attendance and other assistance as
the Board shall think fit, and subject to the provisions of Section
293 (1) (e) of the Act. To subscribe or contribute or otherwise to
assist or to guarantee money to any charitable, benevolent,
religious, scientific, national or other institutions or objects
which shall have any moral or other claim to support or aid by the
Company either by reason of locality of operation, or of public and
general utility or otherwise.
TO CREATE RESERVE FUND
16) Before recommending any dividend to set aside, out of the profits of
the Company such sums as they may think proper for depreciation or to
a Depreciation Fund or to an Insurance Fund or as a Reserve Fund or
Sinking Fund or any special fund to meet contingencies or to repay
debentures or debenture-stock, or for special dividends or for
equalising dividends or for repairing, improving, extending and
maintaining any of the property of the Company and for such other
purposes (including the purposes referred to in the preceding
clause), as the Board may in their absolute discretion think
conducive to the interest of the Company, and subject to Section 292
of the Act, to invest the several sums so set aside or so much
thereof as required to be invested, upon such investments (other than
shares of the Company) as they think fit, and from time to time to
deal with and vary such investments and dispose of and apply and
expend all or any part thereof for the benefit of the Company, in
such manner and for such purposes as the Board in their absolute
discretion, think, conducive to the interest of the company
notwithstanding that the matters to which the Board apply or upon
which they expend the same, or any part thereof, may be matters to or
upon which the capital moneys of the company might rightly be applied
or expended, and to divide the reserve fund into such special funds
as the Board may think fit with full power to transfer the whole or
any portion of the Reserve Fund into such special funds as the Board
may think fit, with full power to transfer the whole or any portion
of a Reserve Fund or division of a Reserve Fund and with full power
to employ the assets constituting all or any of the above funds,
including the Depreciation Fund, in the business of the company or in
the purchase or repayment of debentures or debenture-stock, and
without being bound to keep the same separate from the other assets
and without being bound to pay interest on the same with power
however to the Board at their discretion to pay or allow to the
credit of such funds interest at such rate as the Board may think
proper.
TO APPOINT MANAGERS ETC.
17) To appoint, and at their discretion remove or suspend such general
managers, secretaries, assistants, supervisors, clerks, agents and
servants for permanent, temporary or special services as they may
from time to time think fit, and to determine their powers and duties
and fix their salaries, or emoluments or remuneration, and to require
security in such instances and to such amount as they may think fit.
And also from time to time to provide for the management and
transaction of the affairs of the company in any specified locality
in India or elsewhere in such manner as they think fit.
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31
TO COMPLY WITH LOCAL LAWS
18) To comply with requirements of any local law which in their opinion it
shall in the interest of the Company be necessary or expedient to
comply with.
TO APPOINT LOCAL BOARD
19) From time to time and at any lime to establish any Local Board for
managing any of the affairs of the Company in any specified locality
in India or elsewhere and to appoint any persons to be Members of such
Local Boards. and to fix their remuneration.
TO DELEGATE POWERS
20) Subject to Section 292 of the Act, from time to time and at any time
to delegate to any persons so appointed any of the powers, authorities
and discretions for the time being vested in the Board, other than
their power to make call or to make loans or borrow moneys and to
authorise the members for the time being of any such Local Board, or
any of them, to fill up any vacancies therein and to act
notwithstanding vacancies, and any such appointment or delegation may
be made on such terms, and subject to such conditions as the Board may
think fit, and the Board may at any time remove any persons so
appointed and may annul any such delegation.
TO AUTHORISE BY POWER OF ATTORNEY
21) At any time and from time to time by Power of Attorney under the Seal
of the Company, to appoint any person or persons to be the Attorney or
Attorneys of the Company, for such purposes and with such powers,
authorities, and discretions (not exceeding those vested in or
exercisable by the Board under these presents and excluding the power
to make calls and excluding also except in the limits authorised by
the Board, the power to make loans and borrow moneys) and for such
period and subject to such conditions as the Board may from time to
time think fit, and any such appointment may (if the Board thinks fit)
be made in favour of the members of any local board, established as
aforesaid or in favour of any company or the shareholders, directors,
nominees or managers of any company or firm or otherwise in favour of
any fluctuating body of persons whether nominated directly, or
indirectly by the Board and any such Power of Attorney may contain
such powers for the protection or convenience of persons dealing with
such Attorneys as the Board may think fit, and may contain Powers
enabling any such delegates or Attorneys as aforesaid to sub-delegate
all or any of the Powers, authorities and discretions for the time-
being vested in them.
TO NEGOTIATE.
22) Subject to Sections 294 and 297 of the Act for or in relation to any
of the matters aforesaid or otherwise for the purposes of the Company
to enter into all such negotiations and contracts and rescind and vary
all such contracts, and execute and do all such acts. deeds, and
things in the name and on behalf of the Company as they may consider
expedient.
TO MAKE AND VARY REGULATIONS
23) From time to time make, vary or repeal bye-laws for the regulation of
the business of the Company, its officers and servants.
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32
AMENDMENTS TO ACCOUNTS
24) The directors shall, if they consider it to be necessary and in the
interest of the company, be entitled to amend the Audited Accounts of
the company of any financial year which have been laid before the
Company in General Meeting. The amendments to the Accounts effected by
the directors in pursuance of this Article shall be placed before the
members in General Meeting for their consideration and approval.
TO FORMULATE SCHEMES, ETC.
25) The directors may formulate, create, institute or set up such schemes,
trusts, plans or proposals as they may deem fit for the purpose of
providing incentive to the officers, employees and workers of the
company, including without limiting the generality of the foregoing,
formulation of schemes for the subscription by the officers, employees
and workers to shares in, or debentures of, the company.
SIGNING OF CHEQUES
144. All cheques, promissory notes, drafts, bills of exchange, and other
negotiable instruments, and all receipts for moneys paid by the company,
shall be signed, drawn, accepted or otherwise executed as the case may be,
in such manner as the directors shall from time to time by resolution
determine.
FOREIGN REGISTER
145. The company may exercise the powers conferred upon the company by Sections
157 and 158 of the Act with regard to the keeping of branch registers of
members or debenture holders residing in any State or Country outside
India, and the directors may (subject to the provisions of those Sections)
make and vary such Regulations as they may think fit respecting the keeping
of any such register.
DECLARATION OF SECRECY
146. Every director including Managing, Wholetime, Debenture or Special
Director, Manager, Secretary, Treasurer, Trustees for the time being of the
company, member or Debenture holder, member of a committee, officer,
servant, agent, accountant or any other person employed in or about the
company business shall if so required by the Board of Directors before
entering upon his duties, sign a declaration pledging himself to observe
strict secrecy respecting all transactions of the company with its
customers and the state of accounts with individuals and all manufacturing,
technical and business information of the company, except when required so
to do by the Board or by any meeting or by a Court of law and except so far
as may be necessary in order to comply with any of the provisions in these
Articles contained.
SECRECY OF WORKS AND INFORMATION
147. No member or other person (not being a director) shall be entitled to visit
or inspect any works of the company without the permission of the directors
or to require discovery of any information concerning the business, trading
or customers of the Company, or any matter which is or may be in the nature
of a trade secret, mystery of trade, secret process, or any other matter
which may relate to the conduct of the business of the Company and which in
the opinion of the Directors, it would be inexpedient in the interest of
the Company to disclose.
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33
PROHIBITION OF SIMULTANEOUS APPOINTMENT OF MANAGING DIRECTOR AND MANAGER
148. The Company shall not appoint or employ at the same time more than one of
the following categories of management personnel namely:
a. Managing Director and
b. Manager
SECRETARY
149. The Directors shall from time to time appoint a Secretary and at their
discretion remove any such Secretary to perform any functions, which by
the Act are to be performed by the Secretary and to execute any other
ministerial or administrative duties, which may from time to time be
assigned to the Secretary by the Directors. The Director may also at any
time appoint any person or persons (who need not be the Secretary) to keep
the registers required to be kept by the Company.
THE SEAL, ITS CUSTODY AND USE
150. a. The Board shall provide a Common Seal for the purposes of the Company
and shall have power from time to time to destroy the same and
substitute a new seal in lieu thereof and the Board shall provide for
the safe custody of the Seal for the time being and the Seal shall
never be used except by the authority of the Board or a Committee of
the Board previously given.
b. The Company shall also be at liberty to have an official Seal in
accordance with Section 50 of the Act, for use in any territory,
district or place outside India.
DEED HOW EXECUTED
151. Every Deed Or Other instrument, to which the Seal of the Company is
required to be affixed, shall unless the same is executed by a duly
constituted attorney be signed by one Director or some other person
appointed by the Board for the purpose provided that in respect of the
Share Certificate the Seal shall be affixed in accordance with Rule 6 of
the Companies (Issue of Share Certificates) Rules, 1960.
DIVISION OF PROFITS
152. The profits of the Company, subject to any special rights relating thereto
created or authorised to be created by these Articles, shall be divisible
among the Members in proportion to the amount of capital paid-up or
credited as paid-up and to the period during the year for which the
capital is paid-up on the shares held by them respectively.
THE COMPANY IN GENERAL MEETING MAY DECLARE DIVIDENDS
153. Subject to the provisions of Section 205 of the Companies Act, 1956 the
Company in General Meeting may declare dividends, to be paid to its
Members according to their respective rights but no dividends shall exceed
the amount recommended by the Board, but the Company in General Meeting
may declare a smaller dividend.
INTERIM DIVIDEND
154. The Board may, from time to time, pay to the members such interim dividend
as in their judgement the position of the Company justifies.
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34
CAPITAL PAID-UP IN ADVANCE CARRYING INTEREST NOT TO EARN DIVIDEND
155. Where capital is paid in advance of calls, such capital may carry interest
but shall not be in respect thereof confer a right to dividend or
participate in profits.
DIVIDEND TO BE PAID PRO-RATA
156. a. Subject to the rights of persons, if any, entitled to shares with
special rights as to dividends, all dividends shall be declared and
paid according to the amounts paid or credited as paid on the shares
in respect whereof dividend is paid but if and so long as nothing is
paid upon any shares in the Company, dividends may be declared and
paid according to the amounts of the shares.
b. No amount paid or credited as paid on shares in advance of calls shall
be treated for the purpose of this regulation as paid on shares.
c. All dividends shall be apportioned and paid proportionately to the
amounts paid or credited as paid on the shares during any portion or
portions of the period in respect of which the dividend is paid. but
if any shares is issued on terms providing that it shall rank for
dividend as from a particular date such shares shall rank for dividend
accordingly.
RETENTION OF DIVIDENDS UNTIL COMPLETION OF TRANSFER UNDER ARTICLE 62
157. The Board may retain the dividends payable upon shares in respect of which
any person is, under Article 62 entitled to become a Member, which any
person under that Article is entitled to transfer, until such person shall
become a member in respect of such shares or shall duly transfer the same.
DIVIDEND, ETC. TO JOINT-HOLDERS
158. Any one of the several persons who are registered as the joint-holders of
any share may give effectual receipts for all dividends or bonus and
payment on account of dividends or bonus or other moneys payable in
respect of such shares.
NO MEMBER TO RECEIVE DIVIDEND WHILST INDEBTED TO THE COMPANY AND COMPANY'S
RIGHT TO REIMBURSEMENT THEREOF
159. No member shall be entitled to receive payment of any interest or dividend
in respect of his share or shares, whilst any money may be due or owing
from him to the Company in respect of such share or shares or otherwise
howsoever either alone or jointly with any other person or persons; and
the Board may deduct from the interest or dividend payable to any member
all sums of money so due from him to the Company.
TRANSFER OF SHARES TO BE REGISTERED
160. A transfer of shares shall not pass the right to any dividend declared
thereon before the registration of the transfer.
MANNER OF PAYMENT OF DIVIDEND
161. Unless otherwise directed, any dividend may be paid by cheque or warrant
or by a pay slip or receipt having the force of a cheque or warrant sent
through the post to the registered address of member or person entitled or
in case of joint holder to that one of them first named in the Register in
respect of the joint holder. Every such cheque or warrant shall be made
<PAGE>
35
payable to the order of the person to whom it is sent. The company shall
not be responsible for any cheque or warrant or pay slip or receipt lost
in transmission or for any dividend lost to the member or person entitled
thereto by the forged signature of any pay slip or receipt or the
fraudulent recovery of the dividend by any other means.
INTEREST ON DIVIDENDS
162. No unpaid dividend shall bear interest as against the Company. No
unclaimed dividend shall be forfeited by the Board unless the claim
thereto becomes barred by law and the Company shall comply with all the
provisions of Section 205A of the Act in respect of unpaid or unclaimed
dividend.
DIVIDEND AND CALL TOGETHER
163. Any General Meeting declaring a dividend may on the recommendation of the
Directors make a call on the Members of such amount as the meeting fixes,
but so that the call on each member shall not exceed the dividend payable
to him and so that the call may be made payable at the same time as the
dividend and the dividend may, if so arranged between the Company and the
Members, be set off against the call.
CAPITALISATION OF PROFITS
164. 1) The Company in General Meeting may, upon the recommendation of the
Board, resolve;-
a) that it is desirable to capitalise any part of the amount for the
time being standing to the credit of any of the company's reserve
accounts or to the credit of the profit and loss account, or
otherwise available for distribution; and
b) that such sum be accordingly set free for distribution in the
manner specified in clause (2) amongst the members who would have
been entitled thereto, if distributed by way of dividend and in
the same proportions.
2) The sum aforesaid shall not be paid in cash but shall be applied,
subject to the provisions contained in clause (3), either in or
towards:-
i) paying up any amounts for the time being unpaid on any shares
held by such member respectively;
ii) paying up in full, unissued shares of the company to be allotted
and distributed, credited as fully paid up to and amongst such
members in the proportions aforesaid; or
iii) partly in the way specified in sub-clause (i) and partly in that
specified in sub-clause (ii).
3) A share premium account and a capital redemption reserve account may,
for the purpose of this Regulation, only be applied in the paying up
of unissued shares to be issued to members of the company as fully
paid bonus shares.
4) The Board shall give effect to the resolution passed by the Company in
pursuance of this Regulation.
165. 1) Whenever such a resolution as aforesaid shall have been passed, the
Board shall:-
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36
a) make all appropriation and application of the undivided profits
resolved to be capitalised thereby, and all allotments and issues
of fully paid shares, if any; and
b) generally do all acts end things required to give effect thereto.
2) The Board shall have full power:-
a) to make such provision, by the issue of fractional certificates
or by payment in cash or otherwise, as it thinks fit, for the
case of shares or debentures becoming distributable in fraction;
and also
b) to authorise any person to enter, on behalf of all the members
entitled thereto, into an agreement with the Company providing
for the allotment to them respectively, credited as fully paid
up, of any further shares to which they may be entitled upon such
capitalisation or (as the case may require) for the payment of by
the company on their behalf by the application thereto of their
respective proportion of the profits resolved to be capitalised,
of the amounts or any part of the amounts remaining unpaid on
their existing shares.
3) Any agreement made under such authority shall be effective and binding
on all such members.
BOARD REPORT
166. There shall be attached to every such balance sheet a report of the Board
as to the state of the Company's affairs and as to the amounts, if any,
which it proposes to carry to any reserves in such balance sheet and the
amount, if any, which it recommends should be paid by way of dividend; and
material changes and commitments, if any, affecting the financial position
of the Company which have occurred between the end of the financial year
of the company to which the balance sheet relates and the date of the
report. The Board's report shall so far as is material for the
appreciation of the state of the Company's affairs by its members and will
not in the Board's opinion be harmful to the business of the company or
any of its subsidiaries, deal with any changes which have occurred during
the financial year in the nature of the Company's business, in the
Company's subsidiaries or in the nature of the business carried on by them
and generally in the classes of business in which the company has an
interest and any other information as may be required by Section 217 of
the .Act, The Board shall also give the fullest information and
explanations in its report aforesaid or in an addendum to that report, on
every reservation, qualification or adverse remark contained in the
auditor's report. The Board's report and any addendum thereto shall be
signed by its Chairman if he is authorised in that behalf by the Board;
and when he is not so authorised, shall be signed by not less than two
Directors.
SIGNING OF BALANCE SHEET
167. The profit and loss account and balance sheet shall be signed by the
Secretary if any, and by not less than two Directors, one of whom shall be
a Managing Director if there is one provided that if there is only one
Director present in India at the time, the profit and loss account and
balance sheet shall be signed by such Director but in such a case there
shall be attached to the profit and loss account and balance sheet a
statement signed by such Director explaining the reason for non-compliance
with the aforesaid provision requiring the signature of Directors. The
profit and loss account shall be annexed to the balance sheet and the
auditor's report (including the auditor's separate, special or
supplementary report, if any), shall be attached thereto, and such report
shall be read before the Company in general meeting and shall be open to
inspection by any member.
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37
RIGHTS OF MEMBERS TO COPIES OF BALANCE SHEET AND AUDITOR'S REPORT
168. The Company shall comply with the requirements of Section 219 of the Act.
DOCUMENTS AND NOTICES
SERVICE OF DOCUMENTS OR NOTICES ON MEMBERS BY THE COMPANY
169. A document or notice may be served or given by the Company on any member
either personally or by sending it by post to him to his registered
address, or (if he has no registered address in India) to the address
supplied by him to the Company for serving documents or notices on him.
MANNER OF SERVICE OF DOCUMENTS OR NOTICES
170. Where a document or notice is sent by post, service of the document or
notice shall be deemed to be effected by properly addressing; prepaying
and posting a letter containing the documents or notice, provided that
where a member has intimated to the Company in advance that documents or
notices should be sent to him under a certificate of posting or by
registered post with or without acknowledgement due and has deposited with
the Company a sum sufficient to defray the expenses of doing so, service
of the document or notice shall not be deemed to be effected unless it is
sent in the manner intimated by the Member and such service shall be
deemed to have been effected in the case of notice of a Meeting at the
expiration of forty-eight hours after the letter containing the document
or notice is posted and in any other case at the time of which the letter
would be delivered in the ordinary course of post.
BY ADVERTISEMENT
171. A document or notice advertised in a newspaper circulating in the city in
which the office of the Company is situated shall be deemed to be duly
served or sent on the day on which the Advertisement appears on or to
every Member who has no registered address in India and has not supplied
to the Company an address within India for the serving of documents on or
the sending of notice to him.
ON PERSONAL REPRESENTATIVES, ETC.
172. A document or notice may be served or given by the Company on or to
persons entitled to a share in consequence of the death or insolvency of a
member by sending it through the post in a prepaid letter addressed to
them by name or by the title of representative of the deceased, or
assignee of the insolvent or by any like description, at the address (if
any) in India supplied for the purpose by the persons claiming to be so
entitled or (until such an address) has been so supplied by serving the
documents or notice in any manner in which the same might have been given
if the death or insolvency had not occurred.
ON JOINT-HOLDERS
173. A document or notice may be served or given by the Company to the joint
holders of share by serving or giving the document or notice on or to the
joint holder named first in the register of members in respect of the
share.
<PAGE>
38
TO WHOM DOCUMENTS OR NOTICES MUST BE SERVED OR GIVEN
174. Documents or notices of every General Meeting shall be served or given in
some manner hereinbefore authorised on or to (a) every Member, (b) every
person entitled to a share in consequence of the death or insolvency of a
member and (c) the Auditor/s for the time being of the Company.
MEMBERS BOUND BY DOCUMENTS OR NOTICES SERVED ON OR GIVEN TO PREVIOUS
HOLDERS
175. Every person, who, by operation of law, transfer or other means
whatsoever, shall become entitled to any share shall be bound by every
document or notice in respect of such share. which prior to his name and
address being entered on the Register of Members, shall have been duly
served on or given to the person from whom he derives his title to such
share.
DOCUMENTS OR NOTICES BY COMPANY AND SIGNATURE THEREOF
176. Any document or notice to be served or given by the Company may be signed
by a Director or some person duly authorised by the Board of Directors for
such purposes and the signature thereto may be written, printed or
lithographed.
SERVICE OF DOCUMENTS OR NOTICE BY MEMBER
177. All documents or notices to be served or given by Members on or to the
Company or any officer at the office by post under a Certificate of
Posting or by Registered Post, or by leaving it at the office.
WINDING UP
DISTRIBUTION OF ASSETS
178. The Liquidator on any winding up (whether voluntary and supervision or
compulsory) may with the sanction of a Special Resolution, but subject to
the rights attached to any preference share capital, divide among the
contributories in specie any part of the assets of the Company and may,
with the like sanction, vest any part of the assets of the Company in
trustees upon such trusts for the benefit of the contributors, as the
liquidator, with the like sanction shall think fit.
INDEMNITY AND RESPONSIBILITY
OFFICER'S AND OTHERS RIGHT TO INDEMNITY
179. Every officer or agent for the time being of the Company shall be
indemnified out of the assets of the Company against all liability
incurred by him in relation to the business of the company in defending
any proceedings whether civil or criminal in which judgement is given in
his favour or in which he is acquitted or in connection with any
application under Section 633 of the Act in which relief is granted to him
by the Court.
DIRECTORS, MANAGERS ETC. NOT LIABLE FOR ACTS OF OTHERS
180. Subject to provisions of Section 201 of the Act no Director, Manager or
other Officer of the Company shall be liable for the act, receipts,
neglects of any other director or officer or for joining in any receipts
or other act for conformity or for any loss or expenses happening to the
company through the insufficiency or deficiency of title to any property
acquired by order of the directors, for and on behalf of the company or
for the insufficiency or deficiency of any
<PAGE>
39
security in or upon which any of the moneys of the company shall be
invested or for any loss or damage arising from bankruptcy, insolvency or
tortious act of any person with whom any moneys, securities, or effects
shall be deposited or for any loss occasioned by an error of judgement or
oversight on his part, or for any other loss, damages or misfortunes
whatever which shall happen in the execution of the duties of this officer
or in relation thereto unless the same happens through his own dishonesty.
We the several persons whose names and addresses are subscribed below are
desirous of being formed into a Company in pursuance of this Articles of
Association and we respectively agree to take the number of shares in the
Capital of the Company set opposite to our respective names.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Signature, Name, Address, Number of Equity Signature, Name, Address,
description and occupation of Shares taken by each description and occupation of
Subscribers Subscriber Witness
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nagavara Ramarao Narayana Murthy 1
(Son of Nagavara Ramarao) (One equity)
Flat 6, Padmanabhan Apartment,
1126/2, Shivajinagar,
Pune - 411 016
Consultant
Nadathur Srinivasa Raghavan 1
(Son of N. Sarangapani) (One equity)
5, "Ravikripa", Station Road,
Matunga (C. R.),
Bombay- 400019.
Consultant
VIPUL DEVENDRA
Senapathy Gopalakrishnan 1 KINKHABWALA
(Son of P. G. Senapathy) (One equity) (S/o. Devendra Vithaldas
Krishna Vihar, Kalapalayam Lane, Kinkhabwala)
Pathenchanthai, 14, Thakurdwar Road,
Trivandrum - 695 001. Zaveri Building, Bombay - 400 002.
Service
Consultant
Nandan Mohan Nilekani 1
(Son of M. R. Nilekani) (One equity)
37, Saraswatput,
Dharwar - 580 002.
KARNATAKA
Consultant
--------------------------
4
(Four equity)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Dated this 15th day of June 1981.
<PAGE>
EXHIBIT 3.2
THE COMPANIES ACT, 1956
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
INFOSYS TECHNOLOGIES LIMITED
I. The name of the Company is INFOSYS TECHNOLOGIES LIMITED.
II. The registered office of the Company will be situated in the State of
Karnataka.
III. The objects for which the Company is established are:
(A) MAIN OBJECTS OF THE COMPANY TO BE PURSUED BY THE COMPANY ON ITS
INCORPORATION:-
1. To establish, maintain, conduct, provide, procure or make available
services of every kind including commercial, statistical, financial,
accountancy, medical, legal, management, educational, engineering, data
processing, communication and other technological social or other
services.
2. To carry on the business as importer, exporter, buyers, lessers, and
sellers of and dealers in all types of electronic components and equipment
necessary for attaining the above objects.
(B) OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT OF THE MAIN
OBJECTS:
3. To carry on all kinds of promotion business, and in particular to form,
constitute, float, lend money to assist, and control any companies,
associations, or undertakings whatsoever.
4. To establish, provide, maintain and conduct or otherwise subsidise
research laboratories, experimental stations, workshops and libraries for
scientific, industrial, commercial and technical research and experiments;
to undertake and carry on scientific, industrial, commercial, economic,
statistical and technical research, surveys and investigations; to promote
studies, research investigation and invention, both scientific and
technical by providing, subsiding, endowing, or assisting laboratories,
colleges, universities, workshops, libraries, lectures, meetings,
exhibitions and conferences and by providing for the remuneration to
scientists, scientific or technical professors or teachers and the award
of scholarship, grants and prizes to students, research-workers and
inventors or otherwise and generally to encourage, promote and reward
studies, research, investigations, experiments, tests and inventions of
any kind.
5. To provide for the welfare of employees or ex-employees of the Company and
the wives, widows, families or dependants of such persons by building or
contributing to the building of houses, dwellings or chawls or by grants
of money, pensions, allowances, gratuities, bonus or other payments or by
creating and from time-to-time subscribing or contributing to provident
and other funds, institutions and trusts and by providing or subscribing
or contributing towards
<PAGE>
2
places of instruction and recreation, hospitals and dispensaries, medical
and other attendance and assistance as the Company shall think fit.
6. To subscribe or contribute or otherwise to assist or to guarantee money to
charitable, benevolent, religious, scientific, national, public or any
other useful institutions, objects or purposes or for any exhibition.
7. To establish and maintain or procure the establishment and maintenance of
any contributory or non-contributory pension or superannuation funds for
the benefit of, and give or procure the giving of donations, gratuities,
pensions, allowances or employments to any person who are or were at any
time in the employment or service of the Company, or of any company which
is a subsidiary of the Company or is allied to or associated with the
Company or with any such subsidiary company, or who are or were at any time
Directors or Officers of the Company or of any such other company as
aforesaid, and wives, widows, families, and dependants of any such persons
and also establish and subsidise and subscribe to any institutions,
associations, clubs or funds calculated to be for the benefit of or to
advance the interests and well being of the Company or of any such other
company as aforesaid, and make payments to or towards the insurance of any
such person as aforesaid and to do any of the matters aforesaid, either
alone or in conjunction with any such other company as aforesaid.
8. To undertake and execute any trust the undertaking of which may seem to the
Company desirable and either gratuitously or otherwise.
9. To act as agents, registrars or brokers and as trustees for any person or
company and to undertake and perform sub-contracts.
10. To buy, sell, manufacture, repair, alter and exchange, let on hire, export,
and deal in all kinds of articles and things which may be required for the
purposes of any of the said businesses, or commonly supplied or dealt in by
persons engaged in any such businesses, or which may seem capable of being
profitably dealt with in connection with any of the said businesses.
11. To adopt such means of making known the business of the Company and/or
associate companies or others as may seem expedient and in particular by
advertising in the press, public places and theatres, by radio, by
television, by circulars, by purchase and exhibition or works of art or
interest, by publication of books, pamphlets, bulletins or periodicals, by
organising or participating in exhibitions and by granting prizes, rewards
and donations.
12. To apply for and acquire any statutory or other powers, rights or
concessions.
13. To act as Aadatias, Selling Agents, Purchasing Agents, Factors, Muccadums,
Carriers, Jatha Merchants, Landing and Forwarding Agents, Brokers,
Guaranteed Brokers, in respect of goods, materials and merchandise and
produce and articles of all kinds and descriptions.
14. To construct and develop residential or industrial colonies for the general
advancement of members, employees or others.
15. To purchase, or otherwise acquire and undertake the whole or any part of
the business, property, rights, and liabilities of any person, firm or
company carrying on any business which this company is authorised to carry
on or possessed of property or rights suitable for any of the purposes of
the Company and to purchase, acquire, sell and deal in property, shares,
stocks, debentures or debenture-stocks of any such person, firm or company
and to conduct, make or carry into effect any arrangements in regard to the
winding up of the business of any such persons, firm or company.
16. To enter into partnership or into any arrangements for sharing of profits,
union of interest, reciprocal concession or co-operation with any person,
partnership, or company and to promote, constitute, form and organise, and
aid in promoting, constituting, forming and
<PAGE>
3
organising companies, syndicates or partnerships of all kinds for all the
purposes or acquiring and undertaking any property and liabilities of the
Company or of advancing, directly or indirectly, the objects thereof or for
any other purposes which this Company may think expedient. As also to pay
for any properties, rights or privileges required by this Company either in
shares of the Company or partly in cash or otherwise and to give shares or
stock of this Company in exchange for shares or stock of any other company.
