<PAGE> 1
AS FILED WITH THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION
ON MAY 19, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REDIFF.COM INDIA 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 7373 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
MAHALAXMI ENGINEERING ESTATE
1ST FLOOR, L. J. FIRST CROSS ROAD,
MAHIM (WEST), MUMBAI 400 016, INDIA
+91-22-444-9144
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CT CORPORATION SYSTEM
818 WEST 7TH STREET
LOS ANGELES, CA 90017
(213) 627-8252
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
MICHAEL J. DANAHER, ESQ. JOHN D. YOUNG, JR., ESQ.
RAJ S. JUDGE, ESQ. SULLIVAN & CROMWELL
WILSON SONSINI GOODRICH & ROSATI 28/F, NINE QUEEN'S ROAD
PROFESSIONAL CORPORATION CENTRAL, HONG KONG
650 PAGE MILL ROAD (852) 2826-8688
PALO ALTO, CA 94304
(650) 493-9300
</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>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PROPOSED
AMOUNT PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER MAXIMUM OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity shares, par value Rs. 2 per
share, each represented by one
American Depositary Share(3)(4)... -- -- $75,000,000 $19,000
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes -- equity shares represented by -- 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) 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.
(4) Includes equity shares initially offered and sold outside the United States
that may be resold from time to time in the United States either as part of
their distribution or within 40 days after the later of the effective date
of this Registration Statement and the date the equity shares are first bona
fide offered to the public.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES EXCHANGE COMMISSION MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Subject to Completion, Dated -- , 2000.
rediff.com LOGO
REDIFF.COM INDIA LIMITED
-- American Depositary Shares
Representing -- Equity Shares
----------------------
This is the initial public offering of Rediff.com India Limited. This
prospectus relates to an offering of up to -- American Depositary Shares, or
ADSs. Each American Depositary Share represents one equity share of Rediff.com
India Limited.
Prior to this offering, there has been no public market for Rediff.com
India Limited's equity shares or ADSs. We expect that the initial public
offering price will be between US$ and US$ per ADS. We have
made application to have the ADSs approved for quotation on the Nasdaq National
Market under the symbol "REDF".
See "Risk Factors" beginning on page 5 to read about factors you should
consider before buying the ADSs.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per ADS Total
----------- -----------
<S> <C> <C>
Initial public offering price............................... US$ US$
Underwriting discount....................................... US$ US$
Proceeds, before expenses to Rediff.com India Limited....... US$ US$
</TABLE>
To the extent that the underwriters sell more than ADSs, they
have the option to purchase up to an additional ADSs from Rediff.com
India Limited at the initial public offering price less the underwriting
discount.
----------------------
The underwriters expect to deliver the ADSs in New York, New York on
-- , 2000.
----------------------
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
ROBERT FLEMING INC.
----------------------
Prospectus dated , 2000.
<PAGE> 3
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.
REDIFF.COM INDIA LIMITED
OUR BUSINESS
We are one of the leading Internet destinations, or portals, focusing on
India and the global Indian community. Our website currently consists of 17
interest specific channels, extensive community features, local language
editions, sophisticated search capabilities, and online shopping. We provide
these services to our users for free. Our revenues are derived from online
advertising and services as well as e-commerce.
We have developed our product offerings based on the demands and the
requirements of our user base. We have extensive content offerings developed
in-house as well as by third parties. Our in-house editorial staff provides
up-to-date news focused on India and the global Indian community. Regular
features include interviews with politicians, sports and movie stars, and other
celebrities. Our channels, which include cricket, finance, movies, astrology,
weather, airline and train schedules are tailored to Indian interests. We also
offer a U.S. version of our site with content that is more relevant to the
Indian community in the United States. We believe that there is also a demand
for non-English content relevant to Indians. To address this demand we offer
Hindi, Tamil, Telugu and Gujarati news editions of our website to attract the
large local language speaking population in India. We also offer broadband and
wireless delivery of our content to cater to the needs of our users who have
access to these services.
We also have extensive Internet community offerings which include e-mail,
chat, a romance channel, and personal homepages. These services allow our users
with similar interests to interact with each other. We respond to the needs of
our users in India and overseas by tailoring our community offerings with
important cultural insights. We draw from the diverse backgrounds of our Indian
employees and consultants to constantly innovate and upgrade our offerings.
The MarketPlace shopping section is the flagship of our e-commerce
offerings, and provides users and merchants with a robust online shopping
experience. The MarketPlace offers a wide range of products including, jewelry,
confectionaries and apparel. In light of the low credit card penetration levels
in India, we offer our users the option to use a cash on delivery, or C.O.D.,
payment method. We also build a web page for each merchant using our templates
so we can ensure consistency, user friendliness and merchant loyalty within the
MarketPlace.
Our market position as one of the leading Internet destinations focusing on
India and the global Indian community offers advertisers access to a large and
rapidly growing market of Indian Internet users. Our monthly page views have
grown from approximately 13.2 million in April 1999 to approximately 70 million
in March 2000.
OUR MARKET OPPORTUNITY
Internet usage is at an early stage in India, but is experiencing rapid
growth. International Data Corporation, or IDC, estimates that approximately 1.0
million people used the Internet in India in 1999. IDC also projects that the
number of Internet users in India will increase from 1.0 million in 1999 to over
17.2 million by 2004, which represents a compounded annual growth rate of 79%.
We believe that one of the key factors driving this growth in India is the
Government of India's promotion of Internet kiosks in smaller towns and villages
and the proliferation of Internet cafes, which are sometimes referred to as
cybercafes. We believe that our market opportunity also includes the global
Indian community living outside India.
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<PAGE> 4
Our specific opportunities are driven by the following factors:
- few comprehensive, branded portals in India with offerings comparable to
those of leading international portals;
- few portals focused on Indians overseas, which are well integrated with
Indian portals;
- underdeveloped retailing and e-commerce environment in India; and
- low levels of online advertising in India.
OUR STRENGTHS AND STRATEGY
We believe that we are well positioned to capture the growth opportunities
of the Internet in India. Our breadth and depth of service offerings is
complemented by our ability to innovate and meet the demands of our users.
Our objective is to strengthen our position as the leading Internet portal
focusing on India and the global Indian community. Our principal business
strategies to accomplish this objective are:
- aggressively extend our brand recognition and reputation through
extensive advertising, marketing, public relations programs and
co-marketing campaigns;
- continue the rapid expansion of Rediff.com by adding original and
innovative content and services to our website;
- promote and expand e-commerce activities by aggressively adding new
merchants and product offerings;
- build relationships with the top 200 advertisers in India by educating
them about the advantages of online advertising;
- leverage relationships with our strategic investors by utilizing their
market penetration and content distribution capabilities;
- pursue selective acquisitions, partnerships and investments in order to
expand our content, technology and distribution; and
- enhance our offerings for broadband and wireless technologies.
CORPORATE INFORMATION
Rediff.com India Limited was incorporated on January 9, 1996 as Rediff
Communication Private Limited under the Indian Companies Act, 1956. We converted
to a public limited company on May 29, 1998. On February 15, 2000 we changed our
name to Rediff.com India Limited. Our principal office is located at Mahalaxmi
Engineering Estate, 1st Floor, L.J. First Cross Road, Mahim (West) Mumbai 400
016, India, and our telephone number is +91-22-444-9144. Our Internet address is
www.rediff.com. The information on our website is not part of this prospectus.
2
<PAGE> 5
THE OFFERING
The following information assumes that the underwriters do not exercise the
option granted by us to purchase additional ADSs in the offering. See
"Underwriting" on page 93.
ADS offered................ -- ADSs
ADS/equity share ratio..... 1/1
ADS equivalents to be
outstanding after the
offering................. --
Proposed Nasdaq National
Market symbol............ REDF
Depositary................. Citibank, N.A.
Use of Proceeds............ To develop content for our Internet portal, 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 23.
3
<PAGE> 6
SUMMARY FINANCIAL DATA
Our financial statements are presented in U.S. dollars and prepared in
accordance with U.S. GAAP. The summary data set forth below as of March 31, 1999
and 2000 and for the fiscal years ended March 31, 1998, 1999 and 2000 has been
derived from our audited financial statements presented elsewhere in this
prospectus and which have been audited by Deloitte Haskins & Sells, Chartered
Accountants. The summary financial data set forth below for the fiscal years
ended March 31, 1996 and 1997 are derived from financial statements which are
not included in this prospectus. The pro forma as adjusted data set forth below
reflects the application of the net proceeds from the sale of the ADSs that we
are offering at an assumed initial public offering price of US$ -- per ADS after
deducting the estimated underwriting discounts and offering expenses. The
presentation below also gives effect to our 5 for 1 share split effective
January 6, 2000.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
------------------------------------------------------
1996 1997 1998 1999 2000
-------- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................................... US$ -- US$ 86 US$ 516 US$ 855 US$ 1,906
Cost of revenues............................. 26 121 175 321 953
Gross profit (loss).......................... (26) (35) 341 534 954
Operating expenses........................... 111 390 692 1,545 7,869
Loss from Operations......................... (137) (425) (352) (1,011) (6,915)
Net loss..................................... US$ (137) US$ (425) US$ (352) US$ (985) US$(6,666)
======== ======== ======== ========= =========
Loss per equity share after adjusting for 5:1
share split................................ US$(0.15) US$(0.11) US$(0.04) US$ (0.06) US$ (0.30)
======== ======== ======== ========= =========
Weighted equity shares used in computing loss
per equity share after adjusting for 5:1
share split................................ 889 3,850 9,080 15,973 21,944
======== ======== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF MARCH 31, MARCH 31, 2000
------------------------ --------------
(IN THOUSANDS)
PRO FORMA
1999 2000 AS ADJUSTED
---- ---- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... US$ 247 US$11,576 US$ --
Working capital......................................... 8 10,795 --
Total assets............................................ 1,073 16,062 --
Long-term debt, including current installments.......... 449 -- --
Total shareholders' equity.............................. 287 12,722 --
</TABLE>
4
<PAGE> 7
RISK FACTORS
This offering involves a high degree of risk. You should consider carefully
the risks and uncertainties described below, together with all of the other
information contained in this prospectus, before you decide whether 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 could lose all or part of your
investment.
RISKS RELATED TO INVESTMENTS IN INDIAN COMPANIES
We are incorporated in India, and the majority of our assets, business
operations and all of our employees are located in India. Consequently, social
and economic developments in India, including taxation and foreign investment
policies, currency exchange controls, as well as changes in exchange rates and
interest rates will affect our financial performance and the market price of our
ADSs.
