<PAGE>
As filed with the Securities and Exchange Commission on October 13, 1999
Registration No. 333-10852
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 2
TO
FORM F-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
Satyam Infoway 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 7379 Not Applicable
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification Number)
of incorporation or
organization)
</TABLE>
Maanasarovar Towers
271-A, Anna Salai, Teynampet, Chennai 600 018, India, (91) 44-435-3221
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
CT Corporation System
111 8th Avenue, New York, New York 10011, (212) 894-8940
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
Anthony J. Richmond, Esq. Ellen B. Corenswet, Esq.
Latham & Watkins Brobeck, Phleger & Harrison LLP
135 Commonwealth Drive 1633 Broadway, 47th Floor
Menlo Park, California 94025 New York, New York 10019
(650) 328-4600 (212) 581-1600
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes 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 filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 statement 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, check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<CAPTION>
Proposed maximum
Title of each class of Proposed maximum aggregate Amount of
securities to be Amount to be offering price offering registration
registered registered(1) per share(2) price(2) fee(3)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity shares, par value
Rs.10 per share, each
represented by one
American Depositary
Share(4).............. 4,801,250 $18.00 $86,422,500 $24,026
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
(1) Includes 626,250 equity shares represented by 626,250 American Depositary
Shares that the Underwriters have the option to purchase to cover
overallotments, 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) An amount equal to $15,985 was paid in connection with the initial filing
of this registration statement on September 21, 1999. An additional
amount equal to $2,702 was paid in connection with the filing of
amendment no. 1 to this registration statement on October 4, 1999. An
additional amount equal to $5,339 is being paid herewith.
(4) 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This registration statement includes two prospectuses, which are
identical except for the alternate cover page, table of contents, underwriting
section, and rear cover page which are provided immediately in front of Part
II.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 13, 1999
PROSPECTUS
4,175,000 American Depositary Shares
[LOGO OF SATYAM INFOWAY LIMITED APPEARS HERE]
SATYAM INFOWAY LIMITED
Representing 4,175,000 Equity Shares
-----------
Satyam Infoway Limited is offering up to 4,175,000 American Depositary
Shares, or ADSs, of Satyam Infoway outside India, including in the United
States. This prospectus relates to an offering by the U.S. underwriters of up
to 2,505,000 American Depositary Shares in the United States and Canada.
Additional underwriters are offering up to 1,670,000 American Depositary Shares
outside the United States and Canada. Each American Depositary Share represents
one equity share.
This is Satyam Infoway's initial public offering, and no public market
currently exists for Satyam Infoway's equity shares.
Satyam Infoway has applied to list its American Depositary Shares on The
Nasdaq Stock Market's National Market under the symbol "SIFY."
It is anticipated that the price to public per ADS will be between $16.00
and $18.00 per ADS.
-----------
Investing in the American Depositary Shares involves certain risks which
are described in the Risk Factors beginning on page 7.
-----------
<TABLE>
<CAPTION>
Underwriting
Price discount and Proceeds
to public commissions to us
--------- ------------ --------
<S> <C> <C> <C>
Per ADS......................................... $ $ $
Total........................................... $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Satyam Infoway has granted to the underwriters the right to purchase up to
an additional 626,250 American Depositary Shares at the public offering price,
less discount and commissions, within 30 days from the date of this prospectus
to cover overallotments.
-----------
Merrill Lynch & Co. Salomon Smith Barney
, 1999
<PAGE>
Three panels of graphical information regarding Satyam Infoway Limited
consisting of:
. a graphical presentation of Satyam Infoway's network covering 25 cities
in India, with international Internet gateways in Mumbai, Bangalore,
Chennai, Hyderabad, Delhi and Calcutta;
. sample web pages from some of Satyam Infoway's content sites, including
satyamonline.com and speciality sites related to cars, movies and
shopping; and
. a list of business-to-business services provided by Satyam Infoway.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................................................... 1
Risk Factors............................................................ 7
Conventions Which Apply to This Prospectus.............................. 22
Currency of Presentation................................................ 22
Enforcement of Civil Liabilities........................................ 23
Reports to Our Security Holders......................................... 24
Use of Proceeds......................................................... 25
Dividend Policy......................................................... 26
Capitalization.......................................................... 27
Exchange Rates.......................................................... 28
Dilution................................................................ 29
Selected Financial Data................................................. 30
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 32
Business................................................................ 43
Management.............................................................. 60
Principal Shareholders.................................................. 65
Certain Transactions.................................................... 66
Description of Equity Shares............................................ 67
Description of American Depositary Shares............................... 72
Restrictions on Foreign Ownership of Indian Securities.................. 80
Government of India Approvals........................................... 84
Taxation................................................................ 86
Shares Eligible for Future Sale......................................... 91
Underwriting............................................................ 92
Legal Matters........................................................... 94
Experts................................................................. 94
Change of Accountants................................................... 94
Additional Information.................................................. 94
Index to Financial Statements........................................... F-1
</TABLE>
----------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information found in greater detail elsewhere in
this prospectus. In addition to this summary, we urge you to read the entire
prospectus carefully, especially the risks of investing in our ADSs discussed
under "Risk Factors," before deciding to buy our ADSs.
Satyam Infoway Limited
Our Business
We are the second largest national provider of Internet access and
Internet services to consumers and businesses in India, based on number of
customers as of August 31, 1999. Our customers primarily use our services to
communicate, transmit and share information, access on-line content and conduct
business remotely using our private data network or the Internet. Our Internet
and network services include the following:
. Consumer Internet Access Services. We offer dial-up Internet access,
e-mail and web page hosting to consumers in India through convenient
on-line registration and user-friendly software. In November 1998
after the deregulation of the Internet service provider market in
India, we launched our Internet service provider business and became
the first private Internet service provider in India. The largest
national Internet service provider is VSNL, which is majority
controlled by the Indian government.
. Corporate Network and Technology Services. We offer dial-up and
dedicated Internet access, private network services, business-to-
business electronic commerce solutions and website development and
hosting services to businesses in India. Initiated in April 1998, our
corporate network and technology services division has formed
strategic partnerships with a number of leading technology and
electronic commerce companies, including CompuServe Network Services,
Sterling Commerce and Open Market.
. On-line Portal and Content Offerings. We operate an on-line portal,
satyamonline.com, that functions as a principal entry point and
gateway for accessing the Internet by providing useful web-related
services and links. We also offer related content sites specifically
tailored to Indian interests worldwide for news, personal finance,
movies, music and automobiles. During September 1999, our six websites
generated approximately 12.0 million page views.
As of June 30, 1999, we had an accumulated deficit of approximately
Rs.366.7 million ($8.4 million). For the fiscal year ended March 31, 1999 and
the fiscal quarter ended June 30, 1999, our net loss was approximately Rs.187.4
million ($4.3 million) and Rs.51.7 million ($1.2 million), respectively.
Our Customers
As of August 31, 1999, we had more than 77,000 consumer Internet access
subscribers and more than 300 corporate customers. Our corporate network and
technology services customers are in a variety of industries, including
financial services, publishing, retail, shipping and manufacturing. Our five
largest corporate customers based on revenue for the fiscal quarter ended June
30, 1999 were Carborandum Universal Limited, CDC Advisors Limited, ESPN
Software India Limited, GE Capital Services and Hutchinson Corporate Access.
The customers listed above accounted for approximately 35% of our corporate
network and technology services division revenues in the fiscal quarter ended
June 30, 1999.
Our Network
We currently operate India's largest national private data network
utilizing Internet protocol, which is an Internet industry standard for
tracking Internet addresses, routing outgoing messages and recognizing
1
<PAGE>
incoming messages. We own and operate points of presence in 25 of the largest
metropolitan areas in India. Points of presence are telecommunications
facilities located in a particular market which allow our customers to connect
to the Internet through a local telephone call. We plan to have points of
presence in 40 cities in India by April 2000, which we believe will allow us to
provide Internet access service via a local telephone call to approximately 85%
of the installed personal computer base in India. Our private network
infrastructure provides the platform for national delivery of Internet access
to consumers as well as the backbone for our broad range of corporate network
and technology services. For example, our network provides an alternative to
government telecom providers for corporations that wish to establish virtual
private networks, which provide secure transmission of data using Internet
protocol over our private network infrastructure, and electronic data
interchanges. Our Internet service provider license permits us to establish and
maintain our own direct international Internet connections via satellite links
or transoceanic cable systems as an alternative to government-provided Internet
gateways. We believe that as the size and capacity of our network
infrastructure grows, its large scale and national coverage will create
economies of scale for us and barriers to entry for our competitors.
Our Market Opportunity
The market for Internet access and electronic commerce, both worldwide
and in India, is expanding rapidly. For example, International Data Corporation
estimates:
. the installed personal and network computer base in India will grow at
a rate that averages 44% annually from 1.9 million in 1998 to 8.2
million in 2002;
. Internet users in India will grow at a rate that averages 76% annually
from 0.5 million in 1998 to 4.5 million in 2002; and
. Internet commerce revenues in India will grow at a rate that averages
260% annually from $3.5 million in 1998 to $593.6 million in 2002.
Internet usage is expected to grow rapidly in the Indian market as
deregulation continues, network bandwidth becomes less expensive, the installed
base of personal and network computers increases, alternative Internet-access
devices become available and Internet connectivity becomes increasingly
important for on-line news and content and electronic commerce transactions. We
believe that our company is well positioned to take advantage of this
significant market opportunity in India. The market in India is, however,
presently at a very early stage of development and involves significant
business, competitive and other risks.
The International Data Corporation market data presented above and
elsewhere in this prospectus shows International Data Corporation's estimates
derived from a combination of vendor, user and other market sources and
therefore may differ from numbers claimed by specific vendors using different
market definitions or methods. There can be no assurances that any of these
projected amounts will be achieved.
Our Growth Strategy
Our goal is to become the premier provider of Internet access, network
services and on-line content to consumers and businesses in India. Our
principal business strategies to accomplish this objective are:
. Increase penetration in our existing markets by expanding awareness of
the Satyam Online brand name to capitalize on our first mover
advantage in India;
. Expand our products and services with new technologies to enable our
customers to use the Internet more effectively;
. Strengthen our Internet portal and other Internet content websites
with more content tailored to Indian interests worldwide;
2
<PAGE>
. Expand customer distribution channels through strategic partnerships
to take advantage of the sales and marketing capabilities of our
strategic partners;
. Invest in the continued enhancement and expansion of our network
infrastructure to support customer growth, enter new markets and
accommodate increased customer usage; and
. Pursue selective strategic investments, partnerships and acquisitions
to expand our customer base, increase utilization of our network and
add new technologies to our product mix.
Our Organization
Our principal executive offices are located at Maanasarovar Towers, 271-
A, Anna Salai, Teynampet, Chennai 600 018, India, and our telephone number is
(91) 44-435-3221. Information contained in our websites, including our
principal website, satyamonline.com, is not part of this prospectus. We are,
and after the offering will continue to be, a majority-owned subsidiary of
Satyam Computer Services Limited, a leading Indian information technology
services company which is traded on the principal Indian stock exchanges.
"Satyam" is a trademark owned by Satyam Computer Services, which has licensed
the use of the "Satyam" trademark to us subject to specified conditions. For
additional information regarding this license, please see "Business--
Intellectual Property" on page 56. "Satyam Online," "Satyam:Net" and
"satyamonline.com" are trademarks used by us for which we have registration
applications pending in India. Each trademark, trade name or service mark of
any other company appearing in this prospectus belongs to its holder.
Recent Developments
Based on our preliminary unaudited results of operations for the fiscal
quarter ended September 30, 1999, we recognized Rs.127.4 million in revenues
for the fiscal quarter ended September 30, 1999. Our net loss, on a preliminary
unadited basis, was Rs.77.0 million for the fiscal quarter ended September 30,
1999.
3
<PAGE>
The Offering
<TABLE>
<S> <C>
American Depositary Shares offered:
U.S. offering............................... 2,505,000 ADSs
International offering...................... 1,670,000 ADSs
--------------
Total................................... 4,175,000 ADSs
==============
The ADSs....................................... Each American Depository Share
represents one equity share,
par value Rs.10 per share. The
ADSs will be evidenced by
American Depository Receipts.
Equity shares outstanding after this offering.. 21,156,000 equity shares
Use of proceeds................................ To fund network infrastructure
expansion and enhancements, to
develop content for our
Internet portal business, to
advertise and promote our brand
and for general corporate
purposes, including possible
strategic investments,
partnerships and acquisitions.
For additional
information regarding the use
of proceeds from this offering,
please see "Use of Proceeds" on
page 25.
Proposed Nasdaq National Market symbol......... SIFY
</TABLE>
---------------
The 21,156,000 equity shares outstanding after this offering are based on
the 15,750,000 equity shares outstanding as of June 30, 1999 and include:
. 481,000 equity shares issued to Sterling Commerce at a price of
$10.40 per share in a private- placement pursuant to an agreement
reached in July 1999 which closed in September 1999;
. 750,000 equity shares to be issued to two existing shareholders, Satyam
Computer Services Limited and South Asia Regional Fund, in connection
with the exercise of warrants held by those shareholders at an exercise
price equal to 66% of the price to public indicated on the cover of this
prospectus; and
. the 4,175,000 equity shares represented by ADSs sold by us in this
offering.
The equity shares to be outstanding after this offering exclude, as of
June 30, 1999, the following:
. any equity shares represented by the ADSs to be issued pursuant to
the underwriters' overallotment option;
. 5,000 equity shares issuable upon the exercise of options
outstanding under our stock option plan at a weighted average
exercise price of Rs.70 per share; and
. 820,000 equity shares reserved for future issuance under our stock
option plan (of which options to acquire 147,000 shares were granted
on September 28, 1999 at a weighted average exercise price equal to
Rs.335 per share).
4
<PAGE>
SUMMARY FINANCIAL DATA
You should read the following summary financial data in conjunction with
our financial statements and the related notes, "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. Our financial statements are
prepared in Indian rupees and presented in accordance with U.S. GAAP for the
fiscal years ended March 31, 1997, 1998 and 1999 and the fiscal quarter ended
June 30, 1999. Financial statements for the year ended March 31, 1999 and the
quarter ended June 30, 1999 also have been translated into U.S. dollars. The
pro forma as adjusted data set forth below are adjusted to give effect to the
following:
. the sale by our company to Sterling Commerce of 481,000 equity shares
in a private placement pursuant to an agreement reached in July 1999
which closed in September 1999 and the application of the $5.0 million
of proceeds from this sale primarily towards the repayment of debt;
. the sale by our company of 4,175,000 ADSs representing 4,175,000
equity shares offered hereby and the application of the proceeds from
the offering at an assumed initial public offering price of $17.00 per
ADS and after deducting underwriting discounts and the estimated
offering expenses payable by us; and
. the exercise of warrants to purchase an aggregate of 750,000 of our
equity shares and the application of the $8.4 million aggregate
exercise price primarily towards the repayment of debt.
For additional information regarding the pro forma as adjusted data, please see
"Capitalization" on page 27.
The summary consolidated historical financial and other data includes a
presentation of EBITDA. EBITDA represents earnings (loss) before depreciation
and amortization, interest income and expense, income tax expense (benefit) and
extraordinary items. EBITDA is presented because we believe some investors find
it to be a useful tool for measuring a company's ability to fund capital
expenditures or to service future debts. EBITDA is not determined in accordance
with generally accepted accounting principles and should not be considered in
isolation or as an alternative to net income as an indicator of operating
performance or as an alternative to cash flow as a measure of liquidity.
Because EBITDA excludes interest expense and capital expenditures, negative
EBITDA would limit our ability to fund capital expenditures and service future
debt obligations. Our EBITDA is not comparable to that of other companies which
may determine EBITDA differently.
5
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, Fiscal Quarter Ended June 30,
------------------------------------------------------ ------------------------------------
1997 1998 1999 1999 1998 1999 1999
Indian rupees U.S. dollars Indian rupees U.S. dollars
---------------------------------------- ------------ ---------------------- ------------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues............... Rs. -- Rs. 6,805 Rs. 103,344 $ 2,378 Rs. 17,558 Rs. 80,803 $ 1,860
Cost of revenues....... -- 19,498 63,651 1,465 7,074 38,897 895
-------------- ----------- ----------- ---------- ---------- ---------- ----------
Gross profit (loss) -- (12,693) 39,693 913 10,484 41,906 965
Operating expenses..... 26,337 80,400 200,282 4,609 30,607 84,338 1,941
Operating loss......... (26,337) (93,093) (160,589) (3,696) (20,123) (42,432) (976)
Net loss............... Rs. (26,337) Rs.(100,590) Rs.(187,376) $ (4,312) Rs.(24,829) Rs.(51,749) $ (1,191)
Loss per equity share.. Rs.(114,508.27) Rs. (121.66) Rs. (17.31) $ (0.40) Rs. (3.28) Rs. (3.29) $ (0.08)
Weighted average equity
shares used in
computing loss per
equity share.......... 230 826,805 10,824,826 10,824,826 7,566,164 15,750,000 15,750,000
Other Financial Data:
EBITDA................. Rs. (25,801) Rs. (73,709) Rs.(111,496) $ (2,566) Rs.(11,337) Rs.(21,131) $ (486)
Capital expenditures... 3,230 77,070 146,135 3,363 15,057 109,578 2,522
Net cash provided by
(used in):
Operating activities.. (30,426) (73,950) (171,388) (3,944) (20,590) (37,258) (857)
Investing activities.. (3,230) (77,070) (146,000) (3,360) (15,057) (109,578) (2,522)
Financing activities.. 35,138 159,449 433,023 9,966 30,504 31,664 729
</TABLE>
<TABLE>
<CAPTION>
As of June 30, 1999
----------------------------------------------------
Pro Forma As
Adjusted Pro Forma
Actual Actual Indian As Adjusted
Indian rupees U.S. dollars rupees U.S. dollars
------------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............. Rs.10,375 $ 239 Rs.3,159,300 $72,711
Working capital
(deficit)............... (198,325) (4,564) 2,950,600 67,908
Total assets............. 464,473 10,690 3,613,398 83,162
Long-term debt, including
current installments.... 259,820 5,980 1,320 30
Total stockholders'
equity (deficit)........ 16,075 370 3,423,500 78,792
</TABLE>
6
<PAGE>
RISK FACTORS
Any investment in our ADSs involves a high degree of risk. You should
consider carefully the following information about these risks, together with
the other information contained in this prospectus, before you decide to buy
our ADSs. If any of the following risks actually occur, our business, results
of operations and financial condition would likely suffer. In any such case,
the market price of our ADSs could decline, and you may lose all or part of the
money you paid to buy our ADSs.
Risks Related to Investments in Indian Companies
We are incorporated in India, and virtually all of our assets and our
employees are located in India. Consequently, our financial performance and the
market price of our ADSs will be affected by changes in exchange rates and
controls, interest rates, government of India policies, including taxation
policies, as well as political, social and economic developments affecting
India.
Political instability related to the formation of a new government in India
could halt or delay the liberalization of the Indian economy and adversely
affect business and economic conditions in India generally and our business in
particular.
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. The government of India is
in the process of changing for the fifth time since 1996. In April 1999, the
then-current government lost a vote of confidence in parliament and the prime
minister resigned. The prior government of India, formed in March 1998,
announced policies and took initiatives that supported the continued economic
liberalization policies that have been pursued by the previous governments. We
cannot assure you that these liberalization policies will continue in the
future. The rate of economic liberalization could change, and specific laws and
policies affecting technology companies, foreign investment, currency exchange
rates and other matters affecting investment in our securities could change as
well. A significant change in India's economic liberalization and deregulation
policies could adversely affect business and economic conditions in India
generally and our business in particular.
Economic sanctions imposed on India by the United States could restrict our
access to technology and limit our ability to construct our network and operate
our business.
In May 1998, the United States imposed economic sanctions against India
in response to India's testing of nuclear devices. Since then, the United
States has waived some of these sanctions subsequent to its discussions with
the government of India. The economic sanctions imposed on India to date have
not had a material impact on our company. However, these sanctions, or
additional sanctions, could restrict our access to technology that is available
only in the United States and that is required to construct our network and
operate our business. We cannot assure you that any of these sanctions will
continue to be waived, that additional economic sanctions of this nature will
not be imposed, or that these sanctions or any additional sanctions that are
imposed will not have a material adverse effect on our business or on the
market for our ADSs in the United States.
Regional conflicts in South Asia could adversely affect the Indian economy and
cause our business to suffer.
South Asia has from time to time experienced instances of civil unrest
and hostilities among neighboring countries, including between India and
Pakistan. In April 1999, India and Pakistan conducted long-range missile tests.
Since May 1999, military confrontations between India and Pakistan have
occurred in the disputed Himalayan region of Kashmir. 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, including our ADSs,
and on the market for our services.
7
<PAGE>
Indian law and the terms of our Internet service provider license contain
restrictive provisions that limit our ability to raise capital or to be
acquired which could prevent us from constructing our network and operating our
business or entering into a transaction that is in the best interests of our
shareholders.
Indian law and the terms of our Internet service provider license
constrain our ability to raise capital through the issuance of equity or
convertible debt securities. Guidelines issued by the Department of Policy and
Promotion, Ministry of Industry in January 1997 state that the maximum foreign
equity investment in an Indian company engaged in business in the
telecommunications sector is 49%. Additional guidelines issued in November 1998
provide that the maximum foreign equity investment in an Indian company acting
as an Internet service provider is also 49%. This 49% limit applies to foreign
equity investment in our company. Likewise, our Internet service provider
license provides that the total foreign equity in our company may not, at any
time, exceed 49% of our total equity.
After this offering, we expect that approximately 39%, or 41% if the
overallotment option is exercised in full, of our equity interests will be held
by foreign investors. As a result of the 49% limit on foreign equity ownership,
we will not be permitted to sell more than an additional 10%, or 8% if the
overallotment option is exercised in full, of our equity shares to foreign
investors in the future. We cannot assure you that other forms of financing
will be available on terms favorable to us, or at all. If adequate funds are
not available or are not available on acceptable terms, our ability to fund our
operations, take advantage of unanticipated opportunities, develop or enhance
our infrastructure or services, or otherwise respond to competitive pressures
would be significantly limited. Our business, results of operations and
financial condition could be materially adversely affected by any such
limitation. The 49% limit on foreign equity ownership also restricts our
ability to be acquired by a non-Indian company because a foreign company is
prohibited from acquiring a majority of our equity shares. Likewise, the terms
of our Internet service provider license prevents us from transferring the
license to a third person. This may prevent us from entering into a transaction
which would otherwise be beneficial for our company and the holders of our
equity shares.
For additional information regarding our sources of capital, please see
"Use of Proceeds" on page 25, "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Expenditures" on page 38. For additional information regarding foreign
ownership restrictions, please see "Business--Government Regulation" on page 57
and "Restrictions on Foreign Ownership of Indian Securities" on page 80.
We are subject to foreign investment restrictions under Indian law that limit
our ability to attract foreign investors which, together with the lack of a
public market for our equity shares, may adversely impact the value of our
ADSs.
Currently there is no public trading market for our equity shares in
India nor can we assure you that we will take steps to develop one. After this
offering, our equity securities will not trade publicly in India, but will only
be traded on Nasdaq through the ADSs as described in this prospectus. Under
current Indian laws and regulations, our depositary cannot accept deposits of
outstanding equity shares and issue ADRs evidencing ADSs representing such
equity shares without prior approval of the government of India. If you elect
to surrender your ADSs and receive equity shares, you will not be able to trade
those equity shares on any securities market. Under current Indian laws and
regulations, you will be prohibited from re-depositing those outstanding equity
shares with our depositary without prior approval of the government of India.
If in the future a market for our equity shares is established in India or
another market outside of the United States, those shares may trade at a
discount or premium to the ADSs in part because of restrictions on foreign
ownership of the underlying shares.
Under current Indian regulations and practice, the approval of the
Reserve Bank of India 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. Since exchange controls still exist in India,
the Reserve Bank of India will approve the price at which the equity shares are
transferred based on a specified formula, and a higher price per share may not
be permitted. Holders who seek to convert the rupee proceeds from a sale of
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equity shares in India into foreign currency and repatriate that foreign
currency from India will have to obtain Reserve Bank of India approval for each
transaction. We cannot assure you that any required approval from the Reserve
Bank of India or any other government agency can be obtained.
Because we operate our business in India, exchange rate fluctuations may affect
the value of our ADSs independent of our operating results.
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 three-year period from July 1, 1996 through June 30, 1999, the value
of the rupee against the U.S. dollar declined by approximately 24%.
Devaluations of the rupee will result in higher expenses to our company for the
purchase of capital equipment, such as routers, modems and other
telecommunications and computer equipment, which is generally manufactured in
the U.S. In addition, our market valuation could be materially adversely
affected by the devaluation of the rupee if U.S. investors analyze our value
based on the U.S. dollar equivalent of our financial condition and results of
operations.
The government of India may change its regulation of our business or the terms
of our license to provide Internet access services without our consent, and any
such change could decrease our revenues and/or increase our costs which would
adversely affect our operating results.
Our business is subject to government regulation under Indian law and to
significant restrictions under our Internet service provider license issued by
the government of India. These regulations and restrictions include the
following:
. Our Internet service provider license has a term of 15 years and we
have no assurance that the license will be renewed. If we are unable
to renew our Internet service provider license in 2013 for any
reason, we will be unable to operate as an Internet service provider
in India and will lose one of our primary sources of revenue.
. The government of India maintains the right to regulate the prices we
charge our subscribers. The success of our business model depends on
our ability to price our services at levels we believe are
appropriate. If the government sets a price floor, we may not be able
to attract and retain subscribers. Likewise, if the government sets a
price ceiling, we may not be able to generate sufficient revenues to
fund our operations.
. The government of India maintains the right to take over our entire
operations or revoke, terminate or suspend our license for national
security and similar reasons without compensation to us. If the
government of India were to take any of these actions, we would be
prevented from conducting all or part of our business.
We had outstanding performance guarantees for various statutory purposes
totaling Rs. 22,144,000 ($509,643) as of June 30, 1999. These guarantees are
generally provided to government agencies, primarily the Telegraph Authority,
as security for compliance with and performance of terms and conditions
contained in an Internet service provider license and VSNL towards the supply
and installation of an electronic commerce platform. These guarantees may be
seized by the governmental agencies if they suffer any losses or damage by
reason of our failure to perform our obligations. Any failure on our part to
comply with governmental regulations and the terms of our Internet service
provider license could result in the loss of our license, which would also
prevent us from carrying on a very significant part of our business. Further,
additional laws regulating telecommunications, electronic records, the
enforceability of electronic documents and the liability of network service
providers are under consideration and if enacted could impose additional
restrictions on our business. For additional information regarding government
regulation, please see "Business--Government Regulation" on page 57.
The global financial crisis could cause our business or the price of our ADSs
to suffer.
Financial turmoil in several Asian countries, Russia and elsewhere in the
world in 1998 and 1999 has adversely affected market prices in the world's
securities markets, including the United States and Indian
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markets, for securities of companies which operate in those developing
economies. Continued or increased financial downturns in these countries could
cause further decreases in prices for securities of companies located in
developing economies, such as our company.
Surcharges on Indian income taxes will increase our tax liability by an
additional 10% and decrease any profits we might have in the future.
The statutory corporate income tax rate in India is currently 35.0%. This
tax rate is presently subject to a 10.0% surcharge resulting in an effective
tax rate of 38.5%. The Finance Minister of India has indicated that the 10.0%
surcharge will be effective for a period of only one year, commencing April 1,
1999. However, we cannot assure you that the 10.0% surcharge will be repealed
on April 1, 2000 or that additional surcharges will not be implemented by the
government of India. Dividends declared, distributed or paid by an Indian
corporation are subject to a tax of 11.0%, including the presently applicable
surcharge, of the total amount of the dividend declared, distributed or paid at
the corporate level. This tax is not paid by shareholders nor is it a
withholding requirement, but rather it is a direct tax payable by the
corporation.
Risks Related to the Internet Market in India
Our success will depend in large part on the increased use of the
Internet by consumers and businesses in India. However, our ability to exploit
the Internet service provider and other data service markets in India is
inhibited by a number of factors. If India's limited Internet usage does not
grow substantially, our business may not succeed.
The success of our business depends on the acceptance of the Internet in India
which may be slowed or halted by high bandwidth costs and other technical
obstacles in India.
Bandwidth, the measurement of the volume of data capable of being
transported in a communications system in a given amount of time, remains very
expensive in India, especially when compared to bandwidth costs in the United
States. Bandwidth rates are commonly expressed in terms of Kbps (kilobits per
second, or thousands of bits of data per second) or Mbps (megabits per second,
or millions of bits of data per second). Prices for bandwidth capacity are set
by the Indian government and have remained high due to, among other things,
capacity constraints. Further, limitations in network architecture in India
limit Internet connection speeds to 28 Kbps and below, less than the 33 to 56
Kbps connection speeds on conventional dial-up telephone lines, and
significantly less than the up to 1.5 Mbps connection speed on cable modems, in
the United States. These speed and cost constraints may severely limit the
quality and desirability of using the Internet in India.
The limited installed personal computer base in India limits our pool of
potential customers and restricts the amount of revenues that our consumer
Internet access services division may generate.
The market penetration rates of personal computers and on-line access in
India are far lower than such rates in the United States. For example,
according to International Data Corporation, in 1998 the Indian market
contained approximately 0.5 million Internet users compared to a total
population in India of 984.0 million, while the U.S. market contained
approximately 68.2 million Internet users compared to a total population in the
U.S. of 270.3 million. Alternate methods of obtaining access to the Internet,
such as through cable television modems or set-top boxes for televisions, are
currently unavailable in India. There can be no assurance that the number or
penetration rate of personal computers in India will increase rapidly or at all
or that alternate means of accessing the Internet will develop and become
widely available in India.
The high cost of accessing the Internet in India limits our pool of potential
customers and restricts the amount of revenues that our consumer Internet
access services division may generate.
Our growth is limited by the cost to Indian consumers of obtaining the
hardware, software and communications links necessary to connect to the
Internet in India. If the costs required to access the Internet do not
significantly decrease, most of India's population will not be able to afford
to use our services. The
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failure of a significant number of additional Indian consumers to obtain
affordable access to the Internet would make it very difficult to execute our
business plan.
The success of our business depends on the acceptance and growth of electronic
commerce in India which is uncertain and, to a large extent, beyond our
control.
Many of our existing and proposed products and services are designed to
facilitate electronic commerce in India, although there is virtually no
electronic commerce currently being conducted in India. Demand and market
acceptance for these products and services by businesses and consumers,
therefore, are highly uncertain. Critical issues concerning the commercial use
of the Internet, such as legal recognition of electronic records, validity of
contracts entered into on-line and the validity of digital signatures, remain
unresolved. In addition, many Indian businesses have deferred purchasing
Internet access and deploying electronic commerce initiatives for a number of
reasons, including the existence or perception of, among other things:
. inconsistent quality of service;
. need to deal with multiple and frequently incompatible vendors;
. lack of legal infrastructure relating to electronic commerce in
India;
. lack of security of commercial data such as credit card numbers; and
. low number of Indian companies accepting credit card numbers over the
Internet.
If usage of the Internet in India does not substantially increase and the
legal infrastructure and network infrastructure in India are not further
developed, we are not likely to realize any benefits from our investment in the
development of electronic commerce products and services.
Risks Related to Satyam Infoway
Our very limited operating history makes it difficult to evaluate our business.
We commenced operation of our private data network business in April 1998
and launched our Internet service provider operations and Internet portal
website in November 1998. Accordingly, we have a very limited operating history
to evaluate our business. You must consider the risks and difficulties
frequently encountered by companies in the early stages of development,
particularly companies in the new and rapidly evolving Internet service
markets. These risks and difficulties include our ability to:
. continue to develop and upgrade our technology, including our network
infrastructure;
. maintain and develop strategic relationships with business partners;
. offer compelling on-line services and content; and
. promptly address the challenges faced by early stage, rapidly growing
companies which do not have an experience or performance base to draw
on.
Not only is our operating history short, but we have determined to
compete in three businesses that we believe are complementary. These three
businesses are business network and connectivity services, Internet service
provider and consumer portal. Our three businesses were started at different
times and have only been functioning together since late in 1998. We do not yet
know whether these businesses will prove complementary. We cannot assure you
that we will successfully address the risks or difficulties described above.
Failure to do so could lead to an inability to attract and retain subscribers
for our Internet services and corporate customers for our network services as
well as the loss of advertising revenues. For additional information regarding
our limited operating history, please see "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on page 32 and our financial
statements included elsewhere in this prospectus commencing on page F-1.
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We have a history of losses and negative cash flows and anticipate this to
continue because our business plan, which is unproven, calls for additional
subscribers and other customers to attain profitability.
Since our founding, we have incurred significant losses and negative cash
flows. As of June 30, 1999, we had an accumulated deficit of approximately $8.4
million. We have not been profitable and expect to incur operating losses as we
expand our services, invest in expansion of our network infrastructure and
sales and marketing staff, and advertise and promote our brand. Our business
plan assumes that consumers in India will be attracted to and use Internet
access services and content available on the Internet in increasing numbers.
Our business plan also assumes that businesses in India will demand private
network and related electronic commerce services. This business model is not
yet proven in India, and we cannot assure you that we will ever achieve or
sustain profitability or that our operating losses will not increase in the
future. For additional information regarding our history of losses, please see
"Selected Financial Data" on page 30 and "Management's Discussion and Analysis
of Financial Condition and Results of Operation" on page 32.
Our ability to compete in the Internet service provider market is hindered by
the fact that our principal competitor is a government-controlled provider of
international telecommunications services in India which enjoys significant
competitive advantages over our company.
Videsh Sanchar Nigam Limited, or VSNL, is a government-controlled
provider of international telecommunications services in India. VSNL is also
the largest Internet service provider in India with an estimated 300,000
subscribers as of June 30, 1999. VSNL enjoys significant competitive advantages
over our company, including the following:
. Lower rates. VSNL currently offers national Internet service provider
services at rates approximately 10% less than the fees we charge our
subscribers.
. Longer service history. VSNL has offered Internet service provider
services since August 1995 whereas we have offered Internet service
provider services only since November 1998.
. Access to network infrastructure. Because VSNL is controlled by the
government of India, it has direct access to network infrastructure
which is owned by the Indian government.
. Greater financial resources. VSNL has significantly greater total
assets and annual revenues than our company.
If we are unable to distinguish our Internet service provider services
from those of VSNL, these competitive advantages may prevent us from attracting
and retaining subscribers and generating advertising revenue. This could result
in loss of market share, price reductions or reduced margins for our company's
operations.
We may be required to lower the rates we charge for our products and services
in response to new pricing models introduced by new and existing competition in
the Internet services market which would significantly decrease our revenues.
We expect a significant number of new competitors to enter India's
recently liberalized Internet service provider market in the near future. As of
June 30, 1999, 129 companies had obtained Internet service provider licenses in
India, including 22 companies which have obtained licenses to offer Internet
service provider services throughout India. Some of these companies, including
WMI, Dishnet, Shrishti and KMR Online, currently offer regional Internet
service provider services. New entrants into the national Internet service
provider market in India may enjoy significant competitive advantages over our
company, including greater financial resources, which could allow them to
charge Internet access fees that are lower than ours in order to attract
subscribers. In addition, although no Internet service provider in India
currently offers unlimited Internet access for a fixed monthly fee or free
Internet access, the unlimited access pricing and free Internet access models
have been implemented in other markets. If these new entrants offer less costly
or free Internet access, or if one or more of them introduce an unlimited
Internet access pricing model to the Indian market, we may be forced to lower
our prices in order to attract and retain subscribers.
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Our on-line portal, satyamonline.com, faces significant competition from
well-established Indian content providers, including IndiaWorld and
RediffontheNet. We also compete with foreign content providers as well as with
traditional print and television media companies.
Our corporate and technology services business faces significant
competition from well-established companies, including Global E-Commerce
Limited, Sprint-RPG Limited and WIPRO-CSD.
Increased competition may result in reduced operating margins, loss of
market share and diminished value in our services, as well as different
pricing, service or marketing decisions. We cannot assure you that we will be
able to successfully compete against current and future competitors. For
additional information regarding competition in our markets, please see
"Business--Competition" on page 55.
Our marketing campaign to establish brand recognition and loyalty for the
Satyam Online brand could be unsuccessful or, if successful, may not benefit
our company if in the future we are no longer permitted to use the "Satyam"
trademark that we license from Satyam Computer Services.
In order to expand our customer base and increase traffic on our
websites, we must establish, maintain and strengthen the Satyam Online brand.
We plan to increase substantially our marketing expenditures to establish brand
recognition and brand loyalty. If our marketing efforts do not produce a
significant increase in consumer traffic to offset our marketing expenditures,
our losses will be increased or, to the extent that we are generating profits,
our profits will be decreased. Furthermore, our Internet portal will be more
attractive to advertisers if we have a large audience of consumers with
demographic characteristics that advertisers perceive as favorable. Therefore,
we intend to introduce additional and enhanced content, interactive tools and
other services and features in the future in an effort to retain our current
subscribers and users and attract new ones. Our reputation and brand name could
be adversely affected if we are unable to do so successfully.
"Satyam" is a trademark owned by Satyam Computer Services Limited, or
Satyam Computer Services, our parent company. We have a license to use the
"Satyam" trademark for so long as Satyam Computer Services continues to own at
least 51% of our company. If there is a change of control in our company,
however, Satyam Computer Services may terminate our license to use the "Satyam"
trademark upon two years' prior written notice. Termination of our license to
use the "Satyam" trademark would require us to invest significant funds in
building a new brand name and could have a material adverse effect on our
business, results of operations and financial condition.
If our efforts to retain our subscribers through investment in network
infrastructure and customer and technical support are unsuccessful, our
revenues will decrease without a corresponding reduction in costs.
Our sales, marketing and other costs of acquiring new subscribers are
substantial relative to the fees actually derived from these subscribers.
Accordingly, our long-term success depends to a great extent on our ability to
retain our existing subscribers, while continuing to attract new subscribers.
We invest significant resources in our network infrastructure and in our
customer and technical support capabilities to provide high levels of customer
service. We cannot be certain, however, that these investments will maintain or
improve subscriber retention. We believe that intense competition from our
competitors, some of whom may offer free hours of service or other enticements
for new subscribers, has caused, and may continue to cause, some of our
subscribers to switch to our competitors' services. In addition, some new
subscribers use the Internet only as a novelty and do not become consistent
users of Internet services, and therefore are more likely to discontinue their
service. Any decline in our subscriber retention rate could decrease the
revenues generated by our consumer Internet access services division.
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Our future operating results could fluctuate in part because our expenses are
relatively fixed in the short-term while future revenues are uncertain, and any
adverse fluctuations could negatively impact the price of our ADSs.
Our revenues, expenses and operating results have varied in the past and
may fluctuate significantly in the future due to a number of factors, many of
which are outside our control. Our business involves significant capital
outlays and, thus, a significant portion of our investment and cost base is
relatively fixed in the short term. Our revenues for the foreseeable future
will depend on the following:
. the number of subscribers to our Internet service provider service
and the level of Internet and other on-line service usage by those
subscribers determines the amount of revenues generated by our
consumer Internet access services division;
. advertising and electronic commerce activity on satyamonline.com
determines the amount of revenues generated by our on-line portal and
content offerings division; and
. the products developed by our strategic partners and the usage
thereof by our customers determines the amount of revenues generated
by our corporate network and technology services division.
Our future revenues are difficult to forecast and, in addition to the
foregoing, will depend on the following:
. new Internet sites, services, products or pricing policies introduced
by our competitors may require us to introduce new offerings or
reduce the prices we charge our customers for Internet access;
. our capital expenditures and other costs relating to the expansion of
our operations could affect the completion of our network or could
require us to generate additional revenue in order to be profitable;
. the timing and nature of any agreements we enter into with strategic
partners will determine the amount of revenues generated by our
corporate network and technology services division;
. the timing and nature of our marketing efforts could affect the
number of our subscribers and the level of electronic commerce
activity on our websites;
. our ability to successfully integrate operations and technologies
from any acquisitions, joint ventures or other business combinations
or investments;
. the introduction of alternative technologies may require us to
reevaluate our business strategy and/or to adapt our products and
services to be compatible with such technologies; and
. technical difficulties or system failures affecting the
telecommunication infrastructure in India, the Internet generally or
the operation of our websites.
We plan to increase our expenditures for our sales and marketing
operations, expand and develop content and enhance our technology and
infrastructure development. Many of our expenses are relatively fixed in the
short-term. We cannot assure you that our revenues will increase in proportion
to the increase in our expenses. We may be unable to adjust spending quickly
enough to offset any unexpected revenues shortfall. This could lead to a
shortfall in revenues in relation to our expenses.
You should not rely on quarter-to-quarter comparisons of our results of
operations as indicators of future performance. It is possible that in some
future periods our operating results may be below the expectations of public
market analysts and investors. In this event, the price of our ADSs may
underperform or fall.
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Because we lack full redundancy for our computer systems, a systems failure
could prevent us from operating our business.
We rely on the Internet and, accordingly, depend upon the continuous,
reliable and secure operation of Internet servers, related hardware and
software and network infrastructure such as lines leased from service providers
operated by the government of India. We have a back-up data facility but we do
not have full redundancy for all of our computer and telecommunications
facilities. As a result, failure of key primary or back-up systems to operate
properly could lead to a loss of customers, damage to our reputation and
violations of our Internet service provider license and contracts with
corporate customers. These failures could also lead to a decrease in value of
our ADSs, significant negative publicity and litigation. Recently, several
large Internet companies have suffered highly publicized system failures which
resulted in adverse reactions to their stock prices, significant negative
publicity and, in some instances, litigation.
We have suffered service outages from time to time. We guarantee to our
corporate customers that our network will be operational 99% of the time, and
our Internet service provider license requires that we provide an acceptable
level of service quality and that we remedy customer complaints within a
specified time period. Our computer and communications hardware are protected
through physical and software safeguards. However, they are still vulnerable to
fire, storm, flood, power loss, telecommunications failures, physical or
software break-ins and similar events. We do not carry business interruption
insurance to protect us in the event of a catastrophe even though such an event
could lead to a significant negative impact on our business. Any sustained
disruption in Internet access provided by third parties could also have a
material adverse effect on our business.
Security breaches could damage our reputation or result in liability to us.
Our facilities and infrastructure must remain secure and be perceived by
consumers to be secure, because we retain confidential customer information in
our database. Despite the implementation of security measures, our
infrastructure may be vulnerable to physical break-ins, computer viruses,
programming errors or similar disruptive problems. If a person circumvents our
security measures, he or she could jeopardize the security of confidential
information stored on our systems, misappropriate proprietary information or
cause interruptions in our operations. We may be required to make significant
additional investments and efforts to protect against or remedy security
breaches. A material security breach could damage our reputation or result in
liability to us, and we do not carry insurance that protects us from this kind
of loss.
The security services that we offer in connection with our business
customers' networks cannot assure complete protection from computer viruses,
break-ins and other disruptive problems. Although we attempt to limit
contractually our liability in such instances, the occurrence of these problems
could result in claims against us or liability on our part. These claims,
regardless of their ultimate outcome, could result in costly litigation and
could damage our reputation and hinder ability to attract and retain customers
for our service offerings.
If we are unable to manage the rapid growth required by our business strategy,
our results of operations will be adversely affected.
We have experienced and are currently experiencing a period of
significant growth. As of June 30, 1999, we had 411 employees, an increase of
135% from the 175 employees we had as of June 30, 1998. We currently anticipate
hiring an additional 250 employees during the current fiscal year, most of whom
will be hired into our sales, marketing and customer support teams. This growth
has placed, and the future growth we anticipate in our operations will continue
to place, a significant strain on our managerial, operational, financial and
information systems resources. As part of this growth, we will have to
implement new operational and financial systems and procedures and controls,
expand our office facilities, train and manage our employee base, and maintain
close coordination among our technical, accounting, finance, marketing, sales
and editorial staffs. If we are unable to manage our growth effectively, we
will be unable to implement our growth strategy, upon which the success of our
business depends.
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We face a competitive labor market in India for skilled personnel and therefore
are highly dependent on our existing key personnel and on our ability to hire
additional skilled employees.
Our success depends upon the continued service of our key personnel,
particularly Mr. R. Ramaraj, our Chief Executive Officer, and each of our vice
presidents. Substantially all of our employees are located in India, and each
of them may voluntarily terminate his or her employment with us. We do not
carry key person life insurance on any of our personnel. Our success also
depends on our ability to attract and retain additional highly qualified
technical, marketing and sales personnel. The labor market for skilled
employees in India is extremely competitive, and the process of hiring
employees with the necessary skills is time-consuming and requires the
diversion of significant resources. While we have not experienced difficulty in
employee retention or integration to date, we may not be able to continue to
retain or integrate existing personnel or identify and hire additional
personnel in the future. The loss of the services of key personnel, especially
the unexpected death or disability of such personnel, or the inability to
attract additional qualified personnel, could disrupt the implementation of our
growth strategy, upon which the success of our business depends. For additional
information regarding our key personnel and other employees, please see
"Management" on page 60 and "Business--Employees" on page 59.
We are highly dependent on our relationships with strategic partners to provide
key products and services to our customers.
We rely on our arrangements with strategic partners to provide key
network and electronic commerce products and services to our business clients.
Our relationships with CompuServe Network Services, Open Market and Sterling
Commerce are exclusive to us within the Indian market with regard to specific
products, so long as we maintain stated minimum sales levels. If we were to
lose exclusivity, we would likely be subject to intense competition for these
products and services. These arrangements can be terminated by our partners in
some circumstances. We also rely on our strategic partners to provide us with
access to their customer base. If our relationships with our strategic partners
do not continue, the ability of our corporate network and technology services
division to generate revenues will be decreased significantly.
We face risks associated with potential acquisitions, investments, strategic
partnerships or other ventures, including whether any such transactions can be
located, completed and the other party integrated with our business on
favorable terms.
We may acquire or make investments in complementary businesses,
technologies, services or products, or enter into strategic partnerships with
parties who can provide access to those assets, if appropriate opportunities
arise. From time to time we have had discussions and negotiations with
companies regarding our acquiring, investing in or partnering with their
businesses, products, services or technologies, and we regularly engage in such
discussions and negotiations in the ordinary course of our business. Some of
those discussions also contemplate the other party making an investment in our
company. We may not identify suitable acquisition, investment or strategic
partnership candidates, or if we do identify suitable candidates, we may not
complete those transactions on commercially acceptable terms or at all. If we
acquire another company, we could have difficulty in assimilating that
company's personnel, operations, technology and software. In addition, the key
personnel of the acquired company may decide not to work for us. If we make
other types of acquisitions, we could have difficulty in integrating the
acquired products, services or technologies into our operations. These
difficulties could disrupt our ongoing business, distract our management and
employees and increase our expenses. Furthermore, we may incur indebtedness or
issue equity securities to pay for any future acquisitions. The issuance of
equity securities would dilute the ownership interests of the holders of our
ADSs. As of the date of this prospectus, we have no agreement to enter into any
material investment or acquisition transaction. The Reserve Bank of India or
government of India must approve under the Foreign Exchange Regulation Act,
1973, any acquisition by our company of any company organized outside of India.
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Satyam Computer Services will control our company and may have interests which
conflict with those of our other shareholders or holders of our ADSs.
Satyam Computer Services will beneficially own approximately 59.2% of our
equity shares following this offering, or 57.5% if the overallotment option is
exercised in full. As a result, it will be able to exercise control over many
matters requiring approval by our shareholders, including the election of
directors and approval of significant corporate transactions. Under Indian law,
a simple majority is sufficient to control all shareholder action except for
those items which require approval by a special resolution. If a special
resolution is required, the number of votes cast in favor of the resolution
must be not less than three times the number of votes cast against it. Examples
of actions that require a special resolution include:
. altering our Articles of Association;
. issuing additional shares of capital stock, except for pro rata
issuances to existing shareholders;
. commencing any new line of business; or
. commencing a liquidation.
Circumstances may arise in which the interests of Satyam Computer
Services could conflict with the interests of our other shareholders or holder
of our ADSs. Satyam Computer Services could delay or prevent a change in
control of our company even if a transaction of that sort would be beneficial
to our other shareholders, including the holders of our ADSs. In addition, we
have an agreement with South Asia Regional Fund, an investor in our company,
which assures them a board seat and provides specified additional rights to
them. For additional information regarding our arrangements with Satyam
Computer Services and South Asia Regional Fund, please see "Management--Board
Composition" on page 62 and "Principal Shareholders" on page 65.
The Year 2000 problem may adversely affect our company. We do not anticipate
receiving Year 2000 compliance certification from the Department of
Telecommunications, on which we are dependent for leased lines and
international gateways to the Internet.
Many existing computer systems and hardware and software products use
only two digits to identify a year in the date field and, consequently, cannot
distinguish 21st century dates from 20th century dates. This defect, if
uncorrected, could result in a system failure or miscalculations causing
disruptions of operations, including a temporary inability to process
transactions or engage in other normal business activities. We maintain various
internal computer systems and equipment and we rely directly and indirectly on
systems utilized by our suppliers for telecommunications, utilities and
electronic hardware and software applications. We are in the process of
assessing the Year 2000 readiness of our systems. Satyam Enterprises, an
affiliate of Satyam Computer Services, has completed a Year 2000 assessment of
all of our network hardware and software, including our computers, application
software, generators and uninterruptible power supply systems and relay
switches. We have performed a Year 2000 simulation on our systems to test Year
2000 system readiness which, to date, has indicated no material problems. We
are in the process of contacting selected third-party vendors, licensors and
providers of hardware, software and services, including the government telecom
providers, regarding their Year 2000 readiness. We do not anticipate receiving
Year 2000 compliance certification from the Department of Telecommunications,
on which we are dependent for leased lines and international gateways to the
Internet. Any failure of the Department of Telecommunications to be Year 2000
compliant could cause a substantial disruption to our operations. We are still
engaged in an ongoing Year 2000 assessment and have not yet developed any
contingency plan.
We must make substantial capital expenditures in new network infrastructure
which, if not offset by additional revenue, will adversely affect our operating
results.
We must continue to expand and adapt our network infrastructure as the
number of users and the amount of information they wish to transfer increases
and as the requirements of our customers change. The
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expansion of our Internet network infrastructure will require substantial
financial, operational and management resources. The development of private
Internet access and other data networks in India is a new business for private
markets entrants such as our company and we may encounter cost overruns,
technical difficulties or other project delays in connection with any or all of
the new facilities. We can give no assurance that we will be able to expand or
adapt our network infrastructure to meet the additional demand or our
customers' changing requirements on a timely basis, or at a commercially
reasonable cost, or at all. A portion of our capital expenditures for network
development are fixed, and the success of our business depends on our ability
to grow our business to utilize this capacity. In addition, if demand for usage
of our network were to increase faster than projected, our network could
experience capacity constraints, which would adversely affect the performance
of the system.
The laws of India do not protect intellectual property rights to the same
extent as those of the United States, and we may be unsuccessful in protecting
our intellectual property rights.
Our intellectual property rights are important to our business. We rely
on a combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our intellectual property.
Our efforts to protect our intellectual property may not be adequate. Our
competitors may independently develop similar technology or duplicate our
products or services. Unauthorized parties may infringe upon or misappropriate
our products, services or proprietary information. In addition, the laws of
India do not protect proprietary rights to the same extent as laws in the
United States, and the global nature of the Internet makes it difficult to
control the ultimate destination of our products and services. For example,
Indian statutory law does not protect service marks. The misappropriation or
duplication of our intellectual property could disrupt our ongoing business,
distract our management and employees, reduce our revenues and increase our
expenses. In the future, litigation may be necessary to enforce our
intellectual property rights or to determine the validity and scope of the
proprietary rights of others. Any such litigation could be time-consuming and
costly.
We could be subject to intellectual property infringement claims as the
number of our competitors grows and the content and functionality of our
websites or other product or service offerings overlap with competitive
offerings. Defending against these claims, even if not meritorious, could be
expensive and divert our attention from operating our company. If we become
liable to third parties for infringing their intellectual property rights, we
could be required to pay a substantial damage award and forced to develop non-
infringing technology, obtain a license or cease selling the applications that
contain the infringing technology. We may be unable to develop non-infringing
technology or obtain a license on commercially reasonable terms, or at all. For
additional information regarding our intellectual property rights, please see
"Business--Intellectual Property" on page 56.
Our platform infrastructure and its scalability are not proven, and our current
systems may not accommodate increased use while maintaining acceptable overall
performance.
Currently, only a relatively limited number of consumers use our Internet
service provider services and Internet portal. We must continue to expand and
adapt our network infrastructure to accommodate additional users, increasing
transaction volumes and changing customer requirements. We may not be able to
project accurately the rate or timing of increases, if any, in the use of our
websites or expand and upgrade our systems and infrastructure to accommodate
such increases. Our systems may not accommodate increased use while maintaining
acceptable overall performance. Service lapses could cause our users to use the
on-line services of our competitors.
We do not plan to pay dividends in the foreseeable future.
We do not anticipate paying cash dividends to the holders of our ADSs in
the foreseeable future. Accordingly, investors must rely on sales of their ADSs
after price appreciation, which may never occur, as the only way to realize on
their investment. Investors seeking cash dividends should not purchase our
ADSs.
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<PAGE>
Risks Related to the Internet
We may be liable to third parties for information retrieved from the Internet.
Because users of our Internet service provider service and visitors to
our websites may distribute our content to others, third parties may sue us for
defamation, negligence, copyright or trademark infringement, personal injury or
other matters. We could also become liable if confidential information is
disclosed inappropriately. These types of claims have been brought, sometimes
successfully, against on-line services in the United States and Europe. Others
could also sue us for the content and services that are accessible from our
websites through links to other websites or through content and materials that
may be posted by our users in chat rooms or bulletin boards. We do not carry
insurance to protect us against these types of claims, and there is no
precedent on Internet service provider liability under Indian law. Further, our
business is based on establishing the satyamonline.com network as a trustworthy
and dependable provider of information and services. Allegations of
impropriety, even if unfounded, could damage our reputation, disrupt our
ongoing business, distract our management and employees, reduce our revenues
and increase our expenses.
The success of our strategy depends on our ability to keep pace with
technological changes.
Our future success depends, in part, upon our ability to use leading
technologies effectively, to continue to develop our technical expertise, to
enhance our existing services and to develop new services that meet changing
customer requirements. The market for our service is characterized by rapidly
changing technology, evolving industry standards, emerging competition and
frequent new service introductions. We may not successfully identify new
opportunities and develop and bring new services to market in a timely manner.
Our business may not be compatible with delivery methods of Internet access
services developed in the future.
We face the risk that fundamental changes may occur in the delivery of
Internet access services. Currently Internet services are accessed primarily by
computers and are delivered by modems using telephone lines. If the Internet
becomes accessible by screen-based telephones, television or other consumer
electronic devices or becomes deliverable through other means such as coaxial
cable or wireless transmission, we will have to develop new technology or
modify our existing technology to accommodate these developments. Our pursuit
of these technological advances, whether directly through internal development
or by third party license, may require substantial time and expense. We may be
unable to adapt our Internet service business to alternate delivery means and
new technologies may not be available to us at all.
Our product and service offerings may not be compatible with industry standards
developed in the future.
Our ability to compete successfully depends upon the continued
compatibility and interoperability of our services with products and
architectures offered by various vendors. Although we intend to support
emerging standards in the market for Internet access, industry standards may
not be established and, if they become established, we may not be able to
conform to these new standards in a timely fashion or maintain a competitive
position in the market. The announcement or introduction of new products or
services by us or our competitors and any change in industry standards could
cause customers to deter or cancel purchases of existing products or services.
Risk Related to the ADSs and Our Trading Market
Our management will have broad discretion in using the proceeds from this
offering and therefore investors will be relying on the judgment of our
management to invest those funds effectively.
Our management will have broad discretion with respect to the expenditure
of the net proceeds from this offering. We intend to use the net proceeds to
fund network infrastructure expansion and enhancements, to develop content for
our Internet portal business, to advertise and promote our brand, to repay debt
and for other general corporate purposes. We may also use a portion of the
proceeds for possible strategic investments, partnerships and acquisitions. We
have not yet finalized the amount of net proceeds to be used specifically for
each of these purposes, although we are not permitted to use the proceeds to
purchase real estate or to purchase
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securities on stock exchanges as specified by the Ministry of Finance.
Investors will be relying on the judgment of our management regarding the
application of these proceeds. For additional information regarding the
expenditure of the net proceeds from this offering, please see "Use of
Proceeds" on page 25 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Expenditures" on
page 38.
Holders of ADSs may be restricted in their ability to exercise preemptive
rights under Indian law and thereby may suffer future dilution of their
ownership position.
Under the Companies Act, 1956 of India, or 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 the preemptive rights have been waived by adopting a special resolution
by holders of three-fourths of the company's shares which are voted on the
resolution. U.S. holders of ADSs may be unable to exercise preemptive rights
for equity shares underlying ADSs unless approval of the Ministry of Finance of
the government of India is obtained and a registration statement under the
Securities Act of 1933, as amended, is effective with respect to the rights or
an exemption from the registration requirements of the Securities Act is
available. Our decision to file a registration statement will depend on the
costs and potential liabilities associated with any given registration
statement as well as the perceived benefits of enabling the holders of our ADSs
to exercise their preemptive rights and any other factors that we deem
appropriate to consider at the time the decision must be made. We may elect not
to file a registration statement related to preemptive rights otherwise
available by law to our shareholders. In the case of future issuances, the new
securities may be issued to our depositary, which may sell the securities for
the benefit of the holders of the ADSs. The value, if any, our depositary would
receive upon the sale of such securities cannot be predicted. 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 our company would be reduced. For additional information regarding
the ability of holders of ADSs to exercise preemptive rights, please see
"Description of American Depositary Shares" on page 72.
Holders of ADSs may be restricted in their ability to exercise voting rights.
As a holder of ADSs, you generally will have the right under the deposit
agreement to instruct the depositary bank to exercise the voting rights for the
equity shares represented by your ADSs. For additional information regarding
the voting rights of holders of equity shares, please see "Description of
Equity Shares--Voting Rights" on page 69.
At our request, the depositary bank will mail to you any notice of
shareholders' meeting received from us together with information explaining how
to instruct the depositary bank to exercise the voting rights of the securities
represented by ADSs. If the depositary bank timely receives voting instructions
from a holder of ADSs, it will endeavor to vote the securities represented by
the holder's ADSs in accordance with such voting instructions. However, the
ability of the depositary bank to carry out voting instructions may be limited
by practical and legal limitations and the terms of the securities on deposit.
We cannot assure you that you will receive voting materials in time to enable
you to return voting instructions to the depositary bank in a timely manner.
Securities for which no voting instructions have been received will not be
voted.
There has been no prior public market for our ADSs or equity shares and the
initial public offering price may not be indicative of future trading prices.
Prior to this offering, there has not been a public market for our ADSs
or equity shares. The initial public offering price for the ADSs will be
determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market. Investors may not be able to resell their shares at or above
the initial public offering price.
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After the IPO, the market price of our ADSs may be highly volatile, as has been
the case recently with many other newly-public Internet companies.
The financial markets in the United States and other countries have
experienced significant price and volume fluctuations, and the market prices of
technology companies, particularly Internet-related companies, have been and
continue to be extremely volatile. Volatility in the price of our ADSs may be
caused by factors outside of our control and may be unrelated or
disproportionate to our operating results. In the past, following periods of
volatility in the market price of a public company's securities, securities
class action litigation has often been instituted against that company. Such
litigation could result in substantial costs and a diversion of our
management's attention and resources. For additional information regarding our
arrangements with the underwriters, please see "Underwriting" on page 92.
This offering may not result in an active or liquid market for the ADSs,
particularly in light of Indian legal restrictions on equity share conversion
and foreign ownership of an Internet service provider.
We cannot predict the extent to which this offering will result in the
development of an active, liquid public trading market for our ADSs offered by
this prospectus. Active, liquid trading markets generally result in lower price
volatility and more efficient execution of buy and sell orders for investors.
Liquidity of a securities market is often a function of the volume of the
underlying shares that are publicly held by unrelated parties. Although ADS
holders are entitled to withdraw the equity shares underlying the ADSs from the
depositary at any time, there is no public market for our equity shares in
India or the United States. Under current Indian law, equity shares may not be
re-deposited into our depositary without prior approval of the government of
India. Therefore, the number of outstanding ADSs will decrease to the extent
that equity shares are withdrawn from our depositary, which may adversely
affect the market price and the liquidity of the market for the ADSs.
Furthermore, foreign ownership in our company, which will include all ADSs, is
limited to 49% under present Indian law. This limitation means that, unless
Indian law changes, 51% of our equity shares will never be available to trade
in the United States market being initiated by this offering.
New investors will experience immediate and substantial dilution.
The purchase price of the ADSs offered by this prospectus will be
substantially higher than the tangible book value of our outstanding equity
shares. Any ADSs an investor purchases in this offering will have a post-
closing net tangible book value per share of $13.28 per share less than the
initial public offering price paid, assuming an initial public offering price
of $17.00 per share. Investors who purchase ADSs in this offering will
therefore experience immediate and significant dilution in the tangible net
book value of their investment. For additional information regarding dilution
to investors in our ADSs, please see "Dilution" on page 29.
The future sales of securities by our company or existing shareholders may hurt
the price of our ADSs.
The market price of our ADSs could decline as a result of sales of a
large number of equity shares or ADSs after this offering or the perception
that such sales could occur. Such sales also might make it more difficult for
us to sell equity securities in the future at a time and at a price that we
deem appropriate. After this offering, we will have an aggregate of 21,156,000
equity shares outstanding, including 750,000 equity shares to be issued to two
existing shareholders in connection with the exercise of warrants held by them.
Of the outstanding equity shares, the 4,175,000 ADSs, representing 4,175,000
equity shares, sold in this offering will be freely tradable, other than ADSs
purchased by our affiliates. The remaining equity shares may be sold in the
United States only pursuant to a registration statement under the Securities
Act or an exemption from the registration requirements of the Securities Act,
including Regulation S. Each of our directors, executive officers and current
shareholders, together with the holders of warrants to purchase 750,000 equity
shares, has agreed that he, she or it will not offer, sell or agree to sell,
directly or indirectly, or otherwise dispose of any equity shares without the
prior written consent of the representatives of the U.S. underwriters for a
period of 180 days from the date of this prospectus. For additional information
regarding possible future sales of our securities, please see "Underwriting" on
page 92 and "Shares Eligible for Future Sale" on page 91.
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<PAGE>
Forward-looking statements contained in this prospectus may not be realized.
This prospectus contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risks faced
by us described above and elsewhere in this prospectus. We do not intend to
update any of the forward-looking statements after the date of this prospectus
to conform such statements to actual results.
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS
Unless we indicate otherwise, all information in this prospectus reflects
the following:
. no exercise by the underwriters of their overallotment option to
purchase up to 626,250 additional ADSs representing 626,250 equity
shares; and
. no exercise of outstanding employee stock options.
CURRENCY OF PRESENTATION
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 some Indian
rupee amounts into U.S. dollars which should not be construed as a
representation that those Indian rupee or U.S. dollar amounts could have been,
or could be, converted into U.S. dollars or Indian rupees, as the case may be,
at any particular rate, the rate stated below, or at all. Except as otherwise
stated in this prospectus, 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 on June 30, 1999 for cable transfers in Indian rupees as
certified for customs purposes by the Federal Reserve Bank of New York. The
noon buying rate on June 30, 1999 was Rs.43.45 per $1.00.
Our financial statements are prepared in Indian rupees and presented in
accordance with U.S. GAAP for the fiscal years ended March 31, 1997, 1998 and
1999 and the fiscal quarter ended June 30, 1999. Solely for your convenience,
our financial statements as of and for the year ended March 31, 1999 and the
quarter ended June 30, 1999 have been translated into U.S. dollars. In this
prospectus, any discrepancies in any table between totals and the sums of the
amounts listed are due to rounding.
For historical information regarding rates of exchange between Indian
rupees and U.S. dollars, please see "Exchange Rates" on page 28.
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ENFORCEMENT OF CIVIL LIABILITIES
Our company is a limited liability company under the laws of the Republic
of India. All of our directors and executive officers, and several of the
experts named in this prospectus, reside outside the United States, and
virtually all of our assets and the assets of those persons are located outside
the United States. As a result, it may be difficult for investors to effect
service of process upon those persons within the United States or to enforce
against us or those persons in U.S. courts judgments obtained in U.S. courts,
including judgments predicated on the civil liability provisions of the federal
securities laws of the United States.
India is not a party to any international treaty relating to the
recognition or enforcement of foreign judgments. We have been advised by M.G.
Ramachandran, our Indian legal counsel, that in India the statutory basis for
recognition of foreign judgments is found in Section 13 of the Indian Code of
Civil Procedure, 1908, or Indian Civil Code, which provides that a foreign
judgment shall be conclusive as to any matter directly adjudicated upon except:
. where the judgment has not been pronounced by a court of competent
jurisdiction;
. where the judgment has not been given on the merits of the case;
. 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;
. where the proceedings in which the judgment was obtained were opposed
to natural justice;
. where the judgment has been obtained by fraud; or
. where the judgment sustains a claim founded on a breach of any law in
force in India.
Section 44A of the Indian Civil Code provides that 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 under the Foreign Exchange Regulation Act, 1973 to execute the
judgment or to repatriate any amount recovered. We have also been advised by M.
G. Ramachandran that a party may file suit in India against us, our directors
or our executive officers as an original action predicated upon the provisions
of the federal securities laws of the United States. To our knowledge, no such
suit has ever been brought in Indian courts. As a result, it may be difficult
for investors to enforce a judgment obtained in a court in the United States,
or to bring an original action in an Indian court, based on the civil liability
provisions of the federal securities laws of the United States against us or
our directors, executive officers or experts who reside outside the United
States.
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REPORTS TO OUR SECURITY HOLDERS
Upon consummation of this offering, we will be subject to the information
requirements of the Securities Exchange Act of 1934, as amended, applicable to
foreign private issuers. As a result, we will be required to file reports,
including annual reports on Form 20-F, reports on Form 6-K and other
information with the Securities and Exchange Commission. We have further agreed
in the underwriting agreement relating to this offering to submit to the SEC
quarterly reports on Form 6-K which will include unaudited quarterly financial
information, for the first three quarters of each fiscal year, in addition to
our annual report on Form 20-F which will include audited annual financial
information. We have agreed to file these reports within the same time periods
that apply to the filing by domestic issuers of quarterly reports on Form 10-Q
and annual reports on Form 10-K. The SEC's rules generally require that
domestic issuers file a quarterly report on Form 10-Q within 45 days after the
end of the first three fiscal quarters and file an annual report on Form 10-K
within 90 days after the end of each fiscal year. These reports and other
information filed or to be filed by us can be inspected and copied at the
public reference facilities maintained by the SEC at:
. Judiciary Plaza
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549;
. Seven World Trade Center
13th Floor
New York, New York 10048; and
. Northwestern Atrium Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511.
Copies of these materials can also be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates.
The SEC maintains a website at www.sec.gov that contains reports, proxy
and information statements, and other information regarding registrants that
make electronic filings with the SEC using its EDGAR system. As a foreign
private issuer, we are not required to use the EDGAR system, but currently
intend to do so in order to make our reports available over the Internet.
Upon approval of the ADSs for quotation on the Nasdaq National Market,
our periodic reports and other information may also be inspected at the offices
of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
As a foreign private issuer, we will be exempt from the rules under the
Exchange Act prescribing the furnishing and content of proxy statements, and
our executive officers, directors and principal shareholders will be exempt
from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act.
We 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 us that, at our request, it will promptly mail these reports to all
registered holders of ADSs. We will also furnish to the depositary all notices
of shareholders' meetings and other reports and communications that are made
generally available to our shareholders. The depositary will arrange for the
mailing of these documents to record holders of ADSs. For further details on
the responsibilities of the depositary and the information to be made available
to persons who purchase our ADSs in this offering, please see "Description of
American Depositary Shares" and "Additional Information."
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USE OF PROCEEDS
The net proceeds from this offering, after deducting underwriting
discounts and the estimated offering expenses payable by us, are estimated to
be approximately $65.0 million, or $74.9 million if the underwriters'
overallotment option is exercised in full, assuming an initial public offering
price of $17.00 per ADS. We currently estimate that we will use the proceeds
from this offering as follows:
. approximately $25 million to fund network infrastructure expansion
and enhancements;
. approximately $10 million to develop content for our Internet portal
business;
. approximately $5 million to advertise and promote our brand; and
. the balance of the proceeds from this offering for general corporate
purposes, including possible strategic investments, partnerships and
acquisitions.
While we have from time to time preliminarily discussed potential investments,
strategic partnerships and acquisitions in the ordinary course of our business,
we have no current agreements or understandings relating to any such
transaction.
We have not yet finalized the amount of net proceeds to be used
specifically for the purposes specified above. Accordingly, management will
have significant flexibility in applying the net proceeds of this offering.
Management will not, however, be able to use the proceeds to purchase real
estate or to purchase securities on stock exchanges as specified by the
Ministry of Finance. We will be required to submit to the Reserve Bank of India
and the Ministry of Finance quarterly statements with regard to the periodic
repatriation of the net proceeds of this offering. Pending any use, as
described above, we intend to invest the net proceeds in dollar or rupee
denominated high quality, interest-bearing instruments, provided that the
government of India may require us to repatriate the proceeds of this offering,
which means converting the proceeds into rupees and holding them in India.
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DIVIDEND POLICY
We have not declared or paid any cash dividends on our equity shares
since inception and do not expect to pay any cash dividends for the foreseeable
future. We currently intend to retain future earnings, if any, to finance the
expansion of our business. Investors seeking cash dividends should not purchase
our ADSs.
Under Indian law, a corporation may pay dividends upon a recommendation
by its Board of Directors and approval by a majority of its shareholders. Any
future cash dividends on our equity shares represented by ADSs will be paid to
the depositary in rupees and will generally be converted into dollars by the
depositary and distributed to holders of ADSs, net of the depositary's fees and
expenses. For additional information regarding the payment of dividends, please
see "Description of American Depositary Shares--Dividends and Distributions" on
page 72.
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CAPITALIZATION
The following table sets forth, as of June 30, 1999, the capitalization
of our company on an actual, pro forma and pro forma as adjusted basis. The pro
forma data set forth below are adjusted to give effect to the following:
. the sale by our company to Sterling Commerce in September 1999 of
481,000 equity shares in a private placement and the application of
the $5.0 million of proceeds from this sale primarily towards the
repayment of debt; and
. the exercise of warrants to purchase an aggregate of 750,000 of our
equity shares and the application of the $8.4 million aggregate
exercise price primarily towards the repayment of debt.
The pro forma as adjusted data set forth below are also adjusted to give effect
to the sale by our company of the 4,175,000 ADSs, representing 4,175,000 equity
shares, offered hereby and the application of the proceeds from the offering at
an assumed initial public offering price of $17.00 per ADS and after deducting
underwriting discounts and the estimated offering expenses payable by us.
This information should be read in conjunction with our financial
statements and the related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of June 30, 1999
---------------------------------------------------------------------------------
Pro Forma As Pro Forma
Actual Actual Pro Forma Pro Forma Adjusted As Adjusted
Indian rupees U.S. dollars Indian Rupees U.S. Dollars Indian rupees U.S. dollars
------------- ------------ ------------- ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ Rs. 10,375 $ 239 Rs.334,757 $ 7,704 Rs.3,159,300 $72,711
========== ======= ========== ======= ============ =======
Short-term debt:
Current installments
of long-term debt..... Rs.167,500 $ 3,855 -- -- -- --
Current installments
of capital lease
obligations........... 915 21 Rs. 915 $ 21 Rs. 915 $ 21
---------- ------- ---------- ------- ------------ -------
Total short-term
debt................ 168,415 3,876 915 21 915 21
Long-term debt:
Long-term debt,
excluding current
installments.......... 91,000 2,095 -- -- -- --
Capital lease
obligations,
excluding current
installments.......... 405 9 405 9 405 9
---------- ------- ---------- ------- ------------ -------
Total long-term
debt................ 91,405 2,104 405 9 405 9
Stockholders' equity:
Equity shares, Rs.10
par value; 25,000,000
shares authorized;
15,750,000 shares
issued and
outstanding actual;
16,981,000 shares
issued and
outstanding pro
forma; 21,156,000
shares issued and
outstanding pro forma
as adjusted........... 157,500 3,625 169,810 3,908 211,560 4,869
Additional paid-in
capital................ 226,636 5,216 797,208 18,348 3,580,001 82,394
Deferred Compensation--
Employee Stock Offer
Plan................... (1,375) (32) (1,375) (32) (1,375) (32)
Accumulated deficit..... (366,686) (8,439) (366,686) (8,439) (366,686) (8,439)
---------- ------- ---------- ------- ------------ -------
Total stockholders'
equity................ 16,075 370 598,957 13,785 3,423,500 78,792
---------- ------- ---------- ------- ------------ -------
Total
capitalization...... Rs.107,480 $ 2,474 Rs.599,362 $13,794 Rs.3,423,905 $78,801
========== ======= ========== ======= ============ =======
</TABLE>
27
<PAGE>
EXCHANGE RATES
The following table sets forth, for the fiscal years indicated,
information concerning the number of Indian rupees for which one U.S. dollar
could be exchanged based on the average of the noon buying rate in the City of
New York on the last day of each month during the period for cable transfers in
Indian rupees as certified for customs purposes by the Federal Reserve Bank of
New York:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, Period End Average High Low
- --------------------------- ---------- -------- -------- --------
<S> <C> <C> <C> <C>
1996 (from December 12, 1995)............ Rs.34.35 Rs.35.21 Rs.38.05 Rs.34.10
1997..................................... 35.88 35.70 36.85 34.15
1998..................................... 39.53 37.37 40.40 35.71
1999..................................... 42.50 42.27 43.60 39.41
2000 (through September 30, 1999)........ 43.59 43.20 43.59 42.50
</TABLE>
28
<PAGE>
DILUTION
The pro forma net tangible book value of our company as of June 30, 1999
was approximately Rs.590.6 million ($13.6 million), or Rs.34.78 ($0.80) per
share. Pro forma net tangible book value per ADS is equal to the amount of our
total tangible assets (total assets less intangible assets) less total
liabilities, divided by the pro forma number of equity shares outstanding as of
June 30, 1999, after giving effect to the following:
.the sale by our company to Sterling Commerce in September 1999 of
481,000 equity shares in a private placement and the application of
the $5.0 million of proceeds from this sale primarily towards the
repayment of debt; and
.the exercise of warrants to purchase an aggregate of 750,000 of our
equity shares and the application of the $8.4 million aggregate
exercise price primarily towards the repayment of debt.
Assuming the sale by us of ADSs offered by this prospectus at an initial public
offering price of $17.00 per ADS and after deducting underwriting discounts and
the estimated offering expenses payable by us, the pro forma as adjusted net
tangible book value of our company as of June 30, 1999 would have been
Rs.3,415.2 million ($78.6 million), or Rs.161.43 ($3.72) per ADS. This
represents an immediate increase in pro forma as adjusted net tangible book
value of Rs.126.65 ($2.92) per equity share to existing shareholders and an
immediate dilution in pro forma as adjusted net tangible book value of
Rs.577.22 ($13.28) per ADS to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per ADS............... $17.00
------
Pro forma net tangible book value per ADS as of June 30,
1999....................................................... $0.80
Increase in net tangible book value attributable to new
investors.................................................. 2.92
-----
Pro forma as adjusted net tangible book value per ADS after
this offering.............................................. 3.72
------
Dilution per ADS to new investors........................... $13.28
======
</TABLE>
The following table summarizes, on a pro forma as adjusted basis as of
June 30, 1999, the difference between existing shareholders and new investors
with respect to the number of equity shares or ADSs, as applicable, purchased,
the total consideration paid and the average price per equity share or ADS, as
applicable, paid. The table assumes that the initial offering price will be
$13.00 per ADS.
<TABLE>
<CAPTION>
Total
ADSs Purchased Consideration Average
-------------- --------------- Price
Number Percent Amount Percent Per ADS
------ ------- ------- ------- -------
(In thousands, except per ADS data)
<S> <C> <C> <C> <C> <C>
Existing shareholders.............. 16,981 80.3% $22,224 23.8% $ 1.31
New investors...................... 4,175 19.7 70,975 76.2 $17.00
------ ---- ------- ----
Total............................ 21,156 100% $93,199 100%
====== ==== ======= ====
</TABLE>
The foregoing tables and calculations assume no exercise by the
underwriters of their overallotment option and no exercise of outstanding
employee stock options. To the extent that the overallotment option or
outstanding options are exercised, there will be further dilution to new
investors. For additional information regarding our outstanding options and
warrants, please see "Management--Employee Benefit Plans" on page 64 and
"Description of Equity Shares" on page 67. Prior to this offering, we had
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.
29
<PAGE>
SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
our financial statements and the related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The statement of operations data for the fiscal years ended
March 31, 1997, 1998 and 1999, and the balance sheet data as of March 31, 1998
and 1999, are derived from our audited financial statements included elsewhere
in this prospectus which have been audited by KPMG Peat Marwick, India,
independent accountants. The statement of operations data for the three months
ended June 30, 1999 and the balance sheet data as of June 30, 1999 are derived
from our unaudited financial statements. Our unaudited financial statements
have been prepared on substantially the same basis as our audited financial
statements and, in the opinion of our management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such periods. Our financial
statements are prepared in Indian rupees and presented in accordance with U.S.
GAAP for the fiscal years ended March 31, 1997, 1998 and 1999 and the fiscal
quarter ended June 30, 1999. Financial statements for the year ended March 31,
1999 and the quarter ended June 30, 1999 also have been translated into U.S.
dollars. The pro forma as adjusted data set forth below are adjusted to give
effect to the following:
. the sale by our company to Sterling Commerce of 481,000 equity shares
in a private placement pursuant to an agreement reached in July 1999
which closed in September 1999 and the application of the $5.0
million of proceeds from this sale primarily towards the repayment of
debt;
. the sale by our company of 4,175,000 ADSs, representing 4,175,000
equity shares, offered hereby and the application of the proceeds
from the offering at an assumed initial public offering price of
$17.00 per ADS and after deducting underwriting discounts and the
estimated offering expenses payable by us; and
. the exercise of warrants to purchase an aggregate of 750,000 of our
equity shares and the application of the $8.4 million aggregate
exercise price primarily towards the repayment of debt.
For additional information regarding the pro forma as adjusted data, please see
"Capitalization" on page 27. Historical results are not indicative of the
results to be expected in the future.
The selected financial data for the period from December 12, 1995
(Inception) through March 31, 1996 are not presented because we had just begun
operations. Our revenues and total operating expenses for the period from
December 12, 1995 (Inception) through March 31, 1996 were approximately Rs.0
and Rs.634,000, respectively. As of March 31, 1996, our total assets were
approximately Rs.98,000.
The selected consolidated historical financial and other data includes a
presentation of EBITDA. EBITDA represents earnings (loss) before depreciation
and amortization, interest income and expense, income tax expense (benefit) and
extraordinary items. EBITDA is presented because we believe some investors find
it to be a useful tool for measuring a company's ability to fund capital
expenditures or to service future debts. EBITDA is not determined in accordance
with generally accepted accounting principles and should not be considered in
isolation or as an alternative to net income as an indicator of operating
performance or as an alternative to cash flow as a measure of liquidity.
Because EBITDA excludes interest expense and capital expenditures, negative
EBITDA would limit our ability to fund capital expenditures and service future
debt obligations. Our EBITDA is not comparable to that of other companies which
may determine EBITDA differently.
30
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, Fiscal Quarter Ended June 30,
------------------------------------------------------ -------------------------------------
1997 1998 1999 1999 1998 1999 1999
-------------- ----------- ----------- ------------ ---------- ----------- ------------
Indian rupees U.S. dollars Indian rupees U.S. dollars
---------------------------------------- ------------ ----------------------- ------------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues............... Rs. -- Rs. 6,805 Rs. 103,344 $ 2,378 Rs. 17,558 Rs. 80,803 $ 1,860
Cost of revenues....... -- 19,498 63,651 1,465 7,074 38,897 895
-------------- ----------- ----------- ---------- ---------- ----------- ----------
Gross profit (loss).... -- (12,693) 39,693 913 10,484 41,906 965
Operating expenses:
Selling, general and
administrative
expenses.............. 25,801 61,017 151,189 3,479 21,821 63,037 1,451
Depreciation and
amortization.......... 536 19,383 49,093 1,130 8,786 21,301 490
-------------- ----------- ----------- ---------- ---------- ----------- ----------
Total operating
expenses............ 26,337 80,400 200,282 4,609 30,607 84,338 1,941
-------------- ----------- ----------- ---------- ---------- ----------- ----------
Operating loss......... (26,337) (93,093) (160,589) (3,696) (20,123) (42,432) (976)
Interest expense....... -- (11,306) (27,755) (639) (4,706) (10,410) (240)
Other income........... -- 3,809 968 23 -- 1,093 25
-------------- ----------- ----------- ---------- ---------- ----------- ----------
Net loss............... Rs. (26,337) Rs.(100,590) Rs.(187,376) $ (4,312) Rs.(24,829) Rs. (51,749) $ (1,191)
============== =========== =========== ========== ========== =========== ==========
Loss per equity share.. Rs.(114,508.27) Rs. (121.66) Rs. (17.31) $ (0.40) Rs. (3.28) Rs. (3.29) $ (0.08)
Weighted equity shares
used in computing loss
per equity share...... 230 826,805 10,824,826 10,824,826 7,566,164 15,750,000 15,750,000
Other Financial Data:
EBITDA................. Rs. (25,801) Rs. (73,709) Rs.(111,496) $ (2,566) Rs.(11,337) Rs. (21,131) $ (486)
Capital expenditures... 3,230 77,070 146,135 3,363 15,057 109,578 2,522
Net cash provided by
(used in):
Operating activities... (30,426) (73,950) (171,388) (3,944) (20,590) (37,258) (857)
Investing activities... (3,230) (77,070) (146,000) (3,360) (15,057) (109,578) (2,522)
Financing activities... 35,138 159,449 433,023 9,966 30,504 31,664 (729)
</TABLE>
<TABLE>
<CAPTION>
As of March 31, As of June 30, 1999
-------------------------------------------- ---------------------------------------------------
Pro Forma
1997 1998 1999 Pro Forma As Adjusted
-------- -------- ---------- 1999 Actual Actual U.S. As Adjusted U.S.
Indian rupees U.S. dollars Indian rupees dollars Indian rupees dollars
------------------------------ ------------ ------------- ----------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents........... Rs.1,482 Rs.9,912 Rs.125,547 $ 2,889 Rs.10,375 $ 239 Rs.3,159,300 $72,711
Working capital
(deficit)............. (33,628) (5,355) (21,706) (500) (198,325) (4,564) 2,950,600 67,908
Total assets........... 11,970 107,632 454,888 10,469 464,473 10,690 3,613,398 83,162
Long-term debt,
including current
installments.......... -- 134,455 259,256 5,967 259,820 5,980 1,320 30
Total stockholders'
equity................ (26,969) (52,559) 67,618 1,556 16,075 370 3,423,500 78,792
</TABLE>
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of Satyam Infoway should be read in conjunction with the financial
statements and the related notes included elsewhere in this prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. For additional information regarding these risks and
uncertainties, please see "Risk Factors" on page 7.
Overview
We were incorporated in December 1995 as an independent business unit of
Satyam Computer Services to develop and offer connectivity-based corporate
services allowing businesses in India to exchange information, communicate and
transact business electronically. Satyam Computer Services, our parent company,
is a leading Indian information technology services company traded on the
principal Indian stock exchanges.
From December 1995 through 1997, we focused on the development and
testing of our private data network. In 1997, we began forming strategic
partnerships with a number of leading technology and electronic commerce
companies, including CompuServe Network Services, Open Market and Sterling
Commerce, in order to broaden our product and service offerings to our
corporate customers. In March 1998, we obtained network certification for
conformity with Indian and international network operating standards from the
Technical Evaluation Committee of India. In April 1998, we began offering
private network services to businesses in India. Our initial products and
services included electronic data interchange, e-mail and other messaging
services, virtual private networks, and related customer support.
In October 1998, we agreed to sell 3,000,000 equity shares to South Asia
Regional Fund, an investment fund managed by Commonwealth Development
Corporation for Rs.210.0 million ($4.8 million). We used the funds from this
private financing primarily to develop our consumer Internet access business,
expand our network and develop our on-line content business.
In October 1998, we initiated our on-line content offerings with two
websites: carnaticmusic.com and indiaupdate.com. We also started development of
satyamonline.com, our on-line portal, and other related content sites for
personal finance, movies and automobiles with the goal of offering a
comprehensive suite of websites offering content specifically tailored to
Indian interests worldwide.
On November 6, 1998, the Indian government opened the Internet service
provider marketplace to private competition. Capitalizing on our existing
private data network, we launched our Internet service provider business,
Satyam Online, on November 22, 1998 and became the first private national
Internet service provider in India. We began offering Satyam Online Internet
access and related services to India's consumer market as a complement to the
network services offered to our business customers. Our Satyam Online service
was the first in India to offer ready-to-use CD-ROMs enabling on-line
registration and immediate usage.
In July 1999, we agreed to sell 481,000 equity shares to Sterling
Commerce for $5.0 million. We completed this transaction in September 1999 and
used the funds for general corporate purposes, primarily the repayment of debt.
We currently operate India's largest private data network utilizing
Internet protocol with points of presence in 25 of the largest metropolitan
areas in India. As of June 30, 1999, we had more than 300 corporate customers
for our private network services, and as of September 30, 1999, we had more
than 87,000 subscribers for our Satyam Online services. During September 1999,
our six websites generated approximately 12.0 million page views.
We conduct our business in India and most of our revenues and expenses
are denominated in Indian rupees. However, our revenues generated from
CompuServe Network Services and our expenses of purchasing
32
<PAGE>
software from Sterling Commerce and Open Market are denominated in U.S.
dollars. Our foreign exchange loss was Rs.0, Rs.5,613, Rs.615,189 ($14,158) and
Rs.129,344 ($2,977) for fiscal 1997, 1998 and 1999 and the quarter ended June
30, 1999, respectively.
Revenues
For reporting purposes, we classify our revenues into three divisions:
. consumer Internet access services;
. corporate network and technology services; and
. on-line portal and content offerings.
Our consumer Internet access services division derives its revenues
primarily from prepaid dial-up subscriptions. We offer our prepaid
subscriptions in a number of time period and pricing plans through ready-to-use
CD-ROMs sold to our distribution partners. Our distribution partners resell the
CD-ROMs to consumers for on-line registration and immediate Internet access.
Revenues are recognized ratably as the prepaid subscription is used with any
unused portion recognized as revenues at the expiration date of the
subscription. We also generate revenues through international roaming and e-
mail registration fees. Our consumer Internet access services division
accounted for approximately 12.9% of our fiscal 1999 revenues.
Our corporate network and technology services division derives its
revenues from dial-up and dedicated Internet access, electronic commerce,
electronic data interchange, e-mail and other messaging services, virtual
private networks and web-based solutions. Our corporate private network
customers typically enter into one-year arrangements that provide for an
initial installation fee and recurring service fees. Web development is
generally charged on a fixed-price basis. We derive revenues from website
hosting based upon our customer's bandwidth requirements, and we charge co-
location customers for use of our physical facilities. We also generate a small
portion of our revenues through the sale of third-party hardware. Our corporate
network and technology services division accounted for approximately 87.1% of
our fiscal 1999 revenues.
Our on-line portal and content offerings division derives revenues from
third-party advertising and commissions from electronic commerce transactions
on our websites. Advertising fees are recognized over the period in which the
advertisements are hosted on our websites. This division does not currently
constitute a material portion of our total revenues.
Expenses
Cost of revenues for the consumer Internet access services division
consists primarily of recurring telecommunications costs necessary to provide
service to subscribers. Telecommunications costs include the costs of providing
local telephone lines to our points of presence, the costs of using third-party
networks pursuant to service agreements and leased line costs. We anticipate
that our telecommunications costs will increase in the near term as we expand
our network and enter new markets. As utilization of our network increases in
future years, we expect to realize a reduction in per unit data transmission
costs due to our network's scalability and fixed cost structure. Another
recurring cost is the personnel and related operating expenses associated with
customer support and network operations. We expect that customer support and
network operations expenses will decrease as a percentage of revenues as we
more efficiently utilize these capabilities across a larger customer base. Cost
of revenues for consumer Internet access services also includes startup
expenses for new subscribers consisting primarily of the cost of CD-ROMs and
other product media, manuals and associated packaging and delivery costs.
Cost of revenues for the corporate network and technology services
division is divided into three groups: corporate Internet access, corporate
network and electronic commerce products, and web development. Cost of revenues
for the corporate Internet access subdivision consists of telecommunications
costs necessary to provide service, customer support costs and the cost of
providing network operations. Cost of revenues for
33
<PAGE>
corporate network and electronic commerce consists primarily of third-party
software and hardware purchased from our strategic partners for resale, direct
labor costs for initial installation and recurring customer support and network
operation and associated telecommunications costs. Cost of revenues for web
development, website hosting and co-location includes direct labor and
associated telecommunications costs.
The cost of revenues for the on-line portal and content offerings
division includes the labor cost of developing and maintaining our websites,
the cost of third-party software and the cost of obtaining content from third-
party vendors.
Selling, general and administrative expenses consist primarily of
salaries and commissions for sales and marketing personnel; salaries and
related costs for executives, financial and administrative personnel; sales,
marketing, advertising and other brand building costs; travel costs; and
occupancy and overhead costs. As we expand the scope of our operations, we
expect selling, general and administrative expenses to continue to increase for
the foreseeable future. We intend to continue to add more points of presence to
our network and hire new sales and marketing personnel for each of our new
markets. We also have and intend to continue to increase marketing expenses to
build our brand awareness in order to increase our subscriber base. Our
business plan assumes these costs will negatively impact our financial results
in the short term but will be offset by anticipated increases in revenues from
overall subscriber growth.
On September 28, 1999, we granted to employees in India options to
acquire 147,000 equity shares at a weighted average exercise price of Rs.335
per share. We presently estimate that we will record a non-cash compensation
charge related to these grants in the aggregate amount of approximately Rs.18.6
million (approximately $427,000) to be recognized over a three year period in
accordance with vesting provisions. This charge is an initial estimate, and is
subject to revision.
We depreciate our tangible assets on a straight-line basis over the
useful life of assets, ranging from two to five years. We depreciate our
intangible assets on a straight-line basis over five years. Our planned
significant capital expenditures for the expansion and enhancement of our
network infrastructure will substantially increase our depreciation expenses in
the near future.
We may face significant competitive pricing pressure from VSNL, the
government-controlled provider of international telecommunications services in
India, and a number of new competitors that are entering India's recently
opened Internet service provider market. In the face of expected increasing
competition, we do not anticipate being able to maintain our present subscriber
retention rates as our subscriber base grows.
Since our inception, we have experienced negative cash flow from
operations and have incurred net losses. Our ability to generate positive cash
flow from operations and achieve profitability is dependent on our ability to
continue to grow our revenues base and achieve further operating efficiencies.
We presently estimate that our consumer Internet access division requires a
minimum of 100,000 subscribers in order to achieve positive EBITDA based on our
current network of 25 points of presence. As we expand our network to 40 points
of presence, we estimate that this minimum number of subscribers will increase
to 200,000. These estimates are based on the present business environment in
India, including current pricing, marketing and service cost conditions, all of
which are subject to change. For the fiscal years ended March 31, 1997, 1998
and 1999 and the quarter ended June 30, 1999, we incurred negative cash flow
from operations of approximately Rs.30.4 million, Rs.74.0 million, Rs.171.3
million ($3.9 million) and Rs.37.3 million ($0.9 million), respectively. For
the fiscal years ended March 31, 1997, 1998 and 1999 and the quarter ended June
30, 1999, we incurred net losses of approximately Rs.26.3 million, Rs.100.6
million, Rs.187.4 million ($4.3 million) and Rs.51.8 million ($1.2 million),
respectively. We intend to substantially increase our operating expenses and
capital expenditures to expand and enhance our network infrastructure and on-
line content offerings. We expect to experience significant negative cash flow
from operations and to incur net losses as a result of these investments. We
believe that the investment in our network infrastructure will enable us to
achieve further economies of scale as we expand our customer base. Although
consumer Internet access and corporate network and technology services account
for the majority of our revenues today, we expect our on-line portal and
content offerings to generate significant revenue growth through increased
third-party advertising and
34
<PAGE>
transaction and referral fees. However, we may not be able to realize
sufficient future revenues to offset our present investment in network
infrastructure and on-line content offerings or achieve positive cash flow or
profitability in the future. As of June 30, 1999, we had an accumulated deficit
of approximately Rs.366.7 million ($8.4 million).
Three months ended June 30, 1999 compared to three months ended June 30, 1998
Revenues. We recognized Rs.80.8 million ($1.9 million) in revenues for
the quarter ended June 30, 1999, as compared to Rs.17.6 million for the quarter
ended June 30, 1998, representing an increase of Rs.63.2 million, or 359%. This
increase is primarily attributable to the commencement of Internet access
services in November 1998, which accounted for Rs.40.2 million of revenues for
the quarter ended June 30, 1999, a Rs.21.3 million increase in revenues from
corporate network services, resulting from an increase in number of corporate
customers contributing to revenues in the amount of Rs.15.0 million and a
Rs.5.0 million increase in revenues from new service offerings, including web-
based solutions.
Cost of Revenues. Cost of revenues were Rs.38.9 million ($0.9 million) or
48.1% of revenues for the quarter ended June 30, 1999, compared to Rs.7.1
million or 40.3% of revenues for the quarter ended June 30, 1998, representing
an increase of Rs.31.8 million, or 448%. This increase was primarily
attributable to a Rs.6.3 million increase in the cost of hardware and software
purchased for resale for our corporate network and technology services
customers that elect to source the technology through us, a Rs.15.0 million
increase in leased line costs resulting from increasing the capacity of our
network backbone from 64 Kbps to 2 Mbps and a Rs.8.0 million increase in direct
personnel costs for web development and customer technical support.
Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.63.0 million ($1.5 million) for the quarter
ended June 30, 1999 compared to Rs.21.8 million for the quarter ended June 30,
1998, representing an increase of Rs.41.2 million. This increase was primarily
attributable to a growth in staff from 340 as of March 31, 1999 to 411 as of
June 30, 1999 resulting in a Rs.10.0 million increase in indirect personnel
costs, a Rs.8.6 million increase in selling and marketing expenses resulting
from additional expenditure in connection with marketing our Satyam Online
business, a Rs.4.0 million increase in travelling expenditures and a Rs.3.0
million increase in the cost of software.
Depreciation and amortization. Depreciation and amortization was Rs.21.3
million ($0.5 million) for the quarter ended June 30, 1999, compared to Rs.8.8
million for the quarter ended June 30, 1998, representing an increase of
Rs.12.5 million, or 142%. This increase was primarily attributable to capital
expenditures associated with the installation of six ATM switches along our
network.
Interest expense. Interest expense was Rs.10.4 million ($0.2 million) for
the quarter ended June 30, 1999, compared to Rs.4.7 million for the quarter
ended June 30, 1998, representing an increase of Rs.5.7 million, or 121%. This
increase was primarily attributable to the drawdown of Rs.136.5 million of our
term loan with the Export Import Bank of India.
Other income. Other income was Rs.1.1 million (less than $0.1 million)
for the quarter ended June 30, 1999 which was primarily attributable to
interest earned on short term deposits with banks. We had no other income for
the quarter ended June 30, 1998.
Net loss. Our net loss was Rs.51.7 million ($1.2 million) for the quarter
ended June 30, 1999, compared to a net loss of Rs.24.8 million for the quarter
ended June 30, 1998.
Year ended March 31, 1999 compared to the year ended March 31, 1998
Revenues. We recognized Rs.103.3 million ($2.4 million) in revenues for
the year ended March 31, 1999, as compared to Rs.6.8 million for the year ended
March 31, 1998, representing an increase of Rs.96.5 million. Fiscal 1999
revenues exclude Rs.71.5 million ($1.7 million) of deferred income representing
consumer access subscriptions which had been purchased but not yet used by the
consumer subscribers. This increase was primarily attributable to the
introduction of our business network services in April 1998 and
35
<PAGE>
consumer Internet access services in November 1998. From March 31, 1998 to
March 31, 1999, our number of corporate customers grew from approximately 30 to
more than 300, and our number of subscribers grew to more than 29,000.