17. To apply for, purchase or otherwise acquire patents, brevet inventions,
licences, concessions and the like conferring any exclusive or non-
exclusive or limited right to use any secret or other information as to any
invention which may seem capable of being used for any of the purposes of
the Company or benefit the Company and to use, exercise, or develop or
grant licences in respect of or otherwise turn to account the property,
rights or information so acquired.
18. To receive money, valuable, and goods and materials of all kinds of
depositor for safe custody.
19. To lend money and other property, to guarantee the performance of contracts
and obligations of all kinds, to act as agents in the management, sale and
purchase of property, and generally to transact business as capitalists and
financiers.
20. To lend, invest or otherwise employ or deal with moneys belonging to or
entrusted to the Company upon making arrangements to secure repayment or
payment of principal and interest thereon.
21. To borrow or raise or secure the payment of money or to receive money on
deposit at interest for any of the purpose of the Company and at such time
and from time to time and in such manner as may be thought fit and in
particular by the issue of debentures, or debenture-stocks, perpetual or
otherwise including debentures or debenture-stock convertible into shares
of this or any other company or perpetual annuities and in security for any
such money so borrowed, raised or received or any such debentures or
debenture-stocks so issued, to mortgage, pledge or charge the whole or any
part of the property, assets or revenue and profits of the Company, present
or future, including its uncalled capital by special assignments or
otherwise or to transfer or convey the same absolutely or in trust and to
give the lenders power of sale and other powers as may seem expedient and
to purchase, redeem or pay off any such securities provided the Company
shall not carry on banking business as defined in the Banking Regulation
Act, 1949.
22. To draw, make, accept, endorse, discount, execute, issue, negotiate, assign
and otherwise deal with cheques, drafts, bills of exchange, promissory
notes, hundies, debentures, bonds, bills of lading, railway receipts,
warrants and all other negotiable or transferable instruments.
23. To amalgamate with any other company or companies.
24. To distribute any of the property of the Company amongst the members in
specie or kind subject to the provisions of the Companies Act in the event
of winding up.
25. To apply for, tender, purchase, or otherwise acquire any contracts, sub-
contracts licences and concessions for or in relation to the objects or
business herein mentioned or any of them, and to undertake, execute, carry
out, dispose of or otherwise turn to account the same.
26. To do all or any of them in any part of the world either as principals,
agents, contractors, trustees or otherwise and either by or through agents,
trustees, sub-contractors or otherwise, either alone or in conjunction with
others and to allow any property to remain outstanding in such agents or
trustees.
27. To do all such other things as are incidental or conducive to the
attainment of the above objects or any of them.
<PAGE>
4
(C) OTHER OBJECTS:
28. To carry on the business of an investment company and to buy, underwrite
and to invest in the acquire and hold shares, stocks, debentures,
debenture-stocks, bonds, obligations and securities issued or guaranteed by
any company constituted or carrying on business in India or elsewhere and
debentures, debenture-stocks, bonds, obligations and securities issued or
guaranteed by any Government, State, Dominion, Sovereign, Ruler,
Commissioners, Public body or authority supreme, municipal, local or
otherwise or firm or person whether in India or elsewhere and to deal and
turn to account the same.
29. To carry on business related to the electronic industry, Textiles,
Chemicals, Hotels, Construction & Engineering items.
30. To transact and carry on all kinds of agency business and in particular to
collect rents and debts, and to negotiate loans, to find investments, and
to issue and place shares, stocks, debentures, debenture-stocks or
securities for the above business of the Company.
31. To carry on business of every kind and to act as merchants, traders,
Commission or other agents or in any other capacity whatsoever in India or
in any part of the world, to carry on the business of providing services of
every kind and to import, export, buy, sell, barter, exchange, pledge, make
advances upon or otherwise deal in goods, produce, article, merchandise,
services, conveniences and amenities of every kind which will be required
for the business of the Company.
32. To carry on business as capitalists, financiers; concession and merchants
and to undertake and carry on and execute all kinds of financial,
commercial, trading and other operations.
33. To sell or purchase or otherwise deal in any goods, products, articles or
things and to carry on business as merchants, traders, and dealers in any
goods, commodities, articles and things whatsoever in or outside India and
generally to carry on business as exporters, importers and dealers.
34. To carry on the business of advertising contractors and agents and any
other business which may be usefully carried on in connection with such
business and to acquire and undertake the whole or any part of the business
property and liabilities of any person or company carrying on business as
such contractor or agents, or any other business which may be usefully
carried on in connection therewith.
35. To manufacture, maintain, export, import, buy, sell, rent, hire or lease or
otherwise acquire, dispose of or deal in all kinds of digital systems,
numerical controller, flexible manufacturing systems, robots, communication
systems, computers, computer peripherals, computer software, computer
hardware, computer technology, machines, computer aided teaching aids,
energy saving devices, alternative sources of energy, electrical and
electronics components, devices, instruments, equipments and controls for
any engineering applications, and all other related components, parts and
products used in communication and computers.
AND IT IS HEREBY DECLARED that the word "company" in this Memorandum when
applied otherwise than to this Company shall whenever the context shall so
require or admit be deemed to include any authority, partnership or other
body of persons whether incorporated or un-incorporated and whether
domiciled in India or elsewhere and that the intention is that the objects
specified in the several paragraphs of this Memorandum shall be regarded as
independent objects and shall accordingly shall be in no wise limited or
restricted in its application (except when otherwise expressed in such
paragraphs) by reference to the objects in any other paragraph or the name
of the company, but may be carried out in as full and ample a manner and
construed and applied in as wide a sense as if each of the said paragraphs
defines the objects of a separate, distinct and independent Company.
<PAGE>
5
IV. The liability of the members is limited.
V. "The Authorized Share Capital of the company is Rs. 50,00,00,000 (Rupees
fifty crores only) divided into 5,00,00,000 (Five crores only) Equity
Shares of Rs. 10 each (Rupees ten only) with power to increase and reduce
the capital of the company and to divide the shares in the capital for the
time being into several classes and attach thereto respectively such
preferential, deferred, qualified or special rights, privileges or
conditions as may be determined by or in accordance with the Articles of
Association of the company for the time being and to vary, modify or
abrogate any such rights, privileges or conditions in such manner as may
be permitted by the Companies Act, 1956 or by the Articles of Association
of the company for the time being".
RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 20,
1999
We the several persons whose names and addresses are subscribed below are
desirous of being formed into a Company in pursuance of this Memorandum of
Association and we respectively agree to take the number of shares in the
Capital of the Company set opposite to our respective names.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Signature, Name, Address, Number of Equity Signature, Name, Address,
description and occupation of Shares taken by each description and occupation of
Subscribers Subscriber Witness
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Nagavara Ramarao Narayana Murthy 1
(Son of Nagavara Ramarao) (One equity)
Flat 6, Padmanabhan Apartment,
1126/2, Shivajinagar,
Pune - 411 016
Consultant
Nadathur Srinivasa Raghavan 1
(Son of N. Sarangapani) (One equity)
5, "Ravikripa", Station Road,
Matunga (C. R.),
Bombay - 400 019. Consultant
VIPUL DEVENDRA
Senapathy Gopalakrishnan 1 KINKHABWALA
(Son of P. G. Senapathy) (One equity) (S/o. Devendra Vithaldas
Krishna Vihar, Kalapalayam Lane, Kinkhabwala)
Pathenchanthai, 14, Thakurdwar Road,
Trivandrum - 695 001. Zaveri Building, Bombay - 400 002.
Service
Consultant
Nandan Mohan Nilekani 1
(Son of M. R. Nilekani) (One equity)
37, Saraswatput,
Dharwar - 580 002.
KARNATAKA
Consultant
-------------------
4
(Four equity)
- ----------------------------------------------------------------------------------------------
</TABLE>
Dated this 15th day of June 1981.
<PAGE>
EXHIBIT 3.3
Company No. 13115
- ----------------- [LOGO APPEARS HERE]
FRESH CERTIFICATE OF INCORPORATION CONSEQUENT
ON CHANGE OF NAME
In the Office of the Registrar of Companies Karnataka, Bangalore.
-------------------------------------
(Under the Companies Act 1956 (1 of 1956)
IN THE MATTER 0F INFOSYS TECHNOLOGIES PRIVATE LIMITED
----------------------------------------------------------------
I hereby certify that Infosys Technologies Pvt. Limited, which was
originally incorporated on Second day of July 1981 under the Companies Act, and
under the name Infosys Consultants Private Limited having duly Passed the
necessary resolution in terms of section 21/44 of Companies Act, 1956.
The name of the said company is this day changed to INFOSYS TECHNOLOGIES
Limited and this certificate is issued pursuant to section 23(1) of the said
Act.
Given under my hand at Bangalore this Second day of June 1992
(One thousand nine hundred Ninety two)
/s/ R. Mantra Murphy
(R. MANTRA MURTHY)
[STAMP APPEARS HERE]
ASSTT. Registrar of Companies
Karnataka, Bangalore
________________________________________________________________________________
Here give the name of the Company as existing prior to the change.
Here give the name of the Act (s) under which the Company was originally
registered and incorporated.
[The above language appears both in Hindi and English.]
<PAGE>
The foregoing document contains both Hindi and English versions of the same
text. I hereby certify that the English text is a fair and accurate translation
of the accompanying Hindi text.
/s/ T.V. Mohandas Pai
---------------------------
T.V. Mohandas Pai
<PAGE>
Exhibit 4.1
INFOSYS TECHNOLOGIES LIMITED
and
BANKERS TRUST COMPANY,
As Depositary
and
REGISTERED HOLDERS AND BENEFICIAL OWNERS OF
AMERICAN DEPOSITARY RECEIPTS
DEPOSIT AGREEMENT
Dated as of 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I DEFINITIONS.......................................... 1
ARTICLE II FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND
DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS......... 4
ARTICLE III CERTAIN OBLIGATIONS OF REGISTERED HOLDERS OF RECEIPTS 13
ARTICLE IV THE DEPOSITED SECURITIES............................. 14
ARTICLE V THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY........ 24
ARTICLE VI AMENDMENT AND TERMINATION............................ 31
ARTICLE VII MISCELLANEOUS........................................ 32
</TABLE>
<PAGE>
DEPOSIT AGREEMENT
DEPOSIT AGREEMENT, dated as of 1999, among INFOSYS TECHOLOGIES LIMITED,
a company organized under the laws of the Republic of India and its successors
(hereinafter referred to as the "Company"), BANKERS TRUST COMPANY, a corporation
duly incorporated and existing under the laws of the State of New York, United
States of America, as Depositary and any successor as depositary hereunder
(hereinafter referred to as the "Depositary"), and all Registered Holders and
Beneficial Owners from time to time of American Depositary Receipts (as
hereinafter defined) issued hereunder.
W I T N E S E T H:
-----------------
WHEREAS, it is desired to provide, as hereinafter set forth in this
Deposit Agreement, for the deposit of Shares (as hereinafter defined) of the
Company from time to time with the Depositary or with the Custodian (as
hereinafter defined) as agent for the Depositary, for the purposes set forth in
this Deposit Agreement and for the issuance hereunder of American Depositary
Receipts evidencing American Depositary Shares representing the Shares so
deposited; and
WHEREAS, the American Depositary Receipts are to be substantially in
the form of Exhibit A annexed hereto, with appropriate insertions, modifications
and omissions, as hereinafter provided in this Deposit Agreement and as shall be
specified in and pursuant to any resolution of the Company's Board of Directors
not inconsistent with the terms of this Deposit Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties hereto as follows:
ARTICLE I
DEFINITIONS
The following definitions shall for all purposes, unless otherwise clearly
indicated, apply to the respective terms used in this Deposit Agreement:
Section 1.01. "Affiliate" shall have the meaning assigned to it under
Regulation C of the Securities Act as hereinafter defined.
Section 1.02. "American Depositary Receipt" or "Receipt" means a
receipt issued pursuant to this Deposit Agreement in substantially the form of
Exhibit A hereto evidencing American Depositary Shares representing Deposited
Securities.
Section 1.03. "American Depositary Shares" means the securities
evidenced by the Receipts issued hereunder and the rights and interests in the
Deposited Securities represented thereby. Each American Depositary Share shall
represent one-half of one Share until there shall occur a distribution upon
Deposited Securities covered by Section 4.03 or a change in Deposited
1
<PAGE>
Securities covered by Section 4.08 with respect to which additional Receipts are
not executed and delivered, and thereafter American Depositary Shares shall
represent the amount of Shares or Deposited Securities specified in such
Sections.
Section 1.04. "Beneficial Owner" means any person who has a
beneficial interest in any American Depositary Shares evidenced by any Receipt.
Section 1.05. "Business Day" means any day on which banks in both New
York and India are not required or authorized by law to close.
Section 1.06. "Commission" means the Securities and Exchange
Commission of the United States or any successor governmental agency in the
United States.
Section 1.07. "Company" means Infosys Technologies Limited, a company
organized under the laws of the Republic of India having its principal executive
office at Electronics City, Hosur Road, Bangalore, Karnataka, India 561 229, and
its successors.
Section 1.08. "Corporate Trust Office," when used with respect to the
Depositary, means the office of the Depositary at which its corporate trust
business shall, at any particular time, be principally administered, which
office is, at the date of this Deposit Agreement, Four Albany Street, New York,
New York 10006.
Section 1.09. "Custodian" means, at the date of this Deposit
Agreement, The Industrial Credit and Investment Corporation of India Limited,
and any other firm or corporation which may be appointed by the Depositary, with
notice to the Company, as a substitute or additional custodian hereunder
pursuant to the terms of Section 5.05 and shall also mean all of them
collectively.
Section 1.10. "deposit", "surrender", "transfer", "withdraw" or
"delivery" mean, when used in respect of Shares, where the context requires, an
entry or entries or an electronic transfer or transfers in an account or
accounts maintained by institutions authorized under Indian law to effect
transfers of securities, and not to the physical transfer of certificates
representing the Shares.
Section 1.11. "Deposit Agreement" means this Agreement, as the same
may be amended from time to time in accordance with the provisions hereof.
Section 1.12. "Depositary" means Bankers Trust Company, a corporation
incorporated and existing under the laws of the State of New York, and any
successor as depositary hereunder pursuant to the terms of Section 5.04.
Section 1.13. "Deposited Securities" as of any time means Shares at
such time deposited or deemed to be deposited (including any Shares deposited
pursuant to Section 2.10 hereof) under this Deposit Agreement and any and all
other securities, property and cash received by the Depositary or the Custodian
in respect or in lieu of such Shares deposited or deemed to be deposited and at
such time held hereunder, subject with respect to cash to the provisions of
2
<PAGE>
Section 4.05 except for any such securities, property or cash as shall have been
distributed to Registered Holders pursuant to sections 4.01, 4.02, 4.03, 4.04 or
4.05.
Section 1.14. "Dollars" or "$" means United States Dollars or such
other currency which is legal tender in the United States of America.
Section 1.15. "Foreign Registrar" means the entity that presently
carries out the duties of registrar for the Shares or any successor as registrar
for the Shares and any other appointed agent of the Company for the transfer and
registration of the Shares.
Section 1.16. "India" means the Republic of India.
Section 1.17. "Initial Deposit" means the deposit of Shares with the
Custodian by the Company pursuant to this Deposit Agreement and the Underwriting
Agreement between the Company and the Underwriters named therein dated
1999.
Section 1.18. "Registered Holder" means the person in whose name a
Receipt is registered on the books of the Depositary or the Registrar, if any,
maintained for such purpose.
Section 1.19. "Registrar" means the Depositary or any bank or trust
company having an office in the Borough of Manhattan, The City of New York,
appointed by the Depositary, subject to the approval by the Company, such
approval not to be unreasonably withheld, to register Receipts and transfers of
Receipts are herein provided, and shall include any co-registrar appointed by
the Depositary, upon the request or with the approval of the Company, for such
purposes. Registrars (other than the Depositary) may be removed and substitutes
appointed by the Depositary upon the request or with the approval of the
Company. Each Registrar (other than the Depositary) appointed pursuant to this
Deposit Agreement shall give notice in writing to the Company and the Depositary
accepting such appointment and agreeing to be bound by the applicable terms of
this Deposit Agreement.
Section 1.20 "Regulation S" means Regulation S under the Securities
Act.
Section 1.21. "Restricted Securities" shall mean Shares, or Receipts
representing such Shares, which are acquired directly or indirectly from the
Company or its Affiliates in a transaction or chain of transactions not
involving any public offering or which are subject to resale limitations under
the Securities Act, as defined below, or which are held by an officer, director
(or persons performing similar functions) or other Affiliate of the Company, or
which are subject to other restrictions on sale or deposit under the laws of the
United States or India, or under a shareholder agreement or the corporate
charter of the Company or under the regulations of an applicable securities
exchange.
Section 1.22. "Rule 144A" means Rule 144A under the Securities Act,
as from time to time amended.
Section 1.23 "Rupees" and "Rs" means the lawful currency of the
Republic of India.
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Section 1.24. "Securities Act" means the United States Securities
Act of 1933, as from time to time amended.
Section 1.25. "Securities Exchange Act" means the United States
Securities Exchange Act of 1934, as from time to time amended.
Section 1.26. "Shares" means the equity shares in registered form of
the Company, nominal value Rs 10 each, validly issued and outstanding and fully
paid, nonassessable and free of any preemptive rights of the holders of
outstanding Shares or hereafter validly issued and outstanding and fully paid,
nonassessable and free of any preemptive rights of the holders of outstanding
Shares or interim certificates representing such Shares; provided, further, that
-------- -------
if there shall occur any change in par or nominal value, a split-up or
consolidation or any other reclassification or, upon the occurrence of any event
described in Section 4.08, an exchange or conversion in respect of the Shares,
the term "Shares" shall thereafter represent the successor securities resulting
from such change in par or nominal value, split-up, consolidation or such other
reclassification or such exchange or conversion. References to Shares shall
include evidence of rights to receive Shares, whether or not stated in the
particular instance; provided, however, that in no event shall Shares include
-------- -------
evidence of rights to receive Shares with respect to which the full purchase
price has not been paid or Shares as to which preemptive rights have theretofore
not been validly waived or exercised.
Section 1.27. "United States" shall have the meaning assigned to it
under Regulation S under the Securities Act.
In this Deposit Agreement, where the context so permits, words
importing the singular number only shall include the plural number and vice
versa, words importing the masculine gender shall include the feminine gender
and vice versa and words importing persons shall include firms, partnerships,
trusts and corporations.
ARTICLE II
FORM OF RECEIPTS, DEPOSIT OF SHARES,
EXECUTION AND DELIVERY, TRANSFER
AND SURRENDER OF RECEIPTS
Section 2.01. Form and Transferability of Receipts. American
------------------------------------
Depositary Shares shall be evidenced by definitive Receipts which shall be
printed or lithographed or shall be in such other form as may be agreed upon by
the Company and the Depositary, and in any event shall be substantially in the
form set forth in Exhibit A annexed hereto, with appropriate insertions,
modifications and omissions, as hereinafter provided. Receipts may be issued in
denominations of any number of American Depositary Shares. No Receipt shall be
entitled to any benefits under this Deposit Agreement or be valid or obligatory
for any purpose, unless it shall have been executed by the Depositary by the
manual signature of a duly authorized officer of the Depositary; provided,
--------
however, that such signature may be a facsimile if a Registrar for the Receipts
- -------
shall have been appointed and such Receipts are countersigned by the manual
signature of a duly authorized officer of the Registrar. The Depositary shall
maintain books, as hereinafter
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provided, on which each Receipt so signed and delivered and the transfer of each
such Receipt shall be registered. Receipts bearing the manual or facsimile
signature of a duly authorized officer of the Depositary who was at any time a
proper signatory of the Depositary, shall bind the Depositary, notwithstanding
that such signatory has ceased to hold such office prior to the execution and
delivery of such Receipts by the Registrar or did not hold such office at the
date of issuance of such Receipts.
The Receipts may, with the prior written consent of the Company (which
consent shall not be unreasonably withheld), and upon the written request of the
Company, shall be endorsed with or have incorporated in the text thereof such
legends or recitals or changes, including requirements with respect to
registration of transfer, not inconsistent with the provisions of this Deposit
Agreement as may be required by the Depositary or the Company to perform their
obligations hereunder or as may be required to comply with any applicable laws
or regulations or with the rules and regulations of any securities exchange upon
which the Receipts or the American Depositary Shares may be listed, or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Receipts are subject by
reason of the date or manner of issuance of the underlying Deposited Securities
or otherwise, including by reason of the issuance of Receipts or the underlying
Deposit Securities in transactions exempt from the registration requirements of
the Securities Act.
The Receipts shall bear a CUSIP number that is different from any
CUSIP number that was, is or may be assigned to any depositary receipts
previously or subsequently issued pursuant to any other arrangement between the
Depositary (or any other depositary) and the Company which are not Receipts
issued hereunder.
Title to a Receipt (and to the American Depositary Shares evidenced
thereby), subject to any limitations set forth in such Receipt, when properly
endorsed or accompanied by a properly executed instrument of transfer and
transferred in accordance with the terms of this Deposit Agreement, including,
without limitation, Sections 2.04 and 2.07, shall be transferable by delivery,
with the same effect as in the case of a negotiable instrument under the laws of
the State of New York; provided, however, that until a Receipt shall be
-------- -------
transferred on the books of the Depositary as provided in Section 2.04 hereof,
the Company and the Depositary, notwithstanding any notice to the contrary, may
treat the Registered Holder thereof at such time as the absolute owner thereof
for the purpose of determining the person entitled to distribution of dividends
or other distributions or to any notice provided for in this Deposit Agreement
and for all other purposes, and neither the Depositary nor the Company shall
have any obligation or be subject to any liability under this Deposit Agreement
to any Beneficial Owner or holder of a Receipt unless such Beneficial Owner or
holder is the Registered Holder thereof.
Section 2.02. Deposit of Shares. Subject to the terms and conditions
-----------------
of this Deposit Agreement, the deposit of Shares shall be made by transfer of
Shares to the Custodian for the account of the Depositary maintained for that
purpose. Shares (other than Restricted Securities) may be deposited by delivery
thereof to the Custodian, accompanied by an appropriate instrument or
instruments of transfer or endorsement, in a form satisfactory to such Custodian
together with (i) all such certifications as may be required by the provisions
of this Deposit
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Agreement and (ii) a written order directing the Depositary to execute and
deliver to, or upon the written order of, the person or persons stated in such
order, as promptly as practicable, a Receipt or Receipts for the number of
American Depositary Shares representing the Shares as deposited.
No Share shall be accepted for deposit unless accompanied by (a)
payment in respect of any applicable taxes or duties, and (b) evidence
satisfactory to the Depositary (which may be an opinion of counsel) that any
necessary exemption is in force or approval has been granted by, or there has
been compliance with the rules and regulations of, the governmental agency in
India, if any, which is then performing the function of the regulation of
currency exchange. Unless current applicable law changes, once withdrawn from
the depository facility, Shares may not be redeposited.
If required by the Depositary, Shares presented for deposit at any
time, including deposit by electronic transfer, whether or not the transfer
books of the Company or the Foreign Registrar, if applicable, are closed, shall
also be accompanied by an agreement or assignment, or other instrument
satisfactory to the Depositary, which will provide for the prompt transfer to
the Custodian or their respective nominees of any dividend, or right to
subscribe for additional Shares or right to receive other property which any
person in whose name the Shares are or have been recorded may thereafter receive
in respect of such deposited Shares, or, in lieu thereof, such agreement of
indemnity or other agreement as shall be satisfactory to the Depositary
At the request and risk and expense of any person proposing to deposit
Shares, and for the account of such person, the Depositary may receive
certificates for Shares to be deposited, evidence that Shares have been
electronically transferred or that irrevocable instructions have been given to
cause the transfer of such Shares to the account of the Custodian together with
the other instruments herein specified, for the purpose of forwarding such Share
certificates to the Custodian for deposit hereunder.
Upon each delivery to a Custodian of a certificate or certificates for
Shares to be deposited hereunder together with the other documents above
specified, such Custodian shall, as soon as registration of transfer can be
accomplished, present such certificate or certificates together with the
appropriate instrument or instruments of transfer or endorsement, to the Company
or the Foreign Registrar, if applicable, for registration of transfer and
recordation of the Shares or other Deposited Securities being deposited in the
name of the Depositary or its nominee or such Custodian or its nominee at the
cost and expense of the person making such deposit (or for whose benefit such
deposit is made) and shall obtain evidence satisfactory to it of such
registration.
Deposited Securities shall be held by the Depositary or by a Custodian
for the account and to the order of the Depositary, the Custodian or any of
their nominees (on behalf of Registered Holders) at the principal office of a
Custodian, or at such other place or places as the Depositary shall determine.
After the Initial Deposit, unless otherwise agreed by the Depositary
and the Company and permitted by applicable law, only the following may be
deposited under this Deposit Agreement: (i) Shares issued as a dividend or free
distribution in respect of deposited
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securities; (ii) Shares subscribed for or acquired by holders from the Company
through the exercise of rights distributed by the Company to such persons in
respect of Deposited Securities; and (iii) securities issued by the Company to
the holders in respect of Deposited Securities as a result of any change in par
value, subdivision, consolidation and other reclassification of deposited
securities or otherwise. The Company must inform the Depositary if any shares
issued by it which may be deposited, do not, by reason of the date of issue or
otherwise, rank pari passu in all respects with the other deposited securities.
The Depositary agrees to instruct the Custodian to place all Shares
and any other securities which are Deposited Securities accepted for deposit
under this Deposit Agreement into an account or accounts that are segregated and
separate from the account in which any Shares or any other securities of the
Company may be held by such Custodian under any other depositary receipt
facility pursuant to which depositary receipts evidencing depositary shares
representing Shares are issued.
The Depositary and the Custodian will refuse to accept Shares for
deposit whenever the Depositary is notified in writing that the Company has
restricted transfer of shares if such transfer would result in the ownership of
the Shares being in violation of any applicable laws or the Memorandum and
Articles of Association of the Company.
Shares may not be deposited by persons located in India, resident of
India or for, on the account of, such persons (except that Shares may be
deposited by the Company and the Custodian).
Section 2.03. Execution and Delivery of Receipts. Upon receipt by
----------------------------------
any Custodian of any deposit in accordance with the provisions of Section 2.02
hereof (and, in addition, if the transfer books of the Company or the Foreign
Registrar, if applicable, are open, the Depositary may in its sole discretion
require a proper acknowledgment or other evidence from the Company or the
Foreign Registrar, as the case may be, that any Deposited Securities have been
recorded upon the books of the Company or the Foreign Registrar, if applicable,
in the name of the Depositary or its nominee or such Custodian or its nominee),
together with the other documents required as specified above, such Custodian
shall notify the Depositary of such deposit and of the name or names of the
person or persons to whom or upon whose written order a Receipt or Receipts are
deliverable in respect thereof, the office of the Depositary at which such
Receipts are to be delivered and the number of American Depositary Shares to be
evidenced thereby. Such notification shall be made at the request, risk and
expense of the person making the deposit in writing and mailed, first class air
mail postage prepaid, or, by SWIFT message, cable, or telex or facsimile
transmission.
Upon receiving such notice from such Custodian, or upon receipt of
such Shares by the Depositary, the Depositary, subject to the terms and
conditions of this Deposit Agreement, shall execute and deliver at its Corporate
Trust Office to or upon the order of the person or persons entitled thereto, a
Receipt or Receipts registered in such name or names as requested by such
persons or persons entitled thereto evidencing the number of American Depositary
Shares requested by such person or persons but only upon payment to the
Depositary of the fees of the Depositary for the execution and delivery of such
Receipt or Receipts as provided in Section 5.09
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<PAGE>
hereof and Exhibit B hereto, and of all taxes and governmental charges and fees
payable in connection with such deposit and the transfer of the Deposited
Securities. Delivery at offices other than the Depositary's Corporate Trust
Office shall be at the risk and expense of the person requesting such delivery.
Section 2.04. Transfer of Receipts. Subject to the terms and
--------------------
conditions of this Deposit Agreement, the Depositary or the Registrar, if any,
shall promptly register transfers of Receipts on its transfer books from time to
time, upon any surrender at its designated transfer offices of a Receipt by the
Registered Holder thereof in person or by a duly authorized attorney, properly
endorsed or accompanied by a properly executed instrument of transfer, and duly
stamped as may be required by the laws of the State of New York, of the United
States of America and any other applicable law. Thereupon the Depositary shall
execute and, if the Depositary's signature is by facsimile, the Registrar shall
manually countersign a new Receipt or Receipts and deliver the same to or upon
the order of the person entitled thereto evidencing the same aggregate number of
American Depositary Shares as those evidenced by the Receipts surrendered.