POLITICAL INSTABILITY OR CHANGES IN THE GOVERNMENT IN INDIA COULD DELAY THE
LIBERALIZATION OF THE INDIAN ECONOMY AND ADVERSELY AFFECT ECONOMIC CONDITIONS IN
INDIA GENERALLY AND OUR BUSINESS IN PARTICULAR.
Our business model relies, in part, on general economic and business
conditions in India. 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 if new restrictions on the
private sector are introduced or if existing restrictions are not relaxed over
time. During the past decade and in particular since 1991, successive Indian
governments have pursued policies of economic liberalization, including
significantly relaxing restrictions on the private sector. Nevertheless, the
roles of the Indian central and state governments in the Indian economy as
producers, consumers and regulators has remained significant. The Government of
India recently changed for the fifth time since 1996. The current Government of
India, formed in October 1999, has announced policies and taken initiatives that
support the continued economic liberalization policies that have been pursued by
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 and other matters affecting investment in our
securities could change as well.
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 nuclear capable missile
tests. Since May 1999, military confrontations between India and Pakistan have
occurred in the disputed 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.
INDIAN LAW LIMITS OUR ABILITY TO RAISE CAPITAL AND THE ABILITY OF OTHERS TO
ACQUIRE US, WHICH COULD PREVENT US FROM OPERATING OUR BUSINESS OR ENTERING INTO
A TRANSACTION THAT IS IN THE BEST INTERESTS OF OUR SHAREHOLDERS.
Indian law constrains our ability to raise capital through the issuance of
equity or convertible debt securities. Any foreign investment in an Indian
company requires approval from relevant government authorities in India
including the Reserve Bank of India. The Government of India has classified
existing businesses into various categories for automatic approval of foreign
direct investment up to certain prescribed percentages. The foreign investment
policy of the
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<PAGE> 8
Government of India in information technology enabled services or e-commerce
related companies is unclear. While the Government of India has not specifically
restricted foreign investment in information technology enabled services or
e-commerce related companies, we understand that it is currently considering
imposing restrictions that would limit the aggregate percentage of foreign
equity ownership in such companies to 49%. If the Government of India decides to
apply this limit, it may restrict the foreign equity investment in our company
to 49%. After this offering, we expect that approximately --% of our equity
interests will be held by foreign investors. If the Government of India decides
to implement a 49% limit on foreign equity ownership, our ability to seek and
obtain additional equity investment by foreign investors will be constrained.
We cannot assure you that equity or 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 and 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. If the Government of India decides to impose a 49% limit on foreign
equity ownership, it may also restrict our ability to be acquired by a non-
Indian company. This may prevent us from entering into a transaction which would
otherwise be beneficial for our company and our shareholders.
CURRENTLY THERE IS NO PUBLIC TRADING MARKET FOR OUR EQUITY SHARES IN INDIA OR
ELSEWHERE WHICH, TOGETHER WITH INDIAN LAWS THAT RESTRICT THE CONVERSION OF
OUTSTANDING EQUITY SHARES INTO ADSS, REDUCE YOUR ABILITY TO SELL OUR ADSS.
Currently there is no public trading market for our equity shares in India
or elsewhere nor can we assure you that we will take steps to develop one. After
the offering, our equity shares will only be traded on the Nasdaq in the form of
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 and representing such equity shares without prior approval
of the Government of India. Thus, 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 and unless there is a change in current Indian laws and
regulations, you will be prohibited from re-depositing those outstanding equity
shares with our depositary.
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 a renunciation of
rights to a resident of India. Under currency exchange controls that are in
effect in India, any such approval granted by the Reserve Bank of India will
specify the price at which the equity shares may be transferred based on a
specified formula, and a higher price per share may not be permitted.
Additionally, shareholders who seek to convert the rupee proceeds from a sale of
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 on any particular
terms or at all. If in the future a market for our equity shares is established
in India, our equity shares may trade at a discount or premium to the ADSs in
part because of restrictions on foreign ownership of the underlying equity
shares.
BECAUSE WE OPERATE OUR BUSINESS IN INDIA, CURRENCY EXCHANGE RATE FLUCTUATIONS
MAY INCREASE OUR COSTS AND AFFECT THE MARKET PRICE OF OUR ADSS.
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 five-year period from January 3, 1995 through March 31, 2000, the
value of the rupee against the U.S. dollar declined
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<PAGE> 9
by approximately 28.2% from Rs. 31.37 to Rs. 43.65 per U.S. dollar (hitting a
low of Rs. 43.73 per U.S. dollar on October 1, 1999). Devaluations or further
depreciation of the value of the rupee will result in higher expenses to our
company, in rupee terms, for the purchase of imported capital equipment, such as
telecommunications and computer equipment, which we purchase in the United
States. 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.
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 online
advertising and e-commerce markets in India is inhibited by a number of factors
such as the ones discussed below. If India's limited Internet usage does not
grow substantially, our business may not succeed.
CHANGES IN THE REGULATION OF OUR BUSINESS IN INDIA MAY RESTRICT THE GROWTH OF
OUR BUSINESS.
The Indian legal regime with respect to information technology software
enabled services and e-commerce companies is uncertain. The Government of India
may apply existing laws to our business or may introduce specific laws to
regulate our business without our consent, and any such change could restrict
the growth of our business by preventing us from expanding into new areas,
decrease our revenues and increase our costs by limiting our ability to conduct
our business, any of which would adversely affect our operating results.
It is unclear whether we are required to register with any Indian
regulatory authority for carrying on our business. The Government of India may
in the future require us to register with any relevant regulatory authorities.
Furthermore, the Government of India may impose sanctions against us for failure
to register with such authorities. This may decrease our revenues, increase our
costs or limit our ability to grow our business.
THE HIGH COST OF ACCESSING THE INTERNET IN INDIA LIMITS OUR POOL OF POTENTIAL
CUSTOMERS AND THE GROWTH OF OUR BUSINESS.
Our growth is limited by the high cost 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 failure
of a significant number of additional Indians to obtain affordable access to the
Internet would make it very difficult to execute our business plan.
THE LIMITED INSTALLED PERSONAL COMPUTER BASE IN INDIA LIMITS OUR POOL OF
POTENTIAL CUSTOMERS AND RESTRICTS THE GROWTH OF OUR BUSINESS.
The market penetration of, or access to, personal computers and the
Internet in India are far lower than in the United States. According to IDC, in
1999 India had approximately 1.0 million Internet users compared to a total
population in India of 986.9 million, while the United States had approximately
80.8 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. We cannot assure you that the market penetration 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. If these events do not occur we will not be able to expand our customer
base, which will make it difficult for us to execute our business plan.
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<PAGE> 10
THE SUCCESS OF OUR BUSINESS DEPENDS ON THE ACCEPTANCE OF THE INTERNET IN INDIA
WHICH MAY BE SLOWED BY HIGH BANDWIDTH COSTS AND OTHER TECHNICAL OBSTACLES IN
INDIA.
As with many developing nations, the telecommunications infrastructure in
India historically has been controlled by government-controlled
telecommunication service providers. The current service has been and remains
inferior to service in most developed countries. Further, the number of
telephone lines per one thousand persons, or teledensity, in India is low when
compared to most developed countries. 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 Government of India 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,
which are 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 direct satellite link, or DSL, lines and cable modems in the United States.
These speed and cost constraints may severely limit the quality and desirability
of using the Internet in India, which consequently may limit our ability to
expand our pool of customers, and reduce our desirability to online advertisers.
WE MAY NOT BE ABLE TO GROW OUR BUSINESS IF ONLINE ADVERTISING IN THE INDIAN
MARKET DOES NOT EXPAND.
Our business plan depends on the anticipated growth of online advertising
in the Indian market and the growth of our revenues depends on increased
revenues generated by advertising. We anticipate that a significant portion of
our future revenues will be derived from hosting advertising space on our
website. Online advertising is an unproven business and our ability to generate
and maintain significant advertising revenues will depend on:
- advertisers' acceptance of the Internet as an effective and sustainable
medium;
- our ability to generate and continue to grow a large community of users
with demographics attractive to advertisers;
- our ability to contract with a diverse group of advertisers that will
generate attractive traffic patterns and user demographics;
- the effectiveness of our advertising delivery, tracking and reporting
systems;
- our ability to attract advertisers at profitable rates in light of
intense competition; and
- our ability to adapt to new forms of Internet advertising.
Different pricing models are used to sell online advertising and it is
difficult to predict which, if any, of the models will emerge as the industry
standard. This makes it difficult to project our future advertising rates and
revenues. A reduction in traffic on our website may cause advertisers not to
renew their contractual arrangements with us which, in turn, would reduce our
advertising revenues. Additionally, any development of Internet software that
blocks advertisements before they appear on a user's screen may hinder the
growth of online advertising and could materially and adversely affect our
ability to grow our online advertising and our business.
THE SUCCESS OF OUR E-COMMERCE BUSINESS DEPENDS ON THE ACCEPTANCE AND GROWTH OF
E-COMMERCE IN INDIA, WHICH IS UNCERTAIN.
Many of our existing and proposed products and services are designed to
facilitate e-commerce in India, although there is very little e-commerce
currently being conducted in India. Demand and market acceptance for these
products and services by businesses and consumers,
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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 through the Internet and the validity of digital
signatures, remain unresolved. In addition, many Indian businesses have deferred
purchasing Internet access and deploying e-commerce initiatives for a number of
reasons, including the existence or perception of, among other things:
- inconsistent quality of service;
- lack of legal infrastructure relating to e-commerce in India;
- lack of security of commercial data such as credit card numbers; and
- low number of users in India.
If usage of the Internet and e-commerce in India does not substantially
increase and the legal infrastructure and network infrastructure in India are
not further developed, we are not likely to achieve significant growth of our
e-commerce products and services.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
OUR LIMITED OPERATING HISTORY AND DEPENDENCE ON THE INTERNET MAKES IT DIFFICULT
TO EVALUATE OUR FUTURE PROSPECTS.
We commenced operations and launched our Internet portal in February 1996.