Cost of Revenues. Cost of revenues were Rs.63.7 million ($1.5 million) or
62% of revenues for the year ended March 31, 1999, compared to Rs.19.5 million
or 287% of revenues for the year ended March 31, 1998, representing an increase
of Rs.44.2 million, or 227%. This increase was primarily attributable to a
Rs.10.5 million increase in software and hardware purchased for resale, a
Rs.7.9 million increase in leased line charges due to the increased capacity of
our network backbone, Rs.1.8 million towards web development charges and a
Rs.23.9 million increase in direct personnel costs for web development and
customer technical support.
Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.151.2 million ($3.5 million) for the year ended
March 31, 1999, compared to Rs.61.0 million for the year ended March 31, 1998,
representing an increase of Rs.90.2 million, or 148%. This increase was
primarily attributable to a growth in staff from 140 in March 1998 to 340 in
March 1999 resulting in an increase in employee expenses of Rs.11.5 million, a
Rs.11.5 million increase in marketing expenses relating to the launch of our
consumer Internet access services division, and increases in travel expenses of
Rs.6.9 million, office rental expenses of Rs.1.3 million and professional and
consultant fees of Rs.10.4 million.
Depreciation and amortization. Depreciation and amortization was Rs.49.1
million ($1.1 million) for the year ended March 31, 1999, compared to Rs.19.4
million for the year ended March 31, 1998, an increase of Rs.29.7 million, or
153%. This increase was primarily attributable to capital expenditures of
Rs.146.1 million during the year ended March 31, 1999, including the purchase
of routers, modems, ports, servers and other capital equipment in connection
with the addition of eight points of presence to our network.
Interest expense. Interest expense was Rs.27.8 million ($0.6 million) for
the year ended March 31, 1999, compared to Rs.11.3 million for the year ended
March 31, 1998, representing an increase of Rs.16.5 million, or 146%. This
increase was attributable to increased interest payments from additional
borrowings of Rs.136.5 million during the year under a new term loan.
Other income. Other income was Rs.1.0 million (less than $0.1 million)
for the year ended March 31, 1999, compared to Rs.3.8 million for the year
ended March 31, 1998, representing a decrease of Rs.2.8 million, or 280%. This
decrease was primarily attributable to reduced interest income as excess funds
were deployed in the business.
Net loss. Our net loss was Rs.187.4 million ($4.3 million) for the year
ended March 31, 1999, compared to a net loss of Rs.100.6 million for the year
ended March 31, 1998.
Year ended March 31, 1998 compared to the year ended March 31, 1997
Revenues. We recognized Rs.6.8 million in revenues for the year ended
March 31, 1998 from network service charges related to paid customer trials for
our private network services projects and the sale of hardware and software. We
recognized no revenues for the year ended March 31, 1997.
Cost of Revenues. Cost of revenues was Rs.19.5 million for the year ended
March 31, 1998, consisting primarily of costs of hardware and software
purchased for resale of Rs.3.5 million and leased line costs of Rs.16.0
million. We had no cost of revenues for the year ended March 31, 1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.61.0 million for the year ended March 31, 1998,
compared to Rs.25.8 million for the year ended March 31, 1997, representing an
increase of Rs.35.2 million. This increase was primarily attributable to a
growth in staff from 33 in March 1997 to 140 in March 1998 resulting in an
increase in employee expenses of Rs.14.5 million and increases in travel
expenses of Rs.3.5 million, office rental expenses of Rs.2.6 million, and
general office expenses of Rs.9.1 million related to the development of our
consumer Internet access services division.
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<PAGE>
Depreciation and amortization. Depreciation and amortization was Rs.19.4
million for the year ended March 31, 1998, compared to Rs.0.5 million for the
year ended March 31, 1997, representing an increase of Rs.18.9 million. This
increase was primarily attributable to capital expenditures of Rs.77.1 million
during the year ended March 31, 1998, including the purchase of routers,
modems, ports, servers and other capital equipment in connection with the
expansion of our network.
Interest expense. Interest expense was Rs.11.3 million for the year ended
March 31, 1998, consisting of interest on privately placed debentures. We had
no interest expense for the year ended March 31, 1997.
Other income. Other income was Rs.3.8 million for the year ended March
31, 1998, consisting of interest income from short-term deposits. We had no
other income for the year ended March 31, 1997.
Net loss. Our net loss was Rs.100.6 million for the year ended March 31,
1998, compared to Rs.26.3 million for the year ended March 31, 1997.
Quarterly Results of Operations Data
The following table sets forth selected unaudited quarterly statements of
operations data for each of the four fiscal quarters ended June 30, 1999 both
in Rupees and as a percentage of revenues. Our management believes this data
has been prepared substantially on the same basis as the audited financial
statement included elsewhere in this prospectus, including all necessary
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such data. You should read this quarterly data in
conjunction with our financial statements and the related notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------
September 30, 1998 December 31, 1998 March 31, 1999 June 30, 1999
----------------------------------------- ----------------- ----------------
(in thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues Rs.17,801 100.0% Rs.22,014 100.0% Rs.45,971 100.0% Rs.80,803 100.0%
Cost of revenues........ 11,962 67.2 18,152 82.5 26,464 57.6 38,897 48.1
---------- ------- ---------- ------- --------- ------ --------- -----
Gross profit (loss)..... 5,839 32.8 3,862 17.5 19,507 42.4 41,906 51.9
Operating expenses:
Selling, general and
administrative
expenses............. 33,165 186.3 38,767 176.1 57,365 124.7 62,831 77.6
Depreciation and
amortization 10,942 61.5 13,707 62.3 15,728 34.2 21,507 26.6
---------- ------- ---------- ------- --------- ------ --------- -----
Total operating
expenses............ 44,107 247.8 52,474 238.4 73,093 158.9 84,338 104.2
Operating loss.......... (38,268) (215.0) (48,612) (220.9) (53,586) (116.5) (42,432) (52.3)
Interest expense........ (5,912) (33.2) (7,877) (35.8) (9,261) (20.1) (10,410) (12.9)
Other income............ -- -- 340 1.5 628 1.4 1,093 1.4
---------- ------- ---------- ------- --------- ------ --------- -----
Net loss................ Rs.44,180 248.2% Rs.56,149 255.2% Rs.62,219 135.2% 51,749 63.8%
========== ======= ========== ======= ========= ====== ========= =====
</TABLE>
A high percentage of our 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 consumer subscribers and
corporate customers, as well as the introduction of new product and service
offerings may cause significant variations in operating results in any
particular quarter. Due to the rapidly evolving nature of our business and our
limited operating history, we believe that period-to-period comparisons of
revenues and operating results are not necessarily meaningful and you should
not rely upon them as indications of future performance.
As indicated in the quarterly data, revenues increased substantially
during the quarters ended March 31, 1999 and June 30, 1999, primarily as a
result of the rapid growth in the number of subscribers for our Satyam Online
Internet access service. The number of Satyam Online subscribers increased from
approximately 4,700 on December 31, 1998 to approximately 28,500 on March 31,
1999 to approximately 60,000 on June 30, 1999 to more than 77,000 on August 31,
1999 to more than 87,000 on September 30, 1999. The number of corporate
customers also increased from approximately 130 on December 31, 1998 to
37
<PAGE>
approximately 170 on March 31, 1999 to more than 300 on June 30, 1999. Cost of
revenues as a percentage of revenues increased from 67.2% for the quarter ended
September 30, 1998 to 82.5% for the quarter ended December 31, 1998, before
decreasing to 57.6% for the quarter ended March 31, 1999 and 48.1% for the
quarter ended June 30, 1999. The increase in cost of revenues as a percent of
revenues for the quarter ended December 31, 1998 reflects the higher operating
costs associated with our expanded network backbone. During this quarter, we
increased the capacity of our network backbone from 64Kbps to 2Mbps. The
decrease in cost of revenues as a percentage of revenues during the quarters
ended March 31, 1999 and June 30, 1999 reflects operating efficiencies
generated by spreading the fixed costs of our network operations over a larger
customer base. Selling, general and administrative expenses increased over the
four quarters as a result of the aggressive marketing and promotion activities
used to launch our Satyam Online service nationally in India as well as an
increase in our employee base. The number of employees increased from 175 at
June 30, 1998 to 411 employees at June 30, 1999. Selling, general and
administrative expenses as a percentage of revenue decreased from 176.1% for
the quarter ended December 31, 1998, to 124.7% for the quarter ended March 31,
1999, to 77.6% for the quarter ended June 30, 1999, reflecting efficiencies
generated from our larger revenue and customer base. Depreciation and
amortization increased over the four quarters as a result of the purchase of
additional routers, modems, ports, servers and other capital equipment in
connection with the expansion of our network. Interest expense increased over
the four quarters as a result of increased borrowings used to fund the
expansion of our operations.
Seasonality
Given the early stage of the development of the Internet in India, the
rapidly evolving nature of our business and our limited operating history, we
cannot predict to what extent, if at all, our operations will prove to be
seasonal.
Liquidity and Capital Expenditures
Since inception, we have financed our operations primarily through a
combination of private equity sales and borrowings from institutions and banks.
During the fiscal years ended March 31, 1998 and 1999, we received Rs.38.5
million and Rs.307.5 million ($7.1 million), respectively, in net proceeds from
the sale of equity shares.
The following table summarizes our statements of cash flows for the
periods presented:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, Fiscal Quarter Ended June 30,
-------------------------------------------------- ------------------------------------
1997 1998 1999 1999 1998 1999 1999
Indian rupees U.S. dollars Indian rupees U.S. dollars
------------------------------------ ------------ ---------------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss................ Rs.(26,337) Rs.(100,590) Rs.(187,376) $(4,312) Rs.(24,829) Rs.(51,749) $(1,191)
Net decrease (increase)
in working capital..... (4,625) 7,257 (33,212) (764) (4,547) (7,016) (161)
Other adjustments for
non-cash items......... 536 19,383 49,200 1,132 8,786 21,507 495
Net cash provided by
(used in) operating
activities............. (30,426) (73,950) (171,388) (3,944) (20,590) (37,258) (857)
Net cash provided by
(used in) investing
activities............. (3,230) (77,070) (145,999) (3,360) (15,057) (109,578) (2,522)
Net cash provided by
(used in) financing
activities............. 35,138 159,449 433,023 9,966 30,504 31,664 729
Net increase (decrease)
in cash and cash
equivalents............ 1,482 8,429 115,636 2,661 (5,143) (115,172) (2,651)
</TABLE>
38
<PAGE>
Our principal capital and liquidity needs historically have related to
developing our network infrastructure and our corporate network and electronic
commerce products, establishing our customer service and support operations,
developing our sales and marketing activities and for general working capital
needs. Prior to 1998, our capital needs were primarily met by funding from our
parent company, Satyam Computer Services, and borrowings from institutions and
banks. As we placed greater emphasis on expanding our network infrastructure
and developing our consumer Internet access and on-line portal and content
services, we sought additional capital from other sources, including vendor
capital leases and other vendor financing arrangements and through private
placements of our securities, as detailed below.
Cash used in operating activities of Rs.171.4 million ($3.9 million)
during fiscal 1999 was primarily attributable to a net loss of Rs.187.4 million
($4.3 million), increases in accounts receivable of Rs.43.1 million ($1.0
million), other current assets of Rs.62.7 million ($1.4 million) and other
assets of Rs.21.2 million ($0.5 million), partially offset by depreciation of
plant and equipment of Rs.46.7 million ($1.1 million) and an increase in
deferred revenues of Rs.71.5 million ($1.7 million). Cash used in investment
activities during fiscal 1999 was Rs.146.0 million ($3.4 million), principally
as a result of the purchase of routers, modems, ports, servers and other
capital equipment in connection with the expansion of our network. Cash
provided from financing activities was Rs.433.0 million ($10.0 million) for
fiscal 1999, which consisted primarily of Rs.307.5 million ($7.1 million) of
net proceeds raised in a private placement of our equity shares to South Asia
Regional Fund and Satyam Computer Services, and Rs.136.5 million ($3.1 million)
of proceeds from a term loan from the Export Import Bank of India.
Our aggregate billings for fiscal 1999 were approximately Rs.174.8
million. This amount represents amounts receivable by us from our customers for
services to be provided over various periods of time. In accordance with our
revenue recognition policy, we recognized Rs. 103.3 million and deferred
Rs.71.5 million of billings in fiscal 1999. Our deferred revenues balance was
Rs.92.5 million as of June 30, 1999.
Cash used in operating activities of Rs.74.0 million during fiscal 1998
was primarily attributable to a net loss of Rs.100.6 million, partially offset
by depreciation of plant and equipment of Rs.18.8 million and an increase in
trade accounts payable of Rs.15.5 million. Cash used in investment activities
during fiscal 1998 was Rs.77.1 million, principally as a result of the purchase
of network equipment and software. Cash provided from financing activities was
Rs.159.4 million in fiscal 1998, which consisted primarily of Rs.122.0 million
of unsecured debentures issued to Citibank, N.A. and Rs.38.5 million of net
proceeds raised in a private placement of our equity shares to Satyam Computer
Services.
As part of our business strategy, we intend to invest significant amounts
of capital over the next 12 to 24 months to fund network infrastructure
expansion and enhancements, to develop content for our Internet portal
business, to advertise and promote our brand and to repay debt. As of June 30,
1999, we had spent approximately Rs.355.7 million ($8.2 million) to develop and
deploy our network infrastructure. We estimate that we will spend approximately
Rs.869 million ($20 million) to extend our network infrastructure to 40 cities
in India by April 2000. As of June 30, 1999, we had aggregate commitments for
capital expenditures in an amount equal to approximately Rs.28.2 million ($0.6
million) of which we had advanced approximately Rs.7.2 million ($0.2 million).
We expect to incur operating losses and negative cash flows from operations for
the foreseeable future. As of June 30, 1999, we had approximately Rs.10.4
million ($0.2 million) of cash and cash equivalents for our working capital
needs, as compared to Rs.4.8 million as of June 30, 1998. As of June 30, 1999,
we had Rs.78.5 million ($1.8 million) of capacity under our Rs.215.0 million
($4.9 million) term loan with the Export Import Bank of India.
We may use a portion of the proceeds from this offering for possible
strategic investments, partnerships and acquisitions. If appropriate
opportunities can be developed, we believe that our growth could be accelerated
by selective investments or acquisitions in India, particularly in Internet
service providers that have developed local or regional points of presence in
markets where we have not yet established a presence. We may also consider
opportunities to acquire sources of content for our Internet portal. We have
engaged in
39
<PAGE>
preliminary discussions involving several transactions of this sort, but have
no agreements as of the date of this prospectus. We expect that once we have
the net proceeds provided by this offering available to us, we will become more
aggressive in our efforts to identify one or more investment or acquisition
opportunities. However, we cannot assure you that we will be able to identify
or complete any such transaction on favorable terms, or at all.
We currently anticipate that our available cash resources combined with
the net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements as discussed above for at
least 12 months after the date of this prospectus. Our ability to raise funds
through the sale of equity is limited by foreign ownership restrictions imposed
on us by Indian law and the terms of our Internet service provider license.
These restrictions provide that the maximum total foreign equity investment in
our company is 49%. For additional information, please see "Restrictions on
Foreign Ownership of Indian Securities" on page 80. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of our shareholders and the holders of our ADSs will be
reduced and these securities may have rights, preferences or privileges senior
to those of our shareholders and the holders of our ADSs. We cannot assure you
that additional financing will be available on terms favorable to us, or at
all. If adequate funds are not available or are not available on acceptable
terms, our ability to fund and expand our operations, take advantage of
unanticipated opportunities, develop or enhance Internet content, features or
services, or otherwise respond to competitive pressures will be significantly
limited. Our business, results of operations and financial condition could be
materially adversely affected by any such limitation.
Income Tax Matters
As of June 30, 1999, we had a net operating loss carryforward of
approximately Rs.42.4 million ($1.0 million) for financial reporting purposes.
Under Indian law, loss carryforwards from a particular year may be used to
offset taxable income over the next eight years.
The statutory corporate income tax rate in India is currently 35.0%. This
tax rate is presently subject to a 10.0% surcharge resulting in an effective
tax rate of 38.5%. The Finance Minister of India has indicated that the 10.0%
surcharge would be effective for a period of only one year, commencing April 1,
1999. However, we cannot assure you that the 10.0% surcharge will be in effect
for only one year or that additional surcharges will not be implemented by the
government of India. Dividends declared, distributed or paid by an Indian
corporation are subject to a dividend tax of 11.0%, including the presently
applicable surcharge, of the total amount of the dividend declared, distributed
or paid. This tax is not paid by shareholders nor is it a withholding
requirement, but rather it is a direct tax payable by the corporation.
Effects of Inflation
Inflation has not had a significant effect on our results of operations
and financial condition to date. However, India has experienced relatively high
rates of inflation. According to the Economist Intelligence Unit, the rates of
inflation in India for 1996, 1997 and 1998 were 9.0%, 7.2% and 14.0%,
respectively, and the projected rate of inflation in India for 1999 is 9.3%.
Under our Internet service provider license, we are given the right to
establish the prices we charge to our subscribers, as determined by market
forces. However, under the conditions of our license, the Telecom Regulatory
Authority of India may review and fix the prices we charge our subscribers at
any time. If the Telecom Regulatory Authority were to fix prices for the
Internet service provider services we provide, we might not be able to increase
the prices we charge our subscribers to mitigate the impact of inflation, which
could have a material adverse effect on our business, results of operations and
financial condition.
40
<PAGE>
Debt Financing
In June 1998, we obtained from the Export Import Bank of India a term
loan of Rs.215.0 million. This term loan is secured by a first charge on our
fixed assets and is guaranteed by Satyam Computer Services. The loan bears
interest at a rate of 15.5% per annum and is repayable in six equal half-yearly
installments commencing on December 20, 1999.
In June 1999, we obtained from IDBI Bank Ltd. short term loan commitments
aggregating Rs.100.0 million and a short-term credit facility of Rs.10.0
million. We used the proceeds from the short-term loans and the short-term
credit facility to purchase telecommunication equipment, including Internet
switches, for our network, and in turn repaid substantially all of this
indebtedness with the proceeds from the issuance of equity shares to Sterling
Commerce.
Impact of the Year 2000
Introduction. The term "Year 2000 issue" is a general term used to
describe the various problems that may result from the improper processing of
dates and date-sensitive calculations by computers and other machinery as the
year 2000 is approached and reached. These problems generally arise from the
fact that most of the world's computer hardware and software have historically
used only two digits to identify the year in a date, meaning that the computer
may fail to distinguish dates in the 2000's from dates in the 1900's. If not
corrected, these miscalculations could result in a disruption of our
operations.
State of Readiness. We are currently implementing a comprehensive plan
for us to become Year 2000 ready. Our overall readiness plan consists of the
following phases:
. preparing an inventory of all software and hardware items affected by
the Year 2000 issue;
. testing our internally developed software for quality assurance;
. contacting third-party vendors, licensors and providers of hardware,
software and services regarding their Year 2000 readiness;
. repairing or replacing components that are determined not to be Year
2000 compliant; and
. creating contingency plans to address potential Year 2000 failures
that we cannot control or have not previously been able to detect or
repair.
Specific steps in our Year 2000 assessment which we have completed to
date include:
. retaining Satyam Enterprises, an affiliate of Satyam Computer
Services, to conduct a Year 2000 assessment of all of our network
hardware and software, including our computers, applications
software, power supply systems and relay switches;
. identifying critical suppliers and communicating with them about
their plans and progress in addressing any Year 2000 problems they
may face; and
. performing Year 2000 simulations to verify performance by
artificially moving the date forward from December 31, 1999 to
January 1, 2000.
The Year 2000 readiness plan described above is being carried out across
the three critical areas where we believe the Year 2000 issue might affect our
business:
. software products which are supplied by us to our subscribers and
customers;
. our information and technology systems; and
. our non-information technology systems.
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<PAGE>
The results of the steps we have completed indicate that substantially all of
our information technology and non-information technology systems are Year 2000
compliant. As a result, we do not anticipate upgrading or modifying any major
internal computers, applications or equipment. In addition, we have contacted,
and obtained verbal or written certification of Year 2000 compliance from, more
than 25 of our third-party vendors, licensors and providers of hardware,
software and services. We expect to receive certification from all of our
private vendors, licensors and providers by September 1999. However, we do not
anticipate receiving Year 2000 compliance certification from the Department of
Telecommunications on which we are dependent for leased lines and international
gateways to the Internet. We cannot assure you that these facilities are Year
2000 compliant.
Costs. We have not incurred any material expenses to date in connection
with the implementation of our Year 2000 program, and we estimate that we will
incur a total of Rs.2.0 million in expenses. These costs will be expensed as
incurred. We currently believe these costs will not have a material effect on
our financial condition, liquidity or results of operations. To date, we have
not deferred any specific information technology projects due to our Year 2000
efforts.
Risks. We are not currently aware of any significant Year 2000 compliance
problems which would materially harm our business, results of operations or
financial condition. During our remaining assessment, we may discover Year 2000
compliance problems in our hardware, software or computer systems that may
require substantial repair or replacement. In addition, material third-party
software, hardware or services incorporated into our systems may contain Year
2000 compliance problems that require substantial repair and/or replacement.
The failure to correct any material Year 2000 problem, including a failure on
the part of the Department of Telecommunications to be Year 2000 compliant,
could materially harm our business, results of operations and financial
condition for the following reasons:
. new subscribers or customers may not be able to sign up for our
Internet services, resulting in reduced growth and lower
effectiveness of our marketing efforts;
. current subscribers or customers may have difficulty using our
services or receiving adequate customer support, which may result in
increased attrition, higher customer support costs and reduced
revenue; and
. we may be subject to claims of mismanagement, misrepresentation or
breach of contract and related litigation, which could be costly and
time-consuming to defend and, if defended unsuccessfully, could
result in the imposition of substantial fines or judgments.
We cannot assure you that governmental agencies, utility companies,
third-party service providers and others outside our control will be Year 2000
compliant. The failure by these entities to be Year 2000 compliant could result
in a systemic failure beyond our control, including, for example, a prolonged
failure of Internet, telecommunication and/or electrical systems, which could
also prevent us from providing our services, or prevent users from accessing
our services, either of which would materially harm our business, results of
operations and financial condition.
Contingency Plans. We are still engaged in an ongoing Year 2000
assessment and have not yet developed any contingency plan. Contingency
planning will be conducted as our ongoing assessment and as feedback received
from third parties necessitates. We estimate that the development of our
contingency plan will be substantially completed by November 1999.
Impact of Recently Issued Accounting Standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999. We currently do not engage or plan to engage in derivative instruments or
hedging activities.
42
<PAGE>
BUSINESS
Background
We are the second largest national provider of Internet access and
Internet services to consumers and businesses in India, based on number of
customers as of August 31, 1999. We offer Internet access to both consumers and
corporate customers. We provide private network services, business-to-business
electronic commerce solutions and website development and hosting services to
businesses in India. We also operate an on-line portal and other on-line
services. Our comprehensive range of products and services enables our consumer
and business customers to communicate, transmit and share information, access
on-line content and conduct business remotely using our private data network or
the Internet. We began providing corporate network and electronic commerce
services to businesses in April 1998, and we currently have more than 300
corporate customers. We launched our Internet service provider business in
November 1998, becoming the first private Internet service provider to begin
service after the Indian government, which controls the largest Internet
service provider in India, opened the market to private competition. As of
September 30, 1999, we had more than 87,000 subscribers for our consumer
Internet access service, Satyam Online. We also operate an on-line portal,
satyamonline.com, and related content sites specifically tailored for Indian
interests worldwide. During September 1999, our six websites generated
approximately 12.0 million page views. We currently operate India's largest
national private data network utilizing Internet protocol, which is an Internet
industry standard for tracking Internet addresses, routing outgoing messages
and recognizing incoming messages. We own and operate points of presence in 25
of the largest metropolitan areas in India. Points of presence are
telecommunications facilities located in a particular market which allow our
customers to connect to the Internet through a local telephone call.
We seek to become the premier provider of Internet services in the Indian
market. We believe that demand for our services is significant in India and
growing rapidly as consumers and businesses seek alternatives to the
communications services offered by India's government-controlled telecom
providers. We intend to continue to focus on providing superior network
performance and high levels of customer service and technical support to
increase our subscriber base and maximize customer satisfaction.
Industry Overview
Development of the Internet. According to International Data Corporation,
the total number of Internet users worldwide is expected to grow from
approximately 140 million in 1998 to 400 million in 2002. The International
Data Corporation market data presented above and elsewhere in this prospectus
shows International Data Corporation's estimates derived from a combination of
vendor, user and other market sources and therefore may differ from numbers
claimed by specific vendors using difference market definitions or methods.
There can be no assurances that this projected amount will be achieved. The
large and increasing number of home and office computers linked to the
Internet, advances in network design, increased availability of Internet-based
software and applications, the emergence of useful content and electronic
commerce technologies, and convenient, fast and inexpensive Internet access
will drive Internet growth and usage in the near future.
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<PAGE>
Special Communications Needs of Businesses. As the Internet becomes more
developed and reliable, businesses are increasingly utilizing the Internet for
functions critical to their core business strategies such as sales and
marketing, customer service and project coordination. The Internet presents a
compelling profit opportunity for businesses by enabling them to reduce
operating costs, access valuable information and reach new markets. To maintain
a significant presence on the Internet, businesses typically purchase Internet
access services and establish a website. Internet access provides a company
with its basic gateway to the Internet, allowing it to transfer e-mail, access
information and connect with employees, customers and suppliers. A website
provides a company with a tangible identity and an interactive presence on the
Internet. Many corporations are also converting their information systems and
databases to web-enabled systems. International Data Corporation estimates that
revenue from Internet web hosting services worldwide will grow at a rate that
averages 96.0% annually from $0.8 billion in 1998 to $11.8 billion in 2002.
International Data Corporation also estimates that revenue from electronic
commerce spending worldwide will grow at a rate that averages 98% annually from
$50.4 million in 1998 to $733.6 million in 2002.
The Opportunity in India. As with many developing nations, the
telecommunications infrastructure in India historically has been controlled by
government-controlled telecom providers. The resulting service has been and
remains inferior to service in developed countries. Consequently, the services
available and the penetration of those services into the base of businesses and
consumers in India has, to date, been limited. At the same time, however, the
Indian economy continues to modernize and expand, particularly in sectors such
as software development that are dependent on a reliable communications
network. The growth of these industries is leading to an increasing base of
personal computers and wired homes and businesses in India with a resulting
increased demand for Internet services. We believe these trends, which mirror
trends in more mature economies, will continue to develop in India. Set forth
below is a table comparing the penetration of computers and on-line access in
India compared to the United States and the Asia-Pacific region in 1998:
<TABLE>
<CAPTION>
Asia-Pacific
India United States Region(1)
----- ------------- ------------
(in millions, except
percentages)
<S> <C> <C> <C>
Population(2).......................... 984.0 270.3 2,769.6
Internet users......................... 0.5 62.8 10.2
Internet users as a percentage of
population............................ 0.0% 23.2% 0.4%
On-line devices........................ 0.3 87.4 9.5
On-line devices as a percentage of
installed base........................ 11.0% 54.5% 24.9%
</TABLE>
--------
(1) Australia, Hong Kong, India, Indonesia, South Korea, Malaysia, New
Zealand, Philippines, China, Singapore, Taiwan, Thailand and
Vietnam.
(2) 1998 population data from U.S. Census Bureau.
Source: International Data Corporation, 1999.
The ability to exploit the Internet service provider and other data
service markets in India is currently inhibited by bandwidth limitations
imposed by cost and technical obstacles. Bandwidth refers to the measurement of
the volume of data capable of being transported in a communications system in a
given amount of time. Bandwidth rates are commonly expressed in terms of Kpbs
(kilobits per second, or thousands of bits of data per second) or Mpbs
(megabits, or millions of bits of data per second). Generally, bandwidth
remains very expensive in India. Prices for bandwidth are set by two
governmental agencies in India, the Department of Telecommunications and the
Telecom Regulatory Authority and have remained high due to, among other things,
capacity constraints. Further, limitations in network architecture limit
consumer telephone dial-up connection speeds to 28 Kbps and below, less than
the 33 to 56 Kbps on conventional dial-up telephone lines, and significantly
less than the up to 1.5 Mbps on cable modems, in the United States.
Improvements in the public telecommunications infrastructure and private
network expansion are expected to diminish these limitations over time. As
network capacity increases worldwide and the cost to transmit data over the
Internet continues to decrease, we also expect the demand for Internet access,
on-line content and similar services to increase.
44
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To date, a significant amount of the usage of Indian content sites on the
World Wide Web has been driven by Internet users outside of India. We expect
this growth in personal computers and Internet users to increase the demand for
Internet content directed towards domestic Indian consumers as well as the
amount of electronic commerce in India. Set forth below is a table summarizing
International Data Corporation's projections for Internet use and electronic
commerce revenue in India:
<TABLE>
<CAPTION>
Annualized
1998 2002 growth
------------ -------------- -----------------
(in millions, except annualized growth)
<S> <C> <C> <C>
Indian Internet users........ 0.5 4.5 76%
Indian Installed personal and
network computer base....... 1.9 8.2 44%
Indian Internet commerce
revenues.................... $ 3.5 $ 593.6 260%
</TABLE>
--------
Source: International Data Corporation, 1999
Private market participants have not been able to exploit the market
opportunities in India until recently because the regulatory environment in
India largely prevented any competition with the national government-controlled
telecom providers. Until November 1998, the only Internet service provider
permitted in India was VSNL, a government sponsored and majority owned entity,
which at that time had approximately 150,000 subscribers. VSNL began providing
Internet access on August 15, 1995. We currently estimate that VSNL has
approximately 300,000 subscribers. On November 6, 1998, the government opened
the Indian Internet service provider market to private competition. As of June
30, 1999, the Indian government had granted Internet service provider licenses
to 129 companies, including 22 national licenses, 42 regional licenses and 65
local licenses. The licensees include cable television operators and joint
ventures between local companies and large international telecom providers.
Internet service provider licenses are granted for 15 years, with only nominal
license fees. Internet telephony is not permitted by the current regulations.
Currently, pricing of Internet service provider services is not regulated by
the government of India, although it has the power to elect to do so.
Satyam Solution
We believe that the growth of the Internet and other network services in
India has been inhibited by relatively high costs and poor user experiences
caused by an inadequate telecommunications infrastructure and slow network
connection speeds. We are committed to expanding and enhancing our private
network backbone and to providing high quality technical support to attract
users to our services. We believe that our products and services provide our
customers with the ability to exchange information, communicate and transact
business over the Internet with speed, efficiency, reliability and security
superior to other Internet service providers. Key advantages of the Satyam
solution include:
. National private Internet protocol network backbone. We currently
operate India's only private national Internet protocol data network.
Our network provides the platform for the national delivery of Internet
access to consumers as well as the backbone for our full range of
corporate network and technology services. Our private network
infrastructure allows corporations to establish virtual private
networks and electronic data interchanges without dealing directly with
the government telecom providers. The planned development of our own
Internet gateways will further reduce our reliance on the government
telecom providers.
. Superior end-user performance and customer support. We provide a high
level of customer service, network performance and technical support to
maximize customer satisfaction. Currently, approximately 40% of our
employees are engaged in our customer service or technical support
departments, which operate 24-hours-a-day, seven-days-a-week. Our
network engineers continually monitor network traffic and congestion
points to deliver consistent, high quality network performance. We plan
to maintain a relatively low ratio of subscribers to modems. As of June
30, 1999, our subscriber to modem ratio was approximately ten to one.
Our strategy of providing superior network performance and customer
service is designed to result in significant customer growth from
referrals and industry recognition.
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<PAGE>
. End-to-end network solutions for business customers. We provide our
business customers with a comprehensive range of Internet,
connectivity and private network solutions complemented by a broad
base of web-based business applications. Our corporate services range
from dial-up and dedicated Internet access, international roaming to
virtual private networks, web implementation and electronic commerce
solutions. Our end-to-end solutions enable our corporate customers to
address their networking and data communication needs efficiently
without having to assemble products and services from different
value-added resellers, Internet service providers and information
technology firms.
. Internet content and electronic commerce websites customized for the
Indian market. We view the Indian market as a series of specific
market segments with unique cultural and topical interests, rather
than an extension of a homogeneous, worldwide Internet market. We
have assembled a team of India-based employees familiar with the
local culture, language and business environments in our markets to
develop Internet content and electronic commerce websites tailored
for the Indian market. We regularly incorporate new and original
third-party content suited to our local and regional audiences to
enhance our customers' on-line experience and to attract new users
both within India and abroad. As a result of our local market
knowledge, we have been able to increase traffic flow to our websites
and to create brand awareness for the Satyam Online service.
. Strategic partnerships with industry leaders. We have developed
exclusive strategic relationships with leading Internet and
telecommunications manufacturers. For example, we are the exclusive
network partner for CompuServe Network Services, providing its
customers with roaming services in India. Our exclusive arrangements
with Sterling Commerce and Open Market provide our customers access
to cutting edge business-to-business electronic data and
communication applications and Internet electronic commerce software.
Business Strategy
Our goal is to become the premier provider of Internet and network
services to consumers and businesses in India. Our principal business
strategies to accomplish this objective are:
. Increase penetration in our existing markets by expanding awareness
of the Satyam Online brand name to capitalize on our first mover
advantage in India. We intend to capitalize on our first-to-market
advantage in India to establish national service and a brand name in
advance of other private competitors. We are presently the largest
national independent Internet service provider in India, based on
number of subscribers. We currently operate in 25 cities in India and
expect to provide service in 40 cities by April 2000. We intend to
accelerate penetration within our existing markets and enter
additional targeted markets by creating awareness of the "Satyam
Online" brand name. We intend to make Satyam Online synonymous with
superior Internet connectivity and with on-line content tailored
specifically for the Indian market and Indian interests worldwide.
Our marketing strategy includes print, television and radio
advertising, direct mailing campaigns targeting personal computer
owners, co-branding with "cybercafes" and joint-marketing programs
with leading schools and universities in India.
. Expand our products and services with new technologies to enable our
customers to use the Internet more effectively. We continually seek
to expand the breadth of our product and service offerings with new
technologies. For example, we recently opened the first prototype
Satyam cybercafe to tap the large non-personal computer owner market
in India. Our cybercafes will prominently display the Satyam Online
brand and offer a full range of our Internet connectivity services.
We intend to introduce a number of other new products and services in
the near future, including e-mail designed for regional Indian
dialects, a user customized portal site, tele-voice mail, e-mail to
fax, micro-payments and a supply chain management product.
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<PAGE>
. Strengthen our Internet portal and other Internet content websites
with more India-specific content tailored to Indian interests
worldwide. Our portal, satyamonline.com, functions as an initial
gateway to the Internet, the user's starting point for web browsing
and other Internet services, for our consumer Internet service
provider subscribers. The Satyam Online portal is a media rich, user
friendly, interactive website offering hyperlinks to a wide variety
of websites and services, including our own websites. To achieve our
goal of developing the premier Internet portal focused on the Indian
market, we intend to continue to expand and improve the quality of
satyamonline.com, and are actively developing additional proprietary
websites oriented towards topical and cultural interests of Indians
worldwide. As the availability of Internet access expands in India,
we believe that increasing numbers of Internet users will be
attracted to our high quality websites and on-line content designed
specifically for the Indian consumer. We will seek to attract
advertisers, electronic commerce merchants and third-party content
providers trying to reach our users in order to generate incremental
revenues for Satyam Online.
. Expand customer distribution channels through strategic partnerships
to take advantage of the sales and marketing capabilities of our
strategic partners. We intend to continue to expand our customer
acquisition channels, for both our consumer Internet access and
corporate network and technology services. We have arrangements with
two leading personal computer manufacturers, Compaq and Hewlett-
Packard, to bundle our Satyam Online Internet access service with the
sale of their personal computers in India. We are working with
Philips Electronics to deploy a television set-top box in India for
accessing the Internet using phone lines. We have also formed
strategic alliances with computer and electronics retailers. We
expect to form additional strategic alliances and referral programs
in the future with selected telecommunication service and equipment
suppliers, network service companies, systems integrators, computer
resellers and retail chains in India.
. Invest in the continued enhancement and expansion of our network
infrastructure to support customer growth, enter new markets and
accommodate increased customer usage. We intend to continue to
increase the capacity and geographic reach of our network in order to
support subscriber growth, enter new markets and accommodate
increased customer usage. We remain committed to using proven
technologies and equipment and to providing superior network
performance. We recently deployed asynchronous transfer mode, or ATM,
switches on six points of presence along our network. These ATM
switches enable us to allocate our network capacity more efficiently.
Our Internet service provider license permits us to establish and
maintain our own direct connections to the international Internet,
either by purchasing satellite earth stations or by leasing or
purchasing capacity on transoceanic fiber optic cables. We believe
that as the size and capacity of our network infrastructure grows,
its large scale and national coverage will create economies of scale
and barriers to entry for our competitors.
. Pursue selective strategic investments, partnerships and acquisitions
to expand our customer base, increase utilization of our network and
add new technologies to our product mix. We believe that our growth
can be supplemented by selective acquisitions of complementary
businesses, particularly Internet service providers that have
developed local or regional points of presence and that have a
significant or growing subscriber base in our current or targeted
markets. We believe that as the Internet service provider market in
India evolves, customers will place greater emphasis on Internet
service provider performance, network coverage, reliability, value-
added services and customer support. As a result, smaller start-up
Internet service providers may be unable to remain competitive on a
national or regional basis, unless they significantly expand the
scope of their operations. These trends could lead to a future
consolidation of Internet service providers in India. In addition, we
may seek to expand our market presence in our corporate network
business through the acquisition of web hosting, data center, web
implementation and/or systems integration companies. We may also
consider opportunities to acquire third-party websites and sources of
additional on-line content and technology for our Internet portal and
proprietary website businesses.
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Service Offerings
We offer a wide range of Internet and other network services to meet the
needs of consumers and corporate customers. These services can be divided into
three categories:
. consumer Internet access services;
. corporate network and technology services; and
. on-line portal and content offerings.
Consumer Internet Access Services
We launched our consumer Internet service provider business on November
22, 1998, just 15 days after the government of India opened the market to
private competition. Within 45 days, we had initiated service in 12 cities,
including Ahmedabad, Bangalore, Bombay (Mumbai), Calcutta, Cochin, Coimbatore,
Delhi, Hyderabad, Ludhiana, Madras (Chennai), Pondicherry and Pune. We
currently own and operate points of presence in 25 of the largest metropolitan
areas in India. We plan to extend service to 40 cities by April 2000 which we
believe will allow us to provide Internet access services to approximately 85%
of the installed personal computer base in India. As of September 30, 1999, we
had more than 87,000 subscribers. Our expansion plan targets major metropolitan
areas and state capitals that we believe have a sufficient number of installed
personal computers to support a point of presence.
Our strategy is to offer better and more extensive services to our
subscribers than our competitors, with an emphasis on ease of use. With VSNL
and many of the regional access providers, the user must apply for service and,
frequently, wait one or more weeks for service to begin. Our subscribers
purchase a ready-to-use CD-ROM available at bookstores, computer stores and
universities, or bundled with a personal computer, to access our service
immediately. Our on-line registration process is available to initiate service
and purchase renewals. We also support our subscribers with a 24-hour-a-day,
seven-day-a-week call center staffed with trained technicians.
Our service offerings come in a number of packages, designed to attract
beginning Internet users and service the needs of advanced users. Our Discover
25 offering is a "starter pack" designed for anyone wishing to explore the
Internet or as a second connection for subscribers who primarily use one of our
competitors' services. Each of our other Discover offerings is designed for
regular Internet users. All of our Discover Internet access offerings are
bundled with a package of value-added products, including one megabyte of
either POP3 or Imap e-mail, a one page pre-templated web page and our 24-hour-
a-day, seven-day-a-week customer service. Our Discover offerings are offered
only on a prepaid basis and can be renewed on-line. Each Discover offering is
bundled with approximately Rs.4,000 ($92) retail value of licensed software,
including Viagrafix and E-safe. Viagrafix is an interactive computer-based
tutorial designed to introduce the Internet to new users. E-safe is a virus
removal and parental control tool. We also offer e-mail capability without
Internet access. Our consumer Internet service provider offerings include:
<TABLE>
<CAPTION>
Service Summary Description Initial Price Renewal Price
------------ ---------------------------- --------------- ---------------
<C> <S> <C> <C>
Discover 25 25 hours of Internet access Rs.990 ($23) Not applicable
over a 3-month period
Discover 100 100 hours of Internet access Rs.3,300 ($76) Rs.2,600 ($60)
over a 10-month period
Discover 250 250 hours of Internet access Rs.6,000 ($138) Rs.5,600 ($129)
over a 12-month period
Discover 500 500 hours of Internet access Rs.8,900 ($205) Rs.8,400 ($193)
over a 12-month period
Venture 500 500 hours of Internet access Rs.17,000 ($391) Rs.16,500 ($380)
over a 12-month period by up
to five concurrent users
NetMail Additional e-mail capability Rs.2,000 ($46) Not applicable
without Internet access
</TABLE>
48
<PAGE>
The most common connection technique is for subscribers to dial-up to our
system using a personal computer configured with a modem. A subscriber who is
within local dialing range of one of our points of presence can access the
Internet with a local telephone call. In addition to paying for Internet
access, the customer is responsible for the cost of the call, which currently
is 1.3 rupees (3.0c) per 3 minutes. We estimate that substantially all of our
subscribers access our services with a local telephone call. Subscribers who
access our services with a long-distance telephone call are responsible for the
long-distance charges.
We recently announced a collaboration with Indira Gandhi National Open
University to make trial Internet access available to 70,000 students of the
School of Information and Computer Science. Under the program, participating
students pay approximately 40% of our normal hourly access charges for 20 hours
of Internet access between the hours of 11:00 p.m. and 7:00 a.m. These students
comprised approximately 5,000 of our 60,000 subscribers as of June 30, 1999,
our more than 77,000 subscribers as of August 31, 1999 and our more than 87,000
subscribers as of September 30, 1999.
We believe that a critical element of consumer satisfaction is to have an
adequate number of access lines available to assure prompt and reliable
connection to our service. Telephone lines are in short supply in India, and
there is frequently a waiting period of one or more months to acquire
additional lines. We have ordered in advance a significant number of additional
lines to provide timely capacity additions as we grow our service. We plan to
maintain a relatively low ratio of subscribers to modems. When we commence
service in a city, we initially have approximately one modem-equipped line
available for each ten subscribers. As of June 30, 1999, our subscriber to
modem ratio was approximately ten to one.
Subscribers local to a call center can call our call center facility for
customer service and technical support through a local telephone number.
Subscribers can also e-mail their questions directly to a customer service and
technical support address at our company.
Corporate Network and Technology Services
We offer a comprehensive suite of technology products and network-based
services that provide our corporate customers with end-to-end Internet and
private network access. Our products and services enable our corporate
customers to offer a full range of business-to-business and electronic
commerce-related services.
Our business services consist of the following:
Internet Access. We offer dial-up Internet access as well as a variety of
dedicated Internet access solutions which provide high-speed continuous access
to the Internet. Our dedicated Internet access services are provided to
corporate customers at speeds ranging from 28 Kbps to 128 Kbps. Our Venture 500
Plan provides dial-up access to the Internet tailored to corporate customers
requiring multiple e-mail identifications and includes our 24-hour-a-day,
seven-day-a-week customer service. A corporate customer which is within local
dialing range of one of our points of presence can access our services with a
local telephone call. We also offer an international roaming service which
caters to business executives who travel outside of India. Our principal
Internet access options for corporate customers include:
<TABLE>
<CAPTION>
Service Summary Description Pricing
----------- ----------------------------- ----------------------------- ---
<C> <S> <C> <C>
Leased Line Dedicated high speed Internet Rs.500,000 ($11,507) annually
access at up to 64 Kbps
ISDN Dedicated high speed Internet Rs.350,000 ($8,055) annually
access at up to 128 Kbps
PSTN Dedicated Internet access at Rs.180,000 ($4,143) annually
up to 28.8 Kbps
NetName Domain name registration Rs.5,000 ($115)
NetWorld 25 hours of Internet access Rs.7,000 ($161)
over a 12-month period while
roaming outside India
NetMail Additional e-mail capability Rs.2,000 ($46)
without Internet access
</TABLE>
49
<PAGE>
Private Network Services. We offer a wide variety of private network
services for our small to large corporate customers. Many companies today in
India have established private data communication networks, which are often
referred to as wide area networks, or WANs, and built on expensive leased
lines, to transfer proprietary data between office locations. We were the first
company in India to offer a cost-effective replacement alternative to WANs
using virtual private networks which provide secure transmission of data using
Internet protocol over our private network infrastructure. Virtual private
network products, often in combination with a website, are also the basis for
offering intranet and extranet services. Intranets are corporate networks that
rely on Internet-based technologies to provide secure links between corporate
offices and secure access to company data. Extranets expand the network to
selected business partners through secure links on the Internet. We also allow
a company to outsource all of its WAN requirements to us. Our virtual private
network solutions offer internetworking without the wait periods created when
obtaining these services from the government provider. Our nationwide Lotus
Notes management system provides the software and framework for our customers
to utilize their private network systems to interlink their offices and
exchange information. We also support the Microsoft Exchange messaging system.
We are the exclusive network partner to CompuServe Network Services in
India, and provide the India portion of CompuServe's global network. Through
our partnership, we provide the ability for CompuServe customers traveling in
India to connect to their corporate network and systems resources using the
Internet. We offer Internet access through a local phone call in all locations
in India serviced by our network points of presence. Our service allows
Internet connectivity from India without incurring international telephone
charges. For providing our network services, we receive a portion of the fees
paid by CompuServe's customers to CompuServe when using its service in India.
Business-to-Business Commerce Solutions. We deliver complete electronic
data interchange, or EDI, and business-to-business electronic commerce
solutions to our corporate customers through our relationships with key vendors
of Internet-related hardware, software and services. Our EDI solutions provide
supply chain integration and help coordinate the manufacturing and distribution
process for our corporate customers. Our electronic commerce solutions enable
business-to-business electronic commerce over our network or the Internet. We
have an exclusive agreement with Sterling Commerce to provide their EDI and
electronic commerce software and systems in India. These products include:
. The CONNECT product line that provides the software infrastructure
for moving and managing information inside and outside the
enterprise;
. The COMMERCE product line that provides value-added services to help
customers build, manage, and service global commerce business
communities;
. The GENTRAN product line that provides software for the integration
of business processes and the automation of business transactions;
and
. EC Managed Services which offer businesses a full range of electronic
commerce outsourcing services and consulting solutions.
Web-based Solutions. We provide comprehensive website design,
development, implementation and hosting services. Since April 1998, we have
developed over 600 websites which we believe makes us one of the largest
website developers in India. Our customers' websites range from basic
informational sites to complex interactive sites featuring sophisticated
graphics, animation, sound and other multimedia content. Our interactive
development capabilities utilize tools such as Hypertext Markup Language, or
HTML, Virtual Reality Markup Language, or VRML, computer animation, composting
and motion capture. We have a dedicated team of design and development
personnel who are available for large-scale web development projects. We have a
long-term exclusive agreement with Open Market to provide their electronic
commerce products and services in India. These products include:
. web-based Internet catalogs with database capabilities of various
sizes;
50
<PAGE>
. Internet publishing software;
. a transaction engine that enables an organization to conduct commerce
over the Internet; and
. a payment gateway to facilitate commerce services to other service
providers or merchants.
We also offer web hosting accounts for companies and other organizations
that wish to create their own websites without maintaining their own web
servers and Internet connections. Our web hosting services feature state-of-
the-art web servers for high speed and reliability, high capacity connections
to the Internet and specialized customer support and security features. We also
offer co-location services for customers who prefer to own their servers, but
require the high performance and reliability of our Internet data center. Co-
location customers are typically larger enterprises employing more
sophisticated Internet hardware and software and having the expertise to
maintain their websites and related equipment.
On-line Portal and Content Offerings
We operate an on-line portal, satyamonline.com, and five related on-line
content sites tailored to needs of Indian interests worldwide. Our portal site
is designed to be the initial launch screen for all of our Satyam Online
customers, but can also be accessed by Internet users worldwide. We seek to
establish satyamonline.com as a leading Indian Internet portal. As a portal, we
provide a gateway to the Internet by offering information services, directory
tools, e-mail, contests, Internet chat and electronic commerce activities such
as online shopping and classified ads. We also allow the user to personalize
the satyamonline.com start page to include links to the user's most frequently
used features on the Internet, including particular search engines, free mail
providers and favorite content sites. Our customization features encourage
users to make satyamonline.com their first stop on the Internet and allow us to
provide special privileges and benefits to our Internet service provider
subscribers compared to users who access satyamonline.com through another
service provider. Our objective is to attract as many users as possible to
generate revenues from advertising, sponsorship fees and electronic commerce
transaction commissions.
In addition to satyamonline.com, our India-specific content sites
include:
<TABLE>
<CAPTION>
Feature Website Description
----------------- ----------------- ------------------------------------------
<C> <C> <S>
News and Features indiaupdate.com Real-time news site with domestic and
international news, weather and
entertainment.
Car and Auto carstreet.com Comparison shopping site for automobiles.
Indian Movies indiatalkies.com Indian movie channel featuring movie
reviews, archives, interviews, chats and
local movie listings.
Carnatic Music carnaticmusic.com Indian classical music site where users
may chat with artists, hear CD music clips
and buy concert tickets on-line. This site
also contains a link to an on-line music
store.
Personal Finance walletwatch.com Personal finance site featuring stock
quotes, portfolio manager, links to
brokerage firms and editorial content.
</TABLE>
Today, there are probably more non-resident Indians, than Indians
residing domestically, with access to the Internet. As a result, many content
sites, including satyamonline.com, have more users located outside of India
than within. However, we believe that the market for content and services
within India will develop rapidly. As a result, this market is the primary
focus of our attention, and the market of non-resident Indians is secondary.
Current Indian residents present a market that advertisers and merchants desire
to reach. To expand usage of our services domestically, we believe that we must
provide more services of daily value, such as the ability to buy groceries or
movie tickets on-line or to check an up-to-date movie review before buying a
ticket. New features that we expect to deploy in 1999 include a drugstore,
travel services featuring hotel and transportation reservation and ticketing,
and an auction service.
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<PAGE>
Strategic Partnerships
We maintain a number of strategic relationships with key vendors of
Internet-related hardware, software and services. Several of these
relationships are exclusive to us in India, subject in some cases to minimum
sales thresholds. These relationships result in two significant benefits.
First, they provide us with the ability to offer valuable products and services
exclusively to our customers in India. In addition, these relationships help us
market our services by providing us with access to our partners' customer
bases. Our network and related services are focused on meeting the needs of
corporate customers, particularly in manufacturing and service organizations,
which have a need to coordinate their activities with satellite operations such
as dealers, distributors, agents and suppliers.
Our key partners are as follows:
CompuServe Network Services. CompuServe Network Services, a unit of MCI
Worldcom, is a world-wide provider of data services. We are the exclusive
network partner to CompuServe Network Services in India, acting as the access
gateway to its global network from India. CompuServe's network business
operates, manages and maintains a global value-added enhanced data network. In
April 1997, we entered into a three-year agreement with CompuServe pursuant to
which each party provides dial-up access services that are sent to the other
party via an international network connection. Each party surcharges its
customers for traffic originated on the other party's network, bills and
collects the amount of such surcharge and remits a portion thereof to the other
party. The cost of the leased line connection between our network and
CompuServe's network is shared between the parties, and each party's
proprietary rights remain the sole and exclusive property of that party. Our
agreement with CompuServe automatically renews at the end of the initial term
and each subsequent term for a period of one year provided there is no default
and the parties have satisfied their respective monetary obligations, subject
to each party's right to elect not to renew the agreement by providing written
notice to the other party at least six months prior to the end of the initial
or any succeeding term.
Sterling Commerce. Sterling Commerce is a leader in the market for
business-to-business electronic commerce software, including communications
software, electronic data interchange, or EDI, software and banking systems
software. In February 1997, we entered into a five-year agreement with Sterling
Commerce pursuant to which Sterling Commerce granted to us the exclusive right
in India, subject to minimum sales thresholds, to market, provide, sublicense,
install, facilitate, maintain and support the electronic commerce network
services, support services and other products developed by Sterling Commerce.
We pay to Sterling Commerce an annual maintenance fee and a percentage of
invoiced charges for Sterling Commerce's products purchased by our customers.
We also paid a license fee to Sterling Commerce in 1997. The license permits us
to use specified proprietary information, as well as trademarks, service marks
and tradenames, of Sterling Commerce in connection with advertising, promoting
and marketing Sterling Commerce's products in India. Our agreement with
Sterling Commerce terminates in 2002 provided that the parties may agree to
renew the term within 30 days of the end of the term, subject to Sterling
Commerce's right to terminate the agreement if we fail to meet any annual sales
threshold. As of June 30, 1999, we had met all sales thresholds under our
agreement with Sterling Commerce.
Open Market. Open Market is a leading platform provider for Internet
commerce worldwide. In June 1997, we entered into a two-year distribution
agreement with Open Market pursuant to which Open Market made us its exclusive
distributor in India of some of its Internet commerce software products,
provided we continue to meet minimum sales thresholds. We purchase copies of
software from Open Market which we resell to our customers. Open Market pays us
a referral fee for software sold to our customers which is not covered by the
agreement. Open Market has granted us a license to use specified proprietary
information and trademarks in connection with our marketing of Open Market
software. Our agreement with Open Market automatically renewed on an exclusive
basis at the end of the initial term through September 2000 and will
automatically renew at the end of each subsequent term provided we continue to
meet minimum sales thresholds, subject to each party's right to elect not to
renew by providing written notice to the other party. Any such additional
extension may be on an exclusive or non-exclusive basis depending on whether we
continue to meet minimum sales thresholds. Open Market may terminate the
agreement if we fail to meet the minimum sales thresholds.
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<PAGE>
Customer Service and Technical Support
We believe that excellent customer support is critical to our success in
attracting and retaining subscribers. We currently provide customer service and
technical support via a local telephone call in all 25 cities in which we have
points of presence. Subscribers can also e-mail their questions directly to a
customer service and technical support address at our company.
Our customer service and technical support staff handles all questions
regarding a subscriber's account and the provision of our services and is
available 24-hours-a-day, seven-days-a-week. As of June 30, 1999, we had
approximately 174 customer service and technical support employees.
Corporate Customers
We have established a diversified base of corporate customers in a
variety of data intensive industries, including financial services, publishing,
retail, shipping and manufacturing. As of June 30, 1999, our corporate customer
base had grown to over 300 customers. Our largest corporate customers based on
revenue for the fiscal quarter ended June 30, 1999 include American Express
Bank, Carborandum Universal Limited, CDC Advisors Limited, Citibank, Compaq,
Computer Associates, Dupont, ESPN Software India Limited, GE Capital Services,
Henkel, Johnson & Johnson, Hutchison Corporate Access, Levi Strauss, Maruti
Suzuki, Philips India, Standard Chartered Bank, Tata British Petroleum, Tata
McGraw Hill, Toyota Kirloskar and Whirlpool India. The customers listed above
accounted for approximately 47% of our revenues in the fiscal quarter ended
June 30, 1999.
Sales and Marketing
Consumer Offerings. A key element of our business strategy is to increase
our brand awareness and market penetration among consumers through a number of
means including:
. an expanded advertising campaign focused primarily on print
advertising combined with a modest amount of television and radio
advertising;
. direct mail; and
. free software to consumers who become subscribers.
In addition, we intend to establish cybercafes under the Satyam Online brand
name, and to enter into relationships with independent cybercafes to co-brand
our websites with their businesses, in order to expand access to our portal and
websites by consumers who do not own a personal computer or have Internet
access at home. We are also developing programs with Indian schools and
universities to provide Internet access to Satyam Online websites. For example,
we recently announced a collaboration with Indira Gandhi National Open
University to make trial Internet access available to 70,000 students of the
School of Information and Computer Science. Under this program, participating
students pay a reduced rate for 20 hours of Internet access during off-peak
hours. As of June 30, August 31, and September 30, 1999, students under this
program constituted approximately 5,000 of our subscribers. To increase
Internet access and use of our websites by personal computer buyers, we have
entered into arrangements with personal computer manufacturers and vendors,
including Compaq and Hewlett-Packard, to have our Internet access software
bundled with their computers.
Corporate Offerings. The principal focus of our sales and marketing staff
is existing and potential corporate customers. We seek to penetrate this market
through trade publication ads, industry trade shows and seminars for the
benefit of industry associations and potential customers. As of June 30, 1999,
we had 411 employees, 178 of whom were dedicated to sales and marketing.
We intend to hire approximately 250 new employees over the next year,
most of whom will be hired into our sales, marketing and customer support
teams. Each new point of presence which becomes operational will be staffed
with between two and five sales and support personnel to call on potential
corporate customers and service our existing customers.
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Technology and Network Infrastructure
We currently operate India's largest national Internet protocol private
data network with points of presence in 25 cities. We own and operate our
network facilities and customer service operations which gives us greater
control over the utilization and quality of our network. We have designed and
built our network using advanced technologies and equipment which allows us to
continue to expand the geographic range of our network, integrate improved data
processing technologies and enhance speed and capacity with little or no
disruption to our customers.
Geographic Coverage. Through our national network of points of presence,
our consumer and business Internet access customers are able to access the
Internet in 25 of the largest markets in India via a local phone call. A point
of presence is commonly defined as the ability to access on-line services in a
market through a local telephone call or local leased lines. As of June 30,
1999, we had backbone points of presence in Ahmedabad, Bangalore, Bombay
(Mumbai), Calcutta, Cochin, Coimbatore, Delhi, Hyderbad, Ludhiana, Madras
(Chennai) and Pune. These backbone points of presence, also called primary
nodes, reside at the core of a larger Internet protocol network with a meshed
topology architecture. We also have additional points of presence, or secondary
nodes, in Baroda, Belgaum, Bhopal, Davengere, Goa, Hubli, Indore, Jaipur,
Jamshedpur, Lucknow, Mangalore, Nagpur and Pondicherry. Each point of presence
contains data communications equipment housed in a secure facility owned or
leased by our company located near a Department of Telecommunications or
Mahanagar Telephone Nigam Limited telephone switching station. Each point of
presence contains a modem bank which receives and aggregates incoming calls
from customers who access our system by modem connection through a local call
on the public telephone system. Our larger corporate customers access the point
of presence directly through leased lines. We plan to have points of presence
in 40 cities by April 2000.
Network Architecture. We ensure network reliability through several
methods and have invested in proven technologies. We use Cisco routers to route
traffic between nodes and an IGX WAN switch to terminate traffic. The routers
and WAN switches are interconnected using a high speed interface. Our
applications and network verification servers are manufactured by Hewlett-
Packard.
The primary nodes on the backbone network are connected by up to 2 Mbps
high speed fiber optic lines that we lease from the Department of
Telecommunications. The secondary nodes are connected by multiple 64 Kbps
leased fiber optic lines. Each node is accessible from at least two other
nodes, allowing us to reroute traffic. We minimize the possibility that system
failures do not interrupt service by automatically activating an ISDN dial-up
on the backbone network in the event any segment goes down. We reduce our
exposure to failures on the local loop by usually locating our points of
presence within one segment of the central telephone exchange. To further
assure our network integrity, we are installing fiber optic connections
directly from each of our primary nodes to the central exchange.
We connect to the international Internet through international gateways
in Bangalore, Calcutta, Delhi, Bombay (Mumbai), Hyderabad and Madras (Chennai).
We currently use international gateways operated by VSNL, the government-
controlled provider of international telecommunications services in India. We
intend to use a portion of the net proceeds from this offering to establish our
own international gateways to the Internet, either by purchasing or leasing
satellite earth stations or by leasing or purchasing capacity on transoceanic
fiber optic cables.
In addition to a fundamental emphasis on reliability, our network design
philosophy has focused on compatibility, interoperability and scalability. At
each level of data transmission, our network is fully compliant with ISO
standards. We use ethernet and Internet protocols to transmit data, thus
ensuring that our network is completely interoperable with other networks and
systems and that we may port any application onto our network. The modular
design of our network is fully scalable, allowing us to expand without changing
the network design or architecture, thus ensuring little or no service
disruption. Finally, we recently deployed Cisco ATM switches on six points of
presence along our network. These ATM switches allow us to allocate our
existing capacity more efficiently by offering frame relay and dedicated
bandwidth.
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Network Operations Center. We maintain a network operation center located
in Madras (Chennai) and a back-up data facility in Bombay (Mumbai). This
facility houses our central network servers as well as our network staff which
monitors network traffic, service quality and equipment at all our points of
presence to ensure a reliable Internet service. Our network operations center
is staffed 24-hours-a-day, seven-days-a-week. We have backup power generators
and software and hardware systems designed to prevent network downtime in the
event of system failures. In the future, we may add additional facilities to
supplement or add redundancy to our current network monitoring capability.
Competition
General. We face competition in each of our markets and expect that this
competition will intensify as the market in India for Internet service provider
services, on-line content and corporate network services and technology
products develops and expands. We compete primarily on the basis of service,
reliability and customer support. Price and ease of use are also competitive
factors.
Internet Access Services. Our principal competitor is VSNL, the
government-controlled telecom provider. VSNL currently has significantly more
subscribers than we do because private companies, such as our company, were not
permitted to enter the Internet service provider market until November 1998. As
of June 30, 1999, 128 private parties, other than our company, have been
granted licenses to operate Internet service providers, 21 of which permit
operation on a national basis in the same manner that we are allowed under our
license. While no other parties had launched a private national Internet
service provider service as of June 30, 1999, we expect competitors to emerge.
Further, we believe that it is inevitable that the large, foreign providers of
Internet service provider services will eventually attempt to enter the Indian
market through local joint ventures or other means. Indian law currently limits
foreign ownership of an Internet service provider to 49%.
In addition, we could face competition from companies that develop new
and innovative techniques to access the Internet. Although growing rapidly,
International Data Corporation estimates that India had an installed base of
only approximately 1.9 million personal computers in 1998. Technology which
permits a connection to the Internet through alternative, less capital
intensive means is likely to be attractive to Indian consumers. A number of
companies, including several collaborating with our company, are planning
alternative Internet access devices, such as set-top boxes for televisions, to
create demand for Internet services in excess of that which could be supported
by the installed base of personal computers. The provider who develops this
technology is likely to have a significant advantage in the marketplace.
On-line Portal. There are several other companies in India that have
developed websites, including indiaworld.com, rediff.com and others, designed
to act as Internet portals. These sites currently have greater traffic than our
site and offer some features that we do not. Further, the dominant Internet
portals continue to be the on-line services and search engine companies based
in the United States, such as America Online, Microsoft Network, Yahoo!,
Excite@Home, Infoseek and Lycos. These companies have been developing specially
branded or co-branded products designed for audiences in specific markets.
Although none of these companies has developed a product designed for India
yet, we believe one or more of them is likely to do so, creating a new source
of competition.
Corporate Network and Technology Services. Our competitors for many
private network services include government services, companies that have built
and operate their own private data networks, satellite communications agencies
such as Hughes, Comsat, HCL Comnet and Bharti BT, and terrestrial network
providers such as Sprint RPG (a joint venture between Sprint and RPG Group),
Wipro Communications Services and Global Electronic Commerce Services.
Many of our existing or potential competitors enjoy substantial
competitive advantages compared to our company, including:
. the ability to offer a wider array of services;
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. larger production and technical staffs;
. greater name recognition and larger marketing budgets and resources;
. larger subscriber bases; and
. substantially greater financial, technical and other resources.
To be competitive, we must respond promptly and effectively to the
challenges of technological change, evolving standards and our competitors'
innovations by continuing to enhance our products and services, as well as our
sales and marketing channels. Increased competition could result in loss of
market share, reduced prices or reduced margins, any of which could adversely
affect our business. Competition is likely to increase significantly as new
companies enter the market and current competitors expand their services.
Intellectual Property
Our intellectual property rights are important to our business. We rely
on a combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our intellectual property. We
require employees, independent contractors and, when possible, suppliers to
enter into confidentiality agreements upon the commencement of their
relationships with our company. These agreements generally provide that
confidential information developed or made known during the course of a
relationship with our company be kept confidential.
Our efforts to protect our intellectual property may not be adequate. Our
competitors may independently develop similar technology or duplicate our
products or services. Unauthorized parties may infringe upon or misappropriate
our products, services or proprietary information. In addition, the laws of
India do not protect proprietary rights to the same extent as laws in the
United States, and the global nature of the Internet makes it difficult to
control the ultimate destination of our products and services. For example,
Indian statutory law does not protect service marks. In the future, litigation
may be necessary to enforce our intellectual property rights or to determine
the validity and scope of the proprietary rights of others. Any such litigation
could be time-consuming and costly.
We could be subject to intellectual property infringement claims as the
number of our competitors grows and the content and functionality of our
website or other product or service offerings overlap with competitive
offerings. Defending against these claims, even if not meritorious, could be
expensive and divert our attention from operating our company. If we become
liable to third parties for infringing their intellectual property rights, we
could be required to pay a substantial damage award and be forced to develop
non-infringing technology, obtain a license or cease selling the applications
that contain the infringing technology. We may be unable to develop non-
infringing technology or obtain a license on commercially reasonable terms, or
at all.
We also rely on a variety of technologies that are licensed from third
parties, including CompuServe, Sterling Commerce and Open Market. The software
developed by these and other companies is used in the satyamonline.com website
to perform key functions. These third-party licenses may not be available to us
on commercially reasonable terms in the future. The loss of any of these
licenses could delay the introduction of software enhancements, interactive
tools and other features until equivalent technology could be licensed or
developed. Any such delays could materially adversely affect our business,
results of operations and financial condition.
The trademark "Satyam" is owned by Satyam Computer Services, our parent
company, and licensed to our company for so long as Satyam Computer Services
continues to own at least 51% of our company. Upon the occurrence of a change
of control in our company, however, Satyam Computer Services may terminate our
license to use the "Satyam" trademark on two years prior written notice. We
have filed trademark applications for "Satyam Online," "Satyam:Net" and
"satyamonline.com" in India. These applications are currently pending, and we
plan to file applications for these marks in the United States.
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Government Regulation
Our business is subject to comprehensive regulation by the Ministry of
Communications through the Telecom Commission and the Department of
Telecommunications pursuant to the provisions of the Indian Telegraph Act of
1885, or Telegraph Act, the India Wireless Telegraphy Act, 1933, or Wireless
Act, and the terms of the Internet service provider license agreement we
entered into with the Department of Telecommunications under which we operate.
Pursuant to the Telegraph Act, the provision of any telecommunications services
in India requires a license from the government of India, obtained through the
Department of Telecommunications. While the Telegraph Act sets the legal
framework for regulation of the telecommunications sector and the Wireless Act
regulates the possession of wireless telegraphy equipment, much of the
supervision and regulation of our company is implemented more informally
through the general administrative powers of the Department of
Telecommunications, including those reserved to the Department of
Telecommunications and other governmental agencies under our license.
In March 1997, the government of India established the Telecom Regulatory
Authority, an independent regulatory authority under the provisions of the
Telecom Regulatory Authority of India Act. The Telecom Regulatory Authority is
an autonomous body consisting of a chairperson and at least two and not more
than four members, and has primary responsibility for the following:
. facilitating competition and promoting efficiency;
. protecting the interests of consumers;
. regulating revenue sharing among service providers;
. ensuring compliance with license conditions;
. setting and ensuring compliance with the time period applicable to
service providers for providing local and long-distance
telecommunications lines;
. ensuring technical compatibility and effective interconnectivity
among different service providers;
. settling differences between service providers;
. advising the government of India on matters relating to the
development of the telecommunications industry; and
. ensuring effective compliance with universal service obligations.
The Telecom Regulatory Authority also has the authority to, from time to
time, set the rates at which domestic and international telecommunications
services are provided in India. The Telecom Regulatory Authority does not have
authority to grant licenses to service providers or renew licenses, functions
which remain with the Department of Telecommunications. The Telecom Regulatory
Authority, however, has the following powers:
. to call on service providers to furnish information relating to their
operations;
. to appoint persons to make official inquiries;
. to inspect the books of service providers; and
. to issue directives to service providers to ensure their proper
functioning.
Failure to follow Telecom Regulatory Authority directives may lead to the
imposition of fines. Decisions of the Telecom Regulatory Authority may be
appealed to High Courts in India.
The authority of the Telecom Regulatory Authority has been the subject of
recent litigation, particularly with respect to its role in introducing new
telecommunications licensees and the scope of its authority to settle disputes
regarding the grant by the Department of Telecommunications of
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telecommunications licenses. The Delhi High Court has held that the authority
of the Department of Telecommunications to issue or amend licenses is not
subject to any prior recommendations of the Telecom Regulatory Authority, and
that any such recommendations are not mandatory. In addition, the Delhi High
Court determined that the Telecom Regulatory Authority does not have
jurisdiction to decide disputes regarding the grant or amendment of a
Department of Telecommunications license. The judgment is subject to the
outcome of a pending appeal. The final outcome of this litigation will affect
the sharing of regulatory authority as between the Department of
Telecommunications and the Telecom Regulatory Authority. The government of
India has formulated the New Telecom Policy, 1999, or NTP. The NTP was cleared
by the Union Cabinet in March 1999 and contemplates a new regime for the
telecom operators, a larger role for Telecom Regulatory Authority, a
restructuring of the Department of Telecommunications and opening up of the
market for long-distance calls.
We began offering Internet access services on November 22, 1998, and we
operate 25 Internet access nodes. In November 1998, the government of India
opened the Internet service provider market to private competition, and the
Department of Telecommunications instituted a mandatory license requirement for
the provision of Internet services. We entered into a license agreement with
the Department of Telecommunications on November 12, 1998 with effect on the
same day, under which we were granted a license to provide national Internet
services on a non-exclusive basis. The terms of our license are generally
consistent with the policy for licensing Internet service providers. The term
of our license is 15 years. Our license can be revoked by the Department of
Telecommunications if we breach the terms and conditions of the license. The
Department of Telecommunications retains the right to take over our network and
to modify, revoke, terminate or suspend the terms and conditions of the license
at any time if, in its opinion, it is necessary or expedient to do so in the
interest of general public, or for the proper operation of the
telecommunications sector or for security considerations. The Department of
Telecommunications also retains the right to review the terms of our license
based on changes in national telecommunications policy. We are not allowed to
assign or transfer our rights under our license without the prior written
consent of the Department of Telecommunications. The license provides that the
total foreign equity in our company may not, at any time, exceed 49% of our
total equity. Telephony on the Internet is not permitted in India, and the
license requires us to take measures to ban carriage of telephone traffic over
the Internet. Our license also requires us to ensure that objectionable,
obscene and unauthorized content, or any other content, messages or
communications infringing copyrights, intellectual property rights and domestic
and international cyberlaws or which is inconsistent with the laws of India, is
not carried on our network. Although under the terms of our license we are free
to fix the prices we charge our subscribers, the Telecom Regulatory Authority
may set prices for the provision of Internet access services generally. We are
permitted to use encryption to safeguard information transmitted over our
network. However, if we use a higher level of encryption than that specified by
the government of India, our license requires us to deposit a set of keys with
the government of India. License fees are waived through October 31, 2003, and
a nominal license fee of Rs.1 per annum is payable from November 1, 2003. Our
obligations under the license are secured by a performance bank guarantee in
the amount of Rs.20.0 million ($0.5 million).
We may be required to import into India computer hardware and Internet
related software purchased from foreign manufacturers for business purposes.
These imports will be subject to the Export and Import Policy as declared by
the Ministry of Commerce. At the time of import, we will be required to pay a
customs duty pursuant to the Customs Tariff Act, 1975. We will also be subject
to the Foreign Exchange Regulation Act, 1973 in connection with payments in
foreign currency to the manufacturers of these products. We will require the
approval of the Reserve Bank of India prior to making these payments.
We may wish to invest in the securities of foreign companies. The Foreign
Exchange Regulation Act, 1973 requires that we obtain permission from the
Reserve Bank of India prior to making any such investment. In addition, foreign
investors may wish to invest in our securities. For information regarding
restrictions on foreign investment in our company, please see "Restrictions on
Foreign Ownership of Indian Securities" on page 80.
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Employees
As of June 30, 1999, we had 411 employees. We currently anticipate hiring
an additional 250 employees, most of whom will be hired into our sales and
marketing and technical support and customer care teams, over the next year. Of
our current employees, 59 are administrative, 178 form our sales and marketing
staffs and 174 are dedicated to technical support and customer care. None of
our employees are represented by a union. We believe that our relationship with
our employees is good.
Facilities
Our approximately 15,000 square foot corporate headquarters are located
in Madras (Chennai), India. We also have additional facilities located in
Ahmedabad, Bangalore, Baroda, Belgaum, Bhopal, Bombay (Mumbai), Calcutta,
Cochin, Coimbatore, Davengere, Goa, Hubli, Hyderabad, Indore, Jaipur,
Jamshedpur, Lucknow, Ludhiana, Madras (Chennai), Mangalore, New Delhi, Nagpur,
Pondicherry and Pune aggregating approximately 42,000 square feet. As we expand
our operations, we anticipate leasing additional facilities in each city in
which we develop a point of presence. We lease all of our current facilities
under leases with terms ranging from 33 months to nine years.
Legal Proceeding
As of the date of this prospectus, we are not a party to any material
legal proceedings.
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MANAGEMENT
The following table sets forth, as of September 30, 1999, the name, age
and position of each director and executive officer of our company.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
R. Ramaraj(1)(2) 49 Chief Executive Officer and Director
A. Srinivasagopalan 44 Senior Vice President
George A. Ajit 40 Vice President, Human Resources
Lalit Bhojwani 43 Vice President, Electronic Commerce
Business
Padma Chandrasekaran 38 Vice President, On-line Business
V.V. Kannan 40 Vice President, Cyber Cafes
Pradeep Lakshmanan 50 Vice President, Internet Sales
N. Shekhar 44 Vice President, Web Services
Rahul Swarup 40 Vice President, Technology
T.R. Santhanakrishnan 42 Chief Financial Officer
T. Suresh Kumar 45 General Manager, Network Control Group
K. Thiagarajan 33 General Manager, Finance
B. Ramalinga Raju(1)(2) 43 Chairman of the Board of Directors
Pranab Barua 46 Director
T.H. Chowdary 67 Director
Donald Peck(2) 47 Director
C. Srinivasa Raju 38 Director
S. Srinivasan(1) 65 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
R. Ramaraj has served as Chief Executive Officer of our company since
April 1998. Mr. Ramaraj has served as a Director since August 1996, prior to
which he served as an advisor to our company since June 1996. From 1992 to
1996, Mr. Ramaraj served as a Director of Sterling Cellular Limited, a mobile
telephone company based in India. Mr. Ramaraj is a Director of Universal Print
Systems Ltd., a publicly held printing company based in India. Mr. Ramaraj
received a B.Tech from Madras University and a P.G.D.M. from IIM Calcutta.
A. Srinivasagopalan has served as Senior Vice President of our company
since February 1996. From 1993 to 1995, Mr. Srinivasagopalan held various
management positions with Abu Dhabi National Oil Co., an oil company based in
the Middle East. Mr. Srinivasagopalan received a B.E. from Madras University
and a P.G.D.M. from IIM Ahmedabad.
George A. Ajit has served as Vice President, Human Resources of our
company since May 1999. From 1998 to 1999, Mr. Ajit was Vice President, Human
Resources of Mobil India, an oil company. From 1996 to 1998, Mr. Ajit was
General Manager, Human Resources, of Mahindra Holidays and Resorts. From 1994
to 1996, Mr. Ajit was Deputy General Manager, BioProducts Division of E.I.D.
Parry, a manufacturing company.
Lalit Bhojwani has served as Vice President, Electronic Commerce Business
of our company since July 1999. From 1997 to 1999, Mr. Bhojwani was Vice
President of Sales of DSS Mobile Communications Limited, a telecommunications
company. Mr. Bhojwani received a B.E. degree from Mumbai University and a
P.G.D.B.M. from IIM, Ahmedabad.
Padma Chandrasekaran has served as Vice President, On-line Business of
our company since March 1996. From June 1995 to February 1996, Ms.
Chandrasekaran was General Manager, Business Development of
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ELNET Technologies, a messaging company based in India. From 1993 to February
1994, she was Group Business Manager of ICIM, Mumbai, a computer hardware
company based in India. Ms. Chandrasekaran received a B.Sc. in Statistics from
Calcutta University, a P.G.D.M. from IIM Ahmedabad and an MBA in
Telecommunications Management from the University of San Francisco.
V.V. Kannan has served as Vice President, Cyber Cafes of our company
since July 1999. From 1996 to 1999, Mr. Kannan was Vice President, Marketing of
G.M. Pens International Limited, a manufacturing company. From 1995 to 1996, he
was Vice President, Retail Sales of Real Value Marketing Sales Limited, and
from 1992 to 1995, he was Marketing Manager of ITC Agri Business Division, a
manufacturing company. Mr. Kannan received a B.E. from Madras University and a
P.G.D.M. from IIM Calcutta.
Pradeep Lakshmanan has served as Vice President, Internet Sales of our
company since September 1998. From 1997 to 1998, Mr. Lakshmanan was Associate
Vice President of Amco Batteries Ltd., a battery manufacturing company based in
India. From 1991 to 1997, Mr. Lakshmanan was General Manager of Berger Paints
Limited, an international paint manufacturing company based in India. Mr.
Lakshmanan received B.Sc. in Chemical Engineering from Trichur Engineering
College.
N. Shekhar has served as Vice President, Web Services of our company
since July 1999. From 1995 to 1999, Mr. Shekhar was Chief Executive Officer of
SSA India Private Limited, a global enterprise resource planning company. Mr.
Shekhar received a B.E. from Bangalore University, an M.S. from the University
of Texas and an M.B.A. from San Jose State University.
Rahul Swarup has served as Vice President, Technology of our company
since September 1999. From 1989 to 1999, Mr. Swarup was Vice President of
Citicorp Global Technology Infrastructure. Mr. Swarup received a B.E. in
Electrical Engineering from Indian Institute of Technology, Kanpur.
T.R. Santhanakrishnan has served as Chief Financial Officer of our
company since September 1999. From 1997 to 1999, Mr. Santhanakrishnan was
Executive Vice President, Finance of Sanmar Engineering Corporation. From 1990
to 1997, he served in a senior financial position for Royal Dutch/Shell Oil
Company. Mr. Santhankrishnan received a degree in Commerce from the University
of Madras and is a member of the Institute of Chartered Accountants of India
and the Institute of Cost and Works Accountants of India.
T. Suresh Kumar has served as General Manager, Network Control Group of
our company since March 1999. From 1996 to 1999, Mr. Kumar was Corporate
Manager, Information Services of Compaq Computer Technologies, India Ltd., a
technology company. From 1994 to 1996, he was Senior Manager of W.S.
Telesystems Ltd., a manufacturing company. Mr. Kumar received a B.E. degree
from Madras University.
K. Thiagarajan has served as General Manager, Finance of our company
since October 1997. From 1990 to 1997, Mr. Thiagarajan was Chief Financial
Officer of Coromandel Garments Limited, an export garment manufacturing company
owned by the House of Tata. Mr. Thiagarajan received a B.Com from Loyola
College of Madras and is a member of the Institute of Chartered Accountants of
India and the Institute of Cost and Works Accountants of India.
B. Ramalinga Raju is a co-founder of our company and has served as a
Director since 1995. Mr. B. Ramalinga Raju has served as the Chairman of the
Board of Directors since January 1996. Mr. B. Ramalinga Raju was the Chief
Executive Officer of Samrat Spinners Limited, a spinning mill, until 1995. Mr.
B. Ramalinga Raju is the Chief Executive Officer of Satyam Computer Services
and is a Director of Satyam Computer Services, Satyam Renaissance Consulting
Limited, Satyam Spark Solutions Limited, Gouthami Power Limited, Samrat
Spinners Limited and Maytas Infra Limited. Mr. B. Ramalinga Raju received an
M.B.A. in Business Management from Ohio State University.
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Pranab Barua has served as a Director of Satyam Infoway since April 1999.
Mr. Barua has been Chief Executive Officer of Reckitt & Coleman of India Ltd.,
a toiletries manufacturing company, and Regional Director of Reckitt & Coleman,
South Asia since July 1998. Prior to that, Mr. Barua served in various
management positions at Brooke Bond India Ltd.
T.H. Chowdary has served as a Director of our company since February
1996. Mr. Chowdary is a Director of Renaissance Technologies Limited, a
software company based in India. Mr. Chowdary retired as the Chief Executive
Officer of VSNL, the government-controlled provider of international
telecommunications services in India, in 1987.
Donald Peck has served as a Director of Satyam Infoway since March 1999.
Mr. Peck has been with Commonwealth Development Corporation, a UK-based
institution investing in developing markets, since 1991. He has been based in
India since 1995, initially as head of International Venture Capital
Management, or IVCM, and since April 1998 as Chief Executive Officer of CDC
Advisors Private Limited, a Commonwealth Development Corporation subsidiary
providing advisory services to IVCM. Mr. Peck received a PhD in Latin American
Economic History from Oxford University.
C. Srinivasa Raju has served as a Director of our company since February
1996. From 1994 to 1995, Mr. C. Srinivasa Raju was Chief Executive Officer of
Dun & Bradstreet Satyam Software Limited, a software services company based in
India. Mr. C. Srinivasa Raju is a Director of Satyam Computer Services, Satyam
Renaissance Consulting Limited and Satyam Enterprise Solutions Limited. Mr. C.
Srinivasa Raju received an M.S. from Utah State University.
S. Srinivasan has served as a Director of our company since February
1996. From 1989 to 1995, Mr. Srinivasan was Chief Executive Officer of AT&T
India Limited. Mr. Srinivasan received a BE in Engineering and a PG in
Management from Madras University.
Board Composition
Our Articles of Association set the minimum number of directors at two
and the maximum number of directors at 12. We currently have seven directors.
The Companies Act and our Articles of Association require the following:
. at least two-thirds of our directors shall be subject to re-election
by our shareholders; and
. at least one-third of our directors who are subject to re-election
shall be up for re-election at each annual meeting of our
shareholders.
Our Articles of Association provide that B. Ramalinga Raju shall be a
permanent director not subject to re-election. Our Articles of Association also
provide that South Asia Regional Fund, or SARF, is entitled to nominate one
director as long as it continues to own at least 7.5% of the issued ordinary
share capital of our company. B. Ramalinga Raju and C. Srinivasa Raju are
brothers-in-law. There are no other family relationships between any of the
directors or executive officers of our company.
On February 5, 1999, we entered into a Share Subscription and
Shareholders' Agreement, or Shareholders' Agreement, with Satyam Computer
Services, South Asia Regional Fund, or SARF, and Mr. B. Ramalinga Raju, the
Chairman of our Board of Directors, which was subsequently amended effective
September 14, 1999. The Shareholders' Agreement provides, among other things,
that:
. so long as SARF owns at least 5.0% of our issued ordinary share
capital, it is entitled to nominate one director to our Board of
Directors;
. so long as Satyam Computer Services owns at least 50.1% of our issued
ordinary share capital, it is entitled to nominate four directors to
our Board of Directors; and
. a quorum for a meeting of our Board of Directors shall be no less
than three directors.
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SARF's current nominee to our Board of Directors is Mr. Peck. Satyam Computer
Services' current nominees to our Board of Directors are Messrs. Ramaraj, B.
Ramalinga Raju, T.H. Chowdary and C. Srinivasa Raju.
Board Committees
The Audit Committee of the Board of Directors reviews, acts on and
reports to the Board of Directors with respect to various auditing and
accounting matters, including the recommendation of our independent auditors,
the scope of the annual audits, fees to be paid to the independent auditors,
the performance of our independent auditors and our accounting practices. The
members of the Audit Committee are Messrs. B. Ramalinga Raju, Ramaraj and Peck.
The Compensation Committee of the Board of Directors determines the
salaries, benefits and stock option grants for our employees, consultants,
directors and other individuals compensated by our company. The Compensation
Committee also administers our compensation plans. The members of the
Compensation Committee are Messrs. B. Ramalinga Raju, Ramaraj and Srinivasan.
Director Compensation
Our Articles of Association provide that each of our directors receives a
sitting fee not exceeding Rs.200 for every Board and Committee meeting. In
fiscal 1999, we did not pay any fees to our non-employee directors. Mr.
Ramaraj, who is employed by Satyam Infoway as our Chief Executive Officer, does
not receive any additional compensation for his service on our Board of
Directors. Directors are reimbursed for travel and out-of-pocket expenses in
connection with their attendance at Board and Committee meetings.
Employment, Severance And Other Agreements
On May 18, 1998, our Board of Directors appointed Mr. Ramaraj as Chief
Executive Officer of Satyam Infoway for a term of five years effective April 1,
1998. Mr. Ramaraj's appointment as Chief Executive Officer was approved by our
shareholders as required under the Companies Act on July 3, 1998. Pursuant to
the terms of his appointment, Mr. Ramaraj receives a monthly salary of
Rs.83,250 ($1,916). Mr. Ramaraj also receives medical, vacation and other
benefits, including membership fees for up to two clubs.
Executive Compensation
The following table sets forth all compensation awarded to, earned by or
paid to R. Ramaraj, our Chief Executive Officer, during the fiscal year ended
March 31, 1999 for services rendered in all capacities to us during the fiscal
year ended March 31, 1999. Mr. Ramaraj was appointed Chief Executive Officer of
our company in April 1998. None of our other executive officers earned a
combined salary and bonus in excess of $100,000 during any of the last three
fiscal years. In accordance with the rules of the SEC, other compensation in
the form of perquisites and other personal benefits has been omitted because
the aggregate amount of such perquisites and personal benefits constituted less
than the lesser of $50,000 or 10% of the total of annual salary and bonuses in
fiscal 1999. The amounts in the following table are in dollars based on the
noon buying rate of Rs.43.45 per dollar on June 30, 1999. The total
remuneration received by our officers and directors for their services to us
for the fiscal year ended March 31, 1999 was approximately $105,700.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- -----------------
Shares Underlying
Name and Principal Position Salary Bonus Options
- --------------------------- -------------------------------------
<S> <C> <C> <C>
R. Ramaraj, Chief Executive Officer $ 22,992 -- --
</TABLE>
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<PAGE>
Option Grants In Last Year
There were no option grants to our Chief Executive Officer during the
fiscal year ended March 31, 1999. Of the 147,000 options granted to employees
on September 28, 1999, 7,500 options with an exercise price of Rs.350 per
equity share were granted to Mr. Ramaraj.
Fiscal Year-End Option Values
Our Chief Executive Officer did not exercise or hold any options during
the fiscal year ended March 31, 1999.
Employee Benefit Plans
We have an Associates Stock Option Plan, or ASOP, which provides for the
grant of options to employees of our company. The ASOP was approved by our
Board of Directors and our shareholders in March 1999. A total of 825,000
equity shares were reserved for issuance under the ASOP. As of June 30, 1999,
we had granted an aggregate of 5,000 options under the ASOP at an exercise
price equal to Rs.70 per share. On September 28, 1999, we granted options to
acquire an additional 147,000 equity shares at a weighted exercise price equal
to Rs.335 per share.
The ASOP is administered by the Compensation Committee of our Board of
Directors. Pursuant to the provisions of the ASOP, the Satyam Infoway
Associates Trust, or Trust, is allotted options to purchase our equity shares
pursuant to resolutions passed at our general meetings. The Trust holds these
options for and on behalf of our employees. The Compensation Committee makes
recommendations to the Trust regarding employees who should be considered for
option grants. On the recommendation of the Compensation Committee, the Trust
will advise our company to transfer the options to identified employees, with
the right to convert the issued options into our equity shares at the rates
indicated in the options. The consideration for transfer of the options will be
Rs.1 per option to be paid by the employee before transfer of the options.
An employee holding options may apply for conversion of the options on a
date specified therein which is referred to as the conversion date. The options
are not transferable by an employee on or before the conversion date, except to
the Trust should the employee cease to be an employee by reason of resignation,
dismissal or termination of employment due to reasons of non-performance or
otherwise. On exercise of the option, the employee submits a letter of
conversion to the Trust for allotment of our equity shares in his or her name.
The Trust collects the consideration for conversion arrived at as a product of
number of options converted and the conversion price as reduced by the price of
the options paid by the employee for the number of options converted by the
employee. The equity shares transferred to the employee after conversion from
options is the absolute property of the employee and will be held by the
employee.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our equity shares as of June 30, 1999, and as adjusted to reflect
the sale of the ADSs offered hereby, by (1) each person or group of affiliated
persons who is known by us to beneficially own 5% or more of the equity shares,
(2) each director and our Chief Executive Officer and (3) all directors and
executive officers as a group. The table gives effect to equity shares issuable
within 60 days of June 30, 1999 upon the exercise of all options and other
rights beneficially owned by the indicated shareholders on that date and
thereby gives effect to the exercise by Satyam Computer Services and South Asia
Regional Fund of warrants to acquire 750,000 equity shares in the aggregate.
The table also gives effect to the purchase by Sterling Commerce in September
1999 of 481,000 equity shares in a private placement. Beneficial ownership is
determined in accordance with the rules of the SEC and includes voting and
investment power with respect to equity shares. Unless otherwise indicated, the
persons named in the table have sole voting and sole investment control with
respect to all equity shares beneficially owned. Mr. B. Ramalinga Raju is the
Chief Executive Officer, Chairman of the Board of Directors and a shareholder
of Satyam Computer Services. Messrs. Satyam Ramnauth and Pierce Guy Noel,
directors of International Venture Capital Management, which manages South Asia
Regional Fund, exercise voting control and dispositive power over the equity
shares owned by South Asia Regional Fund. Mr. Peck, a director of our company,
is affiliated with South Asia Regional Fund.
<TABLE>
<CAPTION>
Equity Shares Equity Shares
Beneficially Owned Beneficially Owned
Prior To This After This
Offering Offering
------------------ ------------------
Beneficial Owner Number Percent Number Percent
- ---------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Satyam Computer Services Limited........ 12,529,800 73.8% 12,529,800 59.2%
Mayfair Centre, S P Road
Secunderabad 500 003
India
South Asia Regional Fund................ 3,600,000 21.2 3,600,000 17.0
Les Cascades Building
Edith Cavell Street
Port Louis
Mauritius
R. Ramaraj.............................. 370,000 2.2 370,000 1.7
B. Ramalinga Raju....................... 100 * 100 *
Pranab Barua............................ -- -- -- --
T. H. Chowdary.......................... -- -- -- --
Donald Peck............................. -- -- -- --
C. Srinivasa Raju....................... -- -- -- --
S. Srinivasan........................... -- -- -- --
All directors and executive officers as
a group
(18 persons)........................... 370,100 2.2 370,100 1.7
</TABLE>
- --------
* Less than 1% of total.
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CERTAIN TRANSACTIONS
Satyam Computer Services is our parent company. In fiscal 1999 and the
quarter ended June 30, 1999, we sold an aggregate of Rs.0.4 million (less than
$0.1 million) and Rs.9.1 million ($0.2 million), respectively, in services to
Satyam Computer Services and its affiliates. In fiscal 1998 and 1999 and the
quarter ended June 30, 1999, we purchased an aggregate of Rs.1.4 million,
Rs.3.0 million and Rs.1.2 million (less than $0.1 million), respectively, in
software and services from Satyam Computer Services and its affiliates. In
addition, we paid an aggregate of Rs.0.8 million in training and consulting
fees to Satyam Computer Services in fiscal 1998. We believe that the foregoing
transactions with Satyam Computer Services and its affiliates were on terms no
less favorable to our company than could have been obtained from independent
third parties.
Since fiscal 1997, Satyam Computer Services had made advances of working
capital to us. The aggregate of all advances we received from Satyam Computer
Services in fiscal 1997, 1998 and 1999 were Rs.5.3 million, Rs.5.6 million and
Rs.1.3 million (less than $0.1 million), respectively. As of the end of fiscal
1998 and 1999 and the quarter ended June 30, 1999, our balances payable to
Satyam Computer Services were Rs.1.5 million, Rs.4.0 million (less than $0.1
million) and Rs.5.5 million ($0.1 million), respectively. In fiscal 1998, we
repaid an aggregate of Rs.7.6 million through the issuance to Satyam Computer
Services of an aggregate of 756,569 equity shares. In fiscal 1999, we repaid an
aggregate of Rs.1.1 million through the issuance to Satyam Computer Services of
an aggregate of 108,390 equity shares. As of the end of fiscal 1999 and the
quarter ended June 30, 1999, we had a balance of Rs.0.2 million (less than $0.1
million) and Rs.0.2 million (less than $0.1 million), respectively, in
receivables from affiliates of Satyam Computer Services. In fiscal 1998, we
placed short-term deposits with Satyam Computer Services at a rate of 18% per
annum for periods ranging from three to six months.
On February 5, 1999, we entered into a Share Subscription and
Shareholders' Agreement, or Shareholders' Agreement, with Satyam Computer
Services, South Asia Regional Fund, or SARF, and Mr. B. Ramalinga Raju, the
Chairman of our Board of Directors, which was subsequently amended effective
September 14, 1999. Pursuant to the Shareholders' Agreement, Satyam Computer
Services and SARF purchased 750,000 and 3,000,000, respectively, of our equity
shares at a price equal to Rs.70 per equity share. Pursuant to the terms of the
Shareholders' Agreement, we are required to use the proceeds from this sale of
our equity shares to set up a value-added network servicing 25 cities in India
for the purpose of offering information technology connectivity, electronic
commerce and Internet solutions. The Shareholders' Agreement contains
provisions regarding our directors and management. For additional information
regarding how the Shareholders Agreement affects the compensation of our Board
of Directors, please see "Management--Board Composition" on page 62. The
Shareholders' Agreement grants to SARF registration rights and, in the event of
a sale of our equity shares by Satyam Computer Services, "tag-along" rights.
The Shareholders' Agreement also grants to Satyam Computer Services and SARF
warrants to purchase up to an aggregate of 750,000 of our equity shares. The
exercise price of the warrants is equal to eight times our fully diluted
earnings per equity share, as shown on our latest audited financial statements;
provided that the exercise price may not be less than 66% of the fair market
value of an equity share on the exercise date. Since we had a net loss in
fiscal 1999, if the warrants were currently exercisable the exercise price
would be 66% of the fair market value, as determined by three merchant banks,
of the underlying equity shares on the exercise date. The warrants are
exercisable for a period commencing on June 30, 2001 and terminating on June
30, 2003, provided that the warrants become immediately exercisable if Satyam
Computer Services sells any of our equity shares or if we file an application
for listing or a petition to wind up our affairs voluntarily. As a result, the
warrants will be exercisable upon completion of this offering. Both Satyam
Computer Services and SARF have notified the Company of their intent to
exercise the warrants, the exercise price for which will be equal to 66% of the
price to public indicated on the cover of this prospectus. For additional
information regarding these warrants, please see "Description of Equity Shares"
on page 67.
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<PAGE>
DESCRIPTION OF EQUITY SHARES
The following are summaries of our Articles of Association and Memorandum
of Association and the Companies Act which govern our affairs. Our Articles of
Association provides that the regulations contained in Table 'A' of the
Companies Act apply to Satyam Infoway. We have filed complete copies of our
Memorandum of Association and Articles of Association as well as Table 'A' of
the Companies Act as exhibits to our registration statement on Form F-1 of
which this prospectus is a part. In this prospectus, all references to our
Articles of Association include the regulations of Table 'A' of the Companies
Act incorporated into our Articles of Association.
General
Our authorized share capital is 25,000,000 shares, par value Rs.10 per
share. As of June 30, 1999, 15,750,000 equity shares, options to purchase an
additional 5,000 equity shares and warrants to purchase an additional 750,000
equity shares were issued and outstanding.
The equity shares are our only class of share capital. However, our
Articles of Association and the Companies Act permit us to issue classes of
securities in addition to the equity shares. For the purposes of this
prospectus, "shareholder" means a shareholder who is registered as a member in
the register of members of our company.
A total of 825,000 equity shares are reserved for issuance under our
ASOP. As of June 30, 1999, we had granted an aggregate of 5,000 options under
our ASOP at an exercise price equal to Rs.70 per share. On September 28, 1999,
we granted options to acquire an additional 147,000 equity shares at a weighted
exercise price equal to Rs. 335 per share.