The Depositary, upon the written request of the Company, shall, or
with the written approval not to be unreasonably withheld of the Company, may,
appoint one or more co-transfer agents for the purpose of effecting transfers
(or combinations and split-ups as under Section 2.05 hereof) of Receipts at
designated transfer offices on behalf of the Depositary. In carrying out its
functions, a co-transfer agent may require evidence of authority and compliance
with applicable laws and other requirements by Registered Holders, Beneficial
Owners or other persons entitled to Receipts and will be entitled to protection
and indemnity to the same extent as the Depositary.
Section 2.05. Combinations and Split-ups of Receipts. Upon surrender
--------------------------------------
of a Receipt or Receipts at the Depositary's designated transfer offices for the
purpose of effecting a split-up or combination of such Receipt or Receipts, and
subject to the terms and conditions of this Deposit Agreement, the Depositary
shall execute and, if the Depositary's signature is by facsimile, the Registrar
shall manually countersign and deliver a new Receipt or Receipts for the number
of American Depositary Shares requested, evidencing the same aggregate number of
American Depositary Shares evidenced by the Receipt or Receipts surrendered.
Section 2.06. Surrender of Receipts and Withdrawal of Shares. Upon
----------------------------------------------
surrender of Receipts at the Depositary's Corporate Trust Office, or at such
other offices as the Depositary may designate, for the purpose of withdrawal of
the Deposited Securities represented by the American Depositary Shares evidenced
thereby, and upon payment of the fees and expenses of the Depositary for the
cancellation of Receipts as provided in Section 5.09 hereof and Exhibit B hereto
and payment of all expenses, taxes, duties and charges payable by the
Depositary, and Agent or the Custodian in connection with any of the foregoing,
including, but not limited to, such customary expenses as are incurred by the
Depositary in the conversion of currencies other than U.S. dollars into U.S.
dollars and fees imposed by any governmental or regulatory authority payable in
connection with such surrender and withdrawal of the Deposited Securities, and
subject to the terms and conditions of the Company's Memorandum and Articles of
Association, the Deposited Securities and this Deposit Agreement, and to any
other restriction applicable thereto, the Registered Holder of such Receipts
shall be entitled to delivery, to him or upon his
8
<PAGE>
order, of the Shares and any other Deposited Securities at the time represented
by the American Depositary Shares evidenced by such Receipts. Delivery of such
Shares and other Deposited Securities may be made by (i) the delivery of
certificates in the name of the Registered Holder or as ordered by him which, if
required by law, shall be properly endorsed or accompanied by properly executed
instruments of transfer to such Registered Holder or as ordered by him or (ii)
book-entry transfer of Shares represented by the American Depositary Shares
evidenced by such Receipt to an account in the name of the Registered Holder or
as ordered by him and (b) the delivery at the office of the Custodian of any
other securities, property and cash to which such Registered Holder is then
entitled in respect of such Receipts to such Registered Holder or as ordered by
him. Such delivery shall be made, as hereinafter provided, without unreasonable
delay.
Receipts surrendered for such purposes may be required by the
Depositary to be properly endorsed in blank or accompanied by a properly
executed instrument of transfer in blank, and if the Depositary so requires, the
Registered Holder thereof shall execute and deliver to the Depositary a written
order directing the Depositary to cause the Shares and any other Deposited
Securities being withdrawn to be delivered to or upon the written order of a
person or persons designated in such order. Thereupon the Depositary shall
direct the Custodian to deliver at the designated office of the Custodian,
subject to Sections 2.07, 3.01 and 3.02, and to the other terms and conditions
of this Deposit Agreement, the Memorandum and Articles of Association of the
Company, the provisions of governing Deposited Securities and applicable laws
now or hereinafter in effect, to or upon the written order of the person or
persons designated in the order delivered to the Depositary as above provided,
the amount of Shares and any other Deposited Securities represented by such
Receipts or evidence of the electronic transfer thereof (if available), as the
case may be, to or for the account of such person, except that the Depositary
may make delivery to such person or persons at its Corporate Trust Office or at
such other place as may have been designated for such purpose by the Depositary
of any dividends or distributions with respect to the Shares and any other
Deposited Securities represented by such Receipts, or of any proceeds of sale of
any such dividends, distributions or rights, which may at the time be held by
the Depositary. Such direction shall be given by letter or, at the risk and
expense of the Registered Holder, by cable, telex or facsimile transmission.
At the request, risk and expense of any Registered Holder so
surrendering Receipts, and for the account of such Registered Holder, provided
that payment of any applicable tax or other governmental charge shall have been
made in accordance with Section 3.02 the Depositary shall direct the Custodian
to forward any cash or other property (other than rights) and the certificate or
certificates and other proper documents of title for the amount of Shares and
any other Deposited Securities represented by such Receipts for delivery at its
Corporate Trust Office or at such other place as may be reasonably requested by
the Registered Holder. Such direction shall be given at the risk and expense of
such Registered Holder in writing and mailed, first class air mail postage
prepaid, or by SWIFT message, cable, telex or facsimile transmission.
The Depositary shall not accept for surrender a Receipt evidencing
American Depositary Shares representing less than one Share. In the case of
surrender of a Receipt evidencing a number of American Depositary Shares
representing other than a whole number of Shares, the
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Depositary shall cause ownership of the appropriate whole number of Shares to be
recorded in the name of the Registered Holder surrendering such Receipt, and
shall issue and deliver to the person surrendering such Receipt a new Receipt
evidencing American Depositary Shares representing any remaining fractional
Share.
A stamp duty of 0.5 percent of the market value of the Shares will be
charged in respect of any withdrawal of Shares and such stamp duty will be
payable by the relevant holder. In addition, it will be necessary to obtain the
approval of the Reserve Bank of India for withdrawal of Shares or for the
Company to register Shares in the name of a person who is not a resident of
India upon such withdrawal. Any subsequent transfer by the Registered Holder
after withdrawal will require the approval of the Reserve Bank of India, which
approval must be obtained by the purchaser and the Company under Section
29(1)(b) and 19(4), respectively, of the Foreign Exchange Regulation Act, 1973.
Section 2.07. Limitations on Execution and Delivery, Registration of
------------------------------------------------------
Transfer and Surrender of Receipts. As a condition precedent to the execution
- ----------------------------------
and delivery, registration of transfer, split-up, combination or surrender of
any Receipt, the delivery of any distribution thereon, or withdrawal of any
Deposited Securities, the Depositary, the Company, the Custodian and the Foreign
Registrar, if applicable, may require payment from the depositor of Shares or
the presenter of the Receipt of a sum sufficient to pay for (i) any tax or other
governmental charge and any stock transfer or registration fees in respect of
Receipts, (ii) any tax or other governmental charge and any stock transfer or
registration fees in respect of registration of transfers of Shares or other
Deposited Securities upon any applicable register (iii) any other expenses,
taxes, duties and charges payable by the Depositary, Agent or Custodian and (iv)
any fees of the Depositary as provided in Section 5.09 hereof and Exhibit B
hereto; (b) the production of proof satisfactory to it as to the identity and
genuineness of any signature and as to any other matter contemplated by Section
3.01 hereof; (c) compliance with the provisions of the Company's Memorandum and
Articles of Association in effect from time to time and resolutions and
regulations of the Company's Board of Directors adopted pursuant to such
Memorandum and Articles of Association and (d) compliance with (i) any laws or
governmental regulations relating to Receipts or American Depositary Shares or
to the withdrawal of Deposited Securities and (ii) such reasonable regulations,
if any, as the Depositary and Company may establish consistent with the
provisions of this Deposit Agreement.
After consultation with the Company, the delivery of Receipts against
deposits of Shares generally or against deposits of particular Shares may be
suspended, or the transfer of Receipts in particular instances may be refused,
or the registration of transfer of outstanding Receipts, or the combination or
split-up of Receipts, generally may be suspended, during any period when the
transfer books of the Depositary or any register for Shares or other Deposited
Securities are closed, or if any such action is deemed necessary or advisable by
the Depositary or the Company at any time or from time to time because of any
requirement of law or of any government or governmental body or commission, or
under any provision of this Deposit Agreement, or for any other reason.
Notwithstanding any other provision of this Deposit Agreement or the Receipts,
the surrender of outstanding Receipts and withdrawal of Deposited Securities may
be suspended only for (i) temporary delays caused by closing the transfer books
of the Depositary or the
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Company or the deposit of Shares in connection with voting at a shareholders'
meeting, or the payment of dividends, (ii) the payment of fees, taxes and
similar charges, (iii) compliance with any U.S. or foreign laws or governmental
regulations relating to the Receipts or to the withdrawal of the Deposited
Securities or (iv) any other reason that may at any time be specified in
paragraph I(A)(1) of the General Instructions to Form F-6 under the Securities
Act, as such instructions may from time to time be in effect, or any successor
provision thereto. In furtherance and not in limitation of the foregoing, the
Depositary shall not, and it shall instruct the Custodian not to (i) accept for
deposit under Section 2.02 hereof, Shares in such circumstances where the
Depositary, the Custodian or the Company has reason to believe that such Shares
have been withdrawn from a restricted depositary receipt facility in respect to
Shares established or maintained by a depositary bank, including any such
facility established or maintained by the Depositary (a "restricted facility")
or permit such Shares to be used to satisfy any person's obligation with respect
to transactions contemplated by Section 2.10 hereof unless such Shares have been
acquired in a transaction (a) registered under the Securities Act, (b) in
compliance with Regulation S, or (c) in accordance with Rule 144A under the
Securities Act and the Depositary may, as a condition to accepting the deposit
of such Shares hereunder, require the person depositing such Shares to provide
the Depositary with a certificate in writing to the foregoing effect; or (ii)
accept for (w) deposit under Section 2.02 hereof, (x) transfer or exchange under
Section 2.04 hereof, (y) cancellation under Section 2.05 hereof or (z) delivery
in satisfaction of any person's obligation with respect to transactions
contemplated by Section 2.10 hereof, depositary receipts representing Shares
issued pursuant to a restricted facility. Without limitation of the foregoing,
the Depositary shall not knowingly accept for deposit under this Deposit
Agreement any Shares or other Deposited Securities which are required to be
registered under the Securities Act unless a registration statement under the
Securities Act is in effect as to such Shares or other Deposited Securities or
any Shares or Deposited Securities the deposit of which would violate the
Company's Memorandum and Articles of Association.
Section 2.08. Lost Receipts, etc. Subject to the payment of the
------------------
relevant fees, taxes, duties, charges, costs and expenses, in case any Receipt
shall be mutilated, destroyed, lost or stolen, the Depositary shall execute and
deliver a new Receipt of like form and tenor in exchange and substitution for
such mutilated Receipt upon cancellation thereof, or in lieu of and in
substitution for such destroyed, lost or stolen Receipt, upon the Registered
Holder thereof (a) filing with the Depositary (i) a request for such execution
and delivery before the Depositary has notice that any such Receipt has been
acquired by a bona fide purchaser, (ii) evidence satisfactory to the Depositary
of such destruction or loss or theft of such Receipt and the authenticity
thereof and of the Registered Holder's ownership thereof, (b) furnishing the
Depositary with a sufficient indemnity bond in favour of, and reasonably
satisfactory to, the Company and the Depositary and (c) satisfying any other
reasonable requirements imposed by the Depositary.
Section 2.09 Cancellation and Destruction of Surrendered Receipts.
----------------------------------------------------
All Receipts surrendered to the Depositary shall be cancelled by the Depositary.
The Depositary is authorized to destroy Receipts so cancelled, except as
otherwise required by law. Cancelled Receipts shall not be entitled to any
benefits under this Agreement or be valid or obligatory for any purpose.
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Section 2.10 Pre-Release of Shares and Receipts. The Depositary may issue
----------------------------------
Receipts against evidence of rights to receive Shares from the Company (or any
agent of the Company recording Share ownership). No such issue of Receipts will
be deemed a "Pre-Release" subject to the restrictions of the following
paragraph. Subject to the further terms and provisions of this Section 2.10,
the Depositary and its agents, on their own behalf, may own and deal in any
class of securities of the Company and its Affiliates and in Receipts.
In its capacity as Depositary, the Depositary shall not lend Shares or
Receipts; provided, however, that the Depositary may execute and deliver
-------- -------
Receipts prior to the receipt of Shares pursuant to Section 2.02 hereof (each
such transaction is hereinafter referred to as a "Pre-Release"). The Depositary
may, subject to the provisions of Section 2.06 hereof, deliver Shares upon the
receipt and cancellation of Receipts which have been pre-released, but which
shares may not yet have been received. The Depositary may receive Receipts in
lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a)
preceded or accompanied by a written representation from the person to whom
Receipts or Shares are to be delivered that such person, or its customer,
beneficially owns the Shares or Receipts to be remitted, as the case may be, and
that such person or its customer agrees to indicate the Depositary as owner of
such Shares or Receipts in its records and to hold such Shares or Receipts in
trust for the Depositary until such Shares or Receipts are delivered to the
Depositary or the Custodian, and unconditionally guarantees to deliver to the
Depositary or the Custodian, as applicable, such Shares or Receipts (b) at all
times fully collateralized with cash, United States Governmental Securities or
such other collateral as the Depositary deems, in good faith, to be of
comparable safety and liquidity, (c) terminable by the Depositary on five (5)
business days' notice and (d) subject to such further indemnities and credit
regulation as the Depositary deems reasonably appropriate upon notice to the
Company. The number of Shares not deposited but represented by American
Depositary Shares outstanding at any time as a result of Pre-Releases will not
normally exceed thirty percent (30%) of the Shares deposited hereunder;
provided, however, that the Depositary reserves the right to change or disregard
- -------- -------
such limit from time to time as it deems appropriate, and may change such limit
for purposes of general application. The Depositary will also set Dollar limits
with respect to Pre-Release transactions to be entered into hereunder with any
particular Pre-Releasee on a case-by-case basis as the Depositary deems
appropriate. For purposes of enabling the Depositary to fulfil its obligations
to the Registered Holders under this Deposit Agreement, the collateral referred
to in clause (b) above shall be held by the Depositary as security for the
performance of the Pre-Releasee's obligations to the Depositary in connection
with a Pre-Release transaction, including the Pre-Releasee's obligation to
deliver Shares or Receipts upon termination of a Pre-Release transaction (and
shall not, for the avoidance of doubt, constitute Deposited Securities
hereunder).
The Depositary may retain for its own account any compensation
received by it in connection with the foregoing.
12
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ARTICLE III
CERTAIN OBLIGATIONS OF REGISTERED HOLDERS OF RECEIPTS
Section 3.01 Filing Proofs, Certificates and Other Information. Any
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person presenting Shares for deposit or any Registered Holder or Beneficial
Owner may be required by the Depositary or the Company from time to time (i) to
file with the Depositary, the Company, or the Custodian such proof of
citizenship or residence, taxpayer status, exchange control approval, payment of
applicable taxes or other governmental charges, legal or beneficial ownership of
Receipts, Deposited Securities or other securities, compliance with all
applicable laws or regulations or terms of this Deposit Agreement or the
Receipts, or such information relating to the registration on the books of the
Company or the Foreign Registrar, if applicable, or any other information the
Depositary or the Company may deem necessary or appropriate to evidence
compliance with all applicable laws and regulations, and (ii) to execute such
certificates and to make such representations and warranties, as the Depositary
may deem necessary or proper or as the Company may reasonably request by written
request to the Depositary. The Depositary and the Registrar, as applicable,
may, and at the reasonable request of the Company, shall, withhold the delivery
or registration of transfer of any Receipt or the distribution of any dividend
or distribution of rights or of the sale proceeds thereof or the delivery of any
Deposited Securities until such proof or other information is filed or such
certificates are executed or such representations and warranties are made to the
Company's and the Depositary's satisfaction. The Depositary shall from time to
time advise the Company of the availability of any such proofs, certificates or
other information and shall provide the Company, in a timely manner, with copies
thereof upon written request by the Company, unless such disclosure is
prohibited by law.
Section 3.02 Liability of Registered Holders for Taxes and Other
---------------------------------------------------
Charges. If any tax, governmental or other charge shall become payable with
- -------
respect to any Receipt or with respect to any Deposited Securities represented
by American Depositary Shares evidenced by any Receipt, such tax, governmental
or other charge shall be payable by the Registered Holder of such Receipt to the
Depositary. The Depositary may refuse, and the Company shall be under no
obligation, to effect any transfer of such Receipt or any combination or split-
up thereof or any withdrawal of Deposited Securities represented by American
Depositary Shares evidenced thereby until such payment is made, and may withhold
or deduct from any dividends or other distributions or may sell any part or all
of the Deposited Securities represented by American Depositary Shares evidenced
by such Receipt and may apply such dividends or other distributions or the
proceeds of any such sale in payment of such tax, governmental or other charge
(and any taxes or expenses arising out of such sale), the Registered Holder of
such Receipt remaining liable for any deficiency.
Section 3.03. Representations and Warranties on Deposit of Shares.
---------------------------------------------------
Every person depositing Shares under this Deposit Agreement shall be deemed
thereby to represent and warrant that such Shares and each certificate therefor
are validly issued, fully paid, non-assessable and free of any preemptive
rights, if any, of the holders of outstanding Shares and that the person making
such deposit is duly authorized so to do. Every such person shall also be
deemed to represent that (i) such Shares presented for deposit are not and the
Receipts
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evidencing the American Depositary Shares representing such Shares would not be
Restricted Securities and (ii) the deposit of such Shares and the sale of
Receipts evidencing American Depositary Shares representing such Shares by that
person are not otherwise restricted under the Securities Act. Such
representations and warranties shall survive the deposit of Shares and the
execution and delivery of Receipts in respect thereof.
Section 3.04 Disclosure of Interests. Each Registered Holder agrees
-----------------------
to comply with the provisions of the Memorandum and Articles of Association of
the Company and the laws of India with regard to notification to the Company of
interests in Shares, which include provisions requiring a Registered Holder to
disclose certain acquisitions or dispositions of Shares (or Share equivalents)
within a prescribed period of time.
Notwithstanding any other provision of this Deposit Agreement, each
Registered Holder agrees to comply with requests from the Company pursuant to
Indian law, the rules and requirements of any relevant stock exchange on which
the Shares are, or will be, registered, traded or listed or the Memorandum and
Articles of Association of the Company, which are made to provide information,
inter alia, as to the capacity in which such Registered Holder owns Receipts
(and Shares as the case may be) and regarding the identity of any other person
interested in such Receipts and the nature of such interests and various other
matters, whether or not they are Registered Holders at the time of such request.
Section 3.05. Ownership Restrictions. The Company may restrict
----------------------
transfers of the Shares where such transfer might result in ownership of Shares
exceeding limits imposed by applicable law or the Memorandum and Articles of
Association of the Company. The Company may also restrict, in such manner as it
deems appropriate, transfers of the American Depositary Shares where such
transfer may result in the total number of Shares represented by the American
Depositary Shares owned by a single Registered Holder to exceed any such limits.
The Company may instruct the Depositary to take action with respect to the
ownership interest of any Holder in excess of the limitation set forth in the
preceding sentence, including but not limited to a mandatory sale or disposition
on behalf of a Registered Holder of the Shares represented by the American
Depositary Shares held by such Registered Holder in excess of such limitations,
if and to the extent such disposition is permitted by applicable law and the
Memorandum and Articles of Association of the Company. The Depositary shall
endeavor to effect any such mandatory sale or disposition as is contemplated in
this Section, but shall have no liability (in the absence of its own willful
default, negligence or bad faith or that of its agents, officers, directors or
employees) with respect the terms of such mandatory sale or disposition or if
such mandatory sale or disposition shall not be possible.
ARTICLE IV
THE DEPOSITED SECURITIES
Section 4.01. Cash Distributions. Whenever the Depositary or the
------------------
Custodian shall receive any cash dividend or other cash distribution on any
Deposited Securities (including any liquidation surplus or other amounts
received in the liquidation of the Company), the Depositary
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shall, subject to the provisions of Section 4.05 hereof, if practicable in the
opinion of the Depositary, give notice to the Registered Holders of its receipt
of such payment, specifying the amount per Share payable in respect of such
dividend or distribution and the estimated date, as determined by the
Depositary, for such payment, and shall as soon as practicable convert or cause
to be converted such dividend or distribution into Dollars and promptly
distribute the Dollars thereby received (net of the fees, expenses and charges
of the Depositary as provided in Section 5.09 hereof and Exhibit B hereto) to
Registered Holders of Receipts entitled thereto on the record date fixed
pursuant to Section 4.06 hereof in proportion to the number of American
Depositary Shares held by each of them, respectively; provided, however, that in
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the event that any of the deposited Shares is not entitled, by reason of its
date of issuance, or otherwise, to receive the full amount of such cash dividend
or distribution, the Depositary shall make appropriate adjustments in the
amounts distributed to the Registered Holders of the Receipts issued in respect
of such Shares; and provided, further, that in the event that the Company or the
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Depositary shall be required to withhold and does withhold from any cash
dividend or other cash distribution in respect of any Deposited Securities an
amount on account of taxes, the amount distributed on the Receipts issued in
respect of such Deposited Securities shall be reduced accordingly.
The Depositary shall distribute only such amounts, however, as can be
distributed without attributing to any Registered Holder of a Receipt a fraction
of one cent and any balance not so distributable shall be retained by the
Depositary beneficially as an additional fee under Section 5.09. Before making
any distribution or other payment in respect of any Deposited Securities, the
Company will make such deductions, if any, which, by any applicable laws or
regulations, the Company is required to make in respect of any income, capital
gains or other taxes (including interest and penalties) and the Company may also
deduct the amount of any tax or governmental charges payable by the Company or
for which the Company might be made liable in respect of such distribution or
gains or other payments or any document signed in connection therewith or any
capital gains or other taxes payable by the Registered Holders. The Company or
its agent will remit to the appropriate governmental agency in India all amounts
withheld and owing to such agency. The Depositary will forward to the Company
or its agent such information from its records as the Company may reasonably
request to enable the Company or its agent to file necessary reports with
governmental agencies, and the Depositary or the Company or its agent may file
to the extent practicable any such reports necessary to obtain benefits under
the applicable tax treaties for the Registered Holders of Receipts.
Section 4.02. Distribution Other Than Cash, Shares or Rights.
----------------------------------------------
Whenever the Depositary or the Custodian shall receive any distribution other
than cash, Shares or rights pursuant to Section 4.01, 4.03 or 4.04 hereof upon
the Deposited Securities, the Depositary shall after obtaining, at the Company's
expense, opinion(s) of United States and Indian counsel, as applicable,
reasonably satisfactory to the Depositary that the proposed distribution does
not violate any applicable laws or regulations, cause such amount of the
securities or property received by it to be distributed to the Registered
Holders of Receipts on the record date fixed pursuant to Section 4.06 hereof, in
proportion to the number of American Depositary Shares representing such
Deposited Securities held by each of them, respectively, in any manner that the
Depositary may reasonably deem equitable and practicable for accomplishing such
distribution
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net of expenses of the Depositary with the consent of the Company (which consent
shall not be unreasonably withheld); provided, however, that if in the
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reasonable opinion of the Depositary such distribution cannot be made among the
Registered Holders of Receipts entitled thereto in proportion to the number of
American Depositary Shares held by them, or if for any other reason (including,
but not limited to, any requirement that the Company or the Depositary withhold
an amount on account of taxes or other governmental or that such securities must
be registered under the Securities Act or other law in order to be distributed
to Registered Holders) the Depositary deems such distribution not to be lawful
or feasible, the Depositary with the consent of the Company (which consent shall
not be unreasonably withheld) may adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution, including, but not
limited to, the sale, at public or private sale, of the securities or property
thus received, or any part thereof, at such place or places and upon such terms
as it deems proper, and the net proceeds of any such sale (net of the fees,
expenses and charges of the Depositary as provided in Section 5.09 hereof and
Exhibit B hereto) shall be distributed by the Depositary to the Registered
Holders of Receipts entitled thereto as in the case of a distribution received
in cash. If any distribution made by the Company with respect to the Deposited
Securities and received by the Depositary shall remain unclaimed at the end of
12 years from the first date upon which such distribution is made available to
Registered Holders and subject to any applicable laws, all rights of the
Registered Holders to such distribution or the proceeds of the sale thereof
shall be extinguished and the Depositary shall return the same to the Company
for its own use and benefit (except for any distribution upon the liquidation of
the Company when the Depositary shall retain the same) and the Depositary shall
have no obligation therefor or liability with respect thereto.
Section 4.03. Distribution in Shares. If any distribution upon
----------------------
Deposited Securities consists of a dividend in, or free distribution of, Shares,
the Depositary may, and shall if the Company so requests, distribute to the
Registered Holders of Receipts on the record date fixed pursuant to Section 4.06
hereof, in proportion to the number of American Depositary Shares held by each
of them, respectively, additional Receipts in the same form for an aggregate
number of American Depositary Shares representing the amount of Shares received
as such dividend or free distribution, subject to the terms and conditions of
this Deposit Agreement with respect to the deposit of Shares and the issuance of
American Depositary Shares evidenced by Receipts, including the withholding of
any tax or other governmental charge as provided in Section 4.12 hereof and the
payment of the fees, expenses and charges of the Depositary as provided in
Section 5.09 hereof and Exhibit B hereto. In lieu of delivering Receipts for
fractional American Depositary Shares the Depositary may, in its discretion,
sell the amount of Shares represented by the aggregate of such fractions, at
public or private sale, at such place or places and upon such terms as it may
deem proper, and distribute the net proceeds of any such sale in accordance with
Section 4.01 hereof. If additional Receipts are not so distributed (except as
pursuant to the preceding sentence), each American Depositary Share shall
thenceforth also represent its proportionate interest in the additional Shares
so distributed upon such Deposited Securities.
Section 4.04. Rights. In the event that the Company shall offer or
------
cause to be offered to the holders of any Deposited Securities any rights to
subscribe for additional Shares or any rights of any other nature, the
Depositary shall as soon as practicable give notice to the Registered
16
<PAGE>
Holders of such offer (unless notified by the Company that such offer or
invitation should not be made), specifying, if applicable, the earliest date
established for acceptance thereof, the last date established for acceptance
thereof and the manner by which and time during which Registered Holders may
request the Depositary to exercise such rights as provided below or, if such be
the case, give details of how the Depositary proposes to distribute the rights
or make the net proceeds available to such Registered Holders in accordance with
the procedures for distributing cash provided for in Section 4.01 hereof, or, if
by the terms of such rights offering or for any other reason it would not be
lawful or feasible for the Depositary either to make such rights available to
any Registered Holders or to dispose of such rights and make the net proceeds
available to such Registered Holders, then the Depositary shall allow the rights
to lapse.
In circumstances in which rights would otherwise not be distributed
generally, if the Company and the Depositary determine that it is lawful and
feasible to make such rights available, by means of warrants or otherwise, to
certain Registered Holders, the Depositary will, subject to applicable law, make
such rights available to such Registered Holders in proportion to the number of
American Depositary Shares held by such Registered Holder, upon written notice
from the Company to the Depositary that (a) the Company has elected in its sole
discretion to permit such rights to be exercised and (b) such Registered Holder
has executed such documents as the Company and the Depositary have determined
are reasonably required under applicable law.
If the Depositary has distributed warrants or other instruments for
rights to all or certain Registered Holders, then upon instruction from any such
Registered Holder pursuant to such warrants or other instruments to the
Depositary from such Registered Holder to exercise such rights, upon payment by
such Registered Holder to the Depositary for the account of such Registered
Holder of an amount equal to the purchase price of the Shares to be received
upon the exercise of the rights, and upon payment of the fees and expenses of
the Depositary and any other charges as set forth in such warrants or other
instruments, the Depositary shall, on behalf of such Registered Holder, exercise
the rights and purchase the Shares, and the Company shall cause the Shares so
purchased to be delivered to the Depositary on behalf of such Registered Holder.
As agent for such Registered Holder, the Depositary will cause the Shares so
purchased to be deposited pursuant to Section 2.02 of this Deposit Agreement,
and shall, pursuant to Section 2.03 of this Deposit Agreement, execute and
deliver Receipts to such Registered Holder. In the case of a distribution
pursuant to the second paragraph of this Section 4.04, such Receipts shall be
legended in accordance with applicable U.S. laws, and shall be subject to the
appropriate restrictions on sale, deposit, cancellation and transfer under such
laws.