Accordingly, we have limited historical financial information and operating
history upon which you may evaluate us and our prospects. You should consider
the challenges that an early stage company like ours faces. These challenges
include our need to:
- increase awareness of the Rediff.com brand and continue to build user
loyalty;
- expand the content and services on our portal;
- attract a larger audience;
- attract a larger number of advertisers from a variety of industries;
- attract, maintain and motivate qualified personnel;
- maintain and develop strategic relationships with business partners;
- respond effectively to competitive pressures;
- continue to develop and upgrade our technology; and
- promptly address the challenges faced by early stage, rapidly growing
businesses which do not have an experience or performance base to draw
on.
We cannot be sure we will be successful in meeting these challenges and
risks.
WE HAVE A HISTORY OF NET LOSSES. WE EXPECT TO CONTINUE TO INCUR NET LOSSES AND
WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.
We have incurred significant net losses and negative cash flows from
operations since our inception in January 1996, including a net loss of
approximately US$6.7 million for the year ended March 31, 2000. As of March 31,
2000, we have an accumulated deficit of US$8.6 million. We expect to have
increasing net losses and negative operating cash flows for the foreseeable
future. Although our revenues have grown in recent quarters, our expenses have
grown even faster and we expect to increase our spending significantly as we
expand our services, advertise and promote our brand, and invest in expansion of
our infrastructure and sales and marketing staff. Accordingly, we will need to
generate significant additional revenues, while controlling our expenses, to
achieve profitability. We may not be able to do so. Our business model is not
yet
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proven in India, and we cannot assure you that we will ever achieve or sustain
profitability or that our operating losses will not continue to increase in the
future. If we are unable to achieve or maintain profitability, we will be unable
to build a sustainable business. In this event, the price of our ADSs and the
value of your investment would likely decline.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY
FAIL TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS AND INVESTORS, WHICH MAY
CAUSE THE PRICE OF OUR ADSS TO DECLINE.
We expect our quarterly results to fluctuate significantly in the future
based on a variety of factors. These factors are also expected to affect our
long-term performance. Some of these factors include:
- the timing of our expansion plans in India and additional geographic
markets;
- changes in pricing policies or our product and service offerings;
- increases in personnel, marketing and other operating expenses to support
our anticipated growth;
- our ability to attract new users and retain existing users at reasonable
costs;
- our ability to adequately maintain, upgrade and develop our portal, our
computer network and the systems that we use to process customer orders
and payments;
- increased competition;
- seasonality in retail sales because of the festival seasons in the Indian
winter months of November through February, and extended vacations in the
Indian summer months of April through June; and
- technical difficulties, system or website downtime or Internet service
disruptions.
Due to all these factors, we expect our operating results to be volatile
and difficult to predict. As a result, quarter-to-quarter comparisons of our
operating results may not be good indicators of our future performance. In
addition, it is possible that our operating results in any future quarter could
be below the expectations of investors generally and any published reports or
analyses of our company. In that event, the market price of our ADSs may
decline, perhaps substantially.
OUR MARKETING CAMPAIGN TO ESTABLISH BRAND RECOGNITION AND LOYALTY FOR THE
REDIFF.COM BRAND COULD BE UNSUCCESSFUL, WHICH COULD HARM OUR BUSINESS.
In order to expand our customer base and increase traffic on our website,
we must establish, maintain and strengthen the Rediff.com 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 or if an increase in consumer traffic does not lead
to an increase in revenues to offset our marketing expenditures, our losses will
be increased or, to the extent that we are generating profits, our profits will
be decreased.
Our success in promoting and enhancing the Rediff.com brand will depend on
our ability to provide high quality content, functionality and product
offerings. Furthermore, our portal will be more attractive to advertisers if we
have a large user base with demographic characteristics that advertisers
perceive as favorable. If we fail to promote our brand successfully, increase
the number of visitors to our website or maintain the quality of our advertising
services, the value of the Rediff.com brand could be diminished.
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WE ARE CURRENTLY EXPERIENCING A PERIOD OF RAPID GROWTH AND MAY NOT BE ABLE TO
MANAGE THIS GROWTH.
As of March 31, 2000, we had 163 employees and full-time consultants, an
increase of 77% from the 92 employees and full-time consultants we had as of
March 31, 1999. Furthermore, we are planning for additional employee increases
which will expand our organization significantly. Our 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:
- expand our current, or seek additional, office facilities;
- implement new operational and financial systems as well as procedures and
controls;
- control expense and seek higher cost efficiencies;
- 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, our business could be
adversely affected.
INTENSE COMPETITION IN THE INTERNET PORTAL BUSINESS COULD PREVENT US FROM
ACHIEVING OR SUSTAINING PROFITABILITY.
Our business faces significant competition from other well-established
Indian online content providers, as well as numerous new entrants. We also
compete with foreign online content providers as well as with traditional print
and television media companies. Additionally, we are competing with other forms
of advertising for advertising customers. Competition for visitors, advertisers
and e-commerce partners is intense and is expected to increase significantly in
the future because there are no substantial barriers to entry in our market.
Furthermore, it is difficult to predict which pricing model, if any, will emerge
as the industry standard. This makes it difficult to predict our future
advertising rates and revenues. Our revenues could be adversely affected if we
are unable to adapt to new forms of pricing for the services and products we
offer. Increased competition may result in:
- loss of visitors and website traffic;
- loss of advertisers;
- different pricing, service or marketing decisions;
- reduced operating margins;
- loss of market share; and
- diminished value in our services.
BECAUSE WE LACK FULL REDUNDANCY FOR OUR TELECOMMUNICATION AND 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 partial back-up facilities but we do not
have full redundancy for all of our telecommunication and computer facilities.
As a result, failure of key primary or back-up systems could lead to disruption
of our services and loss of important data. This in turn could lead to a loss of
users and customers and damage to our reputation. These failures, which could
have a significant adverse effect on our business and results of operations,
could also lead to significant negative publicity
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and litigation and to a decline in the market price of our ADSs. Recently,
several large Internet companies have suffered highly publicized system failures
which resulted in adverse reactions to their stock prices, significant negative
publicity.
We have suffered temporary service outages from time to time which have
resulted in a disruption of our services which have lasted no longer than 30
minutes. As a result of such outages, Internet users are temporarily unable to
access our content, community and e-commerce offerings. Any sustained disruption
will reduce the number of visitors to our website and have a material adverse
impact on the number of revenues from e-commerce transactions handled through
our website. Such disruptions could also reduce the number of advertisers on our
site and materially affect our results of operations.
Our computer and communications hardware are protected through physical and
software safeguards. However, they are still vulnerable to fire, storm, flood,
power loss, telecommunication 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 significantly harm our business.
OUR BUSINESS AND GROWTH WILL BE IMPAIRED IF WE ARE UNABLE TO RETAIN OUR EXISTING
KEY PERSONNEL AND HIRE ADDITIONAL SKILLED EMPLOYEES.
We are highly dependent on the principal members of our management team. In
particular, our success depends upon the continued efforts of our Chairman and
Managing Director, Mr. Ajit Balakrishnan. Substantially all of our employees are
located in India, and each may voluntarily terminate his or her employment with
us. Our planned activities will require additional expertise in the sales and
marketing and other areas. 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 existing personnel or identify,
hire and successfully integrate additional qualified 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 impair the growth of our business.
WE ARE HIGHLY DEPENDENT ON OUR AGREEMENTS WITH THIRD PARTIES TO PROVIDE PRODUCTS
AND SERVICES TO OUR CUSTOMERS AND ANY TERMINATION OF THESE RELATIONSHIPS COULD
HARM OUR BUSINESS.
We rely on our relationships with third parties to provide high quality
products and services to our e-commerce customers. Currently, most of our
e-commerce product manufacturers and vendors that we have agreements with do not
provide their products and services to our competitors. However, because these
agreements are not exclusive, our competitors may offer the same or similar
products and services we do. Although we generally enter into agreements with
more than one vendor or manufacturer for a specific product category, not all of
these vendors and manufacturers can supply the same or similar products. Factors
such as brand name, quality and supply can affect our ability to obtain and sell
e-commerce products. We also rely on our agreements with third parties to
provide us with online credit card transactions processing, courier delivery
services and C.O.D. transaction services for our e-commerce customers.
Currently, there is a very limited number of third party credit card transaction
processing companies and couriers in India. Although we seek to establish
relationships with additional suppliers of these services, any unexpectedly
terminated agreements with these will significantly impair our e-commerce
offerings and our ability to generate revenues from e-commerce.
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We also rely on third-party content providers to develop our content.
However, these content providers may also make their content available to our
competitors. Because most of these relationships are not exclusive, our
competitors could use the same content we do. Although we constantly attempt to
determine what content, features and functionality our users want, other
competitors may present the same or similar content in a superior manner and
thereby decrease our visitor traffic. Such a decrease in traffic could reduce
our advertising and e-commerce revenues and have a material adverse effect on
our business.
OUR FUTURE ACQUISITIONS, INVESTMENTS, STRATEGIC PARTNERSHIPS OR OTHER VENTURES,
EVEN IF COMPLETED ON FAVORABLE TERMS, MAY STRAIN OUR MANAGERIAL, OPERATIONAL AND
FINANCIAL RESOURCES.
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. 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. 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 terms commercially acceptable to us or at
all. If we acquire another company, we could have difficulty in assimilating
that company's personnel, operations, third party relationships, 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 owners
of our equity shares and ADSs. Incurrence of additional indebtedness could
increase our interest expenses and cost of capital. 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 and, in certain cases, the
Government of India must approve under the Foreign Exchange Regulation Act,
1973, any acquisition by our company of any company organized outside of India.
We cannot assure you that any required approval from the Government of India,
the Reserve Bank of India or any other government agency can be obtained.
FAILURE TO MEET MERCHANDISING, INVENTORY MANAGEMENT AND ORDER FULFILLMENT
OBLIGATIONS FOR OUR E-COMMERCE BUSINESS COULD RESULT IN DISRUPTION OF OUR
OPERATIONS.
We handle merchandising, inventory management and order fulfillment for our
e-commerce business. Our failure to perform these functions efficiently and in a
timely manner could result in the disruption of operations, including shipment
delays. This in turn could lead to a loss of customers and damage to our
reputation, which may cause the price of our ADSs to decline.
A SMALL GROUP OF OUR EXISTING SHAREHOLDERS WILL CONTROL OUR COMPANY AND MAY HAVE
INTERESTS WHICH CONFLICT WITH THOSE OF OUR OTHER SHAREHOLDERS OR OWNERS OF OUR
ADSS.