On February 5, 1999, we entered into a Share Subscription and
Shareholders' Agreement, or Shareholders' Agreement, with Satyam Computer
Services, South Asia Regional Fund, or SARF, and Mr. B. Ramalinga Raju, the
Chairman of our Board of Directors, which was subsequently amended effective
September 14, 1999. The Shareholders' Agreement grants "tag-along" rights to
SARF in the event of a sale of our equity shares by Satyam Computer Services as
well as customary information and inspection rights. Sterling Commerce has
similar rights pursuant to the stockholders agreement in connection with the
sale of our equity shares to Sterling Commerce. The Shareholders' Agreement
with SARF provides that upon the occurrence of specified events, SARF may
require Satyam Computer Services to repurchase our equity shares owned by SARF.
The Shareholders' Agreements also grants to Satyam Computer Services and SARF
warrants to purchase up to an aggregate of 750,000 of our equity shares.
Pursuant to the warrants, Satyam Computer Services and SARF may purchase
150,000 and 600,000, respectively, of our equity shares. The exercise price of
the warrants is equal to eight times our fully diluted earnings per equity
share, as shown on our latest audited financial statements; provided that the
exercise price may not be less than 66% of the fair market value of an equity
share on the exercise date. Since we had a net loss in fiscal 1999, if the
warrants were currently exercisable the exercise price would be 66% of the fair
market value, as determined by three merchant banks, of the underlying equity
shares on the exercise date. The warrants are exercisable for a period
commencing on June 30, 2001 and terminating on June 30, 2003, provided that the
warrants become immediately exercisable if Satyam Computer Services sells any
of our equity shares or if we file an application for listing or a petition to
wind up our affairs voluntarily. As a result, the warrants will be exercisable
upon completion of this offering. Both Satyam Computer Services and SARF have
notified the Company of their intent to exercise the warrants, the exercise
price for which will be equal to 66% of the price to public indicated on the
cover of this prospectus.
Dividends
Under the Companies Act, unless our Board of Directors recommends the
payment of a dividend, we may not declare a dividend. Similarly, under our
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. In India, dividends generally are declared
as a percentage of the par value of a
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<PAGE>
company's equity shares. The dividend recommended by the Board, if any, 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
our Articles, our Board has discretion to declare and pay interim dividends
without shareholder approval. With respect to equity shares issued during a
particular fiscal year (including any equity shares underlying ADSs issued to
the depositary in connection with the offering or in the future), 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 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.
Under the 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% of the par value of its equity shares, a company is required
under the 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 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:
. the rate of dividend to be declared may 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;
. the total amount to be drawn from the accumulated profits earned in
the previous years and transferred to the reserves may 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
. the balance of reserves after withdrawals shall not fall below 15% of
its paid up capital.
For additional information, please see "Dividend Policy" on page 26. A
tax of 11%, including the presently applicable surcharge, of the total dividend
declared, distributed or paid for a relevant period is payable by our company.
For additional information, please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 32.
Bonus Shares
In addition to permitting dividends to be paid out of current or retained
earnings as described above, the Companies Act permits us to distribute an
amount transferred from the general reserve or surplus in our profit and loss
account to our shareholders in the form of bonus shares, which are similar to a
stock dividend. The 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 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. For approval, this special resolution must be approved by a
number of votes which is not less than three times the number of votes against
the special resolution. If the special resolution is not approved, the new
shares must first be offered to the existing shareholders as of a fixed record
date. The offer must include: (1) the right, exercisable by the shareholders of
record, to renounce the shares offered in favor of any other person; and (2)
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. Our Board is authorized under the Companies Act to
distribute any new shares not purchased by the preemptive rights holders in the
manner that it deems most beneficial to our company.
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Annual General Meetings of Shareholders
We must convene an annual general meeting of 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 our paid up capital
carrying voting rights. The annual general meeting of the shareholders is
generally convened by our 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 our registered
office 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. Our registered office is located at
Mayfair Trade Center, IInd Floor, 1-8-303/36, S.P. Road, Secunderabad 500 003,
India.
Our 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. Our Chairman of the Board has a deciding vote in the case of any
tie. For a description of voting of ADSs, please see "Description of American
Depositary Shares--Voting Rights" on page 76.
Any shareholder may appoint a proxy. The instrument appointing a proxy
must be delivered to us 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.
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, specified resolutions such as amendments to our 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
We maintain a register of shareholders. 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. The date on which this period
begins is the record date.
To determine which shareholders are entitled to specified shareholder
rights, we may close the register of shareholders. The Companies Act requires
us to give at least seven days' prior notice to the public before such closure.
We may not close the register of shareholders for more than thirty consecutive
days, and in no event for more than forty-five days in a year.
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 some
circumstances, the equity shares of a public company are freely transferable,
subject only to the
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provisions of Section 111A of the Companies Act. Since we are a public company,
the provisions of Section 111A will apply to us. Our Articles currently contain
provisions which give our directors discretion to refuse to register a transfer
of shares in some circumstances. According to our Articles, our directors are
required to exercise this right in the best interests of our company. While our
directors are not required to provide a reason for any such refusal in writing,
they must give notice of the refusal to the transferee within one month after
receipt of the application for registration of transfer by our company. In
accordance with the provisions of Section 111A(2) of the Companies Act, our
directors may exercise this discretion if they have sufficient cause to do so.
If our directors refuse to register a transfer of shares, the shareholder
wishing to transfer his, her or its shares may file a civil suit or an appeal
with the Company Law Board, or CLB. Pursuant to Section 111A(3), if a 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 Indian laws,
the CLB may, on application made by the company, a depositary incorporated in
India, an investor, the Securities and Exchange Board of India or 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 Companies Act, unless the shares of a company are held in a
dematerialized form, a transfer of shares is effected by an instrument of
transfer in the form prescribed by the Companies Act and the rules thereunder
together with delivery of the share certificates. Our transfer agent is .
Disclosure of Ownership Interest
Section 187C of the Companies Act requires beneficial owners of shares of
Indian companies who are not holders of record to declare to us 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 equity share by its registered owner, or
any hypothecation by the registered owner of any equity share, 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 our obligation to register a transfer of shares or
to pay any dividends to the registered holder of any shares pursuant to which
the declaration has not been made. While it is unclear under Indian law whether
Section 187C applies to holders of ADSs, investors who exchange ADSs for the
underlying equity shares will be subject to the restrictions of Section 187C.
Additionally, holders of ADSs may be required to comply with the notification
and disclosure obligations pursuant to the provisions of the deposit agreement
to be entered into by us, such holders and a depositary. For additional
information regarding the deposit agreement, please see "Description of
American Depositary Shares" on page 72.
Audit and Annual Report
At least 21 days before the annual general meeting of shareholders
excluding the days of mailing and receipt, we must distribute to our
shareholders a detailed version of our audited balance sheet and profit and
loss account and the related reports of the Board and the auditors, together
with a notice convening the annual general meeting. Under the Companies Act, we
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 in Andhra Pradesh, India, which is the state in
which our registered office is located. We must also file an annual return
containing a list of our shareholders and other information, within 60 days of
the conclusion of the meeting.
Company Acquisition of Equity Shares
Under the Companies Act, approval of at least 75% of a company's
shareholders voting on the matter and approval of the High Court of the State
in which the registered office of the company is situated is required to reduce
a company's share capital. A company may, under some circumstances, acquire its
own equity shares
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without seeking the approval of the High Court. However, a company would have
to extinguish the shares it has so acquired within the prescribed time period.
A company is not permitted to acquire its own shares for treasury operations.
An acquisition by a company of its own shares (without having to obtain the
approval of the High Court) must comply with prescribed rules, regulations and
conditions as laid down in the Companies Act and the Securities and Exchange
Board of India (Buy-back of Securities) Regulations, 1998, or Buy-back
Regulations. However, the Buy-back Regulations apply only to public companies
listed on a recognized Indian stock exchange and will therefore not apply to
Satyam Infoway. The guidelines for the buy-back of securities by unlisted
companies have not yet been prescribed.
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 our winding-up the holders of the equity shares
are entitled to be repaid the amounts of paid up capital or credited as paid up
on those 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
Citibank, N.A. will act as the depositary bank for the American
Depositary Shares. Citibank's depositary offices are located at 111 Wall
Street, New York, New York 10005. American Depositary Shares are frequently
referred to as "ADSs" and represent ownership interests in securities that are
on deposit with the depositary bank. ADSs are normally represented by
certificates that are commonly known as American Depositary Receipts or "ADRs."
The depositary bank typically appoints a custodian to safekeep the securities
on deposit. In this case, the custodian is Citibank, N.A.--Mumbai Branch,
located at 81 Dr. Annie Besant Road, Worli, Mumbai India 400 018.
We have appointed Citibank as depositary bank pursuant to a deposit
agreement. A copy of the deposit agreement is on file with the SEC under cover
of a Registration Statement on Form F-6. You may obtain a copy of the deposit
agreement from the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
We are providing you with a summary description of the ADSs and your
rights as an owner of ADSs. Please remember that summaries by their nature lack
the precision of the information summarized and that a holder's rights and
obligations as an owner of ADSs will be determined by the deposit agreement and
not by this summary. We urge you to review the deposit agreement in its
entirety as well as the form of ADR attached to the deposit agreement.
Each ADS represents one equity share on deposit with the custodian bank.
An ADS will also represent any other property received by the depositary bank
or the custodian on behalf of the owner of the ADS but that has not been
distributed to the owners of ADSs because of legal restrictions or practical
considerations.
If you become an owner of ADSs, you will become a party to the deposit
agreement and therefore will be bound to its terms and to the terms of the ADR
that represents your ADSs. The deposit agreement and the ADR specify our rights
and obligations as well as your rights and obligations as owner of ADSs and
those of the depositary bank. As an ADS holder you appoint the depositary bank
to act on your behalf in certain circumstances. The deposit agreement is
governed by New York law. However, our obligations to the holders of equity
shares will continue to be governed by the laws of India, which may be
different from the laws in the United States.
As an owner of ADSs, you may hold your ADSs either by means of an ADR
registered in your name or through a brokerage or safekeeping account. If you
decide to hold your ADSs through your brokerage or safekeeping account, you
must rely on the procedures of your broker or bank to assert your rights as ADS
owner. Please consult with your broker or bank to determine what those
procedures are. This summary description assumes you have opted to own the ADSs
directly by means of an ADR registered in your name and, as such, we will refer
to you as the "holder." When we refer to "you," we assume the reader owns new
ADSs and will own ADSs at the relevant time.
Dividends and Distributions
As a holder, you generally have the right to receive the distributions we
make on the securities deposited with the custodian bank. Your receipt of these
distributions may be limited, however, by practical considerations and legal
limitations. Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of ADSs held as of a specified
record date.
Distributions of Cash
Whenever we make a cash distribution for the securities on deposit with
the custodian, we will notify the depositary bank. Upon receipt of such notice
the depositary bank will arrange for the funds to be converted into U.S.
dollars and for the distribution of the U.S. dollars to the holders.
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The conversion into U.S. dollars will take place only if practicable and
if the U.S. dollars are transferable to the United States. The amounts
distributed to holders will be net of the fees, expenses, taxes and
governmental charges payable by holders under the terms of the deposit
agreement. The depositary will apply the same method for distributing the
proceeds of the sale of any property (such as undistributed rights) held by the
custodian in respect of securities on deposit.
Distributions of Shares
Whenever we make a free distribution of equity shares for the securities
on deposit with the custodian, we will notify the depositary bank. Upon receipt
of such notice, the depositary bank will either distribute to holders new ADSs
representing the equity shares deposited or modify the ADS to equity shares
ratio, in which case each ADS you hold will represent rights and interests in
the additional equity shares so deposited. Only whole new ADSs will be
distributed. Fractional entitlements will be sold and the proceeds of such sale
will be distributed as in the case of a cash distribution.
The distribution of new ADSs or the modification of the ADS-to-Share
ratio upon a distribution of equity shares will be made net of the fees,
expenses, taxes and governmental charges payable by holders under the terms of
the deposit agreement. In order to pay such taxes or governmental charges, the
depositary bank may sell all or a portion of the new equity shares so
distributed.
No such distribution of new ADSs will be made if it would violate a law
(e.g., the U.S. securities laws) or if it is not operationally practicable. If
the depositary bank does not distribute new ADSs as described above, it will
use its best efforts to sell the equity shares received and will distribute the
proceeds of the sale as in the case of a distribution of cash.
Distributions of Rights
Whenever we intend to distribute rights to purchase additional equity
shares, we will give prior notice to the depositary bank and we will assist the
depositary bank in determining whether it is lawful and reasonably practicable
to distribute rights to purchase additional ADSs to holders.
The depositary bank will establish procedures to distribute rights to
purchase additional ADSs to holders and to enable such holders to exercise such
rights if it is lawful and reasonably practicable to make the rights available
to holders of ADSs, and if we provide all of the documentation contemplated in
the deposit agreement (such as opinions to address the lawfulness of the
transaction). You may have to pay fees, expenses, taxes and other governmental
charges to subscribe for the new ADSs upon the exercise of your rights. The
depositary bank is not obligated to establish procedures to facilitate the
distribution and exercise by holders of rights to purchase new equity shares
directly rather than new ADSs.
The depositary bank will not distribute the rights to you if:
. we do not request that the rights be distributed to you or we ask
that the rights not be distributed to you;
. we fail to deliver satisfactory documents to the depositary bank; or
. it is not reasonably practicable to distribute the rights.
The depositary bank will sell the rights that are not exercised or not
distributed if such sale is lawful and reasonably practicable. The proceeds of
such sale will be distributed to holders as in the case of a cash distribution.
If the depositary bank is unable to sell the rights, it will allow the rights
to lapse.
Elective Distributions
Whenever we intend to distribute a dividend payable at the election of
shareholders either in cash or in additional shares, we will give prior notice
thereof to the depositary bank and will indicate whether we wish the
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elective distribution to be made available to you. In such case, we will assist
the depositary bank in determining whether such distribution is lawful and
reasonably practical.
The depositary bank will make the election available to you only if it is
reasonably practical and if we have provided all of the documentation
contemplated in the deposit agreement. In such case, the depositary bank will
establish procedures to enable you to elect to receive either cash or
additional ADSs, in each case as described in the deposit agreement.
If the election is not made available to you, you will receive either
cash or additional ADSs, depending on what a shareholder in India would receive
for failing to make an election, as more fully described in the deposit
agreement.
Other Distributions
Whenever we intend to distribute property other than cash, equity shares
or rights to purchase additional equity shares, we will notify the depositary
bank in advance and will indicate whether we wish such distribution to be made
to you. If so, we will assist the depositary bank in determining whether such
distribution to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute such property to you and if
we provide all of the documentation contemplated in the deposit agreement, the
depositary bank will distribute the property to the holders in a manner it
deems practicable.
The distribution will be made net of fees, expenses, taxes and
governmental charges payable by holders under the terms of the deposit
agreement. In order to pay such taxes and governmental charges, the depositary
bank may sell all or a portion of the property received.
The depositary bank will not distribute the property to you and will sell
the property if:
. we do not request that the property be distributed to you or if we
ask that the property not be distributed to you;
. we do not deliver satisfactory documents to the depositary bank; or
. the depositary bank determines that all or a portion of the
distribution to you is not reasonably practicable.
The proceeds of such a sale will be distributed to holders as in the case
of a cash distribution.
Redemption
Whenever we decide to redeem any of the securities on deposit with the
custodian, we will notify the depositary bank. If it is reasonably practicable
and if we provide all of the documentation contemplated in the deposit
agreement, the depositary bank will mail notice of the redemption to the
holders.
The custodian will be instructed to surrender the shares being redeemed
against payment of the applicable redemption price. The depositary bank will
convert the redemption funds received into U.S. dollars upon the terms of the
deposit agreement and will establish procedures to enable holders to receive
the net proceeds from the redemption upon surrender of their ADSs to the
depositary bank. You may have to pay fees, expenses, taxes and other
governmental charges upon the redemption of your ADSs. If less than all ADSs
are being redeemed, the ADSs to be retired will be selected by lot or on a pro
rata basis, as the depositary bank may determine.
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Changes Affecting Equity Shares
The equity shares held on deposit for your ADSs may change from time to
time. For example, there may be a change in nominal or par value, a split-up,
cancellation, consolidation or classification of such equity shares or a
recapitalization, reorganization, merger, consolidation or sale of assets.
If any such change were to occur, your ADSs would, to the extent
permitted by law, represent the right to receive the property received or
exchanged in respect of the equity shares held on deposit. The depositary bank
may in such circumstances deliver new ADSs to you or call for the exchange of
your existing ADSs for new ADSs. If the depositary bank may not lawfully
distribute such property to you, the depositary bank may sell such property and
distribute the net proceeds to you as in the case of a cash distribution.
Issuance of ADSs upon Deposit of Equity Shares
Under current Indian laws and regulations, the depositary cannot accept
deposits of outstanding equity shares and issue ADRs evidencing ADSs
representing such equity shares without prior approval of the government of
India. If you elect to surrender your ADSs and receive equity shares, under
current Indian laws and regulations, you will be prohibited from re-depositing
those outstanding equity shares with our depositary without prior approval of
the government of India. For additional information, please see "Risk Factors--
Foreign investment restrictions and the lack of a public market for our equity
shares may impact the value of our ADSs" and "--This offering may not result in
an active or liquid market for the ADSs."
If permitted under applicable law, the depositary bank may create ADSs on
your behalf if you or your broker deposit equity shares with the custodian. The
depositary bank will deliver these ADSs to the person you indicate only after
you obtain all necessary government approvals and pay any applicable issuance
fees and any charges and taxes payable for the transfer of the equity shares to
the custodian.
The issuance of ADSs may be delayed until the depositary bank or the
custodian receives confirmation that all required approvals have been given and
that the equity shares have been duly transferred to the custodian. The
depositary bank will only issue ADSs in whole numbers.
If you are permitted to make a deposit of equity shares, you will be
responsible for transferring good and valid title to the depositary bank. As
such, you will be deemed to represent and warrant that:
. the equity shares are duly authorized, validly issued, fully paid,
non-assessable and legally obtained;
. all preemptive (and similar) rights, if any, with respect to such
equity shares have been validly waived or exercised;
. you are duly authorized to deposit the equity shares;
. the equity shares presented for deposit are free and clear of any
lien, encumbrance, security interest, charge, mortgage or adverse
claim, and are not, and the ADSs issuable upon such deposit will not
be, "restricted securities" (as defined in the deposit agreement);
and
. the equity shares presented for deposit have not been stripped of any
rights or entitlements.
If any of the representations or warranties are incorrect in any way, we
and the depositary bank may, at your cost and expense, take any and all actions
necessary to correct the consequences of the misrepresentations.
Withdrawal of Shares Upon Cancellation of ADSs
As a holder, you will be entitled to present your ADSs to the depositary
bank for cancellation and then receive the underlying equity shares at the
custodian's offices. In order to withdraw the equity shares
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represented by your ADSs, you will be required to pay to the depositary the
fees for cancellation of ADSs and any charges and taxes payable upon the
transfer of the equity shares being withdrawn. You assume the risk for delivery
of all funds and securities upon withdrawal. Once canceled, the ADSs will not
have any rights under the deposit agreement.
If you hold an ADR registered in your name, the depositary bank may ask
you to provide proof of identity and genuineness of any signature and certain
other documents as the depositary bank may deem appropriate before it will
cancel your ADSs. The withdrawal of the equity shares represented by your ADSs
may be delayed until the depositary bank receives satisfactory evidence of
compliance with all applicable laws and regulations. Please keep in mind that
the depositary bank will only accept ADSs for cancellation that represent a
whole number of securities on deposit.
You will have the right to withdraw the securities represented by your
ADSs at any time except for:
. Temporary delays that may arise because (i) the transfer books for
the equity shares or ADSs are closed, or (ii) equity shares are
immobilized on account of a shareholders' meeting or a payment of
dividends.
. Obligations to pay fees, taxes and similar charges.
. Restrictions imposed because of laws or regulations applicable to
ADSs or the withdrawal of securities on deposit.
The deposit agreement may not be modified to impair your right to
withdraw the securities represented by your ADSs except to comply with
mandatory provisions of law.
Voting Rights
As a holder, you generally have the right under the deposit agreement to
instruct the depositary bank to exercise the voting rights for the equity
shares represented by your ADSs. The voting rights of holders of equity shares
are described in "Description of Equity Shares--Voting Rights."
At our request, the depositary bank will mail to you any notice of
shareholders' meeting received from us together with information explaining how
to instruct the depositary bank to exercise the voting rights of the securities
represented by ADSs.
If the depositary bank timely receives voting instructions from a holder
of ADSs, it will endeavor to vote the securities represented by the holder's
ADSs in accordance with such voting instructions.
Please note that the ability of the depositary bank to carry out voting
instructions may be limited by practical and legal limitations and the terms of
the securities on deposit. We cannot assure you that you will receive voting
materials in time to enable you to return voting instructions to the depositary
bank in a timely manner. Securities for which no voting instructions have been
received will not be voted.
Fees and Charges
As an ADS holder, you will be required to pay the following service fees
to the depositary bank:
<TABLE>
<CAPTION>
Service Fees
------- ----
<S> <C>
Issuance of ADSs Up to 5c per ADS issued
Cancellation of ADSs Up to 5c per ADS canceled
Exercise of rights to purchase Up to 5c per ADS issued
additional ADSs
Distribution of cash upon sale Up to 2c per ADS held
of rights and other entitlements
</TABLE>
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As an ADS holder you will also be responsible to pay certain fees and
expenses incurred by the depositary bank and certain taxes and governmental
charges such as:
. fees for the transfer and registration of equity shares (i.e., upon
deposit and withdrawal of equity shares);
. expenses incurred for converting foreign currency into U.S. dollars;
. expenses for cable, telex and fax transmissions and for delivery of
securities; and
. Taxes and duties upon the transfer of securities (i.e., when equity
shares are deposited or withdrawn from deposit).
We have agreed to pay certain other charges and expenses of the
depositary bank. Note that the fees and charges you may be required to pay may
vary over time and may be changed by us and by the depositary bank. You will
receive prior notice of such changes.
Amendments and Termination
We may agree with the depositary bank to modify the deposit agreement at
any time without your consent. We undertake to give holders 30 days' prior
notice of any modifications that would prejudice any of their substantial
rights under the deposit agreement (except in very limited circumstances
enumerated in the deposit agreement).
You will be bound by the modifications to the deposit agreement if you
continue to hold your ADSs after the modifications to the deposit agreement
become effective. The deposit agreement cannot be amended to prevent you from
withdrawing the equity shares represented by your ADSs (except as permitted by
law).
We have the right to direct the depositary bank to terminate the deposit
agreement. Similarly, the depositary bank may in certain circumstances on its
own initiative terminate the deposit agreement. In either case, the depositary
bank must give notice to the holders at least 30 days before termination.
Upon termination, the following will occur under the deposit agreement:
. For a period of six months after termination, you will be able to
request the cancellation of your ADSs and the withdrawal of the
equity shares represented by your ADSs and the delivery of all other
property held by the depositary bank in respect of those equity
shares on the same terms as prior to the termination. During such six
months' period the depositary bank will continue to collect all
distributions received on the equity shares on deposit (i.e.,
dividends) but will not distribute any such property to you until you
request the cancellation of your ADSs.
. After the expiration of such six months' period, the depositary bank
may sell the securities held on deposit. The depositary bank will
hold the proceeds from such sale and any other funds then held for
the holders of ADSs in a non-interest bearing account. At that point,
the depositary bank will have no further obligations to holders other
than to account for the funds then held for the holders of ADSs still
outstanding.
Books of Depositary
The depositary bank will maintain ADS holder records at its depositary
office. You may inspect such records at such office during regular business
hours but solely for the purpose of communicating with other holders in the
interest of business matters relating to the ADSs and the deposit agreement.
The depositary bank will maintain in New York facilities to record and
process the issuance, cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed from time to time, to the extent not prohibited
by law.
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Limitations on Obligations and Liabilities
The deposit agreement limits our obligations and the depositary bank's
obligations to you. Please note the following:
. We and the depositary bank are obligated only to take the actions
specifically stated in the depositary agreement without negligence or
bad faith.
. The depositary bank disclaims any liability for any failure to carry
out voting instructions, for any manner in which a vote is cast or
for the effect of any vote, provided it acts in good faith and in
accordance with the terms of the deposit agreement.
. The depositary bank disclaims any liability for any failure to
determine the lawfulness or practicality of any action, for the
content of any document forwarded to you on our behalf or for the
accuracy of any translation of such a document, for the investment
risks associated with investing in equity shares, for the validity or
worth of the equity shares, for any tax consequences that result from
the ownership of ADSs, for the credit worthiness of any third party,
for allowing any rights to lapse under the terms of the deposit
agreement, for the timeliness of any of our notices or for our
failure to give notice.
. We and the depositary bank will not be obligated to perform any act
that is inconsistent with the terms of the deposit agreement.
. We and the depositary bank disclaim any liability if we are prevented
or forbidden from acting on account of any law or regulation, any
provision of our Articles of Association or Memorandum of
Association, any provision of any securities on deposit or by reason
of any act of God or war or other circumstances beyond our control.
. We and the depositary bank disclaim any liability by reason of any
exercise of, or failure to exercise, any discretion provided for the
deposit agreement or in our Articles of Association or Memorandum of
Association or in any provisions of securities on deposit.
. We and the depositary bank further disclaim any liability for any
action or inaction in reliance on the advice or information received
from legal counsel, accountants, any person presenting equity shares
for deposit, any holder of ADSs or authorized representative thereof,
or any other person believed by either of us in good faith to be
competent to give such advice or information.
. We and the depositary bank also disclaim liability for the inability
by a holder to benefit from any distribution, offering, right or
other benefit which is made available to holders equity shares but is
not, under the terms of the deposit agreement, made available to you.
. We and the depositary bank may rely without any liability upon any
written notice, request or other document believed to be genuine and
to have been signed or presented by the proper parties.
Pre-Release Transactions
The depositary bank may, in certain circumstances, issue ADSs before
receiving a deposit of equity shares or release equity shares before receiving
ADSs. These transactions are commonly referred to as "pre-release
transactions." The deposit agreement limits the aggregate size of pre-release
transactions and imposes a number of conditions on such transactions (i.e., the
need to receive collateral, the type of collateral required, the
representations required from brokers, etc.). The depositary bank may retain
the compensation received from the pre-release transactions.
Taxes
You will be responsible for the taxes and other governmental charges
payable on the ADSs and the securities represented by the ADSs. We, the
depositary bank and the custodian may deduct from any
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distribution the taxes and governmental charges payable by holders and may sell
any and all property on deposit to pay the taxes and governmental charges
payable by holders. You will be liable for any deficiency if the sale proceeds
do not cover the taxes that are due.
The depositary bank may refuse to issue ADSs, to deliver transfer, split
and combine ADRs or to release securities on deposit until all taxes and
charges are paid by the applicable holder. The depositary bank and the
custodian may take reasonable administrative actions to obtain tax refunds and
reduced tax withholding for any distributions on your behalf. However, you may
be required to provide to the depositary bank and to the custodian proof of
taxpayer status and residence and such other information as the depositary bank
and the custodian may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian for any claims with respect
to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary bank will arrange for the conversion of all foreign
currency received into U.S. dollars if such conversion is practical, and it
will distribute the U.S. dollars in accordance with the terms of the deposit
agreement. You may have to pay fees and expenses incurred in converting foreign
currency, such as fees and expenses incurred in complying with currency
exchange controls and other governmental requirements.
If the conversion of foreign currency is not practical or lawful, or if
any required approvals are denied or not obtainable at a reasonable cost or
within a reasonable period, the depositary bank may take the following actions
in its discretion:
. convert the foreign currency to the extent practical and lawful and
distribute the U.S. dollars to the holders for whom the conversion
and distribution is lawful and practical;
. distribute the foreign currency to holders for whom the distribution
is lawful and practical; and
. hold the foreign currency (without liability for interest) for the
applicable holders.
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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Foreign investment in Indian securities is regulated by the Foreign
Exchange Regulation Act, 1973. Under Section 29(1)(b) of the Foreign Exchange
Regulation Act, 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 Reserve Bank of India. Also, under Section
19(1)(d) of the Foreign Exchange Regulation Act, the transfer and issuance of
any security of any Indian company to a person resident outside India requires
the permission of the Reserve Bank of India. Under Section 19(5) of the Foreign
Exchange Regulation Act, 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 Reserve Bank of India upon application filed by the transferor
or the transferee. Furthermore, the issuance of rights and other distributions
of securities to a non-resident also requires the prior consent of the Reserve
Bank of India. The Reserve Bank of India has issued notifications over the past
few years relaxing the restrictions on foreign investment in Indian companies.
These notifications have provided that foreign investment in high priority
industries do not require prior approval of the Reserve Bank of India under
some conditions. Under these circumstances, a post-investment declaration is
required to be filed with the Reserve Bank of India. The Reserve Bank of India
has granted an exemption from application of some of these provisions in
connection with this offering. For additional information, please see
"Government of India Approvals" on page 84.
General
Shares of Indian companies represented by ADSs are required to be
approved for issuance to foreign investors by the Ministry of Finance under the
Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through
Depositary Receipt Mechanism) Scheme, 1993, as modified from time to time,
notified by the government of India. The Issue of Foreign Currency Convertible
Bonds and Ordinary Shares Scheme 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 Issue of Foreign Currency
Convertible Bonds and Ordinary Shares Scheme also affords to holders of ADSs
the benefits of Section 115AC of the Indian Income-tax Act, 1961 for purposes
of the application of Indian tax law. For additional information, please see
"Taxation--Indian Taxation" on page 86.
Foreign Direct Investment
In July 1991, the government of India commenced the liberalization
process and raised the limit on foreign equity holdings in Indian companies
from 40% to 51% in high priority industries. The Foreign Investment Promotion
Board currently under the Ministry of Industry of the government of India was
thereafter formed to negotiate with large foreign companies wishing to make
long-term investments in India. Since then, the government of India has relaxed
the restrictions on foreign investment considerably. Our business is not deemed
to be a high priority industry. As a result, the maximum foreign equity
investment in an Indian company operating as an Internet service provider is
49%.
Under current Indian law, no prior approval of the Reserve Bank of India
or the Foreign Investment Promotion Board is required in respect of foreign
equity participation up to 50%, 51%, 74% or 100%, depending on industry
category, in high priority industries in a new issue of shares, including the
purchase of ADSs representing equity securities issued by Indian companies.
However, within a period of 30 days from the date of the investment being made,
a declaration in the prescribed form is required to be filed with the Reserve
Bank of India. For foreign direct investment in the high priority industries in
excess of 50%, 51% or 74% (depending on the category of industry) or in the
industries in which direct foreign investment is permitted up to 100%, or for
any issue of equity securities to foreign investors by a company not in a high-
priority industry, approval of the Foreign Investment Promotion Board is
required if the amount of investment is up to Rs.6 billion ($142.9 million).
Proposals in excess of Rs.6 billion ($142.9 million) 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 foreign direct
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investments by non-residents of India who are not non-resident Indians,
overseas corporate bodies or foreign institutional investors, all of which we
refer to as foreign direct investors, and do not include transfers of shares
from residents to non-residents. 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
Foreign Investment Promotion Board. Under these guidelines, sector specific
guidelines for foreign direct investment and the levels of permitted equity
participation have been established. The issues to be considered by the Foreign
Investment Promotion Board and the Foreign Investment Promotion Board'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 Foreign Investment Promotion Board's consideration of proposals. However,
because the guidelines are administrative and have not been codified as either
law or regulations, they are not legally binding with respect to any
recommendation made by the Foreign Investment Promotion Board or with respect
to any decision taken by the government of India in cases involving foreign
direct investment.
The high priority industries referred to above are classified into the
following four categories under Annexure III to the New Industrial Policy,
1991:
. Part A lists three industries, comprised mainly of mining-related
industries, in which up to 50% foreign equity participation is
permitted;
. Part B lists 21 industries, including software development,
agricultural production, food product manufacturing, textile
products, paper and basic chemicals, in which up to 51% foreign
equity participation is permitted;
. Part C lists seven industries, including medical equipment
manufacturing, iron ore manufacturing, land transport, water
transport and storage and warehousing services, in which up to 74%
foreign equity participation is permitted; and
. Part D lists two industries, including electricity generation,
transmission and distribution and construction, in which up to 100%
foreign equity participation is permitted.
In May 1994, the government of India announced that purchases by foreign
investors of ADSs and foreign currency convertible bonds of Indian companies
will be treated as foreign direct 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 foreign direct investments (which depends on the
category of industry) in high priority industries or for any issue of equity to
foreign investors by companies not in high priority industries, would require
approval from the Foreign Investment Promotion Board. In addition, in
connection with offerings of any such securities to foreign investors, approval
of the Foreign Investment Promotion Board 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 our company, Foreign Investment
Promotion Board approval is required for any foreign direct investment in our
stock. As a result, we will require Foreign Investment Promotion Board approval
before allotting the equity shares underlying the ADSs.
In November 1998, the Reserve Bank of India issued a notification to the
effect that foreign investment in preferred shares will be considered as part
of the share capital of a company and the provisions relating to foreign direct
investment in the equity shares of a company discussed above would apply.
Accordingly, no prior approval of the Reserve Bank of India or the Foreign
Investment Promotion Board would be required in respect of foreign investment
in the preferred stock of an Indian company up to 50%, 51%, 74% or 100% in high
priority industries. All other proposals for foreign investment in the
preferred stock of an Indian company will be processed by the Foreign
Investment Promotion Board. 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.
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Notwithstanding the foregoing, the terms of our Internet service provider
license provide that the maximum total foreign equity investment in our company
is 49%.
Investment by Non-Resident Indians and Overseas Corporate Bodies Owned At Least
60% By Non-Resident Indians
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, or non-resident Indians, and to overseas corporate
bodies, at least 60% owned by such persons, or overseas corporate bodies. These
facilities permit non-resident Indians and overseas corporate bodies 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.
Apart from portfolio investments in Indian companies, non-resident
Indians and overseas corporate bodies may also invest in Indian companies
through foreign direct investments. For additional information, please see "--
Foreign Direct Investment" on page 80. Under the foreign direct investment
rules, non-resident Indians and overseas corporate bodies may invest up to 100%
in high-priority industries in which other foreign investors are permitted to
invest only up to 50%, 51%, 74% or 100%, depending on the industry category.
Investment by Foreign Institutional Investors
In September 1992, the government of India issued guidelines which enable
foreign institutional investors, including institutions such as pension funds,
investment trusts, asset management companies, nominee companies and
incorporated/institutional portfolio managers, to make portfolio investments in
all the securities traded on the primary and secondary markets in India. Under
the guidelines, foreign institutional investors must obtain an initial
registration from the Securities and Exchange Board of India and a general
permission from the Reserve Bank of India to engage in transactions regulated
under the Foreign Exchange Regulation Act. Foreign institutional investors must
also comply with the provisions of the Securities and Exchange Board of India
(Foreign Institutional Investors) Regulations, 1995. When it receives the
initial registration, the foreign institutional investor also obtains general
permission from the Reserve Bank of India to engage in transactions regulated
under the Foreign Exchange Regulation Act. Together, the initial registration
and the Reserve Bank of India's general permission enable the registered
foreign institutional investor to buy, subject to the ownership restrictions
discussed below, and sell freely securities issued by Indian companies whether
or not they are listed, 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.
Apart from making portfolio investments in Indian companies as described
above, foreign institutional investors may make direct foreign investments in
Indian companies. For additional information, please see "--Foreign Direct
Investment" on page 80.
Ownership Restrictions
The Securities and Exchange Board of India and Reserve Bank of India
regulations restrict portfolio investments in Indian companies by foreign
institutional investors, non-resident Indians and overseas corporate bodies,
all of which we refer to as foreign portfolio investors. The Reserve Bank of
India issued a circular in August 1998 stating that foreign institutional
investors in aggregate may hold no more than 30% of the equity shares of an
Indian company and non-resident Indians and overseas corporate bodies in
aggregate may hold no more than 10% of the shares of an Indian company through
portfolio investments. The Reserve Bank of India circular also states that no
single foreign institutional investor may hold more than 10% of the shares of
an Indian company and no single non-resident Indian or overseas corporate body
may hold more than 5% of the shares of an Indian company. The Foreign
Investment Promotion Board guidelines issued by the Foreign
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Investment Promotion Board in January 1997 state that the total cap on foreign
investment in the telecommunications sector would be 49%. The Guidelines and
General Information for Internet Service Provider announced by the Telecom
Commission of the government of India in November 1998 also state that the
total foreign equity investment in a company acting as an Internet service
provider would be capped at 49%. This cap of 49% applies to foreign equity
investment by foreign portfolio investors and foreign direct investors in our
company.
There is uncertainty under Indian law about the tax regime applicable to
foreign institutional investors that hold and trade ADSs. Foreign institutional
investors are urged to consult with their Indian legal and tax advisers about
the relationship between the foreign institutional investor regulations and the
ADSs and any equity shares withdrawn upon surrender of ADSs.
More detailed provisions relating to foreign institutional investor
investment have been introduced by the Securities and Exchange Board of India
with the introduction of the foreign institutional investor Regulations in
1995. These provisions relate to the registration of foreign institutional
investors, their general obligations and responsibilities and investment
conditions and restrictions. One such restriction is that unless the foreign
institutional investor is registered as a debt fund with the Securities and
Exchange Board of India the total investment in equity and equity-related
instruments should not be less than 70% of the aggregate of all investments of
an foreign institutional investor in India.
Under the Securities and Exchange Board of India (Substantial Acquisition
of Shares and Takeovers) Regulations, 1997 approved by the Securities and
Exchange Board of India in January 1997 and notified by the government of India
in February 1997, which replaced the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 1994, upon the
acquisition of more than 5% of the outstanding shares or voting rights of a
listed public Indian company, a purchaser is required to notify the company and
the company and the purchaser are required to notify all the stock exchanges on
which the shares of such company are listed. Upon the acquisition of 15% or
more of such shares or voting rights 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 new regulations. Upon
conversion of ADSs into equity shares, an ADS holder will be subject to the new
regulations. However, since Satyam Infoway is an unlisted company, the
provisions of the new regulations will not apply to us. If our shares are
listed on an Indian stock exchange in the future, the new regulations will
apply to the holders of our ADSs.
Open market purchases of securities of Indian companies in India by
foreign direct investors or investments by non-resident Indians, overseas
corporate bodies and foreign institutional investors 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
The Ministry of Finance and the Ministry of Industry of the government of
India and the Reserve Bank of India have approved this offering. In addition,
we have obtained the required approval from the Ministry of Finance to enter
into the underwriting agreements and the depository agreement referred to
elsewhere in this prospectus. Various tax concessions are expected to be
available with respect to this offering in accordance with the provisions of
Section 115AC of the Indian Income-tax Act, 1961. Copies of the approvals from
the Ministry of Industry and the Reserve Bank of India will be made available
for public inspection at our corporate office or provided upon written request
to our Chief Financial Officer. For additional information, please see
"Taxation--Indian Taxation" on page 86.
The Reserve Bank of India has granted our company general approvals which
permit:
. foreign investors to acquire ADSs and equity shares issued by us;
. us to issue the ADSs and transfer and register the equity shares in
the name of the depositary or its nominee;
. us to remit dividends on the equity shares issued by us and
represented by ADSs at market rates, as and when due subject to the
payment of any applicable Indian taxes;
. us to issue any rights or bonus equity shares represented by the ADSs
issued by us;
. us to repatriate in free foreign exchange 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;
. us to export the equity shares from India for transfer thereof
outside of India upon withdrawal from the depositary facility; and
. the free transfer of the ADSs issued by us outside India between non-
residents of India.
Specific approval of the Reserve Bank of India will have to be obtained,
however, for the sale of the underlying equity shares by a person resident
outside India to a person resident in India as well as for any renunciation of
rights to a person resident in India. Pursuant to the Indian Foreign Exchange
Regulation Act, 1973, a person resident in India is: (1) a citizen of India who
has not left India with an intention of staying outside India; and (2) a non-
citizen of India who stays in India for a purpose indicating an intention to
stay in India. Transfers of securities in Indian companies from a person
resident outside India to a person resident in India require approval from the
Reserve Bank of India under Section 19(5) of the Foreign Exchange Regulation
Act. Currently, however, no prior approval of the Reserve Bank of India is
required in respect of such sales if the company whose shares are being sold is
listed in India and if such sales are made in the stock market through a
registered Indian broker and through a recognized stock exchange in India at
prevailing market rates. In such cases, the sale proceeds may be repatriated
after payment of applicable taxes and stamp duties. Since the equity shares of
Satyam Infoway are not presently listed in India, however, the prior approval
of the Reserve Bank of India will be required for a person resident outside
India who is a shareholder in our company to sell his equity shares in our
company to a person resident in India. The Reserve Bank of India will approve
the price at which the shares can be sold based on a formula. Because the sale
would result in an outflow of foreign exchange, the Reserve Bank of India would
generally not approve a price higher than that arrived at by using the formula.
For additional information, please see "Taxation--Indian Taxation--Taxation of
Distributions" on page 86.
Any person resident outside India desiring to sell equity shares received
upon surrender of ADSs or otherwise transfer such equity shares within India
should seek the advice of Indian counsel as to the requirements applicable at
that time. The Reserve Bank of India has approved the free transferability of
our ADSs outside India between two non-residents. However, under current Indian
law, the sale and transfer of our equity shares withdrawn from the depositary
to any person resident in India would require additional approvals to be
obtained from the Reserve Bank of India. Under current regulations and
practice, since we are not listed
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on any recognized stock exchange in India, a person resident outside of India
intending to sell our securities within India or to a person resident in India
is required to apply for Reserve Bank of India approval by submitting a Form
TS1, which requires information as to the transferor, transferee, the
shareholding structure of our company, the proposed sale price per share and
other information. The proceeds from such transfers may be transferred outside
India after payment of applicable taxes and stamp duties. The Reserve Bank of
India will approve the price at which shares are to be transferred from a non-
resident holder of shares in our company to a person resident in India based on
a formula. The Reserve Bank of India 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.
Prior to the effectiveness of the registration statement of which this
prospectus is a part, we will file an application with the Department of
Company Affairs to the effect that we are not required to file this prospectus
under the Companies Act. The Ministry of Finance may request that a copy of
this prospectus be filed with the Securities and Exchange Board of India and
the Registrar of Companies in Andhra Pradesh, which is the state in India where
our registered office is located.
The equity shares issued and outstanding prior to the offering are not
listed on any Indian stock exchanges, and no such listing is presently planned.
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TAXATION
Indian Taxation
General. The following is based on the opinion of M.G. Ramachandran
regarding 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. We refer to these persons as non-
resident holders. The following is based on the provisions of the Income-tax
Act, 1961, including the special tax regime contained in Section 115AC and the
Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through
Depository Receipt Mechanism) Scheme, 1993. The Income-tax Act is amended every
year by the Finance Act of the relevant year. Some or all of the tax
consequences of the Section 115AC may be amended or changed by future
amendments of the Income-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 non-resident
holders 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 Income-tax Act, an individual is
considered to be a resident of India during any fiscal year if he or she is in
India in that year for:
. a period or periods amounting to 182 days or more; or
. 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 182 days or more 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 a resident of India if it is registered in India or the control
and the management of its affairs is situated wholly in India. Individuals and
companies that are not residents of India would be treated as non-residents for
purposes of the Income-tax Act.
Taxation of Distributions. Pursuant to the Finance Act, 1997, withholding
tax on dividends paid to shareholders no longer applies. However, the company
paying the dividend would be subject to a dividend distribution tax of 11%
including the presently applicable surcharge, of the total amount it
distributes, declares or pays as a dividend. This dividend distribution tax is
in addition to the normal corporate tax of 38.5%, including the presently
applicable surcharge. The surcharge was introduced by the Finance Act, 1999.
Any distributions of additional ADSs, equity shares or rights to
subscribe for equity shares made to non-resident holders with respect to ADSs
or equity shares will not be subject to Indian tax.
Taxation of Capital Gains. Any gain realized on the sale of our ADSs or
equity shares by a non-resident holder to any non-resident outside India is not
subject to Indian capital gains tax. However, because subscription rights are
not expressly covered by the Section 115AC, it is unclear, and M.G.
Ramachandran is therefore unable to give an opinion, as to whether capital gain
derived from the sale of subscription rights by a non-resident holder not
entitled to an exemption under a tax treaty to any non-resident outside India
will be subject to Indian capital gains tax. If such subscription rights are
deemed by the Indian tax authorities to be situated within India, the gains
realized on the sale of such subscription rights will be subject to customary
Indian taxation on capital gains as discussed below.
Since the offering has been approved by the government of India under the
Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme, non-
resident holders of the ADSs will have the benefit of tax concessions available
under Section 115AC. The effect of the Scheme in the context of Section 115AC
is
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unclear, and M.G. Ramachandran is therefore unable to give an opinion, 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 on capital gains as discussed below. The
Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme provides
that if the equity shares are sold on a recognized stock exchange in India
against payment in Indian rupees, they will no longer be eligible for such
concessional tax treatment.
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
withheld at the source by the buyer. Under the Issue of Foreign Currency
Convertible Bonds and Ordinary Shares Scheme, the cost of acquisition of equity
shares received in exchange for ADSs will be the cost of the underlying shares
on the date that the depositary gives notice to the custodian of the delivery
of the equity shares in exchange for the corresponding ADSs. In the case of
companies listed in India, the cost of acquisition of the equity shares would
be the price of the equity shares prevailing on the Stock Exchange, Mumbai or
the National Stock Exchange on the date the depositary gives notice to the
custodian of the delivery of the equity shares in exchange for the
corresponding ADSs. However, the Issue of Foreign Currency Convertible Bonds
and Ordinary Shares Scheme and Section 115AC do not provide for determination
of the cost of acquisition for the purposes of computing capital gains tax
where the shares of the Indian company are not listed on the Stock Exchange,
Mumbai or the National Stock Exchange in India. Therefore, in the case of our
company, which is not listed on either the Stock Exchange, Mumbai or the
National Stock Exchange, M.G. Ramachandran is unable to give an opinion on the
mode of determination of the cost of acquisition of equity shares. Therefore,
the original cost of acquisition of the ADSs may be treated as the cost of
acquisition for the purposes of determining the capital gains tax. According to
the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme, 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 India-U.S. Treaty does not provide an
exemption from the imposition of Indian capital gains tax.
Under Section 115AC, taxable gain realized in respect of equity shares
held for more than 12 months, or 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, or short-term gain, is subject to tax at variable rates with a maximum
rate of 48%. If Section 115AC is not applicable, then a tax rate of 20% applies
to long-term capital gains. The actual rate of tax on short-term gain depends
on a number of factors, including the residential status of the non-resident
holder and the type of income chargeable in India.
Buy-back of Securities. Currently, Indian companies are not subject to
any tax in respect of the buy-back of their shares. However, the shareholders
will be taxed on any gain at the long-term or short-term, as applicable,
capital gains rates. For additional information, please see "--Taxation of
Capital Gains" on page 87.
Stamp Duty and Transfer Tax. Upon issuance of the equity shares
underlying our ADSs, we will be required to pay a stamp duty of Rs.0.30 per
share certificate issued by us. However, for purposes of convenience, instead
of paying a stamp duty of Rs.0.30 per share certificate, we will pay a stamp
duty of Rs.1 per share certificate issued by us in respect 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 non-resident 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 non-resident 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.
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 will be exempt from Indian wealth tax. Non-resident holders are
advised to consult their own tax advisers in this context.
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Gift Tax and Estate Duty. Indian gift tax was abolished in October 1998,
although it may be restored in the future. In India, there is no estate duty
law. As a result, no estate duty would be applicable to non-resident holders.
Non-resident holders are advised to consult their own tax advisors in this
context.
United States Federal Taxation
The following is a summary of the material U.S. federal income and estate
tax consequences that may be relevant with respect to the acquisition,
ownership and disposition of equity shares or ADSs. This summary addresses the
U.S. federal income and estate tax considerations of holders that are U.S.
persons, i.e., 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 for which a U.S.
court exercises primary supervision and a U.S. person has the authority to
control all substantial decisions and that will hold equity shares or ADSs as
capital assets and holders that are not U.S. persons. We refer to these persons
as U.S. holders and non-U.S. holders, respectively. 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 our 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 some 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 deposit 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 investor should consult his, her or 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.
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 our 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 our 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 our
company exceeds our 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 dividend distribution taxes paid
by our 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 our company generally will constitute "passive income" for purposes of the
foreign tax credit.
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.
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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 or loss, if any, recognized by a U.S. holder generally will
be treated as U.S. source passive income or loss 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:
. such gain is effectively connected with the conduct by such non-U.S.
holder of a trade or business in the U.S.; or
. 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 other conditions are met.
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 a number of conditions and limitations.
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 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 for U.S. Federal income tax
purposes if either:
. 75% or more of its gross income for the taxable year is passive
income; or
. on average for the taxable year by value (or, if it is not a publicly
traded corporation and so elects, by adjusted basis) 50% or more of
its assets produce or are held for the production of passive income.
We do not believe that we satisfy either of the tests for passive foreign
investment company status. If we were to be a passive foreign investment
company for any taxable year, U.S. holders would be required to either:
. pay an interest charge together with tax calculated at maximum
ordinary income rates on "excess distributions," which is defined to
include gain on a sale or other disposition of equity shares;
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. if a qualified electing fund election is made, to include in their
taxable income their pro rata share of undistributed amounts of our
income; or
. if the equity shares are "marketable" and a mark-to-market election
is made, to mark-to-market the equity shares each taxable year and
recognize ordinary gain and, to the extent of prior ordinary gain,
ordinary loss for the increase or decrease in market value for such
taxable year.
The above summary is not intended to constitute a complete analysis of
all tax consequences relating to ownership of equity shares or ADSs. You should
consult your own tax advisor concerning the tax consequences of your particular
situation.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our ADSs
or equity shares, and no prediction can be made as to the effect, if any, that
market sales of ADSs or equity shares or the availability of ADSs for sale will
have on the market price of the ADSs prevailing from time to time.
Nevertheless, sales of substantial amounts of ADSs in the public market, or the
perception that such sales could occur, could adversely affect the market price
of ADSs and could impair our future ability to raise capital through the sale
of our equity securities. For additional information, please see "Risk
Factors--The future sales of securities by our company or existing shareholders
may hurt the price of our ADSs" on page 21.
Upon the closing of this offering, we will have an aggregate of
21,156,000 equity shares outstanding, assuming no exercise of the underwriters'
overallotment option or outstanding employee stock options, but assuming the
exercise of the 750,000 warrants presently held by SARF and Satyam Computer
Services. Of the outstanding equity shares, the ADSs sold in this offering will
be freely tradable, except that any shares held by "affiliates" as defined
under Rule 144 under the Securities Act may only be sold in compliance with the
limitations described below. The remaining equity shares were all issued in
accordance with Regulation S, other than the 481,000 shares issued to Sterling
Commerce which were issued pursuant to Regulation D. None of these shares may,
under present law, be converted into ADSs without government of India approval.
If converted into ADSs, all equity shares issued in accordance with Regulation
S and held by non-affiliates may immediately be resold, subject to any
applicable lock-up periods. All equity shares issued in accordance with
Regulation D may be resold in accordance with Rule 144 after complying with a
holding period of at least one year and the other requirements of that rule.
In September 1999, we entered into a registration rights agreement with
SARF and Sterling Commerce relating to our company. Commencing 180 days after
the completion of this offering, each of SARF and Sterling Commerce may up to
make three requests of our company to register their equity shares. In
addition, SARF and Sterling Commerce have specified rights to sell equity
shares in connection with any public offering of our equity shares in India or
any other country, excluding the United States. The registration rights
agreement also grants to SARF and Sterling Commerce "piggy-back" registration
rights and contains other customary provisions. SARF also has similar rights to
require the listing of its shares in markets other than the United States under
specified circumstances.
Our company, each of our executive officers and directors, the holders of
warrants to purchase 750,000 equity shares and substantially all of our
shareholders have agreed not to offer, sell, contract to sell or otherwise
dispose of any equity shares or securities convertible into, exchangeable for
or representing the right to receive equity shares, for a period of 180 days
after the date of this prospectus without the prior written consent of Merrill
Lynch, Pierce, Fenner and Smith Incorporated. These agreements do not cover (1)
the grant of stock options under our existing stock option plan or (2) equity
shares issued upon the conversion of convertible or exchangeable securities or
the exercise of an option or warrant outstanding as of the date of this
prospectus. These lock-up agreements cover substantially all equity shares
outstanding prior to this offering.
We have agreed not to sell or otherwise dispose of any equity shares
during the 180-day period following the date of the prospectus, except we may
issue, and grant options to purchase, equity shares under our Associate Stock
Option Plan and other pre-existing agreements. In addition, we may issue equity
shares in connection with any acquisition of another company if the terms of
such issuance provide that such equity shares shall not be resold prior to the
expiration of the 180-day period referenced in the preceding sentence. For
additional information, please see "Risk Factors--The future sales of
securities by our company or existing shareholders may hurt the price of our
ADSs" on page 21.
91
<PAGE>
UNDERWRITING
The offering consists of:
. the U.S. offering of 2,505,000 ADSs in the United States and
Canada; and
. the international offering of 1,670,000 ADSs outside the United
States and Canada.
We and the underwriters for the U.S. offering named below have entered
into an underwriting agreement with respect to the ADSs being offered in the
U.S. offering. Each U.S. underwriter has severally agreed to purchase the
number of ADSs indicated in the table below. Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Smith Barney Inc. are the representatives of the
U.S. underwriters.
<TABLE>
<CAPTION>
Number
of
U.S. Underwriters ADSs
----------------- ------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................................
Salomon Smith Barney Inc. ..........................................
----
Total..........................................................
====
</TABLE>
The U.S. underwriters have agreed to purchase all the ADSs being offered
in the U.S. offering, other than those covered by the overallotment option
described below, if they purchase any of these ADSs.
We have granted to the underwriters in the U.S. and international
offerings an option, exercisable within 30 days after the date of this
prospectus, to purchase up to 626,250 additional ADSs at the public offering
price less the underwriting commission. The underwriters may exercise this
option solely for the purpose of covering overallotments, if any, in connection
with the offerings. The representatives of the U.S. underwriters will decide on
behalf of the underwriters whether to exercise the option and whether to
allocate any ADSs covered by the option to the U.S. offering or the
international offering. If the underwriters exercise the overallotment option,
each U.S. underwriter will purchase a number of additional ADSs approximately
proportionate to the underwriter's initial purchase commitment.
The U.S. underwriters will initially offer the ADSs at the public
offering price set out on the cover of this prospectus. The U.S. underwriters
may sell ADSs to securities dealers at a discount of up to $ per ADS from
the initial public offering price. Any of these securities dealers may resell
any securities purchased from the U.S. underwriters to other brokers or dealers
at a discount of up to $ per ADS from the initial public offering price. If
all the ADSs are not sold at the initial offering price, the representatives of
the U.S. underwriters may change the offering price and the other selling
terms.
We have also entered into an underwriting agreement for the sale of
1,670,000 ADSs outside the United States and Canada. Merrill Lynch (Singapore)
Pte. Ltd. and Salomon Brothers International Limited are the representatives of
the underwriters for the international offering. The U.S. and international
offerings are conditioned on each other. The initial offering price and
aggregate underwriting commissions per ADS for the U.S. offering and the
international offering are identical.
The underwriters have entered into an agreement in which they agree to
restrictions on where and to whom they and any dealer purchasing from them may
offer ADSs in connection with the offering. The U.S. and international
underwriters also have agreed that they may sell shares between their
respective underwriting groups.
Our company, each of our executive officers and directors, the holders of
warrants to purchase 750,000 equity shares and substantially all of our
shareholders have agreed not to offer, sell, contract to sell or
92
<PAGE>
otherwise dispose of any equity shares or securities convertible into,
exchangeable for or representing the right to receive equity shares, for a
period of 180 days after the date of this prospectus without the prior written
consent of Merrill Lynch, Pierce, Fenner and Smith Incorporated. These
agreements do not cover (1) the grant of stock options under our existing stock
option plan or (2) equity shares issued upon the conversion of convertible or
exchangeable securities or the exercise of an option or warrant outstanding as
of the date of this prospectus. These lock-up agreements cover substantially
all equity shares outstanding prior to this offering.
The ADSs offered under this prospectus are expected to be approved for
listing on the Nasdaq National Market.
In connection with the offering, the U.S. and international underwriters
may purchase and sell ADSs in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of securities than they are required to purchase in the offering.
Stabilizing transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the ADSs while the
offering is in progress.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the ADSs. As a result, the price of the ADSs may be
higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, the underwriters may discontinue these
transactions at any time. The underwriters may effect transactions through the
Nasdaq National Market, in the over-the-counter market or otherwise.
We have agreed to indemnify the several underwriters against some
liabilities, including liabilities under the Securities Act of 1933.
The underwriters and their affiliates engage and may in the future engage
in investment banking and commercial banking transactions with us.
The underwriters have reserved up to 200,000 ADSs for sale at our request
to persons associated with our company at the same price and on the same terms
as the shares sold by the underwriters to the general public. The number of
ADSs available for sale to the general public will be reduced to the extent any
reserved ADSs are purchased. Any reserved ADSs not so purchased will be offered
by the underwriters on the same basis as the other ADSs offered hereby.
The underwriters expect to deliver ADSs against payment for the ADSs in
U.S. dollars in New York, New York on or about , 1999.
Selling Restrictions
This prospectus does not constitute an offer or an invitation by, or on
behalf of, us or by or on behalf of the underwriters, to subscribe for or
purchase any of our equity shares or ADSs in any jurisdiction to any person to
whom it is unlawful to make such an offer or solicitation in that jurisdiction.
The distribution of this prospectus and the offering of our equity shares or
ADSs in certain jurisdictions may be restricted by law. Persons into whose
possession this prospectus comes are required by us and the underwriters to
inform themselves about and to observe any such restrictions.
93
<PAGE>
LEGAL MATTERS
The validity of the ADSs offered hereby will be passed upon for Satyam
Infoway Limited by Latham & Watkins, Menlo Park, California. The validity of
the equity shares represented by the ADSs offered hereby and 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 will be passed
upon by M.G. Ramachandran, New Delhi, India, Indian counsel for Satyam Infoway
Limited. Matters in connection with the offering will be passed upon on behalf
of the underwriters by Brobeck, Phleger & Harrison, LLP, New York, New York,
and Nishith Desai Associates, Mumbai, India, counsel for the Underwriters.
Latham & Watkins may rely upon M.G. Ramachandran with respect to matters
governed by Indian law.
EXPERTS
The U.S. GAAP financial statements of Satyam Infoway Limited as of March
31, 1998 and 1999, and for each of the years in the three-year period ended
March 31, 1999, 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 May 1998, Bharat S. Raut and Company was engaged as the
principal independent accountants for Satyam Infoway for Indian GAAP reporting,
replacing Fraser & Ross, who resigned at that time. The change was approved by
our Directors and at the annual general meeting held on May 23, 1998.
In connection with the audits of the fiscal years ended March 31, 1996,
1997 and 1998, and for the interim period from April 1, 1998 through May 23,
1998, there were no disagreements with Fraser & Ross on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction
of Fraser & Ross, would have caused them to make reference to the matter in
their report, except that during the fiscal year ended March 31, 1998 Fraser &
Ross qualified its opinion regarding whether or not Section 58A of the
Companies Act applied to Satyam Infoway's issuance of debentures to Citibank.
Section 58A prohibits Indian companies, other than banks, from accepting
"deposits" in an amount in excess of 25% of their share capital. Fraser & Ross
concluded that the debentures should be classified as "deposits" while Satyam
Infoway concluded that they should be classified as a bank loan. The audit
reports of Fraser & Ross for the financial statements of Satyam Infoway as of
and for the fiscal years ended March 31, 1996, 1997 and 1998 did not contain
any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty or audit scope, except for a qualification of the
financial statements at March 31, 1998 prepared under Indian GAAP related to
the treatment of the Citibank debentures as described above.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form F-1, which
includes amendments, exhibits, schedules and supplements, under the Securities
Act of 1933, as amended, and the rules and regulations of the SEC, for the
registration of the ADSs and underlying equity shares offered by this
prospectus. Although this prospectus, which forms a part of the registration
statement, contains all material information included in the registration
statement, part of the registration statement have been omitted from this
prospectus as permitted by the rules and regulations of the SEC. A related
registration statement on Form F-6 has also been filed to register our ADSs as
represented by the ADRs. For further information with respect to
94
<PAGE>
our company and the ADSs offered by this prospectus, please refer to the
registration statement. Although this prospectus contains all material terms of
the contracts or other documents referred to in this prospectus, the
descriptions of these contracts or other documents contained in this prospectus
are not necessarily complete.
You may read and copy all or any portion of the registration statement or
any other information that we file, or obtain a copy of those materials,
through facilities maintained by the SEC as described in the front of this
prospectus under the caption "Reports to our Security Holders."
95
<PAGE>
SATYAM INFOWAY LIMITED
INDEX TO 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 Stockholders' 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 Stockholders
Satyam Infoway Limited:
We have audited the accompanying balance sheets of Satyam Infoway
Limited as of March 31, 1998 and 1999, and the related statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended March 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these 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 financial statements referred to above present
fairly, in all material respects, the financial position of Satyam Infoway
Limited as of March 31, 1998 and 1999, and the results of its operations and
its cash flows for each of the years in the three-year period ended March 31,
1999, in conformity with accounting principles generally accepted in the
United States.
The United States dollar amounts are presented in the accompanying
financial statements solely for the convenience of the readers and are
arithmetically correct on the basis disclosed in footnote 1(b).
KPMG Peat Marwick
Chennai, India
April 19, 1999
F-2
<PAGE>
SATYAM INFOWAY LIMITED
BALANCE SHEETS
(Expressed in Indian Rupees, except share data and as otherwise stated)
<TABLE>
<CAPTION>
As of
------------------------------------------------------------------------------
March 31, March 31, March 31, June 30, June 30, June 30,
1998 1999 1999 1998 1999 1999
Rs. Rs. US$ Rs. Rs. US$
------------ ------------ ---------- ------------ ------------ ----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............ 9,911,667 125,547,453 2,889,470 4,768,486 10,375,381 238,789
Accounts receivable, net
of allowances of Rs
Nil, Rs. 501,839 and
Rs. 726,060 as of March
31, 1998, 1999 and
June 30, 1999,
respectively........... 1,945,483 45,087,639 1,037,692 10,515,365 53,157,565 1,223,419
Due from officers and
employees.............. 87,302 573,143 13,191 123,676 570,806 13,137
Inventories............. -- 6,758,190 155,539 102,755 5,925,745 136,381
Other current assets.... 10,978,160 73,688,213 1,695,931 12,358,743 87,638,648 2,017,000
------------ ------------ ---------- ------------ ------------ ----------
Total current assets... 22,922,612 251,654,638 5,791,823 27,869,025 157,668,145 3,628,726
Plant and equipment--
net.................... 63,240,894 162,833,876 3,747,615 70,106,064 252,429,715 5,809,660
Intangible asset........ 11,295,502 8,916,052 205,203 10,700,639 8,321,190 191,512
Other assets............ 10,173,248 31,483,855 724,599 10,825,159 46,053,778 1,059,925
------------ ------------ ---------- ------------ ------------ ----------
Total assets........... 107,632,256 454,888,421 10,469,240 119,500,887 464,472,828 10,689,823
============ ============ ========== ============ ============ ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt......... -- 144,750,000 3,331,415 -- 167,500,000 3,855,006
Current installments of
capital lease
obligations............ 2,541,263 596,740 13,734 2,689,165 914,901 21,056
Short term borrowings... -- -- -- -- 31,823,824 732,424
Trade accounts payable.. 15,471,302 17,275,480 397,595 21,748,862 23,118,809 532,079
Due to parent company... 1,508,887 3,980,370 91,608 1,890,222 5,481,776 126,163
Accrued expenses........ 3,685,525 19,028,671 437,944 4,294,524 15,152,329 348,730
Deferred revenue........ -- 71,506,440 1,645,719 1,491,293 92,480,652 2,128,439
Advances from
customers.............. 1,641,292 11,747,346 270,365 919,373 8,596,943 197,858
Other current
liabilities............ 3,429,204 4,476,322 103,022 2,585,996 10,923,424 251,402
------------ ------------ ---------- ------------ ------------ ----------
Total current
liabilities........... 28,277,473 273,361,369 6,291,402 35,619,435 355,992,658 8,193,157
Non-current liabilities:
Long-term debt,
excluding current
installments........... 122,000,000 113,750,000 2,617,952 122,000,000 91,000,000 2,094,361
Capital lease
obligations, excluding
current installments... 9,913,961 159,244 3,665 9,269,877 404,806 9,317
Other liabilities....... -- -- -- -- 1,000,000 23,015
------------ ------------ ---------- ------------ ------------ ----------
Total liabilities...... 160,191,434 387,270,613 8,913,019 166,889,312 448,397,464 10,319,850
============ ============ ========== ============ ============ ==========
Stockholders' equity:
Common stock, Rs. 10 par
value; 15,000,000,
25,000,000 and
25,000,000 Equity
Shares authorized as of
March 31, 1998, 1999
and June 30, 1999;
Issued and outstanding
Equity Shares--
7,500,230, 15,750,000
and 15,750,000 as of
March 31, 1998, 1999
and June 30, 1999...... 75,002,300 157,500,000 3,624,856 105,002,300 157,500,000 3,624,856
Additional paid-in
capital................ -- 226,636,200 5,216,023 -- 226,636,200 5,216,023
Accumulated deficit
during development
stage.................. (127,561,478) -- -- -- -- --
Deferred Compensation--
Employee Stock Offer
Plan................... -- (1,581,249) (36,392) -- (1,374,999) (31,646)
Accumulated deficit..... -- (314,937,143) (7,248,266) (152,390,725) (366,685,837) (8,439,260)
------------ ------------ ---------- ------------ ------------ ----------
Total stockholders'
equity................ (52,559,178) 67,617,808 1,556,221 (47,388,425) 16,075,364 369,973
------------ ------------ ---------- ------------ ------------ ----------
Total liabilities and
stockholders' equity.. 107,632,256 454,888,421 10,469,240 119,500,887 464,472,828 10,689,823
============ ============ ========== ============ ============ ==========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
SATYAM INFOWAY LIMITED
STATEMENTS OF INCOME
(Expressed in Indian Rupees, except share data and as otherwise stated)
<TABLE>
<CAPTION>
Years ended March 31 Quarter ended June 30,
--------------------------------------------------- ------------------------------------
1997 1998 1999 1999 1998 1999 1999
Rs. Rs. Rs. US$ Rs. Rs. US$
----------- ------------ ------------ ---------- ----------- ----------- ----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............... -- 6,805,020 103,343,832 2,378,454 17,557,719 80,803,252 1,859,684
Cost of revenues....... -- (19,497,654) (63,651,265) (1,464,931) (7,074,081) (38,896,630) (895,204)
----------- ------------ ------------ ---------- ----------- ----------- ----------
Gross profit/(loss).... -- (12,692,634) 39,692,567 913,523 10,483,638 41,906,622 964,480
----------- ------------ ------------ ---------- ----------- ----------- ----------
Operating expenses:
Selling, general and
administrative
expenses............. 26,336,901 80,399,677 200,212,761 4,607,888 30,607,474 84,131,759 1,936,289
Amortization of
deferred stock
compensation
expense.............. -- -- 68,751 1,582 -- 206,250 4,747
----------- ------------ ------------ ---------- ----------- ----------- ----------
Total operating
expenses.............. 26,336,901 80,399,677 200,281,512 4,609,470 30,607,474 84,338,009 1,941,036
----------- ------------ ------------ ---------- ----------- ----------- ----------
Operating loss......... (26,336,901) (93,092,311) (160,588,945) (3,695,947) (20,123,836) (42,431,387) (976,556)
Other expense, net..... -- (7,498,053) (26,786,720) (616,495) (4,705,411) (9,317,307) (214,437)
----------- ------------ ------------ ---------- ----------- ----------- ----------
Net loss............... (26,336,901) (100,590,364) (187,375,665) (4,312,442) (24,829,247) (51,748,694) (1,190,993)
=========== ============ ============ ========== =========== =========== ==========
Loss per Equity Share.. (114,508.27) (121.66) (17.31) (0.40) (3.28) (3.29) (0.08)
=========== ============ ============ ========== =========== =========== ==========
Weighted Equity Shares
used in computing loss
per equity share...... 230 826,805 10,824,826 10,824,826 7,566,164 15,750,000 15,750,000
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
SATYAM INFOWAY LIMITED
STATEMENTS OF STOCK HOLDERS EQUITY
(Expressed in Indian Rupees, except share data and as otherwise stated)
<TABLE>
<CAPTION>
Deferred
Common Stock Accumulated Compensation- Total
---------------------- Additional Paid Deficit During Employee Accumulated Stockholders'
Shares Par Value In Capital Development Stage Stock Offer Plan Deficit Equity
---------- ----------- --------------- ----------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of March
31, 1996.......... 230 2,300 -- (634,213) -- -- (631,913)
Net loss........... -- -- -- (26,336,901) -- -- (26,336,901)
---------- ----------- ----------- ------------ ---------- ------------ ------------
Balance as of March
31, 1997.......... 230 2,300 -- (26,971,114) -- -- (26,968,814)
Common stock issued
to the parent
Company........... 7,500,000 75,000,000 -- -- -- -- 75,000,000
Net loss........... -- -- -- (100,590,364) -- -- (100,590,364)
---------- ----------- ----------- ------------ ---------- ------------ ------------
Balance as of March
31, 1998.......... 7,500,230 75,002,300 -- (127,561,478) -- -- (52,559,178)
Deficit transfer... -- -- -- 127,561,478 -- (127,561,478) --
Common stock issued
to the parent
Company........... 4,879,770 48,797,700 44,986,200 -- -- -- 93,783,900
Other issuances of
common stock...... 3,370,000 33,700,000 180,000,000 -- -- -- 213,700,000
Net loss........... -- -- -- -- -- (187,375,665) (187,375,665)
Compensation
related to stock
option grants..... -- -- 1,650,000 -- (1,650,000) -- --
Amortization of
compensation
related to stock
option grants..... -- -- -- -- 68,751 -- 68,751
---------- ----------- ----------- ------------ ---------- ------------ ------------
Balance as of March
31, 1999.......... 15,750,000 157,500,000 226,636,200 -- (1,581,249) (314,937,143) 67,617,808
Net loss
(unaudited)....... -- -- -- -- -- (51,748,694) (51,748,694)
Amortization of
compensation
related to stock
option grants
(unaudited)....... -- -- -- -- 206,250 -- 206,250
---------- ----------- ----------- ------------ ---------- ------------ ------------
Balance as of June
30, 1999
(unaudited)....... 15,750,000 157,500,000 226,636,200 -- (1,374,999) (366,685,837) 16,075,364
========== =========== =========== ============ ========== ============ ============
Balance as of March
31, 1999 (in
US$).............. 15,750,000 3,624,856 5,216,023 -- (36,392) (7,248,266) 1,556,221
========== =========== =========== ============ ========== ============ ============
Balance as of June
30, 1999 (in US$)
(unaudited)....... 15,750,000 3,624,856 5,216,023 -- (31,646) (8,439,260) 369,973
========== =========== =========== ============ ========== ============ ============
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
SATYAM INFOWAY LIMITED
STATEMENTS OF CASH FLOWS
(Expressed in Indian Rupees, except share data and as otherwise stated)
<TABLE>
<CAPTION>
Years ended March 31, Quarter ended June 30,
--------------------------------------------------- --------------------------------------
1997 1998 1999 1999 1998 1999 1999
Rs. Rs. Rs. US$ Rs. Rs. US$
----------- ------------ ------------ ---------- ----------- ------------ -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss................ (26,336,901) (100,590,364) (187,375,665) (4,312,442) (24,829,247) (51,748,694) (1,190,993)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation of plant
and equipment......... 535,975 18,781,598 46,714,402 1,075,130 8,191,497 20,705,897 476,545
Amortization of
technical know how
fees.................. -- 601,748 2,379,450 54,763 594,863 594,862 13,691
Amortization of
deferred stock
compensation
expense............... -- -- 68,751 1,582 -- 206,250 4,747
Loss on sale of plant
and equipment......... -- -- 37,627 866 -- -- --
Changes in assets and
liabilities:
Accounts receivable
(net)............... -- (1,945,483) (43,142,156) (992,916) (8,569,882) (8,069,926) (185,727)
Inventories.......... -- -- (6,758,190) (155,539) (102,755) 832,445 19,159
Other current
assets.............. (4,710,247) (6,204,993) (62,710,053) (1,443,269) (1,380,583) (13,950,435) (321,070)
Other assets......... (2,780,684) (7,212,564) (21,218,607) (488,345) (651,911) (14,538,260) (334,598)
Due to parent
company............. -- 1,508,887 1,387,583 31,935 (618,665) 1,501,406 34,555
Accrued expenses..... 2,743,173 942,352 15,343,146 353,122 608,999 (3,876,342) (89,215)
Deferred revenue..... -- -- 71,506,440 1,645,718 1,491,293 20,974,212 482,721
Trade accounts
payable............. -- 15,471,302 1,804,178 41,523 6,277,560 5,843,329 134,484
Advances from
customers........... -- 1,641,292 10,106,054 232,590 (721,919) (3,150,403) (72,506)
Other current
liabilities......... 327,643 3,082,704 1,047,118 24,098 (843,208) 6,447,102 148,379
Advances given to
officers and
employees........... (205,341) (26,961) (577,841) (13,299) (36,374) (29,326) (675)
Other liabilities.... -- -- -- -- -- 1,000,000 23,015
----------- ------------ ------------ ---------- ----------- ------------ ----------
Net cash used in
operating activities... (30,426,382) (73,950,482) (171,387,763) (3,944,483) (20,590,332) (37,257,883) (857,488)
----------- ------------ ------------ ---------- ----------- ------------ ----------
Cash flows from
investing activities:
Expenditure on plant and
equipment.............. (3,229,593) (65,172,385) (146,134,547) (3,363,281) (15,056,667) (109,577,914) (2,521,931)
Expenditure on technical
know how............... -- (11,897,250) -- -- -- -- --
Proceeds from sale of
plant and equipment.... -- -- 135,000 3,107 -- -- --
----------- ------------ ------------ ---------- ----------- ------------ ----------
Net cash used in
investing activities... (3,229,593) (77,069,635) (145,999,547) (3,360,174) (15,056,667) (109,577,914) (2,521,931)
----------- ------------ ------------ ---------- ----------- ------------ ----------
Cash flows from
financing activities:
Principal payments of
long-term debt......... -- (860,000) -- -- -- -- --
Proceeds from issuance
of long-term debt...... 860,000 122,000,000 136,500,000 3,141,542 -- -- --
Proceeds from short term
loans.................. -- -- -- -- -- 31,823,824 732,423
Principal payments under
capital lease
obligations............ -- (1,701,265) (12,044,704) (277,208) (496,182) (160,099) (3,685)
Net proceeds from
issuance of common
stock.................. -- 38,453,000 307,483,900 7,076,730 30,000,000 -- --
Due to parent company... 34,278,465 1,557,559 1,083,900 24,946 1,000,000 -- --
----------- ------------ ------------ ---------- ----------- ------------ ----------
Net cash provided by
financing activities... 35,138,465 159,449,294 433,023,096 9,966,010 30,503,818 31,663,725 728,738
----------- ------------ ------------ ---------- ----------- ------------ ----------
Net increase/(decrease)
in cash and cash
equivalents............ 1,482,490 8,429,177 115,635,786 2,661,353 (5,143,181) (115,172,072) (2,650,681)
Cash and cash
equivalents at the
beginning of the
year/quarter........... -- 1,482,490 9,911,667 228,117 9,911,667 125,547,453 2,889,470
----------- ------------ ------------ ---------- ----------- ------------ ----------
Cash and cash
equivalents at the end
of the year/quarter.... 1,482,490 9,911,667 125,547,453 2,889,470 4,768,486 10,375,381 238,789
=========== ============ ============ ========== =========== ============ ==========
Supplementary
Information
Cash paid towards
interest............... -- 11,307,320 27,754,615 638,770 4,422,500 10,060,759 231,547
Supplemental schedule of
non cash financing
activity
Additional common stock
issued upon conversion
of amounts payable to
parent company......... -- 7,565,690 1,083,900 24,946 1,000,000 -- --
Capital leases.......... -- 14,156,489 161,443 3,716 -- 723,822 16,659
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
1. Summary of Significant Accounting Policies
(a) Description of Business
Satyam Infoway Limited ("Satyam" or "the Company") was incorporated on
December 12, 1995 in Chennai, India with the objective of offering electronic
commerce and Internet/intranet based solutions. Headquartered at Chennai, the
Company has 25 points of presence throughout the country. Prior to April 1,
1998, the Company was in the development stage and its primary activities
included raising capital, developing strategic alliances, developing, deploying
and certifying its network, acquiring plant and equipment and other operating
assets and identifying markets. As of April 1, 1998, the Company is no longer
in the development stage.
The Company commenced its Internet service operations on November 22,
1998, consequent to the privatization of Internet services by the Government of
India.
The Company is a majority owned subsidiary of Satyam Computer Services
Limited ("Satyam Computer Services"). As of June 30, 1999, Satyam Computer
Services held approximately 78.6% of the voting control of the Company
represented by 12,379,800 Equity Shares of Rs. 10 each.
(b) Basis of Preparation of Financial Statements
The accompanying financial statements have been prepared in Indian Rupees
(Rs.), the national currency of India. Solely for the convenience of the
reader, the financial statements as of and for the year ended March 31, 1999
and quarter ended June 30, 1999 have been translated into United States dollars
at the noon buying rate in New York City on June 30, 1999 for cable transfers
in Indian rupees, as certified for customs purposes by the Federal Reserve Bank
of New York of US$ 1 = Rs. 43.45. No representation is made that the Indian
rupee amounts have been, could have been or could be converted into United
States dollars at such a rate or at any other certain rate on June 30, 1999 or
at any other date.
(c) 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(d) Cash, Cash Equivalents and Short-term Investments
The Company considers all highly liquid investments with original
maturities, at the date of purchase/investment, of three months or less to be
cash equivalents. Cash and cash equivalents currently consist of cash and cash
on deposit with banks.
(e) Revenue Recognition
Revenues from corporate network services which include providing e-
commerce solutions, electronic data interchange and other network based
services are recognized upon actual usage of such services by customers and is
based on either the time for which the network is used or the volume of data
transferred or
F-7
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
both. The Company enters into contracts with its corporate customers for the
use of its networks on both a time and usage basis. In accordance with the
terms of these contracts, customers are allowed to transmit certain volumes of
data free of cost through the Company's networks. No revenues are recognized
for such data transfers. Data transfers above the minimum exempt volumes are
charged to customers at specified rates. Customers also receive the right to
use the Company's networks free of cost for specified periods of time. No
revenues are recognized for such exempt periods of time. Network usage over and
above the exempt periods of time are billed to customers at agreed rates. The
Company recognizes such revenues based on actual usage of the networks by
customers both in terms of time and data transferred.
Revenues from web-site design and development are recognized upon
completion of the project once the customer's web links are commissioned and
available on the world-wide-web. Revenues from web-site hosting are recognized
ratably over the period for which the site is hosted.
Internet access is sold to customers for a specified number of hours,
which is to be utilized within a specified period of time. Customers purchase a
CD ROM that allows them to access the Internet. The amounts received from
customers on the sale of these CD ROMs are not refundable. The Company
recognizes revenue based on usage by the customer over the specified period. At
the end of the specified time frame, the remaining unutilized hours, if any,
are recognized as revenue. Electronic mail access is sold to customers for a
specified period of time over which the related revenue is recognized.
Revenues from banner advertisements are recognized ratably over the
period in which the advertisement is displayed, provided that no significant
Company obligations remain at the end of the period and the collection of the
related receivable is probable. Revenues from sponsorship contracts are
recognized ratably over the period in which the sponsors' advertisements are
displayed provided no significant Company obligations remain at the end of the
period and collection of the resulting receivable is probable. Revenues from
electronic commerce transactions are recognized when the transaction is
completed provided there are no significant remaining Company obligations and
collection of the resulting receivable is probable.
The Company has entered into a three-year agreement with CompuServe
Network Services ("CompuServe") to provide dial up access services. The Company
recognizes revenues from this agreement on the basis of usage of its networks
by CompuServe's customers. Revenues from the sale of communication hardware and
software required to provide the Company's network based services is recognized
when the sale is complete with the passing of title.
(f) Inventories
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out method for all classes of inventories
other than CD ROMs used for Internet service activities for which the weighted
average method is used to determine cost.
F-8
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
(g) Plant and Equipment
Plant and equipment are stated at cost. Plant and equipment under capital
leases are stated at the present value of minimum lease payments. The Company
computes depreciation for all plant and equipment using the straight-line
method. Leasehold improvements are amortized on a straight-line basis over the
shorter of the primary lease period or estimated useful life of the asset. The
estimated useful lives of assets are as follows:
<TABLE>
<S> <C>
Plant and machinery............................................... 5 years
Computer equipment................................................ 2 years
Office equipment.................................................. 5 years
Furniture and fixtures............................................ 5 years
Vehicles.......................................................... 5 years
System software................................................... 3 years
</TABLE>
The Company purchases certain application software for internal use. It
is estimated that such software has a relatively short useful life, usually
less than one year. The Company, therefore, charges to income the cost of
acquiring such software, entirely at the time of acquisition. Deposits paid
towards the acquisition of plant and equipment outstanding at each balance
sheet date and the cost of plant and equipment not put to use before such date
are disclosed under Construction-in-progress.
(h) Intangible Asset
The Company entered into a five year agreement effective September 1997
with Sterling Commerce International Inc ("Sterling") whereby Sterling agreed
to grant the Company certain rights to market, provide, install, facilitate,
maintain and support Sterling's proprietary electronic commerce technology. In
consideration for granting this proprietary technology, the Company paid
Sterling a licencing fee of $ 300,000, which was capitalized. The Company
currently amortizes this fee over five years, this being the initial period
over which it is entitled to use the electronic commerce technology. The
amortization related to the licence is included under "Depreciation and
amortization" and is classified in the Income Statement under the caption
"Selling, general and administrative expenses."
(i) Earnings Per Share
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("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.
(j) 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 carry-forwards. 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
F-9
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
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.
(k) Retirement Benefits to Employees
Provident fund: In accordance with Indian law, 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 basic salary. The Company has no further obligations
under the plan beyond its monthly contributions.
Gratuity: In addition to the above benefits, the Company provides for
gratuity, a defined benefit retirement plan (the "Gratuity Plan") covering all
employees. The Gratuity Plan commenced on April 1, 1997. 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. The Company contributes each year to a gratuity
fund maintained by the Life Insurance Corporation of India ("LIC") based upon
actuarial valuations. No additional contributions were required to be made by
the Company in excess of the unpaid contributions to the plan. The LIC has no
recourse to the Company in the event of any shortfall in its obligations to
vested employees and is entirely responsible for meeting all unfunded
liabilities. Consequently, all additional liabilities that may arise will be
borne by the LIC. Further, vested employees do not have any recourse to the
Company in the event the LIC does not fulfil its obligations to them. The
Company does not carry any pension liability in its financial statements and
has no further obligations under the plan beyond its monthly contributions.
(l) Stock-based Compensation
The Company uses the intrinsic value-based method of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees, to account for its employee stock-based compensation plan. The
Company has therefore adopted the pro forma disclosure provisions of SFAS No.
123, Accounting for Stock-Based Compensation.
(2) Cash and Cash Equivalents
The cost and fair values for cash and cash equivalents as of March 31,
1998 and 1999 and June 30, 1999, are set out below.
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30,
1998 1999 1999 1999 1999
Rs. Rs. US$ Rs. US$
--------- ----------- --------- ----------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cost and fair values
Cash and cash
equivalents.......... 9,911,667 125,547,453 2,889,470 10,375,381 238,789
</TABLE>
Cash and cash equivalents include deposits of Rs. 69,200, Rs. 7,261,200
(US$ 167,116) and Rs. 7,634,477 (US$ 175,707) as of March 31, 1998 and 1999 and
June 30, 1999, respectively placed in "No-charge-no-lien" accounts as security
towards performance guarantees issued by the Company's bankers on the Company's
behalf. The Company cannot utilize these amounts until the guarantees are
discharged or revoked.
F-10
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
Cash and cash equivalents as of March 31, 1999 also include deposits of Rs.
115,000,000 (US$ 2,646,720) placed with banks as short-term deposits.
(3) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30, June 30,
1998 1999 1999 1998 1999 1999
Rs. Rs. US$ Rs. Rs. US$
--------- --------- --------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Compact discs........... -- 120,192 2,765 -- 178,378 4,105
Communication hardware.. -- 3,288,496 75,685 -- 2,345,114 53,973
Application software.... -- 3,349,502 77,089 102,755 3,402,253 78,303
--- --------- ------- ------- --------- -------
-- 6,758,190 155,539 102,755 5,925,745 136,381
=== ========= ======= ======= ========= =======
</TABLE>
(4) Other Current Assets
Other current assets consist of the following:
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30,
1998 1999 1999 1999 1999
Rs. Rs. US$ Rs. US$
---------- ---------- --------- ----------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Advance for expenses.... 818,285 1,617,959 37,238 5,976,618 137,552
Prepaid expenses........ 9,398,921 70,329,478 1,618,630 79,850,894 1,837,765
Prepaid telephone
rentals................ 51,750 296,250 6,818 296,250 6,818
Advance tax payments.... 709,204 959,516 22,083 1,225,783 28,211
Due from associate
company................ -- 190,104 4,375 224,993 5,178
Other advances.......... -- 294,906 6,787 64,110 1,476
---------- ---------- --------- ---------- ---------
10,978,160 73,688,213 1,695,931 87,638,648 2,017,000
========== ========== ========= ========== =========
</TABLE>
Prepaid expenses consist mainly of the unexpired portion of annual
rentals paid to the Department of Telecommunications, Ministry of
Communications, Government of India for use of leased telecommunication lines.
F-11
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
(5) Plant and Equipment
Plant and equipment consist of the following:
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30,
1998 1999 1999 1999 1999
Rs. Rs. US$ Rs. US$
----------- ----------- ---------- ----------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Leasehold improvements.. 1,455,293 6,164,699 141,880 8,799,064 202,510
Plant and machinery..... 20,979,507 101,558,254 2,337,359 193,243,376 4,447,489
Computer equipment...... 41,055,959 72,577,533 1,670,369 82,403,663 1,896,517
Office equipment........ 1,299,341 1,727,654 39,762 2,104,818 48,442
Furniture and fixtures.. 4,636,715 7,665,644 176,424 8,211,437 188,986
Vehicles................ -- 161,443 3,716 885,265 20,374
System software......... 11,039,530 20,022,142 460,809 20,925,905 481,609
Construction-in-
progress............... 2,092,122 18,977,088 436,757 22,582,665 519,739
----------- ----------- ---------- ----------- ----------
82,558,467 228,854,457 5,267,076 339,156,193 7,805,666
Accumulated
depreciation........... (19,317,573) (66,020,581) (1,519,461) (86,726,478) (1,996,006)
----------- ----------- ---------- ----------- ----------
63,240,894 162,833,876 3,747,615 252,429,715 5,809,660
=========== =========== ========== =========== ==========
</TABLE>
Depreciation expense amounted to Rs. 535,975, Rs. 18,781,598, Rs.
46,714,402 (US$ 1,075,130) and Rs. 20,705,897 (US$ 476,545) for fiscal years
1997, 1998, 1999 and for the quarter ended June 30, 1999, respectively.
(6) Technical know-how fees as of March 31, 1998 and 1999 and June 30, 1999,
net of accumulated amortization of Rs. 601,748, Rs. 2,981,198 (US$ 68,612) and
Rs. 3,576,060 (US$ 82,303) respectively amounted to Rs. 11,295,502, Rs.
8,916,052 (US$ 205,203) and Rs. 8,321,190 (US$ 191,512) respectively.
(7) Leases
The Company is obligated under capital leases that expire in fiscal 1999
through 2002 for certain items of computers and vehicles. The gross amount and
related accumulated amortization recorded under capital leases were as follows:
<TABLE>
<CAPTION>
March 31, March 31, March June 30, June 30,
1998 1999 31, 1999 1999 1999
Rs. Rs. US$ Rs. US$
---------- ----------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Computer equipment...... 14,156,489 14,156,489 325,811 1,649,789 37,970
Vehicles................ -- 161,443 3,716 885,265 20,374
---------- ----------- -------- ---------- -------
Total................... 14,156,489 14,317,932 329,527 2,535,054 58,344
========== =========== ======== ========== =======
Accumulated
depreciation........... (3,526,065) (10,628,548) (244,616) (1,706,580) (39,277)
</TABLE>
F-12
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
Depreciation on assets held under capital leases is included in total
depreciation expense.
Future minimum capital lease payments as of June 30, 1999 (unaudited)
are:
<TABLE>
<CAPTION>
Year ending March 31, June 30,
----------- ----------------- ----------------------
Rs. US$ Rs. US$
-------- ------- ----------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
2000.......................... 701,804 16,152 1,094,487 25,190
2001.......................... 166,461 3,831 253,140 5,826
2002.......................... -- -- 210,950 4,855
-------- ------- --------- -------
Total minimum lease payments.. 868,265 19,983 1,558,577 35,871
Less: Amount representing
interest..................... (112,281) (2,584) (238,870) (5,498)
-------- ------- --------- -------
Present value of net minimum
capital lease payments....... 755,984 17,399 1,319,707 30,373
Less: Current installments of
obligations under capital
leases....................... (596,740) (13,734) (914,901) (21,056)
-------- ------- --------- -------
Obligations under capital
leases, excluding current
installments................. 159,244 3,665 404,806 9,317
======== ======= ========= =======
</TABLE>
During fiscal 1999 the Company prepaid certain of its capital lease
obligations acquiring ownership of the related assets. The principal repaid
amounted to Rs. 1,121,696 and Rs. 11,385,004 (US$ 262,025) in fiscal 1998 and
1999, respectively.
(8) Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30,
1998 1999 1999 1999 1999
Rs. Rs. US$ Rs. US$
---------- ---------- --------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Rent and maintenance
deposits............... 5,948,129 8,239,345 189,627 9,803,140 225,619
Telephone deposits...... 2,334,000 17,308,000 398,343 30,330,076 698,045
Other deposits.......... 139,822 392,197 9,026 418,647 9,635
Prepaid telephone
rentals................ 1,606,297 5,307,313 122,148 5,233,252 120,443
Staff advances
recoverable after one
year................... 145,000 237,000 5,455 268,663 6,183
---------- ---------- ------- ---------- ---------
10,173,248 31,483,855 724,599 46,053,778 1,059,925
========== ========== ======= ========== =========
</TABLE>
F-13
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
(9) Short term borrowings
Short term borrowings comprise the following:
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30,
1998 1999 1999 1999 1999
Rs. Rs. US$ Rs. US$
--------- --------- --------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Short term loan......... -- -- -- 20,000,000 460,299
Cash credit facilities
from banks............. -- -- -- 11,823,824 272,125
--- --- --- ---------- -------
-- -- -- 31,823,824 732,424
=== === === ========== =======
</TABLE>
In June 1999, the Company obtained a short term loan facility from the
IDBI Bank Limited ("IDBI") in an amount of Rs. 100,000,000. This loan is
secured by a subordinated charge on the fixed assets (both present and future)
of the Company and also by a corporate guarantee provided by Satyam Computer
Services. The loan carries an interest rate of 12.75% per annum and is
repayable within 90 days. As of June 30, 1999, the Company has availed an
amount of Rs. 20,000,000 (US$ 460,299) under this facility, which is repayable
in the month of September 1999. The Company has also availed of a cash credit
facility from IDBI to meet its working capital requirements. The facility
carries an interest rate of 15.81% per annum. This loan is secured by a senior
charge on all present and future goods, book debts and other movable current
assets of the Company.
(10) Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30,
1998 1999 1999 1999 1999
Rs. Rs. US$ Rs. US$
----------- ------------ ---------- ------------ ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Unsecured debentures.... 122,000,000 122,000,000 2,807,825 122,000,000 2,807,825
Term loan from Export
Import Bank of India... -- 136,500,000 3,141,542 136,500,000 3,141,542
----------- ------------ ---------- ------------ ----------
Total long-term debt.... 122,000,000 258,500,000 5,949,367 258,500,000 5,949,367
Less: Current
installments........... -- (144,750,000) (3,331,415) (167,500,000) (3,855,006)
----------- ------------ ---------- ------------ ----------
Long-term debt,
excluding current
installments........... 122,000,000 113,750,000 2,617,952 91,000,000 2,094,361
=========== ============ ========== ============ ==========
</TABLE>
Long term debt includes 1,220,000 unsecured debentures of Rs. 100 each
issued to Citibank NA, redeemable on August 31, 1999 and guaranteed by Satyam
Computer Services, the Company's holding company. These debentures carry a
floating rate of interest subject to a minimum rate of 14.5% per annum and an
additional mark-up rate. This additional mark-up rate is based on the
difference between the "base reference rate" and the "reference rate". The
"base reference rate" and the "reference rate" are calculated based on the
performance of the Indian National Stock Exchange indices through certain
designated periods. Such additional interest will be payable if the reference
rate as of August 31, 1999 exceeds the base reference rate and consequently
will be accounted for at the time of redemption, i.e. on August 31, 1999.
F-14
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
In June 1998, the Company obtained a facility from the Export Import Bank
of India for a term loan of Rs. 215,000,000. This term loan is secured by a
first charge on the fixed assets (both present and future) of the Company and
is also guaranteed by Satyam Computer Services. The loan carries an interest
rate of 15.5% per annum and will be repaid in six equal half-yearly
installments commencing on December 20, 1999. As of June 30, 1999, the Company
has availed an amount of Rs. 136,500,000 (US$ 3,141,542) under this facility.
Aggregate maturities of long-term debt for each of the years subsequent
to June 30, 1999 are as follows: June 30, 2000 - Rs. 167,500,000; June 30,
2001 - Rs. 45,500,000 and June 30, 2002 - Rs. 45,500,000.
(11) Income Taxes
The Company has incurred book and tax operating losses since inception
and has not provided for any deferred income tax because of the uncertainty
associated with the realization of such deferred tax assets.
The composition of the deferred tax asset is as follows:
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30,
1998 1999 1999 1999 1999
Rs. Rs. US$ Rs. US$
----------- ------------ ---------- ------------ ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Deferred tax assets
Operating loss carry
forwards............. 35,433,113 95,590,394 2,200,009 123,081,836 2,832,723
Plant and equipment
and intangibles...... 1,091,277 5,807,119 133,651 8,160,313 187,809
----------- ------------ ---------- ------------ ----------
Total deferred tax
assets................. 36,524,390 101,397,513 2,333,660 131,242,149 3,020,532
Less: Valuation
allowance.............. (36,524,390) (101,397,513) (2,333,660) (131,242,149) (3,020,532)
----------- ------------ ---------- ------------ ----------
Net deferred tax
assets................. -- -- -- -- --
=========== ============ ========== ============ ==========
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. Based
upon the level of historical taxable income and projections for future taxable
income over the periods in which the deferred tax assets are deductible,
management believes that it is more likely than not the Company will not
realize the benefit of these deductible differences. Under Indian law, loss
carry-forwards from a particular year may be used to offset taxable income over
the next eight years.
(12) Common Stock
Dividends: Should the Company declare and pay dividends, such dividends
will be paid in Indian rupees.
Indian law mandates that any dividend can be 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.
F-15
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
(13) Stock Purchase Plan
In fiscal 1999, the Company entered into an agreement with Satyam
Computer Services and the South Asia Regional Fund ("SARF"). Under the terms of
this agreement, the Company agreed to issue warrants to Satyam Computer
Services and SARF. Each warrant entitles the registered holder thereof to
subscribe for and be allotted one Equity Share in the Company. The warrants are
exercisable at a price calculated at a multiple of eight times the fully
diluted earnings per share, subject to a minimum price of the higher of: (a)
66% of the fair market value of a share as determined by three merchant bankers
acceptable to shareholders, and (b) par value of the shares subscribed. These
warrants are exercisable anytime: (a) between June 30, 2001 through June 30,
2003; or (b) if the Company decides to sell any of its shares prior to June 30,
2001; or (c) on a date not later than the date on which the Company files an
application for listing or petitions for voluntary liquidation. As of June 30,
1999, the Company had issued 150,000 and 600,000 warrants to Satyam Computer
Services and SARF respectively. The Company has been notified by Satyam
Computer Services and SARF of their intent to exercise the warrants issued to
them in the event of an Initial Public Offering made by the Company.