If the Depositary determines in its reasonable discretion that it is
not lawful or feasible to make such rights available to all or certain
Registered Holders, it may sell the rights, warrants or other instruments
(either by public or private sale and otherwise at its discretion subject to
Indian laws and regulations) in proportion to the number of American Depositary
Shares held by the Registered Holders to whom it has determined it may not
lawfully or feasibly make such rights available, and allocate the net proceeds
of such sales (net of the fees, expenses and charges of the Depositary as
provided in Section 5.09 hereof and Exhibit B hereto and all taxes and other
governmental charges payable in connection with such rights, and subject to the
terms and
17
<PAGE>
conditions of this Deposit Agreement) for the account of such Registered Holders
otherwise entitled to such rights, warrants or other instruments, upon an
averaged or other practical basis without regard to any distinctions among such
Registered Holders on account of exchange restrictions or the date of delivery
of any Receipt or otherwise. The Depositary shall endeavor to effect any such
sale as is contemplated in this Section, but shall have no liability (in the
absence of its own willful default, negligence or bad faith or that of its
agents, officers, directors or employees) with respect the terms of such sale or
if such sale shall not be possible.
The Depositary will not offer rights to Registered Holders, unless it
has received from the Company evidence, as provided in Section 5.07 hereof, to
the effect that (i) a registration statement under the Securities Act covering
such offering is in effect or (ii) such offering does not require registration
under the Securities Act. If a Registered Holder of Receipts requests the
distribution of warrants or other instruments, notwithstanding that there has
been no registration under the Securities Act, the Depositary shall not effect
such distribution unless it has received an opinion from recognized counsel in
the United States for the Company satisfactory to the Depositary upon which the
Depositary may rely that such distribution to such Registered Holder is exempt
from such registration.
The Depositary shall not be responsible for any failure to determine
that it may be lawful or feasible to make such rights available to Registered
Holders in general or any Registered Holder in particular, any foreign exchange
exposure or loss incurred in connection with such sale, or any liability to the
purchaser of such rights or other instruments. Nothing in the Deposit Agreement
shall create, or shall be construed to create, any obligation on the part of the
Company to file such a registration statement or to register such rights or the
securities represented thereby under the Securities Act or any other applicable
law.
Notwithstanding any provision of this Deposit Agreement or the
Receipts to the contrary, the Company shall not issue any rights or bonus shares
in respect of the Deposited Securities nor shall the proceeds of a sale of such
rights or bonus shares be repatriated by the Company unless there is approval by
the Reserve Bank of India to do so.
Section 4.05. Conversion of Foreign Currency. Whenever the
------------------------------
Depositary or the Custodian shall receive foreign currency, received by way of
dividends or other distributions or in the form of net proceeds from the sale of
securities, property or rights, and if, at the time, the foreign currency so
received can, in the judgment of the Depositary, be converted on a reasonable
basis into Dollars and the resulting Dollars transferred to the United States,
the Depositary shall as soon as practicable convert or cause to be converted, by
sale or in any other manner that it may determine, such foreign currency into
Dollars, and such Dollars (less any reasonable and customary expenses incurred
by the Depositary in the conversion of such foreign currency and any expenses
incurred on behalf of the Registered Holder in complying with currency exchange
control or other governmental requirements) shall be promptly distributed to the
Registered Holders entitled thereto or, if the Depositary shall have distributed
any warrants or other instruments which entitle the holders thereof to such
Dollars, then to the holders of such warrants or instruments upon surrender
thereof for cancellation, in either case, without liability for interest
thereon. Such distribution may be made upon an averaged or other practicable
basis
18
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without regard to any distinctions among Registered Holders on account of
exchange restrictions, the date of delivery of any Receipt or otherwise.
If such conversion or distribution can be effected only with the
approval or license of any government or agency thereof, the Depositary, with
the assistance of, and at the reasonable expense of, the Company, shall make
reasonable efforts to apply, or procure that an application be made, for such
approval or licence, if any, as it may deem desirable. In no event, however,
shall the Depositary be obligated to make such a filing, nor shall it be liable
for failure to obtain such permit or licence.
If at any time the Depositary shall determine that in its judgment any
foreign currency received by the Depositary is not convertible on a reasonable
basis into Dollars transferable to the United States, or if any approval or
license of any government or agency thereof which is required for such
conversion is denied or in the opinion of the Depositary is not obtainable, or
if any such approval or license is not obtainable at a reasonable cost or within
a reasonable period as determined by the Depositary, the Depositary may in its
discretion, after notice to the Company, and subject to applicable laws and
regulations, either (i) distribute such foreign currency (or an appropriate
document evidencing the right to receive such foreign currency) to the
Registered Holders of Receipts entitled to receive the same, or (ii) hold such
foreign currency, without liability for interest thereon, for the respective
accounts of such persons, uninvested and without liability for interest.
If any such conversion of foreign currency, in whole or in part, can
be effected as aforesaid for distribution to some but not all of the Registered
Holders of Receipts entitled thereto, the Depositary may in its discretion make
such conversion and distribution in Dollars, to the extent such currency shall
be convertible as aforesaid, to the Registered Holders of Receipts entitled
thereto and, with respect to the balance of such foreign currency, shall in its
discretion, after consultation with the Company, and subject to any applicable
law and regulations, either (i) distribute or make available for distribution
such balance to the persons who were Registered Holders of Receipts entitled
thereto with respect to whom such conversion could not then be effected, or (ii)
hold such balance for the respective accounts of such persons, uninvested and
without liability for interest.
Section 4.06. Fixing of Record Date. Whenever any cash dividend or
---------------------
other cash distribution shall become payable or any distribution other than cash
shall be made, or whenever rights shall be issued with respect to the Deposited
Securities, or whenever for any reason the Depositary causes a change in the
number of Shares that are represented by each American Depositary Share, or
whenever the Depositary shall receive notice of any meeting of holders of Shares
or other Deposited Securities, the Depositary shall fix a record date (a) for
the determination of the Registered Holders who shall be (i) entitled to receive
such dividend, distribution or rights or the net proceeds of the sale thereof or
(ii) entitled to give instructions for the exercise of voting rights at any such
meeting, or (b) on or after which each American Depositary Share will represent
the changed number of Shares. Such record date shall, to the extent
practicable, be the same record date as any corresponding record date set by the
Company for such purpose. Subject to the provisions of Sections 4.01 through
4.05 and to the other terms
19
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and conditions of this Deposit Agreement, the Registered Holders on such record
date shall be entitled, as the case may be, to receive the amount distributable
by the Depositary with respect to such dividend or other distribution or such
rights or the net proceeds of sale thereof in proportion to the number of
American Depositary Shares held by them, respectively, and to give voting
instructions and to act in respect of any other such matter.
Section 4.07. Voting of Deposited Securities. As soon as practicable
------------------------------
after receipt of notice of any meeting of holders of Shares or other Deposited
Securities the Depositary shall at the Company's expense, mail to the Registered
Holders of Receipts a notice which shall contain (a) such information as is
contained in such notice of meeting, (b) a statement that such Registered
Holders of Receipts at the close of business on a specified record date will be
entitled, subject to any applicable provision of Indian law, of the Deposited
Securities or of the Memorandum and Articles of Association of the Company, to
instruct the Depositary as to the exercise of the voting rights, if any,
pertaining to the amount of Shares or other Deposited Securities represented by
their respective American Depositary Shares, and (c) a brief statement as to the
manner in which such instructions may be given, including an express indication
that the Depositary shall notify such instruction to the Chairman of the
Company, or such other director that the Chairman may designate, and appoint the
Chairman or that other person designated by the Chairman as representative of
the Depositary and the Registered Holders to attend such meeting and vote the
Deposited Securities in the direction so instructed by such Registered Holder
and (d) a statement that if the Depositary does not receive instructions from a
Registered Holder, such Registered Holder may under certain circumstances be
deemed to have instructed the Depositary to give a discretionary proxy to a
person designated by the Company to vote such Deposited Securities. Upon the
written request of a Registered Holder on such record date, received on or
before the date established by the Depositary for such purpose, the Depositary
shall endeavor insofar as is practicable and permitted under the applicable
provisions of law and of the Memorandum and Articles of Association governing
Deposited Securities of the Company to vote or cause to be voted the amount of
Deposited Securities represented by such American Depositary Shares evidenced by
such Receipt in accordance with the instructions set forth in such request.
For the purposes of this Section 4.07, in the event that the
Depositary receives express instructions from Registered Holders to demand a
poll with respect to any matter to be voted on by Holders, the Depositary may
notify the Chairman or a person designated by the Chairman of such instructions
and request the Chairman or such designee to demand a poll with respect to such
matters and the Company agrees that the Chairman or such designee will make
their reasonable best efforts to demand a poll at the meeting at which such
matters are to be voted on and to vote such Shares in accordance with such
Registered Holder's instructions; provided, however, that prior to any demand of
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a poll or request to demand poll by the Depositary upon the terms set forth
herein, the Company shall, at its expense, deliver to the Depositary an opinion
of Indian counsel, reasonably satisfactory to the Depositary, stating that such
action is in conformity with all applicable laws and regulations and that the
demand for a poll by the Depositary or a person designated by the Depositary
will not expose the Depositary to any liability to any person. The Depositary
shall not have any obligation to demand a poll or request
20
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the demand of a poll if the Company shall not have delivered to the Depositary
the local counsel opinion set forth in this paragraph.
Under Indian law voting of Shares is by show of hands unless a poll is
demanded by a member or members present in person or by proxy holding at least
one-tenth of the total Shares entitled to vote on the resolution or by those
holding paid up capital of at least Rs. 50,000. A proxy may not vote except in
a poll.
The Depositary agrees not to, and shall ensure that the Custodian and
each of their nominees does not, vote, attempt to exercise the right to vote, or
in any way make use of, for purposes of establishing a quorum or otherwise, the
Shares or other Deposited Securities represented by the American Depositary
Shares evidenced by a Receipt other than in accordance with such instructions
from the Registered Holder, or as provided below. The Depositary may not itself
exercise any voting discretion over any Shares. If the Depositary does not
receive instructions from any Registered Holder with respect to any of the
Deposited Securities represented by the American Depositary Shares evidenced by
such Registered Holder's Receipts on or before the date established by the
Depositary for such purpose, such Registered Holder shall be deemed, and the
Depositary shall deem such Registered Holder, to have instructed the Depositary
to give discretionary proxy to a person designated by the Company to vote such
Deposited Securities; provided that (x) no such discretionary proxy shall be
given with respect to any matter as to which the Company informs the Depositary
(and the Company agrees to provide such information as promptly as practicable
in writing) that (i) the Company does not wish such proxy given, (ii)
substantial opposition exists or (iii) the rights of the holders of Shares will
be adversely affected and (y) the Depositary shall not have any obligation to
give such discretionary proxy to a person designated by the Company if the
Company shall not have delivered to the Depositary the local counsel opinion and
representation letter set forth in the next paragraph.
Prior to each request for a discretionary proxy upon the terms set
forth herein, the Company shall, at its own expense, deliver to the Depositary
(aa) an opinion of Indian counsel, reasonably satisfactory to the Depositary,
stating that such action is in conformity with all applicable laws and
regulations (bb) a representation and indemnity letter from the Company
(executed by a senior officer of the Company) which (i) designates the person to
whom any discretionary proxy should be given, (ii) confirms that the Company
wishes such discretionary proxy to be given and (iii) certifies that the Company
has not and shall not request the discretionary proxy to be given as to any
matter as to which substantial opposition exists or which may adversely affect
the rights of holders of Shares.
Shares which have been withdrawn from the depositary facility and
transferred on the Company's Register of Members to a person other than the
Depositary or its nominee may be voted by such persons. However, Registered
Holders who wish to withdraw Shares to vote at a shareholders meeting may not
receive sufficient advance notice of shareholders meetings to enable them to
make such withdrawal of the Shares in time to vote at the meeting. In addition,
once withdrawn from the depositary facility, Shares may not be redeposited.
21
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The directors of the Company may decline to register the transfer of
Shares on certain grounds.
Section 4.08 Changes Affecting Deposited Securities. Upon any change
--------------------------------------
in nominal value, split-up, cancellation, consolidation or any other
reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting the Company
or to which it is a party, any securities which shall be received by the
Depositary or a Custodian in exchange for, or in conversion of or replacement or
otherwise in respect of, such Deposited Securities shall be treated as new
Deposited Securities under this Deposit Agreement, and the Receipts shall,
subject to the provisions of this Deposit Agreement, and applicable law,
evidence American Depositary Shares representing the right to receive such
additional Deposited Securities. Alternatively, the Depositary may, with the
Company's approval, and shall, if the Company shall so request, subject to the
terms of this Deposit Agreement and receipt of an opinion of counsel to the
Company obtained at the expense of the Company satisfactory to the Depositary
that such distributions are not in violation of any applicable laws or
regulations, execute and deliver additional Receipts as in the case of a stock
dividend on the Deposited Securities, or call for the surrender of outstanding
Receipts to be exchanged for new Receipts, in either case, as well as in the
event of newly deposited Shares, with necessary modifications to the form of
Receipt contained in Exhibit A hereto, specifically describing such new
Deposited Securities or corporate change. If the Company approves or requests
the execution and delivery of additional Receipts, the Company shall, jointly
with the Depositary, amend the Registration Statement of Form F-6 as filed with
the Commission to permit the issuance of such new form of Receipts.
Notwithstanding the foregoing, in the event that any security so received may
not be lawfully distributed to some or all Registered Holders, the Depositary
may with the Company's approval and shall if the Company requests, subject to
receipt of an opinion of Company's counsel reasonably satisfactory to the
Depositary that such action is not in violation of any applicable laws or
regulations, sell such securities at public or private sale, at such place or
places and upon such terms as it may deem proper and may allocate the net
proceeds of such sales for the account of the Registered Holders otherwise
entitled to such securities upon an averaged or other practicable basis without
regard to any distinctions among such Registered Holders and distribute the net
proceeds so allocated to the extent practicable as in the case of a distribution
received in cash pursuant to Section 4.01. The Depositary shall not be
responsible for (i) any failure to determine that it may be lawful or feasible
to make such securities available to Registered Holders in general or any
Registered Holder or Registered Holders in particular, (ii) any foreign exchange
exposure or loss incurred in connection with such sale, or (iii) any liability
to the purchaser of such securities.
Section 4.09. Statutory Reports. The Depositary shall make available
-----------------
for inspection by Registered Holders at the Depositary's Corporate Trust Office
any notices, reports and other communications received from the Company which
are both (a) received by the Depositary, the Custodian or their respective
nominees as the holder of Deposited Securities and (b) made generally available
to the holders of Deposited Securities by the Company. Any such reports and
communications, including any proxy soliciting material, furnished to the
Depositary by the Company shall be furnished in English, to the extent such
materials are required to be translated into English pursuant to any rules or
regulations of the Commission.
22
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Section 4.10 Information Made Available to the Commission. The
--------------------------------- ----------
Company furnishes the Commission with certain public reports and documents
required by foreign law or otherwise under the Securities Exchange Act and will
continue to furnish the Commission such reports and documents for as long as any
Receipts remain outstanding or until sixty (60) days shall have expired after
the Company shall have delivered to the Depositary a written notice of its
election to terminate this Deposit Agreement pursuant to Section 6.02 hereof.
Such reports and documents, and all notices, reports and communications referred
to in Sections 4.09 and 5.06 hereof, shall be in English. The Company is subject
to periodic reporting or other information delivery requirements under the
Securities Exchange Act and will in accordance therewith file reports and other
information with the Commission. Such information may be inspected and copied
by Registered Holders at the public reference facilities maintained by the
Commission located at the date hereof at Judiciary Plaza, 450 Fifth Street N.W.
(Room 1024), Washington, D.C. 20549.
Section 4.11 List of Registered Holders. Promptly upon the written
--------------------------
request of the Company, the Depositary shall furnish on a semi-annual basis to
the Company a list, as of a recent date, of the names, addresses and holdings of
American Depositary Shares by all persons in whose names Receipts are registered
on the books of the Depositary.
Section 4.12. Withholding. In connection with any distribution to
-----------
Registered Holders, the Company will remit to the appropriate governmental
authority or agency any amounts required to be withheld by the Company and owing
to such authority or agency by the Company; and the Depositary and the Custodian
will remit to the appropriate governmental authority or agency any amounts
required to be withheld and owing to such authority or agency by the Depositary
or the Custodian. In the event that the Depositary determines that any
distribution in property (including Shares and rights to subscribe therefor) is
subject to any tax or other governmental charge which the Depositary is
obligated to withhold, the Depositary may, by public or private sale, dispose of
all or a portion of such property (including Shares and rights to subscribe
therefor) in such amounts and in such manner as the Depositary deems necessary
and practicable to pay any such taxes or charges and the Depositary shall
distribute the net proceeds of any such sale after deduction of such taxes or
charges to the Registered Holders entitled thereto in proportion to the number
of American Depositary Shares held by them, respectively. The Registered Holder
shall indemnify the Depositary, the Company, the Custodian and any of their
respective directors, employees, agents and Affiliates against, and hold each of
them harmless from, any claims by any governmental authority with respect to
taxes, additions to tax, penalties or interest arising out of any refund of
taxes, reduced rate of withholding at source or other tax benefit obtained for
such Registered Holder pursuant to this Section 4.12.
Section 4.13 Reports. The Depositary shall make available for
-------
inspection by Registered Holders at its Principal Office any reports and
communications, including any proxy soliciting materials, received from the
Company which are both (a) received by the Depositary, the Custodian, or the
nominee of either of them as the holder of the Deposited Securities and (b) made
generally available to the holders of such Deposited Securities by the Company.
The Depositary shall also send to Registered Holders copies of such reports when
furnished by the Company to the Custodian pursuant to Section 5.06 hereof.
23
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Section 4.14 Power of Attorney. Each Registered Holder and
-----------------
Beneficial Owner, upon acceptance of American Depositary Share(s) represented by
a Receipt issued in accordance with the terms hereof, hereby appoints the
Depositary its attorney-in-fact, with full power to delegate, to act on its
behalf and to take any and all steps or action provided for or contemplated
herein with respect to the Deposited Securities, to adopt any and all procedures
necessary to comply with applicable law, including, but not limited to, those
set forth in this Article IV, and to take such further steps or action as the
Depositary in its sole discretion may deem necessary or appropriate to carry out
the purposes of this Deposit Agreement.
ARTICLE V
THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY
Section 5.01. Maintenance of Offices and Transfer Books by the
----------------------------------- ------------
Depositary. Until termination of this Deposit Agreement in accordance with its
- ----------
terms, the Registrar shall maintain, in the Borough of Manhattan, The City of
New York, facilities for the execution and delivery, registration of transfer,
combination and split-up of Receipts and surrender of Receipts, and the delivery
and withdrawal of Deposited Securities in accordance with the provisions of this
Deposit Agreement.
The Registrar shall keep a book or books for the transfer and
registration of Receipts which at all reasonable times shall be open for
inspection by Registered Holders of Receipts; provided that such inspection
shall not be for the purpose of communicating with Registered Holders in the
interest of a business or object other than the business of the Company or a
matter related to this Deposit Agreement or the Receipts. The Registrar may
close the books, at any time or from time to time, when reasonably deemed
expedient by it in connection with the performance of its duties hereunder.
If any Receipts or the American Depositary Shares evidenced thereby
are listed on one or more stock exchanges or automated quotation systems in the
United States, the Depositary shall act as Registrar or appoint a Registrar or
one or more co-registrars for registry of such Receipts in accordance with any
requirements of such exchange or exchanges.
Section 5.02. Prevention or Delay in Performance by the Depositary,
-----------------------------------------------------
the Custodian or the Company. Neither the Depositary, the Custodian nor the
- ----------------------------
Company shall incur any liability to any Registered Holder or Beneficial Owner
of any Receipt, if by reason of any provision of any present or future law or
regulation of the United States of America, any state thereof, India or of any
other country, or of any other action of any governmental or regulatory
authority of the United States, India or any other country, or of any stock
exchange, or by reason of any provision, present or future, of the Memorandum
and Articles of Association of the Company, or by reason of any act of God or
war or other circumstance beyond its control, the Depositary, the Custodian or
the Company, as the case may be, shall be delayed in, prevented or forbidden
from, or subjected to any civil or criminal penalty on account of, doing or
performing any act or thing which by the terms of this Deposit Agreement it is
provided shall be done or performed; nor shall the Depositary, the Custodian or
the Company, nor any of their respective directors, officers,
24
<PAGE>
employees or agents, incur any liability to any Registered Holder or Beneficial
Owner of a Receipt by reason of any non-performance or delay, caused as
aforesaid, in the performance of any act or thing which, by the terms of this
Deposit Agreement, it is provided shall or may be done or performed, or by
reason of any exercise of, or failure to exercise, any discretion provided for
in this Deposit Agreement. Where, by the terms of a distribution pursuant to
Section 4.01, 4.02, or 4.03 of this Deposit Agreement, or an offering or
distribution pursuant to Section 4.04 of this Deposit Agreement, or for any
other reason, such distribution or offering may not be made available to
Registered Holders, and the Depositary may not dispose of such distribution or
offering on behalf of such Registered Holders and make the net proceeds
available to such Registered Holders, then the Depositary shall not make such
distribution or offering, and shall allow any rights, if applicable, to lapse.
Section 5.03. Obligations of the Depositary, the Custodian and the
----------------------------------------------------
Company. Neither the Depositary, the Custodian nor the Company nor any of their
- -------
respective directors, officers, employees or agents, assumes any obligation or
shall be subject to any liability (including, without limitation, as to the
Depositary and Custodian, liability with respect to the validity or worth of the
Deposited Securities) under this Deposit Agreement to Registered Holders or
Beneficial Owners of Receipts, other than that each of them agrees to perform
its obligations and duties specifically set forth in this Deposit Agreement
without negligence or bad faith.
Neither the Depositary nor the Company shall be under any obligation
to appear in, prosecute or defend any action, suit or other proceeding in
respect of any Deposited Securities or in respect of the Receipts, which in its
opinion may involve it in expense or liability, unless indemnity satisfactory to
it against all expenses and liabilities be furnished as often as may be
required, and the Custodian shall not be under any obligation whatsoever with
respect to such proceedings, the responsibility of the Custodian being solely to
the Depositary.
Neither the Depositary, the Custodian nor the Company shall be liable
for any action or non-action by it in reliance upon the advice of or information
from legal counsel, accountants, any person presenting Shares for deposit, any
Registered Holder or Beneficial Owner of a Receipt or any other person believed
by it in good faith to be competent to give such advice or information. The
Depositary, the Custodian and the Company may rely and shall be protected in
acting upon any written notice, request, direction or other document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
The Depositary shall not be liable for any acts or omissions made by a
successor depositary whether in connection with a previous act or omission of
the Depositary or in connection with any matter arising wholly after the removal
or resignation of the Depositary, provided that in connection with the issue out
of which such potential liability arises the Depositary performed its
obligations without negligence or bad faith while it acted as Depositary.
Neither the Depositary nor its agents shall be responsible for any
failure to carry out any instructions to vote any of the Deposited Securities,
or for the manner or effect of any such vote made either with or without
request, or for not exercising any right to vote, as long as any such action or
non-action is in good faith and in accordance with the terms of this Deposit
Agreement.
25
<PAGE>
No disclaimer of liability under the Securities Act is intended by
any provision of this Deposit Agreement.
Section 5.04. Resignation and Removal of the Depositary; Appointment
------------------------------------------------------
of Successor Depositary. Subject to the provisions of the next paragraph, the
- -----------------------
Company may terminate the appointment of the Depositary under the Deposit
Agreement by giving at least 60 days' notice in writing to the Depositary and
the Custodian, and the Depositary may resign as Depositary by giving at least 60
days' notice in writing to the Company and the Custodian. Within 30 days after
the giving of such notice, notice thereof shall be duly given by the Depositary
to the Registered Holders. In the event a successor depositary has not been
appointed and accepted its appointment within 60 days, the Depositary may
terminate the Deposit Agreement as provided in Section 6.02 hereof.
Notwithstanding any other provision hereof, the Company may not
appoint a successor depositary hereunder or establish another deposit facility
with another depositary bank for a period of ten years from the date of hereof
unless (a) a dispute with respect to the services provided by the Depositary
hereunder remains unresolved after a period of three months from the date such
problem was first brought to the attention of the Depositary by the Company or
(b) the relevant pro rata amount of any contribution made to the Company by the
Depositary is repaid to the Depositary.
The termination of the appointment or the resignation of the
Depositary shall take effect on the date specified in such notice; provided that
no such termination of appointment or resignation shall take effect until the
appointment by the Company of a successor Depositary as hereinafter provided.
In case at any time the Depositary acting hereunder shall resign or be
removed, the Company, unless the Company shall desire the termination of this
Deposit Agreement as provided in Section 6.02 hereof, shall use its best efforts
to appoint a successor depositary, which shall be a bank or trust company having
its principal office in the Borough of Manhattan, The City of New York with
effect from the date of termination or resignation specified in such notice as
soon as reasonably possible following notice of such termination or resignation.
Every successor depositary shall execute and deliver to its predecessor and to
the Company an instrument in writing accepting its appointment hereunder, and
thereupon such successor depositary, without any further act or deed, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor; provided, however, that such predecessor, upon payment of all sums
-------- -------
due it and on the written request of the Company, shall execute and deliver an
instrument transferring to such successor all rights and powers of such
predecessor hereunder, shall duly assign, transfer and deliver all right, title
and interest in the Deposited Securities to such successor and shall deliver to
such successor a list of the Registered Holders of all outstanding Receipts and
such other information relating to Receipts and Registered Holders thereof as
the successor may reasonably request. The Depositary shall promptly mail notice
of the appointment of the successor depositary to the Registered Holders of
Receipts and the Custodian.
26
<PAGE>
Any corporation into or with which the Depositary may be converted,
merged or consolidated shall be the successor of such Depositary without the
execution or filing of any document or any further act.
Section 5.05. The Custodian. The Depositary may appoint one or more
-------------
agents to act as its Custodian hereunder. The Depositary has initially
appointed The Industrial Credit and Investment Corporation of India Limited as
Custodian and agent of the Depositary for the purpose of this Deposit Agreement.
Any Custodian in acting hereunder shall be subject at all times and in all
respects to the directions of the Depositary, and shall be responsible solely to
it. Any Custodian may resign and be discharged from its duties hereunder by
notice of such resignation delivered to the Depositary at least thirty (30) days
prior to the date on which such resignation is to become effective. If upon the
effectiveness of such resignation there shall be no Custodian acting hereunder,
the Depositary shall, promptly after receiving such notice, appoint, subject to
the written approval of the Company which shall not unreasonably withheld, a
substitute custodian that is organized under the laws of India and which shall
thereafter be a Custodian hereunder. Whenever the Depositary in its discretion
determines that it is in the best interest of the Registered Holders to do so,
it may appoint substitute or additional custodian or custodians, which shall
thereafter be one of the Custodians hereunder subject in each instance to the
written approval of the Company. Upon demand of the Depositary any previous
Custodian shall deliver the Deposited Securities held by it to any other
Custodian or such substitute or additional custodian or custodians as the
Depositary shall instruct. Each such substitute or additional custodian or
custodians shall deliver to the Depositary, forthwith upon its appointment an
acceptance of such appointment satisfactory in form and substance to the
Depositary.
Upon the appointment of any successor depositary hereunder, any
Custodian then acting hereunder shall forthwith become, without any further act
or writing, the agent hereunder of such successor depositary, and the
appointment of such successor depositary shall in no way impair the authority of
any Custodian hereunder; provided, however, that the successor depositary so
-------- -------
appointed shall, on the written request of any Custodian, execute and deliver to
such Custodian all such instruments as may be proper to give to such Custodian
full and complete power and authority as agent hereunder of such successor
depositary.
Section 5.06. Notices and Reports. On or before the first date on
-------------------
which the Company gives notice, by publication or otherwise, of any meeting of
holders of Shares or other Deposited Securities, or of any adjourned meeting of
such holders, or of the taking of any action in respect of any cash or other
distributions or the offering of any rights, the Company agrees to transmit to
the Depositary and the Custodian a copy of the notice thereof in English
language but otherwise in the form given or to be given to holders of Shares or
other Deposited Securities. The Company shall also furnish to the Custodian and
the Depositary a summary, in English, of any applicable provisions or proposed
provisions of the Memorandum and Articles of Association of the Company that may
be relevant or pertain to such notice of meeting or be the subject of a vote
thereat.