Our nine largest shareholders will beneficially own an aggregate of
approximately --% of our equity shares following this offering, or --% if the
underwriters' overallotment option is exercised in full. As a result, such
shareholders acting collectively will be able to exercise control over most
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, approval requires the number of votes cast in favor of
the
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resolution to 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; and
- commencing a liquidation.
The interests of this group may differ from our other shareholders or
owners of our ADSs and could result in a delay or prevention of a change in
control of our company even if a transaction of that sort would be beneficial to
our other shareholders, including the owners of our ADSs, or in the best
interest of our company.
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, WHICH COULD LEAD TO A REDUCTION IN OUR REVENUES
AND AN INCREASE IN OUR EXPENSES.
Our intellectual property rights are important to our business. We rely on
a combination of copyright and trademark laws, trade secrets, 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. We may
need to litigate 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 and resources 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 53.
WE DO NOT PLAN TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We do not anticipate paying cash dividends to the owners of our equity
shares or ADSs in the foreseeable future. Accordingly, investors must rely on
sales of their equity shares or ADSs, which may increase or decrease in value,
as the only way to realize cash from their investment. Investors seeking cash
dividends should not purchase our ADSs.
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RISKS RELATED TO THE INTERNET
WE MAY BE LIABLE TO THIRD PARTIES FOR INFORMATION RETRIEVED FROM OUR WEBSITE.
We may be subject to claims for defamation, negligence, copyright, or
trademark infringement, personal injury or other legal theories relating to the
information we publish on our website. The laws in India and the United States
relating to the liability of companies which provide online services, like ours,
for activities of their users are currently unsettled. Claims have been made,
against Internet portal companies like ours in the past. We could be subject to
similar claims and incur significant costs in their defense. In addition, we
could be exposed to liability for the selection of listings that may be
accessible through our portal or through content and materials that we develop
or that our users may post in message boards, chat rooms, or other interactive
services. It is also possible that if any information provided through our
services contains errors, third parties could make claims against us for losses
incurred in reliance on the information. We offer Internet-based e-mail
services, which expose us to potential liabilities or claims resulting from:
- unsolicited e-mail;
- lost or misdirected e-mail;
- illegal or fraudulent use of e-mail; and
- interruptions or delays in e-mail service.
Investigating and defending these claims is expensive, even if they do not
result in liability. We could also become liable if confidential information is
disclosed inappropriately. Others could also sue us for the content and services
that are accessible from our website 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 such liabilities under Indian law. Further, our
business is based on establishing the Rediff.com portal as a trustworthy and
dependable provider of content 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.
WE MAY BE LIABLE TO THIRD PARTIES FOR THE PRODUCTS WE SELL THROUGH E-COMMERCE.
Consumers may sue us if any of the products or services that we offer are
defective, fail to perform properly or injure the user. To date, we have very
limited experience in the sale of products through our e-commerce business and
the development of relationships with manufacturers or suppliers of such
products. Although our agreements with manufacturers and distributors typically
contain provisions intended to limit our exposure to liability claims, these
limitations may not prevent all potential claims. We currently accept full
responsibility for any loss, damage or inconsistency in quality of the products
offered through our e-commerce business. Liability claims could require us to
spend a considerable amount of resources, time and money in litigation and to
pay any significant damages. 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.
Currently we do not collect any sales taxes on the products sold through
our website. However, we may be required to collect such taxes in the future.
The Government of India may impose sanctions against us for failure to collect
sales taxes on products sold by us through our website. This may materially
adversely affect our business, financial condition and operations.
In addition, the laws relating to the sale of goods through e-commerce is
not fully developed. The various laws and regulations that cover online sales of
products and their
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interpretation involve a significant degree of uncertainty. For example, we may
have to register our business under various laws relating to the sale of goods.
Our business, financial condition and operations would be materially affected if
we would be required to obtain the necessary registrations.
COMPUTER VIRUSES MAY CAUSE OUR SYSTEMS TO INCUR DELAYS OR INTERRUPTIONS AND MAY
ADVERSELY AFFECT OUR ABILITY TO PROVIDE OUR SERVICES ONLINE.
Computer viruses may cause our systems to incur delays or other
interruptions. In addition, the inadvertent transmission of computer viruses
could expose us to a material risk of loss or litigation and possible liability.
Moreover, if a computer virus affecting our system is highly publicized, our
reputation and brand could be materially damaged and our visitor traffic and
advertising customers may decrease.
WE MAY STILL FACE YEAR 2000 COMPLIANCE ISSUES.
Notwithstanding significant efforts by many participants in the computer
industry and corporate and other users worldwide to address what is broadly
known as the Year 2000 problem, we believe that there are many computer and
software products that remain coded to accept only two-digit entries in the date
code field, or that have not been properly coded to properly recognize and
handle all dates after January 1, 2000. If our third-party suppliers were not
Year 2000 compliant, our operation and services could be disrupted. Through the
date of this prospectus neither we, nor our third-party suppliers have
experienced any material Year 2000 related service disruptions that would affect
our business. We believe that there are still several dates in the Year 2000,
such as the fiscal year ends of many Indian corporations, which are widely
anticipated to have the potential to cause problems. The failure to adequately
address Year 2000 compliance issues in our information technology systems could
result in claims of mismanagement, misrepresentation or breach of contract and
related litigation, which could be costly and time-consuming to defend.
RISKS RELATED TO THE ADSS AND OUR TRADING MARKET
OUR ADSS MAY NOT HAVE AN ACTIVE OR LIQUID MARKET, PARTICULARLY IN LIGHT OF
INDIAN LEGAL RESTRICTIONS ON EQUITY SHARE CONVERTIBILITY AND PROPOSED
RESTRICTIONS ON FOREIGN OWNERSHIP.
We cannot predict the extent to which this offering will result in the
development of an active, liquid public trading market for our ADSs. 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 shares that are
publicly held by unrelated parties. Although ADS owners are entitled to withdraw
the equity shares underlying the ADSs from the depositary facility at any time,
subject to certain legal restrictions, there is no public market for our equity
shares in India or elsewhere. Under current Indian law, equity shares may not be
deposited into our depositary facility in exchange for ADSs. Therefore, the
number of outstanding ADSs and trading volumes will decrease to the extent that
equity shares are withdrawn from our depositary facility, which may adversely
affect the market price and the liquidity of the market for the ADSs.
Additionally, foreign ownership in our company, which will include all ADSs, may
be limited to 49% by the Government of India. The implementation of this
limitation and the existing restrictions on depositing equity shares in exchange
for ADSs would mean that at least 51% of our equity shares would never be
available to trade in the U.S. market.
AFTER THIS OFFERING, OUR ADS MARKET PRICE MAY BE HIGHLY VOLATILE AND COULD DROP
UNEXPECTEDLY.
The stock markets in the United States have from time to time experienced
significant price and volume fluctuations that have affected the market prices
for the securities of technology
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companies, particularly Internet companies. 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. Any such
litigation brought against us, even if unsuccessful, could damage our reputation
and result in substantial costs and a diversion of our management's attention
and resources.
OUR MANAGEMENT WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS FROM THIS
OFFERING WHICH MAY RESULT IN USES YOU MAY NOT AGREE WITH.
Our management will have broad discretion with respect to the expenditure
of the net proceeds from this offering. We have not committed the net proceeds
of this offering to any particular purpose, although we are not permitted to use
the proceeds to purchase real estate or to purchase securities on stock
exchanges pursuant to restrictions imposed by the Ministry of Finance of the
Government of India. Investors will be relying on the judgment of our management
regarding the application of these proceeds, which may include ways with which
you do not agree. For additional information regarding the expenditure of the
net proceeds from this offering, please see "Use of Proceeds" on page 23.
OWNERS OF ADSS MAY BE RESTRICTED IN THEIR ABILITY TO EXERCISE PREEMPTIVE RIGHTS
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 equity shares which are voted on
the resolution. U.S. owners of ADSs may not be able to exercise preemptive
rights for equity shares underlying ADSs unless a registration statement under
the Securities Act of 1933, as amended, or Securities Act, 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 owners
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 such future issuances, the
new securities may be issued to our depositary, which may sell the securities
for the benefit of the owners of our ADSs. The value, if any, our depositary
would receive upon the sale of such securities cannot be predicted. To the
extent that owners 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.
OWNERS OF ADSS MAY BE RESTRICTED IN THEIR ABILITY TO EXERCISE VOTING RIGHTS
BECAUSE OF THE PRACTICAL AND LEGAL LIMITATIONS ASSOCIATED WITH INSTRUCTING THE
DEPOSITARY TO VOTE ON YOUR BEHALF.
An owner of ADSs may exercise voting rights only through a depositary,
unlike an owner of equity shares, who can exercise voting rights directly. As an
owner of ADSs, you generally will have the right under the deposit agreement to
instruct the depositary to exercise the voting rights for the equity shares
represented by your ADSs. For additional information regarding the voting rights
of owners of equity shares, please see "Description of Equity Shares -- Voting
Rights" on page 68.
The depositary will mail to you any notice of shareholders' meeting timely
received from us together with information explaining how to instruct the
depositary to exercise the voting rights of the equity shares represented by
ADSs. If the depositary timely receives voting instructions from
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an owner of ADSs, it will endeavor to vote the securities represented by those
ADSs in accordance with such voting instructions. In the event that voting takes
place by a show of hands, the depositary bank will cause the custodian to vote
all deposited securities in accordance with the instructions received from
owners of a majority of the ADSs for which the depositary bank receives voting
instructions. However, the ability of the depositary 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
in a timely manner.
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. You may not
be able to resell your ADSs or underlying equity shares at or above the initial
public offering price.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price of the ADSs offered by this prospectus
will be substantially higher than the net tangible book value of our outstanding
equity shares. Accordingly, investors who purchase ADSs in this offering will
experience immediate and substantial 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 26.
SALES OF SUBSTANTIAL AMOUNTS OF SECURITIES IN THE PUBLIC MARKET AFTER THIS
OFFERING COULD DEPRESS THE PRICE OF OUR ADSS AND COULD IMPAIR OUR ABILITY TO
RAISE CAPITAL THROUGH THE SALE OF ADDITIONAL EQUITY SECURITIES.
The market price of our ADSs could decline as a result of sales of a large
number of equity securities on an Indian stock exchange or elsewhere after the
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 -- equity shares outstanding. Of the outstanding equity shares, the
- -- ADSs, representing -- equity shares sold in this offering will be freely
tradable, other than ADSs held 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. Each of our directors, executive officers and substantially all
of our current shareholders 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 Rediff.com
and the underwriters for a period of 180 days from the date of this prospectus.