(14) Employee Post Retirement Benefits
Contributions to the gratuity plan managed by the Life Insurance
Corporation of India in fiscal 1998 and 1999 was Rs. 313,733 and Rs. 319,606
(US$ 7,356) respectively. No contribution has been made for the quarter ended
June 30, 1999 as the amount had not fallen due on the Balance Sheet date.
In addition the Company contributed Rs. 266,328, Rs. 679,830, Rs.
2,122,963 (US$ 48,860), and Rs. 986,842 (US$ 22,712) to the provident fund
managed by Government of India in fiscal 1997, 1998, 1999 and quarter ended
June 30, 1999 respectively.
(15) Other Expense
Other expense, net, consists of the following:
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, June 30, June 30,
1997 1998 1999 1999 1999 1999
Rs. Rs. Rs. US$ Rs. US$
--------- ---------- ---------- --------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Interest expense........ -- 11,307,320 27,754,615 638,771 10,060,759 231,547
Other finance charges... -- -- -- -- 349,650 8,047
Interest income......... -- (3,809,267) (609,020) (14,017) (785,361) (18,075)
Internet management
fees................... -- -- -- -- (300,000) (6,904)
Other income............ -- -- (358,875) (8,259) (7,741) (178)
----- ---------- ---------- ------- ---------- -------
-- 7,498,053 26,786,720 616,495 9,317,307 214,437
===== ========== ========== ======= ========== =======
</TABLE>
(16) Commitments and Contingencies
The Company had outstanding performance guarantees for various statutory
purposes totaling Rs. 144,000, Rs. 22,144,000 (US$ 509,643) and Rs. 22,144,000
(US$ 509,643) as of March 31, 1998 and 1999 and June 30, 1999, respectively.
These guarantees are generally provided to government agencies, primarily the
Telegraph Authority, as security for compliance with and performance of terms
and conditions contained in the Internet Service Provider licence granted to
the Company, and Videsh Sanchar Nigam Limited, towards the
F-16
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
supply and installation of an electronic commerce platform, respectively. These
guarantees may be invoked by the governmental agencies if they suffer any
losses or damage by reason of breach of any of the covenants contained in the
licence.
As of June 30, 1999, the Company had contractual commitments of
Rs.21,066,110 ($484,836) for capital expenditures relating to new network
infrastructure.
(17) Related Party Transactions
An analysis of transactions with Satyam Computer Services is set out
below.
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, June 30, June 30,
1997 1998 1999 1999 1999 1999
Rs. Rs. Rs. US$ Rs. US$
---------- ----------- ----------- ---------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
the year............... 710,976 34,989,440 1,508,887 34,727 3,980,370 91,608
Advances received
towards working
capital................ 5,297,155 5,590,982 1,308,714 30,121 341,936 7,869
Advance received against
equity................. 28,981,309 38,453,000 92,700,000 2,133,487 -- --
Allocation of facilities
costs.................. -- -- 636,747 14,655 1,107,394 25,487
Expenses incurred on
behalf
of the Company......... -- -- 809,922 18,640 52,076 1,199
Purchases from Satyam
Computer Services...... -- -- 800,000 18,411 -- --
Allotment of equity..... -- (75,000,000) (93,783,900) (2,158,433) -- --
Interest income
received............... -- (2,524,535) -- -- -- --
---------- ----------- ----------- ---------- --------- -------
Balance at the end of
the year............... 34,989,440 1,508,887 3,980,370 91,608 5,481,776 126,163
========== =========== =========== ========== ========= =======
</TABLE>
Advance against equity represents interest free advances received from
the Company's parent company, Satyam Computer Services to be adjusted against
subsequent issues of common stock. There are no other terms against which such
advances have been made. The Company received temporary advances from Satyam
Computer Services to meet its working capital requirements in fiscal 1997
through 1999. Of these, advances amounting to Rs. 7,565,690 and Rs. 1,083,900
were settled by the issue of 756,569 and 108,390 equity shares of Rs. 10 each
in fiscal 1998 and 1999 respectively and is disclosed in the statement of cash
flows as a non-cash financing activity. The fair value of each equity share on
the dates of issuance of these shares equaled their face value.
The Company made sales to Satyam Computer Services for cash amounting to
Rs. 390,000 (US$ 8,976) and Rs. 9,039,000 (US$ 208,032) during the year March
31, 1999 and quarter ended June 30, 1999 respectively. The Company also paid
Satyam Computer Services Rs. 757,141 towards training and consultancy fees in
fiscal 1998.
During fiscal 1998, the Company placed short term deposits with Satyam
Computer Services at a rate of 18% per annum for periods ranging between three
to six months.
F-17
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
Particulars of significant related transactions with other affiliated
companies are set out below.
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, June 30, June 30,
1997 1998 1999 1999 1999 1999
Rs. Rs. Rs. US$ Rs. US$
--------- --------- --------- --------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Sales to affiliates..... -- -- 45,000 1,036 -- --
Purchases of
software/cables from
affiliates............. -- 1,370,938 800,000 18,411 -- --
</TABLE>
No interest is charged by Satyam Computer Services on the balances
payable to them. The balances payable to Satyam Computer Services as of March
31, 1998, 1999 and June 30, 1999 were as follows:
<TABLE>
<CAPTION>
March 31, March 31, March 31, June 30, June 30,
1998 1999 1999 1999 1999
Rs. Rs. US$ Rs. US$
--------- --------- --------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Due to Satyam Computer
Services............... 1,508,887 3,980,370 91,608 5,481,776 126,163
</TABLE>
No amounts were receivable from Satyam Computer Services as of March 31,
1998, March 31, 1999 and June 30, 1999. Included in other current assets is an
amount of Rs. 190,104 (US$ 4,375) and Rs. 224,993 (US$ 5,178) receivable from
affiliates as of March 31, 1999 and June 30, 1999 respectively. No other
amounts were receivable from or payable to affiliates as of March 31, 1998,
1999 and June 30, 1999.
The Company grants interest free advances to officers and employees. Such
loans are repayable over fixed periods ranging from one to sixty months. As of
March 31, 1998, 1999 and June 30, 1999, the amounts recoverable from officers
and employees were Rs. 232,302, Rs. 810,143 (US$ 18,645) and Rs. 839,469
(US$ 19,320) respectively, of which Rs. 87,302, Rs. 573,143 (US$ 13,191) and
Rs. 570,806 (US$ 13,137) respectively were recoverable within one year from
those dates.
(18) Segment Reporting
In accordance with the provisions of SFAS 131, Disclosures about Segments
of an Enterprise and Related Information, the Company has determined that it
has three operating segments:
. Internet Access Services, providing Internet access services to
subscribers;
. Corporate Services, providing dial up and dedicated Internet
access, e-commerce, electronic data interchange, e-mail and other
messaging services, virtual private networks, and web based
solutions to businesses, web page hosting to individuals; and
. Online Portal Services, operating an Internet portal and offering
related content sites.
F-18
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
These operating segments were identified from the structure of the
Company's internal organization. Currently, the chief operating decision-maker
of the Company receives and reviews information relating to segment revenues
only. Products and services revenues are presented below.
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, June 30, June 30,
1997 1998 1999 1999 1999 1999
Rs. Rs. Rs. US$ Rs. US$
--------- --------- ----------- --------- ----------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Internet access
services............... -- -- 13,310,800 306,348 40,148,279 924,011
Corporate services...... -- 6,805,020 89,973,032 2,070,725 40,076,347 922,356
Online portal services.. -- -- 60,000 1,381 578,626 13,317
--- --------- ----------- --------- ---------- ---------
Revenues................ -- 6,805,020 103,343,832 2,378,454 80,803,252 1,859,684
=== ========= =========== ========= ========== =========
</TABLE>
SFAS 131 also requires that an enterprise report a measure of profit or
loss and total assets for each reportable segment. Certain expenses such as
bandwidth costs (telecommunication), depreciation on plant and machinery, etc.,
which form a significant component of total expenses, are not specifically
allocable to these business segments as the services are used interchangeably
between reportable segments. Management believes that it is not practical to
provide segment disclosures relating to segment costs and expenses, and
consequently segment profits or losses, since a realistic allocation cannot be
made. The fixed assets used in the Company's business are not identifiable to
any particular reportable segment and can be used interchangeably among
segments. Consequently, management believes that it is not practical to provide
segment disclosures relating to total assets since a realistic analysis among
the various operating segments is not possible.
(19) Employee Stock Offer Plan
In fiscal 1999, the Company established the Employee Stock Offer Plan
("ESOP") which provides for the issuance of 825,000 warrants to eligible
employees. The warrants were issued to an employee welfare trust (the "Trust")
at Rs. 1 each. The Trust holds the warrants and transfers them to eligible
employees over a period of three years. The warrants are transferred to
employees at Rs. 1 each and each warrant entitles the holder to purchase one of
the Company's equity shares at an exercise price of Rs. 70 per share. The
warrants and the equity shares received upon the exercise of warrants are
subject to progressive vesting over a three-year period from the date of issue
of warrants to employees. The fair market value of each of the issued warrants
was determined by the Board of Directors to be Rs. 400. The warrants allotted
and the underlying equity shares are not subject to any repurchase obligations
by the Company.
During fiscal 1999, 5,000 warrants were granted to a single employee
resulting in a deferred compensation of Rs. 1,650,000, for the difference
between the exercise price and the fair market value of the common stock
underlying the warrants, as of the date the warrants were unconditionally made
available to the employee. Deferred compensation is amortized over the vesting
period of the warrants. The weighted average remaining useful life of the
outstanding warrants as of June 30, 1999 was 2.11 years.
F-19
<PAGE>
SATYAM INFOWAY LIMITED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Expressed in Indian Rupees, except share data and as otherwise stated)
(Information as of June 30, 1999 and for the quarter ended June 30, 1998 and
1999 is unaudited)
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 loss would have increased to the pro forma
amounts indicated below.
<TABLE>
<CAPTION>
March 31, March 31, June 30, June 30,
1999 1999 1999 1999
Rs. US$ Rs. US$
------------ ---------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net loss
As reported.......... (187,375,665) (4,312,442) (51,748,694) (1,190,993)
Adjusted pro forma... (187,378,430) (4,312,507) (51,756,994) (1,191,185)
Basic loss per share
As reported.......... (17.31) (0.40) (3.29) (0.08)
Adjusted pro forma... (17.31) (0.40) (3.29) (0.08)
</TABLE>
The fair value of each warrant is estimated on the date of grant using
the Black-Scholes model with the following assumptions:
<TABLE>
<CAPTION>
March 31, June 30,
1999 1999
--------- -----------
(unaudited)
<S> <C> <C>
Dividend yield %..................................... 0.00% 0.00%
Expected life........................................ 3 years 3 years
Risk free interest rates............................. 11.00% 11.00%
Volatility........................................... 0.01% 0.01%
</TABLE>
(20) 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.
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 July 1999. All costs associated with the
Company's plan for the Year 2000 are being expensed as incurred. The costs
associated with 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.
F-20
<PAGE>
Three panels of graphical information regarding Satyam Infoway Limited
consisting of:
. a graphical presentation of Satyam Infoway's network covering 25 cities
in India, with international Internet gateways in Mumbai, Bangalore,
Chennai, Hyderabad, Delhi and Calcutta;
. sample web pages from some of Satyam Infoway's content sites, including
specialty sites related to personal finance and classified ads;
. a picture of the Satyam Online CD-ROM;
. a list of products and services provided by Satyam Infoway;
. a picture of equipment in Satyam's data center; and
. a description of some of the features of Satyam Online.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,175,000 American Depositary Shares
Representing 4,175,000 equity shares
[LOGO OF SATYAM INFOWAY LIMITED APPEARS HERE]
SATYAM INFOWAY LIMITED
American Depositary Shares
----------------
P R O S P E C T U S
----------------
Merrill Lynch & Co.
Salomon Smith Barney
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this offering circular is not complete and may be changed. +
+We may not sell these securities until the registration statement filed with +
+the Securities and Exchange Commission is effective. This offering circular +
+is not an offer to sell these securities and we are not soliciting an offer +
+to buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 13, 1999
OFFERING CIRCULAR
4,175,000 American Depositary Shares
[LOGO OF SATYAM INFOWAY LIMITED APPEARS HERE]
SATYAM INFOWAY LIMITED
Representing 4,175,000 Equity Shares
-----------
Satyam Infoway Limited is offering up to 4,175,000 American Depositary
Shares, or ADSs, of Satyam Infoway outside India, including in the United
States. This offering circular relates to an offering by the international
underwriters of up to 1,670,000 American Depositary Shares outside the United
States and Canada. Additional underwriters are offering up to 2,505,000
American Depositary Shares in the United States and Canada. Each American
Depositary Share represents one equity share.
This is Satyam Infoway's initial public offering, and no public market
currently exists for Satyam Infoway's equity shares.
Satyam Infoway has applied to list its American Depositary Shares on The
Nasdaq Stock Market's National Market under the symbol "SIFY."
It is anticipated that the price to public per ADS will be between $16.00
and $18.00 per ADS.
-----------
Investing in the American Depositary Shares involves certain risks which
are described in the Risk Factors beginning on page 7.
-----------
<TABLE>
<CAPTION>
Underwriting
Price discount and Proceeds
to public commissions to us
--------- ------------ --------
<S> <C> <C> <C>
Per ADS......................................... $ $ $
Total........................................... $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Satyam Infoway has granted to the underwriters the right to purchase up to
an additional 626,250 American Depositary Shares at the public offering price,
less discount and commissions, within 30 days from the date of this offering
circular to cover overallotments.
-----------
Merrill Lynch International Salomon Smith Barney International
, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................................................... 1
Risk Factors............................................................ 7
Conventions Which Apply to This Prospectus.............................. 22
Currency of Presentation................................................ 22
Enforcement of Civil Liabilities........................................ 23
Reports to Our Security Holders......................................... 24
Use of Proceeds......................................................... 25
Dividend Policy......................................................... 26
Capitalization.......................................................... 27
Exchange Rates.......................................................... 28
Dilution................................................................ 29
Selected Financial Data................................................. 30
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 32
Business................................................................ 43
Management.............................................................. 60
Principal Shareholders.................................................. 65
Certain Transactions.................................................... 66
Description of Equity Shares............................................ 67
Description of American Depositary Shares............................... 72
Restrictions on Foreign Ownership of Indian Securities.................. 80
Government of India Approvals........................................... 84
Taxation................................................................ 86
Shares Eligible for Future Sale......................................... 91
Underwriting............................................................ 92
Legal Matters........................................................... 95
Experts................................................................. 95
Change of Accountants................................................... 95
Additional Information.................................................. 95
Index to Financial Statements........................................... F-1
</TABLE>
----------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
UNDERWRITING
The global offering consists of:
. the international offering of 1,670,000 ADSs outside the United
States and Canada; and
. the U.S. offering of 2,505,000 ADSs in the United States and
Canada.
We and the underwriters for the international offering named below have
entered into an underwriting agreement with respect to the ADSs being offered
in the international offering. Each international underwriter has severally
agreed to purchase the number of ADSs indicated in the table below. Merrill
Lynch (Singapore) Pte. Ltd. and Salomon Brothers International Limited are the
representatives for the international underwriters. Merrill Lynch International
will be selling in Europe.
<TABLE>
<CAPTION>
Number
of
International Underwriters ADSs
-------------------------- ------
<S> <C>
Merrill Lynch (Singapore) Pte. Ltd...................................
Salomon Brothers International Limited...............................
----
Total...........................................................
====
</TABLE>
The international underwriters have agreed to purchase all the ADSs being
offered in the international offering, other than those covered by the
overallotment option described below, if they purchase any of these ADSs.
We have granted to the underwriters in the international and U.S.
offerings an option, exercisable within 30 days after the date of this
prospectus, to purchase up to 626,250 additional ADSs at the public offering
price less the underwriting commission. The underwriters may exercise this
option solely for the purpose of covering overallotments, if any, in connection
with the offerings. The representatives of the U.S. underwriters will decide on
behalf of the underwriters whether to exercise the option and whether to
allocate any ADSs covered by the option to the U.S. offering or the
international offering. If the international underwriters purchase
overallotment ADSs, each international underwriter will purchase a number of
additional ADSs approximately proportionate to the underwriter's initial
purchase commitment.
The international underwriters will initially offer the ADSs at the
public offering price set out on the cover of this prospectus. The
international underwriters may sell ADSs to securities dealers at a discount of
up to $ per ADS from the initial public offering price. Any of these
securities dealers may resell any securities purchased from the international
underwriters to other brokers or dealers at a discount of up to $ per ADS
from the initial public offering price. If all the ADSs are not sold at the
initial offering price, the representatives of the international underwriters
may change the offering price and the other selling terms.
We have also entered into an underwriting agreement for the sale of
2,505,000 ADSs in the United States and Canada. Merrill Lynch and Co. and
Salomon Smith Barney Inc. are the representatives of the underwriters for the
U.S. offering. The international and U.S. offerings are conditioned on each
other. The initial offering price and aggregate underwriting commissions per
ADS for the international offering and the U.S. offering are identical.
The underwriters have entered into an agreement in which they agree to
restrictions on where and to whom they and any dealer purchasing from them may
offer ADSs in connection with the offering. The international and U.S.
underwriters also have agreed that they may sell shares between their
respective underwriting groups.
Our company, each of our executive officers and directors, the holders of
warrants to purchase 750,000 equity shares and substantially all of our
shareholders have agreed not to offer, sell, contract to sell or otherwise
dispose of any equity shares or securities convertible into, exchangeable for
or representing the right to receive equity shares, for a period of 180 days
after the date of this prospectus without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated. These agreements do not cover (1)
the grant of stock options under our existing stock option plan or (2) equity
shares issued upon the conversion of convertible or exchangeable securities or
the exercise of an option or warrant outstanding as of the date of this
prospectus. These lock-up agreements cover substantially all equity shares
outstanding prior to this offering.
92
<PAGE>
The ADSs offered under this prospectus are expected to be approved for
listing on the Nasdaq National Market.
In connection with the global offering, the international and U.S.
underwriters may purchase and sell ADSs in the open market. These transactions
may include short sales, stabilizing transactions and purchases to cover
positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of securities than they are required to
purchase in the offering. Stabilizing transactions consist of bids or purchases
made for the purpose of preventing or retarding a decline in the market price
of the ADSs while the offering is in progress.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the ADSs. As a result, the price of the ADSs may be
higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, the underwriters may discontinue these
transactions at any time. The underwriters may effect transactions through the
Nasdaq National Market, in the over-the-counter market or otherwise.
We have agreed to indemnify the several underwriters against some
liabilities, including liabilities under the Securities Act of 1933.
The underwriters and their affiliates engage and may in the future engage
in investment banking and commercial banking transactions with us.
The underwriters have reserved up to 200,000 ADSs for sale at our request
to persons associated with our company at the same price and on the same terms
as the shares sold by the underwriters to the general public. The number of
ADSs available for sale to the general public will be reduced to the extent any
reserved ADSs are purchased. Any reserved ADSs not so purchased will be offered
by the underwriters on the same basis as the other ADSs offered hereby.
The underwriters expect to deliver ADSs against payment for the ADSs in
U.S. dollars in New York, New York on or about , 1999.
Selling Restrictions
The prospectus does not constitute an offer or an invitation by, or on
behalf of, us or by or on behalf of the underwriters, to subscribe for or
purchase any of the equity shares or the offered ADSs in any jurisdiction to
any person to whom it is unlawful to make such an offer or solicitation in that
jurisdiction. The distribution of this prospectus and the offering of the
equity shares or the ADSs in certain jurisdictions may be restricted by law.
Persons into whose possession this prospectus comes are required by us and the
underwriters to inform themselves about and to observe any such restrictions.
Each international underwriter has represented and agreed that it has not
distributed and will not distribute, directly or indirectly, any prospectus
relating to the ADSs in India or to residents of India and that it has not
offered or sold and will not offer or sell, directly or indirectly, any ADSs in
India or to, or for the account or benefit of, any resident of India.
Each international underwriter has represented and agreed that (1) it has
not offered or sold and prior to the expiry of the period of six months from
the initial issue date of the ADSs will not offer or sell any ADSs to persons
in the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purpose of their business or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995;
(2) it has completed and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the ADSs in, from or otherwise involving the United Kingdom; and (3) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the
93
<PAGE>
issue of the ADSs to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996, as amended, or is a person to whom such document may otherwise lawfully
be issued or passed on.
Each international underwriter has represented and agreed that (1) it has
not offered or sold and will not offer or sell in the Hong Kong Special
Administrative Region of the People's Republic of China, or Hong Kong, by means
of any document, the ADSs other than to persons whose ordinary business is to
buy or sell shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Ordinance (Cap. 32 of the laws of Hong Kong) and (2) unless
permitted to do so under the securities laws of Hong Kong, it has not issued or
had in its possession for the purpose of issue and will not issue or have in
its possession for the purpose of issue any invitation, advertisement or
document relating to the ADSs in Hong Kong other than with respect to such ADSs
intended to be disposed of to persons outside Hong Kong or to persons whose
business involves the acquisition, disposal or holding of securities (whether
as principal or agent).
This prospectus has not been registered with the Registrar of Companies
and Business in Singapore. Accordingly, each international underwriter has
represented and agreed that is has not and will not offer or sell any ADSs or
distribute this prospectus or any other document or material in connection with
the ADSs, either directly or indirectly, (1) to constitute an offer or sale of
the ADSs to the public of Singapore or (2) to the public or any member of the
public in Singapore other than pursuant to, and in accordance with the
conditions of, an exemption invoked under Division 5A of Part IV of the
Companies Act, Chapter 50 of Singapore and to persons to whom the ADSs may be
offered or sold under such exemption. The Registrar of Companies and Businesses
in Singapore takes no responsibility as to the contents of this document.
Each international underwriter has represented and agreed that the ADSs
have not been registered under the Securities and Exchange Law of Japan and are
not being offered or sold and may not be offered or sold, directly or
indirectly, in Japan or to or for the account of any resident of Japan or to
any persons for reoffering or resale, directly or indirectly, in Japan or to
any residents of Japan, except (1) pursuant to an exemption from the
registration requirements of the Securities and Exchange law of Japan and (2)
in compliance with any other applicable requirements of Japanese law.
94
<PAGE>
LEGAL MATTERS
The validity of the ADSs offered hereby will be passed upon for Satyam
Infoway Limited by Latham & Watkins, Menlo Park, California. The validity of
the equity shares represented by the ADSs offered hereby and 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 will be passed
upon by M.G. Ramachandran, New Delhi, India, Indian counsel for Satyam Infoway
Limited. Matters in connection with the offering will be passed upon on behalf
of the underwriters by Brobeck, Phleger & Harrison, LLP, New York, New York,
and Nishith Desai Associates, Mumbai, India, counsel for the Underwriters.
Latham & Watkins may rely upon M.G. Ramachandran with respect to matters
governed by Indian law.
EXPERTS
The U.S. GAAP financial statements of Satyam Infoway Limited as of March
31, 1998 and 1999, and for each of the years in the three-year period ended
March 31, 1999, 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 May 1998, Bharat S. Raut and Company was engaged as the
principal independent accountants for Satyam Infoway for Indian GAAP reporting,
replacing Fraser & Ross, who resigned at that time. The change was approved by
our Directors and at the annual general meeting held on May 23, 1998.
In connection with the audits of the fiscal years ended March 31, 1996,
1997 and 1998, and for the interim period from April 1, 1998 through May 23,
1998, there were no disagreements with Fraser & Ross on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction
of Fraser & Ross, would have caused them to make reference to the matter in
their report, except that during the fiscal year ended March 31, 1998 Fraser &
Ross qualified its opinion regarding whether or not Section 58A of the
Companies Act applied to Satyam Infoway's issuance of debentures to Citibank.
Section 58A prohibits Indian companies, other than banks, from accepting
"deposits" in an amount in excess of 25% of their share capital. Fraser & Ross
concluded that the debentures should be classified as "deposits" while Satyam
Infoway concluded that they should be classified as a bank loan. The audit
reports of Fraser & Ross for the financial statements of Satyam Infoway as of
and for the fiscal years ended March 31, 1996, 1997 and 1998 did not contain
any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty or audit scope, except for a qualification of the
financial statements at March 31, 1998 prepared under Indian GAAP related to
the treatment of the Citibank debentures as described above.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form F-1, which
includes amendments, exhibits, schedules and supplements, under the Securities
Act of 1933, as amended, and the rules and regulations of the SEC, for the
registration of the ADSs and underlying equity shares offered by this
prospectus. Although this prospectus, which forms a part of the registration
statement, contains all material information included in the registration
statement, part of the registration statement have been omitted from this
prospectus as permitted by the rules and regulations of the SEC. A related
registration statement on Form F-6 has also been filed to register our ADSs as
represented by the ADRs. For further information with respect to
95
<PAGE>
our company and the ADSs offered by this prospectus, please refer to the
registration statement. Although this prospectus contains all material terms of
the contracts or other documents referred to in this prospectus, the
descriptions of these contracts or other documents contained in this prospectus
are not necessarily complete.
You may read and copy all or any portion of the registration statement or
any other information that we file, or obtain a copy of those materials,
through facilities maintained by the SEC as described in the front of this
prospectus under the caption "Reports to our Security Holders."
96
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,175,000 American Depositary Shares
Representing 4,175,000 equity shares
[LOGO OF SATYAM INFOWAY LIMITED APPEARS HERE]
SATYAM INFOWAY LIMITED
American Depositary Shares
----------------
OFFERING CIRCULAR
----------------
Merrill Lynch International
Salomon Smith Barney International
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale
of the ADSs being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
Amount
to Be Paid
----------
<S> <C>
SEC registration fee............................................. $ 24,026
NASD filing fee.................................................. 7,222
Nasdaq National Market listing fee............................... 60,000
Legal fees and expenses.......................................... 500,000
Accounting fees and expenses..................................... 120,000
Printing and engraving........................................... 200,000
Blue sky fees and expenses (including legal fees)................ 10,000
Reimbursement of offering expenses by Depositary................. (75,000)
Miscellaneous.................................................... 153,752
----------
Total.......................................................... $1,000,000
==========
</TABLE>
- --------
* To be supplied by amendment.
Item 14. Indemnification of Directors and Officers
We expect to amend our Articles of Association to provide that our
directors and officers shall be indemnified by our 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, we expect to amend
our Articles of Association to provide that our company shall indemnify our
officers and directors in connection with any application pursuant to Section
633 of the Companies Act, 1956 in which relief is granted by the court.
We expect to enter into indemnification agreements with our directors
and officers, pursuant to which our company will agree to indemnify them
against a number of 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 our company
and our officers and directors.
Our company may obtain directors and officers insurance providing
indemnification for a number of our directors, officers, affiliates, partners
or employees for specified errors and omissions.
Item 15. Recent Sales of Unregistered Securities
The registrant has sold and issued the following securities since
December 12, 1995 (Inception):
(1) On December 12, 1995, we issued on aggregate of (a) 100 equity
shares to B. Ramalinga Raju, (b) 100 equity shares to B. Rama Raju and (c) 30
equity shares to Satyam Computer Services for a purchase price of Rs.2,300.
(2) On August 13, 1997, we issued an aggregate of 1.3 million equity
shares to Satyam Computer Services for a purchase price of Rs.13.0 million.
(3) On March 30, 1998, we issued an aggregate of 6.2 million equity
shares to Satyam Computer Services for a purchase price of Rs.62.0 million.
II-1
<PAGE>
(4) On June 30, 1998, we issued an aggregate of 3.0 million equity
shares, to Satyam Computer Services for a purchase price of Rs.30.0 million.
(5) On September 25, 1998, we issued an aggregate of (a) 370,000 equity
shares to R. Ramaraj and (b) 1,130,000 equity shares to Satyam Computer
Services for a purchase price of Rs.15.0 million.
(6) On December 24, 1998, we issued an aggregate of 749,770 equity
shares to Satyam Computer Services for a purchase price of Rs.52.5 million.
(7) In March 1999, we issued (a) an aggregate of 3.0 million equity
shares to SARF for a purchase price of Rs.210.0 million and (b) warrants to
purchase an aggregate of 750,000 equity shares to SARF and Satyam Computer
Services.
(8) In September 1999, we issued an aggregate of 481,000 equity shares
to Sterling Commerce for a purchase price of $5.0 million.
(9) On or about the effective date of this registration statement, we
will issue an aggregate of 750,000 equity shares to SARF and Satyam Computer
Services upon the exercise of warrants.
The sale of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Regulation S under the
Securities Act, except that the issuance described under (8) was deemed exempt
in reliance on Regulation D and Section 4(2) under the Securities Act.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement
**3.1 Articles of Association of Satyam Infoway Limited.
**3.2 Memorandum of Association of Satyam Infoway Limited.
**3.3 Table "A' of the Companies Act, 1956.
**4.1 Share Subscription and Shareholders' Agreement, dated as of February 5,
1999, by and among Satyam Infoway Limited, Satyam Computer Services
Limited, South Asia Regional Fund and Mr. B. Ramalinga Raju.
**4.2 Amendment No. 1 to Share Subscription and Shareholders' Agreement,
dated as of September 14, 1999, by and among Satyam Infoway Limited,
Satyam Computer Services Limited, South Asia Regional Fund and Mr. B.
Ramalinga Raju.
*4.3 Form of Deposit Agreement among Satyam Infoway Limited, Citibank, N.A.
and holders from time to time of American Depositary Receipts issued
thereunder (including as an exhibit, the form of American Depositary
Receipt).
4.4 Satyam Infoway Limited's Specimen Certificate for equity shares.
**4.5 Rupee Loan Agreement, dated as of July 3, 1998, by and between Satyam
Infoway Limited and Export-Import Bank of India.
**4.6 Letter Agreement, dated as of September 14, 1999, by and between Satyam
Infoway Limited and Sterling Commerce, Inc.
**4.7 Stockholders Agreement, dated as of September 14, 1999, by and among
Satyam Infoway Limited, Sterling Commerce, Inc. and Satyam Computer
Services Limited.
**4.8 Registration Rights Agreement, dated as of September 14, 1999, by and
among Satyam Infoway Limited, Sterling Commerce, Inc. and South Asia
Regional Fund.
*5.1 Opinion of M. G. Ramachandran.
10.1 Associate Stock Option Plan (including Deed of Trust).
10.2 Form of Indemnification Agreement.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Number Description
------- -----------
<C> <S>
**10.3 License Agreement For Provision of Internet Service, dated as of
November 12, 1998, by and between Satyam Infoway Limited and the
Government of India, Ministry of Communications, the Department of
Telecommunications, Telecom Commission.
**10.4 Bank Guarantee, dated as of November 4, 1998.
+10.5 CompuServe Network Services Strategic Alliance Agreement, dated of
April 18, 1997, by and between Satyam Infoway Limited and CompuServe
Incorporated.
+10.6 International Electronic Commerce Provider Agreement, dated as of
February 14, 1997, by and between Satyam Infoway Limited and Sterling
Commerce International Inc.
+10.7 Amendment No. 1 to International Electronic Commerce Provider
Agreement by and between Satyam Infoway Limited and Sterling Commerce
International Inc.
+10.8 Amendment No. 2 to International Electronic Commerce Provider
Agreement by and between Satyam Infoway Limited and Sterling Commerce
International Inc.
+10.9 Amendment No. 3 to International Electronic Commerce Provider
Agreement, dated as of September 14, 1999, by and between Satyam
Infoway Limited and Sterling Commerce International Inc.
+10.10 Distribution Agreement, dated as of June 1997, by and between Satyam
Infoway Limited and Open Market, Inc.
**10.11 User Agreement, effective as of April 1, 1999 by and between Satyam
Infoway Limited and Satyam Computer Services Limited.
16.1 Letter from Fraser & Ross regarding Change in Certifying Accountant.
23.1 Consent of Latham & Watkins.
*23.2 Consent of M.G. Ramachandran (included in Exhibit 5.1).
**23.3 Consent of KPMG Peat Marwick, India, Independent Auditors.
**23.4 Consent of International Data Corporation.
24.1 Power of Attorney (included on Page S-1 of prior filing).
27.1 Financial Data Schedule
27.2 Financial Data Schedule
</TABLE>
- --------
+ Registrant has requested confidential treatment pursuant to Rule 406 for a
portion of the referenced exhibit and has separately filed such exhibit
with the Commission.
* To be supplied by amendment.
** Previously filed.
(b) Financial Statement Schedules
None.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates 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 SEC such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a 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
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 Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, 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 of 1933, 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 Act,
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 this offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Chennai,
State of Tamil Nadu, Country of India, on this 13th day of October, 1999.
Satyam Infoway Limited
/s/ R. Ramaraj
By: _________________________________
Name: R. Ramaraj
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R. Ramaraj Chief Executive Officer and October
____________________________________ Director (Principal 13, 1999
R. Ramaraj Executive Officer)
/s/ T.R. Santhanakrishnan Chief Financial Officer October 13,
____________________________________ (Principal Financial and 1999
T.R. Santhanakrishnan Accounting Officer)
* Director October 13,
____________________________________ 1999
B. Ramalinga Raju
* Director October 13,
____________________________________ 1999
Pranab Barua
* Director October 13,
____________________________________ 1999
T. H. Chowdary
* Director October
____________________________________ 13, 1999
Donald Peck
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director October 13, 1999
____________________________________
C. Srinivasa Raju
* Director October 13, 1999
____________________________________
S. Srinivasan
* Authorized Representative in October 13, 1999
____________________________________ the United States
Donald J. Puglisi
</TABLE>
/s/ R. Ramaraj
*By: __________________________
R. Ramaraj, Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
**3.1 Articles of Association of Satyam Infoway Limited.
**3.2 Memorandum of Association of Satyam Infoway Limited.
**3.3 Table "A' of the Companies Act, 1956.
**4.1 Share Subscription and Shareholders' Agreement, dated as of February
5, 1999, by and among Satyam Infoway Limited, Satyam Computer Services
Limited, South Asia Regional Fund and Mr. B. Ramalinga Raju.
**4.2 Amendment No. 1 to Share Subscription and Shareholders' Agreement,
dated as of September 14, 1999, by and among Satyam Infoway Limited,
Satyam Computer Services Limited, South Asia Regional Fund and Mr. B.
Ramalinga Raju.
*4.3 Form of Deposit Agreement among Satyam Infoway Limited, Citibank, N.A.
and holders from time to time of American Depositary Receipts issued
thereunder (including as an exhibit, the form of American Depositary
Receipt).
4.4 Satyam Infoway Limited's Specimen Certificate for equity shares.
**4.5 Rupee Loan Agreement, dated as of July 3, 1998, by and between Satyam
Infoway Limited and Export-Import Bank of India.
**4.6 Letter Agreement, dated as of September 14, 1999, by and between
Satyam Infoway Limited and Sterling Commerce, Inc.
**4.7 Stockholders Agreement, dated as of September 14, 1999, by and among
Satyam Infoway Limited, Sterling Commerce, Inc. and Satyam Computer
Services Limited.
**4.8 Registration Rights Agreement, dated as of September 14, 1999, by and
among Satyam Infoway Limited, Sterling Commerce, Inc. and South Asia
Regional Fund.
*5.1 Opinion of M. G. Ramachandran.
10.1 Associate Stock Option Plan (including Deed of Trust).
10.2 Form of Indemnification Agreement.
**10.3 License Agreement For Provision of Internet Service, dated as of
November 12, 1998, by and between Satyam Infoway Limited and the
Government of India, Ministry of Communications, the Department of
Telecommunications, Telecom Commission.
**10.4 Bank Guarantee, dated as of November 4, 1998.
+10.5 CompuServe Network Services Strategic Alliance Agreement, dated of
April 18, 1997, by and between Satyam Infoway Limited and CompuServe
Incorporated.
+10.6 International Electronic Commerce Provider Agreement, dated as of
February 14, 1997, by and between Satyam Infoway Limited and Sterling
Commerce International Inc.
+10.7 Amendment No. 1 to International Electronic Commerce Provider
Agreement by and between Satyam Infoway Limited and Sterling Commerce
International Inc.
+10.8 Amendment No. 2 to International Electronic Commerce Provider
Agreement by and between Satyam Infoway Limited and Sterling Commerce
International Inc.
+10.9 Amendment No. 3 to International Electronic Commerce Provider
Agreement, dated as of September 14, 1999, by and between Satyam
Infoway Limited and Sterling Commerce International Inc.
+10.10 Distribution Agreement, dated as of June 1997, by and between Satyam
Infoway Limited and Open Market, Inc.
**10.11 User Agreement, effective as of April 1, 1999 by and between Satyam
Infoway Limited and Satyam Computer Services Limited.
16.1 Letter from Fraser & Ross regarding Change in Certifying Accountant.
23.1 Consent of Latham & Watkins.
*23.2 Consent of M.G. Ramachandran (included in Exhibit 5.1).
**23.3 Consent of KPMG Peat Marwick, India, Independent Auditors.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
**23.4 Consent of International Data Corporation.
24.1 Power of Attorney (included on Page S-1 of prior filing).
27.1 Financial Data Schedule.
27.2 Financial Data Schedule.
</TABLE>
- --------
+ Resistrant has requested confidential treatment pursuant to Rule 406 for a
portion of the referenced exhibit and has separately filed such exhibit with
the Commission.
* To be supplied by amendment.
** Previously filed.
2
<PAGE>
Exhibit 1.1
[2,505,000] American Depositary Shares
SATYAM INFOWAY LIMITED
American Depositary Shares
Each Representing One Equity Share, Par Value Rs.10 Per Share
U.S. UNDERWRITING AGREEMENT
---------------------------
October __, 1999
MERRILL LYNCH & CO.
Salomon Smith Barney Inc.
As U.S. Representatives of the several U.S. Underwriters
named in Schedule I hereto
c/o Merrill Lynch & Co.
North Tower
World Financial Center
New York, New York 10281-1209
Ladies/Gentlemen:
Satyam Infoway Limited, a limited liability company formed under the
laws of the Republic of India (the "Company"), proposes to issue and sell to
Merrill Lynch & Co. ("Merrill Lynch"), Salomon Smith Barney Inc. and each of the
other U.S. Underwriters named in Schedule I hereto (collectively, the "U.S.
Underwriters"), for whom Merrill Lynch and Salomon Smith Barney Inc. are acting
as representatives (in such capacity, the "U.S. Representatives"), an aggregate
of [2,505,000] American Depositary Shares (the "Firm ADSs") each representing
one equity share, par value Rs.10 per share (the "Equity Shares"), of the
Company, subject to the terms and conditions set forth herein. The Company also
proposes to issue and sell to the several U.S. Underwriters not more than an
additional [626,250] American Depositary Shares (the "Additional ADSs"), each
representing one Equity Share, if requested by the U.S. Underwriters as provided
in Section 2 hereof. The Firm ADSs and the Additional ADSs are hereinafter
referred to collectively as the "ADSs". The Firm ADSs ("Initial U.S.
Securities") and the Additional ADSs ("U.S. Option Securities") are hereinafter
called, collectively, the "U.S. Securities". The offer of the U.S. Securities
by the U.S. Underwriters is hereinafter called the "U.S. Offering".
<PAGE>
Each ADS will be evidenced by an American Depositary Receipt (an
"ADR") to be issued by Citibank, N.A., as depositary (the "Depositary"),
pursuant to a Deposit Agreement dated as of October __, 1999 (the "Deposit
Agreement") by and among the Company, the Depositary and the holders and
beneficial holders from time to time of the ADSs.
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering pursuant to Regulation S under the Securities Act of
1933, as amended (the "1933 Act"), by the Company of an aggregate of 1,670,000
American Depositary Shares (the "Initial International Securities") through
arrangements with certain underwriters outside the United States and Canada (the
"International Underwriters") and the grant by the Company to the International
Underwriters, acting severally and not jointly, of an option to purchase all of
any part of the International Underwriters' pro rata portion of up to
___________ additional American Depositary Shares to cover allotments, if any,
and for other transactions (the "International Option Securities"). The Initial
International Securities and the International Option Securities are hereinafter
called the "International Securities."
The U.S. Underwriters and the International Underwriters are
hereinafter collectively called the "Underwriters", the Initial U.S. Securities
and the Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities and the International Securities
are hereinafter called the "Securities". The U.S. Offering and the
International Offering are collectively called the "Offerings". This Agreement
(the "U.S. Purchase Agreement") and the International Purchase Agreement are
hereinafter collectively called the "Purchase Agreements". All references to
"US dollars" or "$" herein are to United States dollars.
The Underwriters will concurrently enter into an Agreement Among
Syndicates of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co.
2.
<PAGE>
I. Registration Statement and Prospectus. The Company has prepared and filed
with the Securities and Exchange Commission (the "Commission") in accordance
with the provisions of the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder (collectively, the "Act"), a
registration statement on Form F-1 (File No. 333-10852), including a
prospectus, relating to the U.S. Securities. Such registration statement also
relates to a portion of the International Securities which are being
registered solely for the purpose of their re-sale in the United States in
such transactions as require registration under the 1933 Act. The registration
statement, as amended at the time it became effective, including the
information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the "Registration Statement". Two forms of prospectuses are to
be used in connection with the offering and sale of the Securities: one
relating to the U.S. Securities (the "U.S. Prospectus") and one relating to
the International Securities (the "International Prospectus"). The U.S.
Prospectus may also be used in connection with re-sales of the International
Securities in the United States to the extent that any such transactions would
not otherwise be exempt from registration under the 1933 Act. The
International Prospectus is identical to the U.S. Prospectus, except for the
front cover and back cover pages and the information under the caption
"Underwriting". The U.S. Prospectus and the International Prospectus are
referred to collectively as the "Prospectuses". If the Company has filed or is
required pursuant to the terms hereof to file a registration statement
pursuant to Rule 462(b) under the Act (a "Rule 462(b) Registration
Statement"), then, unless otherwise specified, any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462(b)
Registration Statement. The Company and the Depositary have also prepared and
filed with the Commission, in accordance with the provisions of the Act, a
registration statement on Form F-6 (File No. 333-_______) relating to the U.S.
Securities. Such registration statement, as amended at the time it becomes
effective, is hereinafter referred to as the "ADS Registration Statement".
3.
<PAGE>
II. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS; ADDITIONAL
EXPENSES. ON THE BASIS OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS
CONTAINED IN THIS AGREEMENT, AND SUBJECT TO ITS TERMS AND CONDITIONS, THE
COMPANY AGREES TO ISSUE AND SELL, AND EACH UNDERWRITER AGREES, SEVERALLY AND
NOT JOINTLY, TO PURCHASE FROM THE COMPANY AT A PRICE PER ADS OF $______ (THE
"PURCHASE PRICE") THE NUMBER OF INITIAL U.S. SECURITIES SET FORTH OPPOSITE THE
NAME OF SUCH UNDERWRITER IN SCHEDULE I HERETO.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the U.S. Option Securities and the U.S. Underwriters shall have the
right to purchase, severally and not jointly, up to [626,500] U.S. Option
Securities from the Company at the Purchase Price. U.S. Option Securities may
be purchased solely for the purpose of covering over-allotments made in
connection with the offering of the Initial U.S. Securities. The U.S.
Underwriters may exercise their right to purchase U.S. Option Securities in
whole or in part from time to time by giving written notice thereof to the
Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the U.S. Underwriters and such notice shall specify the
aggregate number of U.S. Option Securities to be purchased pursuant to such
exercise and the date for payment and delivery thereof, which date shall be a
business day (i) no earlier than two business days after such notice has been
given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten business days after such notice has been
given. If any U.S. Option Securities are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
U.S. Option Securities (subject to such adjustments to eliminate fractional
shares as you may determine) which bears the same proportion to the total number
of U.S. Option Securities to be purchased from the Company as the number of
Initial U.S. Securities set forth opposite the name of such Underwriter in
Schedule I bears to the total number of Initial U.S. Securities.
The Company hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, disposes of or transfer any
Equity Shares, ADSs, or any securities convertible into or exercisable or
exchangeable for Equity Shares, ADSs or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, economic consequences of ownership of the Equity Shares, ADSs
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Equity Shares, ADSs or such other
securities, in cash or otherwise), whether any such swap or transaction is to be
settled by delivery of Equity Shares, ADSs or other securities, in cash or
otherwise, except to the U.S. Underwriters pursuant to this Agreement and
pursuant to the Deposit Agreement, for a period of 180 days after the date of
the U.S. Prospectus without the prior written consent of Merrill Lynch.
Notwithstanding the foregoing, during such period (i) the Company may grant
stock options pursuant to the Company's existing stock option plan and (ii) the
Company may issue Equity Shares upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof. The Company also
agrees not to file any registration statement with respect to any Equity Shares,
ADSs or any securities convertible into or exercisable or exchangeable for
Equity Shares, ADSs for a period of 180 days after the date of the U.S.
Prospectus without the prior written consent of Merrill Lynch. The Company
shall,
4.
<PAGE>
prior to or concurrently with the execution of this Agreement, deliver an
agreement executed by (i) each of the directors and officers of the Company and
(ii) each stockholder listed on Annex I hereto to the effect that such person
will not, during the period commencing on the date such person signs such
agreement and ending 180 days after the date of the U.S. Prospectus, without the
prior written consent of Merrill Lynch, (A) engage in any of the transactions
described in the first sentence of this paragraph or (B) make any demand for, or
exercise any right with respect to, the registration of any Equity Shares, ADSs
or any securities convertible into or exercisable or exchangeable for Equity
Shares or ADSs.
Notwithstanding any other provision of this Agreement, you hereby
agree (i) to assume and to pay all obligations of (a) Brobeck, Phleger &
Harrison LLP, United States counsel for the U.S. Underwriters, and (b) Nishith
Desai Associates, Indian counsel to the U.S. Underwriters, in the case of (a)
and (b) for reasonable fees and expenses and (ii) to reimburse Donaldson, Lufkin
& Jenrette Securities Corporation for out of pocket expenses (not to exceed
$65,000), in the case of (i) and (ii), incurred in connection with the
transactions contemplated by this Agreement.
5.
<PAGE>
III. TERMS OF PUBLIC OFFERING. THE COMPANY IS ADVISED BY YOU THAT THE U.S.
UNDERWRITERS PROPOSE (I) TO MAKE A PUBLIC OFFERING OF THEIR RESPECTIVE
PORTIONS OF THE U.S. SECURITIES AS SOON AFTER THE EXECUTION AND DELIVERY OF
THIS AGREEMENT AS IN YOUR JUDGMENT IS ADVISABLE AND (II) INITIALLY TO OFFER
THE U.S. SECURITIES UPON THE TERMS SET FORTH IN THE U.S. PROSPECTUS.
IV. DELIVERY OF ADRS EVIDENCING THE ADSS. THE COMPANY SHALL DELIVER, OR CAUSE
TO BE DELIVERED, TO THE REPRESENTATIVES FOR THE ACCOUNTS OF THE SEVERAL U.S.
UNDERWRITERS ADRS EVIDENCING THE INITIAL U.S. SECURITIES AT THE CLOSING DATE
(AS DEFINED BELOW), AGAINST THE RELEASE OF A WIRE TRANSFER OF FEDERAL OR
OTHER IMMEDIATELY AVAILABLE FUNDS IN NEW YORK CITY. THE COMPANY SHALL
DELIVER, OR CAUSE TO BE DELIVERED, TO THE REPRESENTATIVES FOR THE ACCOUNTS OF
THE SEVERAL U.S. UNDERWRITERS, ADRS EVIDENCING THE U.S. OPTION SECURITIES THE
U.S. UNDERWRITERS HAVE AGREED TO PURCHASE AT THE CLOSING DATE OR THE OPTION
CLOSING DATE (AS DEFINED BELOW), AS THE CASE MAY BE, AGAINST THE RELEASE OF A
WIRE TRANSFER OF FEDERAL OR OTHER IMMEDIATELY AVAILABLE FUNDS IN NEW YORK
CITY. THE ADRs SHALL BE IN DEFINITIVE FORM AND REGISTERED IN SUCH NAMES AND
DENOMINATIONS AS MERRILL LYNCH SHALL REQUEST NO LATER THAN TWO BUSINESS DAYS
PRIOR TO THE CLOSING DATE OR THE APPLICABLE OPTION CLOSING DATE (AS DEFINED
BELOW), AS THE CASE MAY BE. THE ADRs SHALL BE MADE AVAILABLE FOR INSPECTION
NOT LATER THAN 9:30 a.m., NEW YORK CITY TIME, ON THE BUSINESS DAY PRIOR TO
THE CLOSING DATE OR THE APPLICABLE OPTION CLOSING DATE, AS THE CASE MAY BE,
AT A LOCATION IN NEW YORK CITY AS THE REPRESENTATIVES MAY DESIGNATE. IF THE
U.S. UNDERWRITERS SO ELECT, DELIVERY OF THE ADRS EVIDENCING THE U.S.
SECURITIES MAY BE MADE BY CREDIT THROUGH FULL FAST TRANSFER TO THE ACCOUNTS
AT THE DEPOSITARY TRUST COMPANY DESIGNATED BY THE U.S. UNDERWRITERS. THE TIME
AND DATE OF DELIVERY AND PAYMENT FOR THE INITIAL U.S. SECURITIES SHALL BE
9:00 A.M., NEW YORK CITY TIME, ON OCTOBER __, 1999 OR SUCH OTHER TIME ON THE
SAME OR SUCH OTHER DATE AS MERRILL LYNCH AND THE COMPANY SHALL AGREE IN
WRITING. THE TIME AND DATE OF DELIVERY FOR THE INITIAL U.S. SECURITIES ARE
REFERRED TO HEREIN AS THE "CLOSING DATE". THE TIME AND DATE OF DELIVERY AND
PAYMENT FOR ANY U.S. OPTION SECURITIES TO BE PURCHASED BY THE U.S.
UNDERWRITERS SHALL BE 9:00 a.m., NEW YORK CITY TIME, ON THE DATE SPECIFIED IN
THE APPLICABLE EXERCISE NOTICE GIVEN BY YOU PURSUANT TO SECTION 2 OR SUCH
OTHER TIME ON THE SAME OR SUCH OTHER DATE AS MERRILL LYNCH AND THE COMPANY
SHALL AGREE IN WRITING. THE TIME AND DATE OF DELIVERY FOR ANY U.S. OPTION
sECURITIES ARE REFERRED TO HEREIN AS AN "OPTION CLOSING DATE".
6.
<PAGE>
The documents to be delivered on the Closing Date or any Option
Closing Date on behalf of the parties hereto pursuant to Section 8 of this
Agreement shall be delivered at the offices of Brobeck, Phleger & Harrison LLP,
1633 Broadway, 47th Floor, New York, New York 10019, and the ADRs shall be
delivered at the designated location, all on the Closing Date or such Option
Closing Date, as the case may be.
7.
<PAGE>
V. AGREEMENTS OF THE COMPANY. THE COMPANY AGREES WITH YOU:
A. To advise you promptly and, if requested by you, to confirm such advice
in writing, (i) of any request by the Commission for amendments to the
Registration Statement, the ADS Registration Statement or amendments or
supplements to the U.S. Prospectus or for additional information, (ii) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, the ADS Registration Statement
or of the suspension of qualification of the U.S. Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for such
purposes, (iii) when any amendment to the Registration Statement or ADS
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective
and (v) of the happening of any event during the period referred to in
Section 5(d) below which makes any statement of a material fact made in the
Registration Statement, the ADS Registration Statement or the U.S.
Prospectus untrue or which requires any additions to or changes in the
Registration Statement, the ADS Registration Statement or the U.S.
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall issue any stop order suspending the effectiveness
of the Registration Statement or the ADS Registration Statement, the Company
will use its reasonable best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time.
B. To furnish to you four signed copies of the Registration Statement and
the ADS Registration Statement as first filed with the Commission and of
each amendment thereto, including all exhibits, and to furnish to you and
each Underwriter designated by you such number of conformed copies of the
Registration Statement and the ADS Registration Statement as so filed and of
each amendment thereto, without exhibits, and the U.S. Prospectus as amended
or supplemented, as you may reasonably request.
C. To prepare the U.S. Prospectus, the form and substance of which shall be
reasonably satisfactory to you, and to file the U.S. Prospectus in such form
with the Commission within the applicable period specified in Rule 424(b)
under the Act; during the period specified in Section 5(d) below, not to
file any further amendment to the Registration Statement or the ADS
Registration Statement and not to make any amendment or supplement to the
U.S. Prospectus of which you shall not previously have been advised or to
which you shall reasonably object after being so advised; and, during such
period, to prepare and file with the Commission, promptly upon your
reasonable request, any amendment to the Registration Statement, ADS
Registration Statement or amendment or supplement to the U.S. Prospectus
which may be necessary or advisable in connection with the distribution of
the U.S. Securities by you, and to use its reasonable best efforts to cause
any such amendment to the Registration Statement or the ADS Registration
Statement to become promptly effective.
8.
<PAGE>
D. Prior to 10:00 A.M., New York City time, on the first business day after
the date of this Agreement and from time to time thereafter for such period
as in the opinion of counsel for the U.S. Underwriters a U.S. Prospectus is
required by law to be delivered in connection with sales by an Underwriter
or a dealer, to furnish in New York City to each Underwriter and any dealer
as many copies of the U.S. Prospectus (and of any amendment or supplement to
the U.S. Prospectus) as such Underwriter or dealer may reasonably request.
E. If during the period specified in Section 5(d), any event shall occur or
condition shall exist as a result of which, in the opinion of counsel for
the U.S. Underwriters, it becomes necessary to amend or supplement the U.S.
Prospectus in order to make the statements therein, in the light of the
circumstances when the U.S. Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the U.S. Underwriters, it
is necessary to amend or supplement the U.S. Prospectus to comply with
applicable law, forthwith to prepare and file with the Commission an
appropriate amendment or supplement to the U.S. Prospectus so that the
statements in the U.S. Prospectus, as so amended or supplemented, will not
in the light of the circumstances when it is so delivered, be misleading, or
so that the U.S. Prospectus will comply with applicable law, and to furnish
to each Underwriter and to any dealer as many copies thereof as such
Underwriter or dealer may reasonably request.
F. Prior to any public offering of the U.S. Securities, to cooperate with
you and counsel for the U.S. Underwriters in connection with the
registration or qualification of the U.S. Securities for offer and sale by
the several U.S. Underwriters and by dealers under the state securities or
Blue Sky laws of such jurisdictions as you may request, to continue such
registration or qualification in effect so long as required for distribution
of the U.S. Securities and to file such consents to service of process or
other documents as may be necessary in order to effect such registration or
qualification; provided, however, that the Company shall not be required in
connection therewith to qualify as a foreign corporation in any jurisdiction
in which it is not now so qualified or to take any action that would subject
it to general consent to service of process or taxation other than as to
matters and transactions relating to the U.S. Prospectus, the Registration
Statement, the ADS Registration Statement any preliminary U.S. Prospectus or
the offering or sale of the U.S. Securities, in any jurisdiction in which it
is not now so subject.
G. To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
__________, 2000 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
H. During the period of three years after the date of this Agreement, to
furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of U.S. Securities or
furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed and such
other publicly available information concerning the Company as you may
reasonably request.
9.
<PAGE>
I. Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the U.S. Securities and ADRs under the Act and
all other fees and expenses in connection with the preparation, printing,
filing and distribution of the Registration Statement (including financial
statements and exhibits), the ADS Registration Statement, any preliminary
U.S. Prospectus, the U.S. Prospectus and all amendments and supplements to
any of the foregoing, including the mailing and delivering of copies thereof
to the U.S. Underwriters and dealers in the quantities specified herein,
(ii) all costs and expenses related to the transfer and delivery of the U.S.
Securities and ADRs to the U.S. Underwriters, including any transfer or
other taxes payable thereon, (iii) all costs of printing this Agreement and
any other agreements or documents in connection with the offering, purchase,
sale or delivery of the U.S. Securities and ADRs, (iv) all expenses in
connection with the registration or qualification of the U.S. Securities for
offer and sale under the securities or Blue Sky laws of the several states
and all costs of printing or producing any Preliminary and Supplemental Blue
Sky Memoranda in connection therewith (including the filing fees and fees
and disbursements of counsel for the U.S. Underwriters in connection with
such registration or qualification and memoranda relating thereto), (v) the
filing fees and disbursements of counsel for the U.S. Underwriters in
connection with the review and clearance of the offering of the U.S.
Securities by the National Association of Securities Dealers, Inc. (the
"NASD"), (vi) all fees and expenses in connection with the preparation and
filing of the registration statement on Form 8-A relating to the U.S.
Securities and all costs and expenses incident to the listing of the U.S.
Securities on the Nasdaq National Market, (vii) the cost of printing the
ADRs, (viii) the costs and charges of any transfer agent, registrar and/or
depositary, including the Depositary, (ix) all fees associated with review
and approval of this offering by Indian federal, local and state authorities
and (x) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section.
J. To use its reasonable best efforts to list for quotation the U.S.
Securities on the Nasdaq National Market and to maintain the listing of the
U.S. Securities on the Nasdaq National Market for a period of three years
after the date of this Agreement.
K. To use its reasonable best efforts to do and perform all things required
or necessary to be done and performed under this Agreement by the Company
prior to the Closing Date or any Option Closing Date, as the case may be,
and to satisfy all conditions precedent to the delivery of the ADRs
evidencing the U.S. Securities.
L. If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all of the U.S. Securities, to file a Rule 462(b)
Registration Statement with the Commission registering the U.S. Securities
not so covered in compliance with Rule 462(b) by 10:00 P.M., New York City
time, on the date of this Agreement and to pay to the Commission the filing
fee for such Rule 462(b) Registration Statement at the time of the filing
thereof or to give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act.
10.
<PAGE>
VI. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. AS OF THE DATE HEREOF, THE
COMPANY REPRESENTS AND WARRANTS TO EACH UNDERWRITER THAT:
A. The Registration Statement and the ADS Registration Statement have become
effective (other than any Rule 462(b) Registration Statement to be filed by
the Company after the effectiveness of this Agreement); any Rule 462(b)
Registration Statement filed after the effectiveness of this Agreement will
become effective no later than 10:00 P.M., New York City time, on the date
of this Agreement; and no stop order suspending the effectiveness of the
Registration Statement or ADS Registration Statement is in effect, and no
proceedings for such purpose are pending before or, to the Company's
knowledge, threatened by the Commission.
B. (i) The Registration Statement and ADS Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement), when it became effective, did not contain
and, as amended, if applicable, 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, (ii) the
Registration Statement and ADS Registration Statement (other than any Rule
462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the U.S. Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Act and the rules and regulations 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 and Exchange Board of India (the "SEBI"), as applicable (iii)
if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) 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 and (B) will comply in all material
respects with the Act and the rules and regulations of the MOF, the RBI, the
DCA, the CLB and the SEBI and (iv) the U.S. Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement, ADS Registration Statement, Rule
462(b) Registration Statement, if any, or the U.S. Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter expressly for use therein.
11.
<PAGE>
C. Each preliminary U.S. Prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an 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, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements or
omissions in any preliminary U.S. Prospectus based upon information relating
to any Underwriter furnished to the Company in writing by such Underwriter
expressly for use therein.
D. The Company has been duly organized, is validly existing in good standing
under the laws of its jurisdiction of organization and has the power and
authority to carry on its business as described in the U.S. Prospectus, to
own, lease and operate its properties and to enter into this Agreement and
the Deposit Agreement, and is duly qualified and is in good standing in each
jurisdiction in which the nature of its business or its ownership or leasing
of property requires such qualification, except where the failure to be so
qualified could not reasonably be expected to have a material adverse effect
on the business, prospects, financial condition or results of operations of
the Company (a "Material Adverse Effect").
E. There are no outstanding subscriptions, rights, warrants, options, calls,
convertible securities, commitments of sale or liens granted or issued by
the Company relating to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock of the Company, except as otherwise
disclosed in the Registration Statement or which could not reasonably be
expected to have a Material Adverse Effect.
12.
<PAGE>
F. All the outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights, except as otherwise disclosed
in the Registration Statement or which could not reasonably be expected to
have a Material Adverse Effect on the Company. The Equity Shares to be
issued in connection with the offering and the sale of the U.S. Securities
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 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 U.S. Securities, though there are restrictions on the future deposit of
Equity Shares which are fully and accurately described in the U.S.
Prospectus. The U.S. Securities are freely transferable by the Company to
the U.S. Underwriters in the manner contemplated in this Agreement. Upon
receipt 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 U.S. Underwriters. Upon issuance by the Depositary of the ADRs
evidencing the U.S. Securities 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 U.S. Securities,
except as described in the U.S. Prospectus.
G. The Company does not presently own or control, directly or indirectly,
any interest in any other corporation, association, or other business
entity. The Company is not a participant in any joint venture, partnership,
or similar arrangement.
H. The authorized capital stock of the Company conforms as to legal matters
to the description thereof contained in the U.S. Prospectus.
I. The Company is not in violation of its respective certificate of its
Articles or Memorandum of Association or in default in the performance of
any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, note, contract, franchise, mortgage, lease or other
agreement or instrument that is material to the Company to which the Company
is a party or by which the Company or its respective property is bound.
13.
<PAGE>
J. The execution, delivery and performance of this Agreement and the Deposit
Agreement by the Company, the compliance by the Company with all the
provisions hereof and thereby and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as have been obtained or made by
the Company and are in full force and effect under the Act, under applicable
state securities or blue sky laws and from the NASD and any applicable
Indian governmental or regulatory authority or agency, including, without
limitation, the required approvals of the MOF, RBI, CLB, DCA and SEBI), (ii)
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the Articles or Memorandum of Association of the Company
or any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company to which the Company is a party
or by which the Company or its respective property is bound, (iii) violate
or conflict with any applicable law or any rule, regulation, judgment, order
or decree of any court or any governmental body or agency having
jurisdiction over the Company, or its respective property (including any
laws limiting foreign ownership of the Company) or (iv) result in the
suspension, termination or revocation of any Authorization (as defined
below) of the Company or any other impairment of the rights of the holder of
any such Authorization.
K. There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company is or could be a party
or to which any of its respective property is or could be subject; nor are
there any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the U.S.
Prospectus or to be filed as exhibits to the Registration Statement that are
not so described or filed as required. No material labor dispute with the
employees of the Company or any of its subsidiaries exists or is threatened.
L. The Company has not violated any foreign, federal, state or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or any provisions of the
Foreign Corrupt Practices Act, or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
14.
<PAGE>
M. Except as disclosed in the U.S. Prospectus, the Company has such permits,
licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "Authorization") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make
any such filing or notice could not reasonably be expected to, singly or in
the aggregate, have a Material Adverse Effect. Except as disclosed in the
U.S. Prospectus, each such Authorization is valid and in full force and
effect and the Company is in compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any authority
or governing body) which allows or, after notice or lapse of time or both,
would allow, revocation, suspension or termination of any such Authorization
or results or, after notice or lapse of time or both, would result in any
other impairment of the rights of the holder of any such Authorization; and
such Authorizations contain no restrictions that are burdensome to the
Company; except where such failure to be valid and in full force and effect
or to be in compliance, the occurrence of any such event or the presence of
any such restriction could not reasonably be expected to, singly or in the
aggregate, have a Material Adverse Effect.
N. There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on
operating activities and any potential liabilities to third parties) which
could reasonably be expected to, singly or in the aggregate, have a Material
Adverse Effect.
O. This Agreement and the Deposit Agreement have been duly authorized,
executed and delivered by the Company and constitute valid and binding
agreements of the Company.
P. KPMG Peat Marwick, India are independent public accountants with respect
to the Company and its subsidiaries as required by the Act.
15.
<PAGE>
Q. The consolidated financial statements included in the Registration
Statement and the U.S. Prospectus (and any amendment or supplement thereto),
together with related schedules and notes, present fairly the consolidated
financial position, results of operations and changes in financial position
of the Company on the basis stated therein at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with United States
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; the supporting schedules, if
any, included in the Registration Statement present fairly in accordance
with generally accepted accounting principles the information required to be
stated therein; and the other financial and statistical information and data
set forth in the Registration Statement and the U.S. Prospectus (and any
amendment or supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements
and the books and records of the Company.
R. The Company is not and, after giving effect to the offering and sale of
the U.S. Securities and the application of the proceeds thereof as described
in the U.S. Prospectus, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
S. Except for the [list the agreements], there are no contracts, agreements
or understandings between the Company and any person granting such person
the right to require the Company to file a registration statement under the
Act with respect to any securities of the Company or to require the Company
to include such securities with the U.S. Securities registered pursuant to
the Registration Statement.
T. Since the respective dates as of which information is given in the U.S.
Prospectus other than as set forth in the U.S. Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there has not occurred any material adverse change or any development
involving a prospective material adverse change in the condition, financial
or otherwise, or the earnings, business, management or operations of the
Company, (ii) there has not been any material adverse change or any
development involving a prospective material adverse change in the capital
stock or in the long-term debt of the Company and (iii) the Company has not
incurred any material liability or obligation, direct or contingent.
U. The Company maintains a system of internal accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with 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.
16.
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V. The form of certificate for the Equity Shares conforms to the
requirements of Indian law, the Articles or Memorandum of Association of the
Company and the description thereof contained in the U.S. Prospectus, and
the U.S. Securities and the ADRs conform to the requirements of the Deposit
Agreement and the Nasdaq National Market.
W. Except as disclosed in the U.S. 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
Equity Shares by the Company against the issuance of the ADRs evidencing
U.S. Securities; (ii) the sale and delivery of the U.S. Securities to or for
the respective accounts of the U.S. Underwriters; (iii) the sale and
delivery outside of India by the U.S. Underwriters of the U.S. Securities or
the ADRs to the initial purchasers thereof; or (iv) except as set forth in
the U.S. Prospectus, the consummation of any other transaction contemplated
by this Agreement or the Deposit Agreement in connection with the sale and
delivery of the U.S. Securities or the issuance of the ADRs.
X. Except as disclosed in the U.S. Prospectus, under applicable laws and
regulations, no taxes, levies, imposts or 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 U.S. Securities) to persons not resident in India.
Y. It is not necessary in order to enable any party to enforce any of its
rights under this Agreement or to enable any owner of U.S. Securities to
enforce any of its rights that all or any of such parties or owners of U.S.
Securities be licensed, qualified or entitled to do business in India. None
of the U.S. Underwriters will be deemed to be resident, domiciled, carrying
on business or subject to taxation in India by reason of the ownership of
the U.S. Securities or the entry into, performance and/or enforcement of
this Agreement and the transactions contemplated hereby.
Z. The Company is subject to the civil and commercial laws of India with
respect to its obligations under this Agreement, the Deposit Agreement and
the U.S. Securities. The execution and delivery by the Company and the
performance by the Company of its obligations hereunder and thereunder
constitute private and commercial acts rather than governmental or public
acts, and neither the Company nor any of its 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.
AA. The Company has full power, authority and legal right to enter into and
perform its obligations set forth in Section 7 of this Agreement and none of
the provisions of such Section 7 contravene current Indian law.
BB. Each certificate signed by any officer of the Company and delivered to
the U.S. Underwriters or counsel for the U.S. Underwriters shall be deemed
to be a representation and warranty by the Company to the U.S. Underwriters
as to the matters covered thereby.
17.
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VII. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter and
their affiliates within the meaning of Section 15 of the Act or Section 20
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as
follows:
1. against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto) or the ADS Registration Statement (or any amendment thereto)
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
arising out of any untrue statement or alleged untrue statement of a material
fact included in any preliminary U.S. Prospectus or the U.S. 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 light
of the circumstances under which they were made, not misleading;
2. against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission, provided that (subject to Section 7(d) below) any such
settlement is effected with the written consent of the Company; and
3. against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by Merrill Lynch) incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
-------- -------
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to
the Company by any Underwriter through Merrill Lynch expressly for use in
the Registration Statement (or any amendment thereto) or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement
thereto).
18.
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B. Each Underwriter severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement and the ADS Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the
Registration Statement and the ADS Registration Statement (or any amendment
thereto) or any preliminary prospectus or the U.S. Prospectus ( or any
amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through
Merrill Lynch expressly for use in the Registration Statement and the ADS
Registration Statement (or any amendment thereto) or such preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto).
C. Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify
an indemnifying party shall not relieve such indemnifying party from any
liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement. In
the case of parties indemnified pursuant to Section 7(a) above, counsel to
the indemnified parties shall be selected by the Company. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except
with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened,
or any claim whatsoever in respect of which indemnification or contribution
could be sought under this Section (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise
or consent (i) includes an unconditional release of each indemnified party
from all liability arising out of such litigation, investigation, proceeding
or claim and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf of any indemnified
party.
19.
<PAGE>
D. If at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel,
such indemnifying party agrees that it shall be liable for any settlement of
the nature contemplated by Section 7(a)(ii) effected without its written
consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior the date of such settlement.
E. If the indemnification provided for in this Section is for any reason
unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate
amount of such losses, liabilities, claims, damages and expenses incurred by
such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the U.S. Underwriters on the other hand from this offering
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
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 U.S.
Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the Equity
Shares, U.S. Securities and ADRs pursuant to this Agreement shall be deemed to
be in the same respective proportions as the total net proceeds from the
offering of the Equity Shares, U.S. Securities and ADRs pursuant to this
Agreement (before deducting expenses) received by the Company and the total
underwriting discount received by the U.S. Underwriters, in each case as set
forth on the cover of the U.S. Prospectus, bear to the aggregate initial public
offering price of the ADRs as set forth on such cover.
The relative fault of the Company on the one hand and the U.S. 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 relates to information
supplied by the Company or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statements or omission.
The Company and the U.S. Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by
20.
<PAGE>
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue or alleged untrue statement or omission or
alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the ADRs underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of any such untrue or alleged
untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each director of the Company and such persons' affiliate, each officer of the
Company who signed the Registration Statement and the ADS Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company. The U.S. Underwriters' respective
obligations to contribute pursuant to his Section 7 are several in proportion
to the number of Firm Shares to be purchased set forth opposite their respective
names in Schedule I hereto and not joint.
21.
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VIII. CONDITIONS OF U.S. UNDERWRITERS' OBLIGATIONS. THE SEVERAL OBLIGATIONS OF
THE U.S. UNDERWRITERS TO PURCHASE THE INITIAL U.S. SECURITIES UNDER THIS
AGREEMENT ARE SUBJECT TO THE SATISFACTION OF EACH OF THE FOLLOWING
CONDITIONS:
A. All the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects on the
Closing Date with the same force and effect as if made on and as of the
Closing Date.
B. If the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement shall have become effective by 10:00 P.M., New York City time,
on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or, to the Company's knowledge, contemplated by the Commission.
C. You shall have received on the Closing Date a certificate dated the
Closing Date, signed by R. Ramaraj and T.R. Santhanakrishnan, in their
capacities as the Chief Executive Officer and Chief Financial Officer of
the Company, confirming the matters set forth in Sections 6(t), 8(a) and
8(b) and that the Company has complied with all of the agreements and
satisfied all of the conditions herein contained and required to be
complied with or satisfied by the Company on or prior to the Closing Date.
D. Since the respective dates as of which information is given in the U.S.
Prospectus other than as set forth in the U.S. Prospectus (exclusive of
any amendments or supplements thereto subsequent to the date of this
Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the
Company, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term
debt of the Company and (iii) the Company shall not have incurred any
liability or obligation, direct or contingent, the effect of which, in any
such case described in clause 8(d)(i), 8(d)(ii) or 8(d)(iii), in your
judgment, is material and adverse and, in your reasonable judgment, makes
it impracticable to market the U.S. Securities on the terms and in the
manner contemplated in the U.S. Prospectus.
E. You shall have received on the Closing Date an opinion (satisfactory to
you and United States counsel for the U.S. Underwriters), dated the
Closing Date, of M.G. Ramachandran, Indian counsel for the Company, and
Nishith Desai Associates, Indian counsel to the U.S. Underwriters, to the
effect that:
1. 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 U.S. Prospectus. The
Company has no subsidiaries.
22.
<PAGE>
2. The Company has an equity and issued capitalization as set forth
in the U.S. Prospectus and such capitalization complies with Indian law. The
summary of the charter documents and Indian law set forth in the U.S. Prospectus
is accurate and complete in all material respects. The authorized share capital
of the Company (including the Equity Shares, ADSs and the ADRs) conforms to the
description thereof under the headings "Description of Equity Shares" and
"Description of American Depository Shares" in the U.S. Prospectus.
3. The shares of capital stock of the Company outstanding prior to
the issuance of the Equity Shares represented by the U.S. Securities have been
duly and validly authorized, are validly issued and outstanding, are fully paid
and nonassessable, conform to the description thereof contained in the U.S.
Prospectus and, to the best of such counsel's 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 U.S. Securities
and deposited pursuant to the Deposit Agreement in accordance with this
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 this 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 U.S. 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 U.S.
Securities or the ADRs, except as described in the U.S. 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 U.S. Securities, the ADRs and the Deposit
Agreement. The form of certificate for the Equity Shares conforms to the
requirements of Indian law and the charter documents of the Company, and the
U.S. Securities and the ADRs conform to the requirements of the Deposit
Agreement.
4. There are neither any preemptive nor other similar rights to
subscribe for or to purchase any of the Deposited Shares or the U.S. Securities,
or 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.
23.
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5. The Company has full power and authority to enter into and perform
its obligations under this 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 the laws of the State of New York by which they are expressed
to be governed, and under the U.S. federal securities laws, 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 Tamil Nadu 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 U.S. Securities and the ADRs
conform to the description thereof in the U.S. 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 U.S.
Securities and the ADRs are in proper legal form for enforcement against the
Company in India. The Depositary and any holder or owner of U.S. Securities 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.
6. 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
U.S. Securities, the deposit of such Equity Shares pursuant to the Deposit
Agreement, the issuance and sale of the U.S. Securities) will not (A) 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,
(B) 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 (C) result in the suspension, termination or revocation
of any authorizations, permits or licenses held by the Company or any other
impairment of the rights of the Company with respect to any such authorization,
permit or license.
7. 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 U.S. Securities,
and the consummation of 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).
24.
<PAGE>
8. Each of the Registration Statement, the ADS Registration
Statement, the Rule 462(b) Registration Statement, if any, and the U.S.
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, has been duly executed by the officers
and directors of the Company set forth on the signature pages thereto.
9. 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.
10. Except as described in the U.S. 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 U.S. 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 U.S. Securities or ADRs, (B) the purchase of the U.S. Securities
by the U.S. Underwriters, (C) the sale and delivery by the U.S. Underwriters of
the U.S. Securities 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 U.S. Securities.
11. The indemnification provisions set forth in Section 7 of the
Underwriting Agreement do not contravene Indian law or public policy.
12. Except as described in the U.S. 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 or U.S. Securities 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.
13. 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.
25.
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14. The Company has the power to submit, and has taken all necessary
action to submit, to the jurisdiction of any Specified Court (as defined in this
Agreement) and to appoint CT Corporation 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, U.S. Securities 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 such counsel has 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
"Enforcement of Civil Liabilities" in the U.S. Prospectus.
15. 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 U.S. Securities 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.
16. The Company is subject to the civil and commercial laws of India
with respect to its obligations under the Principal Agreements, the U.S.
Securities 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.
17. To the best of such counsel's knowledge after due inquiry, there
are no litigation or governmental proceedings pending or threatened to which the
Company is or could be a party or to which any of its respective property is or
could be subject that are required to be described in the Registration Statement
or the U.S. Prospectus and are not so described, or of any statutes,
regulations, contracts or other documents that are required to be described in
the Registration Statement or the U.S. Prospectus or to be filed as exhibits to
the Registration Statement that are not so described or filed as required.
18. To the best of such counsel's 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 U.S.
Prospectus.
26.
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19. 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 U.S. 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.
20. The statements (A) in the U.S. Prospectus under the captions
"Enforcement of Civil Liabilities," "Risk Factors--Risks Related to Investments
in Indian Companies," "Risk Factors--Risks Related to the ADSs and Our Trading
Market," "Dividend Policy," "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--Government Regulations,"
"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.
21. To the best of such counsel's knowledge after due inquiry, 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 the
Underwriting Agreement, except for such rights as have been duly waived.
22. It is not necessary (a) in order to enable the U.S. 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 U.S.
Securities 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 U.S. Underwriters or
the Depositary or the holders or owners of U.S. Securities should be licensed,
qualified or entitled to do business in India.
23. None of the U.S. Underwriters, 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, such counsel shall state that it has 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 U.S. Underwriters at which the
contents of the Registration Statement, the ADS Registration Statement, the U.S.
Prospectus, and any supplements or amendments thereto, and related matters were
discussed and, although they 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
U.S. Prospectus (other than as specified above), and any supplements or
amendments thereto, on the basis of the foregoing, nothing has come to their
27.
<PAGE>
attention which would lead such counsel to believe that either the Registration
Statement or 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 U.S. 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 (except
that such counsel need not express its belief with respect 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 U.S. Prospectus or any amendments or supplements thereto).
The opinions of M.G. Ramachandran and Nishith Desai Associates
described in Section 8(e) above shall be rendered to you at the request of the
Company and shall so state therein.
28.
<PAGE>
F. You shall have received on the Closing Date an opinion (reasonably
satisfactory to you and counsel for the U.S. Underwriters), dated the
Closing Date, of Latham & Watkins, United States counsel for the Company,
to the effect that:
1. This Agreement has been duly executed and delivered by the
Company.
2. 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.
3. 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 Act, and the Form 8-A Registration Statement has
been declared effective by the Commission under the Exchange Act. To our
knowledge, 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 Act or the Exchange Act, as applicable, and, to the 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 U.S. Prospectus and any supplement thereto pursuant to Rule 424(b) under
the Act has been made in the manner and within the time period required by such
Rule 424(b).
4. The Registration Statement, including any Rule 462(b) Registration
Statement, the ADS Registration Statement, the U.S. Prospectus, and each
amendment or supplement to the Registration Statement and/or the ADS
Registration Statement and the U.S. 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 Act.
5. The U.S. Securities have been approved for inclusion on the Nasdaq
National Market.
6. The statements in the U.S. Prospectus under the captions
"Management--Certain Transactions," and "Taxation--United States Federal
Taxation," 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.
7. To the 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.
29.
<PAGE>
8. To the 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.
9. No consent, approval, authorization or other order of, or
registration or filing with, any United States 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 U.S.
Prospectus, except as required under the Act, applicable United States state
securities or blue sky laws and from the NASD (all of which have been made or
obtained and are, to our knowledge, in full force and effect).
10. The execution and delivery of this 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.
11. The Company is not, and after receipt of payment for the U.S.
Securities will not be, an "investment company" within the meaning of Investment
Company Act.
12. The U.S. Securities conform to the requirements of the Deposit
Agreement and the Nasdaq National Market.
In addition, such counsel shall state that it has 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 U.S. Underwriters at which the
contents of the Registration Statement, the ADS Registration Statement, the U.S.
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
U.S. Prospectus (other than as specified above), and any supplements or
amendments thereto, and have not made any independent check or verification
thereof, and, during the course of such participation, no facts have come to
their attention which would cause them to believe that either the Registration
Statement or 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 U.S. Prospectus, as of
its date or at the Closing Date or the Option 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 (except that such
counsel need not express its belief with respect to the financial statements,
notes, schedules or other financial and statistical data derived therefrom,
included in, or omitted from, the Registration
30.
<PAGE>
Statement, the ADS Registration Statement or the U.S. Prospectus or any
amendments or supplements thereto).
The opinion of Latham & Watkins described in Section 8(f) above shall
be rendered to you at the request of the Company and shall so state therein.
31.
<PAGE>
G. You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the U.S. Underwriters), dated the Closing Date, of
Patterson, Belknap, Webb & Tyler LLP, counsel for the Depositary, to the
effect that:
1. the Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and assuming the due authorization, execution and
delivery by the Company, the Deposit Agreement constitutes a valid and binding
obligation of the Depositary, enforceable in accordance with its 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, and
2. when the ADRs have been duly executed and, if applicable,
countersigned, and duly issued and delivered in accordance with the Deposit
Agreement, the U.S. Securities evidenced by the ADRs will be validly issued and
will entitle the registered holders thereof to the rights specified in the ADRs
and the Deposit Agreement.
H. You shall have received on the Closing Date an opinion, dated the
Closing Date, of Brobeck, Phleger & Harrison, LLP, United States counsel
for the U.S. Underwriters, to the effect that:
1. The statements in the U.S. Prospectus under the caption
"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, have been reviewed by such counsel and fairly
present and summarize, in all material respects, the matters referred to
therein.
2. 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 Act, and the Form 8-A Registration Statement has
been declared effective by the Commission under the Exchange Act. To our
knowledge, 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 Act or the Exchange Act, as applicable, and, to the 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 U.S. Prospectus and any supplement thereto pursuant to Rule 424(b) under
the Act has been made in the manner and within the time period required by such
Rule 424(b).
3. The Registration Statement, including any Rule 462(b) Registration
Statement, the ADS Registration Statement, the U.S. Prospectus, and each
amendment or supplement to the Registration Statement and/or the ADS
Registration Statement and the U.S. 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 Act.
32.
<PAGE>
4. To the knowledge of such counsel, there are no litigation or
governmental proceedings pending or threatened to which the Company is or could
be a party or to which any of its property is or could be subject that are
required to be described in the Registration Statement or the U.S. Prospectus
and are not so described, or of any statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or the
U.S. Prospectus or to be filed as exhibits to the Registration Statement that
are not so described or filed as required.
In addition, such counsel shall state that it has 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 U.S. Underwriters at which the
contents of the Registration Statement, the ADS Registration Statement, the U.S.
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
U.S. Prospectus (other than as specified above), and any supplements or
amendments thereto, and have not made any independent check or verification
thereof, and, during the course of such participation, no facts have come to
their attention which would cause them to believe that either the Registration
Statement or 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 U.S. Prospectus, as of
its date or at the Closing Date or the Option 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 (except that such
counsel need not express its belief with respect to the financial statements,
notes, schedules or other financial and statistical data derived therefrom,
included in, or omitted from, the Registration Statement, the ADS Registration
Statement or the U.S. Prospectus or any amendments or supplements thereto).
In giving such opinions with respect to Section 8(i)(ii) Brobeck,
Phleger & Harrison LLP may state that its opinion and belief are based upon
their participation in the preparation of the Registration Statement, the ADS
Registration Statement and U.S. Prospectus, and any amendment or supplements
thereto, and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
33.
<PAGE>
I. You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may
be, in form and substance reasonably satisfactory to you, from KPMG Peat
Marwick, India, independent public accountants, containing the information
and statements of the type ordinarily included in accountants' "comfort
letters" to U.S. Underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the U.S. Prospectus.
J. The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
K. The U.S. Securities shall have been duly listed for quotation on the
Nasdaq National Market.
L. The Deposit Agreement shall be in full force and effect. The Depositary
shall have furnished or caused to be furnished to you certificates
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 U.S. Securities to be delivered by the Company
at the Closing Date; (y) the execution, issuance, signature and delivery
of ADRs evidencing the U.S. Securities pursuant to the Deposit Agreement;
and (z) such other matters related thereto as you may reasonably request.
M. The Company shall not have failed on or prior to the Closing Date to
perform or comply in any material respect with any of the agreements
herein contained and required to be performed or complied with by the
Company on or prior to the Closing Date.
The several obligations of the U.S. Underwriters to purchase any U.S.
Option Securities hereunder are subject to the delivery to you on the applicable
Option Closing Date of such documents as you may reasonably request with respect
to the good standing of the Company, the due authorization and issuance of such
U.S. Option Securities and other matters related to the issuance of such U.S.
Option Securities.
IX. EFFECTIVENESS OF AGREEMENT AND TERMINATION. THIS AGREEMENT SHALL BECOME
EFFECTIVE UPON THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY THE PARTIES
HERETO.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company (i) if there has been, since the
time of execution of this Agreement or since the respective dates as of which
information is given in the U.S. Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as on
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
India or in the United States, Asian or international financial markets, any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the U.S. Underwriters,
impracticable to market the ADRs or to enforce contracts for
34.
<PAGE>
the sale of the ADRs, or (iii) if trading in any securities of the Company has
been suspended or materially limited by the Commission, the Nasdaq National
Market or any Indian authority, or if trading generally on the Nasdaq National
Market or any Indian exchange has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any such exchange or by such system or by order of
the Commission, the NASD or any other U.S. or Indian governmental authority, or
(iv) if a banking moratorium has been declared by either Indian, U.S. federal or
New York authorities, or (v) if exchange controls have been imposed by India on
the U.S. dollar, or (vi) if there is a change, or an official announcement by a
competent authority of a prospective change, in Indian or U.S. taxation
adversely affecting the Company, the Equity Shares, the ADRs or the U.S.
Securities or the transfer thereof.
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the U.S. Underwriters shall fail or refuse to purchase
the Initial U.S. Securities or U.S. Option Securities, as the case may be, which
it has or they have agreed to purchase hereunder on such date and the aggregate
number of Initial U.S. Securities or U.S. Option Securities, as the case may be,
which such defaulting Underwriter or U.S. Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the total number of Initial
U.S. Securities or U.S. Option Securities, as the case may be, to be purchased
on such date by all U.S. Underwriters, each non-defaulting Underwriter shall be
obligated severally, in the proportion which the number of Initial U.S.
Securities set forth opposite its name in Schedule I bears to the total number
of Initial U.S. Securities which all the non-defaulting U.S. Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Initial U.S. Securities or U.S. Option Securities, as the case may be, which
such defaulting Underwriter or U.S. Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Initial
U.S. Securities or U.S. Option Securities, as the case may be, which any
Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number of
Initial U.S. Securities or U.S. Option Securities, as the case may be, without
the written consent of such Underwriter. If on the Closing Date any Underwriter
or U.S. Underwriters shall fail or refuse to purchase Initial U.S. Securities
and the aggregate number of Initial U.S. Securities with respect to which such
default occurs is more than one-tenth of the aggregate number of Initial U.S.
Securities to be purchased by all U.S. Underwriters and arrangements
satisfactory to you and the Company for purchase of such Initial U.S. Securities
are not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter and the Company.
In any such case which does not result in termination of this Agreement, either
you or the Company shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Registration Statement and the U.S. Prospectus or any other documents or
arrangements may be effected. If, on an Option Closing Date, any Underwriter or
U.S. Underwriters shall fail or refuse to purchase Additional U.S. Securities
and the aggregate number of U.S. Option Securities with respect to which such
default occurs is more than one-tenth of the aggregate number of U.S. Option
Securities to be purchased on such date, the non-defaulting U.S. Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
such U.S. Option Securities or (ii) purchase not less than the number of U.S.
Option Securities that such non-defaulting U.S. Underwriters would have been
obligated to purchase on such date in the absence of such default.
35.
<PAGE>
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of any such Underwriter
under this Agreement.
X. MISCELLANEOUS. NOTICES GIVEN PURSUANT TO ANY PROVISION OF THIS AGREEMENT
SHALL BE ADDRESSED AS FOLLOWS: (I) IF TO THE COMPANY, TO SATYAM INFOWAY
LIMITED, MAANASAROVAR TOWERS, 271-A, ANNA SALAI, TEYNAMPET, CHENNAI 600 015
INDIA, ATTENTION: CHIEF EXECUTIVE OFFICER, WITH A COPY TO LATHAM & WATKINS,
135 COMMONWEALTH DRIVE, MENLO PARK, CA 94025, ATTENTION: ANTHONY J. RICHMOND,
ESQ., AND (II) IF TO ANY UNDERWRITER OR TO YOU, TO YOU C/O MERRILL LYNCH &
CO., NORTH TOWER, WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1201,
ATTENTION: SYNDICATE DEPARTMENT, OR IN ANY CASE TO SUCH OTHER ADDRESS AS THE
PERSON TO BE NOTIFIED MAY HAVE REQUESTED IN WRITING.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several U.S. Underwriters
set forth in or made pursuant to this Agreement shall remain operative and in
full force and effect, and will survive delivery of and payment for the U.S.
Securities, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of any Underwriter, the officers or directors of
any Underwriter, any person controlling any Underwriter, the Company, the
officers or directors of the Company or any person controlling the Company, (ii)
acceptance of the U.S. Securities and payment for them hereunder. The
respective agreements, covenants and indemnities set forth in Section 7 shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
If for any reason the U.S. Securities or ADRs are not delivered by or
on behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 9), the Company agrees to
reimburse the several U.S. Underwriters for all out-of-pocket expenses
(including the fees and disbursements of counsel) incurred by them.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof.
The Company also agrees to reimburse the several U.S. Underwriters, their
directors and officers and any persons controlling any of the U.S. Underwriters
for any and all fees and expenses (including, without limitation, the fees
disbursements of counsel) incurred by them in connection with enforcing their
rights hereunder (including, without limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the U.S.
Underwriters, the U.S. Underwriters' directors and officers, any controlling
persons referred to herein, the Company's directors and the Company's officers
who sign the Registration Statement and their respective successors and assigns,
all as and to the extent provided in this Agreement, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include a purchaser of any of the U.S.
Securities from any of the several U.S. Underwriters merely because of such
purchase.
36.
<PAGE>
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.
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 New York or the courts of the State of New York in each case
located in the City and County of New York (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 New York office at
1633 Broadway, New York, New York 10019, 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 New York.
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.
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,
37.
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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 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.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
38.
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Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several U.S. Underwriters.
Very truly yours,
SATYAM INFOWAY LIMITED
By:
_____________________________
Name:
Title:
MERRILL LYNCH & CO.
Salomon Smith Barney
By: MERRILL LYNCH & CO.
By:
--------------------
39.
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SCHEDULE I
----------
U.S. Underwriters Number of Firm Shares
- ----------------- to be Purchased
---------------
Merrill Lynch & Co.
Salomon Smith Barney
Total
-----
<PAGE>
Annex I
-------
[Insert names of stockholders of the Company who will be required to sign lock
ups]
<PAGE>
Exhibit 1.2
[1,670,000] American Depositary Shares
SATYAM INFOWAY LIMITED
American Depositary Shares
Each Representing One Equity Share, Par Value Rs.10 Per Share
INTERNATIONAL UNDERWRITING AGREEMENT
------------------------------------
October __, 1999
MERRILL LYNCH INTERNATIONAL
Salomon Brothers International Limited
As International Representatives of the several
International Underwriters named in Schedule I hereto
c/o Merrill Lynch & Co.
North Tower
World Financial Center
New York, New York 10281-1209
Ladies/Gentlemen:
Satyam Infoway Limited, a limited liability company formed under the
laws of the Republic of India (the "Company"), proposes to issue and sell to
Merrill Lynch (Singapore) Pte. Ltd. ("Merrill Lynch International"), Salomon
Brothers International Limited and each of the other International Underwriters
named in Schedule I hereto (collectively, the "International Underwriters"), for
whom Merrill Lynch International and Salomon Brothers International Limited are
acting as representatives (in such capacity, the "International
Representatives"), an aggregate of [1,670,000] American Depositary Shares (the
"Firm ADSs") each representing one equity share, par value Rs.10 per share (the
"Equity Shares"), of the Company, subject to the terms and conditions set forth
herein. The Company also proposes to issue and sell to the several
International Underwriters not more than an additional [626,250] American
Depositary Shares (the "Additional ADSs"), each representing one Equity Share,
if requested by the International Underwriters as provided in Section 2 hereof.
The Firm ADSs and the Additional ADSs are hereinafter referred to collectively
as the "ADSs". The Firm ADSs ("Initial International Securities") and the
Additional ADSs ("International Option Securities") are hereinafter called,
collectively, the "International Securities". The offer of the International
Securities by the International Underwriters is hereinafter called the
"International Offering".
Each ADS will be evidenced by an American Depositary Receipt (an
"ADR") to be issued by Citibank, N.A., as depositary (the "Depositary"),
pursuant to a Deposit Agreement dated as of October __, 1999 (the "Deposit
Agreement") by and among the Company, the Depositary and the holders and
beneficial holders from time to time of the ADSs.
<PAGE>
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
the offering by the Company of an aggregate of 2,505,000 American Depositary
Shares (the "Initial International Securities") through arrangements with
certain underwriters in the United States and Canada (the "U.S. Underwriters")
and the grant by the Company to the International Underwriters, acting severally
and not jointly, of an option to purchase all of any part of the International
Underwriters' pro rata portion of up to ___________ additional American
Depositary Shares to cover allotments, if any, and for other transactions (the
"International Option Securities"). The Initial International Securities and
the International Option Securities are hereinafter called the "International
Securities."
The International Underwriters and the U.S. Underwriters are
hereinafter collectively called the "Underwriters", the Initial International
Securities and the Initial International Securities are hereinafter collectively
called the "Initial Securities", and the International Securities and the
International Securities are hereinafter called the "Securities". The U.S.
Offering and the International Offering are collectively called the "Offerings".
This Agreement (the "International Purchase Agreement") and the U.S. Purchase
Agreement are hereinafter collectively called the "Purchase Agreements". All
references to "US dollars" or "$" herein are to United States dollars.
The Underwriters will concurrently enter into an Agreement Among
Syndicates of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch International & Co.
2
<PAGE>
I. REGISTRATION STATEMENT AND PROSPECTUS. THE COMPANY HAS PREPARED AND FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN
ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS OF THE COMMISSION THEREUNDER (COLLECTIVELY,
THE "ACT"), A REGISTRATION STATEMENT ON FORM F-1 (FILE NO. 333-10852),
INCLUDING A PROSPECTUS, RELATING TO THE INTERNATIONAL SECURITIES. SUCH
REGISTRATION STATEMENT ALSO RELATES TO A PORTION OF THE INTERNATIONAL
SECURITIES WHICH ARE BEING REGISTERED SOLELY FOR THE PURPOSE OF THEIR RE-
SALE IN THE UNITED STATES IN SUCH TRANSACTIONS AS REQUIRE REGISTRATION
UNDER THE 1933 ACT. THE REGISTRATION STATEMENT, AS AMENDED AT THE TIME IT
BECAME EFFECTIVE, INCLUDING THE INFORMATION (IF ANY) DEEMED TO BE PART OF
THE REGISTRATION STATEMENT AT THE TIME OF EFFECTIVENESS PURSUANT TO RULE
430A UNDER THE ACT, IS HEREINAFTER REFERRED TO AS THE "REGISTRATION
STATEMENT". TWO FORMS OF PROSPECTUSES ARE TO BE USED IN CONNECTION WITH THE
OFFERING AND SALE OF THE SECURITIES: ONE RELATING TO THE INTERNATIONAL
SECURITIES (THE "INTERNATIONAL PROSPECTUS") AND ONE RELATING TO THE U.S.
SECURITIES (THE "U.S. PROSPECTUS"). THE INTERNATIONAL PROSPECTUS MAY ALSO
BE USED IN CONNECTION WITH RE-SALES OF THE INTERNATIONAL SECURITIES IN THE
UNITED STATES TO THE EXTENT THAT ANY SUCH TRANSACTIONS WOULD NOT OTHERWISE
BE EXEMPT FROM REGISTRATION UNDER THE 1933 ACT. THE INTERNATIONAL
PROSPECTUS IS IDENTICAL TO THE U.S. PROSPECTUS, EXCEPT FOR THE FRONT COVER
AND BACK COVER PAGES AND THE INFORMATION UNDER THE CAPTION "UNDERWRITING".
THE INTERNATIONAL PROSPECTUS AND THE U.S. PROSPECTUS ARE REFERRED TO
COLLECTIVELY AS THE "PROSPECTUSES". IF THE COMPANY HAS FILED OR IS REQUIRED
PURSUANT TO THE TERMS HEREOF TO FILE A REGISTRATION STATEMENT PURSUANT TO
RULE 462(B) UNDER THE ACT (A "RULE 462(B) REGISTRATION STATEMENT"), THEN,
UNLESS OTHERWISE SPECIFIED, ANY REFERENCE HEREIN TO THE TERM "REGISTRATION
STATEMENT" SHALL BE DEEMED TO INCLUDE SUCH RULE 462(B) REGISTRATION
STATEMENT. THE COMPANY AND THE DEPOSITARY HAVE ALSO PREPARED AND FILED WITH
THE COMMISSION, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, A
REGISTRATION STATEMENT ON FORM F-6 (FILE NO. 333-_______) RELATING TO THE
INTERNATIONAL SECURITIES. SUCH REGISTRATION STATEMENT, AS AMENDED AT THE
TIME IT BECOMES EFFECTIVE, IS HEREINAFTER REFERRED TO AS THE "ADS
REGISTRATION STATEMENT".