The Company will arrange for the translation into English, if not
already in English, to the extent required pursuant to any rules or regulations
of the Commission, and the prompt
27
<PAGE>
transmittal by the Company to the Depositary and the Custodian, of such notices
and any other reports and communications, including any proxy soliciting
materials, which are made generally available by the Company to holders of its
Shares or other Deposited Securities. If requested in writing by the Company,
the Depositary will arrange for the mailing, at the Company's expense, of copies
of such notices, reports and communications that are made generally available by
the Company to holders of its Shares or other Deposited Securities and/or, at
the written request of the Company and at the Company's expense, make such
notices, reports and other communications available to all Registered Holders on
a basis similar to that for holders of Shares or other Deposited Securities, or
on such other basis as the Company may advise the Depositary is required or as
the Depositary may be required by any applicable law or regulation. The Company
will timely provide the Depositary with the quantity of such notices, reports
and communications, including any proxy soliciting materials, as requested by
the Depositary from time to time, in order for the Depositary to effect such
mailings. The Depositary and Custodian may rely upon such copies for all
purposes of this Agreement. The Depositary will, at the expense of the Company,
make such copies and such notices, reports and communications available for
inspection by Registered Holders at the Depositary's Corporate Trust Office, at
the office of the Custodian and at any other designated transfer offices.
Section 5.07. Distribution of Additional Shares, Rights, etc. The
----------------------------------------------
Company agrees that in the event of any future issuances or distributions
(collectively, a "Distribution") of (a) additional Shares or other securities
that are Deposited Securities ("Infosys Securities"), (b) rights, preferences or
privileges to subscribe for Infosys Securities, (c) securities convertible into
or exchangeable for Infosys Securities or (d) rights, preferences or privileges
to subscribe for securities convertible into or exchangeable for Infosys
Securities, such Distribution shall be effected by the Company in a manner so as
not to violate the Securities Act or any securities or "Blue Sky" law of any
relevant jurisdictions in the United States. The Company shall direct the
Depositary in writing to take, or to cause the Custodian to take, specified,
reasonable measures with respect to the acceptance for deposit of Infosys
Securities as shall be required to prevent any violation of the registration
requirements of the Securities Act or any securities or "Blue Sky" law of any
relevant jurisdictions in the United States.
The Company will promptly furnish to the Depositary evidence
reasonably satisfactory to the Depositary and its counsel that a registration
statement under the Securities Act is in effect with respect to such
Distribution or a written opinion from U.S. counsel for the Company, which
counsel shall be satisfactory to the Depositary, stating that registration under
the Securities Act is not required with respect to such Distribution in order to
prevent violation of the registration requirements of the Securities Act or any
securities or "Blue Sky" law of any relevant jurisdictions in the United States.
Without limiting the duty of the Company under the previous sentence, the
Depositary shall be entitled, but not required, to consult with counsel of its
own choice at the expense of the Company and to take such action with respect to
the facility created hereby as it may deem appropriate to prevent any violation
by the Depositary or any agent of the Depositary of any United States federal or
state securities laws.
The Company agrees with the Depositary that neither the Company nor
any Affiliate will at any time deposit any Infosys Securities hereunder, either
upon original issuance or upon a sale
28
<PAGE>
of Infosys Securities previously issued and reacquired by the Company or by any
such Affiliate, unless such Infosys Securities have been registered under the
Securities Act or an exemption from the registration requirements of the
Securities Act is available.
5.08. Indemnification. The Company agrees to indemnify the
---------------
Depositary, any Custodian, any other agent of the Company or the Depositary
hereunder and their respective directors, officers, employees, agents and
affiliates (each, an "Indemnified Person") against, and hold each of them
harmless from, any liability or expense (including, but not limited to, the
reasonable fees and expenses of counsel) which may be based on or arise out of
(a) acts performed or omitted in accordance with the provisions of this Deposit
Agreement and of the Receipts, as the same may be amended, modified or
supplemented from time to time, (i) by an Indemnified Person, except for any
liability or expense arising out of the negligence or bad faith of such
Indemnified Person, or (ii) by the Company or any of its directors, officers,
employees, agents and affiliates or (b) out of or in connection with any offer
or sale of Receipts, American Depositary Shares, Shares or other Deposited
Securities or any registration statement under the Securities Act in respect
thereof, except to the extent such loss, liability or expense arises out of
information (or omissions from such information) relating to such Indemnified
Person, furnished in writing to the Company by such Indemnified Person expressly
for use in a registration statement under the Securities Act.
The Depositary agrees to indemnify the Company, its directors,
officers, employees, agents and Affiliates against, and hold each of them
harmless from, any liability or expense (including, but not limited to, the
reasonable fees and expenses of counsel) which may be based on or arise out of
acts performed or omitted by such Indemnified Person, due to its negligence or
bad faith.
The obligations set forth in this Section 5.08 shall survive the
termination of this Deposit Agreement or the succession or substitution of any
indemnified person hereunder.
Any person seeking indemnification hereunder (an "indemnified person")
shall notify the person from whom it is seeking indemnification (the
"indemnifying person") of the commencement of any indemnifiable action or claim
promptly after such indemnified person becomes aware of such commencement
(provided that the failure to make such notification shall not affect such
indemnified person's rights otherwise than under this Section 5.08) and shall
consult in good faith with the indemnifying person as to the conduct of the
defense of such action or claim, which defense shall be reasonable in the
circumstances. No indemnified person shall compromise or settle any action or
claim without the consent of the indemnifying person, which consent shall not be
unreasonably withheld.
Section 5.09. Charges and Expenses. The Depositary shall be entitled
--------------------
to receive the following remuneration and reimbursement in respect of its
services under this agreement (a) from the Registered Holder (i) taxes and other
governmental charges; (ii) such registration fees as may from time to time be in
effect for the registration of transfers, if any, of Shares generally on the
share register of the Company or Foreign Registrar and accordingly applicable to
transfer of Shares to the name of the Depositary, a Custodian or their nominees
or the person who makes
29
<PAGE>
a withdrawal of Shares, on the making of deposits or withdrawals pursuant to
Sections 2.02 or 2.06; (iii) such cable, telex, facsimile transmission and
delivery expenses as are expressly provided in this Deposit Agreement to be at
the expense of persons depositing Shares or the Registered Holders; (iv) such
customary expenses as are incurred by the Depositary in the conversion of
foreign currency pursuant to Section 4.08 (including, without limitation,
expenses incurred on behalf of Registered Holders in connection with compliance
with foreign exchange control restrictions); (v) a fee not in excess of $5.00
per 100 Receipts (or portion thereof) for the issuance and surrender,
respectively of Receipts pursuant to this Deposit Agreement; (vi) a fee not in
excess of $0.02 per American Depositary Share (or portion thereof) held for any
cash distribution made pursuant to this Deposit Agreement; and (vii) a fee for
the distribution of the Deposited Securities pursuant to this Deposit Agreement,
such fee being an amount equal to the fee for the execution and delivery of
American Depositary Shares referred to above which would have been charged as a
result of the deposit of such securities, but which securities were instead
distributed by the Depositary to Registered Holders, and (b) from the Company
(i) such sums and amounts as may have been agreed between the Company and the
Depositary; (ii) all reasonable costs in connection with the delivery of
information under sections 4.10 and 5.06; and (iii) in respect of any
exceptional fees, taxes, duties, charges, costs and expenses which the
Depositary finds it necessary or desirable or is required to undertake or to pay
in the performance of its obligations under this agreement, such additional
remuneration as shall be agreed between the Depositary and the Company.
Subject to the above paragraph all fees, taxes, duties, charges, costs
and expenses which are payable by the Company shall be paid by the Company to
the Depositary upon demand therefor.
The right of the Depositary to receive payment of fees, charges and
expenses as provided above shall survive the termination of this Deposit
Agreement and, as to any Depositary, the resignation or removal of such
Depositary as described in Section 5.04 hereof for those fees, charges and
expenses incurred prior to the effectiveness of such resignation or removal.
Section 5.10. Retention of Depositary Documents. The Depositary is
---------------------------------
authorized to destroy those documents, records, bills and other data compiled
during the term of this Deposit Agreement at the time permitted by the laws or
regulations governing the Depositary, unless the Company requests in writing
that such papers be retained for a longer period or turned over to the Company
or to a successor depositary.
Section 5.11. Exclusivity. The Company agrees not to appoint any
-----------
other depositary for issuance of American Depositary Receipts so long as Bankers
Trust Company is acting as Depositary hereunder.
Section 5.12 List of Restricted Securities Owners. From time to
------------------------------------
time, the Company shall provide to the Depositary a list setting forth, to the
actual knowledge of the Company, those persons or entities who beneficially own
Restricted Securities and the Company shall update that list on a regular basis.
The Company agrees to advise in writing each of the persons or entities so
listed that such Restricted Securities are ineligible for deposit hereunder.
The Depositary may
30
<PAGE>
rely on such a list or update but shall not be liable for any action or omission
made in reliance thereon.
ARTICLE VI
AMENDMENT AND TERMINATION
Section 6.01. Amendment. The form of the Receipts and any provisions
---------
of this Deposit Agreement may at any time and from time to time be amended by
agreement between the Company and the Depositary in any respect which they may
deem necessary or desirable. Any amendment which shall impose or have, the
effect of increasing any fees or charges payable by the Registered Holders of
Receipts (other than the fees of the Depositary for the execution and delivery
or cancellation of Receipts and taxes or other governmental charges,
registration fees and cable, telex or facsimile transmission and delivery
expenses), or which shall otherwise prejudice any substantial existing right of
Registered Holders of Receipts, shall not become effective as to outstanding
Receipts until the expiration of thirty (30) days after notice of such amendment
shall have been given to the Registered Holders of outstanding Receipts. The
parties hereto agree that any amendments or supplements which (i) are reasonably
necessary (as agreed by the Company and the Depositary) in order for (a) the
American Depositary Shares to be registered on Form F-6 under the Securities Act
or (b) the American Depositary Shares or Shares to be traded solely in
electronic book-entry form and (ii) do not in either such case impose or
increase any fees or charges to be borne by Registered Holders, shall be deemed
not to prejudice any substantial rights of Registered Holders or Beneficial
Owners. Every Registered Holder of an outstanding Receipt at the time any such
amendment so becomes effective shall be deemed, by continuing to hold such
Receipt, to consent and agree to such amendment and to be bound by the Deposit
Agreement as amended thereby. In no event shall any amendment impair the right
of the Registered Holder of any Receipt to surrender such Receipt and receive
therefor the Deposited Securities represented thereby, except an order to comply
with mandatory provisions of applicable law. Notwithstanding the foregoing, if
any governmental body should adopt new laws, rules or regulations which would
require amendment or supplement of the Deposit Agreement to ensure compliance
therewith, the Company and the Depositary may amend or supplement the Deposit
Agreement and the Receipt at any time in accordance with such changed rules.
Such amendment or supplement to the Deposit Agreement in such circumstances may
become effective before a notice of such amendment or supplement is given to
Registered Holders or within any other period of time as required for
compliance.
Section 6.02. Termination. The Depositary shall at any time, at the
------------
direction of the Company, terminate this Deposit Agreement by mailing notice of
such termination to the Registered Holders of all Receipts then outstanding at
least 90 days prior to the date fixed in such notice for such termination. The
Depositary may likewise terminate the Deposit Agreement by mailing notice of
such termination to the Company and the Registered Holders of all Receipts then
outstanding, if at any time 60 days shall have expired after the Depositary
shall have delivered to the Company a written notice of its election to resign
and a successor depositary shall not have been appointed and accepted its
appointment as provided in the Deposit
31
<PAGE>
Agreement. Within 30 days after the giving of such notice, notice of such
termination shall be duly given by the Depositary to the Registered Holders of
all Receipts then outstanding.
During the period beginning on the date of the giving of such notice
by the Depositary to the Registered Holders and ending on the date on which such
termination takes effect, each Registered Holder of a Receipt will, upon (a)
surrender of such Receipt at the Corporate Trust Office of the Depositary, (b)
payment of the fee of the Depositary for the surrender of Receipts referred to
in Section 5.09 and Exhibit B hereto, and (c) payment of any applicable taxes or
other governmental charges, be entitled to delivery, to him or upon his order,
of the amount of Deposited Securities represented by the American Depositary
Shares evidenced by such Receipt.
If any Receipts shall remain outstanding after the date of
termination, the Depositary shall as soon as reasonably practicable sell the
Deposited Securities then held under this Deposit Agreement by public or private
sale as it may deem appropriate (but shall have no liability with respect to
such sale) and, as soon as reasonably practicable thereafter, deliver the net
proceeds of any such sale, together with any other cash then held by it
thereunder, unsegregated and without liability for interest, for the pro rata
benefit of the Registered Holders of Receipts which have not theretofore been
surrendered, such Registered Holders thereupon becoming general creditors of the
Depositary with respect to such net proceeds. After making such sale, the
Depositary shall be discharged from all obligations under this Deposit
Agreement, except to account for such net proceeds and other cash without
interest (after deducting, in each case, the fee of the Depositary for the
surrender of a Receipt, any expenses for the account of the Registered Holder of
such Receipt in accordance with the terms and conditions of this Deposit
Agreement, and any applicable taxes or other governmental charges). Upon the
termination of this Deposit Agreement, the Depositary and the Company shall be
discharged from all obligations under this Deposit Agreement except for their
respective obligations under Section 5.08 hereof and the Company's obligations
to the Depositary under Section 5.09 hereof.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Counterparts. This Deposit Agreement may be executed
------------
in any number of counterparts, each of which shall be deemed an original and all
such counterparts shall constitute one and the same instrument. Copies of the
Deposit Agreement shall be filed with the Depositary and the Custodian, and
shall be open to inspection at the Depositary's Corporate Trust Office and the
principal office of the Custodian by any Registered Holder of a Receipt during
business hours.
Section 7.02 Agreement for Exclusive Benefit of Parties. This
---------------------------------- -------
Deposit Agreement is for the exclusive benefit of the parties hereto, and their
respective successors hereunder, and shall not be deemed to give any legal or
equitable right, remedy or claim whatsoever to any other person.
Section 7.03. Severability. In the event that any one or more of the
------------
provisions contained in this Deposit Agreement or in the Receipts shall be or
become invalid, illegal or unenforceable
32
<PAGE>
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein or therein shall in no way be affected, prejudiced
or disturbed thereby.
Section 7.04. Notices. Any and all notices to be given to the
-------
Company shall be deemed to have been duly given if personally delivered or sent
by mail, or by cable, telex or facsimile transmission confirmed by letter,
addressed to: Infosys Technologies Limited, Electronics City, Hosur Road,
Bangalore, Karnataka, India 561 229, Attention: Chief Financial Officer or any
other place to which the Company may have transferred it principal office.
Any and all notices to be given to the Depositary shall be deemed to
have been duly given if in English and personally delivered or sent by mail,
first-class airmail postage prepaid or by cable, telex or facsimile transmission
confirmed by letter, addressed to: Bankers Trust Company, Four Albany Street,
New York, New York 10006, Attention: ADR Department or any other place to which
the Depositary may have transferred its Corporate Trust Office.
Any and all notices to be given to the Custodian shall be deemed to
have been duly given if personally delivered or sent by mail, air courier or
SWIFT message, cable, telex or facsimile transmission, confirmed by letter,
addressed to: The Industrial Credit and Investment Corporation of India Limited,
163 Backbay Reclamation Road No.3, Mubai 400 020-25, or to any other address
which the Custodian may specify in writing to the Company.
Any and all notices to be given to any Registered Holder of a Receipt
shall be deemed to have been duly given if personally delivered or sent by mail,
first-class airmail postage prepaid, or by cable, telex or facsimile
transmission confirmed by letter, addressed to such Registered Holder at the
address of such Registered Holder as it appears on the transfer books of the
Depositary, or, if such Registered Holder shall have filed with the Depositary a
written request that notices intended for such Registered Holder be mailed to
some other address, at the address designated in such request.
Delivery of a notice sent by mail or by SWIFT message, cable, telex or
facsimile transmission shall be deemed to be effected at the time when a duly
addressed letter containing the same (or a confirmation thereof in the case of
cable or telex or facsimile transmission message) is deposited, first-class
airmail postage prepaid, in a post-office letter box. The Depositary or the
Company, however, may act upon any cable, telex or facsimile transmission
message received by it from the other or from any Registered Holder of a
Receipt, notwithstanding that such cable, telex or, facsimile transmission
message shall not subsequently be confirmed by letter as aforesaid.
Section 7.05 Registered Holders and Beneficial Owners of Receipts are
--------------------------------------------------------
Parties. The Registered Holders and Beneficial Owners from time to time shall
- -------
be parties to this Deposit Agreement and shall be bound by all of the terms and
conditions hereof and of the Receipts by acceptance thereof.
Section 7.06. Governing Law. This Deposit Agreement and the Receipts
-------------
shall be governed by and construed in accordance with the laws of the State of
New York. Except as set forth in the following sentence, the Company and the
Depositary agree that the federal courts in
33
<PAGE>
the State of New York shall have jurisdiction to hear and determine any suit,
action or proceeding and to settle any dispute between them that may arise out
of or in connection with this Deposit Agreement and, for such purposes, each
irrevocably submits to the non-exclusive jurisdiction of such courts. In
addition, the Company and the Depositary hereby agree that in the event that a
Registered Holder brings a suit, action or proceeding against (a) the Depositary
in its capacity as Depositary under this Deposit Agreement or (b) against both
the Company and the Depositary, in either case, in any state or federal court of
the United States, and the Depositary has any claim for indemnification or
otherwise, against the Company arising out of the subject matter of such suit,
action or proceeding, then the Depositary may pursue such claim against the
Company in the state or federal court in the United States in which such suit,
action or proceeding is pending and, for such purposes, the Company irrevocably
submits to the non-exclusive jurisdiction of such courts. No disclaimer of
liability under the Securities Act is intended by any provision of the Deposit
Agreement.
Section 7.07 Assignment. This Deposit Agreement may not be assigned
----------
by either the Company or the Depositary.
Section 7.08. Compliance with U.S. Securities Laws. Notwithstanding
------------------------------------
anything in this Deposit Agreement to the contrary, the Company and the
Depositary each agree that it will not exercise any rights it has under this
Deposit Agreement to prevent the withdrawal or delivery of Deposited Securities
in a manner which would violate the United States securities laws, including,
but not limited to, Instruction IA(1) of the General Instructions to Form F-6
Registration Statement, as amended from time to time, under the Securities Act.
Section 7.09. Headings. Headings contained herein are included for
--------
convenience only and are not to be used in construing or interpreting any
provisions hereof.
34
<PAGE>
IN WITNESS WHEREOF, Infosys Technologies Limited and Bankers Trust Company have
duly executed this Agreement as of the day and year first set forth above and
all Registered Holders and Beneficial Owners of Receipts shall become parties
hereto upon acceptance by them of Receipts issued in accordance with the terms
hereof.
INFOSYS TECHNOLOGIES LIMITED
By:
___________________________
Name:
Title:
BANKERS TRUST COMPANY
By:
___________________________
Name:
Title:
35
<PAGE>
EXHIBIT A
FORM OF FACE OF AMERICAN DEPOSITARY RECEIPT
CUSIP Number ___________
AMERICAN DEPOSITARY SHARES
(Each American Depositary Share
represents one-half of one deposited Share)
BANKERS TRUST COMPANY
AMERICAN DEPOSITARY RECEIPT
EVIDENCING AMERICAN DEPOSITARY SHARES
REPRESENTING EQUITY SHARES OF
NOMINAL VALUE Rs. 10 EACH OF
INFOSYS TECHNOLOGIES LIMITED
(INCORPORATED UNDER THE LAWS OF THE REPUBLIC OF INDIA)
Bankers Trust Company, as depositary (hereinafter called the "Depositary"),
hereby certifies that_______________________________________ , or registered
assigns is the owner of _____________________________ American Depositary Shares
representing deposited Shares of nominal value Rs. 10 each, or evidence of
rights to receive such shares (herein called "Shares") of Infosys Technologies
Limited, incorporated under the laws of the Republic of India (herein called the
"Company"). At the date of the Deposit Agreement, each American Depositary
Share represents one-half of one Share deposited or subject to deposit under the
Deposit Agreement (as such term is hereinafter defined) at the principal office
of The Industrial Credit and Investment Corporation of India Limited (herein
called the "Custodian"). The ratio of American Depositary shares to Shares is
subject to subsequent amendment as provided in Article IV of the Deposit
Agreement. The Depositary's Corporate Trust Office is located at Four Albany
Street, New York, N.Y. 10006.
1. THE DEPOSIT AGREEMENT.
This American Depositary Receipt is one of an issue (herein called
"Receipts"), all issued and to be issued upon the terms and conditions set forth
in the deposit agreement, dated as of [___________], 1999 (herein called the
"Deposit Agreement"), by and among the Company, the Depositary, and all
Registered Holders and Beneficial Owners from time to time of Receipts issued
thereunder, each of whom by accepting a Receipt agrees to become a party thereto
and become bound by all the terms and conditions thereof. The Deposit Agreement
sets forth the rights of Registered Holders and Beneficial Owners of the
Receipts and the rights and duties of the Depositary in respect of the Shares
deposited thereunder and any and all other securities, property and cash from
time to time received in respect of such Shares and held thereunder (such
Shares, securities, property, and cash are herein called "Deposited
Securities"). Copies of the Deposit Agreement are on file at the Depositary's
Corporate Trust Office in New York City and at the office of the Custodian.
The statements made on the face and reverse of this Receipt are summaries of
certain provisions of the
<PAGE>
Deposit Agreement and are qualified by and subject to the detailed provisions of
the Deposit Agreement, to which reference is hereby made. Capitalized terms
defined in the Deposit Agreement and not defined herein shall have the meanings
set forth in the Deposit Agreement.
2. SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.
Upon surrender of Receipts at the Depositary's Corporate Trust Office, or
at such other offices as the Depositary may designate, for the purpose of
withdrawal of the Deposited Securities represented by the American Depositary
Shares evidenced thereby, and upon payment of the fees and expenses of the
Depositary for the cancellation of Receipts as provided in Section 5.09 of the
Deposit Agreement and Exhibit B thereto and payment of all taxes and other
governmental charges payable in connection with such surrender and withdrawal of
the Deposited Securities, and subject to the terms and conditions of the
Company's Memorandum and Articles of Association, the Deposited Securities and
the Deposit Agreement, and to any other restriction applicable thereto, the
Registered Holder of such Receipts shall be entitled to delivery, to him or upon
his order, of the Shares and any other Deposited Securities at the time
represented by the American Depositary Shares evidenced by such Receipts.
Delivery of such Shares and other Deposited Securities may be made by (i) the
delivery of certificates in the name of the Registered Holder or as ordered by
him which, if required by law, shall be properly endorsed or accompanied by
properly executed instruments of transfer to such Registered Holder or as
ordered by him or (ii) book-entry transfer of Shares represented by the American
Depositary Shares evidenced by such Receipt to an account in the name of the
Registered Holder or as ordered by him and (b) the delivery at the office of the
Custodian of any other securities, property and cash to which such Registered
Holder is then entitled in respect of such Receipts to such Registered Holder or
as ordered by him. Such delivery shall be made, as hereinafter provided,
without unreasonable delay.
A Receipt surrendered for such purposes may be required by the Depositary to be
properly endorsed in blank or accompanied by a properly executed instrument of
transfer in blank, and if the Depositary so requires, the Registered Holder
thereof shall execute and deliver to the Depositary a written order directing
the Depositary to cause the Shares and any other Deposited Securities being
withdrawn to be delivered to or upon the written order of a person or persons
designated in such order.
The Depositary shall not accept for surrender a Receipt evidencing American
Depositary Shares representing less than one Share. In the case of surrender of
a Receipt evidencing a number of American Depositary Shares representing other
than a whole number of Shares, the Depositary shall cause ownership of the
appropriate whole number of Shares to be recorded in the name of the Registered
Holder surrendering such Receipt, and shall issue and deliver to the person
surrendering such Receipt a new Receipt evidencing American Depositary Shares
representing any remaining fractional Share.
A stamp duty of 0.5 percent of the market value of the Shares will be
charged in respect of any withdrawal of Shares and such stamp duty will be
payable by the relevant holder. In addition, it will be necessary to obtain the
approval of the Reserve Bank of India for withdrawal of Shares or for the
Company to register Shares in the name of a person who is not a resident of
<PAGE>
India upon such withdrawal. Any subsequent transfer by the Registered Holder
after withdrawal will require the approval of the Reserve Bank of India, which
approval must be obtained by the purchaser and the Company under Section
29(1)(b) and 19(4), respectively, of the Foreign Exchange Regulation Act, 1973.
3. TRANSFER OF RECEIPTS; COMBINATIONS AND SPLIT-UPS OF RECEIPTS.
Subject to the limitations set forth herein and in the Deposit Agreement,
the transfer of this Receipt is registrable on the books of the Depositary or
the Registrar, if any, by the Registered Holder hereof in person or by a duly
authorized attorney, upon surrender at the Depositary's designated transfer
offices of this Receipt, properly endorsed or accompanied by a properly executed
instrument of transfer and duly stamped as required by applicable law. This
Receipt may be split into other such Receipts, or may be combined with other
such receipts into one Receipt, evidencing the same aggregate number of American
Depositary Shares as the Receipt or Receipts surrendered.
As a condition precedent to the execution and delivery, registration of
transfer, split-up, combination, or surrender of any Receipt, the delivery of
any distribution thereon, or withdrawal of any Deposited Securities, the
Depositary, the Company, the Custodian, or Foreign Registrar may require (a)
payment from the depositor of the Shares or the presentor of the Receipt of a
sum sufficient to reimburse it for (i) any tax or other governmental charge and
any stock transfer or registration fees in respect of Receipts, (ii) any tax or
other governmental charge and any stock transfer or registration fees in respect
of registration of transfers of Shares or the Deposited Securities upon any
applicable register and (iii) any applicable fees as provided in this Receipt;
(b) the production of proof satisfactory to it as to the identity and
genuineness of any signature and as to any other matter contemplated by Section
3.01 of the Deposit Agreement; (c) compliance with the provisions of the
Company's Memorandum and Articles of Association in effect from time to time and
resolutions and regulations of the Company's Board of Directors adopted pursuant
to such Memorandum and Articles of Association; and (d) compliance with (i) any
laws or governmental regulations relating to Receipts or American Depositary
Shares or to the withdrawal of Deposited Securities and (ii) such reasonable
regulations the Depositary and Company may establish consistent with the
provisions of the Deposit Agreement or this Receipt, including, without
limitation, this Article 3.
The delivery of Receipts against deposits of Shares generally or against
deposits of particular Shares may be suspended, or the transfer of Receipts in
particular instances may be refused, or the registration of transfer of
outstanding Receipts, or the combination or split-up of Receipts, generally may
be suspended, during any period when the transfer books of the Depositary or any
register for Shares or other Deposited Securities are closed, or if any such
action is deemed necessary or advisable by the Depositary or the Company at any
time or from time to time because of any requirement of law or of any government
or governmental body or commission, or under any provision of the Deposit
Agreement or this Receipt, or for any other reason. Notwithstanding any other
provision of the Deposit Agreement or this Receipt, the surrender of outstanding
Receipts and withdrawal of Deposited Securities may be suspended only for (i)
temporary delays caused by closing the transfer books of the Depositary or the
Company or the deposit of Shares in connection with voting at a shareholders'
meeting, or the payment of
<PAGE>
dividends, (ii) the payment of fees, taxes and similar charges, and (iii)
compliance with any U.S. or foreign laws or governmental regulations relating to
the Receipts or to the withdrawal of the Deposited Securities, or (iv) any other
reason that may at any time be specified in paragraph I(A)(1) of the General
Instructions to Form F-6 under the Securities Act, as such instructions may from
time to time be in effect, or any successor provision thereto. Without
limitation of the foregoing, the Depositary shall not knowingly accept for
deposit under the Deposit Agreement any Shares or other Deposited Securities
which are required to be registered under the provisions of the Securities Act
of 1933, unless a registration statement is in effect as to such Shares.
4. LIABILITY OF REGISTERED HOLDER FOR TAXES AND OTHER CHARGES.
If any tax or other governmental charge shall become payable with respect
to this Receipt or with respect to any Deposited Securities represented by
American Depositary Shares evidenced hereby, such tax or other governmental
charge shall be payable by the Registered Holder hereof to the Depositary. The
Depositary may refuse to effect any transfer of this Receipt or any combination
or split-up hereof or any withdrawal of Deposited Securities represented by
American Depositary Shares evidenced hereby until such payment is made, and may
withhold or deduct from any dividends or other distributions and may sell any
part or all of the Deposited Securities represented by the American Depositary
Shares evidenced by this Receipt and may apply such dividends or other
distributions or the proceeds of any such sale in payment of such tax or other
governmental charge (and any taxes or expenses arising out of such sale), the
Registered Holder hereof remaining liable for any deficiency.