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<PAGE> 21
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS
Unless we indicate otherwise, all information in this prospectus assumes
the following:
- no exercise by the underwriters of their overallotment option to purchase
up to -- additional ADSs representing -- equity shares; and
- no exercise of outstanding employee stock options.
- the effectiveness of an Amended and Restated Shareholders' Rights
Agreement between us and our shareholders, dated February 24, 2000.
Our U.S. GAAP financial statements as of March 31, 1998, 1999 and 2000 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 Deloitte Haskins & Sells, India,
Chartered Accountants, a member firm of Deloitte Touche & Tohmatsu.
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 "US$" are to the legal currency of the United States. For the
convenience of the reader, this prospectus contains translations of Indian rupee
amounts into U.S. dollars. This 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 March 31, 2000 for cable transfers in Indian rupees as certified for
customs purposes by the Federal Reserve Bank of New York, which was Rs.43.65 per
US$1.00. The noon buying rate on April --, 2000 was Rs.-- per US$1.00.
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 25.
ENFORCEMENT OF CIVIL LIABILITIES
Our company is a public 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 our non-United States resident directors, executive
officers and the Indian experts named in this prospectus and to enforce
judgments obtained in the United States against us or such persons in the United
States, including judgments 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 informed by
Nishith Desai Associates, our Indian legal counsel, that there is doubt as to
the enforceability of civil liabilities under U.S. securities laws in original
actions instituted in India. However, we have been advised by Nishith Desai
Associates that the statutory basis for recognition of foreign judgments is
found in Section 13 of the Indian Code of Civil Procedure, 1908, which provides
that an Indian court may recognize a foreign civil judgment,
19
<PAGE> 22
subject to certain time limitations, as conclusive regarding any matter directly
decided upon if it finds that:
- the judgment has been pronounced by a court of competent jurisdiction;
- the judgment has been given on the merits of the case;
- the judgment does not appear 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;
- the proceedings in which the judgment was obtained were not opposed to
natural justice;
- the judgment has not been obtained by fraud; and
- the judgment does not sustain a claim founded on a breach of any law in
force in India.
Section 44A of the Indian Code of Civil Procedure, 1908, 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 Indian Foreign Exchange Regulation Act,
1973 to execute such a judgment or to repatriate any amount recovered. We have
also been advised by Nishith Desai Associates that a party may file a 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.
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. All of these quarterly and annual financial statements will be
prepared in accordance with U.S. GAAP. 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
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<PAGE> 23
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 it will promptly mail these reports to all registered owners 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 owners 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" on page 72.
FORWARD LOOKING STATEMENTS
Included in this prospectus are various forward looking statements which
can be identified by the use of forward looking terminology such as "may",
"will", "expect", "anticipate", "estimate", "continue", "believe" or other
similar words. We have made forward-looking statements with respect to the
following, among others:
- our goals and strategies;
- the importance and expected growth of Internet technology;
- the pace of change in the Internet market;
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<PAGE> 24
- the demand for Internet services; and
- advertising demand and revenues.
These statements are forward looking and reflect our current expectations.
They are subject to a number of risks and uncertainties, including but not
limited to, changes in the economic and political environments in India and
Asia, changes in technology and changes in the Internet marketplace. In light of
the many risks and uncertainties surrounding Rediff.com, India, Asia and the
Internet marketplace, prospective purchasers of the shares offered hereby should
keep in mind that we cannot guarantee that the forward-looking statements
described in this prospectus will transpire.
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<PAGE> 25
USE OF PROCEEDS
The net proceeds from this offering, after deducting the underwriting
discount and the estimated offering expenses payable by us, are estimated to be
approximately US$-- million (or US$-- million if the underwriters' overallotment
option is exercised in full) assuming an initial public offering price of US$--
per ADS. Although we have not yet determined a specific plan for the use of the
proceeds from this offering, we currently estimate that we may use the proceeds
from this offering to:
- enhance our content and service offerings;
- advertise and promote our brand; and
- provide 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 relating to any such transaction.
We have not yet determined 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 of India. Additionally, we will not be able to use the proceeds of
this offering for overseas acquisitions or investments without the prior
approval of the Government of India. 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 repatriation of the issue proceeds to India we are permitted to
invest the net proceeds in the following:
- short term deposits in foreign banks which are rated A1+ by Standard &
Poor or P1 by Moody's or with the branches of Indian banks abroad, or;
- treasury bills and other monetary instruments, the maturity period of
which does not exceed one year, or;
- foreign currency deposits maintained with authorized dealers and/or
public financial institutions in India, or;
- Certificate(s) of Deposit or other paper issued outside India by Indian
banks.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our equity shares since
our 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 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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<PAGE> 26
CAPITALIZATION
The following table sets forth, as of March 31, 2000, the capitalization of
our company on an actual and pro forma as adjusted basis.
The pro forma as adjusted data set forth below is also adjusted to give
effect to the sale by our company of -- ADSs, representing -- equity shares,
offered hereby and the application of the proceeds from the offering at an
assumed initial public offering price of US$-- per ADS and after deducting the
underwriting discount 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 MARCH 31, 2000
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents................................... US$11,576 US$ --
Shareholders' equity:
Equity shares, Rs. 2 par value; 50,000,000 shares
authorized, 25,375,500 shares issued and outstanding
after giving effect to the 5:1 share split -- shares
issued and outstanding pro forma as adjusted............ 1,237 --
Additional paid-in capital.................................. 19,945 --
Accumulated deficit......................................... (8,563) (--)
Cumulative translation adjustment........................... 103 --
Total shareholders' equity................................ 12,722 --
Total capitalization...................................... US$12,722 US$ --
========= =======
</TABLE>
The number of equity shares to be outstanding after this offering is based
on the number of shares outstanding as of March 31, 2000. It does not include:
- 739,750 equity shares subject to options granted under our ESOP and ASOP
at a weighted average exercise price of US$3.19.
- 455,250 equity shares that could be issued under our ESOP and ASOP.
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<PAGE> 27
EXCHANGE RATES
The following table sets forth, for the fiscal years indicated, information
concerning the number of Indian rupees for which one U.S. dollar could be
exchanged based on the average of the noon buying rate in the City of New York
on the last day of each month during the period for cable transfers in Indian
rupees as certified for customs purposes by the Federal Reserve Bank of New
York:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, PERIOD END AVERAGE HIGH LOW
--------------------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
1996 (From January 1, 1996)............. Rs. 34.35 Rs. 35.22 Rs. 36.46 Rs. 34.35
1997.................................... 35.88 35.70 35.95 35.00
1998.................................... 39.53 37.37 39.53 35.72
1999.................................... 42.50 42.27 42.83 39.74
2000.................................... 43.65 43.46 43.75 42.50
2001 (through -- 2000)..................
</TABLE>
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<PAGE> 28
DILUTION
If you invest in our ADSs, your interest will be diluted to the extent of
the difference between the initial public offering price per share of our ADSs
and the pro forma as adjusted net tangible book value per share of our ADSs
after this offering. Net tangible book value per equity share represents the
amount of our total tangible assets less total liabilities, divided by the
number of equity shares outstanding. The pro forma as adjusted net tangible book
value per share gives effect to the sale by our company of -- ADSs representing
- -- equity shares offered hereby and the application of the proceeds from the
offering at an assumed initial public offering price of US$-- per ADS and after
deducting underwriting discounts and the estimated offering expenses payable by
us. Dilution in net tangible book value per equity share represents the
difference between the amount per equity share paid by purchasers of equity ADSs
in this offering and the pro forma as adjusted net tangible book value per
equity share immediately after the completion of this offering. The pro forma as
adjusted net tangible book value of our company per ADS is equal to our pro
forma as adjusted net tangible book value per equity share since each ADS
represents one equity share.
Our net tangible book value as of March 31, 2000 was approximately US$12.7
million or US$0.50 per equity share.
Assuming the sale of the ADSs offered by this prospectus at an initial
public offering price of US$-- per ADS and after deducting the underwriting
discount and the estimated offering expenses, the pro forma as adjusted net
tangible book value of our company as of March 31, 2000 would have been US$--
million, or US$-- per ADS. This represents an immediate increase in pro forma as
adjusted net tangible book value of US$-- per equity share to existing
shareholders and an immediate dilution in pro forma as adjusted net tangible
book value of Rs. -- ($--) per ADS to new investors.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per ADS............... US$--
Pro forma net tangible book value per ADS as of March 31,
2000................................................... US$--
Increase in net tangible book value attributable to new
investors.............................................. --
------
Pro forma as adjusted net tangible book value per ADS after
this offering............................................. --
------
Dilution per ADS to new investors........................... US$--
======
</TABLE>
The following table summarizes, on a pro forma as adjusted basis as of
March 31, 2000, 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 paid per equity share or ADS,
as applicable.
<TABLE>
<CAPTION>
EQUITY SHARES OR ADSS TOTAL CONSIDERATION AVERAGE PRICE
---------------------- ------------------------ -------------
NUMBER PERCENT AMOUNT PERCENT PER ADS
----------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.... 25,375,500 --% US$21,182,255 --% $ --
New investors............ -- --% -- --% $ --
---------- ------ ------------- ------
Total.................. -- 100% $ -- 100%
========== ====== ============= ======
</TABLE>
The foregoing tables and calculations assume no exercise by the
underwriters of their overallotment option and no exercise of outstanding
options to purchase equity shares. To the extent that the underwriters'
overallotment option or outstanding options are exercised, there will be further
dilution to new investors. For additional information regarding our outstanding
options, please see "Management--Employee Benefit Plans" on page 60. Prior to
this offering, we had issued only equity shares that have not been represented
by ADSs.