3
<PAGE>
II. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS; ADDITIONAL
EXPENSES. ON THE BASIS OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS
CONTAINED IN THIS AGREEMENT, AND SUBJECT TO ITS TERMS AND CONDITIONS, THE
COMPANY AGREES TO ISSUE AND SELL, AND EACH UNDERWRITER AGREES, SEVERALLY
AND NOT JOINTLY, TO PURCHASE FROM THE COMPANY AT A PRICE PER ADS OF $______
(THE "PURCHASE PRICE") THE NUMBER OF INITIAL INTERNATIONAL SECURITIES SET
FORTH OPPOSITE THE NAME OF SUCH UNDERWRITER IN SCHEDULE I HERETO.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the International Option Securities and the International Underwriters
shall have the right to purchase, severally and not jointly, up to [626,500]
International Option Securities from the Company at the Purchase Price.
International Option Securities may be purchased solely for the purpose of
covering over-allotments made in connection with the offering of the Initial
International Securities. The International Underwriters may exercise their
right to purchase International Option Securities in whole or in part from time
to time by giving written notice thereof to the Company within 30 days after the
date of this Agreement. You shall give any such notice on behalf of the
International Underwriters and such notice shall specify the aggregate number of
International Option Securities to be purchased pursuant to such exercise and
the date for payment and delivery thereof, which date shall be a business day
(i) no earlier than two business days after such notice has been given (and, in
any event, no earlier than the Closing Date (as hereinafter defined)) and (ii)
no later than ten business days after such notice has been given. If any
International Option Securities are to be purchased, each Underwriter, severally
and not jointly, agrees to purchase from the Company the number of International
Option Securities (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
International Option Securities to be purchased from the Company as the number
of Initial International Securities set forth opposite the name of such
Underwriter in Schedule I bears to the total number of Initial International
Securities.
The Company hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, disposes of or transfer any
Equity Shares, ADSs, or any securities convertible into or exercisable or
exchangeable for Equity Shares, ADSs or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, economic consequences of ownership of the Equity Shares, ADSs
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Equity Shares, ADSs or such other
securities, in cash or otherwise), whether any such swap or transaction is to be
settled by delivery of Equity Shares, ADSs or other securities, in cash or
otherwise, except to the International Underwriters pursuant to this Agreement
and pursuant to the Deposit Agreement, for a period of 180 days after the date
of the International Prospectus without the prior written consent of Merrill
Lynch International. Notwithstanding the foregoing, during such period (i) the
Company may grant stock options pursuant to the Company's existing stock option
plan and (ii) the Company may issue Equity Shares upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof. The
Company also agrees not to file any registration statement with respect to any
Equity Shares, ADSs or any securities convertible into or exercisable or
exchangeable for Equity Shares, ADSs for a period
4
<PAGE>
of 180 days after the date of the International Prospectus without the prior
written consent of Merrill Lynch International. The Company shall, prior to or
concurrently with the execution of this Agreement, deliver an agreement
executed by (i) each of the directors and officers of the Company and (ii)
each stockholder listed on Annex I hereto to the effect that such person will
not, during the period commencing on the date such person signs such agreement
and ending 180 days after the date of the International Prospectus, without
the prior written consent of Merrill Lynch International, (A) engage in any of
the transactions described in the first sentence of this paragraph or (B) make
any demand for, or exercise any right with respect to, the registration of any
Equity Shares, ADSs or any securities convertible into or exercisable or
exchangeable for Equity Shares or ADSs.
Notwithstanding any other provision of this Agreement, you hereby
agree (i) to assume and to pay all obligations of (a) Brobeck, Phleger &
Harrison LLP, United States counsel for the International Underwriters, and (b)
Nishith Desai Associates, Indian counsel to the International Underwriters, in
the case of (a) and (b) for reasonable fees and expenses and (ii) to reimburse
Donaldson, Lufkin & Jenrette Securities Corporation for out of pocket expenses
(not to exceed $65,000), in the case of (i) and (ii), incurred in connection
with the transactions contemplated by this Agreement.
5
<PAGE>
III. TERMS OF PUBLIC OFFERING. THE COMPANY IS ADVISED BY YOU THAT THE
INTERNATIONAL UNDERWRITERS PROPOSE (I) TO MAKE A PUBLIC OFFERING OF THEIR
RESPECTIVE PORTIONS OF THE INTERNATIONAL SECURITIES AS SOON AFTER THE
EXECUTION AND DELIVERY OF THIS AGREEMENT AS IN YOUR JUDGMENT IS ADVISABLE
AND (II) INITIALLY TO OFFER THE INTERNATIONAL SECURITIES UPON THE TERMS
SET FORTH IN THE INTERNATIONAL PROSPECTUS.
6
<PAGE>
IV. DELIVERY OF ADRS EVIDENCING THE ADSS. THE COMPANY SHALL DELIVER, OR
CAUSE TO BE DELIVERED, TO THE REPRESENTATIVES FOR THE ACCOUNTS OF THE
SEVERAL INTERNATIONAL UNDERWRITERS ADRS EVIDENCING THE INITIAL
INTERNATIONAL SECURITIES AT THE CLOSING DATE (AS DEFINED BELOW), AGAINST
THE RELEASE OF A WIRE TRANSFER OF FEDERAL OR OTHER IMMEDIATELY AVAILABLE
FUNDS IN NEW YORK CITY. THE COMPANY SHALL DELIVER, OR CAUSE TO BE
DELIVERED, TO THE REPRESENTATIVES FOR THE ACCOUNTS OF THE SEVERAL
INTERNATIONAL UNDERWRITERS, ADRS EVIDENCING THE INTERNATIONAL OPTION
SECURITIES THE INTERNATIONAL UNDERWRITERS HAVE AGREED TO PURCHASE AT THE
CLOSING DATE OR THE OPTION CLOSING DATE (AS DEFINED BELOW), AS THE CASE
MAY BE, AGAINST THE RELEASE OF A WIRE TRANSFER OF FEDERAL OR OTHER
IMMEDIATELY AVAILABLE FUNDS IN NEW YORK CITY. THE ADRS SHALL BE IN
DEFINITIVE FORM AND REGISTERED IN SUCH NAMES AND DENOMINATIONS AS MERRILL
LYNCH INTERNATIONAL SHALL REQUEST NO LATER THAN TWO BUSINESS DAYS PRIOR TO
THE CLOSING DATE OR THE APPLICABLE OPTION CLOSING DATE (AS DEFINED BELOW),
AS THE CASE MAY BE. THE ADRS SHALL BE MADE AVAILABLE FOR INSPECTION NOT
LATER THAN 9:30 A.M., NEW YORK CITY TIME, ON THE BUSINESS DAY PRIOR TO THE
CLOSING DATE OR THE APPLICABLE OPTION CLOSING DATE, AS THE CASE MAY BE, AT
A LOCATION IN NEW YORK CITY AS THE REPRESENTATIVES MAY DESIGNATE. IF THE
INTERNATIONAL UNDERWRITERS SO ELECT, DELIVERY OF THE ADRS EVIDENCING THE
INTERNATIONAL SECURITIES MAY BE MADE BY CREDIT THROUGH FULL FAST TRANSFER
TO THE ACCOUNTS AT THE DEPOSITARY TRUST COMPANY DESIGNATED BY THE
INTERNATIONAL UNDERWRITERS. THE TIME AND DATE OF DELIVERY AND PAYMENT FOR
THE INITIAL INTERNATIONAL SECURITIES SHALL BE 9:00 A.M., NEW YORK CITY
TIME, ON OCTOBER __, 1999 OR SUCH OTHER TIME ON THE SAME OR SUCH OTHER
DATE AS MERRILL LYNCH INTERNATIONAL AND THE COMPANY SHALL AGREE IN
WRITING. THE TIME AND DATE OF DELIVERY FOR THE INITIAL INTERNATIONAL
SECURITIES ARE REFERRED TO HEREIN AS THE "CLOSING DATE". THE TIME AND DATE
OF DELIVERY AND PAYMENT FOR ANY INTERNATIONAL OPTION SECURITIES TO BE
PURCHASED BY THE INTERNATIONAL UNDERWRITERS SHALL BE 9:00 A.M., NEW YORK
CITY TIME, ON THE DATE SPECIFIED IN THE APPLICABLE EXERCISE NOTICE GIVEN
BY YOU PURSUANT TO SECTION 2 OR SUCH OTHER TIME ON THE SAME OR SUCH OTHER
DATE AS MERRILL LYNCH INTERNATIONAL AND THE COMPANY SHALL AGREE IN
WRITING. THE TIME AND DATE OF DELIVERY FOR ANY INTERNATIONAL OPTION
SECURITIES ARE REFERRED TO HEREIN AS AN "OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any Option
Closing Date on behalf of the parties hereto pursuant to Section 8 of this
Agreement shall be delivered at the offices of Brobeck, Phleger & Harrison LLP,
1633 Broadway, 47th Floor, New York, New York
7
<PAGE>
10019, and the ADRs shall be delivered at the designated location, all on the
Closing Date or such Option Closing Date, as the case may be.
8
<PAGE>
V. AGREEMENTS OF THE COMPANY. THE COMPANY AGREES WITH YOU:
A. To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to
the Registration Statement, the ADS Registration Statement or amendments
or supplements to the International Prospectus or for additional
information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, the ADS
Registration Statement or of the suspension of qualification of the
International Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment
to the Registration Statement or ADS Registration Statement becomes
effective, (iv) if the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, when the
Rule 462(b) Registration Statement has become effective and (v) of the
happening of any event during the period referred to in Section 5(d) below
which makes any statement of a material fact made in the Registration
Statement, the ADS Registration Statement or the International Prospectus
untrue or which requires any additions to or changes in the Registration
Statement, the ADS Registration Statement or the International Prospectus
in order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement or the ADS Registration Statement, the Company will
use its reasonable best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time.
B. To furnish to you four signed copies of the Registration Statement and
the ADS Registration Statement as first filed with the Commission and of
each amendment thereto, including all exhibits, and to furnish to you and
each Underwriter designated by you such number of conformed copies of the
Registration Statement and the ADS Registration Statement as so filed and
of each amendment thereto, without exhibits, and the International
Prospectus as amended or supplemented, as you may reasonably request.
C. To prepare the International Prospectus, the form and substance of
which shall be reasonably satisfactory to you, and to file the
International Prospectus in such form with the Commission within the
applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment
to the Registration Statement or the ADS Registration Statement and not to
make any amendment or supplement to the International Prospectus of which
you shall not previously have been advised or to which you shall
reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement, ADS Registration
Statement or amendment or supplement to the International Prospectus which
may be necessary or advisable in connection with the distribution of the
International Securities by you, and to use its reasonable best efforts to
cause any such amendment to the Registration Statement or the ADS
Registration Statement to become promptly effective.
9
<PAGE>
D. Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the International Underwriters an
International Prospectus is required by law to be delivered in connection
with sales by an Underwriter or a dealer, to furnish in New York City to
each Underwriter and any dealer as many copies of the International
Prospectus (and of any amendment or supplement to the International
Prospectus) as such Underwriter or dealer may reasonably request.
E. If during the period specified in Section 5(d), any event shall occur
or condition shall exist as a result of which, in the opinion of counsel
for the International Underwriters, it becomes necessary to amend or
supplement the International Prospectus in order to make the statements
therein, in the light of the circumstances when the International
Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the International Underwriters, it is necessary to
amend or supplement the International Prospectus to comply with applicable
law, forthwith to prepare and file with the Commission an appropriate
amendment or supplement to the International Prospectus so that the
statements in the International Prospectus, as so amended or supplemented,
will not in the light of the circumstances when it is so delivered, be
misleading, or so that the International Prospectus will comply with
applicable law, and to furnish to each Underwriter and to any dealer as
many copies thereof as such Underwriter or dealer may reasonably request.
F. Prior to any public offering of the International Securities, to
cooperate with you and counsel for the International Underwriters in
connection with the registration or qualification of the International
Securities for offer and sale by the several International Underwriters
and by dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such registration or
qualification in effect so long as required for distribution of the
International Securities and to file such consents to service of process
or other documents as may be necessary in order to effect such
registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified or to
take any action that would subject it to general consent to service of
process or taxation other than as to matters and transactions relating to
the International Prospectus, the Registration Statement, the ADS
Registration Statement any preliminary International Prospectus or the
offering or sale of the International Securities, in any jurisdiction in
which it is not now so subject.
G. To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
__________, 2000 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
10
<PAGE>
H. During the period of three years after the date of this Agreement, to
furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of International Securities
or furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed and
such other publicly available information concerning the Company as you
may reasonably request.
I. Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the International Securities and ADRs under
the Act and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Registration
Statement (including financial statements and exhibits), the ADS
Registration Statement, any preliminary International Prospectus, the
International Prospectus and all amendments and supplements to any of the
foregoing, including the mailing and delivering of copies thereof to the
International Underwriters and dealers in the quantities specified herein,
(ii) all costs and expenses related to the transfer and delivery of the
International Securities and ADRs to the International Underwriters,
including any transfer or other taxes payable thereon, (iii) all costs of
printing this Agreement and any other agreements or documents in
connection with the offering, purchase, sale or delivery of the
International Securities and ADRs, (iv) all expenses in connection with
the registration or qualification of the International Securities for
offer and sale under the securities or Blue Sky laws of the several states
and all costs of printing or producing any Preliminary and Supplemental
Blue Sky Memoranda in connection therewith (including the filing fees and
fees and disbursements of counsel for the International Underwriters in
connection with such registration or qualification and memoranda relating
thereto), (v) the filing fees and disbursements of counsel for the
International Underwriters in connection with the review and clearance of
the offering of the International Securities by the National Association
of Securities Dealers, Inc. (the "NASD"), (vi) all fees and expenses in
connection with the preparation and filing of the registration statement
on Form 8-A relating to the International Securities and all costs and
expenses incident to the listing of the International Securities on the
Nasdaq National Market, (vii) the cost of printing the ADRs, (viii) the
costs and charges of any transfer agent, registrar and/or depositary,
including the Depositary, (ix) all fees associated with review and
approval of this offering by Indian federal, local and state authorities
and (x) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section.
J. To use its reasonable best efforts to list for quotation the
International Securities on the Nasdaq National Market and to maintain the
listing of the International Securities on the Nasdaq National Market for
a period of three years after the date of this Agreement.
11
<PAGE>
K. To use its reasonable best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date or any Option Closing Date, as the case
may be, and to satisfy all conditions precedent to the delivery of the
ADRs evidencing the International Securities.
L. If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all of the International Securities, to file a
Rule 462(b) Registration Statement with the Commission registering the
International Securities not so covered in compliance with Rule 462(b) by
10:00 P.M., New York City time, on the date of this Agreement and to pay
to the Commission the filing fee for such Rule 462(b) Registration
Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the
Act.
VI. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. AS OF THE DATE HEREOF, THE
COMPANY REPRESENTS AND WARRANTS TO EACH UNDERWRITER THAT:
A. The Registration Statement and the ADS Registration Statement have
become effective (other than any Rule 462(b) Registration Statement to be
filed by the Company after the effectiveness of this Agreement); any Rule
462(b) Registration Statement filed after the effectiveness of this
Agreement will become effective no later than 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement or ADS Registration Statement
is in effect, and no proceedings for such purpose are pending before or,
to the Company's knowledge, threatened by the Commission.
12
<PAGE>
B. (i) The Registration Statement and ADS Registration Statement (other
than any Rule 462(b) Registration Statement to be filed by the Company
after the effectiveness of this Agreement), when it became effective, did
not contain and, as amended, if applicable, 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, (ii) the Registration Statement and ADS Registration Statement
(other than any Rule 462(b) Registration Statement to be filed by the
Company after the effectiveness of this Agreement) and the International
Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Act and the rules and regulations
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 and Exchange Board of
India (the "SEBI"), as applicable (iii) if the Company is required to file
a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, such Rule 462(b) Registration Statement and any amendments
thereto, when they become effective (A) 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 and (B) will comply in all material respects with the Act and
the rules and regulations of the MOF, the RBI, the DCA, the CLB and the
SEBI and (iv) the International Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement, ADS Registration Statement, Rule
462(b) Registration Statement, if any, or the International Prospectus
based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter expressly for use therein.
C. Each preliminary International Prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, complied when so
filed in all material respects with the Act, and did not contain an 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, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph
do not apply to statements or omissions in any preliminary International
Prospectus based upon information relating to any Underwriter furnished to
the Company in writing by such Underwriter expressly for use therein.
D. The Company has been duly organized, is validly existing in good
standing under the laws of its jurisdiction of organization and has the
power and authority to carry on its business as described in the
International Prospectus, to own, lease and operate its properties and to
enter into this Agreement and the Deposit Agreement, and is duly qualified
and is in good standing in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified could not
reasonably be expected to have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company (a
"Material Adverse Effect").
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<PAGE>
E. There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or
issued by the Company relating to or entitling any person to purchase or
otherwise to acquire any shares of the capital stock of the Company,
except as otherwise disclosed in the Registration Statement or which could
not reasonably be expected to have a Material Adverse Effect.
F. All the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights, except as otherwise
disclosed in the Registration Statement or which could not reasonably be
expected to have a Material Adverse Effect on the Company. The Equity
Shares to be issued in connection with the offering and the sale of the
International Securities 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 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 International
Securities, though there are restrictions on the future deposit of Equity
Shares which are fully and accurately described in the International
Prospectus. The International Securities are freely transferable by the
Company to the International Underwriters in the manner contemplated in
this Agreement. Upon receipt 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 International Underwriters.
Upon issuance by the Depositary of the ADRs evidencing the International
Securities 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 International Securities,
except as described in the International Prospectus.
G. The Company does not presently own or control, directly or indirectly,
any interest in any other corporation, association, or other business
entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
H. The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the International
Prospectus.
I. The Company is not in violation of its respective certificate of its
Articles or Memorandum of Association or in default in the performance of
any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, note, contract, franchise, mortgage, lease or
other agreement or instrument that is material to the Company to which the
Company is a party or by which the Company or its respective property is
bound.
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<PAGE>
J. The execution, delivery and performance of this Agreement and the
Deposit Agreement by the Company, the compliance by the Company with all
the provisions hereof and thereby and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as have been obtained or
made by the Company and are in full force and effect under the Act, under
applicable state securities or blue sky laws and from the NASD and any
applicable Indian governmental or regulatory authority or agency,
including, without limitation, the required approvals of the MOF, RBI,
CLB, DCA and SEBI), (ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the Articles or Memorandum
of Association of the Company or any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Company to
which the Company is a party or by which the Company or its respective
property is bound, (iii) violate or conflict with any applicable law or
any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company, or its
respective property (including any laws limiting foreign ownership of the
Company) or (iv) result in the suspension, termination or revocation of
any Authorization (as defined below) of the Company or any other
impairment of the rights of the holder of any such Authorization.
K. There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company is or could be a
party or to which any of its respective property is or could be subject;
nor are there any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the
International Prospectus or to be filed as exhibits to the Registration
Statement that are not so described or filed as required. No material
labor dispute with the employees of the Company or any of its subsidiaries
exists or is threatened.
L. The Company has not violated any foreign, federal, state or local law
or regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or any provisions of
the Foreign Corrupt Practices Act, or the rules and regulations
promulgated thereunder, except for such violations which, singly or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
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M. Except as disclosed in the International Prospectus, the Company has
such permits, licenses, consents, exemptions, franchises, authorizations
and other approvals (each, an "Authorization") of, and has made all
filings with and notices to, all governmental or regulatory authorities
and self-regulatory organizations and all courts and other tribunals,
including, without limitation, under any applicable Environmental Laws, as
are necessary to own, lease, license and operate its respective properties
and to conduct its business, except where the failure to have any such
Authorization or to make any such filing or notice could not reasonably be
expected to, singly or in the aggregate, have a Material Adverse Effect.
Except as disclosed in the International Prospectus, each such
Authorization is valid and in full force and effect and the Company is in
compliance with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including,
without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both,
would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company; except where such failure to be valid and in
full force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction could not reasonably be
expected to, singly or in the aggregate, have a Material Adverse Effect.
N. There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on
operating activities and any potential liabilities to third parties) which
could reasonably be expected to, singly or in the aggregate, have a
Material Adverse Effect.
O. This Agreement and the Deposit Agreement have been duly authorized,
executed and delivered by the Company and constitute valid and binding
agreements of the Company.
P. KPMG Peat Marwick, India are independent public accountants with
respect to the Company and its subsidiaries as required by the Act.
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Q. The consolidated financial statements included in the Registration
Statement and the International Prospectus (and any amendment or
supplement thereto), together with related schedules and notes, present
fairly the consolidated financial position, results of operations and
changes in financial position of the Company on the basis stated therein
at the respective dates or for the respective periods to which they apply;
such statements and related schedules and notes have been prepared in
accordance with United States generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; the supporting schedules, if any, included in the Registration
Statement present fairly in accordance with generally accepted accounting
principles the information required to be stated therein; and the other
financial and statistical information and data set forth in the
Registration Statement and the International Prospectus (and any amendment
or supplement thereto) are, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements and the
books and records of the Company.
R. The Company is not and, after giving effect to the offering and sale
of the International Securities and the application of the proceeds
thereof as described in the International Prospectus, will not be, an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
S. Except for the [list the agreements], there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company or
to require the Company to include such securities with the International
Securities registered pursuant to the Registration Statement.
T. Since the respective dates as of which information is given in the
International Prospectus other than as set forth in the International
Prospectus (exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement), (i) there has not occurred any material
adverse change or any development involving a prospective material adverse
change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company, (ii) there has not been
any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of
the Company and (iii) the Company has not incurred any material liability
or obligation, direct or contingent.
U. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with 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.
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V. The form of certificate for the Equity Shares conforms to the
requirements of Indian law, the Articles or Memorandum of Association of
the Company and the description thereof contained in the International
Prospectus, and the International Securities and the ADRs conform to the
requirements of the Deposit Agreement and the Nasdaq National Market.
W. Except as disclosed in the International 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 Equity Shares by the Company against the
issuance of the ADRs evidencing International Securities; (ii) the sale
and delivery of the International Securities to or for the respective
accounts of the International Underwriters; (iii) the sale and delivery
outside of India by the International Underwriters of the International
Securities or the ADRs to the initial purchasers thereof; or (iv) except
as set forth in the International Prospectus, the consummation of any
other transaction contemplated by this Agreement or the Deposit Agreement
in connection with the sale and delivery of the International Securities
or the issuance of the ADRs.
X. Except as disclosed in the International Prospectus, under applicable
laws and regulations, no taxes, levies, imposts or 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 International Securities) to persons not resident in India.
Y. It is not necessary in order to enable any party to enforce any of its
rights under this Agreement or to enable any owner of International
Securities to enforce any of its rights that all or any of such parties or
owners of International Securities be licensed, qualified or entitled to
do business in India. None of the International Underwriters will be
deemed to be resident, domiciled, carrying on business or subject to
taxation in India by reason of the ownership of the International
Securities or the entry into, performance and/or enforcement of this
Agreement and the transactions contemplated hereby.
Z. The Company is subject to the civil and commercial laws of India with
respect to its obligations under this Agreement, the Deposit Agreement and
the International Securities. The execution and delivery by the Company
and the performance by the Company of its obligations hereunder and
thereunder constitute private and commercial acts rather than governmental
or public acts, and neither the Company nor any of its 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.
AA. The Company has full power, authority and legal right to enter into
and perform its obligations set forth in Section 7 of this Agreement and
none of the provisions of such Section 7 contravene current Indian law.
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BB. Each certificate signed by any officer of the Company and delivered
to the International Underwriters or counsel for the International
Underwriters shall be deemed to be a representation and warranty by the
Company to the International Underwriters as to the matters covered
thereby.
VII. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter
and their affiliates within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") as follows:
1. against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto) or the ADS Registration Statement (or any amendment
thereto) 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 arising out of any untrue statement or alleged untrue statement
of a material fact included in any preliminary International Prospectus or the
International 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 light of the circumstances under which they
were made, not misleading;
2. against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, provided that (subject to Section 7(d)
below) any such settlement is effected with the written consent of the
Company; and
3. against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch International)
incurred in investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
-------- -------
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to
the Company by any Underwriter through Merrill Lynch International
expressly for use in the Registration Statement (or any amendment thereto)
or any preliminary prospectus or the International Prospectus (or any
amendment or supplement thereto).
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B. Each Underwriter severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement and the ADS Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement and the ADS Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
International Prospectus ( or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through Merrill Lynch International expressly
for use in the Registration Statement and the ADS Registration Statement
(or any amendment thereto) or such preliminary prospectus or the
International Prospectus (or any amendment or supplement thereto).
C. Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it
in respect of which indemnity may be sought hereunder, but failure to so
notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially
prejudiced as a result thereof and in any event shall not relieve it from
any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to
Section 7(a) above, counsel to the indemnified parties shall be selected
by the Company. An indemnifying party may participate at its own expense
in the defense of any such action; provided, however, that counsel to the
indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment
with respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be
sought under this Section (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise
or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
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D. If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by Section 7(a)(ii)
effected without its written consent if (i) such settlement is entered
into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received
notice of the terms of such settlement at least 30 days prior to such
settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request
prior the date of such settlement.
E. If the indemnification provided for in this Section is for any reason
unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred
to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and
expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the International Underwriters on the
other hand from this offering pursuant to this Agreement or (ii) if the
allocation provided by clause (i) 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 International Underwriters on the
other hand in connection with the statements or omissions which resulted
in such losses, liabilities, claims, damages or expenses, as well as any
other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
International Underwriters on the other hand in connection with the offering of
the Equity Shares, International Securities and ADRs pursuant to this Agreement
shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Equity Shares, International Securities and
ADRs pursuant to this Agreement (before deducting expenses) received by the
Company and the total underwriting discount received by the International
Underwriters, in each case as set forth on the cover of the International
Prospectus, bear to the aggregate initial public offering price of the ADRs as
set forth on such cover.
The relative fault of the Company on the one hand and the International
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 relates to information
supplied by the Company or by the International Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statements or omission.
The Company and the International Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by
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any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue or alleged untrue statement or omission
or alleged omission. Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the ADRs underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of any
such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each director of the Company and such persons' affiliate, each officer of the
Company who signed the Registration Statement and the ADS Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company. The International Underwriters'
respective obligations to contribute pursuant tot his Section 7 are several in
proportion to the number of Firm Shares to be purchased set forth opposite their
respective names in Schedule I hereto and not joint.
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VIII. CONDITIONS OF INTERNATIONAL UNDERWRITERS' OBLIGATIONS. THE SEVERAL
OBLIGATIONS OF THE INTERNATIONAL UNDERWRITERS TO PURCHASE THE INITIAL
INTERNATIONAL SECURITIES UNDER THIS AGREEMENT ARE SUBJECT TO THE
SATISFACTION OF EACH OF THE FOLLOWING CONDITIONS:
A. All the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects on the
Closing Date with the same force and effect as if made on and as of the
Closing Date.
B. If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New
York City time, on the date of this Agreement; and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been commenced
or shall be pending before or, to the Company's knowledge, contemplated
by the Commission.
C. You shall have received on the Closing Date a certificate dated the
Closing Date, signed by R. Ramaraj and T.R. Santhanakrishnan, in their
capacities as the Chief Executive Officer and Chief Financial Officer of
the Company, confirming the matters set forth in Sections 6(t), 8(a) and
8(b) and that the Company has complied with all of the agreements and
satisfied all of the conditions herein contained and required to be
complied with or satisfied by the Company on or prior to the Closing
Date.
D. Since the respective dates as of which information is given in the
International Prospectus other than as set forth in the International
Prospectus (exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement), (i) there shall not have occurred any
change or any development involving a prospective change in the
condition, financial or otherwise, or the earnings, business, management
or operations of the Company, (ii) there shall not have been any change
or any development involving a prospective change in the capital stock or
in the long-term debt of the Company and (iii) the Company shall not have
incurred any liability or obligation, direct or contingent, the effect of
which, in any such case described in clause 8(d)(i), 8(d)(ii) or
8(d)(iii), in your judgment, is material and adverse and, in your
reasonable judgment, makes it impracticable to market the International
Securities on the terms and in the manner contemplated in the
International Prospectus.
E. You shall have received on the Closing Date an opinion (satisfactory
to you and United States counsel for the Underwriters), dated the Closing
Date, of M.G. Ramachandran, Indian counsel for the Company, and Nishith
Desai Associates, Indian counsel to the Underwriters, to the effect that:
1. 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
International Prospectus. The Company has no subsidiaries.
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2. The Company has an equity and issued capitalization as set forth
in the International Prospectus and such capitalization complies with Indian
law. The summary of the charter documents and Indian law set forth in the
International Prospectus is accurate and complete in all material respects.
The authorized share capital of the Company (including the Equity Shares, ADSs
and the ADRs) conforms to the description thereof under the headings
"Description of Equity Shares" and "Description of American Depository Shares"
in the International Prospectus.
3. The shares of capital stock of the Company outstanding prior to
the issuance of the Equity Shares represented by the International Securities
have been duly and validly authorized, are validly issued and outstanding, are
fully paid and nonassessable, conform to the description thereof contained in
the International Prospectus and, to the best of such counsel's 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 International Securities and deposited pursuant to the
Deposit Agreement in accordance with this 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
this 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 International 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
International Securities or the ADRs, except as described in the International
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 International
Securities, the ADRs and the Deposit Agreement. The form of certificate for
the Equity Shares conforms to the requirements of Indian law and the charter
documents of the Company, and the International Securities and the ADRs
conform to the requirements of the Deposit Agreement.
4. There are neither any preemptive nor other similar rights to
subscribe for or to purchase any of the Deposited Shares or the International
Securities, or 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.
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5. The Company has full power and authority to enter into and
perform its obligations under this 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 the laws of the State of New York by which
they are expressed to be governed, and under the U.S. federal securities laws,
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 Tamil Nadu
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 International Securities and the ADRs conform to the description thereof
in the International 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 International Securities
and the ADRs are in proper legal form for enforcement against the Company in
India. The Depositary and any holder or owner of International Securities 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.
6. 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
International Securities, the deposit of such Equity Shares pursuant to the
Deposit Agreement, the issuance and sale of the International Securities) will
not (A) 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, (B) 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 (C) result in
the suspension, termination or revocation of any authorizations, permits or
licenses held by the Company or any other impairment of the rights of the
Company with respect to any such authorization, permit or license.
7. 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 International
Securities, and the consummation of 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).
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8. Each of the Registration Statement, the ADS Registration
Statement, the Rule 462(b) Registration Statement, if any, and the
International 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, has been duly
executed by the officers and directors of the Company set forth on the
signature pages thereto.
9. 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.
10. Except as described in the International 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 International
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 International Securities or ADRs,
(B) the purchase of the International Securities by the International
Underwriters, (C) the sale and delivery by the International Underwriters of
the International Securities 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 International
Securities.
11. The indemnification provisions set forth in Section 7 of the
Underwriting Agreement do not contravene Indian law or public policy.
12. Except as described in the International 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 or International Securities 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.
13. 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.
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14. The Company has the power to submit, and has taken all
necessary action to submit, to the jurisdiction of any Specified Court (as
defined in this Agreement) and to appoint CT Corporation 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,
International Securities 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 such counsel has 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 "Enforcement of
Civil Liabilities" in the International Prospectus.
15. 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
International Securities 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.
16. The Company is subject to the civil and commercial laws of
India with respect to its obligations under the Principal Agreements, the
International Securities 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.
17. To the best of such counsel's knowledge after due inquiry,
there are no litigation or governmental proceedings pending or threatened to
which the Company is or could be a party or to which any of its respective
property is or could be subject that are required to be described in the
Registration Statement or the International Prospectus and are not so
described, or of any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the
International Prospectus or to be filed as exhibits to the Registration
Statement that are not so described or filed as required.
18. To the best of such counsel's 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 International Prospectus.
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19. 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 International 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.
20. The statements (A) in the International Prospectus under the
captions "Enforcement of Civil Liabilities," "Risk Factors--Risks Related to
Investments in Indian Companies," "Risk Factors--Risks Related to the ADSs and
Our Trading Market," "Dividend Policy," "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--
Government Regulations," "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.
21. To the best of such counsel's knowledge after due inquiry,
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, except for such rights as have been duly waived.
22. It is not necessary (a) in order to enable the International
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 International Securities 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 International Underwriters or the Depositary or the holders or
owners of International Securities should be licensed, qualified or entitled
to do business in India.
23. None of the International Underwriters, 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, such counsel shall state that it has 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 International Underwriters at which
the contents of the Registration Statement, the ADS Registration Statement, the
International Prospectus, and any supplements or amendments thereto, and related
matters were discussed and, although they 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
International Prospectus (other than as specified above), and any supplements or
amendments thereto, on the basis of the foregoing, nothing has come to their
attention which would lead such counsel to believe that
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either the Registration Statement or 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 International 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 (except that
such counsel need not express its belief with respect 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 International Prospectus or any amendments or supplements
thereto).
The opinions of M.G. Ramachandran and Nishith Desai Associates
described in Section 8(e) above shall be rendered to you at the request of the
Company and shall so state therein.
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F. You shall have received on the Closing Date an opinion (reasonably
satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Latham & Watkins, United States counsel for the Company, to the
effect that:
1. This Agreement has been duly executed and delivered by the
Company.
2. 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.
3. 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 Act, and the Form 8-A
Registration Statement has been declared effective by the Commission under the
Exchange Act. To our knowledge, 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 Act or the Exchange Act, as applicable, and, to the
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 International Prospectus and any supplement thereto
pursuant to Rule 424(b) under the Act has been made in the manner and within
the time period required by such Rule 424(b).
4. The Registration Statement, including any Rule 462(b)
Registration Statement, the ADS Registration Statement, the International
Prospectus, and each amendment or supplement to the Registration Statement
and/or the ADS Registration Statement and the International 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 Act.
5. The International Securities have been approved for inclusion on
the Nasdaq National Market.
6. The statements in the International Prospectus under the
captions "Management--Certain Transactions," and "Taxation--United States
Federal Taxation," 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.
7. To the 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.
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8. To the 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.
9. 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
International Prospectus, except as required under the Act, applicable United
States state securities or blue sky laws and from the NASD (all of which have
been made or obtained and are, to our knowledge, in full force and effect).
10. The execution and delivery of this 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.
11. The Company is not, and after receipt of payment for the
International Securities will not be, an "investment company" within the
meaning of Investment Company Act.
12. The International Securities conform to the requirements of the
Deposit Agreement and the Nasdaq National Market.
In addition, such counsel shall state that it has 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 International Underwriters at which
the contents of the Registration Statement, the ADS Registration Statement, the
International 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 International Prospectus (other than as specified above), and
any supplements or amendments thereto, and have not made any independent check
or verification thereof, and, during the course of such participation, no facts
have come to their attention which would cause them to believe that either the
Registration Statement or 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
International Prospectus, as of its date or at the Closing Date or the Option
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 (except that such counsel need not express its belief with
respect to the financial statements, notes, schedules or other financial and
statistical data derived therefrom,
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included in, or omitted from, the Registration Statement, the ADS Registration
Statement or the International Prospectus or any amendments or supplements
thereto).
The opinion of Latham & Watkins described in Section 8(f) above shall
be rendered to you at the request of the Company and shall so state therein.
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G. You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of
Patterson, Belknap, Webb & Tyler LLP, counsel for the Depositary, to the
effect that:
1. the Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and assuming the due authorization, execution and
delivery by the Company, the Deposit Agreement constitutes a valid and binding
obligation of the Depositary, enforceable in accordance with its 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, and
2. when the ADRs have been duly executed and, if applicable,
countersigned, and duly issued and delivered in accordance with the Deposit
Agreement, the International Securities evidenced by the ADRs will be validly
issued and will entitle the registered holders thereof to the rights specified
in the ADRs and the Deposit Agreement.
H. You shall have received on the Closing Date an opinion, dated the
Closing Date, of Brobeck, Phleger & Harrison, LLP, United States counsel
for the U.S. Underwriters, to the effect that:
1. The statements in the U.S. Prospectus under the caption
"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, have been reviewed by such counsel and
fairly present and summarize, in all material respects, the matters referred
to therein.
2. 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 Act, and the Form 8-A
Registration Statement has been declared effective by the Commission under the
Exchange Act. To our knowledge, 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 Act or the Exchange Act, as applicable, and, to the
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 U.S. Prospectus and any supplement thereto pursuant
to Rule 424(b) under the Act has been made in the manner and within the time
period required by such Rule 424(b).
3. The Registration Statement, including any Rule 462(b)
Registration Statement, the ADS Registration Statement, the U.S. Prospectus,
and each amendment or supplement to the Registration Statement and/or the ADS
Registration Statement and the U.S. 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 Act.
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4. To the knowledge of such counsel, there are no litigation or
governmental proceedings pending or threatened to which the Company is or
could be a party or to which any of its property is or could be subject that
are required to be described in the Registration Statement or the U.S.
Prospectus and are not so described, or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the U.S. Prospectus or to be filed as exhibits to
the Registration Statement that are not so described or filed as required.
In addition, such counsel shall state that it has 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 International
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
U.S. Prospectus (other than as specified above), and any supplements or
amendments thereto, and have not made any independent check or verification
thereof, and, during the course of such participation, no facts have come to
their attention which would cause them to believe that either the Registration
Statement or 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 U.S. Prospectus, as of
its date or at the Closing Date or the Option 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 (except that such
counsel need not express its belief with respect to the financial statements,
notes, schedules or other financial and statistical data derived therefrom,
included in, or omitted from, the Registration Statement, the ADS Registration
Statement or the U.S. Prospectus or any amendments or supplements thereto).
In giving such opinions with respect to Section 8(i)(ii) Brobeck,
Phleger & Harrison LLP may state that its opinion and belief are based upon
their participation in the preparation of the Registration Statement, the ADS
Registration Statement and U.S. Prospectus, and any amendment or supplements
thereto, and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
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I. You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may
be, in form and substance reasonably satisfactory to you, from KPMG Peat
Marwick, India, independent public accountants, containing the
information and statements of the type ordinarily included in
accountants' "comfort letters" to Underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectuses.
J. The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on
the Closing Date. K. The International Securities shall have been duly
listed for quotation on the Nasdaq National Market.
L. The Deposit Agreement shall be in full force and effect. The
Depositary shall have furnished or caused to be furnished to you
certificates 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 International Securities to
be delivered by the Company at the Closing Date; (y) the execution,
issuance, signature and delivery of ADRs evidencing the International
Securities pursuant to the Deposit Agreement; and (z) such other matters
related thereto as you may reasonably request.
M. The Company shall not have failed on or prior to the Closing Date to
perform or comply in any material respect with any of the agreements
herein contained and required to be performed or complied with by the
Company on or prior to the Closing Date.
The several obligations of the International Underwriters to purchase
any International Option Securities hereunder are subject to the delivery to you
on the applicable Option Closing Date of such documents as you may reasonably
request with respect to the good standing of the Company, the due authorization
and issuance of such International Option Securities and other matters related
to the issuance of such International Option Securities.
IX. EFFECTIVENESS OF AGREEMENT AND TERMINATION. THIS AGREEMENT SHALL BECOME
EFFECTIVE UPON THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY THE PARTIES
HERETO.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company (i) if there has been, since the
time of execution of this Agreement or since the respective dates as of which
information is given in the International Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries considered as
on enterprise, whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the financial markets
in India or in the United States, Asian or international financial markets, any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the International
Underwriters, impracticable to market the ADRs or to enforce
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contracts for the sale of the ADRs, or (iii) if trading in any securities of
the Company has been suspended or materially limited by the Commission, the
Nadaq National Market or any Indian authority, or if trading generally on the
Nasdaq National Market or any Indian exchange has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any such exchange or by such system
or by order of the Commission, the NASD or any other U.S. or Indian
governmental authority, or (iv) if a banking moratorium has been declared by
either Indian, U.S. federal or New York authorities, or (v) if exchange
controls have been imposed by India on the U.S. dollar, or (vi) if there is a
change, or an official announcement by a competent authority of a prospective
change, in Indian or U.S. taxation adversely affecting the Company, the Equity
Shares, the ADRs or the International Securities or the transfer thereof.
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the International Underwriters shall fail or refuse to
purchase the Initial International Securities or International Option
Securities, as the case may be, which it has or they have agreed to purchase
hereunder on such date and the aggregate number of Initial International
Securities or International Option Securities, as the case may be, which such
defaulting Underwriter or International Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the total number of Initial
International Securities or International Option Securities, as the case may be,
to be purchased on such date by all International Underwriters, each non-
defaulting Underwriter shall be obligated severally, in the proportion which the
number of Initial International Securities set forth opposite its name in
Schedule I bears to the total number of Initial International Securities which
all the non-defaulting International Underwriters have agreed to purchase, or in
such other proportion as you may specify, to purchase the Initial International
Securities or International Option Securities, as the case may be, which such
defaulting Underwriter or International Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Initial International Securities or International Option Securities, as the case
may be, which any Underwriter has agreed to purchase pursuant to Section 2
hereof be increased pursuant to this Section 9 by an amount in excess of one-
ninth of such number of Initial International Securities or International Option
Securities, as the case may be, without the written consent of such Underwriter.
If on the Closing Date any Underwriter or International Underwriters shall fail
or refuse to purchase Initial International Securities and the aggregate number
of Initial International Securities with respect to which such default occurs is
more than one-tenth of the aggregate number of Initial International Securities
to be purchased by all International Underwriters and arrangements satisfactory
to you and the Company for purchase of such Initial International Securities are
not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter and the Company.
In any such case which does not result in termination of this Agreement, either
you or the Company shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Registration Statement and the International Prospectus or any other
documents or arrangements may be effected. If, on an Option Closing Date, any
Underwriter or International Underwriters shall fail or refuse to purchase
Additional International Securities and the aggregate number of International
Option Securities with respect to which such default occurs is more than one-
tenth of the aggregate number of International Option Securities to be purchased
on such date, the non-defaulting International Underwriters shall have the
option to
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(i) terminate their obligation hereunder to purchase such International Option
Securities or (ii) purchase not less than the number of International Option
Securities that such non-defaulting International Underwriters would have been
obligated to purchase on such date in the absence of such default. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
X. MISCELLANEOUS. NOTICES GIVEN PURSUANT TO ANY PROVISION OF THIS AGREEMENT
SHALL BE ADDRESSED AS FOLLOWS: (I) IF TO THE COMPANY, TO SATYAM INFOWAY
LIMITED, MAANASAROVAR TOWERS, 271-A, ANNA SALAI, TEYNAMPET, CHENNAI 600 015
INDIA, ATTENTION: CHIEF EXECUTIVE OFFICER, WITH A COPY TO LATHAM & WATKINS,
135 COMMONWEALTH DRIVE, MENLO PARK, CA 94025, ATTENTION: ANTHONY J.
RICHMOND, ESQ., AND (II) IF TO ANY UNDERWRITER OR TO YOU, TO YOU C/O MERRILL
LYNCH INTERNATIONAL & CO., NORTH TOWER, WORLD FINANCIAL CENTER, NEW YORK,
NEW YORK 10281-1201, ATTENTION: SYNDICATE DEPARTMENT, OR IN ANY CASE TO SUCH
OTHER ADDRESS AS THE PERSON TO BE NOTIFIED MAY HAVE REQUESTED IN WRITING.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several International
Underwriters set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the International Securities, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter,
the officers or directors of any Underwriter, any person controlling any
Underwriter, the Company, the officers or directors of the Company or any person
controlling the Company, (ii) acceptance of the International Securities and
payment for them hereunder. The respective agreements, covenants and
indemnities set forth in Section 7 shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.
If for any reason the International Securities or ADRs are not
delivered by or on behalf of the Company as provided herein (other than as a
result of any termination of this Agreement pursuant to Section 9), the Company
agrees to reimburse the several International Underwriters for all out-of-pocket
expenses (including the fees and disbursements of counsel) incurred by them.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof.
The Company also agrees to reimburse the several International Underwriters,
their directors and officers and any persons controlling any of the
International Underwriters for any and all fees and expenses (including, without
limitation, the fees disbursements of counsel) incurred by them in connection
with enforcing their rights hereunder (including, without limitation, pursuant
to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
International Underwriters, the International Underwriters' directors and
officers, any controlling persons referred to herein, the Company's directors
and the Company's officers who sign the Registration Statement and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no
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other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the International Securities from any of the several International
Underwriters merely because of such purchase.
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.
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 New York or the courts of the State of New York in each case
located in the City and County of New York (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 New York office at
1633 Broadway, New York, New York 10019, 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 New York.
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.
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.
38
<PAGE>
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 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.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
39
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several International Underwriters.
Very truly yours,
SATYAM INFOWAY LIMITED
By:
-----------------------------------
Name:
Title:
MERRILL LYNCH INTERNATIONAL
Salomon Brothers International Limited
By: MERRILL LYNCH INTERNATIONAL
By:
-----------------------------------
40
<PAGE>
SCHEDULE I
----------
International Underwriters Number of Firm Shares
- -------------------------- to be Purchased
---------------
Merrill Lynch (Singapore) Pte. Ltd.
Salomon Brothers International Limited
Total
-----
41
<PAGE>
Annex I
-------
[Insert names of stockholders of the Company who will be required to sign lock
ups]
42
<PAGE>
EXHIBIT 4.4
[LOGO FOR SATYAM]
SATYAM INFOWAY LIMITED
(Incorporated under the Companies Act, 1956 on 12th December,
1995 as a Private Limited Company)
Registered Office 11nd Floor, Mayfair Trade Centre. 1-8-303/36. S.P. Road,
Secunderabad-500 003.
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.
Equity Shares Each of Rs.10/-
- -------------------------------------------------------------------------------
Amount Paid Up Per Share Rs.10/-
- -------------------------------------------------------------------------------
Reg. Folio No. Certificate No.
- -------------------------------------------------------------------------------
Names(s) of Holder(s)
- -------------------------------------------------------------------------------
No. of share(s) held
- -------------------------------------------------------------------------------
Distinctive No(s)
- -------------------------------------------------------------------------------
Given under the Common Seal of the Company this day of , 19__
/s/ B. Ramalinga Raju /s/ [Illegible]
[SEAL APPEARS HERE] Director Director
/s/ R. Ramaraj
Authorised Signatory
Note: No transfer of any of the shares comprised in this certificate will be
considered for registration unless accompanied by this certificate.
<PAGE>
[BACK OF SHARE CERTIFICATE]
Memorandum of transfers of shares mentioned overleaf
<TABLE>
<CAPTION>
===========================================================================================
Name(s) of Authorized
Date Transfer no. Register Folio Transferees Initials Signatory
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.1
- --------------------------------------------------------------------------------
[LOGO FOR SATYAM]
Associate Stock Option
Plan' 99
Satyam Infoway Limited
- --------------------------------------------------------------------------------
<PAGE>
1.0 Objective
In furtherance of the corporate policy of SATYAM INFOWAY LIMITED (SATYAM) of
creating an environment conducive to higher growth opportunities to
associates, the Associate Stock Option Plan' 99 (ASOP) is designed to make
the associates, partners in progress.
The plan is aimed at the following :
. rewarding the associates for their performance and contribution to the
success and growth of SATYAM
. providing them with a good and attractive motivational tool to improve
their performance
. providing an opportunity for the professional partners to become
financial partners in the Equity of SATYAM
. retaining the talent and services of the associates who have contributed
to the success of SATYAM
2.0 Definitions
In this plan, unless the context otherwise requires
2.1 "Scheme" means "Associate Stock Option Plan" for Associates
2.2 "SATYAM" means "Satyam Infoway Limited"
2.3 "Board of Directors" means the "Board of Directors of SATYAM"
2.4 "Associate" means Employee of SATYAM either on full time or part time, in
the regular service.
2.5 "Trust" means Satyam Infoway Associates Trust constituted in pursuance of
the resolutions passed at the Annual General Meeting and Board of Directors
meeting approving the Associate Stock Option Plan for associates.
2.6 "Compensation Committee" means a committee of directors constituted and
authorised by `the Board of Directors' of SATYAM
2.7 "Warrant" means a document entitling the associate to whom it has been
issued/transferred to apply for and get allotted one equity share of SATYAM
subject to other clauses of the scheme. However, the warrant shall not
entitle the holder to any dividend that may be declared by SATYAM.
2.8 "Conversion Price" means the price determined by the Board of Directors
from time to time in accordance with the notifications, guidelines and
clarifications issued by SEBI or any other statutory authority from time to
time as applicable.
<PAGE>
3.0 Administration
3.1 A "Satyam Infoway Associates Trust" will be constituted, in terms of a
Trust Deed, as part of the plan to be entrusted with the responsibility of
being the Operating Agency for administering the ASOP.
3.2 The trust will be allotted warrants in pursuance of the resolution(s)
passed at the Annual General Meeting of SATYAM. The trust will hold those
warrants for and on behalf of the associates of SATYAM.
3.3 On the recommendations of the "Compensation Committee", the trust will
transfer the warrants to identified associates, with an option to convert
the issued warrants into Equity Shares at the rates indicated in the
warrants, before conversion date.
3.4 The trust will also be holding the shares allotted to the associates for
and on their behalf, in terms of clauses 11.0 to 11.4 dealing with the
conversion before the conversion date.
3.5 The Trust will also act as coordinator for disposal of odd lot shares held
by Associates.
3.6 The administration of the trust shall be as per the Administration Manual
of the trust read with the Trust Deed and the scheme. In cases of
incompatibility among the scheme, Trust Deed and the Administration Manual,
the provisions of the scheme and Trust Deed shall override the
Administration Manual.
4.0 Quantum of the plan
4.1 The trust will be allotted warrants entitling the holders for allotment of
shares in terms of the scheme, for a quantum not exceeding 5% of the paid
up capital in any one year in terms of the resolution passed at Annual
General Meeting for being transferred to eligible associates identified by
the "Compensation Committee", which may be increased as per guidelines
issued by SEBI from time to time.
5.0 Functions of Compensation Committee
5.1 Guided by the principles of fairness, impartiality and natural justice, the
Compensation Committee will study and assess the eligible associates, based
on the guidelines for assessment formulated as part of the plan from time
to time and make recommendations of identified associates to the Trust.
5.2 The Compensation Committee shall have the right to exclude any one from the
list of eligible associates, from being identified for the benefits of the
scheme.
5.3 The recommendations of the Compensation Committee shall be final and are
not subject to review or appeal at the request/demand of associates.
6.0 Eligible Associates
6.1 Full time and part time associates of SATYAM.
6.2 Out of eligible associates the Compensation Committee shall identify and
recommend the associates to the benefits of the scheme.
<PAGE>
7.0 Basis of selection by Compensation Committee
7.1 Basis of selection out of eligible associates shall be as per the
guidelines framed and approved by the Board of Directors from time to time.
7.2 The factors to be considered for assessment of associates for selection
shall be:
. Performance
. Organisational Development
. Customer Satisfaction
7.3 The weightage to the factors mentioned in clause 7.2 and any addition or
deletion to the list of factors shall be decided by the Board of Directors
initially and shall be reviewed periodically by the Board of Directors.
7.4 The Board of Directors shall also decide the quantum of eligibility to
shares for different categories of associates on the basis of identified
parameters and in terms of the scoring of the associates in the assessment.
7.5 The Board shall also determine the minimum scoring that an associate in
each category has to score to be considered for the benefits of the scheme.
7.6 The Board of Directors reserves the right to factor different parameters
and different weightages for different categories of the associates.
7.7 The Compensation Committee can also recommend associates for awards for
exceptional performance and or contribution for the organizational growth.
7.8 The Compensation Committee can also recommend new Associates joining Satyam
to the benefits of the scheme, if they are found to be Key Performers.
7.9 The Compensation Committee shall seek the guidance and clarifications if
any required, from the Board of Directors in implementing the assessment
procedure.
8.0 Issue of warrants
8.1 The trust will hold the number of warrants allotted to the trust for and
on behalf of the associates of SATYAM.
8.2 Based on the recommendations of the Compensation Committee, the trust will
transfer the number of warrants recommended to identified associate
8.3 The consideration for transfer of warrants by trust will be Re.1/- per
warrant to be paid by associate to trust, before the transfer of the
warrant.
8.4 The warrants shall not be transferable by any eligible associate, on or
before the conversion date, except to the trust in cases of the associate
ceasing to be an associate of the company or its subsidiaries by reason of
resignation, dismissal or severance of employment due to reasons of non-
performance or otherwise. In such cases of severance of employment, the
warrants will be transferred back to trust at the same consideration as
paid by the associate.
8.5 In the event of the associate dying in harness or attaining the age of
superannuation, the rights and obligations under the warrants shall accrue
to the legal heirs of the associate or to the associate as the case may be.
<PAGE>
8.6 In cases where an associate has different conversion dates for different
lots of warrants issued to him, the separate warrant certificates will be
issued for each set of warrants with different conversion dates.
8.7 In cases where the warrants entitles an associate, with odd lot (not being
marketable lot), the trust will interact with the associates and arrange
for making them marketable lots in the best interests of all parties
concerned.
8.8 The warrant certificate shall indicate the warrant certificate number, name
of the associate holding the warrants, number of warrants held by the
associate, Conversion price at which warrants will be converted into shares
and the Conversion Date, along with main terms and conditions of issue of
warrant.
8.9 The format of the warrant certificate shall be as per Annexure I.
9.0 Conversion Date
9.1 The associate holding warrants may apply for conversion of the warrants on
the date mentioned in those warrants/warrant certificates as conversion
date.
9.2 The conversion date shall be determined by Advisory Board considering the
period of applicability, the date of issue of warrants and lock in period
applicable to the associate concerned as per the guidelines approved by
Board of Directors from time to time. There shall be a grace period of 30
days from conversion date for exercising the option.
9.3 The warrants shall not be permitted to be converted after the grace period
as contained in Clause 10.2 hereof from the conversion date after which all
the rights under warrants will become invalid. In such cases the
consideration for the warrants paid by associates to the trust will be
refunded to the associate.
9.4 Every associate who is entitled for conversion of warrants shall before the
conversion date approach Satyam Infoway Associates Trust for initiating the
conversion process.
10.0 Conversion Option
10.1 Associates opting for conversion can apply for conversion of warrants
into shares in form prescribed for the purpose.
10.2 Associates may at their discretion, opt for conversion on the conversion
date of all the warrants held by him/her or some of the warrants. In the
event of partial conversion, the consideration paid for warrants not
converted shall be refunded.
10.3 On exercise of option, the associate shall submit the letter of conversion
to Satyam Infoway Associates Trust, for allotment of shares in his name.
The Trust shall collect the consideration for conversion arrived at as a
product of number of warrants opted for conversion and the conversion price
as reduced by the price of the warrant paid by the associate for the number
of warrants opted for conversion by the associate. This option shall be
exercised before the expiry of grace period. The collection of
consideration shall be in the form of cheques/demand drafts/pay orders in
favor of "Satyam Infoway Associates Trust".
10.4 On receipt of the warrants with payment as mentioned in Clause 10.3,
SATYAM shall take necessary steps for allotment of shares.
<PAGE>
10.5 Associates who do not want to avail ASOP, may opt out of the scheme any
time before conversion date and surrender the warrant certificate to trust
for cancellation. Such option can be exercised at their discretion even
before issue of warrant certificates by not communicating their acceptance
to the offer of warrants.
11.0 Bonus/Rights Issue
11.1 In the event of a Bonus/Rights or any other issue of securities to the
existing shareholders, the warrant-holders may be given an opportunity of
exercising conversion option, even before conversion date and record date
for issue of Bonus/Rights or other issue or shares, to enable the warrant
holders to be eligible for issue of rights/bonus shares or other
securities, if any. Such opportunity shall be subject to guidelines/
clarifications/ rules framed by SEBI and or any statutory authority.
11.2 The shares allotted because of preponement of conversion option, will be
in the custody of the Trust to be released to the associates after the
conversion date.
11.3 In the event of severance of employment before conversion date as referred
to in clause 8.4 of the scheme, after conversion in accordance with the
clause 12.1, the shares shall be transferred back by the associate to the
Trust at the conversion price.
11.4 However the shares allotted as bonus/rights shares to the associates, in
the capacity of shareholders would not be subjected to lock-in and will be
available to be held by the associate. However, they would be subject to
same terms and conditions as applicable to the rights/bonus issue.
11.5 The shares allotted as bonus/rights shares to associates under this clause
shall not be mortgaged or pledged or hypothecated by the associates.
11.6 The dividends if any, received on the shares held by Trust, on behalf of
Associates will be maintained with Trust and be distributed to the
Associates on whose behalf the dividends are received, after the conversion
date, in case of continuance of employment. In the event of severance of
employment the dividends received will be forfeited by the Trust.
12. Lock-In Period
12.1 The warrants held by the associates are not transferable during the
validity of the warrant except back to the trust. The said warrants cannot
be pledged/hypothecated/ charged/ assigned/ mortgaged or in any manner
disposed of or alienated.
12.2 In case of cessation of service as mentioned in clause No.8.4 the warrants
shall be forthwith transferred back to the trust, by the associate.
12.3 In case of Bonus/ Rights Issue, where the conversion option is permitted to
be exercised before conversion date in terms of clause 11.1, the shares so
converted will be subject to lock in period for unexpired period up to
conversion date.
12.4 During the lock in period, the shares will be in the safe custody of the
trust.
<PAGE>
13.0 Safe Custody
13.1 The trust would be empowered by an agreement with the associate for
. Safe custody of shares in cases where conversion is permitted before
conversion date due to bonus/ rights issue.
. Issue of a statement, every financial year, during the period of
custody, to the associate intimating the number of shares held in trust
on behalf of the associate.
14.0 Shares After Conversion
14.1 The shares transferred to the associate after conversion from warrants,
shall be the absolute property of the associate and will be held by the
associate, subject to the lock-in period.
14.2 As a registered shareholder he will be entitled to all the benefits which
may accrue to him such as dividends, bonus, rights, etc.
14.3 Shares issued as bonus shares or rights shares after conversion into
shares, after lock in period, will not be subjected to any lock in period.
14.4 The shares arising on conversion shall rank pari passu with all other
equity shares of SATYAM for the time being in force; from the date of
allotment.
15.0 Loans For Purchase Of Shares
15.1 While the associates are at liberty to contract for loans for purchase/
conversion of shares from outside sources, the terms and conditions of the
scheme/policy for granting of loans to associates will apply if the loans
are either from SATYAM or the Trust.
15.2 The company shall have lien on the shares converted under the scheme, that
are held in the name of the associate, for any moneys due to the company by
the associate either due to loans from the company or otherwise.
16.0 Listing of Shares
16.1 The shares allotted to associates on conversion shall be listed on the
stock exchanges subject to the terms and conditions of this scheme and
terms and conditions of the listing agreement.
17.0 Tax Liability
17.1 Any tax liability on account of issue of warrants/ conversion into shares/
allotment of shares/ transfer of shares shall be that of the associate
alone.
<PAGE>
18.0 Modifications to the Scheme
18.1 The Board of Directors reserves the right to change the terms and
conditions of the scheme, at any time, at its discretion.
18.2 Such changes in terms and conditions as per clause 18.1 can also be due to
any change in the law applicable to the scheme or any mutual agreement
between SATYAM and its associates.
18.3 Subject to any law for the time being in force, the changes if any, brought
in terms of clause 18.1 would be prospective for implementation and shall
not affect the rights and obligations created under the Scheme to SATYAM or
associates.
19.0 Contract of Employment
19.1 This scheme shall not form part of any contract of employment between
SATYAM and the associate. The rights and obligations of any individual
under the contract of employment shall not be affected by his participation
in this scheme or any right which he may have to participate in it.
19.2 Nothing in this scheme shall afford any associate any additional right(s)
as to compensation or damages in consequence of the termination of such
office or employment for any reason.
19.3 This scheme shall not confer any associate any legal or equitable right
against SATYAM either directly or indirectly or give rise to any cause of
action in law or equity against SATYAM.
20.0 Government Regulations
20.1 This scheme is subject to all applicable laws, rules, regulations,
guidelines and to such approvals from any governmental agencies as may be
required. In case of any contradiction between the provisions of this
Scheme and any provisions, rules, regulations, guidelines issued by any
governmental agencies, the provisions of law shall override the provisions
of this scheme.
20.2 The associates who are granted warrants/ shares under the scheme shall
comply with such requirements of law as may be necessary.
21.0 General Risks
21.1 SATYAM does not guarantee any return on the equity investment made by
associates as part of the scheme. Any loss due to fluctuations in the
market price of the equity including the shortfall in the expectations or
projections and the risks associated with the investment are that of the
associate alone.
<PAGE>
SATYAM INFOWAY ASSOCIATES TRUST
THIS DEED OF TRUST declared and executed on this the 27/th/ day of September,
1999 at Chennai by SATYAM INFOWAY LIMITED, a company incorporated under the
Companies Act, 1956 and having its Registered Office at II floor, 1-8-303/36,
Mayfair Centre, S.P. Road, Secunderabad - 500 003 represented by its Managing
Director, Mr. R. Ramaraj S/o Mr. R. Rajasekhar, aged about 49 years, residing at
No.7, Canal Bank Road, K.B.Nagar, Chennai- 600020 Hereinafter referred to as the
"AUTHOR" (which expression shall, wherever the context so admits, mean and
include successors-in-business and assigns ) OF THE ONE PART
AND
1. Mr. T.R. Santhanakrishnan, Chief Financial Officer, S/o Mr.
T.K.Radhakrishnan aged about 42 years residing at A2, Alsa Brent wood, 38,
First Main Road, R A Puram, Chennai - 600028;
2. Mr. K. Thiagarajan, General Manager - Finance, S/o Mr. R. Krishnaraj, aged
about 33 years, residing at B-13,No.10, South Lock Street, Kottur, Chennai-
600085;
3. Mr. Ajit. G. Abraham, Vice President - Human Resources, S/o Mr. P.J.
Abraham, aged about 40 years, residing at 3-B, Cedar Park-I, 4/th/ Main
Road Extension, Kotturpuram, Chennai-600085,
(Hereinafter referred to as the "TRUSTEES", which expression shall mean and
include their respective representatives, assigns) OF THE OTHER PART
WHEREAS the Author is a Public Limited Company incorporated by a Certificate of
Incorporation granted by Registrar of Companies on the 12/th/ December, 1995,
<PAGE>
WHEREAS the Author has been established for the purposes of carrying on the
business of providing internet services and facilitating electronic commerce,
WHEREAS at the meeting of the shareholders of the Author, held on 19/th/ March,
1999 the shareholders considered and approved issue of new equity shares to
employees, directly or through the medium of Warrants/Fully Convertible
Debetures/Partly Convertible Debentures/any other appropriate instrument or
security, at such price and on such terms and conditions as the Board may in
their absolute discretion think fit, to a trust to be set-up for the purpose of
implementing the scheme of Associates Stock Option Plan or directly to the
employees of the Company and whereas the Board of Directors have been authorised
to do all things necessary for the purpose,
WHEREAS at a meeting of the Board of Directors of the Author, held on 24/th/
March, 1999 the Board of Directors considered formulating a scheme for providing
stock options to its employees and it was unanimously resolved by the Board of
Directors of the Author to establish a Trust for the purpose of implementing the
Associate Stock Option Plan (hereinafter referred to as the scheme) as
formulated, adopted, amended and advised by the Board of Directors of the Author
to the Trust subject to such rules and regulations as the Trustees may from time
to time frame,
WHEREAS in terms of the resolution of the Board of Directors of the Author, Mr.
R. Ramaraj, Managing Director, has been authorised to establish a Trust for the
benefit of the associates of the Author, with its office at Maanasarovar Towers,
No.271-A, Anna Salai , Teynampet, Chennai-600018,
WHEREAS in pursuance of the said resolution of the Author, the Author is
desirous of setting up a Trust for the benefit of the associates for the
purposes of implementing the stock option scheme, and
WHEREAS the Author has requested the Trustees to hold the property of the Trust
for the benefit of the beneficiaries subject to the terms and conditions which
are set out hereinafter.
<PAGE>
NOW THEREFORE THIS TRUST DEED WITNESSETH AS FOLLOWS :
1. The Trust shall be known as " SATYAM INFOWAY ASSOCIATES TRUST"
2. The word 'Associate' in this document means Employee of Author either on
full time or part time, in the regular service and includes full time or
part time employees of subsidiary companies of Author.
3. The author makes an initial contribution of Rs. 25,000/- (Rupees Twenty Five
Thousand only) (hereinafter referred to as " Trust Fund " towards the Corpus
of the Trust).
4. The Author of the Trust agrees to lend such amount of money to the Trustees
as may be required from time to time for fulfilling objectives of this
Trust. The Trustees agree to hold such monies received together with all
accretions, additions and donations which may be received by the Trustees in
future from the author subject to the terms and conditions hereof for the
benefit of the beneficiaries. The trustees also agree to repay such sums as
per the terms and conditions that may be agreed upon from time to time.
5. The objects of the Trust are to provide stock option to the selected
associates of the Author. From out of the Trust funds and the additions and
accretions made thereto from time to time, the trust shall acquire and / or
purchase warrants, shares or any other financial instruments (hereinafter
referred to as 'securities') as may be issued from time to time of the
Author and / or its subsidiaries only and not of any other company. The
Trust shall be further entitled to make over the said securities to the
associates of the Author, who are from time to time notified by the
Compensation Committee constituted by the Author to be eligible for the
benefits under this Trust Deed. The acquisition, holding, transfer, re-
purchase or re-transfer and all acts incidental thereto shall be in terms of
and in accordance with the scheme as formulated, approved, adopted, amended
and advised by the Author from time to time.
<PAGE>
6. The trustees shall have the requisite power and authority to frame rules and
regulations for the purposes of its administration in accordance with the
scheme. The rules and regulations may further provide circumstances in which
the benefits under the Trust Deed to a particular employee may be confirmed
upon or withdrawn; and in particular the consequences of resignation /
termination of the services of the employees with Author. All such rules and
regulations framed by the trustees from time to time shall be considered as
part and parcel of this Trust Deed itself and the Trust shall be subject to
such rules and regulations.
7. The Author agrees to meet the legal and normal administrative expenditure
incurred by the trustees for due and efficient management of the affairs and
properties of the Trust.
8. The Trust hereby created is irrevocable and the Author does not reserve any
power of revocation of the Trust, except for compliance with any laws,
rules, regulations, guidelines from any governmental agencies.
9. The Trustees shall upon the receipt of the Trust Fund and upon receipt of
such further funds as may be made over to the Trust by the Author shall
proceed to acquire such securities in the name of the Trust for the benefit
of the beneficiaries.
10. The Trust shall act upon the recommendation of Compensatrion Committee of
the Board of Directors constituted in terms of the scheme of the Author, and
transfer such number of securities to such beneficiaries of the Trust from
time to time, upon receipt of consideration as fixed in terms of the scheme.
11. The receipt(s) of consideration for transfer of securities to beneficiaries
shall be passed on to the Author from time to time for full or partial
reduction of loans obtained by the Trust for its activities.
<PAGE>
12. The Trust shall maintain in its safe-custody the securities acquired by or
pending transfer to the beneficiaries.
13. The Trust shall also maintain in its safe-custody the securities transferred
to beneficiaries for such period as may be contracted between the trust and
the beneficiaries to whom securities have been transferred.
14. During such period of safe-custody, the Trust shall cause a statement to be
issued periodically intimating the number of securities held in trust on
behalf of the beneficiary.
15. Without prejudice to the generality of the powers vested in the Trustees,
the Trustees shall have the following specific powers:
(a) to enter into agreements, contracts and to cancel or vary them;
(b) to receive any money and to grant receipts and discharge thereof;
(c) to institute, prosecute and defend all actions and proceedings,
including suits, appeals, reviews, revisions execution and the like
before the Government, Courts, Tribunals, Revenue, Municipal and Local
Authorities and taxation authorities and to represent the Trust before
them;
(d) to enter into any compromise and to refer to matters to arbitration;
(e) to engage the service of any persons(s) upon such remuneration and
terms as the Trustees may deem fit, to take disciplinary action against
them and also to terminate their services;
(f) to incur all costs and expenses considered by the Trustees to be
necessary for the due and efficient management of the affairs and
properties of the Trust;
(g) to open account(s) in such Bank(s) as the Trustees deem fit and operate
all such account(s) jointly by any two Trustees authorized by the
Trust;
(h) to delegate to any person(s) all or any of the foregoing powers
conferred on the Trustees subject however, to their retaining the
ultimate control and direction over the action and conduct of the
delegate(s).
(i) Notwithstanding anything contained in these presents, the Trustees may
borrow monies, raise loans, otherwise raise funds with or without
interest from Bank(s), financial institutions, companies, employees,
individuals or any other trust including Satyam Infoway Limited, as may
be considered appropriate by the Trustees, with or without security on
any of the properties or assets including bonds, debentures, promissory
notes or any other marketable securities forming part of the Trust by
way of pledge, mortgage, hypothecation, charge or any other event.
(j) The Trustees may also pledge, mortgage, hypothecate or otherwise create
encumbrances or lien by way of security or otherwise as the Trustees
may consider appropriate for securing loans raised or bonds, debentures
or other securities issued from time to time by the Trustees for the
Trust.
<PAGE>
(k) To recover the interest and other costs of borrowing from the Associate
or to sell the securities to meet the costs of borrowing including
interest, penalties and other costs.
(l) All the powers for raising loans and for creating mortgage, pledge,
charge hypothecation or other encumbrances or other properties of the
Trust including securities may be exercised by any two Trustees, for
the time being, of the Trust.
16. At the option of the Associate, Trust may be approached by Associate for
disposal of odd lots which may be allotted to him. Trust may accept the
responsibility of accepting the odd lots, consolidate such shares in
marketable lots, sell them through recognised stockbroker and distribute
the proceeds to associates after deducting brokerage and service charges.
17. The Trustees may accept any donation or contribution in cash or otherwise
from the Author or any other person for and on behalf of the Trust for the
furtherance of the objects of the Trust or upon such terms and conditions,
as they may in their absolute discretion think fit and which are not
inconsistent with the objects of the Trust.
18. The Trustees shall cause true and accurate accounts to be kept of all
monies received and spent relating to all matters of the management of
Trust properties or in relation to the carrying out of the objects and
purposes of the Trust.
19. The Trustees may from time to time and whenever necessary frame rules and
regulations to carry out the objects of the Trust and otherwise for giving
effect to the objects and purpose of the trust and also to vary, alter and
amend the same from time to time, as they may in their absolute discretion
deem fit and proper.
20. The Trustees shall be respectively chargeable only for such monies, stocks,
shares, funds and securities, as they shall actually receive,
notwithstanding their respectively signing a receipt jointly with others,
for the sake of conformity and shall be answerable for their acts,
receipts, negligence and defaults respectively. The Trustees may reimburse
themselves and pay and discharge out of the Trust Fund all expenses
incurred in or about the execution of the Trust or any of their duties
under these presents including reasonable travelling expenses etc.,
21. a) The Trustees hereof shall be of such number as may be determined in the
manner set out in sub-clause (b) below and until so determined shall be two
in number.
Provided that the number of trustees shall be not less than two.
(b) The Author shall have the right to appoint and also increase the number
of Trustees from time to time. The author can change a Trustee and
appoint some other person as Trustee in his place.
(c) It is hereby declared that Mr. T. R. Santhanakrishnan, Chief Financial
Officer, Mr. K. Thiagarajan, General Manager - Finance and Mr.
Ajit G Abraham, Vice President - Human Resources shall be the
present Trustees.
22. Any Trustee may retire at any time without assigning any reasons after
giving AUTHOR a three months notice of his intention to retire and without
being responsible for any costs occasioned by such retirement.
<PAGE>
23. The surviving or continuing Trustees may act notwithstanding any vacancy in
their Body.
24. Two of the Trustees present at a meeting shall form a quorum. Mr. T.R.
Santhanakrishnan, the first named Trustee shall chair all the Trust
meetings. In case of his non - availability for the Trust meetings,
the meeting shall stand adjourned to same time and same day of the
next week. When the number of Trustees exceed two, the trustees may
elect one of them as Chairman of that meeting. At every meeting of
the Trustees all questions shall be decided unanimously.
25. A resolution in writing circulated to all Trustees and approved by all the
Trustees shall be valid and effective as a resolution passed at a meeting.
26. The Trustees shall not take any decision in the matter of administration of
the Trust which is not permitted by the Scheme or which is against the
Scheme. The Scheme shall take precedence over the Trust Deed in the matters
where there is ambiguity.
27. Any notice / transfer or other document requiring to be signed or executed
by the Trustees shall be regarded as properly signed or executed and shall
be binding upon the Trustees if signed or executed by any one of the
Trustees or by any other person duly authorized so to do by the Trustees,
for and on behalf of the Trust.
28. Notices of the meeting of the Trustees and all communications may be sent to
the Trustees at their address registered for the time being in the record of
the Trust.
29. All meetings of the Trustees shall be held at such place, as the trustees
for the time being, may from time to time decide.
30. A Trustee who is a participant or fit to be considered for participation in
the Scheme may exercise his powers and execute his duties as such Trustee
notwithstanding that he is or may become a participant. No decision shall be
invalidated or questioned on the ground that the Trustee or any of them had
a direct or other personal interest in the mode or result of such decision
or of exercising such power or discretion provided that a Trustee shall not
participate in any discussion or vote upon any decision affecting him
personally either as a potential or existing participant. But this
prohibition shall not apply to any amendment to or termination of the
Scheme.
<PAGE>
IN WITNESS WHEREOF THE AUTHOR AND THE TRUSTEES HAE SET THEIR HANDS TO THIS DEED
THIS THE 27/TH/ DAY OF SEPTEMBER 1999 AT CHENNAI.
WITNESS :
1. /s/ Suchiont Murali /s/ R. Ramaraj
(Suchiont Murali) R. RAMARAJ
(AUTHOR)
2. /s/ P.K. Hari hara Subrananian /s/ T. T. Santhanakrishnan
(P.K. Hari hara Subrananian) T. R. SANTHANAKRISHNAN
(TRUSTEE)
/s/ K. THIAGARAJAN
K. THIAGARAJAN
(TRUSTEE)
/s/ AJIT G ABRAHAM
AJIT G ABRAHAM
(TRUSTEE)
<PAGE>
Exhibit 10.2
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this day of
_______________, 199__ by and between Satyam Infoway 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 esires 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 a the
Company, or by reason of any action or in action 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 unreasonable 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 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)
<PAGE>
actually and reasonably incurred by Indemnitee in connection with such
action or proceeding is 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. 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 tot he 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 or judgment from which no
further right of appeal exists.
3. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to the 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
<PAGE>
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 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.
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,
<PAGE>
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 bought 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SATYAM INFOWAY LIMITED
By: __________________________
Name: ________________________
Title: _______________________
Address:
Maanasarovar Infoway Limited
271-A, Anna Salai
Teynonpet, Chennai 600 015
India
AGREED TO AND ACCEPTED:
INDEMNITEE
(signature)
Address: __________________________
__________________________
<PAGE>
EXHIBIT 10.5
CompuServe Network Services
Strategic Alliance Agreement
This is a Strategic Alliance Agreement (the "Agreement") entered into at
Columbus, Ohio, dated April 18, 1997, between CompuServe Incorporated, an Ohio
corporation having its principal place of business at 5000 Arlington Center
Boulevard, Columbus, Ohio, USA ("CompuServe") and Satyam Infoway (Private)
Limited an Indian corporation having its principal place of business at PLA
Complex, 35 Velachery Road, Little Mount, Chennai - 600 015, India ("Satyam").
1. Definitions
"Agreement" means this network services Strategic Alliance Agreement
(including all attachments) as originally executed and as it may be amended
as provided herein from time to time.
"CompuServe" means CompuServe Incorporated, or its wholly-owned
subsidiaries.
"Satyam" means Satyam Infoway (Private) Limited, or its subsidiaries and
affiliates.
"Customer" means an individual or company that is billed for services by
contracted provider of those services.
"Documentation" means written materials provided by CompuServe to Satyam
for use in connection with CompuServe Network Services.
"Effective Date" means the date on which a counterpart of this Agreement
has been executed by each party to this Agreement and delivered to
CompuServe.
"Launch Date" means the first day that the Dial Access service becomes
available in the Territory.
"Know-how" means all trade secrets, patented or unpatented technical
knowledge, and inventions, copyrights and derivatives thereof, proprietary
rights, confidential processing procedures and methods, software,
documentation and marketing expertise and any other specialized knowledge,
skill and expertise relating to CompuServe Network Services either
presently owned or licensed by CompuServe or later developed, licensed or
owned by CompuServe.
"Territory" means the Republic of India ("India").
"Dial Access" means asynchronous dial connection as defined by the CCITT
X.28 standard.
"Value-added enhanced data network" means hardware including, but not
limited to, servers, routers, packet assemblers-disassemblers, switches,
hubs, modems, software, cabling and leased line connections required to
create a network than can accept and
- -----------------------
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as *****. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
deliver data via protocols including, but not limited to, TCP/IP, X.25,
X.28, X.3, Frame Relay, ATM, and related protocols.
2. Scope
2.1 The Services
2.1.1 Satyam is constructing and will operate, manage and maintain a
value-added enhanced data network in India.
2.1.2 CompuServe operates, manages and maintains a global value-added
enhanced data network.
2.1.3 Each party will provide Dial Access services (the "Services")
that will be sent to the other party via the international network
interconnection specified in Section 3.
2.1.4 The Services will be provided for customers of CompuServe's
Network Services Division ("CNS") and also for Satyam's customers.
2.1.5 The Services will be in addition to services contemplated
between Satyam and CompuServe's Information Services Division (CSI)
which will be governed by a separate agreement between the parties.
3. Interconnection of the CompuServe and Satyam Networks
3.1 International Network Interconnection
3.1.1 The CompuServe and Satyam networks shall be interconnected as
defined in Attachment A.
3.2 Settlements on Communications
3.2.1 The billing, collection, and payment for services between the
parties and the settlement of accounts shall be conducted in
accordance with the provisions of Attachment B.
4. End-User Support and Fault Escalation Procedures.
4.1 Primary End-user Support
4.1.1 Satyam will provide the primary end-user support for Satyam
customers.
4.1.2 CompuServe will provide the primary end-user support for
CompuServe customers.
4.2 Fault Escalation Procedures
2
<PAGE>
4.2.1 CompuServe and Satyam agree to use the fault escalation
procedures as defined in Attachment C.
4.3 Information Regarding the Local PTT
4.3.1 Satyam will provide CompuServe with the following information
regarding the local PTT.
4.3.1.1 Service Levels
4.3.1.2 Escalation Procedures
4.3.1.3 Installation Lead-times
4.4 Support Services
4.4.1 CompuServe shall provide and make available to Satyam and for
the customers of Satyam in the Territory the benefits of all
development, improvements and changes in the products and the Services
covered by the Agreement.
4.4.2 CompuServe agrees to provide mutually agreed upon training to
Satyam personnel both in the CompuServe facilities in Columbus, Ohio
or other places as well as in the Territory on terms and conditions to
be mutually agreed to between CompuServe and Satyam.
4.4.3 CompuServe will provide mutually agreed upon assistance to
Satyam in the installation and commissioning of the facilities at
different places in the Territory to provide the Services under this
Agreement.
5. Non-competition, Non-solicitation, Non-disclosure and Exclusivity
5.1 Exclusivity
5.1.1 Satyam shall be CompuServe's sole business affiliate providing
value-added enhanced data network services in the Territory during the
term of this agreement.
5.1.2 CompuServe shall be Satyam's sole business affiliate providing
value-added enhanced data network services outside of the Territory
during the term of this agreement.
5.2 Solicitation of Employees
5.2.1 During the term of this Agreement neither party will (without
the consent of the other party) knowingly, directly or indirectly, on
behalf of any entity, solicit or participate in the solicitation of
any employee of any other party to this Agreement to terminate his or
her employment with such other party.
3
<PAGE>
5.3 Confidential Information
5.3.1 Any writing, drawing, sketch, model, sample, data, computer
program, software, recording, or documentation of any kind
("Information") that is furnished, made available or otherwise
disclosed by one party ("Disclosing Party") to the other party
("Receiving Party") pursuant to this Agreement shall be deemed the
confidential properly of the Disclosing Party.
5.3.2 Unless such Information was previously known to the Receiving
Party free of any obligation, or has been subsequently made public by
any act not attributable to the Receiving Party, or it has been agreed
to by the Disclosing Party in writing not to be regarded as
confidential, Information shall be deemed to be the proprietary
information of the Disclosing Party and will be held in confidence by
the Receiving Party during the term of this Agreement and for an
additional five (5) years thereafter, and will be disclosed by the
Receiving Party only to employees who have a need for such Information
to carry out this Agreement. The Receiving Party shall use at least
the same degree of care as it uses with regard to its own proprietary
information, but in no case shall the parties be required to exercise
greater than reasonable care to prevent disclosure or unauthorized
use. Except as the parties may otherwise agree in writing, such
Information (a) will be used only for the purpose of performing under
this Agreement; (b) will not be reproduced or copied, in whole or in
part, except as necessary for use as authorized herein; and (c) will,
together with any copies thereof, be returned or destroyed when no
longer needed or upon termination of this Agreement, whichever occurs
first.
5.4 Irreparable Injury
5.4.1 The breach by either party of any provisions of this Section
may cause irreparable injury to the party against which the breach was
committed, for which monetary damages may be an inadequate remedy. In
the event of a breach or a threat of a breach of any such provision,
the injured party, in addition to all other remedies that it may have
at law or in equity, will be entitled to seek a restraining order,
preliminary injunction, and other appropriate relief to enforce such
provisions.
6. Satyam Warranties
6.1 No Violation
6.1.1 Satyam warrants that it has the legal and corporate right,
capacity, and authority to enter into and perform its obligations
under this Agreement, and that its entry into this Agreement does not
violate any other agreement to which it is a party.
6.2 Compliance with Law
6.2.1 Satyam warrants that its conduct pursuant to this Agreement
will conform to all, and will not constitute a violation of any,
applicable and valid laws and governmental rules and regulations in
the Territory.
4
<PAGE>
6.3 Disclaimer of Implied Warranties
6.3.1 There are no implied warranties of merchantability or fitness
for a particular purpose relating to Satyam's performance of this
Agreement. In no event shall Satyam be liable for any indirect,
special or consequential damages or lost profits arising from or
related to this Agreement or the performance, breach or termination
hereof, regardless of whether the claim is in contract, tort or other
legal theory. Notwithstanding any other provision of this Agreement,
Satyam's aggregate liability for actual damages, losses or associated
costs or expenses of CompuServe under, arising out of, or in relation
to this Agreement, shall not exceed the amount of Charges paid to
CompuServe for the sale of CompuServe Network Services by the Satyam
over the preceding 12 months; provided, however, that such limitation
shall not operate to reduce Satyam's obligations for any CompuServe
Network Services charges payable under this Agreement.
7. CompuServe Warranties
7.1 No Violation
7.1.1 CompuServe warrants that it has the legal and corporate right,
capacity, and authority to enter into and perform its obligations
under this Agreement and that its entry into this Agreement does not
violate any other agreement to which it is a party.
7.2 Compliance with Law
7.2.1 CompuServe warrants that its conduct in performing this
Agreement will conform to all, and will not constitute a violation of
any, applicable and valid laws and government rules and regulations.
7.3 Disclaimer of Implied Warranties
7.3.1 There are no implied warranties of merchantability or fitness
for a particular purpose relating to any matters in this Agreement,
including without limitation of computer resources provided by
CompuServe. Except as otherwise provided in this Agreement, such
network resources are provided by CompuServe on an "as is, as
available" basis. In no event shall CompuServe be liable for any
indirect, special or consequential damages or lost profits arising
from or related to this Agreement or the performance, breach or
termination thereof, regardless of whether the claim is in contract,
tort or other legal theory. In no event shall CompuServe's liability
exceed the Hourly Network Usage charges for the prior 12 months paid
by Satyam under this Agreement.
5
<PAGE>
8. Indemnification
8.1 Breach of Contract
8.1.1 If either party breaches any of its obligations or warranties
under this Agreement, or if any matter is not as warranted by either
party, the breaching or warranting party will indemnify, save and hold
harmless the non-breaching party and its officers, directors, agents
and employees from any and all claims, demands, liabilities, costs or
expenses, including attorney's fees, resulting from such breach,
except to the extent such claims, demands, liabilities, costs or
expenses result from the negligence or fault of the other party.
8.2 Satyam Indemnification Obligation
8.2.1 Satyam shall indemnify and hold harmless CompuServe against any
claim, suit, action or proceeding brought against CompuServe resulting
from or based on the negligent or wrongful actions of Satyam including
any claim of libel, defamation, invasion of privacy or infringement of
any patent, copyright, trade secret, trademark or other proprietary
right, or any actions arising out of the territory, except to the
extent the claim, suit, or proceeding arises solely or proximately
from CompuServe's negligence or fault.
8.3 CompuServe Indemnification Obligation
8.3.1 CompuServe shall indemnify and hold harmless Satyam against any
claim, suit, action or proceeding brought against Satyam resulting
from or based on the negligent or wrongful actions of CompuServe
including any claim of libel, defamation, invasion of privacy or
infringement of any patent, copyright, trade secret, trademark or
other proprietary right except to the extent the claim, suit, or
proceeding arises solely or proximately from Satyam's negligence or
fault.
9. Term
9.1 Effective Date
9.1.1 Except as otherwise provided in this Agreement, the term of
this Agreement shall begin on the Effective Date and end on the third
anniversary of the Effective Date of this Agreement.
9.2 Renewal
9.2.1 This Agreement will renew without renewal fee for second, and
subsequent terms of one (1) year, provided that at the end of the each
term:
9.2.1.1 Neither party is in default of any provision of this
Agreement, any amendment hereof or successor hereto,
or any other agreement between Satyam and CompuServe
or its subsidiaries or affiliates and both parties
have substantially complied with all the terms and
conditions of all such agreements
6
<PAGE>
during the terms thereof;
9.2.1.2 Both parties have satisfied all monetary obligations
owed to the other party and its subsidiaries and
affiliates, and has met these obligations in a timely
manner throughout the term of this Agreement;
9.2.1.3 Either party may, by providing written notice no later
than six (6) months prior to the end of the initial or
any succeeding term, exercise its right not to renew
this Agreement. In such event, all the provisions of
Section 10 and Section 4 shall apply in full.
9.2.1.4 Upon termination of this Agreement, both parties shall
have the right to continue provision of network
services to their customers within the Territory.
10. Transfer of Interest
10.1 CompuServe Right to Transfer or Assign
10.1.1 CompuServe shall have the right to transfer or assign all or
any part of its rights to payments and benefits under this Agreement
to any person or legal entity, but shall have the right to transfer or
to assign its obligations herein to an entity not controlled or owned
by CompuServe only with the written consent of Satyam, which consent
shall not be unreasonably withheld.
10.2 Satyam Right to Transfer or Assign
10.2.1 Satyam shall have the right to transfer or assign all or any
part of its rights to payments and benefits under this Agreement to
any person or legal entity, but shall have the right to transfer or to
assign its obligations herein to an entity not controlled or owned by
Satyam only with the written consent of CompuServe, which consent
shall not be unreasonably withheld.
10.3 Action upon Transfer or Assignment
10.3.1 The party to whom the rights are transferred or assigned shall
sign an undertaking to and shall be bound by the terms of this
agreement and the obligations assumed by the transferor or assignor.
7
<PAGE>
11. Default and Termination
11.1 Material Breach
11.1.1 If a party materially breaches this Agreement and fails to
remedy that breach within thirty (30) days after receiving written
notice thereof from the non-breaching party, that non-breaching party
may immediately terminate this agreement.
11.2 Termination
11.2.1 Termination shall not release either party from its
obligations under this Agreement regarding confidentiality and to pay
statements which have already become due.
12. Permits
12.1 Import Licenses, Permits and Approvals
12.1.1 All import licenses, permits and approvals of any government
or any agency or body thereof in or of the Territory required for the
performance of this Agreement shall be obtained in a timely manner by
Satyam at its expense.
13. Independent Contractor
13.1 Agreement Does Not Create a Fiduciary Relationship
13.1.1 It is understood and agreed by the parties hereto that this
Agreement does not create a fiduciary relationship between them, that
each party shall be an independent contractor with respect to the
other, and that nothing in this Agreement is intended to constitute
either party an agent, legal representative, subsidiary, joint
venture, partner, employee, or servant of the other for any purpose
whatsoever.
14. Applicable Law
14.1 Terms
14.1.1 This Agreement shall be governed by and construed in
accordance with the laws of the state of Ohio and the United
States. The actions and obligations of both parties are
governed by the laws of the applicable local jurisdiction.
Both parties understand that they are bound by the local
regulations, rules, administrative procedures and laws
governing creation, maintenance and use of the value-added
network. Satyam agrees to the terms
8
<PAGE>
in the first sentence of this paragraph 14.1 unless within 30 days of
the execution date Satyam's legal counsel discovers anomalous contract
construction rules in Ohio law.
14.2 Arbitration
14.2.1 The parties agree that any claim or action brought by either
party against the other shall be submitted to arbitration to be held
in the London Court of Arbitration and shall be conducted in English
language pursuant to the rules addressing non-administered arbitration
of business disputes of the International Chamber of Commerce. The
arbitration shall be decided by a panel of three. Each party shall
select an independent arbitrator, which arbitrators shall agree upon a
third independent arbitrator. In the event these arbitrators cannot
agree upon the selection of a third arbitrator, such arbitrator will
be selected in accordance with applicable ICC rules and procedures.
The rendering of the arbitration award shall be London, UK. The
parties waive the right to appeal to the arbitrator's award. In the
event of any inconsistency between this Agreement and any translation,
this Agreement shall control.
14.3 Right to Remedy
14.3.1 No right to remedy conferred upon or reserved to CompuServe or
Satyam by this Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy provided or permitted herein or
by law, but each shall be cumulative of every other right or remedy.
14.4 Injunctive Relief
14.4.1 Nothing herein contained shall bar either parties right to
obtain injunctive relief, including restraining orders and/or
preliminary injunctions against threatened conduct that will cause it
loss or damage.
15. Governmental Approvals
15.1 Necessary Government Approval
15.1.1 This Agreement is executed subject to all necessary government
approvals. Satyam agrees to use due diligence and its best efforts to
obtain all required approvals promptly.
15.2 Compliance to Modifications
15.2.1 If, at any time during the term of this Agreement, any
government or agency thereof should require, directly or indirectly,
alteration or modification of any term of condition of this Agreement,
or of the performance of the parties hereunder or thereunder, the
parties agree to use their best efforts to comply with such request.
Should, however, either of the parties determine that the request is
material and adverse to it, or should the parties fail to reach an
agreement concerning the implementation of such request within one
hundred twenty (120) days after it is received, then the matter will
be referred to
9
<PAGE>
arbitration.
16. Miscellaneous
16.1 Proprietary Rights
16.1.1 Whether or not developed by CompuServe, all CompuServe
trademarks, service marks, programs, documents, data, inventions,
discoveries, enhancements and improvements relating to the CompuServe
Network Services or other CompuServe products and services are, and
shall remain, the sole and exclusive property of CompuServe.
16.1.2 Whether or not developed by Satyam, all Satyam trademarks,
service marks, programs, documents, data, inventions, discoveries,
enhancements, and improvements relating to Satyam products and
services are, and shall remain, the sole and exclusive property of
Satyam.
16.2 Entire Agreement
16.2.1 This Agreement and the Schedules hereto constitute the full
and entire understanding and agreement among the parties for the
specified Territory and no party shall be liable or bound to the other
in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein. Each
party has been represented by competent legal counsel in the
negotiation of the terms of this Agreement which shall not be
construed against either party as the drafter of the Agreement.
Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
16.3 Amendment
16.3.1 Any modification or amendment of this Agreement, the
appendices to this Agreement, or the other documents delivered
pursuant hereto is effective only if it is in writing and executed by
an officer of each of the parties.
16.4 Notices
16.4.1 To be effective, a notice or other communications required or
permitted under this Agreement must be given in writing or by Telex,
telecopy, or similar electronic means. Unless otherwise specified in
this Agreement, a notice is considered effectively given when it is
received by the intended recipient. Notices may be mailed or sent by
Federal Express or a similar service addressed to the intended
recipient at the address, and to the attention of the person indicated
in Attachment D of this Agreement, if Notice is being sent to
CompuServe or Attachment E of this agreement, if Notice is being sent
to Satyam, with return receipt requested and with postage or delivery
charges paid by the sender. The effective date of a notice sent by
such means shall be the date of delivery or refusal of delivery
indicated on the return receipt.
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<PAGE>
16.5 Titles and Subtitles
16.5.1 The titles of the sections and subsections of this Agreement
are for convenience of reference only and are not to be considered in
construing this Agreement.
16.6 Counterparts
16.6.1 This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together, when at
least one counterpart has been executed by each party, shall
constitute one instrument.
16.7 Currency
16.7.1 All payments between the parties required under this Agreement
shall be in United States dollars.
16.8 Force Majeure
16.8.1 If the performance of any obligation hereunder is prevented or
delayed, in whole or in part, by reason of an act of God, or the
consequence thereof, affecting the part hereto or the license granted
hereunder, such act of God to include but not be limited to fire,
flood, typhoon, earthquake, or by reason of riots, wars, hostilities,
governmental restrictions, trade embargoes, strikes, lockouts or labor
disputes, then the affected party shall be given an additional time to
perform equal to the delay caused directly by the act of God
referenced in this paragraph.
11
<PAGE>
16.9 Severability
16.9.1 In the event one or more of the provisions contained hereunder
are invalid, illegal or unenforceable in any way under the law
applicable to this Agreement and particularly to the distributorship
and marketing rights contained herein, the validity, legality and
enforceability of the remaining provisions shall not be affected or
diminished in any way, to the extent permitted by applicable law.
In witness whereof the parties have caused this Agreement to be executed by
their respective officers.
Satyam Infoway (Private) Limited CompuServe Incorporated
Signature: /s/ Padma Chandrasekaran /s/ T.F. ClayPoole
---------------------------------- -------------------------------
Name: Padma Chandrasekaran T.F. ClayPoole
---------------------------------- -------------------------------
Title: Vice President Internet & Services Corporate Counsel
---------------------------------- -------------------------------
Date: April 18, 1997 4/18/97
---------------------------------- -------------------------------
12
<PAGE>
ATTACHMENT A.
International Network Interconnection.
ATTACHMENT B
Settlements on Communications.
ATTACHMENT C
Fault Escalation Procedures
ATTACHMENT D
Address to which correspondence and invoices to CompuServe should be mailed.
ATTACHMENT E
Address to which invoices and correspondence to Satyam should be mailed.
ATTACHMENT F
CompuServe bank account information to which Satyam should remit payment of the
CompuServe Network Services invoice.
ATTACHMENT G
Satyam bank account information to which CompuServe should remit payment of the
Satyam Services invoice.
13
<PAGE>
CompuServe Network Services
Strategic Alliance Agreement
Attachment A
International Network Interconnection
This is Attachment A to the STrategic Alliance Agreement (the "Agreement")
entered into at Columbus, Ohio, dated April 18, 1997, 1997 between CompuServe
incorporated, and Ohio corporation having its principal place of business at
5000 Arlington Center Boulevard, Columbus, Ohio, USA ("CompuServe") and Satyam
Infoway (Private) Limited an Indian corporation having its principal places of
business at PLA Complex, 35 Velachery Road, Little Mount, Chennai - 600 015,
India ("Satyam").
1. Interconnection
1.1 Leased Line Connections(s)
1.1.1. CompuServe and Satyam shall maintain leased line connections(s)
between then as mutually agreed upon in Section 1.2.
* * * * *
1.2 Leased Line Size and Termination Points
* * * * *
2. Liaison
14
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
2.1. Engineering Liaison
2.1.1. The parties will promptly establish engineering liaisons, who will
cooperate regarding the technical matters necessary for effective
operations under this Agreement in practice. The parties will each provide
the other with name(s), address(es), and telephone number(s) of a person
who will be their engineering liaison and will update this information as
required to keep current.
2.1.2. A party wishing to move the interconnection facilities, or change
or update the interconnection specifications which may materially affect
the ability to provide the Services, must provide written notice to the
engineering liaison of the other party at least sixty (60) days prior to
the date upon which the change will be implemented.
2.2. Management Liaison
2.2.1. The parties will promptly establish management liaisons, who will
cooperate regarding the business, financial, and management matters
necessary for effective operations under this Agreement in practice. The
parties will each provide the other with name(s), address(es), and
telephone number(s) of a person who will be their management liaison and
will update this information as required to keep current.