5. REPRESENTATIONS AND WARRANTIES OF DEPOSITORS.
Every person depositing Shares hereunder and under the Deposit Agreement
shall be deemed thereby to represent and warrant that such Shares and each
certificate therefor are validly issued, fully paid, non-assessable, and free of
any preemptive rights, if any, of the holders of outstanding Shares and that the
person making such deposit is duly authorized so to do. Every such person shall
also be deemed to represent that (i) Shares presented for deposit are not, and
the Receipts evidencing the American Depositary Shares representing such Shares
would not be, Restricted Securities, and (ii) the deposit of such Shares and the
sale of Receipts evidencing American Depositary Shares representing such Shares
by that person are not otherwise restricted under the Securities Act. Such
representations and warranties shall survive the deposit of Shares and the
execution and delivery of Receipts in respect thereof.
<PAGE>
6. FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.
Any person presenting Shares for deposit or any Registered Holder or
Beneficial Owner of a Receipt may be required by the Depositary or the Company
from time to time (i) to file with the Depositary, the Company, or the Custodian
such proof of citizenship or residence, taxpayer status, exchange control
approval, payment of applicable taxes or other governmental charges, legal or
beneficial ownership of Receipts, Deposited Securities or other securities,
compliance with all applicable laws or regulations or terms of the Deposit
Agreement or such Receipt, or such information relating to the registration on
the books of the Company or the Foreign Registrar, if applicable, or any other
information the Depositary or the Company may deem necessary or appropriate to
evidence compliance with all applicable laws and regulations, and (ii) to
execute such certificates and to make such representations and warranties, as
the Depositary and the Registrar, as applicable, may deem necessary or proper or
as the Company may reasonably request by written request to the Depositary. The
Depositary may withhold the delivery or registration of transfer of any Receipt
or the distribution of any dividend or distribution of rights or of the sale
proceeds thereof or the delivery of any Deposited Securities until such proof or
other information is filed or such certificates are executed or such
representations and warranties are made to the Company's and the Depositary's
satisfaction. The Depositary shall from time to time advise the Company of the
availability of any such proofs, certificates or other information and shall
provide the Company, in a timely manner, with copies thereof upon written
request by the Company, unless such disclosure is prohibited by law.
7. CHARGES OF DEPOSITARY.
The Depositary shall be entitled to receive the following remuneration and
reimbursement in respect of its services under this agreement (a) from the
Registered Holder (i) taxes and other governmental charges; (ii) such
registration fees as may from time to time be in effect for the registration of
transfers, if any, of Shares generally on the share register of the Company (or
any appointed agent of the Company for transfer and registration of Shares which
may be the Registrar) and accordingly applicable to transfer of Shares to the
name of the Depositary, a Custodian or their nominees or the person who makes a
withdrawal of Shares, on the making of deposits or withdrawals pursuant to
Sections 2.02 or 2.05 of the Deposit Agreement; (iii) such cable, telex,
facsimile transmission and delivery expenses as are expressly provided in the
Deposit Agreement to be at the expense of persons depositing Shares or the
Registered Holders; (iv) such customary expenses as are incurred by the
Depositary in the conversion of foreign currency pursuant to Section 4.08 of the
Deposit Agreement (including, without limitation, expenses incurred on behalf of
Registered Holders in connection with compliance with foreign exchange control
restrictions); (v) a fee not in excess of $5.00 per 100 Receipts (or portion
thereof) for the issuance and surrender, respectively of Receipts pursuant to
the Deposit Agreement; (vi) a fee not in excess of $0.02 per American Depositary
Share (or portion thereof) held for any cash distribution made pursuant to the
Deposit Agreement; and (vii) a fee for the distribution of the Deposited
Securities pursuant to the Deposit Agreement, such fee being an amount equal to
the fee for the execution and delivery of American Depositary Shares referred to
above which would have been charged as a result of the deposit of such
securities, but which securities were instead distributed by the Depositary to
Registered Holders, and (b) from the Company (i) such sums and amounts as may
have been agreed between the Company and the
<PAGE>
Depositary; (ii) all reasonable costs in connection with the delivery of
information under sections 4.10 and 5.06 of the Deposit Agreement; and (iii) in
respect of any exceptional fees, taxes, duties, charges, costs and expenses
which the Depositary finds it necessary or desirable or is required to undertake
or to pay in the performance of its obligations under this agreement, such
additional remuneration as shall be agreed between the Depositary and the
Company. Subject to the above paragraph all fees, taxes, duties, charges, costs
and expenses which are payable by the Company shall be paid by the Company to
the Depositary upon demand therefor.
8. PRE-RELEASE OF SHARES AND RECEIPTS.
The Depositary may issue Receipts against evidence of rights to receive
Shares from the Company (or any agent of the Company recording Share ownership).
No such issue of Receipts will be deemed a "Pre-Release" subject to the
restrictions of the following paragraph. Subject to the further terms and
provisions of this Article 8, the Depositary and its agents, on their own
behalf, may own and deal in any class of securities of the Company and its
Affiliates and in Receipts.
In its capacity as Depositary, the Depositary shall not lend Shares or Receipts;
provided, however, that the Depositary may execute and deliver Receipts prior to
- -------- -------
the receipt of Shares pursuant to Section 2.02 of the Deposit Agreement (each
such transaction is hereinafter referred to as a "Pre-Release"). The Depositary
may, subject to the provisions of Section 2.06 of the Deposit Agreement, deliver
Shares upon the receipt and cancellation of Receipts which have been pre-
released, whether or not such cancellation is prior to the termination of such
Pre-Release or the Depositary knows that such Receipt has been pre-released.
The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-
Release. Each Pre-Release will be (a) preceded or accompanied by a written
representation and agreement from the person to whom Receipts or Shares are to
be delivered that such person, or its customer, beneficially owns the Shares or
Receipts to be remitted, as the case may be, and that such person or its
customer agrees to indicate the Depositary as owner of such Shares or Receipts
in its records and to hold such Shares or Receipts in trust for the Depositary
until such Shares or Receipts are delivered to the Depositary or the Custodian,
and unconditionally guarantees to deliver to the Depositary or the Custodian, as
applicable, such Shares or Receipts (b) at all times fully collateralized with
cash or other collateral the Depositary deems appropriate, (c) terminable by the
Depositary on five (5) business day notice, and (d) subject to such further
indemnities and credit regulation as the Depositary deems appropriate. The
number of Shares not deposited but represented by American Depositary Shares
outstanding at any time as a result of Pre-Releases will not normally exceed
thirty percent (30%) of the Shares deposited hereunder; provided, however, that
-------- -------
the Depositary reserves the right to change or disregard such limit from time to
time as it deems appropriate and may change such limit for purposes of general
application. The Depositary will also set Dollar limits with respect to Pre-
Release transactions to be entered into hereunder with any particular Pre-
Releasee on a case-by-case basis as the Depositary deems appropriate. For
purposes of enabling the Depositary to fulfil its obligations to the Registered
Holder under this Receipt and the Deposit Agreement, the collateral referred to
in clause (b) above shall be held by the Depositary for the benefit of the
Registered Holder as security for the performance of the Pre-Releasee's
obligations to the Depositary in connection with a Pre-Release transaction,
including the Pre-Releasee's obligation to deliver Shares or Receipts upon
termination of a Pre-Release transaction (and shall not, for the avoidance of
doubt, constitute Deposited Securities hereunder).
<PAGE>
The Depositary may retain for its own account any compensation received by it in
connection with the foregoing.
9. TITLE TO RECEIPTS.
Subject to the limitations set forth herein or in the Deposit Agreement, it is a
condition of this Receipt, and every successive holder of this Receipt by
accepting or holding the same consents and agrees, that title to this Receipt,
when properly endorsed or accompanied by a properly executed instrument of
transfer and transferred in accordance with the terms of the Deposit Agreement,
is transferable by delivery with the same effect as in the case of a negotiable
instrument, provided, however, that until this Receipt is transferred on the
-----------------
books of the Depositary as provided in the Deposit Agreement, the Depositary and
the Company, notwithstanding any notice to the contrary, may treat the person in
whose name this Receipt is registered on the books of the Depositary as the
absolute owner hereof for the purpose of determining the person entitled to
distribution of dividends or other distributions or to any notice provided for
in the Deposit Agreement or for all other purposes, and neither the Depositary
nor the Company shall have any obligation or be subject to any liability under
this Receipt or the Deposit Agreement to any Beneficial Owner or holder of a
Receipt unless such Beneficial Owner or holder is the Registered Holder hereof.
10. VALIDITY OF RECEIPT.
This Receipt shall not be entitled to any benefits under the Deposit
Agreement or be valid or obligatory for any purpose, unless this Receipt shall
have been executed by the Depositary by the manual signature of a duly
authorized signatory of the Depositary; provided, however, that such signature
may be a facsimile if a Registrar for the Receipts shall have been appointed and
such Receipts are countersigned by the manual signature of a duly authorized
officer of the Registrar.
11. REPORTS; INSPECTION OF TRANSFER BOOKS.
The Company furnishes the Securities and Exchange Commission (hereinafter
called the "Commission") with certain public reports and documents required by
foreign law or otherwise under the Securities Exchange Act. Such reports and
documents are available for inspection and copying by Registered Holders at the
public reference facilities maintained by the Commission located at 450 Fifth
Street, N.W. (Room 1024), Washington, D.C. 20549.
The Depositary shall make available for inspection by Registered Holders of
Receipts at the Depositary's Corporate Trust Office any notices, reports and
other communications received from the Company which are both (a) received by
the Depositary, the Custodian or a nominee of either as the holder of the
Deposited Securities and (b) generally available to the holders of such
Deposited Securities by the Company.
The Company will arrange for the translation into English, if not already in
English, to the extent required pursuant to any rules or regulations of the
Commission, and the prompt transmittal by the Company to the Depositary and the
Custodian, of any notices, reports and other communications, including any proxy
soliciting materials, which are made generally available by the Company to
holders of its Shares or other Deposited Securities. If requested in writing by
the Company, the Depositary will arrange for the mailing, at the Company's
expense, of copies of such notices, reports and communications that are made
generally available by the Company
<PAGE>
to holders of its Shares or other Deposited Securities and/or, at the written
request of the Company and at the Company's expense, make such notices, reports
and other communications available to all Registered Holders on a basis similar
to that for holders of Shares or other Deposited Securities, or on such other
basis as the Company may advise the Depositary is required or as the Depositary
may be required by any applicable law or regulation. The Company will timely
provide the Depositary with the quantity of such notices, reports and
communications, including any proxy soliciting materials, as requested by the
Depositary from time to time, in order for the Depositary to effect such
mailings. The Depositary and Custodian may rely upon such copies for all
purposes of this Receipt and the Deposit Agreement. The Depositary will, at the
expense of the Company, make such copy and such notices, reports and
communications available for inspection by Registered Holders at the
Depositary's Corporate Trust Office, at the office of the Custodian and at any
other designated transfer offices. The Depositary will keep at its Corporate
Trust Office a book or books for the transfer and registration of Receipts which
at all reasonable times shall be open for inspection by the Registered Holders
of Receipts; provided that such inspection shall not be for the purpose of
communicating with Registered Holders of Receipts in the interest of a business
or object other than the business of the Company or a matter related to the
Deposit Agreement or the Receipts. The Depositary may close the books, at any
time or from time to time, when reasonably deemed expedient by it in connection
with the performance of its duties under the Deposit Agreement.
Dated: _____________________
BANKERS TRUST COMPANY,
as Depositary
By: _______________________
The address of the Corporate Trust office is located at Four Albany Street, New
York, New York 10006.
<PAGE>
EXHIBIT B
CHARGES OF THE DEPOSITARY
<TABLE>
<CAPTION>
Service Rate By Whom Paid
<S> <C> <C> <C>
(1) Issuance of Receipts or the Up to $0.05 per American Party for whom deposits are
cancellation of Receipts Depositary Receipt (or made
upon withdrawal of Deposited fraction thereof)
Securities
(2) Receiving and paying Up to $0.02 per American Party to whom distribution,
distributions of cash Depositary Share for each or for whom the sale or
distribution exercise of rights, is made
</TABLE>
The Depositary shall be entitled to receive the following remuneration and
reimbursement in respect of its services under this agreement (a) from the
Registered Holder (i) taxes and other governmental charges; (ii) such
registration fees as may from time to time be in effect for the registration of
transfers, if any, of Shares generally on the share register of the Company or
Foreign Registrar and accordingly applicable to transfer of Shares to the name
of the Depositary, a Custodian or their nominees or the person who makes a
withdrawal of Shares, on the making of deposits or withdrawals pursuant to
Sections 2.02 or 2.06; (iii) such cable, telex, facsimile transmission and
delivery expenses as are expressly provided in this Deposit Agreement to be at
the expense of persons depositing Shares or the Registered Holders; (iv) such
customary expenses as are incurred by the Depositary in the conversion of
foreign currency pursuant to Section 4.08 of the Deposit Agreement (including,
without limitation, expenses incurred on behalf of Registered Holders in
connection with compliance with foreign exchange control restrictions); (vii) a
fee for the distribution of the Deposited Securities pursuant to this Deposit
Agreement, such fee being an amount equal to the fee for the execution and
delivery of American Depositary Shares referred to in Section 4.02. and 4.03
respectively of the Deposit Agreement which would have been charged as a result
of the deposit of such securities, but which securities were instead distributed
by the Depositary to Registered Holders.
The Company after consultation and agreement between the Depositary and the
Company as to the amount and nature of any other charges, will pay those other
charges of the Depositary and those of any Registrar, if any, plus reasonable
out-of-pocket expenses in accordance with written agreements entered into
between the Depositary and the Company from time to time.
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
INFOSYS
INFOSYS TECHNOLOGIES LIMITED
(Incorporated under the Companies Act. 1956)
REGD. OFFICE: ELECTRONICS CITY, HOSUR ROAD. BANGALORE - 561229, INDIA
SHARE CERTIFICATE
THIS IS TO CERTIFY that the person(s) named in this Certificate is/are the
Registered Holder(s) of the within mentioned share (s) bearing the distinctive
number (s) herein specified in the above Company subject to the memorandum and
Articles of Association of the Company and that the amount endorsed hereon has
been paid up on each such share.
Given under the Common Seal of the Company this
/s/ N.R. Narayana Murthy /s/ N.S. Raghavan
---------------------------- -------------------------
Chairman & Managing Director Joint Managing Director
Authorised Signatory
Note: No transfer of the above shares will be registered unless accompanied by
this Certificate
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 5.1
[Crawford Bayley & Co. Letterhead]
February 11, 1999
Infosys Technologies Limited
Electronics City, Hosur Road
Bangalore, Karnataka, India 561 229
Re: Infosys Technologies Limited Registration Statement on Form F-1
Gentlemen:
We have acted as your counsel in connection with the registration, offering
and sale under the Securities Act of 1933, as amended, of up to 1,035,000
equity shares (including up to 135,000 equity shares that the underwriters have
the option to purchase to cover over-allotments, if any), par value Rs.10 per
share (the "Shares") of Infosys Technologies Limited, a company with limited
------
liability incorporated in the Republic of India (the "Company"). Each of the
-------
Shares being so registered is represented by two American Depositary Shares.
We have examined the registration statement on Form F-1 (the "Registration
------------
Statement") filed by you with the United States Securities and Exchange
- ---------
Commission on February 11, 1999 for the purpose of registering the Shares. The
Shares are to be sold to the underwriters for resale to the public in a form
evidenced by American Depositary Receipts, to be issued by the Depositary, all
as described and defined in the Registration Statement and pursuant to the
underwriting agreement filed as an exhibit thereto (the "Underwriting
------------
Agreement"). As your counsel, we have also examined, under Indian law, the
- ---------
proceedings proposed to be taken in connection with such offering and sale of
the Shares.
Strictly limited to Indian law, it is our opinion that the Shares to be
sold by the Company in the offering pursuant to the Underwriting Agreement have
been duly authorised and validly issued and are fully paid and non-assessable.
We hereby confirm to you that subject to the assumptions and limitations
set forth therein, the statements set forth under the caption "Taxation--Indian
Taxation" in the prospectus included in the Registration Statement constitute
our opinion with respect to the Indian income tax consequences of the
acquisition, ownership and disposition of the Shares and the American Depositary
Shares representing such Shares.
<PAGE>
We consent to the reference to our firm under the captions "Legal Matters,"
"Taxation--Indian Taxation" and "Enforcement of Civil Liabilities" in the
prospectus included as a part of the Registration Statement and to the use of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Crawford Bayley & Co.
CRAWFORD BAYLEY & CO.
<PAGE>
EXHIBIT 10.1
INFOSYS TECHNOLOGIES LIMITED
1998 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Plan are to attract and
--------------------
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business through the grant of Options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the legal requirements relating to stock
---------------
option plans, including, without limitation, the tax, securities or corporate
laws of India, any stock exchange or quotation on which the ADSs are listed or
quoted, or the applicable laws of any other country or jurisdiction where
Options are, or will be, granted under the Plan.
(c) "ADR" shall mean an American Depositary Receipt evidencing
---
American Depositary Share(s) corresponding to Share(s).
(d) "ADS" shall mean an American Depositary Share corresponding to
---
Share(s).
(e) "Board" means the Board of Directors of the Company.
-----
(f) "Code" means the United States Internal Revenue Code of 1986, as
----
amended.
(g) "Committee" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 hereof.
(h) "Company" means Infosys Technologies Limited, a company
-------
incorporated under the laws of India.
(i) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services to such entity.
(j) "Director" means a member of the Board.
--------
(k) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
<PAGE>
(l) "Employee" means any person, including officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. An Employee
shall not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Fair Market Value" means the value for one ADS, as reported on
-----------------
any established stock exchange or market system, on the day of determination.
(n) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(p) "Option" means a stock option granted pursuant to the Plan.
------
(q) "Option Agreement" means a written or electronic agreement between
----------------
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(r) "Optioned Stock" means the ADSs subject to an Option.
--------------
(s) "Optionee" means the holder of an outstanding Option granted under
--------
the Plan.
(t) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1998 Stock Option Plan.
----
(v) "Share" means an Equity Share of the Company, as adjusted in
-----
accordance with Section 11 of the Plan.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan (in the form of ADSs) is 800,000 Shares. The Shares may
be authorized but unissued, or reacquired.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale
-2-
<PAGE>
under the Plan (unless the Plan has terminated). However, Shares that have
actually been issued under the Plan upon exercise of an Option, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration of the Plan.
--------------------------
(a) Administrator. The Plan shall be administered by the Board or a
-------------
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine Fair Market Value;
(ii) to select the Employees to whom Options may from time to
time be granted hereunder;
(iii) to determine the number of ADSs to be covered by each such
Option granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option granted hereunder;
(vi) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(e) instead of ADSs;
(vii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws; and
(viii) to construe and interpret the terms of the Plan and Options
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility.
-----------
(a) Options may be granted only to Employees.
-3-
<PAGE>
(b) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option.
(c) Neither the Plan nor any Option shall confer upon any Optionee any
right with respect to continuing the Optionee's relationship as an Employee with
the Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate such relationship at any time, with or without
cause.
(d) The following limitations shall apply to grants of Options:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than [400,000] ADSs.
(ii) In connection with his or her initial service, an Employee
may be granted Options to purchase up to an additional [400,000] ADSs which
shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11.
(iv) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the canceled Option will be counted against the limits
set forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon its adoption by
------------
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per ADS exercise price for the ADSs to be issued upon exercise
of an Option shall be such price as is determined by the Administrator;
provided, however, that in no case shall the per ADS exercise price of an Option
be less than 90% of Fair Market Value on the date of grant. Notwithstanding the
foregoing, Options may be granted with a per ADS exercise price of less than 90%
of Fair Market Value pursuant to a merger or other corporate transaction.
(b) The consideration to be paid for the ADSs to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator at the time of
-4-
<PAGE>
grant. Such consideration may consist of (1) cash, (2) check, (3) promissory
note, (4) other ADSs which (x) in the case of ADSs acquired upon exercise of an
Option, have been owned by the Optionee for more than six months on the date of
surrender, and (y) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the ADSs as to which such Option shall be
exercised, (5) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan, or (6) any
combination of the foregoing methods of payment. In making its determination as
to the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, the
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of an ADS.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the ADSs with respect to which the Option is exercised. Full payment
may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. ADSs issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the ADSs are issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the ADSs, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such ADSs promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the ADSs are issued, except as provided in
Section 11 of the Plan.
(b) Termination of Relationship as an Employee. If an Optionee ceases
------------------------------------------
to be an Employee, such Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of the Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares underlying the ADSs covered by the unvested portion of the
Option shall again become available for issuance under the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
underlying the ADSs covered by such Option shall again become available for
issuance under the Plan.
-5-
<PAGE>
(c) Death or Disability of Optionee. If an Optionee dies while an
-------------------------------
Employee, or ceases to be an Employee as a result of the Optionee's disability,
the vesting and exercisability of the Option shall accelerate in full and the
Option may be exercised within such period of time as is specified in the Option
Agreement to the extent that the Option is vested on the date of death (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement) by the Optionee or Optionee's estate or by a person who
acquires the right to exercise the Option by bequest or inheritance. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares underlying the ADSs covered by such Option shall again
become available for issuance under the Plan.
(d) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
----------------------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of ADSs covered by each outstanding
Option, and the number of Shares (in the form of ADSs) which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per ADS covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Shares, or any other increase
or decrease in the number of issued Shares effected without receipt of
consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of the ADSs subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including ADSs
as to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company
-6-
<PAGE>
repurchase option applicable to any ADSs purchased upon exercise of an Option
shall lapse as to all such ADSs, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including ADSs
as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
ADS subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of ADSs for each ADS held on the
effective date of the transaction (and if the holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding ADSs); provided, however, that if such consideration received in
the merger or sale of assets is not solely equity shares (or their equivalent)
of the successor corporation or its Parent, the Administrator may, with the
consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each ADS subject to the Option, to
be solely equity shares (or their equivalent) of the successor corporation or
its Parent equal in fair market value to the per ADS consideration received by
holders of ADS in the merger or sale of assets.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee to whom an Option is
so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder approval
--------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise
-7-
<PAGE>
between the Optionee and the Administrator, which agreement must be in writing
and signed by the Optionee and the Company. Termination of the Plan shall not
affect the Administrator's ability to exercise the powers granted to it
hereunder with respect to Options granted under the Plan prior to the date of
such termination.
14. Conditions Upon Issuance of ADSs.
--------------------------------
(a) Legal Compliance. ADSs shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such ADSs shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the ADSs are being
purchased only for investment and without any present intention to sell or
distribute such ADSs if, in the opinion of counsel for the Company, such a
representation is required.
15. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any ADSs hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required by Applicable Laws.
-8-
<PAGE>
APPENDIX A
----------
Rules for U.S. Option Grants
----------------------------
The following additional rules shall apply in the case of Option grants to
U.S. residents.
1. $100,000 Rule Limitation. Notwithstanding a designation of Options as
------------------------
an Incentive Stock Options, to the extent that the aggregate Fair Market Value
of the ADSs with respect to which Incentive Stock Options are exercisable for
the first time by an Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds U.S. $100,000, such Options shall
be treated as Nonstatutory Stock Options. For these purposes, Incentive Stock
Options shall be taken into account in the order in which they were granted.
The Fair Market Value of the ADSs shall be determined as of the time the Option
with respect to such ADSs is granted.
2. Term of Option. Notwithstanding Section 7 of the Plan, in the case of
--------------
an Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the Option Agreement.
3. Option Exercise Price.
---------------------
(a) In the case of an Incentive Stock Option
(i) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the exercise
price shall be no less than 110% of the Fair Market Value per ADS on the date of
grant.
(ii) granted to any other Employee, the per ADS exercise price
shall be no less than 100% of the Fair Market Value per ADS on the date of
grant.
(b) In the case of a Nonstatutory Stock Option, the per ADS exercise
price shall be determined by the Administrator; provided, however, that in the
case of an Option intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code, the per ADS exercise price shall be
no less than 100% of the Fair Market Value per ADS on the date of grant.
-9-
<PAGE>
Exhibit 10.2
INFOSYS TECHNOLOGIES LIMITED
----------------------------
EMPLOYEES STOCK OFFER PLAN
--------------------------
SCHEME
------
(Adopted by Resolution of the Board of Directors of the Company on the 15th day
of September 1994)
1. Short title , extent and commencement:
-------------------------------------
i) This Scheme may be called the "EMPLOYEES STOCK OFFER PLAN".
ii) It applies only to the bonafide employees of the Company, who are in whole
time employment with the company.
iii) It shall be deemed to have come into force on the 15th day of September
1994 or on such other date as may be decided by the Board of Directors of
the Company.
2. Object:
------
The Scheme has been adopted by resolution of the Board of Directors of the
Company, pursuant to the enabling authority of the members of the Company
in General Meeting, with the object of allowing, at the discretion of the
Company or of the Employees Welfare Trust , such of the company's
employees as are eligible and qualify under the scheme, to acquire
warrants directly from the company or at the company's discretion, from
the Trustees of the Employees Welfare Trust and to be allotted Equity
Shares of the company on conversion of such warrants at their option.
3. Definitions:
-----------
i) In this Scheme, unless the context otherwise requires,
(a) "Advisory Board" means the Board set up under Clause 5.
(b) "Board of Directors" means the Board of Directors for the time being
of the Company.
(c) "Company" means INFOSYS TECHNOLOGIES LIMITED.
contd.....2
<PAGE>
:2:
(d) "Employee" means an employee of the Company including a wholetime
Director, whose name appears as on the qualifying date in the register
of employees maintained by the Company. However, Promoter Employees
and Promoter Directors, as per the list given below are not eligible
under this scheme. Promoter Employees and Promoter Directors mean the
following, namely :
1. Mr. N. R. Narayana Murthy
2. Mr. N. S. Raghavan
3. Mr. Nandan M. Nilekani
4. Mr. K. Dinesh
5. Mr. S. D. Shibulal
6. Mr. S. Gopalakrishnan
(e) "Eligible Employee" means an employee who qualifies for issue of
warrants/shares under this scheme and who fulfills the minimum
conditions of service and other conditions as decided in the appraisal
process.
(f) "Exercise Date" means, in relation to the Exercise Period, any day
within 2 months in every financial year of the company, which 2 months
shall be intimated individually to each of the warrant holders by
giving notice in writing of not less than 30 days for the purpose of
enabling them to exercise their right to apply for conversion. The
said notice shall be sent by registered post to their address as
maintained by the company.
Provided that in the event of a bonus/rights or any other issue
of securities made by the company to existing shareholders, the Board
shall offer an opportunity, independent of the above, of exercising
the conversion option, to the warrant holders, before the record date
of the issue of the said securities so that the Warrant holders are
given an opportunity to exercise their option to convert their
Warrants into shares to be eligible for the further issue as
shareholders of the company.
Further provided that the warrants holders shall be given an
opportunity of exercising their option during the 60 days before the
end of the exercise period, in addition to that provided supra.
contd....3
<PAGE>
:3:
(g) "Exercise Period" means, in relation to the Employees Trust, 60 months
from the date of issue of the warrants by the company.
"Exercise Period" means, in relation to the eligible employee, the
period after 12 months of the date of issue of Warrants to the
eligible employee but within 60 months from the date of issue of the
warrants by the company. On the expiry of the Exercise period, any
Warrants which have not been exercised will lapse and cease to be
valid for any purpose. The exercise period is subject to the
relaxation in (f) above.
(h) "Exercise Price" means, subject to adjustment as set out below, the
sum of Rs.l00/- (Rupees one hundred only) or such amount as may be
decided by the Board based upon the professional advice of the
valuers, as the Board may decide from time to time but not being less
than Rs.l00/- per Warrant. The said exercise price shall be reduced by
the sum of Rs. 1 per warrant or such other sum as is paid on the issue
of warrant. In case the warrant is not exercised before the end of the
exercise period, the amount paid of Ks. 1 per warrant or such sum as
is paid on the issue of warrants shall stand forfeited by the company.
The said Exercise Price shall be subject to adjustment., at the
discretion of the Board, in the event of the company distributing
bonus shares, so that the holder of any Warrant, who has not opted for
conversion before the record date for the issue of the said bonus
shares, shall be entitled to receive the number of shares of the
Company which he would have held or have been entitled to receive on
such Warrant being exercised immediately prior to such record date.
(i) "Qualifying Date" means the 31st day of March of every year or the
last day of the financial year of the Company, or such date as the
Board may decide. However, the eligible employee as on 31st March
1994, shall be eligible for issue of Warrants under the scheme.
contd....4
<PAGE>
:4:
However, the Board can relax the qualifying date condition on a case
to case basis and recommend to the Advisory Board for issue of such
warrants as it may consider fit to any employee, subject to any other
conditions as specified in the scheme.