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<PAGE> 29
SELECTED FINANCIAL DATA
Our financial statements are presented in U.S. dollars and prepared in
accordance with U.S. GAAP. The selected financial data as of March 31, 1999 and
2000 and for the fiscal years ended March 31, 1998, 1999 and 2000 are derived
from our audited financial statements included elsewhere in this prospectus
which have been audited by Deloitte Haskins & Sells, Chartered Accountants. The
selected financial data set forth below for the fiscal years ended March 31,
1996 and 1997 are derived from financial statements which are not included in
this Prospectus. The presentation below also gives effect to our 5 for 1 share
split effective January 6, 2000.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
------------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Advertising and services................... US$ -- US$ 86 US$ 516 US$ 785 US$ 1,465
E-Commerce................................. -- -- -- 69 441
-------- -------- -------- --------- ---------
Total revenues...................... -- 86 516 855 1,906
-------- -------- -------- --------- ---------
Cost of revenues............................. 26 121 175 321 953
-------- -------- -------- --------- ---------
Gross profit (loss).......................... (26) (35) 341 534 954
-------- -------- -------- --------- ---------
Sales and marketing........................ 25 83 145 389 5,276
Product development........................ 27 87 152 307 866
General and administrative................. 59 220 396 849 1,727
Total operating expenses............ 111 390 693 1,545 7,869
-------- -------- -------- --------- ---------
Loss from operations......................... (137) (425) (352) (1,011) (6,915)
-------- -------- -------- --------- ---------
Net loss..................................... US$ (137) US$ (425) US$ (352) US$ (985) US$(6,666)
======== ======== ======== ========= =========
Loss per equity share after adjusting for the
5:1 share split............................ US$(0.15) US$(0.11) US$(0.04) US$ (0.06) US$ (0.30)
======== ======== ======== ========= =========
Weighted equity shares used in computing loss
per equity share after adjusting for the
5:1 share split............................ 889 3,850 9,080 15,973 21,944
======== ======== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
---------------------
1999 2000
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... US$ 247 US$11,576
Working capital............................................. 8 10,795
Total assets................................................ 1,073 16,062
Long-term debt, including current installments.............. 449 --
Total shareholders' equity.................................. 287 12,722
</TABLE>
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<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations 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. Our actual
results could differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below and elsewhere in this prospectus
particularly in "Risk Factors" on page 5.
OVERVIEW
We are one of the leading Internet destinations, or portals, focusing on
India and the global Indian community. Our website consists of 17 interest
specific channels, extensive community features, local language editions,
sophisticated search capabilities, and online shopping. We provide these
services to our users for free. Our revenues are derived from online advertising
and services as well as e-commerce.
In February 1996, we initiated our online content offerings with
rediff.co.in and rediffindia.com. We later combined the sites into rediff.com,
our online portal, which includes channels that offer content on various subject
matter like news, personal finance, movies and sports with the goal of offering
a comprehensive suite of content channels specifically focused on India and the
global Indian community.
In April 1998, we sold 5.5 million equity shares to Draper-India
International for Rs. 38.5 million (US$965,000). In 1999, we sold an aggregate
of 8.9 million additional equity shares to Intel Corporation, Queenswood
Investments Limited, GE Capital Services India, Citicorp Finance (India) Ltd.
and Pacific Century Cyberworks India Pvt. Ltd. for an aggregate of Rs. 872.2
million (US$20.1 million). We used the funds from these private financings
primarily to expand our content business and develop our consumer e-commerce
business.
We conduct our business in India and most of our revenues and expenses are
denominated in Indian rupees. However, a portion of our revenues generated from
our e-commerce purchasers overseas and a portion of our hardware and software
purchasing expenses are denominated in U.S. dollars. We have had no significant
foreign exchange transactions for fiscal years 1997 and 1998. We had net foreign
exchange gains of US$2,800 and US$1,551 for the fiscal years 1999 and 2000,
respectively.
REVENUES
For reporting purposes, we classify our revenues into two segments:
- advertising and services; and
- e-commerce.
Our advertising revenues consist of fees from the sale of third-party
banner advertisements and sponsorships hosted on our website. Revenue from
banners and sponsorships is recognized ratably over the contractual period of
the advertisement, commencing when the advertisement is placed on the website.
We also derive revenues from sponsor buttons placed in specific areas of our
website, which generally provide users with direct links to sponsor websites.
These revenues are recognized ratably over the period in which the advertisement
is displayed, provided that no significant obligations of our company remain and
collection of the resulting receivable is probable. Our obligations may include
guarantees of a minimum number of impressions, or times, that an advertisement
appears in pages viewed by users of our portal. To the extent that
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<PAGE> 31
minimum guaranteed impressions are not met, we defer recognition of the
corresponding revenues until the guaranteed impression levels are met.
We also earn revenues on sponsorship contracts for fees relating to the
design, coordination, and integration of the customers' content. Revenues
related to the design, coordination and integration of the customer's content
are recognized ratably over the term of the contract.
Website development services principally comprise services relating to
designing a client's Internet strategy, marketing approach and assistance with
graphics, layout, artwork and content of the client's website. Revenue from such
services is recognized upon completion of milestones specified in the contract.
At each such milestone, the services are either billed or billable, and as they
relate to completed work, are earned.
We began a second segment, e-commerce, in August 1998. Our e-commerce
revenues consists primarily of revenues from the sale of products on our site.
We recognize product revenues when the product is shipped from the manufacturer
or distribution warehouse to the consumer. We are liable to the consumer for
product fulfillment and we recognize as revenue the gross amount of the product
sales. Our e-commerce revenues also include fees charged to vendors for
creating, designing and hosting the vendor's product information on our website.
We recognize such fees ratably over the contract period.
EXPENSES
Our cost of revenues is made up primarily of compensation of editorial
staff that directly relates to the production of services, fees paid to third
party content providers and costs of products sold that are purchased from
vendors for e-commerce transactions.
The primary elements of our sales and marketing expenses are our brand
building and marketing costs for our site. Other elements of these sales and
marketing expenses include compensation for sales and marketing personnel,
travel costs, business promotion and market research costs.
As we expand the scope of our operations, we expect sales and marketing
expenses to continue to increase for the foreseeable future. We intend to
increase our brand building through advertising and other related activity and
hire additional sales and marketing personnel for each of our new markets. 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.
Product development expenses are made up of employee compensation and
software costs related to developing and enhancing the features and
functionality of our site, as well as Internet communication costs. Our general
and administrative expenses consist primarily of compensation for general
management and supervisory operational staff, depreciation, occupancy costs,
repairs and other general expenses.
We depreciate our tangible assets on a straight-line basis over the useful
life of the assets, ranging from 3 to 10 years. The costs for software used in
product development and services are charged to operations as incurred.
We have a limited operating history upon which you can evaluate our
business and prospects. We have not achieved profitability, and we expect to
continue to incur net losses in fiscal year 2001 and subsequent periods. We
expect to continue to incur significant operating expenses and, as a result, we
need to generate significant revenues in order to achieve profitability, which
may not occur. Even if we do achieve profitability, we may be unable to sustain
or increase profitability on a quarterly or annual basis in the future. We
believe that quarter-to-quarter comparisons of our operating results may not be
a good indication of our
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<PAGE> 32
future performance, nor would our operating results for any particular period be
indicative of future operating results. As of March 31, 2000, we had an
accumulated deficit of approximately US$8.6 million.
FISCAL YEAR ENDED MARCH 31, 2000 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1999
Advertising and services revenues. We recognized US$1,465,000 in
advertising and services revenues for the year ended March 31, 2000 as compared
to US$785,000 for the year ended March 31, 1999, representing an increase of
US$680,000, or 86%. This revenue includes revenue from one barter transaction
amounting to US$9,800. The revenue growth included an increase of US$501,000 in
banner and sponsorship revenues and an increase of US$179,000 in revenues from
web development services. The increase in banner and sponsorship revenues was
attributable to the growing awareness of the Internet in India and its use as a
medium for advertising and introduction of sponsored partner channels on our
site.
E-commerce revenues. We recognized US$441,000 in e-commerce revenues for
the year ended March 31, 2000 as compared to US$69,000 for the year ended March
31, 1999, representing an increase of US$372,000, or 536%. The increase in
e-commerce revenue resulted from the increase in the number of vendors supplying
a larger number of products in the GiftShop and MarketPlace, which attracted
more customers and the expansion of our advertising campaign to promote
e-commerce. We introduced the MarketPlace in October 1999.
Cost of revenues. Cost of revenues was US$953,000, or 50% of revenues for
the year ended March 31, 2000, compared to US$321,000, or 38% of revenues for
the year ended March 31, 1999, representing an increase of US$632,000, or 197%.
Cost of goods sold increased by US$319,000 due to an increase in e-commerce
sales. The costs of third-party editorial contributions increased by US$170,000
and compensation expenses increased by US$126,000 as a result of increases in
editorial fees, salary levels and in the number of employees.
Sales and marketing expenses. Sales and marketing expenses were US$5.3
million for the year ended March 31, 2000 compared to US$389,000 for the year
ended March 31, 1999, representing an increase of US$4.9 million, or 1,257%. A
US$4.2 million increase in advertising expenses accounted for most of the
increase. The growth in sales and marketing expenses also included increased
compensation expenses of US$159,000 resulting from an increase in the sales and
marketing staff, from 20 as of March 31, 1999 to 42 as of March 31, 2000, as
well as increased travel, business, promotion and market research expenses.
Product development expenses. Product development expenses were US$866,000
for the year ended March 31, 2000 compared to US$307,000 for the year ended
March 31, 1999, representing an increase of US$559,000, or 182%. The increase in
product development expenses included a US$315,000 increase in software purchase
and development costs associated with the growing number of products and
services on our site, a US$133,000 increase in Internet communication charges
caused by an increase in the numbers of our web servers and a US$112,000
increase in compensation expenses.
General and administrative expenses. General and administrative expenses
were US$1.7 million for the year ended March 31, 2000 compared to US$854,000 for
the year ended March 31, 1999, representing an increase of US$861,000, or 101%.
The increase in general and administrative expenses included a US$162,000
increase in compensation costs resulting from an increase in operational staff
from 25 as of March 31, 1999 to 42 as of March 31, 2000, as well as an increase
of US$144,000 in professional charges, US$147,000 in occupancy costs, an
increase of US$51,000 in communications expenses and an increase of US$34,000 in
allowance for doubtful accounts, offset by stock-based compensation expense of
US$143,000 in 1999 which did not recur in 2000.
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<PAGE> 33
Depreciation and amortization. Depreciation and amortization was US$229,000
for the year ended March 31, 2000, compared to US$73,000 for the year ended
March 31, 1999, representing an increase of US$157,000, or 215%. The increase in
depreciation and amortization resulted from capital expenditures for leasehold
improvements and for furniture, fixtures and equipment, including computer
equipment.