2.2.2. A party wishing to move the interconnection facilities, or change
or update the interconnection specifications which may materially affect
the ability to provide the Services, or alter any business or financial
model or management structure relating to the Services, must provide
written notice to the management liaison of the other party at least sixty
(60) days prior to the date upon which the change will be implemented.
15
<PAGE>
CompuServe Network Services
Strategic Alliance Agreement
Attachment B
Settlements on Communications
This Attachment B to the Strategic Alliance Agreement (the "Agreement") entered
into at Columbus, Ohio, dated April 18, 1997, 1997 between CompuServe
Incorporated, an Ohio corporation having its principal place of business at 5000
Arlington Center Boulevard, Columbus, Ohio, USA ("CompuServe") and Satyam
Infoway (Private) Limited and Indian corporation having its principal place of
business at PLA Complex, 35 Velacher Road, Little Mount, Chennai - 600 015,
India ("Satyam").
1. Billing
1.1. Billing Responsibility
* * * * *
2. Reverse Charging
2.1. Subaddress
2.1.1. Satyam will provide a subaddress to point CompuServe Network
Services traffic to CompuServe's Host Name prompt.
2.1.2. CompuServe will provide a subaddress to point Satyam traffic
to Satyam Host Name prompt.
2.2. Revers Charge Traffic
2.2.1. Each party will accept reverse charge traffic that originates
on its network that is destined for hosts on the other parties network and
deliver it to that network.
2.2.2. Each party will accept such traffic and compensate the other
party in accordance with the specifications in Section 3.
3. Billing and Collections for Reverse Charge Traffic
3.1. CompuServe Customers
* * * * *
16
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
*****
3.2. Satyam Customers
*****
3.3. Reporting
3.3.1. By the thirtieth (30/th/) day of each month, each party shall
provide to the other a monthly traffic report showing the previous months
traffic in summary form. As a minimum the monthly summary report shall
include:
3.3.1.1. Month and Year
3.3.1.2. Originating DNIC and Destination DNIC
3.3.1.3. Number of chargeable calls
3.3.1.4. Number of chargeable hours, rate of the duration charge and
amount
3.4. Settlement of Accounts
3.4.1. Based on the reports specified in paragraph 3.3., a
settlement of accounts shall be made monthly in US Dollars.
3.4.2. The payment payable to one party shall be made to the bank
account designated in Attachment F, if payment is to be made to
CompuServe, and Attachment G, if payment is to be made to Satyam.
3.4.3. The Statement of accounts shall be addressed to the address
designated in Attachment D, if being sent to CompuServe, and
Attachment E, if being sent to Satyam.
3.4.4. The parties will mutually resolve claims for adjustments to
the monthly traffic report provided for in Section 3.3 if such
claims are made within six (6) months of issuance of the report in
question. Unless a claim is brought within six (6) months, the
respective reports become final and no longer subject to adjustment.
A claim for adjustment must be made in writing and should be sent to
the address designated in Attachment D, if being sent to CompuServe,
and Attachment E, if being sent to Satyam.
17
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
CompuServe Network Services
Strategic Alliance Agreement
Attachment C
Fault Escalation Procedures
This is Attachment C to the Strategic Alliance Agreement (the "Agreement")
entered into at Columbus, Ohio, dated April 18, 1997,1997 between CompuServe
Incorporated, an Ohio corporation having its principal place of business at 5000
Arlington Center Boulevard, Columbus, Ohio, USA ("CompuServe") and Satyam
Infoway (Private) Limited an Indian corporation having its principal place of
business at PLA Complex, 35 Velachery Road, Little Mount, Chennai - 600 015,
India ("Satyam")
CompuServe and Satyam agree to mutually develop and implement a fault escalation
procedure and to have all necessary mechanisms and systems in place to implement
and support this procedure on or before the Launch Date. This fault escalation
procedure shall include but shall not be limited to the following:
. Single point of contact
. Trouble ticket system
. Fault classification
. Fault escalation
. Metrics
CompuServe and Satyam further agree to share training materials developed for
the purpose of providing customer support.
18
<PAGE>
CompuServe Network Services
Strategic Alliance Agreement
Attachment D
CompuServe Address
This is Attachment D to the Strategic Alliance Agreement (the "Agreement")
entered into at Columbus, Ohio, dated April 18, 1997,1997 between CompuServe
Incorporated, an Ohio corporation having its principal place of business at 5000
Arlington Center Boulevard, Columbus, Ohio, USA ("CompuServe") and Satyam
Infoway (Private) Limited an Indian corporation having its principal place of
business at PLA Complex, 35 Velachery Road, Little Mount, Chennai - 600 015,
India ("Satyam").
1. CompuServe Address
1.1. Address To Which Correspondence to CompuServe Should Be Sent
1.1.1. CompuServe Incorporated
5000 Arlington Centre Boulevard
Columbus, OH 43220
USA
Attn.: Controller
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<PAGE>
CompuServe Network Services
Strategic Alliance, Agreement
Attachment E
Satyam Address
This is Attachment E to the Strategic Alliance Agreement (the "Agreement")
entered into at Columbus, Ohio, dated April 18, 1997, 1997 between CompuServe
Incorporated, an Ohio corporation having its principal place of business at 5000
Arlington Center Boulevard, Columbus, Ohio, USA ("CompuServe") and Satyam
Infoway (Private) Limited an Indian corporation having its principal place of
business at PLA Complex, 35 Velachery Road, Little Mount, Chennai - 600 015,
India ("Satyam").
1. Satyam Address
1.1. Address To Which Correspondence to Satyam Should Be Sent
1.1.1. Satyam Infoway (Private) Limited
PLA Complex
35 Velachery Road
Little Mount, Chennai - 600 015
India
Attn.: Controller
20
<PAGE>
CompuServe Network Services
Strategic Alliance Agreement
Attachment F
CompuServe Bank Account Information
This is Attachment F to the Strategic Alliance Agreement (the "Agreement")
entered into at Columbus, Ohio, dated April 18, 1997,1997 between CompuServe
Incorporated, an Ohio corporation having its principal place of business at 5000
Arlington Center Boulevard, Columbus, Ohio, USA ("CompuServe") and Satyam
Infoway (Private) Limited an Indian corporation having its principal place of
business at PLA Complex, 35 Velachery Road, Little Mount, Chennai - 600 015,
India ("Satyam").
1. CompuServe Bank Account Information
1.1. Account To Which Payments to CompuServe Should Be Sent
1.1.1. Bank One Columbus, NA
Columbus, OH
ABA Routing #044000037
Account #981864388
21
<PAGE>
CompuServe Network Services
Strategic Alliance Agreement
Attachment G
Satyam Bank Account Information
This is Attachment G to the Strategic Alliance Agreement (the "Agreement")
entered into at Columbus, Ohio, dated April 18, 1997,1997 between CompuServe
Incorporated, an Ohio corporation having its principal place of business at 5000
Arlington Center Boulevard, Columbus, Ohio, USA ("CompuServe") and Satyam
Infoway (Private) Limited an Indian corporation having its principal place of
business at PLA Complex, 35 Velachery Road, Little Mount, Chennai - 600 015,
India ("Satyam").
1. Satyam Bank Account Information
1.1. Account To Which Payments to Satyam Should Be Sent
1.1.1. Current Account 16596
Bank of Baroda
PO Box 3307
32, Nungambakkam High Road,
Chennai - 600 034
Tamil Nadu
India
22
<PAGE>
EXHIBIT 10.6
INTERNATIONAL ELECTRONIC COMMERCE
PROVIDER AGREEMENT
THIS AGREEMENT is made as of February 14, 1997, between Sterling
Commerce International Inc., a Delaware corporation ("STERLING COMMERCE"), with
its principal offices at Dublin, Ohio (United States), a wholly owned subsidiary
of Sterling Commerce, Inc., and Satyam Infoway (Private) Limited, an Indian
corporation, with its principal offices at Chennai, India ("Company").
WHEREAS, STERLING COMMERCE provides, facilitates, markets, licenses,
sublicenses, maintains and/or supports certain (i) EC Network Services, (ii) EC
Support Services, and (iii) EC Products, all as herein defined; and
WHEREAS, STERLING COMMERCE provides, markets, licenses, sublicenses,
maintains and/or supports certain EC Technology which supports or otherwise
facilitates such EC Offerings, as herein defined; and
WHEREAS, Company desires to obtain certain rights, to the extent
stated below in this Agreement, to the EC Technology, and to market, provide,
sublicense, install, facilitate, maintain and support the EC Offerings within
the Territory, as herein defined; and
WHEREAS, STERLING COMMERCE is willing to grant to Company, certain
rights, to the extent stated below in this Agreement, related to the EC
Technology and the ability to market, provide, sublicense, install, facilitate,
maintain and support the EC Offerings in the aforementioned Territory, in
accordance with the terms and subject to the conditions specified below;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
-----------
1.1 EC Technology. "EC Technology" collectively means:
-------------
(a) the proprietary technology provided to Company by STERLING COMMERCE, to
the extent specified in Exhibit A, and as provided from time to time by
STERLING COMMERCE pursuant to this Agreement, in support of and which
facilitates the EC Network Services;
- -----------------------
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as *****. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
(b) source code, machine-readable code and machine executable code ("EC
Technology Software") that STERLING COMMERCE designates in its sole
discretion, and makes available to Company from time to time, whether
embedded on disc, tape, chip, electronic transfer form, or other media;
(c) technical and user documentation ("EC Technology Documentation") for
the EC Technology Software that STERLING COMMERCE makes generally available
to other similar providers of the EC Network Services;
(d) all modifications, enhancements, updates and revisions to the EC
Technology Software or the EC Technology Documentation that STERLING
COMMERCE may release to Company from time to time ("EC Technology Updates")
pursuant to this Agreement; and
(e) all copies of the EC Technology Software, the EC Technology
Documentation or the EC Technology Updates, whether or not produced or
otherwise copied by or for the benefit of STERLING COMMERCE or Company.
1.2 EC Network Services. "EC Network Services" means the electronic commerce
-------------------
("EC") related services as specified in Exhibit B to the extent modified,
supplemented, or enhanced pursuant to this Agreement.
1.3 EC Support Services. "EC Support Services" means those EC consulting,
-------------------
education, support and training services offered by STERLING COMMERCE to Company
(or subcontracted by Company for the benefit of the Company Customers), as more
fully described in Section 4.10 below, to the extent modified, supplemented, or
enhanced pursuant to this Agreement.
1.4 EC Products. "EC Products" means those EC related software products, video
-----------
products another materials and items as specified in Exhibit C, and to the
extent modified, supplemented, or enhanced pursuant to this Agreement.
1.5 EC Offerings. "EC Offerings" collectively means the EC Network Services,
------------
EC Support Services and EC Products hereunder.
1.6 Territory. "Territory" means the geographic area set forth in Exhibit D.
---------
1.7 Prospective Subscribers. "Prospective Subscribers" means those entities
-----------------------
that: (a) are located within territory, and (b) request, desire to initiate, or
are otherwise interested or may be interested in obtaining access to the EC
Network Services from a computer ("CPU") located in the Territory, unless
otherwise agreed to by the parties hereto.
2
<PAGE>
1.8 Subscriber. "Subscriber" means those Prospective Subscribers which enter
----------
into EC Network Services agreements ("EC Network Contracts") with Company for
the EC Network Services.
1.9 Prospective Customers. "Prospective Customers" means those entities, that
---------------------
are located within the Territory and request, desire to obtain, or are otherwise
interested or may be interested in obtaining (a) the EC Support Services
(through a subcontract arrangement between STERLING COMMERCE and Company) to be
performed within the Territory, or (b) sublicenses to the EC Products for use
within the Territory, unless otherwise agreed to by the parties hereto.
1.10 Customer. "Customer" means those Prospective Customers which enter into
--------
EC Product licenses or product agreements ("EC Product Contracts") with Company
for EC Products or EC support agreements ("EC Support Contracts") with Company
under which such Support is to be performed by STERLING COMMERCE under a
subcontract agreement with Company.
1.11 Prospects. "Prospects" shall mean Prospective Customers and/or
---------
Prospective Subscribers.
1.12 Company Customer. "Company Customer" means those entities which area
----------------
Subscriber and/or a Customer of Company.
1.13 Company Contract. "Company Contract" means any EC Network Contract, EC
----------------
Product Contract or EC Support Contract, or any evaluation agreements as
provided in Section 3.7.
2. GRANT OF LICENSE; APPOINTMENT
-----------------------------
2.1 General. Subject to this Agreement, including as stated in Sections 2.2(a)
-------
and 2.2(d), STERLING COMMERCE hereby grants to Company, and Company hereby
accepts from STERLING COMMERCE:
(a) a non-exclusive and non-transferable right to the EC Technology to use
it exclusively for providing, facilitating, maintaining and supporting the
EC Offerings; and
(b) a non-transferable right, to the extent stated in this Agreement, to
market, provide, sublicense, install, facilitate, maintain and support the
EC Offerings within the Territory.
2.2 Exclusivity; Transborder Rules.
(a) Except as otherwise provided in Section 2.2(d) and as otherwise stated
in this Section 2.2(a), nothing in this Agreement shall be deemed to limit
STERLING COMMERCE's right, directly or indirectly, to further develop,
market, facilitate, sublicense, install, maintain and support the EC
Offerings and to appoint other remarketers, providers and distributors in
or outside of the Territory to market, facilitate, sublicense, install,
maintain and support the EC Technology and the EC Offerings in
3
<PAGE>
or outside the Territory. At STERLING COMMERCE's request, Company will
offer and perform (to no less a degree than is required to be provided to
the Company Customers) installation, maintenance, facilitation and support
services to and for the benefit of those businesses ("Transborder
Customers") within the Territory that have obtained EC Offerings from
STERLING COMMERCE or its other remarketers, providers or distributors,
subject to the applicable provisions of the transborder rules, which is
attached hereto as Exhibit E
(b) Company will not promote or solicit, nor is Company permitted to obtain
orders or any agreements for, the EC Offerings outside of the Territory,
without the prior written approval of STERLING COMMERCE.
(c) Company will immediately notify STERLING COMMERCE if Company receives
an inquiry or order (i) from any and all businesses located outside of the
Territory concerning the possible use of any of the EC Offerings within the
Territory, (ii) from any and all Company Customers located within the
Territory concerning the possible use of any of the EC Offerings outside
the Territory, or (iii) from any and all businesses concerning the possible
use of the EC Offerings within and outside the Territory. All such
inquiries or orders shall be processed in accordance with the Transborder
Rules. Company will also immediately notify STERLING COMMERCE if Company
receives an inquiry or order from any and all businesses located outside of
the Territory concerning any of the EC Offerings to be installed or
performed outside of the Territory.
(d) During the term of this Agreement, and so long as Company makes all
applicable exclusivity minimum payments (each an "Exclusivity Payment") set
forth on Exhibit F STERLING COMMERCE shall not itself market the EC Network
Services in the Territory (except to the extent related to Transborder
Customers as stated in Section 2.2(a)), nor grant to other distributors,
providers, dealers, agents or other resellers in or outside the Territory
rights to use the EC Technology in providing, facilitating, maintaining or
supporting the EC Network Services in the Territory. If Company fails to
make any Exclusivity Payment (including any Deficiency Payment as specified
in Exhibit F) for any stated period, STERLING COMMERCE's obligation to
comply with this Section 2.2(d) shall immediately and forever terminate,
without any action required on the part of STERLING COMMERCE. Nothing in
this Agreement shall be deemed to limit, modify or otherwise prohibit (i)
the right of STERLING COMMERCE to license, directly or indirectly, the EC
Technology to end users in the Territory who intend to use such
intellectual property for its own internal purposes, or (ii) the right of
STERLING COMMERCE or its other appointed third parties, from marketing,
providing or sublicensing the EC Offerings to Transborder Customers in
accordance with the Transborder Rules.
2.3 Product or Services Modifications. The EC Network Services, the EC Support
---------------------------------
Services and the EC Products may be modified, deleted, expanded or updated in
any manner by STERLING COMMERCE from time to time with written notice to Company
provided that such changes are generally imposed upon STERLING COMMERCE's other
providers, or are necessary due to territorial or technical requirements.
4
<PAGE>
2.4 Implementation; Cooperation. The parties shall cooperate in the
---------------------------
implementation of tile EC Offerings and will use reasonable efforts to
effectuate the promotion of such services and Products on an ongoing basis
during the term of this Agreement. The parties agree to jointly develop an
implementation plan and to use reasonable efforts to implement such plan for the
EC Offerings. The parties agree to continue to cooperate with each other in
improving and effectuating such future business plans of Company, as stated in
Section 3.4.
2.5 Subdistributors. Company is prohibited from appointing or otherwise
---------------
authorizing any other Person (as defined in Section 23.1) as its
subdistributors, providers, dealers, agents or other resellers under this
Agreement or otherwise delegating any of its duties or obligations hereunder
without the prior written consent of STERLING COMMERCE, which shall not be
unreasonably withheld. As a condition to any such appointment or delegation,
which STERLING COMMERCE, may withhold in its sole discretion, any such appointee
or delegatee shall execute an agreement which shall be in form and substance
satisfactory to STERLING COMMERCE and which shall not be valid until approved in
writing by STERLING COMMERCE. No such agreement shall extend beyond the then
current term of this Agreement. Company shall notify STERLING COMMERCE
immediately if it learns of or has reason to believe that there has occurred a
breach by such third party of such agreement, or if it learns of a breach by the
third party independently, in which case STERLING COMMERCE shall have the right
to cause Company to terminate such agreement. STERLING COMMERCE shall also be
entitled to cause Company to terminate such agreement if STERLING COMMERCE
determines that it should and may be terminated under the terms of such
agreement. Provided that Company does not then have exclusive rights as
determined pursuant to this Agreement, in the event of (i) termination (other
than for cause as determined by Company or as instructed by STERLING COMMERCE
hereunder) or expiration of the third party agreement or of termination or
expiration of this Agreement, STERLING COMMERCE shall have the right, without
any obligation whatsoever to Company, directly or indirectly, to enter into an
agreement with any such third party appointed or delegated by Company during the
term of this Agreement.
2.6 Interconnection. Company and STERLING COMMERCE each agrees to facilitate,
---------------
maintain and support an EC network interconnection between Company's EC network
and STERLING COMMERCE's global EC network for the benefit of Company's
Subscribers and STERLING COMMERCE's users of its EC network.
3. COMPANY'S OBLIGATIONS
---------------------
3.1 Best Efforts. Company will use its best efforts throughout the Territory
------------
to (a) promote, solicit and obtain orders for the EC Offerings, (b) perform the
EC Network Services and support the EC Products, (c) perform its consulting,
education, training, implementation, installation, maintenance and support
services in a timely and professional manner consistent with and to no less a
degree than the performance standards levels, as the parties may mutually agree
to from time to time, taking into account the conditions prevailing in the
Territory, and (d) develop the goodwill and reputation of STERLING COMMERCE.
Company's best efforts include, without limitation, its agreement not to
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market any other EC product or services as stated in Section 3.13. Company
represents that it possesses the experience, skills and resources required to
carry out its obligations under this Agreement, including without limitation,
the marketing and service activities as set forth herein. Company agrees to
make no representations or warranties of any kind with respect to STERLING
COMMERCE or the EC Offerings, except as may be specifically permitted in this
Agreement. Company acknowledges and agrees that all goodwill created or
otherwise associated with its performance of this Agreement concerning the EC
Offerings shall accrue directly and solely for the benefit of STERLING COMMERCE.
3.2 Equipment, Telecommunications, Security, Facilities and Staff.
(a) Company represents that it has, and will possess and maintain, (i)
equipment, telecommunications, and security safeguards to no less an extent
than as is required to satisfactorily implement and perform its obligations
under this Agreement and (ii) facilities and staff sufficiently trained to
market, provide and service the EC Offerings effectively throughout the
Territory during the term of this Agreement.
(b) In conjunction with the provision, maintenance and support of the EC
Network Services, Company shall be responsible for establishing and
maintaining or causing its Subscribers to establish and maintain
communication facilities, on devices and equipment approved in advance by
STERLING COMMERCE, which approval shall not be unreasonably withheld or
delayed, in order to hook-up, communicate, interconnect and interface (i)
with the facilities, data centers and networks of STERLING COMMERCE, its
affiliates and its other third party authorized EC Network Services
providers wherever designated from time to time by STERLING COMMERCE and
(ii) with other EC providers through interconnections. Notwithstanding the
foregoing, wherever possible, Company will endeavor to connect Subscribers
via COMMERCE:Network or such other preferred network clearinghouse as
STERLING COMMERCE may designate to Company from time to time.
(c) Company and the Subscribers will be solely responsible for abiding by
and will promptly advise STERLING COMMERCE of all governmental laws,
statutes and regulations regarding the transmission of data intraborder or
transborder by electronic means and by means of telecommunications, to the
extent that such legal provisions govern or control the EC Offering
provided by Company hereunder. Company agrees to defend and hold STERLING
COMMERCE, including, but not limited to its shareholders, directors,
officers, employees and representatives, harmless from and against any and
all claims, actions, liabilities, attorneys' fees and legal costs arising
from Company's breach of its obligations hereunder.
(d) Company agrees to send its staff at Company's expense, to participate
in training programs and in the reseller meetings which STERLING COMMERCE
may hold from time to time. All persons that Company uses to market and
service the EC Offerings will be employees of Company or of its affiliates,
or as otherwise as set out under Section 2.5, or as otherwise agreed in
advance by
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STERLING COMMERCE on a case-by-case basis in writing. Company is
responsible for the acts and omissions of all such third parties.
3.3 EC Technology Provision
During the term of this Agreement, and as otherwise specified
hereunder:
(a) Company agrees to permit STERLING COMMERCE or its representatives to,
or will itself, if instructed by STERLING COMMERCE, promptly install and
implement any and all upgrades, enhancements and modifications to the EC
Technology or other software provided by STERLING COMMERCE or its
representatives pursuant to this Agreement. Company will also (i)
purchase, license and take any and all equipment and telecommunications
upgrade, remedial and alternative precautionary steps reasonably instructed
from time to time by STERLING COMMERCE or its representatives, including
but not limited to the utilization of a redundant CPU, (ii) comply with and
support all EC standards and protocols reasonably directed by STERLING
COMMERCE or its representatives, from time to time and (iii) be responsible
for purchasing other equipment and licenses for all third party software,
not licensed pursuant to this Agreement, that is reasonably required by
STERLING COMMERCE, from time to time, in order to facilitate the EC Network
Services.
(b) Company will permit STERLING COMMERCE and/or its representatives the
right at all times to electronically or otherwise audit the Company's
CPU(s) and other equipment activities, and performance and quality levels.
Notwithstanding STERLING COMMERCE's right of audit hereunder, Company shall
remain solely responsible for the performance and quality levels of its
CPU(s) and equipment.
(c) Company will not reverse engineer, decompile or reverse compile the
object, machine readable or machine executable code of the EC Technology or
of any other software provided by STERLING COMMERCE to Company pursuant to
this Agreement. Company will not delete or otherwise modify any
proprietary notices of STERLING COMMERCE or its Licensors on or in such
technology or software; provided that Company shall reproduce such notices
on any copies such technology or software permitted to be made hereunder.
(d) The EC Technology Software shall be used exclusively on the designated
computer platform(s) specified in Exhibit G ("Designated CPUs"), unless
otherwise authorized in advance by STERLING COMMERCE and the then current
applicable upgrade fees are paid by Company.
(e) STERLING COMMERCE may, at STERLING COMMERCE's sole discretion and with
written notice, add new EC Technology Software to, delete existing EC
Technology Software from or substitute replacement EC Technology Software
for existing EC Technology Software as related to the EC Technology.
7
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3.4 Business Plan. Upon entering into this Agreement and at least ninety (90)
-------------
days before the expiration of any anniversary date of this Agreement, Company
shall submit to STERLING COMMERCE a business plan (the "Business Plan") setting
forth in detail Company's annual Business Plan for the next calendar year for
the EC Offerings, including, without limitation, projected revenues, and
expenses, marketing and other efforts planned and personnel to be assigned
throughout that year in support of Company's obligations under this Agreement.
The Business Plan shall include the information set out in Exhibit H hereto.
From time to time, STERLING COMMERCE may make reasonable requests for updates of
the Business Plan.
3.5 Promotional Literature. Company may use the brochures and other
----------------------
promotional literature describing the EC Offerings that STERLING COMMERCE may
provide in the English language to Company (the "Promotional Literature"). All
reproductions thereof shall include all required and directed STERLING COMMERCE
proprietary notices and copyright and all other proprietary rights in and to
said reproductions shall be assigned to and remain with STERLING COMMERCE.
Company shall be solely responsible for the cost of its own marketing and sales
activities, including without limitation the preparation and production of its
own marketing materials. Company agrees to provide co-marketing opportunities
for the EC Offerings and Company's other products and services, if applicable,
through the participation by Company at its own and other user group meetings,
mailings to the Company's Customer and Subscriber bases, and collateral
marketing programs. All Company developed sales literature shall be submitted
to STERLING COMMERCE, in the non-English version and in an English translation
form, for approval, which approval shall not be unreasonably withheld or
delayed.
3.6 Translations; Revisions. Company may revise and translate into the
-----------------------
language(s) officially spoken within the Territory the EC Technology
Documentation (to the extent of end user materials) and the Technical Materials,
as defined in Section 4.5, for the Company's technical personnel regarding the
EC Technology and the Promotional Literature (collectively, "Sterling
Materials") and reproduce such translations and revisions ("Translated
Materials") for distribution to parties authorized to receive such materials
hereunder. Before distribution of any Translated Materials, Company shall
provide such proposed Translated Materials (including an English translation
thereof to STERLING COMMERCE for approval, which approval will not be
unreasonably withheld or delayed. STERLING COMMERCE will own any such
translations, derivative works and revisions. Company hereby assigns to
STERLING COMMERCE or its licensor any and all copyright or other proprietary
rights therein. Company will affix STERLING COMMERCE's directed copyright and
other proprietary notices to all such translations, derivative works, revisions
and reproductions thereof Company will bear a translation, revision,
reproduction, and registration costs. Company will also cooperate with STERLING
COMMERCE, upon request, in any and all local copyright and other proprietary
rights registration filings of the Sterling Materials and the Translated
Materials.
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3.7 Company Contracts.
(a) Company will promote, solicit and obtain orders from Prospective
Subscribers and Prospective Customers for the EC Offerings using the form
of the applicable Company Contracts attached as Exhibits I. In the event
that the applicable law in the Territory may render any provision of a
Company Contract invalid or unenforceable, Company shall promptly notify
STERLING COMMERCE and shall cooperate fully in taking such actions to
modify provisions of the Company Contract as STERLING COMMERCE may direct.
STERLING COMMERCE may modify or replace the Company Contracts at any time,
in whole or in part with respect to any binding commitment that STERLING
COMMERCE has made to Company outside of this Agreement or Company has made
to a Company Customer with respect to use of an existing form.
(b) If Company translates any Company Contract into the language(s) spoken
within the Territory, Company will deliver the proposed translation (and a
corresponding English translation thereof) to STERLING COMMERCE for
approval prior to use. Company will not modify or amend the terms and
conditions of the Company Contracts without STERLING COMMERCE's prior
written approval on a case-by-case basis.
(c) Company will not deliver or perform any of the EC Offerings unless and
until (i) a Company Contract is entered into by and between Company and
Company Customer, if signatures are required, or (ii) a shrink-wrap type
license or other similar agreement accompanies the product or service.
Company will include all installation details of the EC Products in the EC
Product Contract. Company will forward to STERLING COMMERCE a copy of each
fully executed Company Contract with each Monthly Billing Report (see
Section 3.11).
(d) Company will effectively enforce against all Company Customers,
Prospective Subscribers and Prospective Customers the provisions of the
respective Company Contracts that affect STERLING COMMERCE's proprietary or
confidentiality rights in the EC Offerings. If Company learns that any
Company Customer, Prospective Subscriber or Prospective Customer has
breached any such provision, Company will immediately notify STERLING
COMMERCE and take, at Company's expense, all steps that may be available to
enforce the Company Contracts including availing itself of actions for
seizure or injunctive relief. If Company fails to take these steps in a
timely and adequate manner, STERLING COMMERCE may take them in its own or
Company's name and at Company's expense.
(e) In no event will Company deliver or disclose to any Company Customer or
third person the source code for the EC Products, nor deliver or disclose
the EC Technology, in whole or in part, to any third party.
9
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3.8 Support and Other Services. Company will offer and will perform
--------------------------
installation, implementation, facilitation, maintenance and support services to
all Company Customers and to all Prospects within the Territory including,
without limitation, at STERLING COMMERCE's request or approval, those
Transborder Customers that obtained the EC Offerings as provided in Section
2.2(a). Company shall have sole responsibility for providing "First Level"
technical assistance and support to such Company Customers (and the Transborder
Customers to the extent stated in Section 21(a)), which shall include customer
relations, training, education, implementation of any services, responding to
inquiries and determining the extent and responsibility for any claimed
malfunctions of any part of the EC Offerings. Company also agrees to provide
promptly to each Company Customer all EC Product bug fixes, bypasses and
releases provided to Company by STERLING COMMERCE from time to time. The quality
and timeliness of Company's implementation, facilitation, maintenance and
support services will be consistent with and to no less a degree than the levels
agreed to by the parties from time to time.
3.9 INTENTIONALLY OMITTED
3.10 Records and Inspections. Company will maintain accurate records of its
-----------------------
marketing and service activities under this Agreement, including (i) a current
list of Company Customers and all Prospects, and (ii) copies of all Company
Contracts. Company will survey the Company Customers under such agreements at
reasonably regular intervals (at least once a year) to ensure the correct use
and installation of the EC Network Services and EC Products thereunder.
3.11 Reports. Company will provide STERLING COMMERCE with a monthly billing
-------
report including the information set out under Exhibit J hereto, as amended from
time to time and notified to Company. On or before May 15th of each year,
Company will provide STERLING COMMERCE with details of all revenues related to
software, services, and maintenance forecasting for the period of 1 October of
that year to the following 30 September. The details of the reporting
requirements will be provided by STERLING COMMERCE to Company in a time frame
adequate for Company to fulfill its obligation. Company will provide further
reports that STERLING COMMERCE may reasonably request, such as (i) a description
of Company's facilities and staff and (ii) a summary of the activities of
competitors within the Territory.
3.12 Surveys. Company will assist STERLING COMMERCE in any business related
-------
survey which it may conduct from time to time in relation to the Territory and
acknowledges that STERLING COMMERCE is entitled to contact Company Customers in
connection with such surveys.
3.13 Non-Competition. Except as and to the extent that applicable local law
---------------
otherwise requires, during the term of this Agreement, Company and its
shareholders, principals, owners, directors, officers and managers will not,
directly or indirectly, promote, represent, distribute, install, customize,
maintain, support or otherwise facilitate, market, service or provide EC
services and/or computer products that are comparable or similar to, in
functions, purpose or use, any of the EC Offerings, in whole or in part,
including without limitation the functions, purpose and use described in the
10
<PAGE>
Promotional Literature. Company warrants that, upon entering into this
Agreement, it has notified STERLING COMMERCE of all the other computer products
and services that Company markets or services and that it will also promptly
notify STERLING COMMERCE of any additional computer products or services that
Company begins to or may be contemplating marketing, or servicing during the
term of this Agreement. Should Company desire to market products or services
related to EC Services or computer products of third parties or of Company
(collectively, "Other EC Items") which are not currently offered by STERLING
COMMERCE to Company pursuant to this Agreement, and, STERLING COMMERCE is not
able to offer products or services which are substantially similar or comparable
to such other EC Items within ninety (90) days of receipt by STERLING COMMERCE
or a written request of Company, then Company is entitled to market such
proposed Other EC Items. However, if at any time, Company does desire to market
STERLING COMMERCE's equivalent Other EC Items when made available by STERLING
COMMERCE, then the parties shall negotiate terms and conditions related thereto.
4. STERLING COMMERCE'S OBLIGATIONS
-------------------------------
4.1 EC Technology, EC Technology Software and EC Technology Documentation.
---------------------------------------------------------------------
STERLING COMMERCE will promptly provide one (1) copy of the (i) EC Technology
Software, in machine readable or machine executable code, (ii) EC Technology
Documentation, and (iii) EC Technology Updates and New Releases, as defined in
Section 4.9 below, thereto from time to time, as further discussed in Sections
4.7 and 4.9 below. Company shall be entitled to make a copy of such programs and
materials, for one (1) CPU production use, and for one (1) CPU redundancy use,
unless otherwise agreed to in writing by STERLING COMMERCE. The EC Technology
Software shall remain resident on the Designated CPUs unless otherwise approved
in writing by STERLING COMMERCE. Such STERLING COMMERCE approval shall include
the payment to STERLING COMMERCE of upgrade fees then charged for by STERLING
COMMERCE, if applicable. Provided that Company is then currently entitled to
maintenance and support of the EC Technology, STERLING COMMERCE will provide
Company, at no additional charge than the current annual maintenance fee, with
(i) new releases, improvements and enhancements of the EC Technology, not
otherwise generally available as a separately priced upgrade, component, or
option (collectively, "EC Options"), and (ii) for the first year of this
Agreement any and all EC Options (except for cc:Mail and/or MS:Mail
capabilities). After the first year, such EC Options shall be made available to
Company at STERLING COMMERCE's then current prices, provided that Company is
then currently under maintenance and support of the EC Technology.
4.2 EC Product. Upon request by Company, and subject to receipt of a fully
----------
executed copy or the Company Contract, STERLING COMMERCE shall, as agreed to by
both parties, promptly provide to Company (i) the ordered number of copies of
the EC Product, including machine readable or machine executable software,
multi-media and user documentation, for distribution to the specified Company
Customer, or (ii) written authorization to reproduce and deliver to the Company
Customer the ordered number of copies of the EC Products including machine
readable or machine executable software, multi-media and user documentation,
from an EC Product master copy of such software and
11
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materials, if provided and authorized by STERLING COMMERCE. Company will affix
and will not delete or otherwise modify any and all STERLING COMMERCE's and any
licensors' copyright and other proprietary notices to all such translations and
reproductions thereof.
4.3 Demonstration Products. STERLING COMMERCE will provide Company with a
----------------------
master demonstration copy of the EC Products as STERLING COMMERCE deems
appropriate for Company to market the EC Products within the Territory (the
"Demonstration Products"). STERLING COMMERCE grants Company a non-exclusive and
non-transferable license to use the Demonstration Products exclusively to
conduct customer demonstrations, training and technical support. Company will
not copy, sublicense, assign or otherwise transfer the Demonstration Products to
or for the benefit of any Prospective Customer(s) except pursuant to an
evaluation form of Company Contract. Such evaluation period shall not exceed a
period of more than sixty (60) days unless first approved by STERLING COMMERCE.
4.4 Marketing Materials. STERLING COMMERCE will provide Company with the
-------------------
initial quantity of Promotional Literature, including media, that STERLING
COMMERCE deems appropriate for Company to promote and solicit orders for the EC
Offerings within the Territory. At Company's request, STERLING COMMERCE will
provide Company with additional. quantities of such Promotional Literature,
subject to their availability at STERLING COMMERCE. STERLING COMMERCE may charge
Company for the initial and additional provided Promotional Literature and other
marketing materials at STERLING COMMERCE's then-current standard rates plus
shipping costs.
4.5 Technical Materials. STERLING COMMERCE will periodically provide Company
-------------------
with the data, diagrams and other technical materials (collectively, "Technical
Materials") that STERLING COMMERCE deems appropriate for Company to facilitate,
provide, install, maintain and support the EC Offerings within the Territory.
STERLING COMMERCE may limit the number of copies of such technical materials
that Company will be authorized to make, if any. Company will (i) consecutively
number each such copy (ii) maintain a current logbook that records the number of
copies that have been made and (iii) reproduce all confidentiality and
proprietary notices on each such copy.
4.6 Training; Initial Installation.
(a) STERLING COMMERCE will initially provide Company, at no cost to
Company, with initial training ("Initial Training") for a period of up to
forty (40) days, as mutually determined is necessary in order to educate
Company to competently operate and maintain the EC Technology within the
Territory. The Initial Training shall encompass various aspects of the EC
Technology including system components, resource monitoring, system
utilization, disaster recovery procedures, remote monitoring facilities,
and COMMERCE:Network interfaces. The Initial Training will be offered at
Company's facilities in conjunction with the Initial Installation (as
defined in Section 4.6(b)) of the EC Technology. Unless otherwise agreed by
STERLING COMMERCE on a case-by-case basis, the additional training will be
offered during STERLING COMMERCE's or its representatives' regularly
scheduled training sessions at the facility(ies) that STERLING COMMERCE may
designate from time to time, and at
12
<PAGE>
other locations as agreed to from time to time by both parties, at terms
and conditions agreed to by the parties hereto. Company will bear all
travel and out-of-pocket expenses that its trainees may incur in attending
all training sessions.
(b) STERLING COMMERCE will provide to Company, at no cost, the following
initial installation ("Initial Installation") services with respect to the
initially delivered EC Technology Software: (i) install primary and
secondary delivered EC Technology Software components, (ii) configure
primary and secondary EC Technology Software components, (iii) setup
primary and secondary system firewall, (iv) develop and implement
COMMERCE:Network connectivity, and perform primary and secondary system
verification testing for a maximum of sixty (60) days.
(c) With respect to the Initial installation of the EC Technology Software,
Company will be responsible for the following: (i) determination of primary
and secondary locations, (ii) prepare primary and secondary locations,
(iii) procurement of all required computer, telecommunication and other
equipment, (iv) assemblage and installation of all such computer,
telecommunication and other equipment, and (v) procurement and initiation
of appropriate telecommunication capabilities and services.
(d) With respect to the Initial Installation of the EC Technology Software,
both parties shall: (i) define entity definition and registration (IP
addresses), (ii) execute quality assurance testing, (iii) configure primary
and secondary system routers, and (iii) test router communications.
4.7 Support. STERLING COMMERCE will provide Company ("Support") with (i) first
-------
and second level support services, including access to STERLING COMMERCE's or
its representatives' technicians for advice, consultation and assistance to
diagnose and resolve the problems that Company may encounter in using the EC
Technology, provided that Company is currently under support for the EC
Technology and (ii) only second level support to Company with respect to
Company's Customers encounters in using the EC Network Services or the EC-
Products. First level support shall mean responding to potential problem
inquiries and determining the extent and responsibility for any claimed
malfunctions of any part of the EC Technology or the EC Products. Second level
support shall mean taking reasonable corrective action with respect to
malfunctions of any part of the EC Technology or the EC Products, including
providing such fixes, modifications and updates, enhancements and new releases
of or for the EC Technology or the EC Products to the same extent that STERLING
COMMERCE provides other EC providers in general. To the extent of problems
arising from STERLING COMMERCE provided third party software, STERLING
COMMERCE's second level support will only be to advise the third party
manufacturer of the problem and forward to Company any and all corrections
delivered by such third party. All such Support will be offered during regular
business hours from Dublin, Ohio, U.S.A. (or from any other facilities, times
and locations that STERLING COMMERCE may designate from time to time), and only
to Company's appointed liaison. STERLING COMMERCE may provide such Support by
(i) telephone or other forms of communication, or (ii) visits by STERLING
COMMERCE's or its affiliates' personnel to a Company facility, as mutually
agreed to by the parties. Company or the Customers will pay all telephone,
travel
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and other out-of-pocket expenses that STERLING COMMERCE or its affiliates may
incur in connection with such Support with respect to subsection 4.7(ii). If
more than basic Support becomes necessary, STERLING COMMERCE may charge Company
for such additional Support at STERLING COMMERCE's then-current standard rates.
4.8 On-Site Visits. STERLING COMMERCE may periodically send to Company's
--------------
facilities certain of STERLING COMMERCE's marketing and service personnel to
advise, consult and assist Company in marketing, providing, maintaining and
supporting the EC Offerings. STERLING COMMERCE and Company will schedule such
on-site visits for mutually acceptable times, subject to availability of
appropriate STERLING COMMERCE personnel. STERLING COMMERCE will pay the travel
and out-of-pocket expenses that its personnel may incur in connection with
regularly scheduled on-site visits. At Company's request, STERLING COMMERCE may
provide unscheduled on-site support to Company. Unless otherwise agreed on a
case-by-case basis, Company will pay or reimburse STERLING COMMERCE for all
travel and out-of-pocket expenses that STERLING COMMERCE's personnel may incur
in connection with such unscheduled on-site visits.
4.9 Improvements and Enhancements. STERLING COMMERCE may periodically provide
-----------------------------
Company with new releases, improvements and enhancements (collectively, "New
Releases") for the EC Offerings. Unless otherwise agreed on a case-by-case
basis, Company will import the New Releases only as required for distribution to
Company Customers that have contracted for EC Network Services or for
maintenance and support for the EC Products in accordance with the terms and
conditions of an applicable Company Contract. Notwithstanding this Section 4.9,
STERLING COMMERCE shall have no obligation to (i) develop and release New
Releases or (ii) customize the New Releases to satisfy the particular
requirements of any Company Customers. The New Releases will not include any new
software or documentation that STERLING COMMERCE decides, in its sole
discretion, to make generally available as a separately-priced upgrade or
option. STERLING COMMERCE may add such New Releases to this Agreement as new EC
Products or EC Network Services or EC Support Services in accordance with
Section 2.3.
4.10 EC Support Services. STERLING COMMERCE may from time to time, upon request
-------------------
by Company, provide such additional services and further support services
related to the EC Technology or the EC Offerings on terms and conditions as
agreed to by the parties on a case by case basis.
4.11 COMMERCE:Network Connectivity. STERLING COMMERCE will provide the necessary
-----------------------------
connectivity of the EC Technology to STERLING COMMERCE's COMMERCE:Network, at no
cost to Company.
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5. PAYMENT TO STERLING
-------------------
5.1 Considerations; Payment Terms. In consideration of the rights granted and
-----------------------------
the services rendered by STERLING COMMERCE hereunder, Company agrees to pay to
STERLING COMMERCE the amounts and pursuant to the payment terms stated in
Exhibit K and as stated in this Section 5.
5.2 Currency and Place. Company will pay all amounts due to STERLING COMMERCE
------------------
pursuant to this Agreement in U.S. dollars at STERLING COMMERCE's bank account
in the United States, or other place outside of the Territory, that STERLING
COMMERCE may designate. All currency conversions required under this Agreement
will be made at the official rate of exchange for purchase of U.S. dollars on
the date of payment to STERLING COMMERCE at such designated bank account and
Company shall bear all banking and similar charges related to such payments. Any
late payment, due to the default on the part of Company, will accrue interest at
the lesser of (i) the LIBOR me quoted on the date that the payment became past
due, this five percent (5%), or (ii) the maximum interest allowable under the
laws of the Territory. Company will pay any late payment charge upon remitting
the principal amount to STERLING COMMERCE.
5.3 Method and Time. Unless otherwise agreed on a case-by-case basis, Company
---------------
will make payment of all amounts due to STERLING COMMERCE pursuant to this
Agreement either (i) by certified or cashier's check or wire transfer or (ii) by
irrevocable letter of credit against shipment of the EC Products as mutually
agreed. If Company fails to make payment within the payment period, STERLING
COMMERCE may, at its sole election and option, require that Company Customers
remit payment directly to STERLING COMMERCE and any amount due to Company as the
net amount less any applicable discount shall be paid to Company as commission.
The foregoing does not negate STERLING COMMERCE's termination rights under
Section 11.3(a) of this Agreement. Company will bear all banking and similar
charges incurred in connection with any of these payments. All letters of credit
must (i) be issued on terms acceptable to STERLING COMMERCE, (ii) be confirmed
by the issuing bank at least fifteen (15) calendar days before the initial
scheduled shipment date or commencement of services, and (iii) be payable at
such bank by sight draft to STERLING COMMERCE's order.
5.4 Prices. STERLING COMMERCE's charges for the EC Products are as specified on
------
STERLING COMMERCE's international price schedules in Exhibit L (the "List
Price"), and may be revised from time to time with written notice from STERLING
COMMERCE. Company may establish its own prices for the EC Offerings that it will
charge to the Company Customers. Company may also increase or decrease the
prices for the EC Offerings. Company will be solely responsible for obtaining
payment of the invoiced amounts for the EC Offerings from Company Customers.
Delays or failures in obtaining such payments will not affect Company's
obligation to make payments to STERLING COMMERCE pursuant to this Section 5.
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5.5 Taxes; Duties. The income, net worth or franchise taxes assessed, if any,
-------------
on STERLING COMMERCE shall be the liability of STERLING COMMERCE, and subject to
withholding taxes, if applicable. Subject to the above, all amounts payable by
Company to STERLING COMMERCE under this Agreement are exclusive of any slipping
and handling charges, other taxes, duties, custom charges, levy or similar
governmental charge that may be assessed by any jurisdiction, whether based on
gross revenue, the delivery, possession or use of the EC Technology, the EC
Products, or the acceptance of any services by Company, the execution or
performance under this Agreement or otherwise. Provided that there is then a
reciprocal tax treaty between the respective parties' taxing jurisdictions, and
STERLING COMMERCE is afforded full recognition and tax credits in its taxing
jurisdictions for any and all amounts required to be withheld by Company,
Company is permitted to withhold such amounts required by the laws of the
Territory, otherwise the parties will reconsider the withholdings issue in order
to equitably resolve STERLING COMMERCE's tax situation. Company will promptly
furnish STERLING COMMERCE with the official receipt of payment of these taxes to
the appropriate taxing authority, and will be responsible for and will hold
STERLING COMMERCE harmless from and will indemnify STERLING COMMERCE for any and
all non-payments, delinquent payments, and related penalties and interest.
Company will pay all other taxes, duties, customs charges, levies or similar
governmental charges or provide STERLING COMMERCE with a certificate of
exemption acceptable to the taxing authority.
5.6 Payment Examination. STERLING COMMERCE, may electronically or otherwise
-------------------
examine Company Customers' transactions with Company with respect to the EC
Offerings. Company will reasonably cooperate with STERLING COMMERCE in such an
exercise and provide STERLING COMMERCE with reasonable access to its books and
records and STERLING COMMERCE shall make all reasonable efforts not to disrupt
Company's normal business activities and for the examination to be carried out
in a professional manner. Any sums found to be due to STERLING COMMERCE shall
immediately be paid by Company. STERLING COMMERCE shall bear the cost of the
examination except where a discrepancy of more than five percent (5%) is found
between monies paid and sums determined to be due to STERLING COMMERCE, then
Company shall bear the cost of the examination and shall promptly pay all
deficient amounts.
6. LIMITED WARRANTIES
------------------
6.1 Warranty.
(a) STERLING COMMERCE agrees, with respect to third party software, and as
its sole responsibility, to transfer to Company and to Company's Customers
those warranties provided by any and all third party licensors of any EC
Products or of the EC Technology, but only to the extent that such
warranties are transferable. Company's sole remedy for such third party
software is as provided under such third party software agreements.
16
<PAGE>
(b) Company acknowledges that (i) neither the EC Technology nor the EC
Products may satisfy all of the Company Customers requirements, and (ii)
the use of the EC Products and the EC Technology may not be uninterrupted
or error-free. Company further acknowledges that (i) the prices and other
charges contemplated under this Agreement are based on the limited
warranty, disclaimer, and limitation of liability specified in this
Agreement, and (ii) such charges would be substantially higher if any of
these provisions were deemed to be unenforceable.
(c) STERLING COMMERCE warrants that for a period of thirty (30) days after
delivery to Company of any software, other than third party software, the
media on which such software is provided shall be free of defects and
perform in accordance with applicable documents.
(d) STERLING COMMERCE warrants that the EC Support Services will be
provided in accordance with a applicable STERLING COMMERCE guidelines.
6.2 Remedies. In case of breach of warranty or any other duty related to the
--------
quality of the EC Technology, the EC Products (in either case subject to Section
6.1 (a)), the EC Support Services, or any other services or products provided by
STERLING COMMERCE under this Agreement, STERLING COMMERCE will, at its option,
correct or replace the defective product or technology, or reperform the
provided service. If STERLING COMMERCE determines that a defect cannot be
corrected or replaced or reperformed within a reasonable period of time, Company
may, as its sole and exclusive remedy, return the EC Product, the affected EC
Support Services' deliverables, the EC Technology or any other end product of a
provided service hereunder to STERLING COMMERCE, in exchange for a refund of (i)
the price that Company actually paid to STERLING COMMERCE, less depreciation
based on a three (3) year straight-line depreciation schedule, and (ii) a pro
rata share of the twelve (12) month maintenance fees than Company actually paid
to STERLING COMMERCE for the period that such EC Product, EC Support Services or
the EC Technology or other service or product was not usable. During any period
that STERLING COMMERCE is attempting to correct or replace any defective
component of the EC Technology and Company is unable to effectively offer or
perform the material aspects of the affect related EC Network Service function,
then STERLING COMMERCE will perform such affect related EC Network Service at no
charge to Company until such time that such correction or replacement has been
made or delivered or STERLING COMMERCE elects not to further proceed with the
corrective or replacement action based on economic or technical considerations
affecting STERLING COMMERCE which makes such remedial steps impracticable to
STERLING COMMERCE. In any case, should STERLING COMMERCE determine that any
remedial actions would be impracticable based on economic or technical
considerations, then STERLING COMMERCE may elect, as its sole and exclusive
liability to terminate such affected rights of Company and, in exchange for the
return or discontinued use of the affected product(s), deliverable(s) or
service(s), refund the remedial net amounts afforded Company to the same extent
as stated above.
17
<PAGE>
6.3 Limitation. the warranties and remedies specified in this Section will not
----------
apply if the EC Product or the technology malfunctions or any provided services
of STERLING COMMERCE is improperly or not timely performed due to extrinsic
causes, such as (i) war or natural disasters, including fire, smoke, water,
earthquakes or lightning, (ii) electrical power fluctuations or failures, (iii)
the neglect or misuse of the EC Product or the EC Technology or other failure to
comply with the instructions set forth in the EC Technology Software or the EC
Technology Documentation, (iv) a correction or modification of the EC Product or
the EC Technology not provided or authorized by STERLING COMMERCE, (v) the
failure to promptly install the EC Product or the EC Technology Software or an
Update, (vi) a malfunction of the Company's or Company Customers hardware
equipment, (vii) the combination of the EC Product or the EC Technology with
other software or equipment not provided by STERLING COMMERCE, or (viii) any act
or omission attributable to Company or Company Customer(s) not authorized or
recommended by STERLING COMMERCE.
6.4 Interconnection Non-Liability. Notwithstanding any provision to the
-----------------------------
contrary in this Section 6, neither party hereto shall be liable for any damages
arising from any failure to properly perform its EC network interconnection
services for the benefit of the Customers or any other EC network subscriber or
customer.
6.5 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 6 AND SECTION 7
----------
BELOW, ALL WARRANTIES, CONDITIONS, REPRESENTATIONS, INDEMNITIES AND GUARANTEES
WITH RESPECT TO THE EC PRODUCTS, THE EC SUPPORT SERVICES, THE EC TECHNOLOGY, AND
ANY OTHER SERVICES AND PRODUCTS OFFERED OR PERFORMED BY STERLING COMMERCE UNDER
THIS AGREEMENT WHETHER EXPRESS OR IMPLIED, ARISING BY LAW, CUSTOM, PRIOR ORAL OR
WRITTEN STATEMENTS BY STERLING COMMERCE OR BY ANY OTHER MANUFACTURER OR AUTHOR
OR OTHERWISE (INCLUDING, BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR PARTICULAR PURPOSE) ARE HEREBY OVERRIDDEN, EXCLUDED AND DISCLAIMED.
7. INDEMNITY
---------
7.1 Indemnity. If an action is brought against Company claiming that an EC
---------
Product or any part of the EC Technology, or any aspect of EC Support Services
infringes a patent or copyright within the Territory, STERLING COMMERCE will or
will use reasonable efforts to cause the applicable manufacturer or author to
defend Company at such indemnitor's expense and, subject to this Section and
Section 8, pay the damages and costs finally awarded against Company in the
infringement action, but only if (i) Company notifies STERLING COMMERCE promptly
upon learning that the claim might be asserted, (ii) the indemnitor has sole
control over the defense of the claim and any negotiation for its settlement or
compromise and (iii) Company takes no action that, in the indemnitor's judgment,
is contrary to the indemnitor's interest.
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<PAGE>
7.2 Alternative Remedy. If a claim described in Section 7.1 may be or has been
------------------
asserted, Company will permit STERLING COMMERCE or the appropriate indemnitor,
at such party's option and expense, to (i) procure the right to continue using
the EC Product or the infringing part of the EC Technology, or (ii) replace or
modify the EC Product or the affected EC Technology to eliminate the
infringement while providing functionally equivalent performance or (iii) accept
the return of the EC Product or the EC Technology in exchange for a refund of
the price that Company actually paid to STERLING COMMERCE for such EC Product or
the EC Technology, less depreciation based oil a three (3) year straight-line
depreciation schedule, and a pro rata share of the renewal/maintenance fees
that, Company actually paid to STERLING COMMERCE for the renewal/maintenance
period in which the claim has arisen.
7.3 Limitation. Neither STERLING COMMERCE nor any other indemnitor hereunder
----------
will have any indemnity obligation to Company if the patent or copyright
infringement claim results from (i) a correction or modification of the EC
Product or the EC Technology not provided by STERLING COMMERCE, (ii) the failure
to promptly install an Update or (iii) the combination of the EC Product or the
EC Technology with other items not provided by STERLING COMMERCE.
8. NO CONSEQUENTIAL DAMAGES
------------------------
8.1 UNDER NO CIRCUMSTANCES WILL STERLING COMMERCE, ITS AFFILIATES, EMPLOYEES,
REPRESENTATIVES OR ANY MANUFACTURERS OR AUTHORS OF ANY PROVIDED THIRD PARTY
PRODUCTS OR SERVICES HEREUNDER BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT,
SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES OR LOST PROFITS, WHETHER FORESEEABLE, OR
UNFORESEEABLE, WHATSOEVER, INCLUDING, WITHOUT LIMITATION, SUCH DAMAGES OR
PROFITS BASED ON CLAIMS OF COMPANY OR COMPANY CUSTOMERS (INCLUDING, BUT NOT
LIMITED TO, CLAIMS FOR LOSS OF DATA, GOODWILL, USE OF MONEY OR USE OF THE EC
PRODUCTS OR THE EC TECHNOLOGY OR ANY EC SUPPORT SERVICES OR ANY OTHER PROVIDED
SERVICES HEREUNDER, INTERRUPTION IN USE OR AVAILABILITY OF DATA, STOPPAGE OF
OTHER WORK OR IMPAIRMENT OF OTHER ASSETS), ARISING OUT OF BREACH OR FAILURE OF
EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT, MISREPRESENTATION, NEGLIGENCE,
STRICT LIABILITY IN TORT OR OTHERWISE, EXCEPT ONLY IN THE CASE OF DEATH OR
PERSONAL PHYSICAL INJURY WHERE AND TO THE EXTENT THAT APPLICABLE LAW REQUIRES
SUCH LIABILITY. IN NO EVENT WILL THE AGGREGATE LIABILITY WHICH STERLING
COMMERCE, ITS AFFILIATES, EMPLOYEES AND REPRESENTATIVES OR ANY APPLICABLE
MANUFACTURERS OR AUTHORS MAY INCUR IN ANY ACTION OR PROCEEDING EXCEED THE TOTAL
AMOUNT ACTUALLY PAID TO STERLING COMMERCE BY COMPANY FOR THE SPECIFIC EC
OFFERING OR ANY OTHER PROVIDED SERVICES HEREUNDER THAT DIRECTLY CAUSED THE
DAMAGE.
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<PAGE>
9. INFORMATION
-----------
9.1 Confidentiality. Company acknowledges that the EC Offerings, the
---------------
EC Technology and the provision of additional services and products hereunder
by STERLING COMMERCE incorporate confidential and proprietary information
developed or acquired by or licensed to STERLING COMMERCE (the "Information").
Company will take all reasonable precautions necessary to safeguard the
confidentiality of the Information, including without limitation (i) those taken
by Company to protect its own confidential information and (ii) those which
STERLING COMMERCE may reasonably request from time to time. Company shall not
allow the removal or defacement of any confidentiality or proprietary notice
placed on the EC Offerings or the EC Technology or other items of information.
The placement of copyright or any other proprietary notices on these items will
not constitute publication or otherwise impair their confidential nature.
9.2 Ownership. This Agreement does not grant convey or otherwise transfer to
---------
Company any patents, copyrights, circuit layouts, trade secrets and other
proprietary rights in or related to the EC Offerings or to the EC Technology,
which intellectual proprietary interests are and will remain the exclusive
property of STERLING COMMERCE, or its affiliates or its third party licensors,
whether or not specifically recognized or perfected under the laws of the
Territory. Company will not take any action that jeopardizes STERLING COMMERCE's
or its licensors proprietary rights or acquire any right in the EC Offerings,
the EC Technology or Information, except the limited use rights specified in
Section 9.3. STERLING COMMERCE, its affiliates or its third party licensors will
own all rights in any copy, translation, modification, adaptation or derivation
of the EC Offerings, the EC Technology or other items of Information, including
any improvement or development thereof. Company will obtain, at STERLING
COMMERCE's request the execution of any instrument that may be appropriate to
assign these rights to STERLING COMMERCE or to its affiliates, or to its third
party licensors or to perfect these rights in such respective parties' name.
9.3 Use. Company will use the EC Offerings and the EC Technology and other
---
items of Information, exclusively to perform its marketing and service
activities pursuant to this Agreement. Except as otherwise specifically
contemplated in this Agreement, Company will not copy the EC Offerings, the
EC Technology or other items of Information without STERLING COMMERCE's
approval. Company will reproduce STERLING COMMERCE's or its licensors'
confidentiality and proprietary notices on all such copies. Company will not
translate, modify, adapt, decompile, disassemble or reverse engineer the
EC Offerings or the EC Technology, except as and to the extent specifically
authorized under applicable law or by written agreement executed between
STERLING COMMERCE and Company or required to be permitted by applicable law.
Company will promptly notify STERLING COMMERCE if Company is contemplating the
creation of any shell or supplemental software that will be combined with the
EC Offerings or the EC Technology. At STERLING COMMERCE's request, Company will
provide STERLING COMMERCE with the specifications, flow charts, source and
object code and other documentation for such programs.
20
<PAGE>
9.4 Disclosure. Company will not disclose, in whole or in part, the source code
----------
(if and when provided by STERLING COMMERCE to Company) or object code of the EC
Products or of the EC Technology or any other item that STERLING COMMERCE
designates as confidential to any person, except to (i) Company Customers, as
and to the extent contemplated under an executed Company Contract, and (ii)
those of Company's directors, officers and employees who require access to
perform its obligations under this Agreement. Company shall take such steps as
may be necessary and/or as required by STERLING COMMERCE to ensure that Company
Customers and Company's directors, officers and employees at times are complying
with this confidentiality and use restrictions of this Agreement.
9.5 Unauthorized Use or Disclosure. Company acknowledges that any unauthorized
------------------------------
use or disclosure of the EC Offerings or the EC Technology or any other item of
information may cause irreparable damage to STERLING COMMERCE or its Licensors.
If an unauthorized use or disclosure occurs, Company will promptly notify
STERLING COMMERCE and take, at Company's expense, all steps which are necessary
recover the EC Product, the EC Technology or the Information and to prevent its
subsequent unauthorized use or dissemination, including availing itself of
actions for seizure and injunctive relief. If Company fails to takes these steps
in a timely and adequate manner, STERLING COMMERCE may take them in its own or
Company's name and at Company's expense. STERLING COMMERCE will provide
reasonable cooperation to Company, at Company's request and expense, in
supporting Company's efforts in remedying any situation hereunder.
9.6 Limitation. Company will have no confidentiality obligation with respect to
----------
any portion of the Information that (i) Company independently knew or developed
before receiving the EC Products, the EC Technology or Information from STERLING
COMMERCE, or (ii) Company lawfully obtained from a third party under no
obligation of confidentiality. Under these circumstances Company will notify
STERLING COMMERCE, at least dirty (30) days before disclosing such portion of
the Information to any other person.
9.7 Company Information. The obligations imposed on Company and the rights of
-------------------
STERLING COMMERCE related to its Information and other proprietary items as
stated in this Section 9, shall similarly and appropriately apply to Company's
proprietary and confidential information, and STERLING COMMERCE, and its
employees and representatives shall similarly be bound by the obligations.
10. MARKS
-----
10.1 Ownership. All trademarks, service marks, trade names, logos or other words
---------
or symbols belonging to STERLING COMMERCE, its affiliates or any third party
licensor(s) identifying the EC Offerings, the EC Technology or STERLING
COMMERCE's business (the "Marks") are and will remain the exclusive property of
STERLING COMMERCE, or its affiliates or its third party licensors, whether or
not specifically recognized or perfected under the laws of the Territory.
Company will not take any action that jeopardizes STERLING COMMERCE's or its
licensors, proprietary rights or
21
<PAGE>
acquire any right in the Marks, except the limited use rights specified in
Section 10.2. Company will not register, directly or indirectly, any trademark,
service mark, trade name, copyright, company name or other proprietary or
commercial right which is identical or confusingly similar to the Marks or which
constitute translations thereof into the local language(s) within the Territory.
Upon STERLING COMMERCE's request, Company will execute and deliver to STERLING
COMMERCE the instruments that may be appropriate to register, maintain or renew
the registration of the Marks in STERLING COMMERCE's, or its affiliates' or its
third party licensors' name within the Territory. STERLING COMMERCE is solely
responsible for any and all registration and other filing fees related to the
Marks. Company agrees to execute the Registered User Agreement, attached hereto
as Exhibit O, and agrees to sign all modifications and amendments requested by
STERLING COMMERCE, from time to time STERLING COMMERCE at no time claims any
ownership or other proprietary rights in or to the mark and logo, "Satyam," and
other marks of Company and its affiliates, which rights shall at all times
remain with Company.
10.2 Use. Company will use the Marks exclusively to advertise and promote the
---
EC Offerings within the Territory. All advertisement and promotional materials
will (i) clearly identify STERLING COMMERCE or its Licensors as the owner of the
Marks, (ii) conform to STERLING COMMERCE's then-current trademark and logo
guidelines and (iii) otherwise comply with any local notice or marking
requirement contemplated under the laws of the Territory. Before publishing or
disseminating any advertisement or promotional materials bearing a Mark,
Company, unless otherwise -waived by STERLING COMMERCE, will deliver a sample of
the advertisement or promotional materials to STERLING COMMERCE for prior
approval. If STERLING COMMERCE notifies Company that the use of the Mark is
inappropriate, Company will not publish or otherwise disseminate the
advertisement or promotional materials until they have been modified to STERLING
COMMERCE's satisfaction.
10.3 Infringement. Company will immediately notify STERLING COMMERCE if Company
------------
learns (i) of any potential infringement of the Marks by a third party or (ii)
that the use of the Marks within the Territory may infringe the proprietary
rights of a third party. STERLING COMMERCE will determine the steps to be taken
under these circumstances. Company will (i) provide STERLING COMMERCE, or it's
affiliates or its third party licensors with the assistance that STERLING
COMMERCE or its licensors may reasonably request and (ii) take no steps on its
own without STERLING COMMERCE's prior approval.
11. TERM AND TERMINATION
--------------------
11.1 Term. This Agreement will become effective (the "Effective Date"), upon
----
the later of (i) its execution by STERLING COMMERCE and Company and (ii) its
approval, registration or filing in accordance with Section 15, if applicable.
This Agreement will remain in effect thereafter for an initial period ("Initial
Period") of five (5) annual terms (the "Annual Term(s)"), commencing from the
date of successful completion of the system verification of the EC Technology,
as noted in Section 4.6, unless earlier terminated under this Section 11 or
Section 22.1. Should Company be unable to obtain the
22
<PAGE>
necessary approval, registration or filing in accordance with Section 15, this
Agreement will be deemed to be void, but all provisions in this Agreement
relating to termination will apply.
11.2 Renewal. Upon the expiration of the Initial Period, and any agreed to
-------
extended period ("Extended Period"), this Agreement may be renewed by written
agreement between the parties and subject to any governmental approval,
registration or filing requirement that may be applicable to such renewal.
Unless such agreement to renew is reached between the parties within thirty (30)
days of the expiry of the Initial Period or the Extended Period, this Agreement
shall be deemed to be terminated at the expiry of the then current term. Neither
party shall have any obligation to renew this Agreement or be liable to the
other party for not agreeing to renew this Agreement.
11.3 Termination by STERLING COMMERCE. STERLING COMMERCE has the right to
--------------------------------
terminate this Agreement, at STERLING COMMERCE's sole option, immediately upon
notice to Company or to refuse to renew this Agreement, without judicial or
administrative notice or resolution, upon the occurrence of any termination
event specified below or elsewhere in this Agreement.
(a) Breach. Company or any of its employees (i) breaches any obligation
------
under Section 9, or (ii) breaches its payment obligations under Section 5
and fails to cure the breach within ten (10) days after STERLING COMMERCE
demands its cure, or (iii) breaches any other material obligation under
this Agreement and fails to cure the breach to STERLING COMMERCE's
satisfaction within thirty (30) days after STERLING COMMERCE demands its
cure. Where a breach is not capable of cure, then this Agreement may be
immediately terminated without a cure period.
(b) Normal Business. Company ceases to conduct business in the normal
---------------
course, becomes insolvent, enters into suspension of payments, moratorium,
reorganization or bankruptcy, makes a general assignment for the benefit
of creditors, admits in writing its inability to pay debts as they mature,
suffers or permits the appointment of a receiver for its business or
assets, or avails itself of or becomes subject to any other judicial or
administrative proceeding that relates to insolvency or protection of
creditors' rights.
(c) Minimum Payment Event. Company fails at any time to make any minimum
---------------------
payment as set forth in Exhibit F ("Minimum: Payment").
(d) Ownership. The direct or indirect ownership or control of Company that
---------
exists on the effective date of this Agreement materially changes in a
manner that, in STERLING COMMERCE's sole and reasonable judgment, may
adversely and materially affect STERLING COMMERCE's rights.
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11.4 INTENTIONALLY OMITTED.
11.5 Termination by Company. Company has the right to terminate this Agreement,
----------------------
at Company's sole option, immediately upon notice to STERLING COMMERCE or to
refuse to renew the Agreement, without judicial or administrative notice or
resolution, upon the occurrence of termination event specified below or
elsewhere in this Agreement.
(a) Breach. STERLING COMMERCE or any of its employees (i) breaches any
------
obligation under Section 9, or (ii) breaches any other material obligation
under this Agreement and fails to cure the breach to Company's
satisfaction within thirty (30) days after Company demands its cure. Where
a breach is not capable of cure, then this Agreement may be immediately
terminated without a cure period.
(b) Normal Business. STERLING COMMERCE ceases to conduct business in the
---------------
normal course, becomes insolvent, enters into suspension of payments,
moratorium, reorganization or bankruptcy, makes a general assignment for
the benefit of creditors, admits in writing its inability to pay debts as
they mature, suffers or permits the appointment of a receiver for its
business or assets, or avails itself of or becomes subject to any other
judicial or administrative proceeding that relates to insolvency or
protection of creditors' rights save for bona fide reasons of
reorganization whereunder STERLING COMMERCE has assigned this Agreement,
and such assignee has agreed in writing to abide by the terms and
conditions of this Agreement.
12. CONSEQUENCES OF TERMINATION
---------------------------
12.1 Termination Obligations. Upon the expiration or termination of this
-----------------------
Agreement, all rights granted to Company hereunder will immediately cease, and
Company will (i) promptly comply with the termination obligations specified
below and (ii) otherwise cooperate with STERLING COMMERCE to terminate relations
in an orderly manner.
(a) Payment. Company will pay STERLING COMMERCE all due and outstanding
-------
amounts. Company will also pay STERLING COMMERCE any amount that has not
become due but would otherwise become due arising out of revenue generated
and owed under this Agreement during the term of the same, the due date of
which will be automatically accelerated to the date of expiration or
termination of this Agreement. Any unexpired portion of revenue generated
by rental, renewal, maintenance or other EC Product Use Contracts
extending beyond termination shall be assigned to STERLING COMMERCE or
STERLING COMMERCE's nominee.
(b) EC Products and EC Technology. Company will purge from its computer
-----------------------------
systems, storage media and other files and, at STERLING COMMERCE's option,
destroy or deliver to STERLING COMMERCE or its designee all EC Products
and the EC Technology within Company's possession or control including the
Demonstration EC Products and all code of the EC Products and of the EC
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Technology, unless otherwise agreed to by STERLING COMMERCE in conjunction
with subsection 12.1(d).
(c) Materials. Company will, at STERLING COMMERCE's option, destroy or
---------
deliver to STERLING COMMERCE or its designee all items within Company's
possession or control that contain any Information or bear a Mark, except
as otherwise contemplated under Section 12.1(d).
(d) Company Contracts. Company will, at STERLING COMMERCE's request, assign
-----------------
or perfect the assignment to STERLING COMMERCE or STERLING COMMERCE's
designee, as directed STERLING COMMERCE, of all or any number of Company
Contracts and all or any number of submarketing agreement(s) executed with
the Company Customers, as determined in STERLING COMMERCE's sole
discretion, and notify these customers and STERLING COMMERCE of such
assignment(s).
(e) Company Customer Information. Company will immediately deliver details
----------------------------
of its Company Customers and Prospects records and billing procedures.
(f) Affidavit. Company will deliver to STERLING COMMERCE a notarized or
---------
certified affidavit which confirms that Company has complied with all of
its termination obligations contemplated under this Agreement.
12.2 Disclaimer. Upon the expiry of this Agreement or its termination in
----------
accordance with Section 11, Company will not be entitled under local law or
otherwise to receive any payment from STERLING COMMERCE, whether for actual
consequential, indirect or incidental damages, costs or expenses, whether
foreseeable or unforeseeable (including, but not limited to, labor claims and
loss of profits, investments or goodwill), any right to which Company hereby
waives and disclaims.
12.3 Survival. The provisions of Sections 1, 3.2(c), 3.3(c), 3.5 (to the extent
--------
of STERLING COMMERCE's ownership rights), 3.6 (to the extent of STERLING
COMMERCE's ownership rights, 3.3(c), 3.11, 5 (to the extent of all accrued
amounts due STERLING COMMERCE), 7, 8, 9, 10.1, 12, 13, 14, 15, 16, 17, 18, 19,
20, 21, 22, 23, 24 and 26 shall be deemed to survive and remain in full force
and effect after any expiration or termination of this Agreement.
13. INSPECTION
----------
13.1 During the term of this Agreement and for one (1) year after its expiration
or termination, STERLING COMMERCE or its representatives may, upon prior notice
to Company, inspect the agreements, business records, computer processors,
equipment and facilities of Company relevant to this Agreement during normal
working hours to verify Company's compliance with this Agreement. While
conducting these inspections, STERLING COMMERCE and its representatives will be
entitled to copy any item that Company may possess pertaining to this Agreement
or Company's obligations hereunder.
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14. U.S. EXPORT RESTRICTIONS
------------------------
14.1 Company acknowledges that the EC Products and all related technical
information, documents and materials are subject to export controls under the
U.S. Export Administration Regulations Company will (i) comply strictly with all
legal requirements under these controls, (ii) cooperate fully with STERLING
COMMERCE in any official or unofficial audit or inspection that relates to these
controls and (iii) not export, re-export, divert, transfer or disclose, directly
or indirectly, any EC Product or related technical information, document or
material or direct products thereof to any country outside of the Territory,
unless Company has obtained the prior written authorization of STERLING COMMERCE
and the U.S. COMMERCE Department and any relevant local governmental authority
and/or in accordance with Section 15.1 below. A list of the current restricted
countries is set out in Exhibit N hereto. Upon notice to Company, STERLING
COMMERCE may modify this list to conform to changes in the U.S. Export Control
Regulations.
15. COMPLIANCE WITH LAWS
--------------------
15.1 Local Compliance. Company will, at its expense, obtain and maintain the
----------------
governmental authorizations, restrictions and filings that may be required under
the laws of the Territory to execute or perform this Agreement. Company will
otherwise comply with all laws, regulations and other legal requirements within
the Territory that apply to this Agreement, including tax and foreign exchange
legislation. Company will promptly notify STERLING COMMERCE of any change in
these laws, regulations or other legal requirements that may affect the
importation of the EC Products or Company's performance of this Agreement.
15.2 Unlawful Payments. Company will not use any payment or other benefit
-----------------
derived from STERLING COMMERCE to offer, promise or pay any money, gift or any
other thing of value to any person for the purpose of influencing official
actions or decisions affecting this Agreement, while knowing or having reason to
know that any portion of this money, gift or thing will, directly or indirectly,
be given, offered or promised to (i) an employee, officer or other person acting
in an official capacity for any government or its instrumentalities or (ii) any
political party, party official or candidate for political office.
15.3 Assurances. Company will provide STERLING COMMERCE with the assurances and
----------
official documents that STERLING COMMERCE periodically may request to verify
Company's compliance with this Section 15.
26
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16. INDEMNITY
---------
16.1 Company will indemnify STERLING COMMERCE against any damage, loss,
liability or expense (including lawyers' fees) that STERLING COMMERCE may incur
(i) with respect to any negligent act or omission by, or willful misconduct of,
Company's employees or agents or (ii) as a result of (a) any modification or
amendment of prescribed terms of the Company Contract that STERLING COMMERCE did
not specifically approve, (b) any warranty, condition, representation, indemnity
or guarantee granted by Company or provided by law, with respect to the EC
Offerings in addition or in lieu of the limited warranties stated in this
Agreement, (c) any omission or inaccuracy in Company's advertisements and
promotional materials that relate to the EC Offerings, (d) any modification of
or addition to the EC Offerings not provided or approved by STERLING COMMERCE,
or (e) Company's breach of this Agreement including, without limitation,
Company's failure to comply with Section 15. This Section will not be construed
to limit or exclude any other claims or remedies which STERLING COMMERCE may
assert under this Agreement or by law.
17. INDEPENDENT PARTIES; NONSOLICITATION
------------------------------------
17.1 STERLING COMMERCE and Company are independent parties. Nothing in this
Agreement will be construed to make Company an agent, employee, franchisee,
joint venturer, partner or legal representative of STERLING COMMERCE. Except as
otherwise provided in this Agreement, Company will neither have nor represent
itself to have any authority to act on STERLING COMMERCE's behalf.
17.2 Neither party shall, directly or indirectly, solicit the employment of the
other party's employees or former employees who voluntarily resigned for a
period of less than three (3) months, except by general advertisement or
employment agencies (without instructions being given to such agency to contact
a specific employee), during the term of this Agreement and for a period of one
(1) year thereafter.
18. FORCE MAJEURE
-------------
18.1 Neither party will be liable for any failure or delay in performing an
obligation under this Agreement (excluding payments) that is due to causes
beyond its reasonable control, such as natural catastrophes, government acts or
omissions, laws or regulations, labor strikes or difficulties, transportation,
stoppages or slowdowns or the inability to procure parts or materials. These
causes will not excuse Company from paying accrued amounts due to STERLING
COMMERCE through any available lawful means acceptable to STERLING COMMERCE. If
any of these causes continue to prevent or delay performance for more than
ninety (90) days, STERLING COMMERCE may terminate this Agreement, effective
immediately, upon notice to Company.
27
<PAGE>
19. NOTICES
-------
19.1 Any notice, approval or other communication required or permitted
under this Agreement will be given in writing and will be sent by telex,
telefax, courier or registered airmail to the address specified below or to any
other address that may be designated by the parties or other communication
delivered by telex or telefax will be deemed to have been received the day it is
sent. Any notice or other communication sent by courier will have been received
on the 3rd working day after its receipt by courier. Any notice or communication
sent by registered airmail will be deemed to have been received on the 7th
business day after posting.
If to STERLING COMMERCE:
STERLING COMMERCE INTERNATIONAL, INC.
44, Rue Washington
75408 Paris Cedex 08
FRANCE
Attn: Thomas A. Lutz
President, International Group
Phone: +33.1.53.93.17.00
Fax: +33.1.53.93.17.17
With a copy to
STERLING COMMERCE, INC.
4600 Lakehurst Court
Dublin, Ohio 43106
USA
Attn: Al Hoover, Esq.
Vice President, Legal
Phone: +614.791.6283
Fax: +614.718.1510
28
<PAGE>
If to Company:
Satyam Infoway (Private) Limited
PLA Complex
35, Velachery Road, Little Mount
Chennai - 600 015
India
Attention: Mr. V. Sanker,
General Manager - Finance
Telephone: (91) 44-2354770
Telefax: (91)44-2354771
20. ASSIGNMENT
----------
20.1 Company may not assign, delegate, sub-contract or otherwise transfer this
Agreement or any of its rights or obligations without STERLING COMMERCE's prior
written approval. Any attempt to do so without STERLING COMMERCE'S written
approval will be void. STERLING COMMERCE may assign this Agreement or any of its
rights or obligations, upon notice to Company (i) to an affiliate or a related
company or (ii) to an unrelated company pursuant to a sale, merger or other
consolidation of STERLING COMMERCE or any of its operating units, or business or
product lines.
21. WAIVER, AMENDMENT, MODIFICATION
-------------------------------
21.1 Except as otherwise provided above, any waiver, amendment or other
modification of this Agreement will not be effective unless in writing and
signed by the party against whom enforcement is sought. A waiver of any right or
remedy under this Agreement shall not be deemed to be a permanent waiver of such
right or remedy, unless otherwise agreed to by the parties.
22. SEVERABILITY
------------
22.1 If any provision of this Agreement is held to be unenforceable, in whole or
in part, such holding will not affect the validity of the other provisions of
this Agreement, unless either STERLING COMMERCE or Company deems the
unenforceable provision to be essential to this Agreement in which case STERLING
COMMERCE or Company may terminate this Agreement, effective immediately upon
notice to the other party.
29
<PAGE>
23. INTERPRETATION
--------------
23.1 The terms that are defined in this Agreement may be used in the singular or
the plural, as the context requires. "Days" means calendar days, unless
otherwise specified. "Person" means an individual, partnership, company,
corporation or other legal entity, as the context requires. "Agreement" means
this Agreement and all of its Exhibits and any and all amendments thereto.
Headings are intended only for reference purposes.
24. GOVERNING LAW; ARBITRATION
--------------------------
24.1 This Agreement will be governed by and interpreted in accordance with the
laws of India. STERLING COMMERCE and Company exclude the United Nations
Convention on Contracts for the International Sale of Goods from this Agreement
and from any transaction between them that may be implemented in connection with
this Agreement.
24.2 Any controversy or claim arising out of or relating to this Agreement, or
the existence, validity, breach or termination thereof whether during or after
its term, will be finally settled by compulsory arbitration by the London Court
of Arbitration in accordance with its then current rules.
24.3 The arbitral award will be the exclusive remedy of the parties for all
claims, counterclaims, issues or accountings presented or pled to the
arbitrators. Judgment upon the arbitral award may be entered in any court that
has jurisdiction thereof.
24.4 Nothing in this Section 24 will prevent either party from Seeking interim
injunctive relief against the other party or prevent STERLING COMMERCE from
filing an action against Company to collect unpaid and past due amounts in the
courts having jurisdiction over the other party.
25. INVESTMENT OPTION AND RIGHT OF FIRST REFUSAL
--------------------------------------------
25.1 The parties agree to the terms and conditions stated in Exhibit O, with
respect to certain investment option and right of first refusal provisions
afforded STERLING COMMERCE.
26. ENTIRE AGREEMENT
----------------
26.1 This Agreement and its Exhibits constitute the complete and entire
statement or all terms, conditions and representations of the agreement between
STERLING COMMERCE and Company with respect to its subject matter. Furthermore
this Agreement and its Exhibits supersede all prior agreements, oral and
written, between the parties with respect to the subject matter stated herein.
30
<PAGE>
26.2 This Agreement shall be subject to requisite approval of the Government of
India / Reserve Bank of India, and as otherwise stated in Section 11.1.
IN WITNESS WHEREOF, STERLING COMMERCE and Company cause this Agreement
to be executed by their duly authorized representatives identified below.
STERLING COMMERCE SATYAM INFOWAY (PRIVATE) LIMITED
INTERNATIONAL, INC. ("Company")
("STERLING COMMERCE")
By: /s/ Thomas A. Lutz By: /s/ B. Ramalinga Raju
------------------------ ----------------------------
Name: Thomas A. Lutz Name: B. Ramalinga Raju
----------------------- --------------------------
Title: President Title: Chairman
---------------------- -------------------------
Date: 17 Feb. 1997 Date: 14 Feb. 1997
----------------------- --------------------------
31
<PAGE>
EXHIBIT A
---------
EC Technology
The EC Technology is the current version (as of the date of this Agreement) of
the product known as COMMERCE:Exchange(TM), as described below.
COMMERCE:Exchange is an electronic commerce messaging environment based upon an
integrated series of programs and services that provide scaleable network
processing, standards-based messaging (including X 400 and SMTP/MIME), network
security, mailbox administration, audits and controls, and network
management/administration facilities.
COMMERCE:Exchange provides a controlled mechanism for both inbound and outbound
message "store and forward" services. Both STMP/MIME (POP3) and X 400 message
stores (P1, P7) are included. The mailbox supports all EDI and data types that
can be contained in a SMTP/MIME or X 400 body part.
COMMERCE:Exchange currently provides the following message handling features:
. Mailboxing Protocol: POP3, X 400 MS
. Messaging Types Supported: MIME/SMTP, X 400
. X 400 Standards: 1994
COMMERCE:Exchange includes a security firewall. Also provided are network
sign-on controls, IDs and mailbox password protection.
COMMERCE:Exchange's disaster recovery manager provides full-time synchronization
of configuration parameters and messaging data on a "hot backup" system
connected over a LAN or WAN. The redundant system mirrors mailbox configuration
information, partner profiles, and inbound and outbound data. Should a failure
occur on the production unit, Sterling Commerce's client communication software,
COMMERCE:Connection for the Internet(TM), is designed to automatically send data
to the mirrored system.
COMMERCE:Exchange's mailbox administration tool provides the ability to
establish mailbox configurations, perform mailbox maintenance, and track network
processing.
The system architecture is designed to utilize Microsoft Windows NT diagnostic
and remote management functionality, including SMS. In addition,
COMMERCE:Exchange software modules have been designed to support SNMP in future
releases.
COMMERCE:Exchange's encryption subsystem provides optional encryption/decryption
support for the DES algorithm implemented with Sterling Commerce's
COMMERCE:Connection for the Internet client. A 56 byte version of DES is
supported for use in the United States and Canada while 40 byte (subject to U.S.
government export approval) or 0 byte encryption can be utilized outside the
United States and Canada.
32
<PAGE>
EXHIBIT B
---------
EC Network Services
The EC Network Services are the current version (as of the date of this
Agreement) of the service offering known as COMMERCE:Network(TM) as described
below.
COMMERCE:Network is an integrated series of, programs and services that provides
electronic mailboxing, automatic mailslotting by document type(s), X400
capability, immediate and scheduled delivery, many document processing options,
network control reports and audits, translation and conversion services,
Internet Access; and interconnects with other messaging networks.
COMMERCE:Network supports multiple messaging formats for each communications
method, a range of baud rates is supported (generally from 1,200 to 56,000 bps)
using dial-up or dedicated lines. In addition to protocols commonly used for
EDI, COMMERCE:Network also supports TCP/IP for Internet access and X 400, SNADS,
PROFS and SMTP for the integration of human-readable and machine-readable
messages.
COMMERCE:Network will support communication with companies using many widely
accepted public EDI standards such as EDIFACT, ANSI X12, VICS, UCS and TDCC. It
will also accommodate many private or proprietary formats as well.
COMMERCE:Network monitors the steps required to process, transmit and receive
data. Scheduled on-line and off-line data archiving captures a variety of
information in a deliberately redundant environment to enable recoverability.
Also provided are network sign-on controls, IDs and mailbox password protection.
In addition, users must comply with detailed profiles that dictate what
documents may be exchanged between specific pairs of trading partners. Several
levels of physical controls are in place to provide back-up power and a remote,
hot site is maintained for disaster recovery.
Company is aware and understands that certain COMMERCE:Network related service
capabilities or functions described above may not be in the EC Technology
delivered as of the Effective Date of this Agreement. Hence, the parties agree
that until such time as when such missing service capabilities or functions are
incorporated into the EC Technology, delivered by STERLING COMMERCE to Company
and installed and operable, the same, if technically feasible, will be performed
by Sterling Commerce or its affiliates at their facilities.
33
<PAGE>
EXHIBIT C
---------
EC Products
Products are those defined by the following Sterling Commerce product offerings:
Part I
- ------
COMMERCE:Connection for Windows
COMMERCE:Forms
COMMERCE:Catalog
COMMERCE:Doculink
COMMERCE:Links
COMMERCE:Library for Windows
CENTRAN:Director for Windows
CENTRAN:Integrator for Windows
CENTRAN:Smartforms
The current releases of the above EC Products, function and interface with the
current release of the Technology.
Part II
- -------
Then currently available video and computer based training (CBT) products (in
English).
34
<PAGE>
EXHIBIT D
Territory
The Territory is defined as the Territory of India.
35
<PAGE>
EXHIBIT E
---------
Transborder Rules
Transborder Rules
1. General. Company acknowledges that the global marketing and support of the
-------
EC Offerings in its various located versions requires a substantial degree
of co-ordination among Sterling Commerce and its various affiliates and
providers throughout the world. Company further acknowledges that certain
Multinational Customers, as defined below, will contract for, install and
use the EC Offerings, as applicable, directly or through selected entities,
in multiple jurisdictions. These Transborder Rules are intended to ensure
that such Multinational Customers receive the EC Offerings in a prompt and
effective manner, and that financial be taken into account by Sterling
Commerce for all parties, including, Company and Sterling Commerce's other
providers ("Providers").
2. Multinational Customer. "Multinational Customer" means any potential or
----------------------
existing customer, whether domiciled inside or outside of the Territory,
that desires to contract for, install, use, or otherwise accept the EC
Offerings, directly or through related entities, in more than a single
jurisdiction. If a potential or existing customer domiciled in the
Territory desires to contract for, install, use or otherwise accept the EC
Offerings outside the Territory, directly or through a related entity, then
such customer will be deemed a Multinational Customer. Similarly, if a
potential or existing customer domiciled outside the Territory desires to
contract for, install, use or otherwise accept the EC Offerings inside the
Territory, directly or through a related entity, then such customer will be
deemed a Multinational Customer.
3. Reservation. Sterling Commerce expressly reserves the right to offer and
-----------
provide the EC Offerings to Multinational Customers, directly or through
its affiliates or un-affiliated third parties. Upon receiving an inquiry or
order from any potential or existing Multinational Customer, Company will
promptly notify Sterling Commerce if and when the performance of such
service, or support, delivery or installation of such product will be
outside the Territory. Such notice will include (i) the name and address of
the Multinational Customer, (ii) the intended location and pertinent entity
of the EC Offering, (iii) the anticipated EC Offerings to be contracted for
by such customer, and (iv) additional information that Sterling Commerce
may request from time to time. Sterling Commerce and Company will in good
faith determine how to respond to any such inquiry or order to best address
the particular Multinational Customer's requirements and the financial and
support considerations that must be taken into account by Sterling
Commerce, including the effect and reconciliation of the fights and
obligations of Sterling Commerce and the Providers in such outside
jurisdiction.
36
<PAGE>
4. Substantial Contribution. Company will be entitled to receive a commission
------------------------
from Sterling Commerce as set out in paragraph 5 hereunder if (i) Sterling
Commerce or any Provider accepts an order from a Multinational Customer for
installation, use or acceptance of the EC Offerings inside the Territory,
or (ii) Sterling Commerce accepts an order from an end user Multinational
Customer or a non-Multinational Customer, as provided in Section 2.2(d),
for installation, use or acceptance of the EC Technology inside the
Territory, and (iii) in either or both cases, Company has substantially
contributed to soliciting such order and will not be receiving any revenues
or other compensation from such order. Sterling Commerce will in good
faith, but at its sole discretion, determine whether Company has
substantially contributed to soliciting the order or is to provide services
or products thereto.
5. Commission; Payment. The commission payable to Company and the payment
-------------------
terms will be determined by the parties hereto on a contract by contract
basis by negotiation in good faith.
6. Services. Company will, at Sterling Commerce's specific written request,
--------
provide Multinational Customers with license grants, network services,
installation, training, customization, maintenance and support services
that may be required within the Territory. Company will provide such
products and services, in whole or in part, under a subscription, license
or service agreement executed directly with the Multinational Customer or
its local related entity(ies) as a subcontractor of Sterling Commerce or
the Provider, as Sterling, Commerce deems appropriate. Company will offer
direct services and products at prices and under terms no less favorable
than those that Company offers to its own customers; alternatively,
Sterling Commerce and Company will establish Company's sub-contracting fee
by prior agreement.
7. Termination. Unless otherwise agreed, Company will not be entitled to any
-----------
commission with respect to orders from Multinational Customers or their
related persons that Sterling Commerce may receive after the expiration or
termination date of this Agreement or, if the order was received before the
expiration or termination of this Agreement, that Sterling Commerce may
accept one (1) month after such expiration or termination date.
37
<PAGE>
EXHIBIT F
---------
Exclusivity and Minimum Payments
A. Exclusivity Payments
--------------------
As discussed in Section 2.2(d), in order for Company to retain the
exclusivity rights thereunder, Company must pay to STERLING COMMERCE the
following minimum amounts both for in-country and international traffic
("Exclusivity Payments") based on charges due STERLING COMMERCE which are only
attributable to revenues from EC Network Services charges billed by Company
(excluding communication charges):
Annual Term Initial 6 Months Minimum Year End Minimum
- ----------- ------------------------ ----------------
* * * * *
38
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
*****
39
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
EXHIBIT G
---------
Designated CPUs
CONDOR ( as of 97.1 Release)
A TYPICAL NEST IMPLEMENTATION
December '96
RACK (depends on location and space requirements):
QTY ITEM NUMBER DESCRIPTION
- --- ----------- -----------
1 TBD
SERVER: (Minimum requirements)
QTY ITEM NUMBER DESCRIPTION
- --- ----------- -----------
HARDWARE:
1 D4305A HP NETSERVER LS2 MODEL 1 ARRAY 5/166 64_
1 D2818A HP 171N SVGA MONITOR
12 D3578A HP 32MB RAM KIT
6 D3583A HP 4GB DISK
1 D2968B HP REMOTE ASSISTANT CARD
1 H5515A HP SUPPORT PACK (7X24 4HR)
1 ITL-G-50760 INTEL PRO 100 PCI
1 J1460A HP 8 PORT CONSOLE SWITCH
3 J1462A HP 7FT SWITCH TO SERVER CABLES
1 70000840 DIGI AccelePort 8em
2 DB25 Male-Female cable
2 3800PLUS AT&T Comsphere Modem
OPERATING SOFTWARE
1 MCS-S-54183 MS WINDOWS NT SERVER v3.51
20 MCS-S-54186 MS WINDOWS NT ACCESS LICENSE
41
<PAGE>
THIRD PARTY SOFTWARE
1 MS SNA
1 MS SMS
1 OCTOPUS NT SERVER v 1.6
1 16606 SYBASE REPLICATION SERVER XI
1 SYBASE SUPPORT FEES FOR REPLICATION
1 16630 SYBASE SQL SERVER XI
1 SYBASE SUPPORT FEES FOR SQL
1 SOFTWARE.COM POST OFFICE 1.9.3
1 SOFTWARE.COM DNS
1 NET-TEL ROUTE 400 MTA
1 NET-TEL TCP/IP COMMUNICATIONS
1 NET-TEL MESSAGE STORE
1 NET-TEL ROUTE 400MTA ACCOUNTING
1 NET-TEL ROUTE 400 RCF 822 SMTP GATEWAY
1 NET-TEL TCPIP RFC 1006
1 NET-TEL GATEWAY RUN TIME
1 NET-TEL FAX AU single line
1 NET-TEL Additional fax line
1 NET-TEL Message Body Part Converter
1 NET-TEL External Conversion Engine
1 NET-TEL MAINTENANCE
FIREWALL:
QTY ITEM NUMBER DESCRIPTION
- --- ----------- -----------
HARDWARE
1 D4305A HP NETSERVER LS2 MODEL 1 ARRAY 5/166 64M
4 D3578A HP 32MB RAM KIT
3 D3583A HP 4GB DISK
1 D2968B HP REMOTE ASSISTANT CARD
1 H5515A HP SUPPORT PACK (7X24 4 HR)
2 ITL-G-50760 INTEL PRO 100 PCI
OPERATING SOFTWARE
1 MCS-S-54183 WINDOWS NT SERVER 3.51
42
<PAGE>
THIRD PARTY SOFTWARE
1 MS WIN NT Patch
1 BIND494
1 DNS
1 RAPTOR EAGLE NT FIREWALL SOFTWARE
RAPTOR ANNUAL SOFTWARE SUPPORT CONTRACT
ROUTER:
QTY ITEM NUMBER DESCRIPTION
- --- ----------- -----------
1 CISCO 4000 M 3 Slot Modular Multiprotocol Router
AC Power supply
1 SF G4C 11.1 4000 IOS IP only feature
1 NP 2E Ethernet Ports NP Module
1 NP 4T 4 Serial Port NP Module
1 CAB V35MT Male DTE V.35 Cable 10'
1 ACS NPRM 19in Rack Mount
COMMUNICATION EQUIPMENT:
QTY ITEM NUMBER DESCRIPTION
- --- ----------- -----------
1 3C16671/3C16630 3COM 24-Port SNMP-Manageable Ethernet Hub
Link builder FMS II
includes 24 RJ-45 and 1 AUI Port
includes SNMP-Management card
6 10BaseT cables
COMMUNICATION MONITORING:
QTY ITEM NUMBER DESCRIPTION
- --- ----------- -----------
1 SS-4078-1MA Network General Ethernet (10BaseT) Sniffer Server
MANAGEMENT, VOICE, and COMMERCE:Network (depends on requirements):
QTY ITEM NUMBER DESCRIPTION
- --- ----------- -----------
1 TBD MICOM
43
<PAGE>
EXHIBIT H
---------
Business Plan
The format of the Business Plan submitted is left to the discretion or the
Company. However, it should contain the elements portrayed in this exhibit.
BUSINESS PLAN
COMPANY PROFILE
-Staffing plans, including numbers of management, sales and technical
personnel who will be marketing, providing, sublicensing, installing,
facilitating, maintaining and supporting the EC Offerings within the
Territory;
-A profile of Company's staff and training plans for sales and technical
personnel (including numbers anticipated to attend STERLING COMMERCE
training);
-3-year Customer and revenue projections for each EC Offering that COMPANY
is proposing to represent.
MARKET SIZE:
1. Number of major potential Hub customers for the EC Offerings and
average number of potential Spokes for each Hub.
Major IT and economic trends within the Territory today and projected over the
next 3 years. Projected economic and computer industry growth.
COMPETITION:
1. Other major companies within the Territory and the vendors they
represent;
2. Number of competitors to COMMERCE:Network that are in the Territory
and available information regarding the size of their customer base
and relevant information regarding offerings.
3. Plans and sales strategies to overcome competition across all EC
Offerings.
44
<PAGE>
PROSPECTS:
1. Top prospects listed by industry;
2. Prospect identification.
MARKETING:
1. Marketing plan used to sell the EC offerings, including seminars and
advertising;
2. Marketing and sales programs;
3. Communications plan for Company's and STERLING COMMERCE's name and for
the EC Offerings;
4. Plan for use of marketing materials to sell the EC Offerings;
5. Sales tools required to sell the EC Offerings.
Plan to support Company Customers of the EC Offerings
Detailed expectations of support to be anticipated from the Company
THE REQUIREMENTS DETAILED ABOVE MAY BE MODIFIED BY STERLING COMMERCE FROM TIME
TO TIME
45
<PAGE>
EXHIBIT I
---------
Company Contracts
See attached agreements forms
- -----------------------------
46
<PAGE>
Sterling Commerce B.V. ("Sterling Commerce"), a subsidiary of Sterling Commerce,
Inc., grants You a nonexclusive license to use the program contained in this
package (the "Program") and the related documentation (the "Documentation")
including any and all provided corrections, revisions, updates to the Program
and Documentation. You assume responsibility for the installation, use and
results obtained from the Program.
LICENSE
The Program may only be used on a single computer located within the European
Union and only in connection with Your own regular business activities. You may
not use the Program in a service bureau environment or for the benefit of any
third party. You may physically transfer the Program from one computer to
another provided that the Program is used on only one computer at a time.