(j) "Shares" mean, the equity shares of the Company with a nominal par
value of Rs.l0/- (Rupees ten only) which have no preference in respect
of dividends or in respect of amounts payable in the event of any
voluntary liquidation or winding up of the Company.
(k) "Trust" means the Employees Welfare Trust constituted by the company.
(1) "Warrant" means, the Warrant constituting the right to subscribe for
one equity share each to be issued pursuant to the resolutions of the
members of the Company and the Board of Directors and for the time
being remaining unexercised.
(m) "Warrant Certificate" means the certificates to be issued in respect
of the Warrant substantially in the form shown in the First Schedule
hereto, as may from time to time be modified.
(n) "Warrantholder" and "Holder" means, in relation to any Warrant, the
Employees welfare Trust or the eligible employee, as the case may be,
who has been issued the Warrant.
(o) Any reference to a male employee shall also be construed as a
reference to a female employee as the case may be.
(p) Any reference to the words "issue of warrants" shall in relation to an
employee shall also mean and include a transfer of a warrant by the
Trust to an employee.
4. THE ALLOTMENT OF WARRANTS BY THE BOARD:
---------------------------------------
(i). The Board of Directors may allot warrants under this scheme, pursuant
to the authority given by the members in the General Meeting, either
directly to the employees or to the Trust constituted by the company,
one of whose objectives is to hold in trust the warrants allotted by
the company, for and on behalf of the employees to be subsequently
transferred to the eligible employee, as per this scheme.
<PAGE>
:5:
(ii) The Trust shall deal with the warrants, and the shares is any, only
for the limited purpose of putting into effect this scheme and all
incidental objectives arising out of this scheme. The Trust cannot' by
itself hold the warrants, and shares is any, on its own account but
shall always hold it for and on behalf of the employees.
5. ESTABLISHMENT OF THE ADVISORY BOARD:
------------------------------------
(i) The Board of Directors shall, as soon as may be possible, after the
date of coming into force of this Scheme, constitute a Board by the
name of the "Advisory Board".
(ii) The Advisory Board shall consist of such number of members not
exceeding seven as the Board of Directors may deem fit.
(iii) At least two of the members of the Advisory Board shall consist of
the Chairman of the company and a whole time Director.
6. APPRAISAL OF ELIGIBLE EMPLOYEES:
--------------------------------
(i) As soon as may be possible after the qualifying date, the
Advisory Board shall, based on the various criteria for selection of
the eligible employees during the year (which criteria shall be
decided from time to time by the company for assessing the
contribution of the employees) decide on the eligible employees who
qualify under the scheme and the number of warrants of the company
that may be issued to them.
7. INVITATION TO APPLY FOR WARRANTS:
---------------------------------
(i) The Advisory Board may, on such dates as it shall determine,
invite such eligible employees as it may in its absolute discretion
select, to apply for Warrants of the Company on the terms and
conditions and for the consideration as set out in the Scheme.
contd.....6..
<PAGE>
:6:
(ii) The invitation sent by the Advisory Board to the eligible employees
shall be in writing and shall
(a) state the date on which it has been issued.
(b) specify the number of Warrants that are being offered.
(c) invite the eligible employee to apply for the said number of
Warrants in consideration of the payment by him to the
Company/Trust of a sum of Rupee one per Warrant or such sum as
the Board/Trust may from time to time decide.
(d) Specify the date not being earlier than 15 days from the date
of issue of the invitation, by which the eligible employees
must accept the invitation.
(iii) The eligible employee may, not later than the date specified in the
invitation as being the last date for receipt of the application,
by delivery of a duly compelled application form accompanied by the
value of Warrants, apply for the issue of a number of Warrants not
exceeding the number specified in the invitation.
8. ISSUE OF WARRANTS:
------------------
(i) The Advisory Board shall, if in its absolute discretion it thinks fit,
approve of the application made by the eligible employee and shall
forward the application to the Board of Directors or Trust as the case
may be, with the recommendation that the number of Warrants applied
for, be issued/transferred, by the company/Trust.
contd.....7..
<PAGE>
:7:
(ii) On receipt of the recommendation from the Advisory Board, the
Board of Directors or Trust shall, as soon as may be practicable,
issue/transfer to the eligible employee the number of Warrants
applied for, on such terms and conditions as may be agreed to
between the trustees and the employee.
(iii) The Board of Directors shall, as soon as may be practicable after
issuing the Warrant to the eligible employee, issue to the
eligible employee a certificate specifying the number of Warrants
issued. The terms and conditions on which the said Warrants have
been issued shall be set out in the said certificate.
9. TERMS AND CONDITIONS OF THE WARRANTS:
-------------------------------------
(i) Warrants shall be issued in lots of 100 in consideration of the
payment to the company/ Trust a Sum of Re.l/- per Warrant or such
other sum as the Board/Trust may from time to time decide.
(ii) The Warrants shall not be transferable(except by the Trust to the
employees) and if not exercised during the Exercise Period, shall
lapse. The Trustees may, if they think fit exercise the warrants,
registered in their names, during the Exercise period. Further in the
event of the holder ceasing to be an employee of the Company by reason
of resignation, dismissal or severance of employment due to non-
performance or otherwise, the Warrants held by him shall be
transferred back to the Trust at the consideration stated supra.
contd....8..
<PAGE>
:8:
In the event of the employee dying in harness or attaining the age
of superannuation while in service, the rights and obligations under
the Warrants shall accrue to his legal heirs or continue in his hands,
as the case may be. However the Directors may in their absolute
discretion, allow the legal heirs or superannuated employee, as the
case may be, the facility of obtaining conversion of the warrants into
shares during such time as they think fit and may also extend the
facility of removing the non transferability clause on the shares so
converted.
(iii) Subject to Rule (9) above, each Warrant shall entitle the holder
thereof
(a) on his payment to the company of the Exercise Price as
applicable to such Warrant; and
(b) by giving notice in writing to the Board of Directors at any
time during the Exercise Period.
to, as and by way of exercise of each such Warrant, call upon the
Board of Directors to issue and allot to him one equity share of
the Company of the par value of Rs.10/- credited as fully paid up.
(iv) Subject to the above, the holder of the Warrants may, in his
discretion, exercise all or any of the Warrants issued to him
during the Exercise Period applicable to such Warrants provided
that the exercise shall be made in lots of 100 Warrants.
10. TERMS AND CONDITIONS OF THE SHARES:
-----------------------------------
(i) All shares allotted on exercise of Warrants will rank pari-passu
with all other equity shares of the Company for the time being in
issue (save as regards any right attached to such shares by
reference to a record date prior to the date of allotment).
contd...9...
<PAGE>
:9:
(ii) Shares allotted on exercise of Warrants shall not be capable' of
being transferred or otherwise alienated for a period of five
years from the date of issue of the Warrant or transfer of the
warrants/Shares to the employee by the Trust. However the
Trustees shall have the right to transfer the shares registered
in their names to the eligible employees.
Provided that, in the case of death of the employee in harness or
the employee retiring on superannuation from the company, the
Board of Directors may, at their discretion allow the shares to
be transferred/transmitted on such terms and conditions as they
may deem fit.
(iii) In the event of the Trust transferring the warrants to the
employee, the shares allotted on exercise of warrants shall not
be capable of being transferred/alienated for a period of S years
from the date of transfer of such warrants to the employee except
to the Trust.
In the event of the Trust transferring shares to the
employees, the shares so transferred shall not be capable of
being further transferred/alienated, by the employee except to
the Trust on the happening of certain events, for a period of 5
years from the date of such transfer to the employee.
(iv) In the event of the employee leaving the services of the Company
due to resignation, dismissal or severance of employment due to
non-performance or otherwise, before the expiry of the period of
five years from the date of issue of the warrants/transfer of
shares to him by the Trust, he shall transfer or cause to be
transferred the warrants/shares so allotted/transferred to
him, to the Trust at the issue price/exercise price.
(v) An eligible employee shall enter into an agreement with the
company substantially in the form shown in the Second Schedule
hereto, as may from time to time be modified in respect of the
matters set out in Rule 9(ii), 9(iii) and 9(iv) supra.
contd....10..
<PAGE>
:10:
(v) On the, expiry of the period of five years from the date of issue
of the Warrant or on such date/s as the Board of Directors may in
their absolute discretion decide, the company shall make an
application to the Bangalore Stock exchange and to the other
stock exchanges on which the shares of the company are listed for
permission to admit the shares allotted on exercise of the
Warrants under the scheme for trading.
11. INDIVIDUAL LIMIT:
-----------------
(i) Warrants shall not be issued exceeding 6000 to an eligible
employee during a financial year.
12. ADMINISTRATION AND AMENDMENT:
-----------------------------
(i) The Advisory Board shall have the power from time to time to make
and vary such regulations (not being inconsistent with this
scheme) as it thinks fit for the implementation and
administration of this scheme.
(ii) The Board of Directors may, at any time, at its absolute
discretion alter or vary the Scheme in any respect. The Scheme
may be repealed at any time by the Board of Directors provided
that the rights of the Warrantholders in respect of the Warrants
which are yet to be exercised shall not be prejudiced.
13 GENERAL:
--------
(i) The company will at all times keep available such number of
authorized and un-issued shares as would be required to be issued
upon exercise of all the Warrants from time to time remaining
outstanding and shall ensure that all shares delivered upon
exercise of the Warrants will be duly and validly issued as fully
paid.
contd...11..
<PAGE>
:11:
(ii) This scheme shall not form part of any contract of employment
between the company and the employee. The rights and obligations
of any individual under the terms of his office or employment
with the company shall not be affected by his participation in
this scheme or any right which he may have to participate in it
and nothing in this scheme shall be construed as affording such
an individual any additional rights as to compensation or damages
in consequence of the termination of such office or employment
for any reason.
(iii) This scheme shall not confirm on any person any legal or
equitable rights (other than that to which he would be entitled
as an ordinary member of the company) against the company either
directly or indirectly or give rise to any cause of action in law
or in equity against the company.
<PAGE>
First Schedule
Warrant Certificate
<PAGE>
INFOSYS
INFOSYS TECHNOLOGIES LIMITED
(Incorporated under the Companies Act, 1956)
Regd. Office: No.403, Manipal Centre, Dickenson Road, Bangalore - 560 042.
WARRANT CERTIFICATE
THIS IS TO CERTIFY that the person(s) named in this Certificate is/are the
Registered Holder(s) of the within- mentioned warrant(s) bearing the distinctive
number(s) herein specified and is/are accordingly entitled, in respect of each
warrant to be allotted, one equity share of Infosys Technologies Limited (the
company) on payment by him/her/them to the company of Rs. 100 (Rupees one
hundred only) being the exercise price.
- --------------------------------------------------------------------------------
WARRANTS EACH OF RUPEE 1
AMOUNT PAID PER WARRANT RUPEE 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Reg. Folio No. Certificate No.
Name(s) of Holder(s)
No. of Warrant(s) held
Distinctive No.(s)
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF the company has caused this warrant certificate to be duly
executed in its name and on its behalf by its duly authorised officer.
Given under the Common Seal of the Company this
Authorised Signatory
Note: The warrant is being issued subject to the conditions mentioned overleaf.
<PAGE>
MEMORANDUM OF TRANSFER OF WARRANTS MENTIONED OVERLEAF.
<TABLE>
<CAPTION>
Date Transfer No. Registered Folio Name(s) of Transferee(s) Initials Authorized
No. Signatory
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
TERMS AND CONDITIONS FOR ISSUE OF WARRANTS
The warrants are not transferable, except in favor of the employee covered by
the Employee Stock Offer Plan (ESOP) and in the circumstances mentioned below.
The warrant shall lapse in the event of the holder not exercising he option
before the expiry of the exercise period, and the sum of Re. 1 paid per warrant
shall stand forfeited. The exercise period expires on Sept. 30, 1999. On
exercising the option the option the sum paid of Re. 1 per warrant shall be
adjusted against the exercise price.
In the event of the holder ceasing to be an employee of the company by reason of
resignation, dismissal or severance of employment due to non-performance or
otherwise, he shall be liable to have the warrant transferred back to the trust.
However, in the event of the employee dying in harness, his legal heirs shall be
entitled to have the warrants transmitted subject to the same terms and
conditions of issue. In the event of an employee attaining the age of
superannuation, while holding the warrants, he shall be entitled to all the
rights on the warrants as if he were an employee subject to the terms and
conditions of the issue of the warrants.
The shares issued on exercise of the warrants are not transferable for a period
of five years from the date of issue/transfer of the warrant to the employee,
except to the trust at the issue price. The warrants are not eligible for
conversion into equity shares during the initial period of 12 months from the
date off issue/transfer to the employee. The warrants are eligible for
conversion into equity shares in a period of 60 days in every financial year of
the company during the exercise period which is 60 months from the date of issue
of the warrant or such other time as specified in the scheme. The exercise date
shall be informed to the warrant holder by the company in writing every
financial year. On the expiry of the exercise period any warrant which has not
been exercised shall lapse and cease to be valid for any purpose. This warrant
is also being issued subject to the terms and conditions as laid down in the
ESOP scheme by the company.
<PAGE>
Second Schedule
Warrant Agreement
<PAGE>
Bangalore
Date:...............
To
The Trustees,
Infosys Technologies Limited Employees Welfare Trust,
Bangalore
Sir
You have set apart.......... number of fully paid shares of Infosys Technologies
Limited through a 'Letter of right' issued to me by the Trust which entitles to
me to get transferred ..........number equity shares of Rs.1O/-- each in the
capital of Infosys Technologies Limited ("the company") on the terms set out in
the Employees Stock Offer Plan (ESOP). During the exercise period the said
shares shall be set apart and retained by the Trust on my behalf. I further
undertake to perform and observe the terms and conditions subject to which the
said warrants have been transferred to me. Those terms are as follows:
The "Letter of right" has been issued to me subject to the terms and conditions
of the Employees Stock Offer Plan, which I have read and understood. I shall
have the right to exercise my option for conversion of the right into shares
during the exercise period. In case the option is not exercised by me during
such period, I understand that the right would lapse, and the amount paid on the
rights shall be forfeited by the Trust. In the event of my leaving the
employment of the company during the period of lock-in due to resignation,
dismissal or due to severance of employment on account of non-performance or
otherwise, I will, on demand, transfer the right back to the Trust for the
consideration paid for by me. In the event default in transferring the same, you
may authorize any officer of the Trust, on my behalf, to sign a transfer of such
right to you or your nominees and a transfer signed by him on my behalf shall be
valid and effective .
....2
<PAGE>
-2-
Upon exercising my option for getting the transfer of equity shares in my name
as per the 'Letter of right', I am not to sell, mortgage, charge, or otherwise
dispose of the said shares until after five years from the date of grant of the
rights to me. And, if I do or attempt to do anything in contravention of this
provision, or if within the said period I cease to be employed by the company
for the reasons mentioned supra, the said shares are at once to revert to you,
and I will on demand transfer the same to you or your nominees at a sum equal to
the consideration hat I have paid for the shares. If I default in transferring
the same, you may authorize any officer of the company on my behalf to sign a
transfer of such shares to you or your nominees, and a transfer signed by him on
my behalf shall be valid and effective.
During the said period stated above, the certificate or certificates relating to
the said shares shall be lodged and retained by the Trust on my behalf.
Any notice to me or my legal/personal representative/s may be served by sending
the same .through the post addressed to me at my address below mentioned, and
any notice so served shall be deemed to have reached me or my legal/personal
representative/s on the expire of 15 days after it is posted.
Yours faithfully,
Signature WITNESS:
Name 01
Emp. No.
02
Address
<PAGE>
Schedule A
Letter of Right
<PAGE>
ADVISORY BOARD
Employees Stock Offer Plan
Infosys Technologies Limited
D. N. KRISHNAMURTHY
CRAIRMAN
DATE:
Dear Mr.
We are pleased to inform you that you have been selected for the offer of
"Letter of right" entitling you to get transferred shares of Infosys
Technologies Ltd as per the Employees Stock Offer Plan (ESOP) of Infosys
Technologies Limited.
You are requested to fill in the enclosed application form and send the same
along with a payment of Re. l per equity share kept apart under the terms of
"Letter of right" amounting to Rs. ...(Rupees ........ only) in all, by crossed
account payee cheque payable to Infosys Technologies Limited Employees Welfare
Trust. Your acceptance along with the payment should reach the office of the
Advisory Board within 15 days of the date of this letter if you are in India or
within 30 days if you are abroad.
Your acceptance should be for the number of shares kept apart for you or for a
lesser number. Any application for equity share kept apart under the terms of
"Letter of right" in excess of that offered to you will be rejected. Please note
that in case your application reaches the office of the Advisory Board later
than the date mentioned above, it will be construed that you have declined the
invitation to apply for the equity share kept apart under the terms of "Letter
of right".
This invitation is being sent to you as per the terms of the ESOP scheme and
shall be subject to the terms and conditions contained therein.
Best wishes and regards.
Yours faithfully,
N. Krishnamurthy
Chauman, Advisory Board
To
Mr.
Emp. No.
<PAGE>
APPLICATION FORM FOR ISSUE OF `LETTER OF RIGHT'
UNDER ESOP SCHEME
---------------------------------
The Advisory Board SUBMIT BEFORE December 15, 1997
---------------------------------
Employees Stock Offer Plan
INFOSYS TECHNOLOGIES LTD. SERIAL NO.
Electronics City, Hosur Road
Bangalore - 561 229, India
- --------------------------------------------------------------------------------
Dear Sirs, Date_________________
Sub: Your letter of invitation to apply for 'Letter of
right' under the ESOP scheme dated ___________ 1997
I herewith apply for issue of `Letter of right' offered to me by the Advisory
Board of the ESOP scheme. My application is subject to acceptance by the
Advisory Board at its discretion and its decision on this matter including the
total number of shares to be kept apart under the scheme utilising me to apply
for the transfer shall be final and binding upon me.
_____________________________________________________________________
Number of Number of shares accepted
shares kept apart (in figures) (in words)
_____________________________________________________________________
100
_____________________________________________________________________
___________________________________________________________________________
Cheque/Demand Draft for Rs. ________________ Rupees ________________
_________________________________________________ at Re. 1 per share
bearing no. ___________________________ dated: ___________________
drawn on:_________________ Bank ____________________________ branch.
___________________________________________________________________________
___________________________________________________________________________
NAME OF APPLICANT :
EMPLOYEE NO. :
DESIGNATION :
PERMANENT ADDRESS :_____________________________________________
___________________________________________________________________________
Thanking you,
Yours faithfully,
Signature
___________________________________________________________________________
SPECIMEN SIGNATURE Name Signature
_________________________ ____________________
____________________
___________________________________________________________________________
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT SLIP SERIAL NO.
INFOSYS TECHNOLOGIES LTD
Received from Mr. __________________an application for a `Letter of right'
entitling him/her for ___ shares at a price of Re. 1 per share along with
payment by Cheque/Demand Draft No. _________________ dated ____________ drawn on
____________________________________ for an amount aggregating
Rs._______________.
Receivers' Signature
<PAGE>
Schedule B
Letter of Indemnity
<PAGE>
Date:
Mr.
Emp. No.
Dear Mr.
As you are aware the Company has in place an Employee Stock Offer Plan (ESOP).
The ESOP is being implemented through a Trust. Accordingly, you must have
received from the Trust, `Letter of right' which would entitle you to apply for
the transfer of shares of the Company at Rs. 100 per share. The Company/Trust
has been advised that the setting apart the shares through the said `Letter of
right' is not taxable in your hands. However, the Income-tax Department may not
necessarily agree with the advice received by the Company/Trust, and in that
event the Income-tax Department may attempt to assess the value of the
right/shares in your hands. Consequently, the Company/Trust may also be exposed
to penalties and other liabilities under the law.
In view of the uncertainty on the tax front, it is necessary for the Company
/Trust to obtain from you an indemnity, indemnifying the Company/Trust against
any loss which the Company/Trust may be put to or suffer, as a result of any
adverse action by the Income-tax Department. We accordingly enclose a Letter of
Indemnity whereby you agree to indemnify the Company/Trust against any loss
which the Company/Trust may suffer for failure to deduct tax at source on the
value of the shares.
Please return this Letter of Indemnity to us duly signed by you.
Thanking you,
Yours faithfully,
T.V.MOHANDAS PAI
SR. VICE PRESIDENT (FINANCE & ADMINISTRATION)
Encl : Letter of Indemnity
<PAGE>
Date:________
FROM
Emp. No..
TO
The Trustees,
Infosys Technologies Ltd Employees Welfare Trust,
Electronics City,
Hosur Road,
Bangalore - 561 229.
Dear Sirs,
LETTER OF INDEMNITY
In consideration of the Trustees agreeing to transfer/set apart shares to me
without deducting any tax from the value of such right/shares, I hereby agree to
indemnify the Company/Trust against any loss and liabilities which the
Company/Trust may incur or suffer by reason of the Company/Trust not deducting
tax at source on the value of such right/shares transferred to me, and as
security for the indemnity, I hereby authorize the Company/Trust to sell all or
any of the right/shares granted under the ESOP standing in my name and receive
the sale proceeds and appropriate the same against any loss or liabilities which
the Company/Trust may have suffered or incurred.
Thanking you,
Yours faithfully,
Witness 1.
2.
<PAGE>
Schedule C
Warrant Exercise Notice
<PAGE>
Infosys
INFOSYS TECHNOLOGIES LIMITED
REGISTERED OFFICE: Electronics City, Hosur Road, Bangalore - 561 229.
FORM-W2
APPLICATION FORM
To SERIAL NO. slno I
The Board of Directors
Infosys Technologies Limited
Electronics City, Hosur Road,
Bangalore - 561 229
Dear Sirs,
In terms of ITL Employees Stock Offer Plan Scheme, I hereby apply to you for
conversion of Warrants into Equity Shares as specified below:-
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Year Number of warrants Transferred Number of warrants opted to be converted
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1994-95 M_1994
- ----------------------------------------------------------------------------------------------------------------------------
1995-96 M_1995
- ----------------------------------------------------------------------------------------------------------------------------
1996-97 M_1996
- ----------------------------------------------------------------------------------------------------------------------------
Total: Total __
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The total amount payable on exercising the conversion of the warrants as shown
below is remitted herewith.
I hereby agree to accept the conversion of ___________ Warrants into __________
Equity Shares, subject to the terms of the Memorandum and Articles of
Association of the company.
I undertake that I will sign all such documents and do all such other acts if
any, necessary on my part to enable me to be registered as the holders of equity
shares which may be allotted to me.
I note that the Board of Directors reserves its full, unqualified and absolute
right to accept or to reject my application in whole or in part and in either
case without assigning any reason thereof.
I authorize you to place my name on the register of members of the company as
the holders of equity shares that may be so allotted and to register my address
as given below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
No of Warrants eligible No. of Warrants opted for conversion Amount paid @ Rs. 99 per warrant Cheque/Demand Draft dated:
- ------------------------------------------------------------------------------------------------------------------------------------
In Figures in Words In Figures in Words Rs. Rs. Instrument Drawn on (Name of the
(in Figures) (in Words) No. Bank & Branch)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Words
Total __
- -----------------------------------------------------------------------------------------------------------------------------------
Applicant Name Surname Date:
- -----------------------------------------------------------------------------------------------------------------------------------
Name in Full Emp_Name Age:
- -----------------------------------------------------------------------------------------------------------------------------------
Address
- ----------------------------------------------------------------------------------------------------------------------------------
Father's/Husband's Name in full
- ----------------------------------------------------------------------------------------------------------------------------------
Usual Signature Specimen Signature
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Tear here
................................................................................
ACKNOWLEDGMENT SLIP
(to be filled in by the Applicant)
SERIAL NO. slno I
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Received from Amount paid @ Rs. 99 per warrant
Mr./Mrs./Ms. Emp_Name Date
- ----------------------------------------------------------------------------------------------------------------------------------
Address: Number of Warrants opted for Conversion In Figures In Words
-----------------------------------------------------------------------------------------------------------
In Figures In Words
--------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Cheque/Draft No. Drawn on (Name of the Bank and Branch)
- -------------------------------------------------------------------------------
Pin: Dated:
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INSTRUCTIONS
(A) HOW TO APPLY
1. Application must be made on the printed application form provided by the
Company and completed in FULL in BLOCK LETTERS in ENGLISH.
2. An applicant should submit only one application (and not more than one) for
the total number of warrants applied for conversion into shares.
3. Signatures other than in English must be attested by a Magistrate or a
Notary Public or a Special Executive Magistrate under his/her official
seal.
(B) MODE OF PAYMENT
1. Payment should be made by Cheque/Bank Draft only. Cheque or Bank Draft
should be drawn on any bank (including a Co-operative Bank) which is
situated at and is a member or sub-member of the Bankers' Clearing House
located at Bangalore. Outstation Cheques on Banks located at other places
will not be accepted and application accompanied by such Cheque or Bank
Draft will be rejected.
2. Al Cheques/Drafts accompanying this application must be made payable to
"Infosys Technologies Limited" and crossed "A/c Payee Only".
3. Applicant should mention the Application Serial No. on the reverse of the
Cheque/Draft.
4. Application Form duly completed together with Cheque/Bank Draft for the
amount payable on application must be delivered before August 14, 1997, to
Mr. V. Viswanathan, Company Secretary, Infosys Technologies Limited,
Electronics City, Hosur Road, Bangalore - 561 229, India.
5. No receipt will be issued for the application money. However, the Company
will acknowledge receipt of the application money by stamping and returning
the acknowledgment slip at the bottom of each Application Form.
6. Share Certificates will be issued in exchange of warrant certificates
within three months from the date of allotment.
(C) DISPOSAL OF APPLICATIONS
1. The Board of Directors reserves its full, unqualified and absolute right to
accept or to reject any application in whole or in part and in either case
without assigning any reason thereof.
<PAGE>
EXHIBIT 10.3
[PHOTO OF FIVE HUNDRED RUPEES APPEARS HERE]
TRUST DEED
THIS INDENTURE made at Bangalore this 15th day of September 1994 between INFOSYS
TECHNOLOGIES LIMITED, a Company incorporated under the Indian Companies Act,
1956 and having its Registered Office at N-4Q3, Manipal Centre, Dickenson Road,
Bangalore - 560 042 (hereinafter referred to as "the Settlor" and this
expression unless it be repugnant to the context or meaning thereof, shall
include its successors and assigns) of the One Part and MR. G. R NAYAK, MS. HEMA
RAVICHANDAR, DR. K. V. VISWANATHAN, MR. N. S. RAGHAVAN all of Bangalore,
Karnataka (hereinafter referred to as "the Trustees"), of the Other Part.
WHEREAS:
A) The Settlor desires to promote the welfare of itself and its employees by
providing assistance to the employees in various forms such as Medical,
Education, Housing, Holiday Homes, Recreation facilities, activities
related to Sports, Music, Research, Artistic pursuits etc.
<PAGE>
B) The Settlor is also desirous of giving certain employees an opportunity to
participate in the growth or prosperity of the Settlor through issue of
shares or other securities or warrants which would entitle such employees
to apply for shares of the company through the Settlor's Employees Stock
Offer Plan (ESOP) or through any other means.
C) In furtherance of the Settlor's aforesaid desire and for implementation of
the Settlor's ESOP, the Settlor has decided to create an irrevocable Trust
as hereinafter mentioned.
D) The Trustees have consented to act as the first Trustees of these presents
and to accept the trust under these presents as is testified by their being
parties to and executing this Deed.
NOW THIS INDENTURE WITNESSETH AS FOLLOWS:
1. IN these presents unless there is anything repugnant to the subject or
context thereof :-
(a) The expression "the Settlor" shall mean INFOSYS TECHNOLOGIES LIMITED
and shall include its successors and assigns.
(b) The expression "the Trustees" shall mean the party of the other part
and include the Trustees for the time being and from time to time
nominated/appointed under these presents and the survivor or survivors
of them.
2 of 22
<PAGE>
(c) The expression "Employee" shall mean so far as the ESOP is concerned,
employee as defined under the said ESOP and so far as other benefits
under this Trust are concerned, any employee of the Settlor as may be
notified by the Settlor to the Trustees.
(d) The expression "the Beneficiaries" shall mean any employee as defined
in the ESOP and any other employee of the Settlor as the Settlor may
specify to the Trustees.
(e) ESOP shall mean the Settlor's Employee Stock Offer Plan adopted by the
Settlor's Board on 15th September 1994.
2. FOR effectuating the said desire and in consideration of these premises,
the Settlor doth hereby declare that it has pursuant to the unanimous
resolution of its Board of Directors passed at their meeting held on 15th
day of September 1994 at its Keonics City, Banga lore, constituted a Trust
and prior to the execution of these presents, handed over to the Trustees
the sum of Rs. 10,001/ (Rupees Ten Thousand One Only) and all the estate,
rights, title, interest, property, claim, and demand whatsoever at law and
inequity of the Settlor in and to the said sum TOHA YE, HOLD, RECEIVE AND
TAKE the same unto the Trustees for ever, upon the trusts and with and
subject to the powers, provisions, agreements and declarations hereinafter
appearing and contained of and concerning the same.