Other income. Other income was US$253,000 for the year ended March 31,
2000, compared to US$31,000 for the year ended March 31, 1999, representing an
increase of US$222,000, or 712%. Most of the increase resulted from an increase
in interest income.
Net loss. Our net loss was US$6.7 million for the year ended March 31,
2000, compared to a net loss of US$985,000 for the year ended March 31, 1999.
FISCAL YEAR ENDED MARCH 31, 1999 COMPARED TO THE FISCAL YEAR ENDED MARCH 31,
1998
Advertising and services revenues. We recognized US$785,000 in advertising
and services revenues for the year ended March 31, 1999 as compared to
US$516,000 for the year ended March 31, 1998, representing an increase of
US$270,000, or 52%. The revenue growth included an increase of US$179,000 in
banner and sponsorship revenues, and an increase of US$91,000 in web development
services revenues.
E-commerce revenues. We recognized US$69,000 in e-commerce revenues for the
year ended March 31, 1999, which is the first year we began this service
offering on our site.
Cost of revenues. Cost of revenues was US$321,000, or 38% of revenues for
the year ended March 31, 1999, compared to US$175,000, or 34% of revenues for
the year ended March 31, 1998, representing an increase of US$146,000, or 83%.
Cost of goods sold increased by US$75,000 due to the introduction of our
e-commerce offerings in August 1998. The cost of compensation expenses increased
US$59,000 as a result of increases in salary levels and in the number of
employees.
Sales and marketing expenses. Sales and marketing expenses were US$389,000
for the year ended March 31, 1999 compared to US$144,000 for the year ended
March 31, 1998, representing an increase of US$244,000, or 169%. The growth in
sales and marketing expenses included increased compensation expenses of
US$75,000 resulting from an increase in sales and marketing staff, from 12 as of
March 31, 1998 to 20 as of March 31, 1999. Increases in traveling expenses of
US$72,000, professional charges of US$50,000, advertising expenses of US$26,000,
market research expenses of US$13,000 and business promotion expenses of
US$8,000 accounted for the balance of the increases in sales and marketing
expenses.
Product development expenses. Product development expenses were US$307,000
for the year ended March 31, 1999 compared to US$152,000 for the year ended
March 31, 1998, representing an increase of US$154,000, or 101%. The increase in
product development expenses included a US$107,000 increase in software
development and purchase costs associated with the growing number of products
and services on our site, a US$39,000 increase in compensation expenses and a
US$8,000 increase in Internet communication charges caused by an increase in the
number of our web servers.
General and administrative expenses. General and administrative expenses
were US$854,000 for the year ended March 31, 1999 compared to US$396,000 for the
year ended March 31, 1998, representing an increase of US$458,000, or 116%. The
increase in general and administrative expenses included a US$39,000 increase in
compensation costs resulting from an increase in operational staff from 14 as of
March 31, 1998 to 25 as of March 31, 1999, a US$143,000 stock based compensation
expense, as well as increases in occupancy costs of US$64,000, traveling costs
of US$28,000, telecommunication costs of US$34,000 and an allowance for doubtful
accounts of US$40,000.
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<PAGE> 34
Depreciation and amortization. Depreciation and amortization was US$73,000
for the year ended March 31, 1999, compared to US$30,000 for the year ended
March 31, 1998, representing an increase of US$42,000, or 138%. The increase in
depreciation and amortization resulted from additional capital expenditures for
computer equipment and vehicles.
Other income. Other income for the year ended March 31, 1999 was US$31,000
which was primarily derived from interest on deposits. We did not recognize
other income in any period prior to this year.
Net loss. Our net loss was US$985,000 for the year ended March 31, 1999,
compared to a net loss of US$352,000 for the year ended March 31, 1998.
FISCAL YEAR ENDED MARCH 31, 1998 COMPARED TO THE FISCAL YEAR ENDED MARCH 31,
1997
Advertising and services revenues. We recognized US$516,000 in advertising
and services revenues for the year ended March 31, 1998 as compared to US$86,000
for the year ended March 31, 1997, representing an increase of US$430,000, or
502%. The revenue growth included an increase of US$326,000 in web development
services revenues and an increase of US$104,000 in banner and sponsorship
revenues.
Cost of revenues. Cost of revenues was US$175,000 or 34% of revenues for
the year ended March 31, 1998, compared to US$121,000 or 141% of revenues for
the year ended March 31, 1997, representing an increase of US$54,000, or 45%.
Compensation expenses increased US$44,000 and the costs of third-party editorial
contributions increased by US$18,000 as a result of increases in salary levels,
the number of employees and in editorial fees.
Sales and marketing expenses. Sales and marketing expenses were US$144,000
for the year ended March 31, 1998 compared to US$83,000 for the year ended March
31, 1997, representing an increase of US$61,000, or 74%. The growth in sales and
marketing expenses primarily reflects an increase of US$38,000 in compensation
expenses resulting from an increase in the sales and marketing staff, from 6 as
of March 31, 1997 to 12 as of March 31, 1998. A US$36,000 increase in traveling
costs also accounted for part of the increase in sales and marketing expenses.
Product development expenses. Product development expenses were US$152,000
for the year ended March 31, 1998 compared to US$87,000 for the year ended March
31, 1997, representing an increase of US$66,000, or 76%. The increase in product
development expenses included a US$27,000 increase in compensation expenses
associated due to an increase in the number of technical staff, a US$28,000
increase in Internet communication charges caused by an increase in the number
of our web servers, and a US$10,000 increase in software purchase and
development costs associated with the growing number of products and services on
our site.
General and administrative expenses. General and administrative expenses
were US$396,000 for the year ended March 31, 1998 compared to US$220,000 for the
year ended March 31, 1997, representing an increase of US$176,000, or 80%. The
growth in general and administrative expenses included a US$25,000 increase in
compensation expenses caused by an increase in the number of operational staff,
from 10 as of March 31, 1997 to 19 as of March 31, 1998, a US$20,000 increase in
occupancy costs, a US$19,000 increase in telecommunication charges, a US$9,000
increase in traveling costs, a US$12,000 increase in allowance for doubtful
accounts, a US$9,000 increase in legal expenses and a US$15,000 increase in
miscellaneous expenses.
Depreciation and amortization. Depreciation and amortization was US$30,000
for the year ended March 31, 1998, compared to US$24,000 for the year ended
March 31, 1997, representing an increase of US$7,000, or 29%. This increase in
depreciation and amortization resulted from additional capital expenditures for
furniture and fixtures, office equipment and computer equipment.
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<PAGE> 35
Net loss. Our net loss was US$352,000 for the year ended March 31, 1998,
compared to a net loss of US$425,000 for the year ended March 31, 1997.
QUARTERLY RESULTS OF OPERATIONS DATA
The following table presents our operating results for each of the five
quarters from January 1, 1999 to March 31, 2000. The information for each of
these quarters has been prepared on the same basis as our audited financial
statements appearing elsewhere in this prospectus. The operating results set
forth below should be read together with our audited financial statements and
the related notes appearing elsewhere in this prospectus. These operating
results do not necessarily indicate what our results of operations will be in
any future period. Accordingly, we believe that quarter to quarter comparisons
of our operating results are not necessarily meaningful and are not a good
indication of our future performance.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1999 1999 1999 1999 2000
--------- -------- ------------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Advertising and services........................ US$ 211 US$ 285 US$ 288 US$ 347 US$ 545
E-commerce...................................... 32 52 83 137 169
------- ------- ------- --------- ---------
Total Revenues................................ 243 337 371 484 714
------- ------- ------- --------- ---------
Cost of revenues.................................. 131 158 169 257 369
------- ------- ------- --------- ---------
Gross profit...................................... 112 179 202 227 345
------- ------- ------- --------- ---------
Operating expenses:
Sales and marketing expenses.................... 172 406 280 2,183 2,407
Product development expenses.................... 132 126 146 214 380
General and administrative expenses............. 300 259 324 422 721
------- ------- ------- --------- ---------
Total operating expenses.......................... 604 791 750 2,819 3,508
------- ------- ------- --------- ---------
Operating Loss.................................... US$(492) US$(612) US$(548) US$(2,592) US$(3,163)
======= ======= ======= ========= =========
AS A PERCENTAGE OF REVENUES:
Revenues
Advertising and services........................ 87% 85% 78% 72% 76%
E-commerce...................................... 13 15 22 28 24
------- ------- ------- --------- ---------
Total Revenues................................ 100 100 100 100 100
------- ------- ------- --------- ---------
Cost of revenues.................................. 54 47 46 53 52
------- ------- ------- --------- ---------
Gross profit...................................... 46 53 54 47 48
------- ------- ------- --------- ---------
Operating expenses:
Sales and marketing expenses.................... 70 121 75 451 337
Product development expenses.................... 54 37 39 44 53
General and administrative expenses............. 123 77 87 87 101
------- ------- ------- --------- ---------
Total operating expenses.......................... 249 235 202 583 491
------- ------- ------- --------- ---------
Operating Loss.................................... (202)% (182)% (148)% (536)% (443)%
======= ======= ======= ========= =========
</TABLE>
Advertising and services revenues increased from US$211,000 for the quarter
ended March 31, 1999 to US$285,000 for the quarter ended June 30, 1999 which
reflects an increase in web development services for new corporate clients.
E-commerce revenues increased in each of the five quarters ended March 31, 2000
as a result of the introduction of the MarketPlace and increases in product
categories offered on our site, as well as overall increases in visitor traffic
on our site. In terms of a percentage of total revenues, advertising and
services revenues decreased from 87% for the quarter ended March 31, 1999 to 76%
for the quarter ended March 31, 2000 and e-commerce revenues increased from 13%
for the quarter ended March 31, 1999 to 24% for the quarter ended March 31,
2000.
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<PAGE> 36
As a result of our efforts to launch several new content and e-commerce
offerings in the quarter ended March 31, 1999, our cost of revenues as a
percentage of total revenues decreased from 54% for the quarter ended March 31,
1999 to 47% for the quarter ended June 30, 1999. In order to launch these
several new content and e-commerce offerings, we increased our third-party
content contribution costs and offered special discounts on e-commerce products.
The increases in cost of revenues as a percent of total revenues for the
quarters ended September 30, 1999, December 31, 1999 and March 31, 2000 reflect
increases in employees, salaries, and third-party editorial expenses.