In the event the Program contains a feature allowing the creation of screen
templates, print templates and/or document turnaround maps, any templates and/or
maps created by You ("Your Templates") may be provided to other property
licensed users of the Program with which You transact business and which are
located in the European Union. Your Templates will be deemed part of the Program
and subject to the provisions of this agreement, except that no warranty of any
kind is made and no maintenance or support services will be provided for Your
Templates. In addition, this provision shall not be construed as a grant of
rights to disclose any screen templates, print templates and/or document
turnaround maps provided by Sterling Commerce. You agree that when Your
Templates are provided to any other property licensed user of the Program with
which You transact business, no charge will be made by You.
YOU MAY NOT OTHERWISE USE, COPY, MODIFY, DISCLOSE OR TRANSFER THE PROGRAM OR
DOCUMENTATION, IN WHOLE OR IN PART, EXCEPT THAT YOU MAY MAKE ONE BACKUP COPY OF
THE PROGRAM. IF YOU DISCLOSE OR TRANSFER POSSESSION OF THE PROGRAM OR
DOCUMENTATION TO ANOTHER PARTY, OR USE THE PROGRAM AS A SERVICE TO ANOTHER
PARTY, THIS AGREEMENT IS AUTOMATICALLY TERMINATED.
FEES
The Initial Program license fee ("Initial License Fee") covering the license and
maintenance services for the first year of this agreement has been paid by You
or will be paid by You upon receipt of Sterling Commerce's invoice. Annual
renewal Program license fees ("Renewal License Fee") thereafter shall be due
upon receipt of invoice based on Sterling Commerce's then current license fee
schedule.
TERM
Except as otherwise provided herein, this agreement shall be effective for one
year from the date of delivery to You, as evidenced by Sterling Commerce's
shipping documents (the "Initial Program Year"), provided that You pay the
Renewal License Fee as invoiced to You. This agreement will terminate if You
fail to comply with any term or condition of this agreement, or if You fail to
pay the Renewal License Fee. You agree upon any termination of this agreement
to immediately cease all use of the Program and Documentation and destroy the
Program and Documentation and to provide to Sterling Commerce written
certification of such destruction.
TITLE; CONFIDENTIALITY
Title to and ownership of the Program and Documentation and all applicable
rights to patents, copyrights, trademarks and trade secrets remain in Sterling
Commerce and/or the respective manufacturer or author. Except as otherwise
expressly provided in this agreement, You agree to maintain the Program and
Documentation in confidence and You shall not sell, transfer, publish, disclose,
display or otherwise make accessible the Program or Documentation, or any whole
or partial copies, to any third party. You agree not to reverse, assemble or
decompile the Program, in whole or in part, or examine the Program for the
purpose of reverse engineering the code, except as and to the extent
specifically authorized under applicable law.
MAINTENANCE AND SUPPORT SERVICES
During the term of this agreement, and provided that such services are generally
made available, Sterling Commerce will:
1. Use reasonable efforts to correct or bypass any material error in the then
current version of the Program;
2. Provide any changes in the Program made generally available by Sterling
Commerce to its licensees to conform to revised industry standards as
announced from time to time by the relevant generally accepted EDI standards
committee(s);
3. Make available reasonable telephone support with respect to the Program
licensed hereunder, during Sterling Commerce's normal business hours.
You agree to promptly replace the Program with any new version of the Program
provided by Sterling Commerce.
STERLING COMMERCE, HOWEVER, DOES NOT REPRESENT OR WARRANT THAT EVERY DEFECT IN
THE PROGRAM CAN OR WILL BE REPAIRED, OR THAT THE FUNCTIONS CONTAINED IN THE
PROGRAM WILL MEET YOUR REQUIREMENTS, OR THAT THE OPERATION OF THE PROGRAM WILL
BE UNINTERRUPTED OR ERROR FREE.
LIMITED WARRANTY
Sterling Commerce warrants that the media on which the Program is recorded is
free from defects in materials and workmanship under normal use for a period of
ninety (90) days from the date of delivery to You as evidenced by Sterling
Commerce's shipping documents.
Sterling Commerce warrants that it has the right to authorize the use of the
Program by You under this agreement. Sterling Commerce will hold You harmless
and defend You against suits based on any claim that Your use of the Program
under this agreement infringes on any patent, copyright, trademark or other
proprietary right provided You give Sterling Commerce prompt written notice of
such suits and permit Sterling Commerce to control the defense thereof. In the
event of any such suit, Sterling Commerce may, at its option, terminate this
agreement and give You a refund, as described below.
EXCEPT AS PROVIDED ABOVE, THE PROGRAM IS PROVIDED "AS IS" WITHOUT WARRANTY OF
ANY KIND, LIMITATIONS OF REMEDIES EITHER EXPRESSED OR IMPLIED.
Sterling Commerce's entire liability and Your exclusive remedy under this
agreement shall be:
1. The replacement of any media not meeting Sterling Commerce's "ULTIMATE
WARRANTY" and which are returned to Sterling Commerce during the first ninety
(90) days from date of delivery; or
2. If Sterling Commerce fails or is unable to deliver replacement media which is
free of defects in materials or workmanship, or fails or is unable to repair
any such defect reported by You within a reasonable period of time, or in the
event of an infringement as described above, Sterling Commerce may terminate
this agreement by refunding the Initial License Fee to the extent then paid
by You. Upon any such termination You agree to destroy the Program and
Documentation and to provide to Sterling Commerce written certification of
such destruction.
IN NO EVENT WILL STERLING COMMERCE BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR
ANY DAMAGES OR LOSSES, INCLUDING LOST PROFITS OR ANY OTHER DAMAGES ARISING OUT
OF THE USE OR INABILITY TO USE THE PROGRAM EVEN IF STERLING HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY DAMAGES WHATSOEVER IN EXCESS OF THE
INITIAL LICENSE FEE PAID BY YOU. THE EXCLUSION AND LIMITATION CONTAINED HEREIN
WILL NOT APPLY ONLY IF ANY ONLY TO THE EXTENT THAT APPLICABLE LAW REQUIRES
LIABILITY BEYOND AND DESPITE THIS EXCLUSION AND LIMITATION.
GENERAL
Except as otherwise provided in this agreement, You may not sublicense, assign
or transfer this Agreement, the license granted hereunder, the Program, the
Documentation or the Templates. Any attempt otherwise to sublicense, assign or
transfer any of the rights, duties or obligations hereunder is void.
The preprinted terms and conditions of any purchase order or other ordering
document issued by you in connection with this Agreement which are in addition
to or inconsistent with the terms and conditions of this Agreement shall not be
binding on Sterling Commerce and shall not be deemed to modify this Agreement.
Customer acknowledges that the Program is unique and that Sterling Commerce is
entitled to all legal and equitable remedies to protect its proprietary
interest, including the right to obtain injunctive relief.
This Agreement will be governed by and construed in accordance with the laws of
the Netherlands. The parties exclude application of the UN Convention on
Contracts for the International Sale of Goods from this Agreement. You consent
to the jurisdiction of the competent courts of Amsterdam, the Netherlands, for
the resolution of all disputes in connection with this Agreement.
Any waiver hereunder shall be effective only if made in writing.
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT AND UNDERSTAND IT AND AGREE TO
BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE
AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US WHICH SUPERSEDES ANY
PROPOSAL OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS
BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
<PAGE>
(c) UNLESS SUBJECT TO A SEPARATE AGREEMENT BETWEEN CUSTOMER AND ANY INTERCONNECT
SERVICES PROVIDER, IN NO EVENT SHALL ANY INTERCONNECT SERVICES PROVIDER HAVE
ANY LIABILITY TO CUSTOMER IN CONNECTION WITH THE PERFORMANCE OF THIS
AGREEMENT.
8. Confidentiality
---------------
(a) Customer acknowledges and agrees that the Documentation relating to the
Services and all copies, partial copies and any and all revisions and
modifications thereof, and the Services are confidential and proprietary
and constitute valuable trade secrets of Sterling Commerce. Customer
agrees it shall maintain the Documentation and the Services in confidence
and shall not, nor shall it permit its employees to sell, publish,
disclose, display or otherwise make accessible the Documentation, or any
copies thereof, or the Services, in whole or in part, to any third party,
or use the Documentation or Services for its own benefit or the benefit of
others, except as expressly permitted under this Agreement.
Notwithstanding any other termination provision of this Agreement,
violation of any provision of this Section 8(a) shall be deemed to
constitute a material breach of this Agreement and shall be the basis for
immediate termination of this Agreement and the Services provided
hereunder, and shall give Sterling Commerce the right to such immediate
injunctive relief in addition to all other available remedies at law and
in equity.
(b) Sterling Commerce agrees to utilize and employ commercially reasonable
safety and security measures for Data transmission and processing and for
protection against unauthorized access to Sterling Commerce's computerized
transmissions with respect to Data contained in Customer's incoming and
outgoing mailbox(es) or data being processed by Sterling Commerce. Except
as authorized by Customer, Sterling Commerce will not disclose to any
third party or use for its own benefit or use in any manner not
contemplated by this Agreement any Data contained in Customer's incoming
or outgoing mailbox(es) or being processed by Sterling Commerce. However,
Sterling Commerce does not represent or guarantee in any manner that Data
coming into Customer's mailbox(es) has been treated by the sender thereof
as confidential or that Data transmitted from Customer's outgoing
mailbox(es) will be treated by the recipient as confidential.
(c) Customer assumes full responsibility for monitoring and restricting the use
of its password(s), user identification numbers and other security measures
subject to control by Customer.
(d) The foregoing notwithstanding, a party's obligations hereunder shall not
extend to any information, including Data, disclosed to that party (the
"Receiving Party") by the owner of the party (the "Disclosing Party"),
which:
(i) the Receiving Party can establish by competent documentation, was
known to the Receiving Party without restriction prior to disclosure
to it by the Disclosing Party or was independently developed by the
Receiving Party; or
(ii) is now or hereafter comes into the public domain through no fault of
the Receiving Party; or
(iii) is disclosed to the Receiving Party without restriction on disclosure
by a third party who has the lawful right to make such disclosure.
(e) The provisions of this Section 8 shall survive any termination or expiration
of this Agreement.
9. Equipment Approval.
------------------
If performance of Services under this Agreement requires connection of Customer
___________________________________.
10. Government Restrictions.
-----------------------
Customer shall be solely responsible for compliance with any applicable
government regulations relating to the exportation and/or importation of Data.
11. General.
-------
(a) Titles and paragraph headings are for convenient reference and are not
part of this Agreement. This Agreement supersedes any and all prior
discussions and agreements between the parties relating to the Services,
constitutes the entire agreement between the parties relating to the
Services, and may be modified or superseded only by a written document
signed by an authorized representative of each. There are no covenants,
promises, agreements, conditions or understandings either oral or written,
between the parties relating to the subject matter of this Agreement other
than as set forth herein. No representation or warranty has been made by
or on behalf of a party to this Agreement or any officer, director, agent,
employee thereof, to induce the other party to enter into this Agreement,
the representations and warranties expressly set forth herein. The
preprinted terms and conditions of any purchase order or other ordering
document issued by Customer in connection with this Agreement which are in
addition to or inconsistent with the terms and conditions of this
Agreement shall not be binding on Sterling Commerce and shall not be
deemed to modify this Agreement. The parties hereto declare they have
received this Agreement and all documents and notices hereto be drawn up
in the English language. Les parties aux presentes sont avoir requis que
la presente entente ains que les ecrits s'y reprodent rediges en anglais.
(b) Except for Customer's payment obligations hereunder, neither party shall be
responsible for delays in any of its performance hereunder due to causes
beyond its reasonable control, including, but not limited to, acts of God,
strikes or inability to obtain materials on time.
(c) If any provision of this Agreement shall be deemed illegal or otherwise
unenforceable, in whole or in part, that provision shall be severed or shall
be enforced to the extent legally permitted and the remainder of the
provision and the Agreement shall remain in full force and effect. The
waiver of any right or election of any provision in one instance shall not
affect any rights or remedies in another instance. A waiver shall be
effective only if made in writing and signed by an authorized representative
of the party making such waiver.
(d) All notices which either party is required or may desire to give the other
party pertinent to this Agreement shall be given by addressing the
communication to the address set forth below, and may be given by
certified or registered mail, overnight carrier or cable. Such notices
shall be deemed given on the date of receipt (or upon delivery of said
notice. Either party may designate a different address for receipt of
notices upon written notice to the other party.
(e) This Agreement shall be deemed accepted by Sterling Commerce at its office
in Dublin, Ohio, and shall be governed by the laws of the State of Ohio,
United States of America. Customer hereby submits to the nonexclusive
jurisdiction of the State of Ohio or United States Federal courts located
within the State of Ohio, United States of America. Customer agrees that
process may be served upon Customer in a manner authorized by Ohio or
United States law.
(f) Customer may not transfer or assign its rights, duties or obligations under
this Agreement to any person or entity, in whole or in part, without the
prior written consent of Sterling Commerce. Any such prohibited assignment
shall be void
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Agreement No.:____________________________________ Accepted by: Accepted by:
Sterling Commerce International, Inc., a
Effective Date:___________________________________ _______________ wholly-owned subsidiary of Sterling Commerce,
"Customer" Inc. "Sterling Commerce"
__________________________________________________ ___________________________ ____________________________________________
Signature Signature
Customer
__________________________________________________ ___________________________ ____________________________________________
Address Name Name
__________________________________________________
__________________________________________________ ___________________________ ____________________________________________
Telephone Title Title
___________________________________________________________________________
Customer specifically accepts the Warranty Disclaimer and Limitation of
Liability clauses of this agreement.
Sterling Commerce International, Inc.
4600 Lakehurst Court
Dublin, Ohio 43016
___________________________ ____________________________________________
Signature Title
___________________________
Name
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
TERM PROGRAM LICENSE AGREEMENT (INTERNATIONAL)
GENTRAN:Integrator(TM) (External)
This Agreement is entered into, effective upon execution by both parties (the
"Effective Date") between Sterling Commerce B.V. ("Sterling Commerce"), a
wholly-owned subsidiary of Sterling Commerce, Inc. and the company named below
("Customer"), with respect to the software product GENTRAN:Integrator (the
"Program") and the related user documentation (the "Documentation"). These terms
and conditions shall also apply to any corrections, revisions or updates to the
Program and Documentation provided by Sterling Commerce, and to any other
feature or functionality provided by Sterling Commerce which are designed or
intended to be used in conjunction with the Program, whether delivered with the
Program or subsequently delivered.
GRANT OF LICENSE
Sterling Commerce grants to Customer a nonexclusive license to use the Program
and Documentation in accordance with the terms of this Agreement. The Program
may be used only on a single computer located within the European Union.
Customer may physically transfer the Program from one computer to another
provided that the Program is used on only one computer at a time. Customer may
use the Program for its own regular internal business activities and for the
purpose of creating templates and/or maps, as further described below. Except as
explicitly permitted herein, and in no event may Customer use the Program in a
service bureau environment or to process the date of any third party.
CREATION OF TEMPLATES
Utilizing GENTRAN:Integrator, Customer may create screen templates, print
templates, application maps, transmission data file templates or document
turnaround maps ("Templates") which may be provided to other properly licensed
users of the Program which are located in the European Union, provided that
Customer receives no monetary compensation for the provision of such Templates.
The Templates will be deemed part of the Program and subject to the provisions
of this Agreement, except that no warranty or infringement indemnity of any kind
is made by Sterling Commerce with respect to the Templates, and no maintenance
or support services will be provided by Sterling Commerce for the Templates.
Customer will hold Sterling Commerce harmless and defend Sterling Commerce
against suits or other proceedings based on any claim that the Templates
infringe on any patent, copyright, trademark or other proprietary right, or any
claim by a third party resulting from Customer's sue or provision of the
Templates pursuant to this Agreement. Customer is not granted any right to
disclose any screen templates, printer templates, application maps, transaction
data file templates and/or document turnaround maps provided by Sterling
Commerce to Customer.
CUSTOMER MAY NOT OTHERWISE USE, COPY, MODIFY, DISCLOSE OR TRANSFER THE PROGRAM
OR DOCUMENTATION, IN WHOLE OR IN PART, EXCEPT THAT CUSTOMER MAY MAKE ONE BACKUP
COPY OF THE PROGRAM. IF CUSTOMER DISCLOSES OR TRANSFERS POSSESSION OF THE
PROGRAM, DOCUMENTATION OR TEMPLATES TO ANOTHER PARTY WHICH IS NOT A PROPERLY
LICENSED USER OF THE PROGRAM OR USES THE PROGRAM OR TEMPLATES TO PROCESS DATA
FOR A THIRD PARTY, THIS AGREEMENT IS AUTOMATICALLY TERMINATED.
LICENSE FEES
The Initial Program license fee ("Initial License Fee") covering the license and
maintenance services for the first year of this agreement has been paid by You
or will be paid by You upon receipt of Sterling Commerce's invoice. Annual
renewal Program license fees ("Renewal License Fee") thereafter shall be due
upon receipt of invoice based on Sterling Commerce's then current license fee
schedule.
TERM
Except as otherwise provided herein, this agreement shall be effective for one
year from the Effective Date (the "Initial Program Year"), and shall be renewed
from year to year thereafter ("Renewal Program Years"), provided that Customer
pays the Renewal License Fee as invoiced to Customer. This agreement will
terminate if Customer fails to comply with any term or condition of this
agreement, or if Customer fails to pay the Renewal License Fee. Customer agrees
upon any termination of this agreement to immediately cease all use of the
Program and Documentation and destroy the Program and Documentation and to
provide to Sterling Commerce written certification of such destruction.
TITLE; CONFIDENTIALITY
Title to and ownership of the Program and Documentation and all applicable
rights to patents, copyrights, trademarks and trade secrets remain in Sterling
Commerce and/or the respective manufacturer or author. Except as otherwise
expressly provided in this agreement, Customer agrees to maintain the Program
and Documentation in confidence and Customer shall not sell, transfer, publish,
disclose, display or otherwise make accessible the Program or Documentation, or
any whole or partial copies, to any third party. Customer agrees not to
reverse, assemble or decompile the Program, in whole or in part, or examine the
Program for the purpose of reverse engineering the code, except as and to the
extent specifically authorized under applicable law.
MAINTENANCE AND SUPPORT SERVICES
During the term of this agreement, Sterling Commerce will:
1. Use reasonable efforts to correct or bypass any material error in the then
current version of the Program;
2. Provide any changes in the Program made generally available by Sterling
Commerce to its licensees to conform to revised industry standards as
announced from time to time by the relevant generally accepted EDI standards
committee(s);
3. Make available reasonable telephone support with respect to the Program
licensed hereunder, during Sterling Commerce's normal business hours.
Customer agrees to promptly replace the Program with any new version of the
Program provided by Sterling Commerce.
STERLING COMMERCE DOES NOT REPRESENT OR WARRANT THAT EVERY DEFECT IN THE PROGRAM
CAN OR WILL BE REPAIRED, OR THAT THE FUNCTIONS CONTAINED IN THE PROGRAM WILL
MEET YOUR REQUIREMENTS, OR THAT THE OPERATION OF THE PROGRAM WILL BE
UNINTERRUPTED OR ERROR FREE. CUSTOMER ASSUMES RESPONSIBILITY FOR THE SELECTION
OF THE PROGRAM TO ACHIEVE CUSTOMER'S INTENDED RESULTS, FOR THE TEMPLATES, AND
FOR THE INSTALLATION, USE AND RESULTS OBTAINED FROM THE PROGRAM, THE
DOCUMENTATION AND THE TEMPLATES.
LIMITED WARRANTY; WARRANTY DISCLAIMER
Sterling Commerce warrants that the media on which the Program is recorded is
free from defects in materials and workmanship under normal use for a period of
ninety (90) days from the Effective Date.
Sterling Commerce warrants that it has the right to authorize the use of the
Program and the documentation by Customer under this agreement. Sterling
Commerce will hold Customer harmless and defend Customer against suits based on
any claim that Customer's use of the Program under this agreement infringes on
any patent, copyright, trademark or other proprietary right provided Customer
gives Sterling Commerce prompt written notice of such suits and permit Sterling
Commerce to control the defense thereof. In the event of any such suit,
Sterling Commerce may, at its option, terminate this agreement and give Customer
a refund, as described below.
EXCEPT AS PROVIDED ABOVE, THE PROGRAM IS PROVIDED "AS IS" WITHOUT WARRANTY OF
ANY KIND, EITHER EXPRESSED OR IMPLIED.
Sterling Commerce's entire liability and Your exclusive remedy under this
agreement shall be:
1. The replacement of any media not meeting Sterling Commerce's "LIMITED
WARRANTY" and which are returned to Sterling Commerce during the first ninety
(90) days from date of delivery; or
2. If Sterling Commerce fails or is unable to deliver replacement media which is
free of defects in materials or workmanship, or fails or is unable to repair
any such defect reported by Customer within a reasonable period of time, or
in the event of an infringement as described above, Sterling Commerce may
terminate this agreement by refunding the Initial License Fee to the extent
then paid by Customer. Upon any such termination Customer agrees to destroy
the Program and Documentation and to provide to Sterling Commerce written
certification of such destruction.
IN NO EVENT WILL STERLING COMMERCE BE LIABLE TO CUSTOMER OR TO ANY THIRD PARTY
FOR ANY DAMAGES OR LOSSES, INCLUDING LOST PROFITS OR ANY OTHER DAMAGES ARISING
OUT OF THE USE OR INABILITY TO USE THE PROGRAM EVEN IF STERLING HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY DAMAGES WHATSOEVER IN EXCESS OF
THE INITIAL LICENSE FEE PAID BY CUSTOMER. THE EXCLUSION AND LIMITATION
CONTAINED HEREIN WILL NOT APPLY ONLY IF ANY ONLY TO THE EXTENT THAT APPLICABLE
LAW REQUIRES LIABILITY BEYOND AND DESPITE THIS EXCLUSION AND LIMITATION.
GENERAL
Except as otherwise provided in this agreement, Customer may not sublicense,
assign or transfer this Agreement, the license granted hereunder, the Program,
the Documentation or the Templates. Any attempt otherwise to sublicense, assign
or transfer any of the rights, duties or obligations hereunder is void.
The preprinted terms and conditions of any purchase order or other ordering
document issued by Customer in connection with this Agreement which are in
addition to or inconsistent with the terms and conditions of this Agreement
shall not be binding on Sterling Commerce and shall not be deemed to modify this
Agreement.
Customer acknowledges that the Program is unique and that Sterling Commerce is
entitled to all legal and equitable remedies to protect its proprietary
interest, including the right to obtain injunctive relief.
This Agreement will be governed by and construed in accordance with the laws of
the Netherlands. The parties exclude application of the UN Convention on
Contracts for the International Sale of Goods from this Agreement. Customer
consents to the jurisdiction of the competent courts of Amsterdam, the
Netherlands, for the resolution of all disputes in connection with this
Agreement.
<PAGE>
PERPETUAL LICENSE AGREEMENT (INTERNATIONAL)
COMMERCE:Forms(TM)
Sterling Commerce B.V. ("Sterling Commerce"), a subsidiary of Sterling Commerce,
Inc. provides the program(s) (the "Program") and the required documentation, and
electronic forms, as applicable (the "Documentation"), and licenses their use.
These terms and conditions shall also apply to any corrections, revisions or
updates to the Program and Documentation provided by Sterling Commerce, and to
any other feature or functionality provided by Sterling Commerce which are
designed or intended to be used in conjunction with the Program. You assume
responsibility for the selection of the Program to achieve your intended
results, and for the installation, use and results obtained from the Program. As
applicable, the terms and conditions of the network service agreement between
you and Sterling Commerce's affiliate shall apply with respect to the
COMMERCE: Network services.
LICENSE
The Program may only be used on a single computer located within the European
Union and only in connection with Your own regular business activities. You may
not use the Program in a service bureau environment or for the benefit of any
third party. You may physically transfer the Program from one computer to
another provided that the Program is used on only one computer at a time.
You acknowledge that the Program is designated solely for the purpose of
communication and with the utilization of Sterling Commerce's affiliate's
network services.
YOU MAY NOT OTHERWISE USE, COPY, MODIFY, DISCLOSE OR TRANSFER THE PROGRAM OR
DOCUMENTATION, IN WHOLE OR IN PART, EXCEPT THAT YOU MAY MAKE ONE BACKUP COPY OF
THE PROGRAM.
IF YOU DISCLOSE OR TRANSFER POSSESSION OF THE PROGRAM OR DOCUMENTATION TO
ANOTHER PARTY, OR USE THE PROGRAM AS A SERVICE TO ANOTHER PARTY, THIS AGREEMENT
IS AUTOMATICALLY TERMINATED.
FEES
Applicable license fees for the Program and Documentation, plus shipping charges
and applicable taxes, are due within thirty (30) days after the date of invoice.
TERM
This agreement shall commence the date of delivery to you, as evidenced by
Sterling Commerce's shipping documents, and shall continue in perpetuity, except
as otherwise provided herein. This agreement will terminate if you fail to
comply with any term or condition of this agreement. You agree upon any
termination of this agreement to immediately cease all use of the Program and
Documentation and destroy the Program and Documentation and to provide to
Sterling Commerce written certification of such destruction.
TITLE; CONFIDENTIALITY
Title to and ownership of the Program and Documentation and all applicable
rights to patents, copyrights, trademarks and trade secrets remain in Sterling
Commerce and/or the respective manufacturer or author. Except as otherwise
expressly provided in this agreement, You agree to maintain the Program and
Documentation in confidence and You shall not sell, transfer, publish, disclose,
display or otherwise make accessible the Program or Documentation, or any whole
or partial copies, to any third party. You agree not to reverse, assemble or
decompile the Program, in whole or in part, or examine the Program for the
purpose of reverse engineering the code, except as and to the extent
specifically authorized under applicable law.
MAINTENANCE AND SUPPORT SERVICES
During the first ninety (90) days from the date of delivery of the Program to
you, as evidenced by applicable shipping documents (the "Delivery Date"),
Sterling Commerce will use reasonable efforts to correct or bypass any material
error in the Program. Sterling Commerce will make available reasonable telephone
support with respect to the Program licensed hereunder, during Sterling
Commerce's normal business hours. Further, during the term of this agreement,
Sterling Commerce will offer to you, at Sterling Commerce's then current
published rates, all future versions of the Program developed by Sterling
Commerce and generally made available.
STERLING COMMERCE, HOWEVER, DOES NOT REPRESENT OR WARRANT THAT EVERY DEFECT IN
THE PROGRAM CAN OR WILL BE REPAIRED, OR THAT THE FUNCTIONS CONTAINED IN THE
PROGRAM WILL MEET YOUR REQUIREMENTS, OR THAT THE OPERATION OF THE PROGRAM WILL
BE UNINTERRUPTED OR ERROR FREE.
LIMITED WARRANTY
Sterling Commerce warrants that the media on which the Program is recorded is
free from defects in materials and workmanship under normal use for a period of
ninety (90) days from the Delivery Date.
Sterling Commerce warrants that it has the right to authorize the use of the
Program by You under this agreement. Sterling Commerce will hold You harmless
and defend You against suits based on any claim that Your use of the Program
under this agreement infringes on any patent, copyright, trademark or other
proprietary right provided You give Sterling Commerce prompt written notice of
such suits and permit Sterling Commerce to control the defense thereof. In the
event of any such suit, Sterling Commerce may, at its option, terminate this
agreement and give You a refund, as described below.
NO OTHER WARRANTY IS EXPRESSED, AND NONE SHALL BE IMPLIED, EXCEPT FOR THE
MAINTENANCE SERVICES PROVIDED ABOVE. THE ENTIRE RISK AS TO THE QUALITY AND
PERFORMANCE OF THE PROGRAM IS WITH YOU.
LIMITATIONS OF REMEDIES
Sterling Commerce's entire liability and Your exclusive remedy under this
agreement shall be:
1. The replacement of any media not meeting Sterling Commerce's "LIMITED
WARRANTY" and which are returned to Sterling Commerce during the first ninety
(90) days from Delivery Date;
2. The correction or bypass of any material error in the Program reported ______
during the first ninety (90) days from the Delivery Date; or
3. If Sterling Commerce fails or is unable to deliver replacement media which is
free of defects in materials or workmanship, or fails or is unable to repair
any such defect reported by You within a reasonable period of time, or in the
event of an infringement as described above, Sterling Commerce may terminate
this agreement by refunding the Initial License Fee to the extent then paid
by You. Upon any such termination You agree to destroy the Program and
Documentation and to provide to Sterling Commerce written certification of
such destruction.
IN NO EVENT WILL STERLING COMMERCE BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR
ANY DAMAGES OR LOSSES, INCLUDING LOST PROFITS OR ANY OTHER DAMAGES ARISING OUT
OF THE USE OR INABILITY TO USE THE PROGRAM EVEN IF STERLING HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY DAMAGES WHATSOEVER IN EXCESS OF THE
INITIAL LICENSE FEE PAID BY YOU. THE EXCLUSION AND LIMITATION CONTAINED HEREIN
WILL NOT APPLY ONLY IF ANY ONLY TO THE EXTENT THAT APPLICABLE LAW REQUIRES
LIABILITY BEYOND AND DESPITE THIS EXCLUSION AND LIMITATION.
GENERAL
You may not sublicense, assign or transfer this Agreement, the license granted
hereunder, the Program, the Documentation or the Templates. Any attempt
otherwise to sublicense, assign or transfer any of the rights, duties or
obligations hereunder is void.
The preprinted terms and conditions of any purchase order or other ordering
document issued by you in connection with this Agreement which are in addition
to or inconsistent with the terms and conditions of this Agreement shall not be
binding on Sterling Commerce and shall not be deemed to modify this Agreement.
You acknowledge that the Program is unique and that Sterling Commerce is
entitled to all legal and equitable remedies to protect its proprietary
interest, including the right to obtain injunctive relief, and Sterling Commerce
may enforce same against you.
This Agreement will be governed by and construed in accordance with the laws of
the Netherlands. The parties exclude application of the UN Convention on
Contracts for the International Sale of Goods from this Agreement. You consent
to the jurisdiction of the competent courts of Amsterdam, the Netherlands, for
the resolution of all disputes in connection with this Agreement.
Any waiver hereunder shall be effective only if made in writing.
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT AND UNDERSTAND IT AND AGREE TO
BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE
AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US WHICH SUPERSEDES ANY
PROPOSAL OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS
BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
<PAGE>
PERPETUAL LICENSE AGREEMENT (INTERNATIONAL)
COMMERCE:Connection(R) Software Products
Sterling Commerce B.V. ("Sterling Commerce"), a subsidiary of Sterling Commerce,
Inc. provides the program(s) (the "Program") and the required documentation, and
electronic forms, as applicable (the "Documentation"), and licenses their use.
These terms and conditions shall also apply to any corrections, revisions or
updates to the Program and Documentation provided by Sterling Commerce, and to
any other feature or functionality provided by Sterling Commerce which are
designed or intended to be used in conjunction with the Program. You assume
responsibility for the selection of the Program to achieve your intended
results, and for the installation, use and results obtained from the Program. As
applicable, the terms and conditions of the network service agreement between
you and Sterling Commerce's affiliate shall apply with respect to the
COMMERCE:Network services.
LICENSE
The Program may only be used on a single computer located within the European
Union and only in connection with Your own regular business activities. You may
not use the Program in a service bureau environment or for the benefit of any
third party. You may physically transfer the Program from one computer to
another provided that the Program is used on only one computer at a time.
You acknowledge that the Program is designated solely for the purpose of
communication and with the utilization of Sterling Commerce's affiliate's
network services.
YOU MAY NOT OTHERWISE USE, COPY, MODIFY, DISCLOSE OR TRANSFER THE PROGRAM OR
DOCUMENTATION, IN WHOLE OR IN PART, EXCEPT THAT YOU MAY MAKE ONE BACKUP COPY OF
THE PROGRAM.
IF YOU DISCLOSE OR TRANSFER POSSESSION OF THE PROGRAM OR DOCUMENTATION TO
ANOTHER PARTY, OR USE THE PROGRAM AS A SERVICE TO ANOTHER PARTY, THIS AGREEMENT
IS AUTOMATICALLY TERMINATED.
FEES
Applicable license fees for the Program and Documentation, plus shipping charges
and applicable taxes, are due within thirty (30) days after the date of invoice.
TERM
This agreement shall commence the date of delivery to you, as evidenced by
Sterling Commerce's shipping documents, and shall continue in perpetuity, except
as otherwise provided herein. This agreement will terminate if you fail to
comply with any term or condition of this agreement. You agree upon any
termination of this agreement to immediately cease all use of the Program and
Documentation and destroy the Program and Documentation and to provide to
Sterling Commerce written certification of such destruction.
TITLE; CONFIDENTIALITY
Title to and ownership of the Program and Documentation and all applicable
rights to patents, copyrights, trademarks and trade secrets remain in Sterling
Commerce and/or the respective manufacturer or author. Except as otherwise
expressly provided in this agreement, You agree to maintain the Program and
Documentation in confidence and You shall not sell, transfer, publish, disclose,
display or otherwise make accessible the Program or Documentation, or any whole
or partial copies, to any third party. You agree not to reverse, assemble or
decompile the Program, in whole or in part, or examine the Program for the
purpose of reverse engineering the code, except as and to the extent
specifically authorized under applicable law.
MAINTENANCE AND SUPPORT SERVICES
During the first ninety (90) days from the date of delivery of the Program to
you, as evidenced by applicable shipping documents (the "Delivery Date"),
Sterling Commerce will use reasonable efforts to correct or bypass any material
error in the Program. Sterling Commerce will make available reasonable telephone
support with respect to the Program licensed hereunder, during Sterling
Commerce's normal business hours. Further, during the term of this agreement,
Sterling Commerce will offer to you, at Sterling Commerce's then current
published rates, all future versions of the Program developed by Sterling
Commerce and generally made available.
STERLING COMMERCE, HOWEVER, DOES NOT REPRESENT OR WARRANT THAT EVERY DEFECT IN
THE PROGRAM CAN OR WILL BE REPAIRED, OR THAT THE FUNCTIONS CONTAINED IN THE
PROGRAM WILL MEET YOUR REQUIREMENTS, OR THAT THE OPERATION OF THE PROGRAM WILL
BE UNINTERRUPTED OR ERROR FREE.
LIMITED WARRANTY
Sterling Commerce warrants that the media on which the Program is recorded is
free from defects in materials and workmanship under normal use for a period of
ninety (90) days from the Delivery Date.
Sterling Commerce warrants that it has the right to authorize the use of the
Program by You under this agreement. Sterling Commerce will hold You harmless
and defend You against suits based on any claim that Your use of the Program
under this agreement infringes on any patent, copyright, trademark or other
proprietary right provided You give Sterling Commerce prompt written notice of
such suits and permit Sterling Commerce to control the defense thereof. In the
event of any such suit, Sterling Commerce may, at its option, terminate this
agreement and give You a refund, as described below.
NO OTHER WARRANTY IS EXPRESSED, AND NONE SHALL BE IMPLIED, EXCEPT FOR THE
MAINTENANCE SERVICES PROVIDED ABOVE. THE ENTIRE RISK AS TO THE QUALITY AND
PERFORMANCE OF THE PROGRAM IS WITH YOU.
LIMITATIONS OF REMEDIES
Sterling Commerce's entire liability and Your exclusive remedy under this
agreement shall be:
1. The replacement of any media not meeting Sterling Commerce's "ULTIMATE
WARRANTY" and which are returned to Sterling Commerce during the first ninety
(90) days from Delivery Date;
2. The correction or bypass of any material error in the Program reported ______
during the first ninety (0) days from the Delivery Date; or
3. If Sterling Commerce fails or is unable to deliver replacement media which is
free of defects in materials or workmanship, or fails or is unable to repair
any such defect reported by You within a reasonable period of time, or in the
event of an infringement as described above, Sterling Commerce may terminate
this agreement by refunding the Initial License Fee to the extent then paid
by You. Upon any such termination You agree to destroy the Program and
Documentation and to provide to Sterling Commerce written certification of
such destruction.
IN NO EVENT WILL STERLING COMMERCE BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR
ANY DAMAGES OR LOSSES, INCLUDING LOST PROFITS OR ANY OTHER DAMAGES ARISING OUT
OF THE USE OR INABILITY TO USE THE PROGRAM EVEN IF STERLING HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY DAMAGES WHATSOEVER IN EXCESS OF THE
INITIAL LICENSE FEE PAID BY YOU. THE EXCLUSION AND LIMITATION CONTAINED HEREIN
WILL NOT APPLY ONLY IF ANY ONLY TO THE EXTENT THAT APPLICABLE LAW REQUIRES
LIABILITY BEYOND AND DESPITE THIS EXCLUSION AND LIMITATION.
GENERAL
You may not sublicense, assign or transfer this Agreement, the license granted
hereunder, the Program, the Documentation or the Templates. Any attempt
otherwise to sublicense, assign or transfer any of the rights, duties or
obligations hereunder is void.
The preprinted terms and conditions of any purchase order or other ordering
document issued by you in connection with this Agreement which are in addition
to or inconsistent with the terms and conditions of this Agreement shall not be
binding on Sterling Commerce and shall not be deemed to modify this Agreement.
You acknowledge that the Program is unique and that Sterling Commerce is
entitled to all legal and equitable remedies to protect its proprietary
interest, including the right to obtain injunctive relief, and Sterling Commerce
may enforce same against you.
This Agreement will be governed by and construed in accordance with the laws of
the Netherlands. The parties exclude application of the UN Convention on
Contracts for the International Sale of Goods from this Agreement. You consent
to the jurisdiction of the competent courts of Amsterdam, the Netherlands, for
the resolution of all disputes in connection with this Agreement.
Any waiver hereunder shall be effective only if made in writing.
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT AND UNDERSTAND IT AND AGREE TO
BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE
AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US WHICH SUPERSEDES ANY
PROPOSAL OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS
BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
<PAGE>
PERPETUAL LICENSE AGREEMENT (INTERNATIONAL)
COMMERCE:Connection(R) and GENTRAN:Smartforms(TM)
for Windows(R) Software Products
Sterling Commerce B.V. ("Sterling Commerce"), a subsidiary of Sterling Commerce,
Inc. provides the program(s) (the "Program") and the required documentation, and
electronic forms, as applicable (the "Documentation"), and licenses their use.
These terms and conditions shall also apply to any corrections, revisions or
updates to the Program and Documentation provided by Sterling Commerce, and to
any other feature or functionality provided by Sterling Commerce which are
designed or intended to be used in conjunction with the Program. You assume
responsibility for the selection of the Program to achieve your intended
results, and for the installation, use and results obtained from the Program. As
applicable, the terms and conditions of the network service agreement between
you and Sterling Commerce's affiliate shall apply with respect to the
COMMERCE:Network services.
LICENSE
The Program may only be used on a single computer located within the European
Union and only in connection with Your own regular business activities. You may
not use the Program in a service bureau environment or for the benefit of any
third party. You may physically transfer the Program from one computer to
another provided that the Program is used on only one computer at a time.
You acknowledge that the Program is designated solely for the purpose of
communication and with the utilization of Sterling Commerce's affiliate's
network services.
YOU MAY NOT OTHERWISE USE, COPY, MODIFY, DISCLOSE OR TRANSFER THE PROGRAM OR
DOCUMENTATION, IN WHOLE OR IN PART, EXCEPT THAT YOU MAY MAKE ONE BACKUP COPY OF
THE PROGRAM.
IF YOU DISCLOSE OR TRANSFER POSSESSION OF THE PROGRAM OR DOCUMENTATION TO
ANOTHER PARTY, OR USE THE PROGRAM AS A SERVICE TO ANOTHER PARTY, THIS AGREEMENT
IS AUTOMATICALLY TERMINATED.
FEES
Applicable license fees for the Program and Documentation, plus shipping charges
and applicable taxes, are due within thirty (30) days after the date of invoice.
TERM
This agreement shall commence the date of delivery to you, as evidenced by
Sterling Commerce's shipping documents, and shall continue in perpetuity, except
as otherwise provided herein. This agreement will terminate if you fail to
comply with any term or condition of this agreement. You agree upon any
termination of this agreement to immediately cease all use of the Program and
Documentation and destroy the Program and Documentation and to provide to
Sterling Commerce written certification of such destruction.
TITLE; CONFIDENTIALITY
Title to and ownership of the Program and Documentation and all applicable
rights to patents, copyrights, trademarks and trade secrets remain in Sterling
Commerce and/or the respective manufacturer or author. Except as otherwise
expressly provided in this agreement, You agree to maintain the Program and
Documentation in confidence and You shall not sell, transfer, publish, disclose,
display or otherwise make accessible the Program or Documentation, or any whole
or partial copies, to any third party. You agree not to reverse, assemble or
decompile the Program, in whole or in part, or examine the Program for the
purpose of reverse engineering the code, except as and to the extent
specifically authorized under applicable law.
MAINTENANCE AND SUPPORT SERVICES
During the first ninety (90) days from the date of delivery of the Program to
you, as evidenced by applicable shipping documents (the "Delivery Date"),
Sterling Commerce will use reasonable efforts to correct or bypass any material
error in the Program. Sterling Commerce will make available reasonable telephone
support with respect to the Program licensed hereunder, during Sterling
Commerce's normal business hours. Further, during the term of this agreement,
Sterling Commerce will offer to you, at Sterling Commerce's then current
published rates, all future versions of the Program developed by Sterling
Commerce and generally made available.
STERLING COMMERCE, HOWEVER, DOES NOT REPRESENT OR WARRANT THAT EVERY DEFECT IN
THE PROGRAM CAN OR WILL BE REPAIRED, OR THAT THE FUNCTIONS CONTAINED IN THE
PROGRAM WILL MEET YOUR REQUIREMENTS, OR THAT THE OPERATION OF THE PROGRAM WILL
BE UNINTERRUPTED OR ERROR FREE.
LIMITED WARRANTY
Sterling Commerce warrants that the media on which the Program is recorded is
free from defects in materials and workmanship under normal use for a period of
ninety (90) days from the Delivery Date.
Sterling Commerce warrants that it has the right to authorize the use of the
Program by You under this agreement. Sterling Commerce will hold You harmless
and defend You against suits based on any claim that Your use of the Program
under this agreement infringes on any patent, copyright, trademark or other
proprietary right provided You give Sterling Commerce prompt written notice of
such suits and permit Sterling Commerce to control the defense thereof. In the
event of any such suit, Sterling Commerce may, at its option, terminate this
agreement and give You a refund, as described below.
NO OTHER WARRANTY IS EXPRESSED, AND NONE SHALL BE IMPLIED, EXCEPT FOR THE
MAINTENANCE SERVICES PROVIDED ABOVE. THE ENTIRE RISK AS TO THE QUALITY AND
PERFORMANCE OF THE PROGRAM IS WITH YOU.
LIMITATIONS OF REMEDIES
Sterling Commerce's entire liability and Your exclusive remedy under this
agreement shall be:
1. The replacement of any media not meeting Sterling Commerce's "LIMITED
WARRANTY" and which are returned to Sterling Commerce during the first ninety
(90) days from Delivery Date;
2. The correction or bypass of any material error in the Program reported ______
during the first ninety (90) days from the Delivery Date; or
3. If Sterling Commerce fails or is unable to deliver replacement media which is
free of defects in materials or workmanship, or fails or is unable to repair
any such defect reported by You within a reasonable period of time, or in the
event of an infringement as described above, Sterling Commerce may terminate
this agreement by refunding the Initial License Fee to the extent then paid
by You. Upon any such termination You agree to destroy the Program and
Documentation and to provide to Sterling Commerce written certification of
such destruction.
IN NO EVENT WILL STERLING COMMERCE BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR
ANY DAMAGES OR LOSSES, INCLUDING LOST PROFITS OR ANY OTHER DAMAGES ARISING OUT
OF THE USE OR INABILITY TO USE THE PROGRAM EVEN IF STERLING HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY DAMAGES WHATSOEVER IN EXCESS OF THE
INITIAL LICENSE FEE PAID BY YOU. THE EXCLUSION AND LIMITATION CONTAINED HEREIN
WILL NOT APPLY ONLY IF ANY ONLY TO THE EXTENT THAT APPLICABLE LAW REQUIRES
LIABILITY BEYOND AND DESPITE THIS EXCLUSION AND LIMITATION.
GENERAL
You may not sublicense, assign or transfer this Agreement, the license granted
hereunder, the Program, the Documentation or the Templates. Any attempt
otherwise to sublicense, assign or transfer any of the rights, duties or
obligations hereunder is void.
The preprinted terms and conditions of any purchase order or other ordering
document issued by you in connection with this Agreement which are in addition
to or inconsistent with the terms and conditions of this Agreement shall not be
binding on Sterling Commerce and shall not be deemed to modify this Agreement.
You acknowledge that the Program is unique and that Sterling Commerce is
entitled to all legal and equitable remedies to protect its proprietary
interest, including the right to obtain injunctive relief, and Sterling Commerce
may enforce same against you.
This Agreement will be governed by and construed in accordance with the laws of
the Netherlands. The parties exclude application of the UN Convention on
Contracts for the International Sale of Goods from this Agreement. You consent
to the jurisdiction of the competent courts of Amsterdam, the Netherlands, for
the resolution of all disputes in connection with this Agreement.
Any waiver hereunder shall be effective only if made in writing.
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT AND UNDERSTAND IT AND AGREE TO
BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE
AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US WHICH SUPERSEDES ANY
PROPOSAL OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS
BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
<PAGE>
TERM PROGRAM LICENSE AGREEMENT (INTERNATIONAL)
COMMERCE:Connection(R) and GENTRAN:Director(TM) for Windows Software Products
Sterling Commerce B.V. ("Sterling Commerce"), a subsidiary of Sterling Commerce,
Inc., grants you ("You") a nonexclusive license to use the program contained in
this package (the "Program") and the related documentation (the "Documentation")
including any and all provided corrections, revisions, updates to the Program
and Documentation. You assume responsibility for the installation, use and
results obtained from the Program, as applicable, the terms and conditions of
the network service agreement between You and Sterling Commerce's affiliate
shall apply with respect to COMMERCE:Network services.
LICENSE
The Program may only be used on a single computer located within the European
Union and only in connection with Your own regular business activities. You may
not use the Program in a service bureau environment or for the benefit of any
third party. You may physically transfer the Program from one computer to
another provided that the Program is used on only one computer at a time.
In the event the Program contains a feature allowing the creation of screen
templates, print templates and/or document turnaround maps, any templates and/or
maps created by You ("Your Templates") may be provided to other property
licensed users of the Program with which You transact business and which are
located in the European Union. Your Templates will be deemed part of the Program
and subject to the provisions of this agreement, except that no warranty of any
kind is made and no maintenance or support services will be provided for Your
Templates. In addition, this provision shall not be construed as a grant of
rights to disclose any screen templates, print templates and/or document
turnaround maps provided by Sterling Commerce. You agree that when Your
Templates are provided to any other property licensed user of the Program with
which You transact business, no charge will be made by You.
YOU MAY NOT OTHERWISE USE, COPY, MODIFY, DISCLOSE OR TRANSFER THE PROGRAM OR
DOCUMENTATION, IN WHOLE OR IN PART, EXCEPT THAT YOU MAY MAKE ONE BACKUP COPY OF
THE PROGRAM. IF YOU DISCLOSE OR TRANSFER POSSESSION OF THE PROGRAM OR
DOCUMENTATION TO ANOTHER PARTY, OR USE THE PROGRAM AS A SERVICE TO ANOTHER
PARTY, THIS AGREEMENT IS AUTOMATICALLY TERMINATED.
FEES
The Initial Program license fee ("Initial License Fee") covering the license and
maintenance services for the first year of this agreement has been paid by You
or will be paid by You upon receipt of Sterling Commerce's invoice. Annual
renewal Program license fees ("Renewal License Fee") thereafter shall be due
upon receipt of invoice based on Sterling Commerce's then current license fee
schedule.
TERM
Except as otherwise provided herein, this agreement shall be effective for one
year from the date of delivery to You, as evidenced by Sterling Commerce's
shipping documents (the "Initial Program Year"), and shall be renewed from year
to year thereafter ("Renewal Program Years"), provided that You pay the Renewal
License Fee as invoiced to You. This agreement will terminate if You fail to
comply with any term or condition of this agreement, or if You fail to pay the
Renewal License Fee. You agree upon any termination of this agreement to
immediately cease all use of the Program and Documentation and destroy the
Program and Documentation and to provide to Sterling Commerce written
certification of such destruction.
TITLE; CONFIDENTIALITY
Title to and ownership of the Program and Documentation and all applicable
rights to patents, copyrights, trademarks and trade secrets remain in Sterling
Commerce and/or the respective manufacturer or author. Except as otherwise
expressly provided in this agreement, You agree to maintain the Program and
Documentation in confidence and You shall not sell, transfer, publish, disclose,
display or otherwise make accessible the Program or Documentation, or any whole
or partial copies, to any third party. You agree not to reverse, assemble or
decompile the Program, in whole or in part, or examine the Program for the
purpose of reverse engineering the code, except as and to the extent
specifically authorized under applicable law.
MAINTENANCE AND SUPPORT SERVICES
During the term of this agreement and provided that such services are generally
made available, Sterling Commerce will:
1. Use reasonable efforts to correct or bypass any material error in the then
current version of the Program;
2. Provide any changes in the Program made generally available by Sterling
Commerce to its licensees to conform to revised industry standards as
announced from time to time by the relevant generally accepted EDI standards
committee(s);
3. Make available reasonable telephone support with respect to the Program
licensed hereunder, during Sterling Commerce's normal business hours.
You agree to promptly replace the Program with any new version of the Program
provided by Sterling Commerce.
STERLING COMMERCE, HOWEVER, DOES NOT REPRESENT OR WARRANT THAT EVERY DEFECT IN
THE PROGRAM CAN OR WILL BE REPAIRED, OR THAT THE FUNCTIONS CONTAINED IN THE
PROGRAM WILL MEET YOUR REQUIREMENTS, OR THAT THE OPERATION OF THE PROGRAM WILL
BE UNINTERRUPTED OR ERROR FREE.
LIMITED WARRANTY
Sterling Commerce warrants that the media on which the Program is recorded is
free from defects in materials and workmanship under normal use for a period of
ninety (90) days from the date of delivery to You as evidenced by Sterling
Commerce's shipping documents.
Sterling Commerce warrants that it has the right to authorize the use of the
Program by You under this agreement. Sterling Commerce will hold You harmless
and defend You against suits based on any claim that Your use of the Program
under this agreement infringes on any patent, copyright, trademark or other
proprietary right provided You give Sterling Commerce prompt written notice of
such suits and permit Sterling Commerce to control the defense thereof. In the
event of any such suit, Sterling Commerce may, at its option, terminate this
agreement and give You a refund, as described below.
EXCEPT AS PROVIDED ABOVE, THE PROGRAM IS PROVIDED "AS IS" WITHOUT WARRANTY OF
ANY KIND, EITHER EXPRESSED OR IMPLIED.
Sterling Commerce's entire liability and Your exclusive remedy under this
agreement shall be:
1. The replacement of any media not meeting Sterling Commerce's "LIMITED
WARRANTY" and which are returned to Sterling Commerce during the first ninety
(90) days from date of delivery; or
2. If Sterling Commerce fails or is unable to deliver replacement media which is
free of defects in materials or workmanship, or fails or is unable to repair
any such defect reported by You within a reasonable period of time, or in the
event of an infringement as described above, Sterling Commerce may terminate
this agreement by refunding the Initial License Fee to the extent then paid
by You. Upon any such termination You agree to destroy the Program and
Documentation and to provide to Sterling Commerce written certification of
such destruction.
IN NO EVENT WILL STERLING COMMERCE BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR
ANY DAMAGES OR LOSSES, INCLUDING LOST PROFITS OR ANY OTHER DAMAGES ARISING OUT
OF THE USE OR INABILITY TO USE THE PROGRAM EVEN IF STERLING HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY DAMAGES WHATSOEVER IN EXCESS OF THE
INITIAL LICENSE FEE PAID BY YOU. THE EXCLUSION AND LIMITATION CONTAINED HEREIN
WILL NOT APPLY ONLY IF ANY ONLY TO THE EXTENT THAT APPLICABLE LAW REQUIRES
LIABILITY BEYOND AND DESPITE THIS EXCLUSION AND LIMITATION.
GENERAL
Except as otherwise provided in this agreement, You may not sublicense, assign
or transfer this Agreement, the license granted hereunder, the Program, the
Documentation or the Templates. Any attempt otherwise to sublicense, assign or
transfer any of the rights, duties or obligations hereunder is void.
The preprinted terms and conditions of any purchase order or other ordering
document issued by you in connection with this Agreement which are in addition
to or inconsistent with the terms and conditions of this Agreement shall not be
binding on Sterling Commerce and shall not be deemed to modify this Agreement.
You acknowledge that the Program is unique and that Sterling Commerce is
entitled to all legal and equitable remedies to protect its proprietary
interest, including the right to obtain injunctive relief.
This Agreement will be governed by and construed in accordance with the laws of
the Netherlands. The parties exclude application of the UN Convention on
Contracts for the International Sale of Goods from this Agreement. You consent
to the jurisdiction of the competent courts of Amsterdam, the Netherlands, for
the resolution of all disputes in connection with this Agreement.
Any waiver hereunder shall be effective only if made in writing.
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT AND UNDERSTAND IT AND AGREE TO
BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE
AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US WHICH SUPERSEDES ANY
PROPOSAL OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS
BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
COMMERCE:Connection is a registered mark and GENTRAN:Director and
COMMERCE:Network are marks of Sterling Commerce, Inc.
Windows is a registered mark of Microsoft, Inc.
<PAGE>
COMMERCE:Catalog(TM)
Sterling Commerce B.V. ("Sterling Commerce"), a subsidiary of Sterling Commerce,
Inc., provides the program(s) contained in this package (the "Program") and the
related documentation (the "Documentation") and licenses their use. These terms
and conditions shall also apply to any corrections, revisions or updates to the
Program and Documentation provided by Sterling Commerce, and to any other
feature or functionality provided by Sterling Commerce which are designed or
intended to be used in conjunction with the Program, whether delivered with this
package or subsequently delivered. You assume responsibility for the
installation, use and results obtained from the Program.
LICENSE
The Program may only be used on a single computer located within the European
Union and only in connection with Your own regular business activities. You may
not use the Program in a service bureau environment or for the benefit of any
third party. You may physically transfer the Program from one computer to
another provided that the Program is used on only one computer at a time.
In addition, the Program may only be used for the purpose of communication with
and the utilization of Sterling Commerce's affiliate's network services, known
as COMMERCE:Catalog. You agree that, in the event of use of the Program for any
other purpose is required, appropriate licensing arrangements must be made.
YOU MAY NOT OTHERWISE USE, COPY, MODIFY, DISCLOSE OR TRANSFER THE PROGRAM OR
DOCUMENTATION, IN WHOLE OR IN PART, INCLUDING FOR PURPOSES OF ERROR CORRECTION,
EXCEPT THAT YOU MAY MAKE A REASONABLE NUMBER OF BACKUP COPIES OF THE PROGRAM
PROVIDED SUCH COPY CONTAINS THE COPYRIGHT AND THE PROPRIETARY NOTICES AND
LEGENDS OF STERLING COMMERCE AND/OR THE RESPECTIVE MANUFACTURER OR AUTHOR.
IF YOU DISCLOSE OR TRANSFER POSSESSION OF THE PROGRAM OR DOCUMENTATION TO
ANOTHER PARTY, OR USE THE PROGRAM AS A SERVICE TO ANOTHER PARTY, THIS AGREEMENT
IS AUTOMATICALLY TERMINATED.
FEES
The fees for use of the Program and Documentation are stated in the
COMMERCE:Catalog Addendum to the Network Services Agreement by and between
Sterling Commerce and your Company.
TERM
This agreement shall be effective for one (1) year from the date of delivery to
you, as evidenced by Sterling Commerce's shipping documents, and shall continue
through your entitled use of Sterling Commerce's affiliate's COMMERCE:Catalog
services unless otherwise earlier terminated pursuant to this agreement. This
agreement will terminate if You fail to comply with any term or condition of
this agreement, or if You fail to pay the Renewal License Fee. You agree upon
any termination of this agreement to immediately cease all use of the Program
and Documentation and destroy the Program and Documentation and to provide to
Sterling Commerce written certification of such destruction.
TITLE; CONFIDENTIALITY
Title to and ownership of the Program and Documentation and all applicable
rights to patents, copyrights, trademarks and trade secrets remain in Sterling
Commerce and/or the respective manufacturer or author. Except as otherwise
expressly provided in this agreement, You agree to maintain the Program and
Documentation in confidence and You shall not sell, transfer, publish, disclose,
display or otherwise make accessible the Program or Documentation, or any whole
or partial copies, to any third party. You agree not to reverse, assemble or
decompile the Program, in whole or in part, or examine the Program for the
purpose of reverse engineering the code, except as and to the extent
specifically authorized under applicable law.
MAINTENANCE AND SUPPORT SERVICES
During the term of this agreement and provided that such services are generally
made available, Sterling Commerce will:
1. Use reasonable efforts to correct or bypass any material error in the then
current version of the Program;
2. Provide any changes in the Program made generally available at no charge by
Sterling Commerce to its licensees;
3. Make available reasonable telephone support with respect to the Program
licensed hereunder, during Sterling Commerce's normal business hours.
You agree to promptly replace the Program with any new version of the Program
provided by Sterling Commerce.
STERLING COMMERCE, HOWEVER, DOES NOT REPRESENT OR WARRANT THAT EVERY DEFECT IN
THE PROGRAM CAN OR WILL BE REPAIRED, OR THAT THE FUNCTIONS CONTAINED IN THE
PROGRAM WILL MEET YOUR REQUIREMENTS, OR THAT THE OPERATION OF THE PROGRAM WILL
BE UNINTERRUPTED OR ERROR FREE.
LIMITED WARRANTY
Sterling Commerce warrants that the media on which the Program is recorded is
free from defects in materials and workmanship under normal use for a period of
ninety (90) days from the date of delivery to You as evidenced by Sterling
Commerce's shipping documents.
Sterling Commerce warrants that it has the right to authorize the use of the
Program by You under this agreement. Sterling Commerce will hold You harmless
and defend You against suits based on any claim that Your use of the Program
under this agreement infringes on any patent, copyright, trademark or other
proprietary right provided You give Sterling Commerce prompt written notice of
such suits and permit Sterling Commerce to control the defense thereof. In the
event of any such suit, Sterling Commerce may, at its option, terminate this
agreement and give You a refund, as described below.
EXCEPT AS PROVIDED ABOVE, THE PROGRAM IS PROVIDED "AS IS" WITHOUT WARRANTY OF
ANY KIND, EITHER EXPRESSED OR IMPLIED, EXCEPT FOR THE MAINTENANCE SERVICES
PROVIDED ABOVE, THE ENTIRE RISK AND THE QUALITY AND PERFORMANCE OF THE PROGRAM
IS WITH YOU.
Sterling Commerce's entire liability and Your exclusive remedy under this
agreement shall be:
1. The replacement of any media not meeting Sterling Commerce's "LIMITED
WARRANTY" and which are returned to Sterling Commerce during the first ninety
(90) days from date of delivery; or
2. If Sterling Commerce fails or is unable to deliver replacement media which is
free of defects in materials or workmanship, or fails or is unable to repair
any such defect reported by You within a reasonable period of time, or in the
event of an infringement as described above, Sterling Commerce may terminate
this agreement by refunding the Initial License Fee to the extent then paid
by You. Upon any such termination You agree to destroy the Program and
Documentation and to provide to Sterling Commerce written certification of
such destruction.
IN NO EVENT WILL STERLING COMMERCE BE LIABLE TO YOU OR TO ANY THIRD PARTY FOR
ANY DAMAGES OR LOSSES, INCLUDING LOST PROFITS OR ANY OTHER DAMAGES ARISING OUT
OF THE USE OR INABILITY TO USE THE PROGRAM EVEN IF STERLING HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY DAMAGES WHATSOEVER IN EXCESS OF THE
INITIAL LICENSE FEE PAID BY YOU. THE EXCLUSION AND LIMITATION CONTAINED HEREIN
WILL NOT APPLY ONLY IF ANY ONLY TO THE EXTENT THAT APPLICABLE LAW REQUIRES
LIABILITY BEYOND AND DESPITE THIS EXCLUSION AND LIMITATION.
GENERAL
You may not sublicense, assign or transfer this Agreement, the license granted
hereunder, the Program, the Documentation or the Templates. Any attempt
otherwise to sublicense, assign or transfer any of the rights, duties or
obligations hereunder is void.
The preprinted terms and conditions of any purchase order or other ordering
document issued by you in connection with this Agreement which are in addition
to or inconsistent with the terms and conditions of this Agreement shall not be
binding on Sterling Commerce and shall not be deemed to modify this Agreement.
You acknowledge that the Program is unique and that Sterling Commerce is
entitled to all legal and equitable remedies to protect its proprietary
interest, including the right to obtain injunctive relief.
This Agreement will be governed by and construed in accordance with the laws of
the Netherlands. The parties exclude application of the UN Convention on
Contracts for the International Sale of Goods from this Agreement. You consent
to the jurisdiction of the competent courts of Amsterdam, the Netherlands, for
the resolution of all disputes in connection with this Agreement.
Any waiver hereunder shall be effective only if made in writing.
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT AND UNDERSTAND IT AND AGREE TO
BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE
AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US WHICH SUPERSEDES ANY
PROPOSAL OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS
BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
<PAGE>
EXHIBIT J
---------
Monthly Billing Report
MONTHLY BILLING REPORT
. Attached is the form of Monthly Report required.
. STERLING COMMERCE'S financial year is 1 October to 30 September
. Monthly Reports are due as follows:
Month Report Due Date
October 25
November 25
December 25
January 25
February 25
March 25
April 25
May 25
June 25
July 25
August 25
September 25
. Agreement Submission:
(i) First Page, Signature Page and Schedule(s)/Software License
Agreement(s)/Order Form to be attached to Monthly Billing
Report;
(ii) Where not shown on Network Services Agreement include with
Monthly Billing Report details in English language of:
Payment Date, Date of Signature, Sterling Network Services,
Delivery Date, Rights of Return, Duration, Renewal Terms
<PAGE>
(iii) Where not shown on Software License Agreement include with Monthly
Billing Report details in English language of: Delivery Date,
Evaluation Period (if any), Payment Date, Rights of Return, License
Fee, Renewal Fee, Renewal Terms
(iv) Variations of any Agreement to be pre-approved and submitted with
Monthly Billing Report;
(v) Full copy of Network Services Agreement/Software License
Agreement(s)/Schedule(s) to be sent to STERLING COMMERCE within
four weeks.
56
<PAGE>
Sterling Commerce International Group
Distributor Billing Reports and payment requirements
To be sent by fax or ccmail to the attention of:
Gayle Mowery-Reynolds Fax number: 1 (614) 793 7092
ccmail address: Gayle Mowery [email protected]
Telephone: 1 (614) 793 7093
A. As they occur - at least once a week:
Copies of new contracts including pricing page
B. Monthly, due on or before the 25th of each month, for each new account:
Company name
assigned mailbox number
trading partner
specified pricing information
contract date
start date and/or local invoice date
Sterling Commerce product name(s)
number of units sold
other relevant information, as applicable
57
<PAGE>
EXHIBIT K
---------
Consideration and Payment Terms
A. Consideration
-------------
1. EC Technology
-------------
The fee for the rights granted in this Agreement, including the right to use the
EC Technology provided herein for the primary and secondary systems (mirrored
backup), is $3000,000 plus
*****
2. EC Network International Services
---------------------------------
*****
58
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
*****
5. EC Products
-----------
*****
6. EC Support Services
-------------------
*****
B. Payment Terms
- ------------------
1. Payment of the initial license fee for EC Technology under Paragraph 1
shall be as follows:
*****
2. Except for the first Annual Term, payment of annual maintenance fees for EC
Technology under Paragraph 1 shall be due and payable no less than thirty (30)
days prior to commencement of each applicable Annual Term.
*****
59
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
3. Payment of amounts under Paragraphs 1 (to the extent of continuing charges)
and 2 shall be due and payable upon the earlier of: (i) within sixty (60) days
after the month in which Company has performed the services for the Subscriber
or (ii) within 60 days of invoice of the Subscribers.
4. Payment of amounts under Paragraph 5 for license grants shall be due and
payable within thirty (30) days after the month in which Sterling Commerce has
delivered the software or other products to Company or permitted Company to
deliver such items to the Company Customer. With respect to maintenance
services, amounts due Sterling Commerce shall be due and payable within thirty
(30) days after the month in which such support services term commences for the
Company Customer.
5. Payment of amounts under Paragraph 6 shall be due and payable within
fifteen (15) days of invoice by STERLING COMMERCE unless otherwise agreed to by
STERLING COMMERCE in writing.
<PAGE>
EXHIBIT L
---------
STERLING COMMERCE List Prices
To be delivered to Company at a later date.
61
<PAGE>
EXHIBIT M
---------
Registered User Agreement
This Agreement is made as of __________ 1997, between Sterling Commerce
International, Inc., a Delaware corporation, with its principal offices at
Dublin, Ohio, U.S.A. ("Sterling Commerce") and Satyam Infoway (Private) Limited,
an Indian corporation, with its principal offices at Chennai, India ("Company").
Whereas, Sterling Commerce is the owner or an authorized user of the trademarks
described in Attachment A of this Agreement (the "Marks"); and
Whereas, Company wants to use the Marks in connection with its marketing,
support and distribution of certain electronic commerce services and products of
Sterling Commerce (the "EC Offerings"), within India (the "Territory") in
conjunction with the International Electronic Commerce Provider Agreement
between the parties hereto (the "Provider Agreement").
NOW, THEREFORE, the parties agree as follows:
1. Grant.
-----
Subject to this Agreement, Sterling Commerce hereby grants to Company, and
Company hereby accepts from Sterling Commerce, the non-exclusive and non-
transferable right to use the Marks solely in conjunction with its rights and
obligations under the Provider Agreement.
2. Use.
---
Company will use the Marks solely in conjunction with and subject to this
Agreement and the Provider Agreement.
3. Ownership.
---------
All Marks and related registrations or applications are and will remain the
exclusive property of Sterling Commerce, its parent and its affiliates, and any
and all proper third party manufacturers and authors. Company will not acquire
any right in the Marks, except as contemplated in this Agreement or otherwise
agreed to in writing. Company will not, without Sterling Commerce's permission
in writing, register or attempt to register, directly or indirectly, any
trademark, service mark, trade name, company name or other proprietary or
commercial designation that is identical or confusingly similar to the Marks or
that constitutes a translation thereof into the language(s) spoken within the
Territory. Upon Sterling Commerce's request, Company will execute the
instruments that may be appropriate to register, maintain or renew the
62
<PAGE>
registration of the Marks in Sterling Commerce's, its parent entity's or any of
its affiliates' or any other Sterling Commerce designee(s)'s name within the
Territory.
4. Term.
----
This Agreement will become effective, as of the date first set forth above,
upon its execution by both parties hereto and will remain in effect thereafter
until the Provider Agreement expires or is otherwise terminated.
5. General.
-------
Sterling Commerce and Company are independent parties. Neither party has
authority to bind the other party or act on its behalf. Company may not assign,
delegate or otherwise transfer this Agreement or any of its rights or
obligations hereunder without Sterling Commerce's prior approval. Sterling
Commerce is permitted to assign this Agreement at any time with notice to
Company. Company consents to any assignment in advance. Any waiver, amendment
or other modification of this Agreement will not be effective unless in writing
and signed by the party against whom enforcement is sought. This Agreement and
the Provider Agreement, to the extent applicable, are the sole and exclusive
agreements between the parties hereto as relates to the subject matter herein.
All prior discussions and agreements, oral and written, are null and void. The
laws of India, and all applicable United States federal trademark laws shall
govern this Agreement.
IN WITNESS WHEREOF, Sterling Commerce and Company cause this Agreement to
be executed by their duly authorized representatives identified below.
Sterling Commerce International, Inc. Satyam Infoway (Private) Limited
By:____________________________________ By:________________________________
Name:__________________________________ Name:______________________________
Title:_________________________________ Title:_____________________________
Date:__________________________________ Date:______________________________
63
<PAGE>
Attachment A
Marks
COMMERCE:Connection for Windows
COMMERCE:Network
COMMERCE:Links
COMMERCE:Mail for Windows
COMMERCE:Library for Windows
GENTRAN:Director for Windows
GENTRAN:Integrator for Windows
GENTRAN:Smartforms
COMMERCE:Forms
COMMERCE:Doculink
COMMERCE Catalog
64
<PAGE>
EXHIBIT N
---------
Restricted Countries
COUNTRIES EMBARGOED under the U.S. EXPORT ADMINISTRATION REGULATIONS
Cuba, Libya, North Korea
COUNTRIES subject to PARTIAL RESTRICTIONS under the U.S. EXPORT ADMINISTRATION
REGULATIONS
Afghanistan, Albania, Armenia, Azerbaijan, Belarus, Bulgaria,
Cambodia, Estonia, Iran, Kazakhstan, Kyrgyzstan Laos, Latvia,
Lithuania, Moldova, Mongolia, People's Republic of China, Romania,
Russia, Syria, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Vietnam
COUNTRIES EMBARGOED pursuant to U.N. RESOLUTIONS
Haiti, Iraq, Federal Republic of Yugoslavia (Serbia, Montenegro, UN
Protected Arms of Croatia and of Bosnia-Hercegovina)
65
<PAGE>
EXHIBIT O
---------
Investment Option and
Right of First Refusal
A. Investment Option
-----------------
1. STERLING COMMERCE shall have the right (the "Investment Option") to invest
in and purchase an ownership interest in the Company's business as it relates to
the electronic commerce products and services offered and performed in this
Agreement by Company (the "EC Business"), or such subsequently divested or
separate enterprise, in and up to a total percentage not to exceed the maximum
permitted by India law, but not more than 50%, on or after the earlier of any of
the following events:
(a) Company elect to vest or otherwise create the EC Business as a separate
entity;
(b) Company has concluded an initial public investment offering or similar
event;
(c) At any time after the fourth anniversary of the Effective Date of this
Agreement; or
(d) When any of the events occur as described in Paragraph B of this
Exhibit O.
2. STERLING COMMERCE's ownership participation shall include all forms of
available investment classifications in the EC Business, including, but not
limited to, equity shares and convertible debentures.
3. The Investment Option may be exercised by STERLING COMMERCE in any number
of instances and at any percentage(s), subject to the total maximum percentage
right, provided that if as a result of STERLING COMMERCE's initiation to elect
to exercise the Investment Option, the EC Business is first divested from the
Company, then STERLING COMMERCE is required to purchase no less than the maximum
percentage then permitted by law or 50%, whichever is less.
4. The Investment Option shall be exercised in writing by STERLING COMMERCE
("Notice"), from time to time, at which time upon receipt of such notice, each
party shall appoint one financial representative ("Evaluator(s)"), at such
party's sole expense, to evaluate, appraise and determine the value of the EC
Business in order to present to the other party and its respective Evaluator
their respective conclusions. Each party shall promptly advise the other party
of the identity of its appointed Evaluator. Each party shall use best efforts
to cause its Evaluator to submit such Evaluator's conclusions in detail and in
writing within thirty (30) days of date of the Notice. Both parties shall
reasonably cooperate with each other's Evaluator, and Company agrees to provide
reasonable access to all financial, business and marketing information related
to the EC Business to the Evaluators.
5. If the Evaluators' conclusions are in disagreement, then such parties shall
promptly be instructed to meet and confer and attempt in good faith to amicably
reach a joint valuation
66
<PAGE>
decision within twenty (20) days after the submission of each other's
conclusions to the other party. If a mutual decision ("Joint Decision") is
reached then the value of the EC Business for purposes of the Investment Option
shall be finally and unappealable as jointly determined by both Evaluators. If a
Joint Decision is not satisfactorily reached, then both Evaluators shall, within
live (5) days, appoint a third party ("Mediator") to review both Evaluators'
previously submitted conclusions. The Mediator shall within fifteen (15) days
after receipt of the Evaluators' conclusions, issue a final and unappealable
decision ("Mediator's Decision"). The Mediator's expenses shall be equally borne
by both parties hereto.
6. Once the then current value of the EC Business has been determined, then
STERLING COMMERCE shall have thirty (30) days after receipt of either the Joint
Decision or the Mediator's Decision ("Valuation"), to determine in writing to
Company what percentage ownership in the EC Business it desires to purchase.
Thereafter, both parties shall proceed in an expeditious manner to conclude the
transaction in a form and manner as mutually agreed to by the parties,
including, without limitation, taking into consideration, the divestiture of the
EC Business from the Company and the formation of a separate legal entity
thereafter, the business structure (ex., partnership or corporation), due
diligence issues and governmental approval processes, investment partner or
shareholder ancillary agreements.
7. Should at such time as when STERLING COMMERCE has elected to purchase
49-50% of the EC Business then Company agrees to afford STERLING COMMERCE the
investment privileges reflective of equal ownership in the EC Business,
including, but not limited to, equal representation on the board of directors,
first right of refusal to purchase the other owner's interest in the EC
Business, and unanimous approval of both parties in regard to important issues
such as, and without limitation, increase in the capital (authorized as well as
issued), involvement in any new line of activities, the sale of any assets of
the business outside the normal course of business, substantial capital
expenditure in excess of that which is agreed to in the budget, appointment of
statutory auditors, appointment of working directors and chief executives.
B. First Right of Refusal
----------------------
1. Should at any time during the term of this Agreement, and subject to
Paragraph B(4) below, Company intend or does offer to or considers any firm
offer from a third party to (i) sale or purchase any ownership rights in or to
the EC Business or (ii) sale or purchase substantially all of the asset's or
rights of the EC Business, then STERLING COMMERCE shall be entitled to a right
of first refusal ("First Right Option") to purchase such affected ownership
rights at terms and conditions no less favorable than as presented to or from
such third party. Ownership investment in the Company, as a whole, shall not be
considered as an opportunity for the exercise by STERLING COMMERCE of its First
Right Option.
2. STERLING COMMERCE shall have thirty (30) days after receipt of such written
offer details to elect to exercise its First Right Option. If elected by
STERLING COMMERCE to proceed with the transaction, then the parties agree to
take reasonable efforts in concluding the purchase/sale transaction in
accordance with the material terms of the presented offer.
67
<PAGE>
3. If STERLING COMMERCE fails to exercise its First Right Option or elects not
to proceed with the presented offer, then Company shall be entitled to proceed
with and conclude its transaction with the intended third party purchaser
pursuant to the material terms in the presented offer. However, the offer must
be resubmitted to STERLING COMMERCE, if, for any reason (i) the transaction
terms with the intended third party becomes more advantageous for any reason,
including price and payment terms, or (ii) the transaction with the intended
third party is not concluded within nine (9) months of STERLING COMMERCE's
election or failure not to exercise its First Right Option.
4. The First Right Option shall expire if and when STERLING COMMERCE exercises
its Investment Option at any time.
C. General
-------
1. Both parties acknowledge and understand that STERLING COMMERCE's exercise
of its Investment Option or its First Right Option, does not commit either party
to extend the term of this Agreement.
2. At any time after STERLING COMMERCE has exercised the Investment Option or
the First Right Option, if the Company and STERLING COMMERCE mutually agree to
allot shares in the formed entity to financial institutions, the public or any
other third party, then Company and STERLING COMMERCE agree to reduce their
respective ownership investment in the formed entity equally so that both
parties will hold in the remaining ownership investment in the same proportion
as they were holding before such offer to the third parties.
68
<PAGE>
EXHIBIT 10.7
AMENDMENT 1 TO
INTERNATIONAL ELECTRONIC COMMERCE PROVIDER AGREEMENT
Dated February 14, 1997
between
Sterling Commerce International, Inc.
and Satyam Infoway Limited
1. Introduction. This Amendment 1 supplements and amends the International
Electronic Commerce Provider Agreement by and between Sterling Commerce
International, Inc. ("Sterling Commerce"), a subsidiary of Sterling Commerce,
Inc. and Satyam Infoway Limited ("Company"), such International Electronic
Commerce Provider Agreement having been made as of February 14, 1997. This
Amendment 1 and the International Electronic Commerce Provider Agreement are
hereinafter collectively referred to as the "Revised Agreement".
2. Additional License Grant. The parties that Company desires to license from
------------------------
Sterling Commerce certain software products, as specified on the attached
Exhibit A Supplement. Such additional software shall be deemed to be included in
the defined term "EC Technology" of this Revised Agreement.
3. Fees/Payment. In consideration of the additional licensing rights for the
------------
options specified in Exhibits A Supplement, Company shall pay to Sterling
Commerce an Initial License Fee in the amount of
* * * * *
4. Required Equipment. Company acknowledges that the equipment specified on
------------------
Exhibit G Supplement is required in support of the options specified in Exhibit
A Supplement. Further, such equipment shall be deemed included in the defined
term "Designated CPU" of this Revised Agreement.
5. Export Restrictions. Notwithstanding anything to the contrary in this
-------------------
Revised Agreement, Company agrees that the options listed in Exhibit A
Supplement is subject to U.S. Export Administration Regulations. Further,
Company agrees that it has and shall continue to strictly comply with the
provisions of Section 14, U.S. Export Restrictions, of the International
------------------------
Electronic Commerce Provider Agreement.
6. Product Modifications. From time to time, Company may present to Sterling
---------------------
- -----------------------
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as *****. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
Commerce requests for market-specific modifications to the options specified in
Exhibit A. Sterling Commerce and Company agree to mutually determine which of
the presented modifications will be developed and/or integrated into such
options and determine mutually agreed upon time frames for such modifications to
be implemented. As of the date this Amendment 1 is accepted by Sterling
Commerce, there are no known modifications to be made to said options.
7. Market Development. At least twice each calendar year, senior management
------------------
from Company and Sterling Commerce will meet at a mutually agreed upon location
to discuss their business relationship. In particular, the companies will
discuss their respective plans for geographic expansion in the Asian continent.
Both Sterling Commerce and Company shall endeavor to expand the geographical
area of operation and agree to earnestly consider such expansion to their mutual
benefit before agreeing to do the same with third parties.
Except to the extent modified by this Amendment 1, all other terms and
conditions of the International Electronic Commerce Provider Agreement shall
remain unmodified and continue in full force and effect.
Satyam Infoway Sterling Commerce
Limited International, Inc.
("Company") ("Sterling Commerce")
By ___________________________ By ___________________________
Print___________________________ Print___________________________
Title___________________________ Title___________________________
Date ___________________________ Date ___________________________
Satyam1amd(063099)/PBH
<PAGE>
EXHIBIT A SUPPLEMENT
Mapping and Translation ("MAT") Option:
- --------------------------------------
The MAT option shall include data translator and extended mapping capabilities,
facilitating the transformation of data to and from EDI, positional, and other
data formats. Maps may be created with graphical client tools, for defining
translation of data between application file layouts, user input forms, and
print or fax documents. This MAT option shall support public, proprietary, and
international standards as defined in the included standards database. Future
standards and updates to existing standards can be loaded into the system as
they become available. In addition, Company may define input or output data
layouts for translation applications relating to the EC Technology.
Web-Enabling ("Web-Enabling") Option:
- ------------------------------------
The Web-Enabling option shall:
1. Provide methods for enabling Web commerce that is extensible from simple
forms, including database integration, compliant EDI transactions, internet
transport
2. Extend transaction tracking, life cycle management, archiving and auditing
3. Internet-enable personal computer applications, linking desktop applications
to the MAT option
4. Incorporate security and reliability supporting firewalls, encryption,
secure Web registration and automatic recovery.
Real-Time Integration ("RTI") Option:
- ------------------------------------
The RTI option shall enable cross-corporate application integration. Using
eXtensible Markup Language (XML), RTI enables integration business applications
with Web sites and other business systems. Additionally, RTI can securely
integrate disparate systems and enable real-time data exchange over the
Internet.
<PAGE>
EXHIBIT G SUPPLEMENT
Mapping and
Translation Options
2 *4 x Xeon 450 processor, 1MB L2 Cache
1 GB MB Memory RAID Array Controller
6 18 GB 10k RPM Hard Disk (RAID 50)
2 INTEL Pro 100 PCI
2 Remote Management Card
2 Support Pack (7X24 4HR)
Operating System
2 MS Windows NT Server V 4.0 (Service Pack 4)
20 MS Windows NT Access License
Third Party Software
2 Microsoft SQL Server 6.5 (Service Pack 3 or 4)
2 MS Data Access Service Pack 2.0
Web-Enabling and/or
Real Time Integration
Options
2 *4 x Xeon 450 processor, 1MB L2 Cache
1 GB MB Memory RAID Array Controller
6 18 GB 10k RPM Hard Disk (RAID 50)
2 INTEL Pro 100 PCI
2 Remote Management Card
2 Support Pack (7X24 4HR)
Operating System
2 MS Windows NT Server V 4.0 (Service Pack 4)
* Servers Supported in the implementation: Dell, HP and Compaq
<PAGE>
EXHIBIT 10.8
AMENDMENT 2 TO
INTERNATIONAL ELECTRONIC COMMERCE PROVIDER AGREEMENT
Dated February 14, 1997
between
Sterling Commerce International, Inc.
and Satyam Infoway Limited
1. Introduction. Sterling Commerce International, Inc. ("Sterling Commerce")
------------
and Satyam Infoway Limited ("Company"), entered into an International Commerce
Provider Agreement dated February 14, 1997 ("Agreement"), attached as Exhibit A.
Company now desires to obtain the right to use the EC Technology, and to market,
provide, sublicense, install, facilitate, maintain and support the EC Offerings,
within Australia under the same terms and conditions as the Agreement, except as
set forth in this Amendment 2. For good and valuable consideration, including
the payments provided for herein, Sterling Commerce is willing and through its
affiliate, Sterling Commerce (Australia) Pty Limited ("Sterling Australian
Affiliate") to grant Company the rights set forth herein, subject to the
following terms and conditions.
This Amendment 2 applies only to the Territory of Australia and does not alter
or amend Company's or Sterling Commerce's rights and obligations under the
Agreement. Terms defined in the Agreement shall have the same meaning in this
Amendment 2, unless otherwise defined herein.
1.1 Company. Company may assign its rights and obligations under this
-------
Amendment 2 with respect to Australia (the "Assignment") to an affiliate company
controlled by Company ("Company Australian Affiliate"); provided that the
Company Australian Affiliate shall assume such obligations in writing in a form
reasonably acceptable to Sterling Commerce, and Company shall remain obligated
under the Agreement and such amendment. For purposes of this Amendment 2, the
term "Company" in the Agreement shall mean Company Australian Affiliate, except
as otherwise set forth in this Amendment 2.
1.2 Sterling Commerce. For purposes of this Amendment 2, the term "Sterling
-----------------
Commerce in the Agreement shall mean Sterling Australian Affiliate. The
collective reference to Sterling Commerce notwithstanding, Sterling Commerce BV
shall be responsible for those obligations which relate to Company's rights
within India, and Sterling Commerce (Australia) Pty Limited shall be responsible
for those obligations which relate to Company's and Company Australian
Affiliate's within Australia.
1.3 Territory. "Territory" mean Australia.
---------
1.4 Exclusivity. The exclusivity provisions, including Exclusivity Payments,
-----------
shall apply to this Amendment 2 per this Agreement.
1.5 Australian Terms And Conditions. For purposes of this Amendment 2, the
-------------------------------
numbered provisions set forth in Exhibit B shall supersede and entirely replace
provisions in the Agreement with the same section number.
2. Company Australian Affiliate's Obligations. Following the Assignment,
------------------------------------------
- -----------------------
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as *****. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
Company Australian Affiliate agrees to be bound by the applicable terms and
conditions of this Amendment 2 and the Agreement, and Sterling Commerce shall
have the right to enforce this Amendment 2 directly against Company Australian
Affiliate.
3. Company's Obligations.
---------------------
3.1 Warranty. Company represents and warrants to Sterling Commerce that it
--------
has, and during the term of this Amendment 2 and any additional term, it will
continue to have, the power and authority to control Company Australian
Affiliate's compliance with the applicable terms and conditions of this
Amendment 2 and the Agreement and that it will exercise such control to require
that the Company Australian Affiliate adhere to the terms and conditions of this
Amendment 2 and Agreement in all respects.
3.2 Indemnity. Company shall hold harmless and indemnify Sterling Commerce
---------
from and against any loss, cost, damage, liability or expense arising out of the
use or access to the EC Offerings or EC Technology by Company Australian
Affiliate. This section will not be construed to limit or exclude any other
claims or remedies which Sterling Commerce or the Sterling Commerce Affiliates
may assert under the Agreement, this Amendment 2, or by law. This Section 3 will
survive termination of the Agreement or of this Amendment 2.
4. Obligations of Both Company and Company Australian Affiliate.
------------------------------------------------------------
4.1 Minimum Payments. In addition to the Minimum Payments specified in Exhibit
----------------
F of the Agreement, the Minimum Payments associated with the additional grant
provided under this Amendment 2 shall be as specified in Exhibit C, attached
hereto.
4.2 Fees/Payment. The fees and payment obligations for this additional grant
------------
shall be as specified in Exhibit D. Company and Company Australian Affiliate
shall jointly and severally liable for any payment obligation incurred by
Company Australian Affiliate pursuant to this Amendment 2. Company shall, in the
first instance, be responsible for making any such payments, and Sterling
Commerce will send all bills, invoices, and other requests for payment to
Company. If Company breaches its payment obligations under this Amendment 2,
Sterling Commerce may immediately assert against either Company or Company
Australian Affiliate, jointly or individually, any claims or remedies that it
may assert under the Agreement, this Amendment 2, or by law, without first
exhausting its remedies against the other.
4.3 Breach by Company or Company Australian Affiliate. Sterling Commerce and
-------------------------------------------------
the Sterling Commerce Affiliates will have the right to assert against the
Company or Company Australian Affiliate for any breach of the provisions of this
Amendment 2 in their respective territories any claims or remedies that Sterling
Commerce or the Sterling Commerce Affiliates may assert under the Agreement,
this Amendment 2, or by law.
5. Sterling Commerce's Rights and Obligations.
------------------------------------------
<PAGE>
5.1 Performance. Except as otherwise provided herein, Sterling Commerce shall
-----------
be deemed to have fulfilled any obligation under the Agreement or this Amendment
2 with respect to both Company and Company Australian Affiliate ("Company
Parties") when it has performed such obligation with respect to either Company
Party. If either Company Party accepts performance by Sterling Commerce under
the Agreement or this Amendment 2, such acceptance shall constitute acceptance
on behalf of both of the Company Parties.
6. Equipment Required. The equipment required for the performance of Company
------------------
Australian Affiliate obligations under this Amendment 2 shall be as specified in
Exhibit E. Further, such equipment shall be deemed included in the defined term
"Designated CPU" of the Agreement.
7. Obligations Regarding Office Space. Sterling Commerce shall make available
----------------------------------
to Company reasonable office space in Sterling Commerce's regional offices in
Australia, where such space is reasonably available and under leases in which
Sterling Commerce is the sole tenant for such occupied premises. Company shall
pay Sterling Commerce for any direct expenses associated with its occupancy
which exceeds one hundred fifty dollars ($150 USD) a month.
*****
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
8. Implementation Assistance. Sterling Commerce will assist Company (a) to
-------------------------
develop an implementation schedule and (b) to implement the EC Technology
provided under this Amendment 2. Such schedule shall not exceed twelve (12)
months form the date this Amendment 2 is accepted by both parties.
9. Entire Agreement. This Amendment 2 and its Exhibits constitute the complete
----------------
and entire statement of all terms, conditions and representations of the
agreement between Sterling Commerce and Company with respect to its subject
matter and supersedes all prior agreements, or oral or written, with respect to
the subject matter hereof.
Satyam Infoway (Private) Sterling Commerce
Limited International, Inc.
("Company") ("Sterling Commerce")
By By
--------------------------- ------------------------------------
Print Print
--------------------------- ------------------------------------
Title Title
--------------------------- ------------------------------------
Date Date
--------------------------- ------------------------------------
Sterling Commerce (Australia)
Pty Limited
("Sterling Australian Affiliate")
By
------------------------------------
Print
------------------------------------
Title
------------------------------------
Date
------------------------------------
<PAGE>
EXHIBIT A
Agreement
<PAGE>
EXHIBIT B
STERLING COMMERCE TERMS AND CONDITIONS FOR AUSTRALIA
For purposes of this Amendment 2, the following sections of the Agreement shall
be amended as follows:
A. Section 3.13, add the following paragraphs at the end of this section:
------------
"If the period of restraint after the expiry of the term or termination of
this Agreement referred to in (i) above is held by a Court of competent
jurisdiction to be unenforceable, it shall be reduced to a period of (a)
nine (9) months, or (b) if the period of restraint in (a) is held by a
Court of competent jurisdiction to be unenforceable, it shall be reduced to
a period of six (6) months, or (c) if the period of restraint in (b) is
held by a court of competent jurisdiction to be unenforceable, it shall be
reduced to a period of three (3) months, or (d) if the period of restraint
in (c) is held by a Court of competent jurisdiction to be unenforceable, it
shall be reduced to a period of one (1) month.
If the period of restraint after the termination of this Agreement pursuant
to a Buy-Out Option referred to in (ii) above is held by a Court of
competent jurisdiction to be unenforceable, it shall be reduced to a period
of (a) two (2) years, or (b) if the period of restraint in (a) is held by a
Court of competent jurisdiction to be unenforceable, it shall be reduced to
a period of one(1) year, or (c) if the period of restraint in (b) is held
by a Court of competent jurisdiction to be unenforceable, it shall be
reduced to a period of nine (9) months, or (d) if the period of restraint
in (c) is held by a Court of competent jurisdiction to be unenforceable, it
shall be reduced to a period of six (6) months, or (e) if the period of
restraint in (d) is held by a Court of competent jurisdiction to be
unenforceable, it shall be reduced to a period of three (3) months, or (f)
if the period of restraint in (e) is held by a Court of competent
jurisdiction to be unenforceable, it shall be reduced to a period of one
(1) month.
If this Section 3.13 or any part of it be held invalid or unenforceable for
any reason, that Section or part will be deemed eliminated or modified to
the extent necessary to make the remainder of this Agreement and that
Section or part enforceable or reasonable, provided that the parties to
this Agreement may negotiate a valid and enforceable provision in
replacement of the invalid or unenforceable provisions."
B. Section 4.7, insert the following text at the end of this section:
-----------
"Notwithstanding the foregoing, Company shall provide all first level
support services, as defined in this Section 4.7, to Company Australian
Affiliate (as defined in Amendment 3 to this Agreement) and its respective
Company Customers with respect to the EC Technology and EC Offerings."
C. Section 5.5, replace the second sentence in its entirety with the following
-----------
text:
"Subject to the above, all amounts payable by Company to STERLING
<PAGE>
COMMERCE under this Agreement are exclusive of any shipping and handling
charges, and tax (including, without limitation, any goods and services,
sales or value-added taxes), duties, customs charges, levy or similar
governmental charge that may be assessed by any jurisdiction, whether based
on gross revenue, the delivery, possession or use of the EC Technology, the
EC Products, or the acceptance of any services by Company, the execution or
performance under this Agreement or otherwise."
D. Section 6.5, replace in its entirety with the following text:
-----------
SECTION 6.5: TO THE FULL EXTENT PERMITTED BY LAW, AND EXCEPT AS EXPRESSLY
PROVIDED IN THIS SECTION 6 AND SECTION 7 BELOW, BUT SUBJECT ALWAYS TO
SECTION 6.6, ALL WARRANTIES, CONDITIONS, REPRESENTATIONS, INDEMNITIES AND
GUARANTEES WITH RESPECT TO THE EC PRODUCTS, THE EC SUPPORT SERVICES, THE EC
TECHNOLOGY, AND ANY OTHER SERVICES AND PRODUCTS OFFERED OR PERFORMED BY
STERLING COMMERCE OR ANY OF ITS AFFILIATED COMPANIES OR ITS OR THEIR
LICENSORS THAT POSSESS ANY PROPRIETARY INTEREST IN THE EC OFFERINGS OR EC
TECHNOLOGY OR ANY COMPONENT THEREOF (COLLECTIVELY, "THIRD PARTY OWNERS")
UNDER THIS AGREEMENT, WHETHER EXPRESS OR IMPLIED, ARISING BY LAW, CUSTOM,
PRIOR ORAL OR WRITTEN STATEMENTS BY STERLING COMMERCE, ITS EMPLOYEES OR
REPRESENTATIVES OR BY ANY THIRD PARTY OWNER OR OTHERWISE (INCLUDING, BUT
NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR PARTICULAR
PURPOSE) ARE HEREBY OVERRIDDEN, EXCLUDED AND DISCLAIMED.
6.6 Mandatory Warranties and Conditions. IF THE EC TECHNOLOGY OR EC
OFFERINGS AND/OR ASSOCIATED DOCUMENTATION PROVIDED ARE SUBJECT TO THE
MANDATORY WARRANTIES AND CONDITIONS OF THE TRADE PRACTICES ACT 1974 (THE
"ACT") OR ANY OTHER APPLICABLE LAW (COLLECTIVELY, THE "LAW"), AND IF THE
LAW PROHIBITS THE EXTENT TO WHICH STERLING COMMERCE AND THE THIRD PARTY
OWNERS CAN EXCLUDE, RESTRICT OR MODIFY THE APPLICATION OF THE LAW OR THEIR
LIABILITY FOR BREACH OF THOSE WARRANTIES OR CONDITIONS, THE LIABILITY OF
STERLING COMMERCE AND/OR THE THIRD PARTY OWNERS FOR BREACH OF ANY SUCH
CONDITION OR WARRANTY (OTHER THAN A CONDITION OR WARRANTY IMPLIED BY
SECTION 69 OF THE ACT) WILL BE LIMITED, AT THE OPTION OF STERLING COMMERCE
AND/OR THE THIRD PARTY OWNER, TO (A) IN THE CASE OF GOODS, ANY ONE OR MORE
OF THE FOLLOWING (i) THE REPLACEMENT OF THE GOODS OR THE SUPPLY OF
EQUIVALENT GOODS; (ii) THE REPAIR OF THE GOODS; (iii) THE PAYMENT OF THE
COST OF REPLACING THE GOODS OR OF ACQUIRING EQUIVALENT GOODS; OR (iv) THE
PAYMENT OF THE COST FOR HAVING THE GOODS REPAIRED; OR (B) IN THE CASE OF
SERVICES (i) TO SUPPLY THE SERVICES AGAIN; OR (ii) THE PAYMENT OF THE COST
OF HAVING THE SERVICES SUPPLIED AGAIN.
<PAGE>
6.7 Non-exclusion. NOTHING IN SECTIONS 6, 7 AND 8 IS INTENDED TO EXCLUDE,
RESTRICT OR MODIFY THE APPLICATION OF ANY FEDERAL OR STATE LAWS (INCLUDING
THE ACT) THAT MAY LIMIT THE RIGHT OF STERLING COMMERCE, ITS EMPLOYEES AND
REPRESENTATIVES AND/OR THE THIRD PARTY OWNERS TO EXCLUDE, RESTRICT OR
MODIFY THEIR LIABILITY IN THE MANNER SET OUT ABOVE."
E. Section 8.1, replace this section in entirety with the following text:
-----------
"SECTION 8.1: TO THE FULL EXTENT PERMITTED BY LAW, UNDER NO CIRCUMSTANCES
WILL STERLING COMMERCE AND/OR THE THIRD PARTY OWNERS BE LIABLE FOR ANY
CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, SUCH DAMAGES OR
PROFITS BASED ON CLAIMS OF COMPANY OR COMPANY CUSTOMERS (INCLUDING, BUT NOT
LIMITED TO, CLAIMS FOR LOSS OF DATA, GOODWILL, USE OF MONEY OR USE OF THE
EC PRODUCTS, THE EC TECHNOLOGY, ANY EC SUPPORT SERVICES OR ANY OTHER
PROVIDED SERVICES HEREUNDER, INTERRUPTION IN USE OR AVAILABILITY OF DATA,
STOPPAGE OF OTHER WORK OR IMPAIRMENT OF OTHER ASSETS). IN NO EVENT WILL THE
AGGREGATE LIABILITY WHICH STERLING COMMERCE, ITS EMPLOYEES AND
REPRESENTATIVES AND/OR THE THIRD PARTY OWNERS MAY INCUR IN ANY ACTION OR
PROCEEDING EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO STERLING COMMERCE BY
COMPANY FOR THE SPECIFIC EC OFFERING OR ANY OTHER SERVICES PROVIDED
HEREUNDER THAT DIRECTLY CAUSED THE DAMAGE. ANY LIMITATION OF LIABILITY
INCLUDED IN THIS AGREEMENT SHALL NOT APPLY IF THE DAMAGE WAS CAUSED AS A
RESULT OF STERLING COMMERCE'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT."