3 of 22
<PAGE>
3. THE Trustees shall henceforth hold and stand possessed of the said sum
(hereinafter for brevity's sake referred to as "the Trust Fund" which
expression shall unless repugnant to the subject or context also include
any other property and investments of any kind whatever into which the same
or any part thereof may be converted, invested or varied from time to time
and those which may be acquired by the Trustees or come to their hands by
virtue of these presents or by operation of law or otherwise howsoever in
relation to these presents including all donations, gifts, bequests and
legacies either in cash or other properties movable or immovable or
otherwise, howsoever which may be received by the Trustees from time to
time for the purpose of these presents and all accretions thereto and
income including capital. gains arising there from or related thereto)
settled upon the trust and with and subject to the powers, provisions,
agreements and declarations hereinafter declared and contained of and
concerning the same.
4. The Trust shall be named as Infosys Technologies Limited Employees Welfare
Trust.
4A. THE Principal Office of the said Trust shall be in Bangaldre at No.N-403,
Manipal Centre, Dickenson Road, Bangalore - 560 042 or at such other place
in India as the Trustees may from time to time decide.
4 of 22
<PAGE>
5. THE Trustees shall hold the Trust Fund and any further sums which may be
paid under any future Deed or Covenant or otherwise Upon Trust at their
discretion to pay or apply the same to or for the benefit of all the
beneficiaries or any one or more of them to the exclusion of the other or
others in such share in such manner in all respects as the trustees in
their absolute discretion may think fit; provided always that the Trustees
may at their absolute discretion postpone the application of the whole or
any part of the same including income received at any particular time and
apply the same at a later time.
6. WITHOUT detracting in any way from the generality of the foregoing purposes
for the benefit of which, the Trust Fund may be applied, the purposes shall
include:-
a) Provision of education, formal or otherwise, in India or abroad,
including, but not limited to, payment of tuition and other fees and
charges and of other expenses directly or indirectly connected
therewith including, but not limited to, expenditure on travelling,
conveyance, boarding fees, 'special coaching, lodging, dress, books,
implements and educational aids of all kinds for the Employees and his
dependent children.
ada) Acquiring and holding shares, warrants or other securities of the
Settlor for the purpose of implementing the Settlor's ESOP and upon
such terms and conditions as the Settlor may from time to time
specify.
5 of 22
<PAGE>
(b) Provision of medical facilities to the Beneficiary involving
hospitalisation or otherwise, arising out of sickness or otherwise, in
India or abroad, including, but not limited to, payment of consultation
charges, professional fees, hospital charges, charges for pathological and
other investigations, costs of medicine and other pharmaceutical or
nutritional or other aids and supplements, charges of health clubs and also
expenditures directly or indirectly associated therewith such as cost of
travel, attendants, nursing, etc.
(c) Provision of sports facilities.
(d) Provision of facilities for leisure, vacation and travel.
(e) Providing assistance to the employees in various forms such as Medical,
Education, Housing, Holiday Homes, Recreation facilities, activities
related to Music, Research, Artistic pursuits etc.
(f) Doing all such other things either alone or in conjunction with others as
are incidental or conducive to the attainment of the above objects or any
of them.
Instead of meeting such expenditure directly, the Trustees shall also have the
power to reimburse the same where the Beneficiaries have already incurred the
same.
6 of 22
<PAGE>
7. IN the event of any Beneficiary ceasing to be in the service or employment
(for any reason whatsoever) of the Settlor, he shall ipso facto cease to be
a Beneficiary under these presents unless otherwise decided by the Settlor
or the Trustees.
8. THE Trustees may at any time invite and receive or without such invitation
receive any voluntary contributions or donations or
loans/advances/deposits, whether refundable or not, from the Settlor and
other persons for all or any of the objects and purposes mentioned above
and for all or any class or beneficiaries provided that they are not
inconsistent with any of the objects of the said Trust. Any such donation
or loans/advance/deposit may be accepted either with or without any special
conditions as may be agreed upon between the Donor and/or Lender and the
Trustees provided that such conditions are not inconsistent with the
intents and purposes of these presents. All such contributions shall be
treated as forming part of the Trust Fund being the subject matter of these
presents and be applied accordingly, and the Settlors do direct that it
shall always be for the Trustees in their absolute discretion to decide
whether they should invite or accept any such donation or grant or
loans/advance/deposit as aforesaid and they shall be at liberty to refuse
any donation or loans/advance/deposit without giving any reason for such
refusal.
7 of 22
<PAGE>
9. THE Trust will be valid until the death of the last to die of the Employees
as on date of creation of the Trust. Provided that the Trustee may at any
time at their discretion and irrespective of whether any of the Trusts or
objects set out herein are fulfilled or not, decide to dissolve the Trust
by a resolution in writing and in such a case the Trust shall stand
dissolved in accordance with the decision of the Trustees. Provided also
that the Trustees shall be and are hereby empowered on such dissolution to
make any arrangement for the matters relating to or arising from the Trust
and are also empowered to distribute or provide for the distribution of the
Trust Fund t6 any one or more or all of the beneficiaries in equal or any
other proportion and on such terms and conditions as the Trustees may in
their absolute discretion deem fit.
10. (a) The number of trustees of the said trust shall not exceed more than
12 or such other number as the Settlor may decide from time to time,
if the trustees are individual trustees.
(b) The continuance of the trustee in his such capacity shall be at the
discretion of the Settlor and his appointment as trustee shall
forthwith be cancelled and his office vacated on receipt of written
intimation from the Settlor to this effect thereof by the continuing
trustee/s.
8 of 22
<PAGE>
(c) If the office of the Trustee is vacated either by death, insanity,
insolvency, resignation, refusal or neglect to act as a trustee or on
his becoming incapable or unfit to act in trust of these presents or
as a result of written intimation to this effect from the Settlor as
per Clause (b) above, the resulting vacancy shall be filled by
person/s nominated by the Settlor.
(d) If the Settlor or any other Company/equity into which the said Settlor
is amalgamated or merged, ceases to exist on account of winding up or
dissolution or otherwise then and in such an event the individual
trustees of the trust shall step into the place of the Settlor in
these presents and such individual trustees shall jointly exercise or
fulfil as the case maybe, the right and obligations laid out on the
Settlor in these presents.
(e) The Settlor shall have the right to appoint itself as the sole
Corporate Trustee of these presents at any point of time hereinafter
by sending a written intimation to this effect and each of the then
Trustees at their usual address in India or their last known address
and in such an event, the office of the individual trustees shall
forthwith stand vacated and the Settlor shall for all intents and
purpose be the only Trustee under these presents.
(f) Consequent to (e) above, clause (c) hereof, clauses 13, 14, 15 and 16
and any other clauses of these presents referring to action by the
majority of Trustees or by more than one Trustee shall not be
applicable in the event of there being a sole corporate Trustee.
9 of 22
<PAGE>
(g) Upon any appointment or reappointment of a new or additional trustee
as aforesaid, the Trust Fund shall if and so far as may be necessary
or be required, be transferred so that the same may be vested in the
Trustees 'for the time being or such of them (but in the case of there
being more than one individual Trustee not being less than two
Trustees) as the Trustees consider proper and upon every such
reappointment the new or additional Trustee may, whether the Trust
Fund shall have been vested in him or not, act or assist in the
execution of the trusts and powers of these presents and shall have
the same powers, authorities and discretions as if he had been
originally appointed a Trustee of these presents.
(h) Without prejudice to any other provisions of law, ~ Trustee of the
said Trust shall stand discharged from his office of Trustee on his
tendering his resignation of his office in writing or on the happening
of any the events mentioned in such clause (c) above.
11. SUBJECT to the provisions of Clause 16 and 19, it shall be lawful for the
Trustees from time to time to frame such Rules and regulations for the
management and administration of the said Trust as they shall think fit and
to add, alter, amend, substitute or vary the same and to make new rules and
regulations provided that such rules and regulations shall not be
inconsistent with the objects and interests of the said Trust.
10 of 22
<PAGE>
12. (a) The Trustees shall be entitled to form one or more Committees for
the management and administration of the Trust and to frame rules and
regulations there for.
(b) The Committees aforesaid shall consist of :-
(i) any or all of the Trustees;
(ii) such number of Beneficiaries as may be selected by the
Trustees' or
(iii) any of all of the Trustees and such number of Beneficiaries
as may be selected by the Trustees;
(c) The Committees aforesaid shall be entitled to make recommendations to
the Trustees with reference to the management and administration of
the trust, the particular object and beneficiaries for and in respect
of which the trust funds shall be utilised from time to time and any
other matters related to or connected therewith.
(d) The Committee/s a foresaid shall be known as the 'General Management
Committee' or the "Board of General Management" or by such other name
or names as the trustees may think fit.
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<PAGE>
13. (a) SUBJECT to the provisions of Clause 11 hereof, the Trustees shall
form and regulate their own procedure relating to meetings of the
Board of Trustees and the quorum of any such meeting shall be four
Trustees present in person. The Trustees shall, except with reference
to the requirements of quorum, be entitled from time to time to alter
or change their procedure as framed or regulated.
(b) A meeting of the Trustees for the time being at which a quorum is
present shall be computent to exercise all or any of the powers,
authorities and discretions by or under the said Trust, vested in the
Trustees or otherwise exercisable by them.
(c) The Trustees may from time to time elect from among the Trustees of
these presents, a Chairman of the Board of Trustees and determine the
period for which he is to hold office. If at any meeting of the
Trustees the Chairman is not present within fifteen minutes of the
time appointed for holding the same, the Trustees present may choose
one of these members to be the Chairman of the Meeting. The Chairman
shall preside at all meetings of the trustees.
14. SUBJECT to the provisions of Clauses 16 and 19, no resolution shall be
deemed to have been duly passed by the Trustees by circulation unless the
resolution has been circulated in draft together with the necessary papers
(if any) to all the Trustees, at their usual address in India and has been
approved by the Trustees, or by a majority of them.
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<PAGE>
15. SUBJECT to the provisions of Clauses 16 and 19, hereof, in case of
difference of opinion arising among the Trustees and in all matters wherein
the Trustees shall have a discretionary power, the votes of the majority of
the Trustee/s, for the time being in the matter shall prevail and shall be
binding on all the Trustees including the Trustees who may not have voted:
Provided however that if as a result of any Trustees not having voted the
Trustees shall be equally divided in opinion the matter shall be decided
according to the casting vote of the Chairman of the Board of Trustees or
the Chairman of the meeting as the case may be.
16. If the office of the Trustee or Trustees is vacated as contemplated in
Clause 10 hereof, the remaining Trustees shall, until such time as the
vacancy or vacancies is filled, be entitled to exercise all the powers
whether discretionary or otherwise vested in the Trustees and the execution
of the Trust declared herein and during such period the provisions of
Clauses 12, 14, 15 and 16 shall govern the remaining Trustees so far as the
same are applicable. Until such vacancy has been filed in, the quorum for
the meetings of the Board of trustees shall be four provided in case there
is only one continuing trustee, he shall be deemed to constitute the quorum
for a meeting of the Trustees to exercise all the powers referred to above.
17. THE Trustees shall keep or cause to be kept a Minute Book of their
proceedings and proper books of account and the accounts shall be audited
annually by Chartered Accountant/s as Auditors.
13 of 22
<PAGE>
18. THE Trustees shall be entitled from time to time to open, operate and
maintain a banking account or accounts in the name of said Trust or in the
names of the Trustees or such two or more of them at such Bank or Banks as
they may from time to time decide and may at any time pay or cause to be
paid or withdraw any moneys forming part of the Trust Fund or the income
thereof to the credit of any such account or accounts and either by way of
fixed deposit or current account or safe custody account or any other
account whatever.
19. NOTWITHSTANDING anything contained in these presents, the Trustees shall at
their discretion invest the Trust Fund and all moneys in their hands which
may require investment in or upon any one or more of the following modes of
investment with power from time to time at their absolute discretion to
convert or vary any investments and securities held by the Trustees into or
for others of the character hereby authorised:
a) Stocks, shares or other securities issued by a co-operative society;
b) Stocks, shares (equity or preference whether involving liability or
not) or debentures or warrants or other financial securities of any
kind issued by companies registered in India, including the Settlor or
statutory corporations in India, mutual funds and in units of the Unit
Trust of India;
14 of 22
<PAGE>
c) Debentures, loans bonds issued by the Government, Municipal or other
authority or public body in India;
d) Debentures, loans, bonds issued by the Government, Municipal or other
local authority or public body in India;
e) In deposits with Scheduled Banks or any firm or company of good
standing;
f) In acquiring by purchase or on lease or on ownership basis or in
exchange, hire or otherwise any immovable property of any tenure
including leaseholds in any part of India including the acquisition of
Lessors or other rights in property and in case of open or vacant land
the Trustees shall be at liberty to erect buildings and structures
thereon out of the Trust Fund which may be leased out on such terms
and conditions and subject to such rent, compensation or fee,
convenants and agreements as the Trustees may deem fit; and
g) Any investment which the Trustees may by law be authorised to make for
the investment of Trust Property;
15 of 22
<PAGE>
PROVIDED that the investments of the Trust Fund including those in
immovable properties may in the event of there being individual
Trustees be made or kept in the name of any two or more trustees or be
made payable to two or more Trustees or be kept in the name of any
Bank, Trustee or Stock Holding Company nominated for this purpose by
the Trustees.
20. THE Trustees shall be entitled to vote in respect of any shares or
securities held upon the trusts hereunder mentioned in such manner as the
Trustees may think best fit for the benefit of the Beneficiaries hereunder.
21. IT shall be lawful for the Trustees to borrow or raise money and/or secure
the repayment of any moneys borrowed by way of pledge, hypothecation,
charge or mortgage of any part of the movable or immovable properties
comprised in the Trust Fund on such terms and conditions as the Trustees
may think fit.
22. The Trustees shall at their absolute discretion by a unanimous vote of the
all Trustees (and not only of those present and voting at a meeting or on
circular resolution) at such time and from time to time, sell by public
auction or private contract or exchange or transfer or assign or grant
lease or sub-lease for any term however long or otherwise dispose of or
permit to be used at such rent, conpensation or fee all or any part of the
Trust Fund including the immovable properties comprised therein and on
16 of 22
<PAGE>
such terms and conditions related to title or otherwise and in full
respects as they may think proper and to rescind or vary any contract for
sale, exchange, transfer, assignment, lease or other disposition and to
resell the same or enter into a fresh contract for sale, exchange,
transfer, assignment, lease or other disposition without being answerable
for any loss or damages occasioned thereby and for such purposes to execute
all necessary conveyances, deeds or exchange assignments, transfers,
leases, sub-leases, counterparts and other assurances, indemnities,
agreements, convenants and other documents in writing and paper and to pass
give and execute necessary receipts, releases and discharges for the
consideration moneys relating thereto. All moneys arising from any such
transfer or other assurance shall be deemed to be part of the Trust Fund
and shall be applicable accordingly.
23 UPON any sale or other transfer by the Trustees under the power aforesaid,
the purchasers or transferees dealing bonafide with the Trustees shall not
be concerned to see or inquire whether the occasion for executing or
exercising such power has arisen or whether the provision as to the
appointment and retirement of Trustees herein contained have been properly
and regularly observed and performed. Neither shall the purchasers or
transferees be concerned to see to the application of the purchase moneys
or other considerations, or be answerable for the loss, misapplication or
non-application thereof.
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<PAGE>
24. The receipt of the Corporate Trustees or of any Trustee/s or any sole
individual trustee for the income of the Trust Fund or for any documents of
title or securities, papers or other documents or any other moneys or
property forming part of the Trust Fund shall be sufficient and shall
effectually discharge the person or persons paying, giving or transferring
the same from being bound to see to the application or being answerable for
the loss, misapplication or non-application thereof;
25 THE Trustees may from time to time appoint one or more employees and
servants as the Trustees may deem expedient and fix their remuneration. The
Trustees shall also have power to fund and maintain provident funds,
gratuity fund, pension and other funds for any employees and make rules and
regulations (with power to add, to alter, amend, vary or substitute the
same or any of them) regarding the payment thereof.
26 THE Trustees shall have the power at their discretion instead of acting
personally to employ and pay any agent (including Banks) to transact any
business or to do any act whatsoever in relation to the said Trust
including receipt and payment of money without being liable for loss and
shall be entitled to be allowed and paid such charges incurred thereby.
27 IT shall be lawful for the Trustees to settle all accounts and to
compromise, compound or refer to arbitration any action, proceedings,
disputes, claims, demands or things relating to any matter in connection
with the said Trust and to do all other things proper for such purpose
without being responsible for any loss occasioned thereby.
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<PAGE>
28 THE Trustees shall have the power to determine in case of doubt whether any
money of property shall for the purpose of this Trust be considered as
capital or income, and whether out of the capital or income any expenses or
out goings shall be ought to be paid or borne and any/every such
determination shall be binding and conclusive provided that nothing herein
contained shall be deemed to authorise the Trustees to spend the income or
corpus of the Trust Fund for any purpose not authorised by these presents.
29 THE Trustees shall be respectively chargeable only for such trust funds and
income including money, stocks, funds, shares and securities as they shall
actually receive notwithstanding their respectively signing any receipt for
the sake of conformity and shall be answerable and accountable only for
their own acts, receipts, neglects or defaults and not for those of the
other or others of them nor for any Banker, broker, auctioneer or agent or
any other persons with whom or into whose hands any Trust Fund or Trust
income may be deposited, nor for the insufficiency of deficiency of any
stocks, funds, shares or securities nor for any other loss, unless the same
shall happen through their own wilful default or dishonesty respectively.
3O THE Trustees may reimburse themselves and pay and discharge out of the
Trust Funds or moneys in their hands all expenses incurred in or about the
execution of the said Trust. It is, expressly agreed and declared that the
Trustees shall be entitled to be paid their actual expenses, travelling,
boarding, lodging and other expenses which may be incurred by them in the
performance of their duties as Trustees including for the attendance of
trustees meetings.
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<PAGE>
31 IF any Trustee shall be lawyer, accountant, medical practitioner,
architect, engineer or a persons carrying on any other profession vocation
or business, he or his firm shall be entitled to charge for his or their
professional services including usual profit, costs and charges in spite of
the fact that he shall be a Trustee of the said Trust as if he had not been
a Trustee.
32 It is hereby expressly agreed and declared that the Trustees shall have the
power by a unanimous resolution in that behalf and if required, after
obtaining the previous sanction of a competent Court of law or authority,
to modify or terminate the powers and/or provisions hereof found
inconsistent with the object and purpose of the trust without however
effecting in any way the general object and purpose of the said Trust for
utilising the said trust fund and the income thereof for the said purposes
only for the benefit of all the beneficiaries subject to clauses 6 and 7
above without distinction of class, creed, religion, community or
nationality and TO THE INTENT that the Trust Fund and the Income thereof
shall at all times hereafter be utilised only for such purposes and not
otherwise.
33 It is hereby expressly understood that the trustees shall not be personally
liable for any act, deed or thing done in their capacity as trustees for
the purposes of the trust and that they shall be indemnified/kept
indemnified for any loss, damage or other disability suffered by them as a
consequence thereof, out of the trust funds, and that the trust shall bear
all costs, damages or losses including the cost of defending a legal action
or otherwise that may arrive as a consequence of their action as trustees.
20 of 22
<PAGE>
34 The said Trust shall be and remain irrevocable for all time and the Settlor
do hereby also release, relinquish, disclaim, surrender and determine all
their rights, title, interest or powers in the said Trust.
35 The said Trust shall be extinguished if the fulfilment of its purpose
become impossible by destruction of trust property or otherwise.
IN WITNESS WHEREOF the parties hereto have executed these presents the day and
year first hereinabove write.
SIGNED SEALED AND DELIVERED by
the above name Trustees
1] SHRI G R NAYAK
2] SMT HEMA RAVICHANDAR
3] DR K V VISWANATHAN
4] SHRI N S RAGHAVAN
in the presence of
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<PAGE>
THE COMMON SEAL OF INFOSYS TECHNOLOGIES LIMITED the above named Settlor was
hereunto affix pursuant to a resolution of its board of Directors in that behalf
on the day of 15TH September 1994 in the presence of Mr. N. R. Narayana Murthy
Chairman & Managing Director and Mr. V. Viswanathan Secretary of the Company.
/s/ N. R. NARAYANA MURTHY /s/ V. VISWANATHAN
N. R. NARAYANA MURTHY V. VISWANATHAN
CHAIRMAN & MANAGING DIRECTOR COMPANY SECRETARY
INFOSYS TECHNOLOGIES LIMITED
(INDENTURE)
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<PAGE>
EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement ("Agreement") is made as of this day of
_________, 199__ by and between Infosys Technologies Limited, an Indian company
(the "Company"), and _______________________("Indemnitee").
WHEREAS, the Company is issuing its American Depositary Shares through a
registered public offering in the United States, and as a result, Indemnitee
will be exposed to litigation risks arising from claims that may be made under
U.S. laws;
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company will benefit from going public in the United States
and desires to attract and retain the services of highly qualified individuals,
such as Indemnitee, to serve as officers and directors of the Company and to
indemnify its officers and directors so as to provide them with the maximum
protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding arising under the laws of
the United States or any state thereof (other than an action in the right of the
Company) by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company or any subsidiary of the Company, or by reason
of any action or inaction on the part of Indemnitee while an officer or
director, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) actually and
reasonably incurred by Indemnitee in connection with such action or proceeding
if Indemnitee acted without intentional misconduct or gross negligence.
(b) Proceedings in the Right of the Company. The Company shall
---------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding in the
right of the Company to procure a judgment in its favor by reason of the fact
that Indemnitee is or was a director, officer, employee or agent of the
<PAGE>
Company or any Subsidiary of the Company by reason of any action or inaction on
the part of Indemnitee while an officer or director such expenses (including
attorneys' fees) actually and reasonably incurred by Indemnitee in connection
with such action or proceeding if such action or proceeding is adjudged in favor
of Indemnitee.
(c) Scope. Notwithstanding any other provision of this Agreement,
-----
Indemnitee shall be entitled to such indemnification, reimbursement and the like
only to the extent permitted under Indian law.
(d) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under any other agreement to which Indemnitee is a party, including any
Indemnification Agreement entered into by and between Indemnitee and Yantra
Corporation, a Delaware corporation and a subsidiary of the Company. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action or
other covered proceeding.
2. Indemnification Procedure.
-------------------------
(a) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his right to be indemnified under this Agreement, give
the company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Managing Director of
the Company at the address shown on the signature page of this Agreement (or
such other address as the Company shall designate in writing to Indemnitee). In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
(b) Procedure. Any indemnification provided for in Section 1 shall be
---------
made no later than forty-five (45) days after receipt of the written request of
Indemnitee. If a claim under this Agreement, under any statute, or under any
provision of the Company's Articles of Association or Memorandum of Association
providing for indemnification, is not paid in full by the Company within forty-
five (45) days after a written request for payment thereof has first been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 12 of this Agreement, Indemnitee shall also be entitled
to be paid for the expenses (including attorneys' fees) of bringing such action.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any action or
proceeding in advance of its final disposition) that Indemnitee has not met the
standards of conduct which make it permissible under applicable law for the
company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Subsection 2(a) unless and
until such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists.
-2-
<PAGE>
3. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
action or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
4. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, applicable law or public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission or any other regulatory body to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company is right under public policy to indemnify Indemnitee.
5. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 5. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
6. Construction of Certain Phrases. For purposes of this Agreement,
-------------------------------
references to the "Company" shall include, in addition to the resulting company,
any constituent company (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that if Indemnitee is or was a director, officer, employee or agent
of such constituent company, or is or was serving at the request of such
constituent company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving company as Indemnitee would have with
respect to such constituent company if its separate existence had continued.
7. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
8. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
-3-
<PAGE>
9. Attorneys' Fees. To the maximum extent provided for under Indian law,
---------------
in the event that any action is instituted by Indemnitee under this Agreement to
enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be
paid all court costs and expenses, including reasonable attorneys' fees,
incurred by Indemnitee with respect to such action, except for the pro-rata
amount of any such costs and expenses relating to material assertions that, as a
part of such action, the court of competent jurisdiction determines were not
made in good faith or were frivolous. In the event of an action instituted in
the name of the Company under this Agreement or to enforce or interpret any of
the terms of this Agreement, Indemnitee shall be entitled to be paid all court
costs and expenses, including attorneys, fees, incurred by Indemnitee in defense
of such action (including with respect to Indemnitee's counterclaims and cross-
claims made in such action), except for the pro-rata amount of any such costs
and expenses relating to material assertions that, as a part of such action, the
court determines were not made in good faith or were frivolous.
10. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing. Addresses for notice to either party are as
shown on the signature page of this Agreement, or as subsequently modified by
written notice.
11. Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the [__________________], India for
all purposes in connection with any action or proceeding which arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in such courts.
12. Choice of Law. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of India.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
INFOSYS TECHNOLOGIES LIMITED
By:___________________________
Name: ________________________
Title:________________________
Address:
Electronics City, Hosur Road
Bangalore 561229, India
AGREED TO AND ACCEPTED:
INDEMNITEE
(signature)
Address:_______________
_______________
<PAGE>
EXHIBIT 16.1
[LETTERHEAD OF A. M. BHATKAL]
JULY 31, 1998.
SECURITIES AND EXCHANGE COMMISSION
450, FIFTH STREET, N.W.
WASHINGTON, DC 20549
LADIES AND GENTLEMEN:
I HAVE READ THE SECTION CAPTIONED "CHANGE OF ACCOUNTANTS" INCLUDED IN THE
REGISTRATION STATEMENT ON FORM F-1 OF INFOSYS TECHNOLOGIES LIMITED (THE
"REGISTRANT") PURSUANT TO WHICH AMERICAN DEPOSITARY SHARES REPRESENTING EQUITY
SHARES OF THE REGISTRANT WILL BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. I AM IN AGREEMENT WITH THE STATEMENTS CONTAINED IN THE FIRST SENTENCE
OF THE FIRST PARAGRAPH AND IN THE SECOND PARAGRAPH THEREIN. I HAVE NO BASIS TO
AGREE OR DISAGREE WITH OTHER STATEMENTS OF THE REGISTRANT CONTAINED THEREIN.
VERY TRULY YOURS,
/s/ A. M Bhatkal
A. M. BHATKAL,
CHARTERED ACCOUNTANT
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Infosys Technologies Limited:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick
Bangalore, India
February 11, 1999
<PAGE>
EXHIBIT 23.3
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD]
February 11, 1999
Re: Infosys Technologies Limited, Registration Statement on Form F-1
(the "Registration Statement")
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus included as a part of the Registration Statement and
any amendments thereto.
/s/ WILSON SONSINI GOODRICH & ROSATI, P.C.
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES AS OF MARCH 31, 1998 AND FOR THE
YEAR THEN ENDED AND AS OF DECEMBER 31, 1998 AND FOR THE NINE MONTHS THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> DEC-31-1998 MAR-31-1998
<CASH> 22,797,989 15,419,265
<SECURITIES> 177,938 362
<RECEIVABLES> 21,270,407 10,263,084
<ALLOWANCES> 317,325 393,799
<INVENTORY> 0 0
<CURRENT-ASSETS> 49,371,220 29,970,607
<PP&E> 22,795,198 16,695,503
<DEPRECIATION> 5,185,071 6,121,650
<TOTAL-ASSETS> 76,581,795 48,782,025
<CURRENT-LIABILITIES> 13,316,453 5,318,565
<BONDS> 0 0
0 0
0<F1> 2,317,500<F1>
<COMMON> 4,545,811 4,545,811
<OTHER-SE> 58,719,531 36,600,149
<TOTAL-LIABILITY-AND-EQUITY> 76,581,795 48,782,025
<SALES> 86,101,258 68,329,961
<TOTAL-REVENUES> 86,101,258 68,329,961
<CGS> 47,001,970 40,156,509
<TOTAL-COSTS> 47,001,970 40,156,509
<OTHER-EXPENSES> 16,110,650 15,792,105
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 24,200,158 13,182,146
<INCOME-TAX> 3,532,000 770,458
<INCOME-CONTINUING> 20,156,827 12,344,188
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 20,516,827 12,344,188
<EPS-PRIMARY> 0.67 0.41
<EPS-DILUTED> 0.67 0.41
<FN>
<F1>(1) Preferred stock of subsidiary
</FN>
</TABLE>