F. Section 10.2, insert the following text after the first sentence:
------------
"Except for the right to use the Marks granted under this Section 10.2, all
powers granted under section 26 of the Australian Trade Marks Act 1995 are
expressly excluded."
G. Section 19.1, revise the addresses as follows:
------------
"If to Sterling Commerce:
Sterling Commerce
4600 Lakehurst Court
Dublin, Ohio 43016
USA
Attn: Phyllis Hohe
Director, Business Administration
Phone: +614.793.7261
Fax: +614.718.1688
With a copy to:
<PAGE>
Sterling Commerce, Inc.
4600 Lakehurst Court
Dublin, Ohio 43106
USA
Attn: Albert K. Hoover, Esq.
Senior Vice President, Legal
Phone: +614.791.6283
Fax: +614.718.1510
If to Company:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attn:
------------------------
Phone:
------------------------
Fax:
------------------------
If to Company Australian Affiliate:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attn:
------------------------
Phone:
------------------------
Fax:
------------------------
H. Section 24.1, replace "India" with "Australia"
------------
I. Exhibit O:
---------
a. Section A.1, replace "maximum permitted by India law, but not more than
50%, with the "maximum permitted by local law."
b. Section A.3, replace "permitted by law or 50%" with "permitted by local
law".
c. Section A.7, replace "Should at...purchase 49-50%" with "If at such time
as when STERLING COMMERCE has elected to purchase 49-50%, if permitted by
local law".
<PAGE>
EXHIBIT C
Minimum Payments
In order for Company and Company Australian Affiliate to retain their entire
granted rights under this Amendment 2, Company Australian Affiliate must make
the following minimum payments to Sterling Commerce ("Minimum Payments"),
pursuant to Section 5.1 of the Agreement and subject to service fees waiver in
Item 3 of Exhibit D of this Amendment 2. Minimum Payments are attributable to
revenues from EC Network Services charges incurred by Company Australian
Affiliate and its respective Subscribers (excluding communication charges):
- ---------------------------------------------------------------------
Annual Term Initial 6 Months Year End Minimum
- ----------- ---------------- -----------------
Minimum
-------
* * * * *
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
EXHIBIT D
Consideration and Payment Terms
for Amendment 3
A. Consideration
-------------
1. EC Technology
-------------
The fee for the rights granted in this Amendment 3, including the right to use
the EC Technology (which shall include COMMERCE:Exchange, MAT Option, Web-
Enabling Option and RTI Option) provided herein for the primary and secondary
systems (mirrored backup), is
* * * * *
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
* * * * *
6. EC Products
-----------
* * * * *
7. EC Support Services
-------------------
* * * * *
B. Payment Terms
-------------
1. Payment of the initial license fee for EC Technology under Paragraph 1 shall
be as follows:
* * * * *
In any event, all payments are due and payable on or before June 30, 2000.
2. Except for the first Annual Term, payment of annual maintenance fees for EC
Technology under Paragraph 1 shall be due and payable no less than thirty (30)
days prior to commencement of each applicable Annual Term. Any and all
adjustments in annual maintenance due to purchases of licenses for EC Options to
the EC Technology shall be payable pursuant to Sterling Commerce's then current
payment policies.
3. Payment of amounts under Paragraphs 1 (to the extent of continuing charges)
and 2 shall be due and payable upon the earlier of: (i) within sixty (60) days
after the month in which Company has performed the services for the Subscriber
or (ii) within
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
60 days of invoice of the Subscribers.
4. Payment of amounts under Paragraph 6 for license grants shall be due and
payable within thirty (30) days after the month in which Sterling Commerce has
delivered the software or other products to Company or permitted Company to
deliver such items to the Company Customer. With respect to maintenance
services, amounts due Sterling Commerce shall be due and payable within thirty
(30) days after the month in which such support services term commences for the
Company Customer.
5. Payment of amounts under Paragraph 7 shall be due and payable within
fifteen (15) days of invoice by STERLING COMMERCE unless otherwise agreed to by
STERLING COMMERCE in writing.
<PAGE>
EXHIBIT E
EQUIPMENT LIST
COMMERCE:Exchange
(as of 98.3.3 Release)
*A Typical Implementation
June 16, 1999
Rack (Depends on location and Space requirements as Company site)
2 TBD
Electrical/UPS
2 UPS for min 2.5kVA
2 Extended battery for 120 minutes @ full load
2 Dedicated 30 AMP Circuit
Communications
2 Internet Connection
2 Phone lines for support management
4 ISDN and Modems for remote management
(If available in country)
Routers
2 CISCO 3640 series 4 - Slot Modular Multi-protocol Router
2 4-8MB Flash Factory
2 Upgrade, 32MB DRAM
2 Ver. 11.3X+IOS, IP Plus feature set
2 2-Ethernet/2 WAN Card Slot Module
2 WIC Serial Port WAN Interface Card Module
2 WIC ISDN BRI (If available in country.)
2 Male DTE V.35 Cable 10' (depending on country's Telecom)
2 CISCO 2610 series 2 - Slot Modular Multi-protocol router
2 4-8MB Flash Factory
2 Upgrade, 32MB DRAM
2 Ver. 11.3X+IOS, IP Plus feature set
2 WIC 2T 2Serial Port WAN Interface Card Module
2 Male DTE V.35 Cable 10'(Depending on country Telecom)
EDI Server
2 ** 4 x Xeon 450 processor, 1MB L2 Cache
2 512 MB Memory RAID Array Controller
6 18 GB 10k RPM Hard Disk (RAID 50)
2 INTEL Pro 100 PCI
2 Remote Management Card
2 DLT 35/70 External Auto-loader tape drive.
2 Seagate Enterprise w/autoloader option
2 Support Pack (7X24 4HR)
<PAGE>
Operating System
2 MS Windows NT Server V 4.0 (Service Pack 4)
50 MS Windows NT Access License
Firewall Server
2 ** P II Array 350MHz 512K Cache
128 MB Memory
2 Additional 350MHz Processor
6 4.5GB SCSI 7.2K RPM Disk Drives (RAID 5)
2 PERC 2/SC RAID Internal single channel 16MB cache
2 12/24 DDS/3 Internal Tape Drive
1 Support Pack (7x24 HR)
6 INTEL PRO 100 PCI
2 Remote Management Card
Operating System
2 MS Windows NT Server V 4.0 (Service Pack 4)
WEB Server
2 ** P II Array 450MHz 512K Cache
256 MB Memory
6 4.5GB SCSI 7.2K RPM Disk Drives (RAID 5)
2 PERC 2/SC RAID Internal single channel 16MB cache
1 Support Pack (7X24 4HR)
2 INTEL PRO 100 PCI
Remote Management Card
Networking
4 3COM 12-SuperStack II Dual Speed 500 Ethernet Hub
15 10 BaseT cables, Cat 5
2 10 BaseT crossover cables, Cat 5
RMON/Probe
Support
2 Desktop PC PII 400MHz 512K Cache
64 MB, 6.4+ Gig HD, 1 Intel PRO 100 PCI
2 Nt 4 Workstation for Observer
Server Switch
2 12 Port Autoview PC/Server KVM Switch
10 8 ft PS/2 Cable Kit for Commander Series
1 17IN SVGA Monitor
Mapping and
Transalation Options
2 ** 4 x Xeon 450 processor, IMB L2 Cache
1 GB MB Memory RAID Array Controller
<PAGE>
6 18 GB 10k RPM Hard Disk (RAID 50)
2 INTEL Pro 100 PCI
2 Remote Management Card
2 Support Pack (7X24 4HR)
Operating System
2 MS Windows NT Server V 4.0 (Service Pack 4)
20 MS Windows NT Access License
Third pary Software
2 Microsoft SQL server 6.5 (Service Pack 3 or 4)
2 MS Data Access Service Pack 2.0
Web-Enabling and/or
Real Time Integration
Options
2 ** 4 x Xeon 450 processor, 1MB L2 Cache
1 GB MB Memory RAID Array Controller
6 18 GB 10k RPM Hard Disk (RAID 50)
2 INTEL Pro 100 PCI
2 Remote Management Card
2 Support Pack (7X24 4HR)
Operating System
2 MS Windows NT Server V 4.0 (Service Pack 4)
* The above configuration is subject to change in the Technical Requirements
Meeting
** Servers Supported in the implementation: Dell, HP and Compaq
in
<PAGE>
EXHIBIT 10.9
AMENDMENT 3 TO
INTERNATIONAL ELECTRONIC COMMERCE PROVIDER AGREEMENT
Dated February 14, 1997
between
Sterling Commerce International, Inc.
and Satyam Infoway Limited
1. Introduction. Sterling Commerce International, Inc. ("Sterling Commerce")
------------ -----------------
and Satyam Infoway Limited (the "Company" and, together with Sterling Commerce,
-------
the "Parties") entered into an International Commerce Provider Agreement, dated
-------
as of February 14, 1997, a copy of which is attached hereto as Exhibit A. In or
about August 1999, the Parties entered into Amendment 1 to the Agreement, a copy
of which is attached hereto as Exhibit B ("Amendment 1"). In or about August
-----------
1999, the Parties entered into Amendment 2 to the Agreement, a copy of which is
attached hereto as Exhibit C (together with Amendment 2, the "Amendments"). The
----------
International Commerce Provider Agreement, as amended by the Amendments, is
referred to herein as the "Agreement." Sterling Commerce and the Company now
---------
desire to further amend the Agreement on this 14th day of September 1999 as set
forth herein.
2. Investment by Sterling Commerce. The Parties have entered into an
-------------------------------
agreement, dated as of September 14, 1999 (the "Stock Purchase Agreement"),
------------------------
pursuant to which the Company will issue and sell to Sterling Commerce
481,000 equity shares, par value Rs.10 per share, of the Company for a
purchase price equal to $5,000,000.00 (the "Investment"). In connection
----------
with the Investment, the Parties have also entered into a Registration
Rights Agreement (the "Registration Rights Agreement") and, together with
-----------------------------
Satyam Computer Services Limited, a Stockholders Agreement (the
"Stockholders Agreement"), each dated as of September 14, 1999. The Stock
Purchase Agreement, the Registration Rights Agreement, the Stockholders
------------
Agreement and the Equity Shares to be issued and sold by the Company to
- ---------
Sterling Commerce are collectively referred to herein as the "Documents."
---------
3. Termination of Investment Option and Right of First Refusal. Each of
-----------------------------------------------------------
Section 25 and Exhibit O of the Agreement, entitled "Investment Option and Right
of First Refusal," are hereby deleted in their entirety.
4. Additional Agreements. The Parties agree that (a) the Investment shall
---------------------
satisfy any investment option and/or right of first refusal of Sterling Commerce
with respect to the Company and (b) Sterling shall have no right to purchase or
otherwise receive Equity Shares, except as otherwise provided (x) in the
Documents and (y) by Indian law upon consummation of the Investment. The Parties
agree to execute all such additional documents and take all such additional
action as may be necessary to carry out the intent and purposes of the
foregoing.
<PAGE>
STERLING COMMERCE
INTERNATIONAL, INC.
/s/ Albert K. Hoover
---------------------------
Name: Albert K. Hoover
Title: Senior Vice President and
General Counsel
Witnessed by:
/s/ Shelly R. Boggs
---------------------------
Name: Shelly R. Boggs
Title: Legal Administrative Assistant
SATYAM INFOWAY LIMITED
/s/ R. Ramaraj
_________________________
Name: R. Ramaraj
Title: Managing Director
Witnessed by:
/s/ K. Thiagarajan
-------------------------
Name: K. Thiagarajan
Title: General Manager - Finance
<PAGE>
EXHIBIT 10.10
OPEN MARKET, INC.
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") is made as of June 1997
---------
(the "Effective Date"), by and between Open Market, Inc., having its principal
--------------
place of business at 245 First Street, Cambridge, Massachusetts USA 02142 ("OPEN
MARKET") and Satyam Infoway Private Limited, whose offices are located at 35,
Velachery Road, Little Mount, Chennai, 600-015 India ("Distributor").
-----------
RECITALS
OPEN MARKET has developed and owns all rights in software products and
related services which provide solutions for doing business over the Internet,
including the Software and the Services; and
Distributor desires to be appointed a distributor of the Software and
Services in the Territory pursuant to the terms and conditions of this
Agreement.
In consideration of the mutual covenants and Agreements herein
contained, OPEN MARKET and Distributor hereby agree as follows:
1. DEFINITIONS.
All capitalized or abbreviated terms in this Agreement shall have the
meaning set forth in this Section I or elsewhere in this Agreement and each
definition shall apply to the singular or plural form of its defined term as the
context requires.
1.1 Software. The term "Software" means (i) the object code versions of
-------- --------
the computer programs listed on Exhibit A together with (ii) the object code
versions of any enhancements, improvements, new releases and other modifications
to such computer programs provided to Distributor pursuant to the terms of this
Agreement, including without limitation the Localized Software. OPEN MARKET
shall have the right to add to or discontinue any or all of the computer
programs comprising the Software, but only upon sixty (60) days prior written
notice, via fax or letter, to Distributor.
1.2 Services. The term "Services" means those service offerings more
-------- --------
specifically described on Exhibit D. There are two types of Services which
---------
Distributor may offer hereunder: (i) service contracts administered by OPEN
MARKET, if and when such Services are available in the Territory ("OPEN MARKET
-----------
Services") or (ii) service contracts administered by Distributor under which
- --------
OPEN MARKET will provide level three back-up support to Distributor
("Distributor Services").
1.3 Documentation. The term "Documentation" means the OPEN MARKET user
------------- -------------
manuals and related documentation prepared for end-users of the Software.
1.4 Territory. The term "Territory" means the geographic areas listed on
--------- ---------
Exhibit B.
- ---------
1.5 House Accounts. The term "House Accounts" means the existing
-------------- --------------
customers of OPEN MARKET as of the Effective Date with facilities located in the
Territory, to which Distributor shall be authorized to market and distribute the
Software, only on condition that such software be purchased and physically
located within the territory. All such House Accounts are designated on Exhibit
-------
C.
- -
- -----------------------
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as *****. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
1.6 Mandatory Provisions. The term "Mandatory Provisions" collectively
-------------------- --------------------
means the Mandatory Customer Agreement Provisions set forth in Exhibit F and the
---------
Mandatory Service Agreement provisions set forth in Exhibit G.
---------
1.7 Subdistributor. The term "Subdistributor" means any business agent,
-------------- --------------
entity or organization authorized by Distributor to market, demonstrate,
license, sublicense, sell and distribute the applicable Software in the
Territory, subject to Section 2.5 of this Agreement.
2. APPOINTMENT AS DISTRIBUTOR.
2.1 Appointment. (a) Subject to the terms of this Agreement, OPEN MARKET
-----------
hereby grants and Distributor accepts, except as to House Accounts, a non-
transferable and non-exclusive right and license (subject to Section 2.1(b)
below) to (i) market, demonstrate, license, sublicense, sell and distribute,
both directly and indirectly through Subdistributors, the Software, Localized
Software (as defined in Section 2.4), Enhanced Products (as defined in Section
2.2) and Documentation listed in Exhibit A, Section 1(a) (collectively,
---------
"Market(ing)") to end-users for delivery and installation in the Territory, and
-----------
(ii) Market and provide the Services to end-users in the Territory.
(a) Subject to the terms of this Agreement, OPEN MARKET hereby
grants and Distributor accepts, except as to House Accounts, a non-transferable
and exclusive right and license to market, demonstrate, license, sublicense,
sell and distribute, both directly and indirectly through Subdistributors, the
Software, Localized Software and Enhanced Products listed in Exhibit A, Section
---------
1(b) to end-users for delivery and installation in the Territory, for a period
of one (1) year from the Effective Date (the "Exclusivity Period"). Upon
termination or expiration of the Exclusivity Period as provided herein, the
Distributor's distribution rights with respect to the applicable Software shall
be subject to the non-exclusive rights granted in Subparagraph 2.1(a) above,
unless otherwise defined as per Exhibit A, 3A. The exclusivity rights granted in
---------
clauses (a) and (b) shall be subject to the condition that the distributor duly
achieves the target of minimum sales set forth in Ex A, 3A.
(b) All end-users receiving the Software shall be required to
enter into a legally binding customer agreement with Distributor or its
authorized Subdistributor (the "Customer Agreement") containing at least the
------------------
applicable Mandatory Provisions. All end-users receiving Services shall be
required to enter into a legally binding service agreement (the "Service
-------
Agreement") containing at least the applicable Mandatory Provisions. Such end-
- ---------
users having entered into their respective agreements are referred to
collectively herein as "Customers".
---------
(c) Except as expressly provided in Section 2.1(b) with respect
to the Exclusivity Period, nothing in this Agreement, expressed or implied,
shall be deemed to limit OPEN MARKET's right at any time during the Term or
thereafter to use, Market, make available for any purpose, or otherwise deal
in -- whether directly or through other parties subject to subparagraph 2.1(b),
within the Territory or elsewhere -- any Software, Documentation or any product,
service, or information related thereto or derived therefrom.
(d) Limited Transact Test Bed Development System License Grant.
----------------------------------------------------------
Upon payment by Distributor of the applicable license fees listed in Paragraph 3
of Exhibit A as and when such fees become due and subject to Section 10.3(f),
---------
OPEN MARKET hereby grants to Distributor a limited, non-exclusive, non-
transferable license to use one (1) each of the TRANSACT, "Magellan" and Folio
software product licenses as a Test Bed Development System (the "Test Bed"), in
object code form only, for Distributor's internal purposes, and for no
2
<PAGE>
other purpose, except as otherwise expressly provided herein. "Internal
purposes" shall be limited to using the Test Bed for (i) internal evaluation,
development, testing and prototyping and (ii) developing experience in the use
and functionality of the test Bed.
The Test Bed shall be installed by OPEN MARKET on designated computer
system(s) owned by Distributor and located at designated Distributor-owned
site(s) located in India (the "Site(s)"). The Test Bed may be accessed solely
by OPEN MARKET and authorized employees of Distributor at the Site(s). Except
for the limited rights granted to Distributor hereunder, all right, title and
interest in and to the Test Bed, including, without limitation, all patent,
copyright, trademark, trade secret and all other intellectual property rights,
shall remain exclusively in OPEN MARKET. Distributor acknowledges and agrees
that this Section 2.1(e) in no way shall be construed to provide to Distributor,
or any third party, any express or implied license to use, copy or otherwise
exploit the Test Bed or any portion thereof other than as specifically set forth
hereunder without limiting the foregoing, Distributor may not (i) sublicense or
otherwise distribute the Test Bed or any portion thereof to any third party,
including any subsidiary or affiliate of Company, (ii) install the Test Bed on a
computer system other than the dedicated computer system(s) described hereunder
or (iii) use the Test Bed in live production for revenue generating purposes,
except as otherwise expressly authorized in subparagraph 2.1(f) below. The
terms and conditions pertaining to the Software in Article 7, Article 8 and
Section 103 under this Agreement shall apply to the Test Bed Support for the
Test Bed shall be as provided in Exhibit D at the fees set forth in Exhibit A.
The initial term of the Support Agreement shall commence upon shipment of the
Test Bed to Licensee and shall continue for Fifteen (15) months thereafter.
Following such initial term, annual extension terms shall be Twelve (12) months
from the extension date.
(e) Limited Commerce Service Provider License Grant. OPEN MARKET
-----------------------------------------------
hereby grants to Distributor a limited, non-exclusive, non-transferable license
to use the Test Bed as a Commerce Service Provider ("CSP") in the Territory, in
object code form, on designated computer system(s) owned by Distributor and
located at designated Distributor-owned site(s) located in India. The terms and
conditions pertaining to the Software in Article 7, Article 8 and Section 10.3
under this Agreement shall apply to the use of the Test Bed by Distributor as a
CSP. Additional terms and conditions relating to the use of the Test Bed by
Distributor as a CSP are set forth in Exhibit I.
---------
2.2 Title and Ownership. Distributor acknowledges that OPEN MARKET
-------------------
retains all rights, title and interests in and to (i) the Software, Localized
Software, Documentation, Promotional Items (as defined in Section 5.1), Test Bed
and any proprietary materials and other information contained in or used in
connection with the Services (the "Service Materials"); (ii) the intellectual
-----------------
property associated with any of the foregoing items, including without
limitation, all patents, copyrights, trade secrets, know-how and all other
proprietary right, throughout the world; and (iii) the OPEN MARKET trade or
service marks, names or symbols specified in Exhibit E (collectively, the
---------
"Marks"). Distributor shall have no express or implied right, title, or
interest in any of the foregoing items or any Localized Product embodiment
thereof, except as expressly set forth herein or as may be mutually agreed in
writing by the parties. All Localized Software, copies, alterations or biller
works relating to such Localized Software shall, to the maximum extent allowed
by applicable law be (i) governed by US copyright law and (ii) deemed derivative
works and/or "works made for hire" for OPEN MARKET. OPEN MARKET holds and shall
retain all rights that vest in any Localized Software as a derivative work, a
"work
3
<PAGE>
made for hire", or as part of a collective work or compilation, unless otherwise
mutually agreed in writing by the parties. To the extent Distributor for any
reason shall acquire by operation of law or otherwise any rights therein not
expressly granted to it under this Agreement, Distributor hereby irrevocably
assigns all such rights to OPEN MARKET and shall, at OPEN MARKET's sole expense,
execute all necessary documents to perfect such assignment to OPEN MARKET under
US law and the laws of the Territory. Distributor also irrevocably waives any
moral or other authorship rights in the Works; or, if such waiver is not
allowed, irrevocably consents to the infringement of such rights by OPEN MARKET.
Notwithstanding the foregoing, Distributor may develop enhanced
products based on Distributor products through the use of OPEN MARKET
Application Programming Interfaces ("Enhanced Products"), provided that (i) such
Enhanced Products shall not perform material functionality of the Software or
otherwise be competitive with the Software or the Localized Software (as defined
in Section 2.4) and (ii) OPEN MARKET shall have no support obligations for such
Enhanced Products to Distributor, Subdistributors, Customers or any other third
party. Distributor will retain copyright for Enhanced Products so developed and
shall provide support for them without OPEN MARKET's assistance. Distributor
may grant to OPEN MARKET a perpetual royalty-free license to any of the
foregoing Enhanced Products that Distributor may so develop hereunder under
mutually agreeable terms and conditions on a case-by-case basis.
2.3 Limited Trademark Use. In addition, OPEN MARKET grants Distributor
---------------------
the non-exclusive and non-transferable license to use the Marks solely (i)
during the Term, (ii) in the Territory and (iii) in connection with
Distributor's Marketing of the Software pursuant to Section 2.1. Distributor
acknowledges that OPEN MARKET owns all rights to the Marks. Distributor shall
not during or after the Term (i) use or attempt to use or register anywhere in
the world a trade or service name, mark or symbol which is identical or
confusingly similar to any one of the Marks; (ii) take any action, during the
Term, which could adversely affect the validity or enforceability of the Marks
or OPEN MARKET's rights therein; or (iii) use or adopt any Mark or any name,
design or symbol similar thereto; as part of, on, in connection with (x)
Distributor's formal or informal business, private, substitute or other name or
(y) any of Distributor's designs, symbols, advertisements, products, services,
letterhead, business cards or other means of identification. In addition,
Distributor shall, at OPEN MARKET's request and expense, assist OPEN MARKET by
executing documents or otherwise as OPEN MARKET reasonably may request, in order
to register any Mark in the Territory.
2.4 Localization. Distributor shall perform any necessary localization of
------------
the Software, including but not limited to additional features, interfaces to
popular payment instruments and translation of the user interface and
Documentation into local languages (collectively, the "Localized Software").
OPEN MARKET will own all rights, title and interests in and to any such
Localized Software, unless otherwise mutually agreed in writing. The reasonable
cost and expense of such localization shall be reimbursed by OPEN MARKET to the
Distributor on an actual basis, subject to OPEN MARKET's review and written
approval prior to any such localization costs and expenses being incurred by
Distributor.
2.5 Appointment of Subdistributors. Distributor may, in its sole
------------------------------
discretion, appoint suitable Subdistributors in the Territory, it being
understood that the acts of such Subdistributors shall be at Distributor's own
risk, expense and supervision. Accordingly, Distributor shall defend, indemnify
and hold OPEN MARKET harmless from and against any and all claims, suits,
actions, liabilities, damages, and expenses (including without limitation
reasonable attorneys fees) suffered or incurred by OPEN MARKET as a result of
Distributor's appointment of Such Subdistributors. Distributor shall require
that each of its Subdistributors be bound by contractual
4
<PAGE>
obligations no less restrictive than those of Distributor hereunder, including
without limitation those set forth in Article 7 of this Agreement. Distributor
shall be solely responsible for making all payments to OPEN MARKET hereunder.
3. ORDERS AND PERFORMANCE.
3.1 Orders and Shipment.
3.1.1 For the Software. Subject to the terms hereof, Distributor
----------------
shall purchase copies of the Software, Localized Software and Documentation from
OPEN MARKET, and OPEN MARKET shall sell such copies of the Software, Localized
Software and Documentation to Distributor for sublicensing and distribution to
Customers in accordance with Section 2.1. Distributor shall place orders for
copies of the Software and Documentation with OPEN MARKET by issuing a purchase
order on Distributor's customary form (a copy of such form in use as of the
Effective Date is attached hereto). The purchase order shall specify the
following information; the quantity of the Software and Documentation ordered;
the applicable version or platform; tile name and address of the prospective
Customer, if known; and the desired delivery date. After its acknowledgment and
acceptance of each order, which shall be at OPEN MARKET's sole discretion, OPEN
MARKET shall ship such copies of the Software and Documentation to Distributor
for Distributor's delivery and installation at such Customers address, subject
to the requirement in Section 2.1 that the Customer receiving the Software shall
execute (or otherwise enter into) a Customer Agreement. No order shall be
binding upon OPEN MARKET unless acknowledged and accepted by OPEN MARKET by fax
or by letter. OPEN MARKET shall promptly confirm its acceptance of an order or
reject such order within three (3) business days after its receipt thereof
either by fax or by letter and shall not reject an order except for reasonable
business reasons. Failure to reject such order within such three (3) day period
shall be deemed acceptance of the order by OPEN MARKET. The terms and conditions
set forth herein shall prevail over any different or additional terms set forth
in any Distributor order or other communications.
OPEN MARKET shall be solely responsible for duplicating Products.
Distributor shall provide a sales forecast to OPEN MARKET monthly.
3.1.2 For the OPEN MARKET Services (if and when available in the
----------------------------------------------------------
Territory). Distributor shall place orders for the OPEN MARKET Services with
- ---------
OPEN MARKET, specifying: the name and address of the prospective Customer; the
type of Service Contract ordered; the model number and version of the Software
that is the subject of the Service Contract; the ordered Service Materials; and
the date of installation of such Software. No such Service order shall be
binding upon OPEN MARKET, unless acknowledged and accepted by OPEN MARKET by fax
or by letter, and OPEN MARKET Services for accepted Service orders may only be
provided subject to the requirement in Section 2.1 that the Customer receiving
the OPEN MARKET Services shall execute (or otherwise enter into) a Service
Agreement. OPEN MARKET shall confirm its acceptance of an order, which shall be
at OPEN MARKET's sole discretion, within fifteen (15) days after its receipt of
such order by fax or by letter. Failure to reject such order within such
fifteen (15) day period shall be deemed acceptance of the order by OPEN MARKET.
The terms and conditions set forth in this Section 3.1 shall prevail
over any different or additional terms set forth in Distributors purchase order
or other communications, including without limitation, preprinted terms and
conditions and may be varied only if it is expressly agreed in writing by OPEN
MARKET.
3.1.3 Cancellation. No confirmed order placed with OPEN MARKET may
------------
be canceled by the Distributor without providing OPEN MARKET with fifteen (15)
days prior written notice.
5
<PAGE>
3.2 Delivery. OPEN MARKET shall use reasonable commercial efforts to
--------
deliver the Software, Localized Software, Documentation and Service Materials by
the desired delivery date. OPEN MARKET shall use commercially reasonable efforts
to deliver the foregoing items within twenty (20) business days of receipt of an
order and shall inform Distributor of any delivery delays. Distributor shall pay
all insurance, duty and customs, and any other charges, except freight which is
borne by OPEN MARKET, associated with shipment of the Software, Documentation
and Service Materials.
4. PRICES, DISCOUNTS AND PAYMENT TERMS.
4.1 Payments; Minimum Performance Requirements and Fees.
(a) Software and Services. Distributor shall directly pay OPEN
---------------------
MARKET all amounts due to OPEN MARKET for Software, OPEN MARKET Services and
Test Bed ordered under this Agreement as set forth in Paragraph 3 of Exhibit A.
Distributor and OPEN MARKET have agreed on Distributor's total minimum sales
revenue target commitments with regard to calculating the applicable discount
rate for Software during the Initial Term of this Agreement ("Target"), which is
specified in Paragraph 3 of Exhibit A. The Target shall be based upon the sum of
all gross revenues received by Distributor for sales of Software licenses as
described in Exhibit A and provision of Services as described in Exhibit D in
the Territory. Such Target shall include software licenses, and third level
support fees as defined in Exhibit D, 7.3, payable by customers.
(b) Referral Fees. OPEN MARKET shall pay Distributor during the
-------------
Term the referral fees specified in Paragraph 3 of Exhibit A in consideration
referring professional services customers to OPEN MARKET for provision of Pass-
Through services as defined in Exhibit D, 7.4, based upon a percentage of the
net revenue resulting from the applicable OPEN MARKET professional services
agreement with such qualified referrals ("Referral Fees"). Distributor shall be
eligible to receive Referral Fees for all net revenue generated by customer
leads during the Twelve (12) month period following the date of the binding
professional services agreement or related order entered into between OPEN
MARKET and such qualified customer lead, provided that OPEN MARKET receives the
proportionate applicable fees from such customer lead and such fees represent
new revenue to OPEN MARKET.
4.2 Prices/Taxes. All prices quoted to Distributor in connection with
------------
this Agreement are exclusive of all government excise, sales, service, use,
occupational, withholding or like taxes and, accordingly, are subject to an
increase equal in amount to any tax OPEN MARKET may be required to collect or
pay upon the licensing, delivery or installation of the Software or Services
marketed hereunder. Distributor is responsible for payment of any taxes
resulting from or imposed upon this Agreement or the copies of the Software,
Documentation or Service Materials or permitted to be made by Distributor, or on
the Services, except taxes based on OPEN MARKET's net income.
4.3 Interest. Interest shall accrue on all monies not paid by Distributor
--------
when due from the due date until the date of payment at the lesser of the rate
of one percent (1%) per month or the maximum legal rate allowed.
5. DISTRIBUTOR OBLIGATIONS.
5.1 Distributors Promotion of the Software and Services. Distributor
---------------------------------------------------
shall dedicate marketing and sales resources, including a minimum of Two (2)
sales and Two (2) engineering personnel, to gaining market penetration for the
Software and Services in the Territory. Distributor shall itself, or by
appointment of a third party, maintain a professional marketing organization for
the promotion of the Software and Services and sufficient qualified personnel to
provide installation,
6
<PAGE>
self, or by appointment of a third party, maintain a professional marketing
organization for the promotion of the Software and Services and sufficient
qualified personnel to provide installation, maintenance, technical support, and
training for Customers in the Territory. Distributor shall advertise the
Software and Services throughout the Territory in appropriate advertising media
and in a manner ensuring proper and adequate publicity for the Software and the
Services, subject to OPEN MARKET's prior review and written approval as to
content and placement of such advertising. Distributor shall not represent or
localize software products that compete with the Software.
Distributor shall submit a brief business plan to OPEN MARKET in
English, including sales activities and a Pro Forma P&L, attached hereto as
Exhibit H.
- ---------
Distributor shall inform its employees, agents, Subdistributors and
independent contractors prior to gaining access to any Software, Localized
Software, Documentation, Services or Customers of Distributor's obligations
under Article 7 of this Agreement and that they shall be deemed bound by such
terms and conditions to the same extent as Distributor hereunder.
5.2 Promotional Items. OPEN MARKET agrees to provide Distributor, free of
-----------------
extra charge, with a reasonable number of copies of such promotional materials
with respect to the Software and Services as OPEN MARKET generally makes
available to its distributors, including technical specifications, drawings,
advertisements, and demonstration products (collectively, the "Promotional
-----------
Items"). Distributor shall, at its sole expense, reproduce the Promotional
- -----
Items as reasonably required for Marketing the Software and Services in the
Territory, provided that all copyright, trademark and other proprietary rights
-------- ----
markings are reproduced thereon.
At Distributor's request, OPEN MARKET shall provide Distributor with
additional copies of the Promotional Items for a price equal to OPEN MARKET's
production and shipping costs. The parties shall discuss the arrangements for
translating the Promotional Items - as well as documentation and Service
Materials - into any local language and shall mutually agree in writing on
appropriate terms, to the full extent such translation is required by the laws
of the Territory or as is commercially appropriate to successfully Market the
Software and Services in the Territory. If Distributor desires to alter any
Promotional Items (other than a translation) or create new materials in
significant quantities (i.e., exceeding 200 copies and intended for widespread
distribution or accessibility), Distributor shall inform OPEN MARKET and OPEN
MARKET may require that Distributor provide OPEN MARKET with a copy of the
altered or proposed new materials together with their English translation. OPEN
MARKET shall have the right, in its reasonable discretion, to reject all or
parts of the proposed alterations promptly by letter or by fax, but in any event
no later than ten (10) days after its receipt thereof.
Prior to translating, or having a translation made of, any of the
foregoing, Distributor shall execute a legally binding written agreement with
the translator (the "Translation Agreement") which shall, to the maximum extent
allowed under applicable law, (i) acknowledge OPEN MARKET's rights in the
resulting translation and that such translation is deemed a "work made for hire"
and (ii) require compliance with the confidentiality provisions of Section 7.1
of this Agreement.
5.3 No Impairment. Distributor shall not disable or impair any features
-------------
of the Software that restrict its use to a particular computer system and/or
number of users.
5.4 Compliance with Laws. Distributor shall comply with all applicable
--------------------
laws, rules and regulations in its performance of this Agreement, including
without limitation those referenced in Section 11.11.
7
<PAGE>
5.5 Indemnification. Distributor shall defend, indemnify and hold OPEN
---------------
MARKET harmless from and against any and all claims, suits, actions,
liabilities, damages, and expenses (including without limitation reasonable
attorneys' fees) suffered or incurred by OPEN MARKET as a result of (i)
Distributor's breach of any term or condition of this Agreement, including
without limitation, Sections 2.2, 2.3, 5.4, 7.1, 7.2, 8.4, 11.11 and 11.12, and
(ii) any Customer action or claim against OPEN MARKET arising under or resulting
from this Agreement as a result of any act or commission or omission on the part
of Distributor, except for any action or claim subject to Section 8.2.2 hereof.
5.6 Test Bed Facility Commitment. In consideration of entering into this
----------------------------
Agreement, Distributor shall license from OPEN MARKET one (1) Test Bed, as
defined in section 2.1(b), for Distributor's internal use in connection with
testing, development and prototyping purposes at the pricing set forth in
Paragraph 3 of Exhibit A and for use as otherwise specified in Section 2.1.(f)
above.
6. TRAINING.
6.1 Training. OPEN MARKET will provide Distributor with training for the
--------
Software and Services at OPEN MARKET's then-current rates and schedule. The
parties may, however, review these arrangements from time to time on a case-by-
case basis and the parties shall mutually agree in writing to any changes that
they may deem appropriate. Distributor shall be responsible for providing
sufficient training for its personnel to meet Distributor's obligations under
this Agreement.
6.2 Support and Maintenance. The obligations of Distributor and OPEN
-----------------------
MARKET with respect to support and maintenance are set forth in Exhibit D.
---------
7. INTELLECTUAL PROPERTY PROTECTION.
7.1 "Confidential Information" shall mean the Service Materials,
------------------------
Documentation, the proprietary information, trade secrets and know-how embodied
in the Software, and any and all other information or materials designated in
writing or otherwise identified prior to disclosure as confidential and
proprietary to OPEN MARKET, including any copies, translations or embodiments
thereof. Distributor shall use Confidential Information solely for the purposes
set forth in this Agreement, and for no other purpose whatsoever, whether for
Distributor's own benefit or for the benefit of any third party.
Notwithstanding the foregoing, for the purpose of this Agreement, Confidential
Information shall not include information which:
(a) is already rightfully known to Distributor when received;
(b) is or becomes publicly known through publication or otherwise
and through no wrongful act of Distributor,
(c) is received by Distributor from a third party without similar
restriction and without breach of this Agreement;
(d) is approved for release or use by written authorization of OPEN
MARKET; or
(e) is required to be disclosed pursuant to any government statute,
regulation or order.
Distributor and OPEN MARKET agree that during the term of this
Agreement and for three (3) years following the date of expiration or
termination, no Confidential Information of either party shall be disclosed to
third parties. Except as expressly contemplated by this Agreement, Distributor
may not use, duplicate onto, convey through, or store on any medium (including
without limitation audio, video, print, software, CD-ROM, on-line or other
electronic form),
8
<PAGE>
publish or disclose Confidential Information (or allow it to be so used,
published or disclosed) to any third party without OPEN MARKET's prior written
consent.
Distributor also agrees to: (i) protect the confidentiality of the
Confidential Information at least to the extent Distributor protects its own
confidential information; and (ii) in any event, keep the Confidential
Information in a safe and secure place, monitor access to the Confidential
Information, and limit access to the Confidential Information only to those of
its personnel who (x) require such access (tile "Recipients") and (y) prior to
----------
obtaining such access, formally notify the recipient of the proprietary and
confidential nature of the Confidential Information and make commercially
reasonable efforts to require the Recipients to comply with this Section 7.1
(the "Acknowledgments"). Distributor agrees to promptly notify OPEN MARKET of
---------------
any use or disclosure of Confidential Information that is not authorized by this
Agreement.
Distributor shall take all reasonable steps to ensure -- and hereby
warrants and represents -- that the Acknowledgments in all respects shall be
valid and enforceable by Distributor and OPEN MARKET against each Recipient
under the laws of the Territory. Since breach of this Section 7.1 may cause
OPEN MARKET irreparable injury, OPEN MARKET, in addition to all other remedies
and notwithstanding Section 11.10, shall have the right to seek equitable or
injunctive relief as and where it deems fit in the event of an actual or
attempted breach of Distributor's or any Recipient's obligations hereunder.
However, nothing herein shall be deemed to prevent Distributor from disclosing
Confidential Information pursuant to a court order or the order of an
administrative or governmental body; provided that such disclosure shall be
-------------
limited to the minimum acceptable level of disclosure and that Distributor shall
immediately notify OPEN MARKET of the imminent disclosure and minimize or
prevent such disclosure to the extent so allowed under applicable law.
7.2 Proprietary Markings; Packaging. Distributor hereby agrees to ensure
-------------------------------
that all copyright, trademark and other proprietary notices of OPEN MARKET
affixed to or displayed on the Promotional Items, Service Materials, Software
and Documentation will not be removed or modified. Distributor shall distribute
all packaging, intact as shipped by OPEN MARKET.
Except as otherwise expressly provided by applicable law in the
Territory, and then only to the limited extent and for the purposes expressly
set forth therein, Distributor shall not itself, or allow others to: (i) modify
the Service Materials, Promotional Items, Software or Documentation; (ii)
reverse engineer, reverse compile, reverse assemble, translate, or otherwise
attempt to reveal the source code of the Software; (iii) solicit orders for the
Software, Documentation, or any. Service outside of the Territory; (iv) use the
Software to create another product or service; (v) use the Software as part of a
commercial time-sharing, service bureau arrangement, other production or resale
capacity, or otherwise for the benefit of any third party (except as otherwise
expressly provided in Section 2.1(f); (vi) do anything which directly or
indirectly may encumber or otherwise interfere with OPEN MARKET's proprietary
rights in the Service Materials, Software, Documentation and Marks; or (vii)
extract ideas, algorithms, procedures, workflows, or hierarchies from the
Service Materials, Software or Documentation for the purpose of creating any
work to be used by Distributor or any third party as a substitute for the
Service Materials, Software or Documentation.
8. WARRANTY.
8.1 Software Warranty. OPEN MARKET warrants to Distributor (i) that each
-----------------
copy of the Software delivered from OPEN MARKET to Distributor shall, under
normal use, perform substantially in accordance with its specifications and/or
descriptions in the then-current Documentation for a period of thirty (30) days
after delivery of such copy to Distributor
9
<PAGE>
and (ii) the medium on which each copy of the Software delivered from OPEN
MARKET to Distributor is recorded will be free from defects in materials and
workmanship under normal use and service for a period of thirty (30) days after
delivery of each such copy to Distributor. OPEN MARKET also warrants that it
has (x) used reasonable commercial diligence to compile the Software, and (y)
the Software, Localized Software, Documentation, Promotional Items, Service
Materials and Marks, either in whole or in part ("OPEN MARKET Products"), and
the use, resale and/or distribution thereof, does not infringe on any third
party's U.S. copyright, trade secrets, or trademark rights (collectively,
"Proprietary Rights").
8.2 Distributor Remedies.
8.2.1 Software Warranty. Distributor's only remedy and OPEN MARKET's
-----------------
only liability under the warranties in Section 8.1(i) and (ii) shall be, at OPEN
MARKET's option, for OPEN MARKET either to replace the copy of the Software or
to refund the purchase price for the copy of tile Software; provided, however
that all fees paid for the Test Bed shall be non-refundable. Distributor, as
part of its obligations hereunder, shall provide all warranty service to
Customers in the Territory.
8.2.2 Infringement Indemnity. In the event of any claim or
----------------------
allegation against Distributor of infringement or misappropriation of any third
party Proprietary Rights arising out of OPEN MARKET's breach of its warranty
under Section 8.1(y), OPEN MARKET shall, subject to the limitations set forth in
Section 8.3 below, defend, indemnify and save Distributor harmless from and
against any such claim, and pay any costs, expenses and finally awarded damages
actually awarded in connection therewith, including the fees and expenses of the
attorneys engaged by OPEN MARKET for such defense provided that (i) OPEN MARKET
shall have the sole and exclusive authority to defend and/or settle any such
claim or action, (ii) Distributor will fully cooperate with OPEN MARKET in
connection therewith and (iii) Distributor will immediately notify OPEN MARKET
of such claim or action. OPEN MARKET shall keep Distributor informed of, and
shall consult with, any independent attorneys appointed by Distributor at
Distributor's own expense regarding the progress of such litigation.
In addition to the foregoing, if any of the OPEN MARKET Products have
become, or in OPEN MARKET's opinion are likely to become, the subject of any
claim of infringement of a third party's Proprietary Rights, OPEN MARKET may at
its option and expense (i) procure for Distributor the right to continue
marketing and distributing such OPEN MARKET Products as set forth hereunder,
(ii) replace or modify the OPEN MARKET Products to make them non infringing, or
(iii) substitute an equivalent for the OPEN MARKET Products. OPEN MARKET shall
have no liability or obligation hereunder with respect to any Proprietary Rights
infringement claim if such infringement is caused by (i) compliance with
designs, guidelines, plans or specifications of Distributor or an end user, (ii)
use of the OPEN MARKET Product in an application or environment other than as
specified in applicable documentation; (iii) modification of the OPEN MARKET
Product by any party other than OPEN MARKET or (iv) use of the OPEN MARKET
Product with other products or services where the OPEN MARKET Product would not
by itself be infringing. Distributor agrees to indemnify and hold harmless OPEN
MARKET from and against all liabilities, obligations, costs, expenses and
judgments, including court costs, reasonable attorneys fees and expert fees,
arising out of any of the circumstances stated in items (i) - (iv) above.
THE FOREGOING STATES OPEN MARKET'S ENTIRE AND EXCLUSIVE LIABILITY AND
OBLIGATION, AND DISTRIBUTORS EXCLUSIVE REMEDY, WHETHER STATUTORY, CONTRACTUAL,
EXPRESS, IMPLIED OR OTHERWISE, FOR CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT.
10
<PAGE>
8.3 Disclaimers and Limitations on Liability. THE WARRANTIES IN SECTION
----------------------------------------
8.1 ARE THE SOLE AND EXCLUSIVE WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, THAT
ARE MADE BY OPEN MARKET IN CONNECTION WITH THE SOFTWARE, LOCALIZED SOFTWARE,
DOCUMENTATION, OPEN MARKET SERVICES OR OTHERWISE UNDER THIS AGREEMENT, AND OPEN
MARKET DISCLAIMS ALL STATUTORY AND OTHER WARRANTIES, INCLUDING BUT NOT LIMITED
TO, IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS FOR A PARTICULAR
PURPOSE.
OPEN MARKET DOES NOT WARRANT THAT USE OF THE SOFTWARE, LOCALIZED
SOFTWARE OR SERVICES WILL BE UNINTERRUPTED OR ERROR-FREE. NO ORAL OR WRITTEN
INFORMATION GIVEN OR OTHER STATEMENTS MADE BY OPEN MARKET, DISTRIBUTOR, ITS
SUBDISTRIBUTORS, AGENTS OR EMPLOYEES SHALL CREATE A WARRANTY OR IN ANY WAY
INCREASE THE SCOPE OF THE WARRANTIES IN THIS AGREEMENT.
NEITHER OPEN MARKET NOR ANYONE ELSE WHO HAS BEEN INVOLVED IN THE
CREATION, PRODUCTION OR DELIVERY OF THE SOFTWARE, LOCALIZED SOFTWARE OR SERVICES
SHALL, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, HAVE ANY LIABILITY TO
DISTRIBUTOR, SUBDISTRIBUTOR, ANY CUSTOMER OR OTHER THIRD PARTY UNDER OR RELATING
TO THIS AGREEMENT, SOFTWARE, LOCALIZED SOFTWARE, DOCUMENTATION OR SERVICES FROM
ANY CAUSE WHATSOEVER, AND REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT
OR IN TORT (INCLUDING NEGLIGENCE), FOR ANY INDIRECT, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS,
BUSINESS INTERRUPTION, LOSS OF INFORMATION, AND THE LIKE) ARISING OUT OF THIS
AGREEMENT OR THE USE OF OR INABILITY TO USE THE SOFTWARE, LOCALIZED SOFTWARE OR
SERVICES.
IN NO CASE SHALL OPEN MARKETS AGGREGATE LIABILITY FOR ALL MATTERS
ARISING OUT OF THE SUBJECT MATTER OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT
OR OTHERWISE, EXCEED THE AMOUNT ACTUALLY RECEIVED BY OPEN MARKET HEREUNDER PRIOR
TO THE DATE GIVING RISE TO SUCH LIABILITY. Distributor acknowledges that OPEN
MARKET's liability and warranty limitations in this Agreement are reasonable
under the circumstances and that Distributors consent thereto and agreement
therewith are fairly reflected in the fees payable hereunder and constitute a
material inducement for OPEN MARKET's entry into this Agreement. HOWEVER,
NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO RESTRICT OPEN MARKET'S LIABILITY
FOR PERSONAL INJURY, DEATH OR PROPERTY DAMAGE, WHICH NOTWITHSTANDING SECTION
11.10, MAY BE MANDATORY AND MADE APPLICABLE TO OPEN MARKET UNDER THE LAWS OF THE
TERRITORY. The warranties in Sections 8.1 shall not apply (i) if the Software
is not used in accordance with its intended purpose as set forth in the
Documentation, or is used together with, or as part of, any other product or
service not previously approved by OPEN MARKET or (ii) to any modification,
translation or other change to the Software that is not made or previously
authorized by OPEN MARKET.
8.4 Distributor Warranties. (a) Distributor warrants and represents that
----------------------
it (i) shall not make any oral or written statements regarding the performance
of the Software or Services other than those set forth in the Documentation;
(ii) has the full authority and capacity to enter into and perform
11
<PAGE>
this Agreement in all respects; (iii) shall not provide or allow access to any
Software, Documentation, Service Materials, or Service to any Customer which has
not executed a corresponding Customer Agreement or Service Agreement, as
applicable, containing the Mandatory Provisions; and (iv) the Customer
Agreements and Service Agreements shall contain no term or provision that is
inconsistent with or derogates from the Mandatory Provisions.
(a) PLACE HOLDER--DO NOT REMOVE
(b) Distributor further warrants and represents that (i)
Distributor shall comply with all laws in the Territory and shall procure and
maintain in good standing all registrations, licenses and other authorizations
required in order lawfully to implement this Agreement in each part of the
Territory; and (ii) Except as may be otherwise set forth under this Agreement
and to the maximum extent permitted by applicable law, Customers shall have
recourse for any claim or allegation arising out of or related to this Agreement
solely to Distributor or Subdistributors and in no event to OPEN MARKET or any
of OPEN MARKET's corporate affiliates, subsidiaries, shareholders, officers,
directors or employees.
9. REPORTS AND RECORDS.
9.1 Reports. Within fifteen (15) days of the end of each calendar quarter
-------
during the Term, Distributor shall furnish OPEN MARKET with a report for such
quarter describing Distributor's Marketing efforts to prospective Customers in
the Territory and listing all Software and Services provided to all Customers,
including at least the following information: Customer name and address; type
and site of installation; and price in the Territory's currency to Customer.
Such reports shall contain such additional detail and be in such form as
reasonably may be specified by OPEN MARKET from time to time.
9.2 Audit. Distributor shall maintain throughout the entire Term and for
-----
the twenty-four (24) month period following the expiration, non-renewal or
termination of this Agreement for any reason (collectively, the "Audit Period")
------------
accurate and complete records of all transactions and dealings involving the
Software and Services, including all invoicing and payment records and
information. OPEN MARKET, or its designated independent certified public
accountant, shall have the right, upon two (2) weeks prior written notice and
during normal business hours, to inspect these records (limited to records
regarding Software and Services) at any time during the Audit Period.
Distributor shall provide full and complete assistance in such audit efforts as
OPEN MARKET may reasonably require.
In the event the audit reveals an underpayment in Distributor's
payments, Distributor shall immediately pay OPEN MARKET such underpayment
amount. In addition, if the underpayment amount exceeds ten percent (10%) of
Distributor's actual payment, Distributor shall, within thirty (30) days of OPEN
MARKET's invoice, reimburse OPEN MARKET for all its audit costs. Audits may not
be conducted more frequently than every twelve (12) months.
10. TERM AND TERMINATION.
10.1 Term
10.1.1 Initial Term. The initial term of this Agreement ("Initial
------------ -------
Term") shall begin on the Effective Date and end on the second anniversary
- ----
thereof, unless earlier terminated under Section 10.2 or 10.3.
10.1.2 Additional Terms. Upon the expiration of the Initial Term,
----------------
this Agreement will renew automatically from year to year subject to Distributor
meeting its Targets (the "Additional Terms"), unless either party hereto
----------------
notifies the other party in writing of its intention to terminate this Agreement
during any such Additional Term. The Initial Term and Additional Terms
collectively constitute the "Term."
12
<PAGE>
10.2 Termination by Either Party. Except as otherwise expressly specified
---------------------------
herein, either party may terminate this Agreement with immediate effect upon
written notice if the other party breaches any of its obligations under this
Agreement and fails to cure its default within (60) days after having been given
notice of such default;
Either party may terminate this Agreement immediately and without
requirement of notice, if (i) the other party files a petition in bankruptcy
reorganization, or similar relief from debtors, or makes an assignment for the
benefit of creditors; (ii) a receiver, trustee or similar officer is appointed
for the other party; (iii) any involuntary petition or proceeding under
bankruptcy or insolvency laws is instituted against the other party and not
enjoined or discharged within thirty (30) days; or (iv) the other party
undertakes to discontinue its business.
10.3 Termination by OPEN MARKET. In addition, and without limiting and
--------------------------
other rights available under applicable law, OPEN MARKET may, at its option,
terminate this Agreement and the licenses granted hereunder and/or suspend
delivery of the OPEN MARKET Software or provision of the Services (regardless of
whether already ordered) for cause:
(a) immediately upon written notice to Distributor, if
Distributor is delinquent on any amount then due to OPEN MARKET for longer than
fifteen (15) days following demand for payment or if Distributor breaches its
obligations under Sections 2.2, 2.3, 7, or 8.4;
(b) in accordance with Section 4.1 or 11.11 hereof;
(c) in the event that Distributor fails to meet the targets
defined in Exhibit A, provided, however that OPEN MARKET agrees to meet and
discuss the termination of this Agreement with Distributor prior to any actual
termination. Notwithstanding the foregoing, should OPEN MARKET terminate this
Agreement for failure of Distributor to achieve the Target, Distributor may
continue to market and distribute all Software inventory in its possession and
shall remain obligated to pay OPEN MARKET all accrued but unpaid fees;
(d) upon thirty (30) days prior written notice to Distributor if
OPEN MARKET discontinues its distribution of all Software or Services; or
(e) if Distributor materially breaches any term and condition in
Section 2.1(b) or Section 2.1(f) with respect to the Test Bed.
10.4 Effect of Termination. No termination hereunder shall be deemed a
---------------------
cancellation of any orders submitted before the effective date of such
termination. Sections 2.2, 2.3, 4, 5.5, 7, 8, 9, 10 and 11 shall survive the
termination, expiration or non-renewal of this Agreement for any reason.
Immediately upon any expiration, non-renewal or termination of this
Agreement for any reason:
(a) Each party shall continue to cooperate with the other in
order to effect an orderly termination of the relationship, and Distributor will
assign to OPEN MARKET or its designee all existing Customer Agreements and
Service Agreements.
(b) Distributor's licenses under this Agreement shall terminate
and Distributor shall immediately cease holding itself out as a Distributor of
OPEN MARKET, except as otherwise expressly provided in Section 10.2 and 10.3
above.
(c) Distributor shall report to OPEN MARKET concerning the status
of negotiations with prospective Customers.
(d) Distributor shall return to OPEN MARKET all Software,
Documentation, Service Materials, Test Bed and other Confidential Information in
whatever form then in its possession, except as otherwise expressly provided in
Sections 10.2 and 10.3 above with respect to existing Software by inventory.
Open Market shall refund to Distributor the value of such Software,
Documentation,
13
<PAGE>
(f) Distributor will remove all Marks from all letterheads, signs
and other media on which it displayed such Marks during the Term, and thereafter
Distributor will not use any Marks for any purpose.
(g) Notwithstanding the foregoing, Distributor acknowledges that
it shall not be entitled to receive from OPEN MARKET any compensation or
payments whatsoever, except as expressly provided in this Agreement, and that
OPEN MARKET shall have no liability to Distributor as a result of the non-
renewal or termination of this Agreement if such non-renewal or termination is
the result of OPEN MARKET's termination under Section 10.3.
11. MISCELLANEOUS.
11.1 Force Majeure. In the event that one party's performance hereunder
-------------
is delayed or prevented because of any Act of God, fire, casualty, delay or
disruption in transportation, flood, war, strike, lockout, epidemic, destruction
or shut-down of production facilities, shortage or curtailment, riot,
insurrection, governmental acts or directives, or any other cause beyond the
reasonable control of that party, the said party may give notice to the other
party via fax or letter, and thereupon the said party's performance shall be
excused and the time for the performance shall be extended for the period of
delay or inability to perform resulting from such occurrence. The occurrence of
such an event shall not constitute grounds for default under this Agreement.
11.2 Notices. All notices hereunder shall be in writing and in English
-------
and be deemed given on the date of delivery, if delivered (i) in person or (ii)
by commercial international overnight courier as confirmed by the courier's
delivery records. Notices shall be addressed to each company at its address set
forth above, or such other address as the recipient may have specified by
earlier notice to the sender.
11.3 Assignment; Successors. This Agreement may not be assigned or
----------------------
accepted by one part without the advance written consent of the other party.
This Agreement shall be binding upon and inure to the benefit of the parties,
their successors and permitted assigns and any assignment in violation of this
Section 11.3 shall be null and void.
11.4 Independent Contractors. The parties shall at all times be
-----------------------
independent contractors with respect to each other in carrying out this
Agreement. Nothing in this Agreement, expressed or implied, shall be construed
to constitute either party as the others agent, employee, partner,
representative or joint venturer. Neither party has, nor shall it hold itself
out as having, the right to assume any obligations on behalf of the other party.
11.5 Amendments. No amendment to this Agreement shall be effective unless
----------
it is in writing and signed by a duly authorized representative of each party.
11.6 Headings Not Controlling. Headings used in this Agreement are for
------------------------
reference only and shall not be deemed a part of this Agreement.
11.7 Consent to Breach Not Waiver. No term or provision hereof shall be
----------------------------
deemed waived and no breach excused, unless such waiver or consent shall be in
writing and signed by the party claimed to have waived or consented. Any
consent by any party to, or waiver of, a breach by the other, whether express or
implied, shall not constitute a consent to, waiver of, or excuse for any other
different or subsequent breach.
11.8 Severability. If one or more provisions in this Agreement (including
------------
without limitation the Mandatory Provisions) are ruled entirely or partly
invalid or unenforceable by any authority in any jurisdiction of the Territory,
then (a) the validity and enforceability of all provisions not ruled to be
invalid or unenforceable shall remain unaffected, (b) the provision(s) held
wholly or partly invalid or unenforceable shall be deemed amended, and the
parties shall reform the provision(s) to the maximum extent necessary to render
them valid and enforceable in
14
<PAGE>
conformity with the parties' intent as manifested herein; and (c) if the ruling,
or the controlling principle of law or equity leading to the ruling is
subsequently overruled, modified or amended, then the provision(s) in question,
as originally set forth in this Agreement, shall be deemed valid and enforceable
to the maximum extent permitted by the new controlling principle of law or
equity.
11.9 Governing Law/Dispute Resolution. (a) Except with respect to tile
--------------------------------
Test Bed, this Agreement shall be governed by and construed in accordance with
the laws of India exclusive of applicable rules governing choice and conflicts
of law. In the event that any claim shall arise out of, or in connection with,
this Agreement, it shall be finally settled by arbitration to be conducted (i)
pursuant to the Commercial Arbitration Rules of the United Nations Commission on
International Trade Law (UNCITRAL) and (ii) in such location as may be mutually
agreed to by the parties in writing. The parties expressly intend that the
United Nations Convention for the International Sale of Goods shall not apply,
in whole or in part, to this Agreement.
(a) PLACE HOLDER--DO NOT REMOVE
(b) With respect to the Test Bed, including without
limitation OPEN MARKET's proprietary and intellectual property therein, this
Agreement, and the parties' rights and obligations thereunder, shall for all
purposes be governed by, and construed, interpreted and enforced solely and
exclusively in accordance with, the laws of the Commonwealth of Massachusetts,
USA (excluding its principles of conflict of laws). The parties hereby agree
that the courts located in the Commonwealth of Massachusetts, USA, shall
constitute the sole and exclusive forum for the resolution of any and all
disputes arising under, out of, or in connection with this Agreement and hereby
consent to the jurisdiction of such courts and irrevocably waive any objections
thereto, including, without limitation, on grounds of improper venue or forum
non conveniens. The parties agree that any judgments of such courts may be
entered and enforced by any court with jurisdiction over the party against which
judgment was rendered or its assets, wherever located.
11.10 Publicity and Public Information. Distributor shall not make any
--------------------------------
public statement, including but not limited to, press releases or public
announcements, referencing its relationship with OPEN MARKET established under
this Agreement or participation in OPEN MARKET's Elite Partners Program, without
prior consultation with and written approval by OPEN MARKET, except as required
by law.
11.11 Registration. Distributor shall submit this Agreement for
------------
registration or approval, if such registration or approval is required by the
applicable laws of the Territory. If the Agreement is not accepted for
registration or approved, as and where required, both parties agree to negotiate
in good faith regarding the amendment of the Agreement as necessary to effect
such registration. If the parties are unable to agree on such amendment within
thirty (30) days following the rejection of the request for registration or
approval, OPEN MARKET shall have the right to terminate this Agreement effective
upon the date of its written notice to Distributor to that effect. Pending
registration, Distributor shall comply with all of its obligations under this
Agreement.
11.12 Export Controls/Boycott/Corrupt Practices. Distributor shall not,
-----------------------------------------
directly or indirectly, export or re-export, or knowingly permit the export or
re-export of, any Service Materials, Software, Documentation or other technical
information about any Software or Service (or any direct product of any of
Software or any such technical information) to any country for Which the United
States Export Administration Act, any regulation thereunder, or any similar
United States law or regulation, requires an export license or other United
States governmental approval, unless tile appropriate export license or approval
has been obtained and OPEN MARKET previously agrees to such export in writing.
Distributor shall not make, offer or agree to make or offer on behalf of OPEN
MARKET, any of its affiliates or any of its shareholders, officers or
15
<PAGE>
directors, any loan, gift, donation or other payment, directly or indirectly,
whether in cash or in kind, for the benefit of or at the direction of, any
candidate, committee, political party, political function or government or
government subdivision, or any individual elected, appointed or otherwise
designated as an employee or officer thereof, for the purposes of influencing
any act or decision of such entity or person or inducing such entity or person
to do or Open Market to do any act in order to obtain or retain business or
other benefits in violation of the United States Foreign Corrupt Practices Act.
Distributor shall not, directly or indirectly, take any action that would cause
OPEN MARKET or any of its affiliates to be in violation of United States
antiboycott laws under the United States Export Administration Act or the United
States Internal Revenue Code, or any regulation thereunder.
11.13 Entire Agreement. This Agreement including Exhibits A, B, C, D, E, F,
---------------- --------------------------
G, H, and I attached and incorporated hereto, constitutes the final and entire
- ---- -
Agreement between the parties with respect to its subject matter; and all other
prior agreements, representations, or undertakings are terminated and superseded
hereby.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as an instrument under seal as of the date first written above.
OPEN MARKET, INC. DISTRIBUTOR
BY: /s/ [illegible] BY: /s/ [illegible]
------------------------------ ------------------------------
TITLE: Legal Counsel & Assistant TITLE: Director
--------------------------- ---------------------------
Secretary
---------------------------
DATE:____________________________ DATE: 30/th/ June 1997
----------------------------
16
<PAGE>
EXHIBIT A
---------
OPEN MARKET SOFTWARE AND SERVICES; ROYALTIES
1. Software: (a) Folio Products:
Folio Views, Folio Builder, Folio Publisher, Folio
Integrator, Folio Web Retriever 2.1 and document
and Manuals.
(a) Transact, Waypoint Catalogue ("Magellan"), SecureLink
and documentation and manuals.
(Additional Open Market and Folio software products may be designated by Open
Market from time to time)
2. Services: See Exhibit D.
3. License Commitments, Pricing and Discount Schedule:
*****
17
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
****
Distributor shall pay OPEN MARKET all license and support fees due within thirty
(30) days of invoice date. All payments shall be made by electronic fund
transfer to OPEN MARKET's account with instructions to be provided by OPEN
MARKET or, in OPEN MARKET's sole discretion, by check in immediately available
funds. The exchange rate used by OPEN MARKET to determine the amount of each
payment due in US Dollars shall be the daily average of exchange rates quoted in
The Wall Street Journal during the calendar month immediately preceding the date
- -----------------------
of shipment.
****
18
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
*****
19
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Schedule I
----------
Initial Order
-------------
*****
20
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
EXHIBIT B
---------
TERRITORY
The Territory shall mean the following: INDIA
21
<PAGE>
EXHIBIT C
---------
HOUSE ACCOUNTS
[To be Designated by OPEN MARKET as applicable]
22
<PAGE>
EXHIBIT D
---------
SUPPORT AND MAINTENANCE
OPEN MARKET shall have no direct support, maintenance or Services obligations
to Customers for the Software or Services distributed by Distributor. OPEN
MARKET will provide Distributor with back-up support and maintenance for the
Software in accordance with the terms and conditions set forth in the Support
Obligations listed below. Such support is conditional upon OPEN Market's
receiving payment for annual or other support charges as set forth in this
Exhibit. The parties will meet to review and negotiate the applicable fees
hereunder at the eleven (11) month point during the first year of the Initial
Term and the amount of the Annual Program Fee for any Additional Term shall be
established by mutual agreement.
Distributor will be responsible for providing Customers with the support,
maintenance and Services set forth in the Support Obligations, including without
limitation: (i) the installation of the Software if required by Customer, (ii)
the training of Customer personnel in the use of the Software, (iii) the
provision of primary support and maintenance relating to the Software and
Services for Customers and other end-users in the Territory.
1. Definitions.
-----------
1.1 "Bypass" means a temporary solution or workaround to a problem which offers
acceptable relief.
1.2 "Compatibility" means that the Software can be recompiled and linked
properly on the new release of the Distributor operating system.
1.3 "Documentation" shall mean the existing Open Market, Inc. user manuals
and other written materials that relate to the particular Software, including
materials useful for installation, operation, and maintenance. Documentation
shall include maintenance modifications and enhancements thereto if, when, and
to the extent such maintenance modifications and/or enhancements are delivered
to Distributor by Open Market, Inc. under this Agreement or under any other
agreement or arrangement between the parties.
1.4 "Customer" shall mean an end user customer of Distributor.
1.5 "Fix" means a permanent solution to a problem that may be obtained in a
generally available Release.
1.6 "Maintenance Release" means any modification of a Software product for
which Distributor or OPEN MARKET, in its sole discretion, changes the second
number to the right of the decimal point in the Software version number, e.g., a
change from version 1.00 to 1.01.
1.7 "Major Release" shall mean a new version of the Software that contains
significantly new functionality or features and is accompanied by a Major
Release bulletin or other notice. Each Major Release shall be identified solely
by the numeral(s) to the left of the decimal point, with the new Major Release
having the larger numeral. For example, for any given Software product, release
3.0 is a more current version than release 2.0.
23
<PAGE>
1.8 "Patch" means a solution to a problem which may be obtained prior to the
next Release of the Software.
1.9 "Software" shall mean the computer programs, Documentation and related
information as defined in the Agreement. The term "Software" shall not include
Source Code.
1.10 "Release" means any modification of the Software which becomes generally
available.
1.ll "Minor Release" means any modification of the Software that contains some
features and or fixes. Each Minor Release shall be identified by the first
number to the right of the decimal point in the Software version number, e.g., a
change from version 1.00 to 1.10.
1.12 "Work Around" shall mean a temporary solution that is intended to
alleviate a Customer's particular problem.
1.13 "Educational Services" shall mean the delivery, materials and scheduling
of education courses which are made available by OPEN MARKET for OPEN MARKET
products or services.
1.14 ""Consulting Services" shall mean any such service by which OPEN MARKET
offers its' Customers, Distributor or others any assistance with the
development, delivery, installation, configuration, testing, management,
training or advice on it's products or technology for a fee.
1.15 "Implementation Services" shall mean the service provided by OPEN MARKET
which involves the planning, installation and testing of OPEN MARKET products.
2. Support Provisions.
------------------
2.1 Level of Support. Distributor and OPEN MARKET acknowledge that three (3)
levels of support are required.
2.1.1 Level 1 Support. Level 1 (problem verification) handles calls requiring
---------------
a relatively low, but broad degree of product expertise. Level 1 activities
include the following:
. Provide Initial Customer Contact
. Maintain Problem Log
. Provide Problem Description and Definition
. Ensure Continuous Availability
. Manage Remote Connections
. Maintain Customer Configuration Data
. Resolve Software Installation Inquiries and Problems Remotely
. Provide Appropriate Quality Metrics to Management
. Provide Remote System Administration and Configuration Assistance
. Attempt Problem Reproduction
2.1.2 Level 2 Support: Level 2 (problem determination and temporary fix)
---------------
requires both broad and in-depth product expertise. Level 2 support has full
responsibility for problem trouble-
24
<PAGE>
shooting, and development of avoidance's and workarounds. Level 2 activities
include the following:
. Critical Call Access or as per Contract/Support Plan
. Provide Problem Determination and Verification
. Perform Remote Diagnosis
. Provide Patch to Customer
. Provide Engineering (Level 3) Interface
2.1.3 Level 3 Support. Level 3 requires engineering level technical expertise.
---------------
The Level 3 support organization has complete ownership of the field release
process, and similarly is responsible for providing timely and accurate product
defect descriptions and resolution plans to Distributor Level 1 and Level 2
support. Level 3 support activities include the following:
. Perform Line of Code Fault-Isolation
. 7 x 24 Critical Call Access
. Provide Patches or Resolve to Customer's Satisfaction
. Provide Major, Minor and Patch releases
2.2 Problem Classifications. Hardware/Software.
------------------------------------------
2.2.1 Problem (call) severity will be determined by Distributor, based upon
Distributor's Customer's priority, using the following as a guideline:
Declared Critical Problem: A "down" situation, whereby a user is unable to
-------------------------
do production work, and a Work-Around is either not available, or, if available,
is unacceptable to Distributor and/or the user.
Serious Problem: A major function/product is unusable and no Work-Around
---------------
is available, but the user is able to do some production work.
Moderate Problem: There is a loss of a function or resource that does not
----------------
seriously affect the user's operations or schedules. Any problem which was
originally reported as Critical or Serious, but has been temporarily solved with
a Work-Around, shall be reduced in severity to Moderate, only if the customer
and Distributor mutually concur.
Minor Problem: Means all other problems with the Software other than those
-------------
falling within the categories above.
2.2.2 Repair/fix criteria.
-------------------
Resolution will be provided by OPEN MARKET in accordance with the following
criteria, and tracked on a case by case basis.
Problem Resolution Criteria
- ---------------------------
Resolution will be provided by OPEN MARKET in accordance with the following
criteria, and tracked on a case by case basis.
25
<PAGE>
Telephone Initial
Severity Response Update Action Patch Maint
Rel.
Declared 30 minutes, every bus. work As Req. Next
Critical if required day continuously
Event
Serious bus. hour every other ASAP As Req. Next
Event
Moderate/ 4-8 bus. hours every week reasonable No As Req.
Minor Event
Note: Times are calendar/clock times except where stated
2.2.3 Unresolved Critical or Serious Event Procedures.
-----------------------------------------------
Should a Critical or Serious Event not be patched fixed within the 10 day time
frame, OPEN MARKET shall dedicate a full time resource to the situation until
resolved. This resource shall provide Distributor with detailed fix plan and
daily progress updates. This resource will perform the work required at the most
convenient location for resolution (Distributor, Company, Customer site). If, by
the 10th day, OPEN MARKET cannot identify the source of the problem then OPEN
MARKET will supply to Distributor a clear and comprehensive plan for locating
and fixing the problem. This information may be passed on the end-user.
3. Distributor Responsibilities.
----------------------------
Distributor shall provide technical support to Customers of those Software
products provided by Distributor. Distributor will provide all Level 1 and Level
2 Support. By this the parties agree that Distributor will:
3.1 Provide access to telephone and electronic communications for technical
assistance and consultation 24 hours a day 365 days a year to Distributor's
support center.
3.2 Execute diagnostic routines as made available by OPEN MARKET's for Level
1 and Level 2 support situations in accordance with OPEN MARKET's instructions
as they relate to OPEN MARKET's Software products, and inform OPEN MARKET of the
results of those diagnostics.
3.3 Reasonably verify the existence of a Software product problem and to
determine the conditions under which that problem can be duplicated prior to
submission to OPEN MARKET.
3.4 Identify, define, and report software problems in a manner that will
allow OPEN MARKET to verify, replicate, and correct Software defects.
3.5 Provide direct customer contact for Level 1 and Level 2 of technical
support assistance and act as the front line field support organization
providing technical support directly to their Customers.
26
<PAGE>
3.6 Manage and control problem situations arising at Customer sites.
3.7 Distributor will act as the front line field support organization for Level
3 support and facilitate OPEN MARKET's direct communication with Customer in
Level 3 support situation.
3.8 Distributor agrees to be a beta test site for OPEN MARKET Software
products.
3.9 Distributor agrees to provide response, updates, and relief support, as per
Section 2.2.2, to its Customers as the primary interface to them.
3.10 Distributor agrees to maintain an adequate staff of trained technical
support personnel to service the needs of its Customers.
3.11 Distributor agrees to participate with OPEN MARKET in a semi-annual
technical support review to ensure Distributor and OPEN MARKET are meeting their
respective Support Obligations as defined herein.
4 OPEN MARKET Responsibilities.
----------------------------
OPEN MARKET intends to supply post-sale technical support to Distributor for
Customers of those Software products provided by Distributor. OPEN MARKET will
provide Level 3 Support Services. By this, the parties agree that OPEN MARKET
will provide the following support to Distributor:
4.1 Provide to Distributor Maintenance Releases, Update Releases and Discounts
on Major Releases of the Software.
4.2 Provide access by Distributor to OPEN MARKET service personnel for
telephone technical assistance as necessary during OPEN MARKET's Support Center
normal business hours via dial up, electronic mail or web site.
4.3 Provide emergency contact to Distributor for Critical problems occurring
outside of normal work hours. Access will be through an assigned duty pager to
be continuously active outside the periods of OPEN MARKET's normal business
hours.
4.4 Use computerized tracking systems to log and record all requests for
technical assistance.
4.5 On a case by case exception basis, if requested by Distributor, OPEN MARKET
may agree to establish direct support obligations for individual customer
licensed Software, subject to mutually acceptable terms, including but not
limited to, price.
4.6 Provide remedial Software support by providing, a Patch or Bypass solution
to verified problems reported by Distributor according to Section 2.2.
4.7 Provide prompt shipment of appropriate and available Fix, Patch or Bypass,
and Documentation updates when available.
27
<PAGE>
4.8 Provide Distributor with Software support services for the current version
and the previous version of the Software under the maintenance agreement.
Additionally, the second back level of the applicable Software will be supported
by OPEN MARKET for a period of three (3) months to allow Distributor time to
install the latest product version.
4.9 OPEN MARKET agrees to provide response, updates, and relief support, as per
Section 2.2.2, to Distributor.
4.10 OPEN MARKET shall provide emergency on-site support upon mutual agreement
between the parties and only in support of Critical events, OPEN MARKET
personnel shall be available for emergency dispatch to Customer site or
Distributor support center for problem correction. Travel, living and
incidental costs incurred due to problems mutually agreed to have been caused
by the product, after all remote problem resolution has been exhausted by OPEN
MARKET, shall be the responsibility of OPEN MARKET. Travel, living and
incidental costs incurred due to problems mutually agreed not to have been
caused by Defects in the Software shall be the responsibility of Distributor.
4.11 OPEN MARKET agrees to participate with Distributor in a semi-annual
technical support review to ensure OPEN MARKET and Distributor are meeting their
Support Obligations.
4.12 OPEN MARKET agrees to participate with Distributor in a technical support
review to ensure OPEN MARKET and Distributor are meeting their Support
Obligations.
5 Technical Training/Distributor's Support Personnel:
--------------------------------------------------
OPEN MARKET shall make available to Distributor qualified personnel who are
knowledgeable in all aspects of the Software, to instruct and assist
Disbributor's personnel with respect to the maintenance and support of the
Software.
OPEN MARKET shall provide training and documentation to Distributor service
personnel with respect to the design, theory, operation, installation,
maintenance and support of the Software. Training shall consist of either class
room instruction or via an on-site consulting engagement. Class room training
shall take place at OPEN MARKET's training facility during normal business hours
and shall commence during a normally scheduled class. After the training class,
Distributor personnel will get a week hands on work in OPEN MARKET's Support
Center.
OPEN MARKET offers several on-site Consulting packages which provide hands on
training of OPEN MARKET products. Consulting packages shall serve as a
substitute for class room instruction. Consulting packages are designed to be
offered on-site. Distributor shall be responsible for the cost of all
Consulting packages at the then current price.
6 Updates, Maintenance releases and Upgrades: Updates and Maintenance
releases will be included under this Support Obligations. Upgrades will be made
available at a discount from the royalty rate as determined hereunder.
7 Fees
----
7.1 Training of Distributor's personnel
28
<PAGE>
*****
29
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Schedule A
Section I Contacts:
Name of Licensee:_______________________________________________________________
Address of Licensee:____________________________________________________________
Telephone Number:____________ Fax Number: ______________, Email_________________
Contact Person(s):
1. _____________________, Telephone:_________________, Email:___________________
2. _____________________, Telephone:_________________, Email:___________________
3. _____________________, Telephone:_________________, Email:___________________
(Premier Only)
Date of License Agreement: ______________________
(Same as Annual Support Agreement)
30
<PAGE>
EXHIBIT E
---------
OPEN MARKET TRADEMARKS
Open Market, Open Market WebServer, Secure WebServer, Open Market -
Where the Internet Does Business, Personal Home Page, PHP, Smart Statement,
WebMaster's Workbench, WebReporter, Transact, Axcess, SecureLink Executive,
Digital Offer, Digital Receipt, Digital Ticket, Session Identifiers, Web VCR,
Merchant Solution, integrated Commerce Service, Store Builder, Secure WebServer,
ActiveCommerce DB, We ARE Internet Commerce, SecurePublish
31
<PAGE>
EXHIBIT F
---------
MANDATORY CUSTOMER AGREEMENT PROVISIONS
1. License/Restrictions on Use. Customer, after the payment of the applicable
---------------------------
fees, shall be entitled to use the Software only (a) for the purposes expressly
set forth in this Agreement; (b) in the Territory; and (c) during the term of
this Agreement. The rights granted to Customer herein are restricted to
Customer. Customer is granted no other license for, and no right of ownership
or title in, any Software. Customer's license may not be assigned or otherwise
transferred to any third party.
2. Nondisclosure.
-------------
(a) Customer shall treat the Software and all other items identified as
confidential Licensor information prior to their disclosure to Customer
(collectively, the "Proprietary Information") as confidential and proprietary.
Except as specified in this Agreement, Customer shall not publish or disclose
Proprietary Information to, or use same for the benefit of, any third party.
Customer shall (1) give Proprietary Information at least the same degree of
protection Customer gives its own confidential information, and in no event
shall use less than reasonable care; (2) keep Proprietary Information in a safe
place and monitor access thereto; and (3) allow access to Proprietary
Information on a "need to know" basis only to those of its personnel ( the
"Recipients") who, prior to gaining access to Proprietary Information, have
executed a written legally binding agreement with Customer (the
"Acknowledgments") acknowledging the confidential and proprietary nature of
Proprietary Information and Licensor's rights therein and requiring compliance
with the nondisclosure, non-use and non-competition provisions of this
Agreement. Customer shall ensure, and hereby warrants and represents, that all
Acknowledgments are valid and enforceable against all Recipients, and this
Agreement is valid and enforceable against Customer, anywhere in the Territory.
(b) Customer shall have no obligations of confidentiality with respect to
information that, without breach of any obligation of confidentiality owed to
Licensor, (1) is or subsequently becomes publicly available; (2) became known to
Customer prior to its disclosure by Licensor; (3) became known to Customer from
a source other than Licensor, (4) is independently and entirely developed by
Customer, (5) is used by Customer to enforce Customer's rights, claims or
defenses under this Agreement; or (6) Customer is legally required to disclose,
provided, however, that Customer shall use its best efforts to minimize or
prevent such disclosure to the maximum extent allowed under applicable law and
to secure confidential treatment of the information being disclosed. Customer
agrees that it must have documentary evidence to invoke any of the provisions of
this subparagraph (b).
3. Proprietary Rights.
------------------
(a) Customer acknowledges that Licensor or its suppliers hold and shall retain
the exclusive and entire right, title, and ownership (including copyright,
patent, trade secret, trademark, and know-how rights) anywhere in the world in
(1) the Software and any translations thereof, and (2) Licensor's trade names
and marks and service names and marks depicted on any Software (the
"Trademarks"). Customer shall not use the Trademarks, or any name or mark
similar thereto, whether alone or together with another name or mark, or as part
of, on, or in connection with, Customer's corporate, business, private,
substitute or other name, or on any of Customer's designs, symbols, Software,
services, letterhead, business cards, or other means of identification. Customer
also shall not adopt or attempt to register anywhere in the world any of the
Trademarks, or any name or mark, similar thereto.
32
<PAGE>
(b) Except as specified in this Agreement, Customer may not (1) copy,
reproduce, store, or convey any Software in any form or on any medium
whatsoever, including without limitation print, audio, video, software, CD-ROM,
or other electronic form; (2) make any modifications, additions, or enhancements
to any Software; (3) attempt to decompile, reverse-engineer, or extract any
algorithms or hierarchies from any Software; or (4) create any work, based on,
or using any idea derived from, any Software. The original, and a copy of the
Software, are the sole and exclusive property of Licensor or its suppliers.
Customer shall reproduce and include all Licensor (or supplier) copyright,
trademark, and other proprietary rights notices on all copies of the Software
and any translation thereof. Customer shall not remove or modify any existing
Licensor or other copyright, trademark or other proprietary rights notice from
the Software or related documentation.
(c) To the maximum extent allowed under applicable law, this agreement shall be
governed by US copyright law, for the purposes of which any copy, modification,
addition, or work made in violation of Paragraph 3(b) shall be deemed a
derivative work or a "work made for hire" for Licensor. Licensor (or its
suppliers) holds and shall retain all rights that may vest at any time in any of
the foregoing items as a derivative work, a "work made for hire", or as part of
a collective work or compilation.
4. Warranties, Remedies, Disclaimers.
---------------------------------
(a) Warranty. Licensor warrants and represents to Customer that (i) Licensor
--------
has the full right and authority to license the Software hereunder, (ii) the
Software do not, to the best of Licensor's knowledge, infringe upon the
copyright of any third party; and (iii) for a period of thirty (30) days
following the date of delivery of each Software from Distributor to Customer,
each Software shall substantially perform in accordance with its intended
purpose and be substantially free from defect in material and workmanship. The
foregoing warranties shall not apply (A) if the applicable Software is not used
in accordance with its intended purpose; (B) to any modification or translation
of any Software not made by Licensor.
(b) Exclusive Remedy. Customer's only remedy, which is in lieu of all other
----------------
remedies, and Licensor's only liability, for breach of the warranties in
Paragraph 4(a)(i) or 4(a)(ii), shall be to obtain for Customer, at Licensor's
sole option and expense, the right to continue to use the infringing or
unauthorized Software, modify the Software so that it becomes non-infringing or
authorized, or replace the infringing Software with a non-infringing or
authorized Software. Customer's only remedy, which is in lieu of all other
remedies, and Licensor's only liability, for breach of the warranties in
Paragraph 4(a)(iii), shall be to replace the non-conforming Software, during
such thirty (30) day warranty period and at no charge to Customer, with a
conforming Software. Customer assumes the entire cost of all necessary
servicing, repair or correction of defects after the thirty (30) day warranty
period.
(c) Disclaimer of Warranty. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
----------------------
PARAGRAPH (4)(a), NEITHER LICENSOR NOR LICENSOR'S SUPPLIERS MAKES ANY WARRANTY,
EXPRESSED OR IMPLIED, CONCERNING THE SOFTWARE, OR OTHERWISE IN CONNECTION WITH
THIS CUSTOMER AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTIES
ARISING FROM USAGE OF TRADE, COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, NEITHER LICENSOR NOR LICENSOR'S
SUPPLIERS WARRANTS THAT THE SOFTWARE WILL MEET CUSTOMER'S REQUIREMENTS OR THAT
THEY WILL BE ACCURATE OR ERROR-FREE. CUSTOMER ASSUMES THE ENTIRE RISK AS TO THE
RESULTS, PERFORMANCE OR USE OF THE SOFTWARE. TO THE MAXIMUM EXTENT ALLOWED BY
APPLICABLE LAW, LICENSOR AND LICENSOR'S SUPPLIERS SHALL HAVE NO LIABILITY TO
CUSTOMER OR ANY THIRD PARTY FOR DAMAGES RESULTING FROM THE USE OF, OR ANY ERROR
OR OMISSION IN, THE SOFTWARE OR ANY ACTION TAKEN OR NOT TAKEN BASED ON THE
SOFTWARE OR OTHERWISE FROM ANY CAUSE WHATSOEVER, AND REGARDLESS OF THE
33
<PAGE>
FORM OF ACTION, WHETHER IN CONTRACT OR IN TORT (INCLUDING NEGLIGENCE). IN NO
EVENT SHALL LICENSOR OR LICENSOR'S SUPPLIERS BE LIABLE TO CUSTOMER OR ANY THIRD
PARTY FOR ANY LOSS OF BUSINESS OR OTHER CONSEQUENTIAL, PUNITIVE, INCIDENTAL, OR
INDIRECT DAMAGES. TO THE MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW, CUSTOMER
ACKNOWLEDGES THAT (i) LICENSOR AND LICENSOR'S SUPPLIERS SHALL NOT HAVE ANY
LIABILITY TO CUSTOMER UNDER THIS CUSTOMER AGREEMENT OR OTHERWISE IN CONNECTION
WITH THE SOFTWARE, AND (ii) IT SHALL LOOK SOLELY TO LICENSOR AND NOT TO ANY OF
LICENSOR'S SUPPLIERS, CORPORATE AFFILIATES, SHAREHOLDERS, DIRECTORS OR
EMPLOYEES, FOR ANY SUIT, CLAIM, OR RELIEF IN CONNECTION WITH THE SOFTWARE OR
THIS CUSTOMER AGREEMENT. IN NO EVENT SHALL LICENSOR BE LIABLE TO CUSTOMER FOR
MORE THAN THE FEE PAID BY CUSTOMER TO LICENSOR.
5. Third Party Beneficiary. CUSTOMER ACKNOWLEDGES THAT LICENSOR IS AN EXPRESS
-----------------------
INTENDED THIRD-PARTY, BENEFICIARY OF THIS CUSTOMER AGREEMENT. AND THAT LICENSOR
SHALL HAVE THE RIGHT TO BRING ACTION, CLAIM OR SUIT FOR DAMAGES, INJUNCTIVE OR
OTHER RELIEF UPON ANY BREACH BY CUSTOMER OF THIS CUSTOMER AGREEMENT.
6. Compliance with Law. Customer shall not, directly or indirectly, (a)
-------------------
export or re-export the Software or any technical information about the Software
to any country for which the United States Export Administration Act prohibits
such export or re-export or requires an export license or other United States
governmental approval, unless the appropriate export license or approval has
been obtained; or (b) take any action that would cause Licensor or Licensor to
be in violation of United States anti-boycott laws under the United States
Export Administration Act or the United States Internal Revenue Code, or any
regulation thereunder, or United States Foreign Corrupt Practices Act.
7. Assignment. This Customer Agreement may be assigned by Licensor or
----------
Licensor's designee upon written notice to Customer.
34
<PAGE>
EXHIBIT G
---------
SERVICE AGREEMENT PROVISIONS
[To be Attached]
35
<PAGE>
EXHIBIT H
---------
PRO FORMA P&L
[To be Attached]
36
<PAGE>
EXHIBIT I
---------
CSP ADDITIONAL TERMS AND CONDITIONS
-----------------------------------
1. Limited CSP License Grant. Upon receipt of written notice from Distributor
-------------------------
informing OPEN MARKET of Distributor's desire to use the Test Bed as a CSP, OPEN
MARKET hereby grants Distributor the following non-exclusive, non-transferable,
non-assignable, license:
a. To use the Test Bed, on the computer system on which it was
installed by OPEN MARKET, in object code form only, in order to
provide transaction services over Internet and/or Satyam network to
Merchant Business Customers;
b. To use the Test Bed, on the computer system on which it was
installed by OPEN MARKET, in object code form only, in order to
conduct demonstrations to prospective Merchant Business Customers; and
c. To make one back-up copy of the Test Bed solely for archival or
recovery purposes, as long as the production copy is in active use.
For purposes of this Section 1, "Merchant Business Customer" means any merchant
business customer of Distributor whose primary business and operations are based
in the Territory and which establishes an active account with Distributor in the
Test Bed system and is registered appropriately in the Test Bed system account
database in order to provide transaction services to buyer consumers using the
Test Bed system.
2. No Implied License. Distributor acknowledges and agrees that this CSP
------------------
License Grant in no way shall be construed to provide to Distributor, or any
third party, any express or implied license to use, copy or otherwise exploit
the Test Bed or any portion thereof other than as specifically set forth in this
Agreement. Without limiting the foregoing, Distributor may not sublicense or
otherwise distribute the Test Bed system or any portion thereof to any third
party, including any subsidiary or affiliate of Distributor, unless otherwise
authorized by OPEN MARKET in writing.
3. OPEN MARKET Acknowledgement and HTML Link. Distributor may insert the
-----------------------------------------
following acknowledgment at the bottom of each Web page presented by
Distributor's CSP service to Merchant Business Customers: "This software
infrastructure powered by TRANSACT, a product of Open Market, Inc." This text
may contain the URL of OPEN MARKET's World Wide Web home page.
4. Distributor Indemnity. Distributor shall indemnify, defend and hold OPEN
---------------------
MARKET harmless from any and all claims, damages, losses, liabilities, costs and
expenses (including reasonable attorney's fees) directly or indirectly brought
against OPEN MARKET by any Merchant Business Customer or any other third party
using Distributor's products or services arising out of Distributor's breach of
this Agreement or otherwise in connection with Distributor's use of the Test
Bed. Distributor shall have the sole and exclusive authority to defend any such
claim or action, provided that (i) Distributor shall immediately notify OPEN
MARKET of such claim or action and (ii) Distributor shall keep OPEN MARKET
informed of, and shall consult with any independent attorneys appointed by OPEN
MARKET at OPEN
37
<PAGE>
own expense regarding the progress of such litigation. OPEN MARKET will fully
cooperate with Distributor in connection therewith. Distributor may not agree
to any settlement that has a material adverse impact upon OPEN MARKET without
first obtaining OPEN MARKET's consent, which shall not be unreasonably withheld.
5. Merchant Business Customer ("Merchant") license fees
----------------------------------------------------
*****
II. Merchant Reporting and Payment Terms
------------------------------------
A. Reporting. Within five (5) business days of the end of each calendar
---------
quarter during the term of this Agreement, Distributor shall furnish Open Market
with a report (using the Transaction Report from TRANSACT) for each such quarter
setting forth the details of all new Merchants in each tier receiving services
from Distributor's Test Bed system including the following information: (i) the
number of active accounts in each Tier receiving services from Distributor's
Test Bed system at quarter end and (ii) the maximum number of active accounts in
each Tier during such quarter. If and when Open Market develops an automated
reporting tool to trace merchant details, the parties shall review and mutually
agree on use.
B. Payment. The report shall be accompanied by payment in full of all Merchant
-------
License Fees for each Merchant in each Tier for each such quarter based upon the
Transaction Report. If payment is not made in full at such time, interest shall
accrue on monies outstanding from the due date of payments at the lesser of the
rate of one percent per month (1%) or the maximum legal rate allowed.
C. Records/Audit Right. Distributor shall maintain complete and accurate
-------------------
records of all documentation relating to the number of Merchants receiving
services from Distributor's Test
38
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Bed system during the term of this Agreement and shall provide Open Market (or
its designated independent certified public accountant) with access to such
records at Distributor's place of business during normal business hours in order
to conduct annual audits of all relevant records upon two (2) weeks advance
notice. Audits may not be conducted more frequently than every six (6) months.
If such audits should disclose any under-reporting, Distributor shall promptly
pay Open Market such amount, together with interest thereon in accordance with
subsection (b) above. If the amount under-reported by Distributor is equal to
or greater than ten percent (10%) of the total payment due Open Market for the
payment period so audited, then the cost of the audit shall be borne by
Distributor.
39
<PAGE>
Exhibit 16.1
[LETTERHEAD OF FRASER & ROSS]
October 11, 1999
Satyam Infoway Limited,
Corporate Office
35, Velachery Road,
Little Mount,
CHENNAI 600 015.
Dear Sirs,
We refer to you telephonic conversation and as advised therein we give
below the required note for inclusion in your offer letter:
"We were the accountants for the Indian GAAP of Satyam Infoway Limited
for the following periods:
1. 12th December 1995 to 31st March 1997
2. 1st April 1997 to 31st March 1998
In connection with audits for the above mentioned periods, we had no
disagreements with the management on any matters of accounting
principles or practices, financial statement disclosure or auditing
scope or procedures.
However, during the fiscal year ended March 31, 1998, we had to qualify
our opinion with respect to the debentures issued to Citibank N.A. since
it exceeded the limits as per Section 58A of The Indian Companies Act.
Section 58A prohibits Indian Companies, other than banks, from accepting
"deposits" in excess of 25% of their share capital.
Our audit reports for financial statements of Satyam Infoway Limited did
not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty or audit scope, except for a
qualification of the financial statements as at March 31, 1998 prepared
under Indian GAAP relating to the treatment of Citibank N.A. debentures
as mentioned above.
<PAGE>
We acknowledge receipt on May 20, 1998 of a letter from the management stating
the following:
"There is a proposal to appoint M/s. Bharat S Raut & Co., 20/2, Vittal Mallya
Road, Bangalore 560 001 as statutory auditors for the year ending March 31,
1999. They may be contacting you in this regard."
In this regard, we have received a letter from M/s. Bharat S. Raut to which we
replied as follows:
"We refer to your letter dated 12th May 1998 and we write to inform that we have
no objection professionally or otherwise in your accepting the appointment as
auditors of the above mentioned Company."
FRASER & ROSS"
Yours faithfully,
/s/ Fraser & Ross
<PAGE>
EXHIBIT 23.1
[LATHAM & WATKINS LETTERHEAD]
September 21, 1999
Re: Satyam 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/ LATHAM & WATKINS
LATHAM & WATKINS
Attorneys at Law
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
</LEGEND>
<CURRENCY> INDIAN RUPEES
<S> <C> <C>
<PERIOD-TYPE> OTHER OTHER
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> MAR-31-1999 MAR-31-1998
<EXCHANGE-RATE> 43.45 43.45
<CASH> 125,547,453 9,911,667
<SECURITIES> 0 0
<RECEIVABLES> 45,087,639 1,945,483
<ALLOWANCES> 501,839 0
<INVENTORY> 6,758,190 0
<CURRENT-ASSETS> 251,654,638 22,922,612
<PP&E> 162,833,876 107,632,256
<DEPRECIATION> 46,714,402 18,781,598
<TOTAL-ASSETS> 454,888,421 107,632,256
<CURRENT-LIABILITIES> 273,361,369 28,277,473
<BONDS> 0 0
0 0
0 0
<COMMON> 157,500,000 75,002,300
<OTHER-SE> (89,882,192) (127,561,478)
<TOTAL-LIABILITY-AND-EQUITY> 454,888,421 107,632,256
<SALES> 103,343,832 6,805,020
<TOTAL-REVENUES> 103,343,832 6,805,020
<CGS> 63,651,265 19,497,654
<TOTAL-COSTS> 263,932,777 99,897,331
<OTHER-EXPENSES> 26,786,720 7,498,053
<LOSS-PROVISION> 501,839 0
<INTEREST-EXPENSE> 27,754,615 11,307,320
<INCOME-PRETAX> (187,375,665) (100,590,364)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (187,375,665) (100,590,364)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (187,375,665) (100,590,364)
<EPS-BASIC> (17.31) (121.66)
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CURRENCY> INDIAN RUPEES
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-2000 MAR-31-1999
<PERIOD-START> APR-01-1999 APR-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<EXCHANGE-RATE> 43.45 43.45
<CASH> 10,375,381 4,768,486
<SECURITIES> 0 0
<RECEIVABLES> 53,157,565 10,515,365
<ALLOWANCES> 726,060 0
<INVENTORY> 5,925,745 102,755
<CURRENT-ASSETS> 157,668,145 27,869,025
<PP&E> 252,429,715 70,106,064
<DEPRECIATION> 20,705,897 8,191,497
<TOTAL-ASSETS> 464,472,828 119,500,887
<CURRENT-LIABILITIES> 355,992,658 35,619,435
<BONDS> 0 0
0 0
0 0
<COMMON> 157,500,000 105,002,300
<OTHER-SE> (141,424,636) (152,390,725)
<TOTAL-LIABILITY-AND-EQUITY> 464,472,828 119,500,887
<SALES> 80,803,252 17,557,719
<TOTAL-REVENUES> 80,803,252 17,552,719
<CGS> 38,896,630 7,074,081
<TOTAL-COSTS> 123,234,639 37,681,555
<OTHER-EXPENSES> 9,317,307 4,705,411
<LOSS-PROVISION> 224,221 0
<INTEREST-EXPENSE> 10,060,759 0
<INCOME-PRETAX> (51,748,694) (24,829,247)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (51,748,694) (24,829,247)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (51,748,694) (24,829,247)
<EPS-BASIC> (3.29) (3.28)
<EPS-DILUTED> 0 0
</TABLE>