Sales and marketing expenses increased significantly from US$172,000 for
the quarter ended March 31, 1999 to US$2.4 million for the quarter ended March
31, 2000. In terms of a percentage of total operating revenues, sales and
marketing expenses increased to 451% of revenues for the quarter ended December
31, 1999 from 75% for the quarter ended September 30, 1999. This increase was
due to the launch of a significant marketing and promotion campaign to build our
brand name. Thereafter, sales and marketing expenses as a percentage of total
operating revenues decreased to 337%, reflecting the 48% increase in operating
revenue.
Product development expenses increased from US$132,000, representing 54% of
total revenues for the quarter ended March 31, 1999 to US$380,000, representing
53% of total revenues for the quarter ended March 31, 2000, reflecting an
increase in Internet connection and server software costs.
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 accurately predict to what extent, if at all, our operations will prove
to be seasonal. However, we do experience peaks in our business because of the
festival seasons in the Indian winter months of November through February and
because of extended vacations in the Indian summer months of April through June.
LIQUIDITY AND CAPITAL EXPENDITURES
From our inception on January 9, 1996, through the date of this prospectus,
we have financed our operations primarily from the private sales of equity
securities and from cash received from the sale of banner and sponsorship
advertisements. During the fiscal year ended March 31, 2000 and the fiscal year
ended March 31, 1999, we received US$19.1 million and US$1.3 million,
respectively, in net proceeds from the sale of equity shares.
Cash used in operating activities of US$5.4 million during the fiscal year
ended March 31, 2000 was primarily attributable to a net loss of US$6.7 million,
increases in accounts receivable of US$490,000, prepaid and other current assets
of US$1.5 million, partially offset by depreciation of plant and equipment of
US$229,000, an increase in unearned revenue of US$298,000, and an increase in
accounts payable of US$2.7 million. We typically provide customers a 15 day
credit period from the date of invoice.
As of March 31, 2000 our accounts receivable was US$827,000 which consisted
of US$115,000 in unbilled receivables, US$762,000 in gross billed receivables
less an allowance for doubtful accounts of US$50,000. In January 2000, we
initiated a new receivables management program. During the period from January
2000 to March 2000, we collected US$255,000 of US$693,000 in accounts
receivable. We continue to focus on receivables management in order to ensure
increased collections.
Cash used in investing activities during the fiscal year ended March 31,
2000 was US$1.9 million, principally as a result of the purchase of routers,
modems, ports, servers and
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<PAGE> 37
other capital equipment in connection with the expansion of our network and in
expansion of our offices and in investments of US$138,000 in two vertical
portals.
Cash provided by financing activities was US$18.6 million for the fiscal
year ended March 31, 2000, which consisted primarily of US$19.1 million of net
proceeds raised in private placements of our equity shares and of proceeds from
a short-term loan from related parties of US$164,000, partially offset by
repayment of an unsecured loan of US$613,000 to a related party.
Our aggregate billings for the fiscal year ended March 31, 2000 were
US$2,218,758. This amount represents amounts payable to us by our customers for
services we will provide over various periods of time. In accordance with our
revenue recognition policy, we recognized US$1,906,100 and deferred recognition
of US$312,658 of billings for the fiscal year ended March 31, 2000.
Cash used in operating activities of US$911,000 for the year ended March
31, 1999 was primarily attributable to a net loss of US$985,000 and an increase
in trade accounts receivable of US$203,000, partially offset by stock-based
compensation expense of US$143,000, depreciation of plant and equipment of
US$73,000 and an increase in trade accounts payable of US$67,000.
Cash used in investment activities during the year ended March 31, 1999 was
US$196,000, principally as a result of the purchase of network equipment.
Cash provided by financing activities of US$1.3 million for the year ended
March 31, 1999 was attributable to net proceeds raised in private placements of
our equity shares to Draper-India International and Intel Corporation.
Cash used in operating activities of US$366,000 for the year ended March
31, 1998 was primarily attributable to a net loss of US$352,000, an increase in
trade accounts receivable of US$128,000 and an increase in prepaid and other
current assets of US$95,000, partially offset by depreciation of plant, property
and equipment of US$30,000 and an increase in trade accounts payable of
US$189,000.
Cash used in investment activities of US$121,000 for the year ended March
31, 1998 was principally attributable to the purchase of Internet servers and
office furniture.
Cash provided by financing activities was US$484,000 for the year ended
March 31, 1998 which consisted primarily of US$290,000 of funds received as
advances for the sale of our equity shares and a US$194,000 unsecured loan from
a related party.
As of March 31, 2000, we had aggregate commitments for capital expenditures
in an amount equal to US$474,000. We expect to incur operating losses and
negative cash flows from operations for the foreseeable future. As of March 31,
2000, we had US$11.6 million of cash and cash equivalents for our working
capital needs, as compared to US$247,000 as of March 31, 1999.
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, the United States or
elsewhere. We have engaged in 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 believe that the net proceeds from this offering, together
with our current cash resources, will be sufficient to meet our anticipated cash
needs for working capital and capital expenditures for at least 12 months after
the date of this prospectus. Thereafter, if cash generated
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<PAGE> 38
from operations is insufficient to satisfy our liquidity requirements, we may
need to raise additional funds through public or private financings, strategic
relationships or other arrangements. If additional funds are raised through the
issuance of equity or convertible debt securities, the percentage ownership of
our shareholders and the owners of our ADSs will be reduced and these securities
may have rights, preferences or privileges senior to those of our shareholders
and the owners of our ADSs. We cannot assure you that any required additional
financing will be available on terms favorable to us, or at all. The failure to
raise capital when needed could materially adversely affect our business,
results of operations and financial condition.
INCOME TAX MATTERS
As of March 31, 2000, we had a net operating loss carryforwards aggregating
approximately US$8.3 million for financial reporting purposes. Under current
Indian law, loss carryforwards from a particular year may be used to offset
taxable income over the next 8 fiscal years. If we do not have sufficient
taxable income or, if the applicable eight year period expires, we will lose the
potential tax benefit of the relevant loss carryforwards.
The statutory corporate income tax rate in India is currently 35%. This tax
rate is presently subject to a 11% surcharge resulting in an effective tax rate
of 38.9%. Dividends declared, distributed or paid by an Indian company are
subject to a dividend tax of 22.2%, including the presently applicable
surcharge, of the total amount of the dividend declared, distributed or paid.
This tax is not paid by shareholders nor is it a withholding requirement, but
rather it is a direct tax payable by the company.
MARKET RISKS
Our primary market risk exposures are to foreign exchange rate
fluctuations, principally relating to the fluctuation of U.S. dollar to Indian
rupee exchange rate. We do not consider these risks to be material to our
business today. Our foreign exchange risk principally arises from accounts
payable to overseas vendors. This risk is partially mitigated as we have
receipts in foreign currency from overseas customers and hold balances in
foreign currency with an overseas bank. Our foreign currency sensitive
instruments usually settle within a short time period.
We do not engage in any hedging activities to protect against our net
foreign exchange exposure, and currently have no plans to do so.
The following table sets out information about our major foreign currency
sensitive instruments as of March 31, 2000:
<TABLE>
<CAPTION>
AS OF
MARCH 31, 2000
-----------------
(IN THOUSANDS)
<S> <C>
Accounts Payable in U.S. dollars............................ US$(29)
Accounts Receivable in U.S. dollars......................... 14
Accounts Receivable in Swiss francs......................... 6
Cash balances held in U.S. dollars.......................... 54
------
Net foreign exchange exposure............................... US$ 45
======
</TABLE>
We have little or no exposure to fluctuations in interest rates, and hold
no equity price-risk investments.
IMPACT OF THE YEAR 2000
We engaged outside consultants to examine our Year 2000 compliance and
incurred other costs specifically for Year 2000 compliance purposes. We have
upgraded our software and
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<PAGE> 39
hardware to the extent necessary to bring our technology infrastructure into
Year 2000 compliance. In addition, we have obtained Year 2000 compliance
certifications from all of our third party suppliers to date. If our third-party
suppliers were not Year 2000 compliant, our operation and services could be
disrupted. Through the date of this prospectus neither we, nor our third-party
suppliers have experienced any material Year 2000 related service disruptions
that would affect our business. We believe that there are still several dates in
the Year 2000, such as the fiscal year ends of many Indian corporations, which
are widely anticipated to have the potential to cause problems. The failure to
adequately address Year 2000 compliance issues in our information technology
systems could result in claims of mismanagement, misrepresentation or breach of
contract and related litigation, which could be costly and time-consuming to
defend.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS No. 133, "Accounting for
Derivative Financial Instruments and Hedging Activities". This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In June 1999, FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities Deferral of Effective Date of FASB
Statement No. 133" which deferred the effective date of SFAS No. 133 to all
fiscal quarters of fiscal years beginning after June 15, 2000. We currently do
not hold any derivative instruments or engage in hedging activities and have no
plans to do so. Accordingly, we do not expect this standard to have an impact on
our financial position or results of operations.
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<PAGE> 40
BUSINESS
OVERVIEW
We are one of the leading Internet destinations, or portals, focusing on
India and the global Indian community. Our website currently consists of 17
interest specific channels, extensive community features, local language
editions, sophisticated search capabilities, and online shopping. We provide
these services to our users for free. Our revenues are derived from online
advertising and services as well as e-commerce.
Our channels, which include cricket, finance, movies, astrology, weather,
airline and train schedules are tailored to Indian interests. Our content
offerings include news in English, Hindi, Tamil, Telugu and Gujarati. Our
community offerings include e-mail, chat, a romance channel and personal home
pages. Our MarketPlace shopping section is the flagship of our e-commerce
offerings, and provides users and merchants with a robust online shopping
experience. Our MarketPlace offers a wide range of products including, jewelry,
confectionaries and apparel. In light of the low credit card penetration levels
in India, we offer our users the option to use a C.O.D. payment method. We also
build a web page for each merchant using our templates so we can ensure
consistency, user friendliness and retailer loyalty within the MarketPlace.
INDUSTRY OVERVIEW
THE INTERNET
The Internet has grown rapidly since its initial commercialization in the
early 1990s. IDC projects that the number of Internet users worldwide will grow
at a compound annual growth rate of 27% from approximately 196 million in 1999
to approximately 502 million in 2003. Forrester Research, Inc. projects online
advertising worldwide to grow from US$3.3 billion in 1999 to US$24.1 billion in
2003 and according to IDC, e-commerce spending is expected to increase from
approximately US$111.4 billion in 1999 to US$1,317 billion in 2003.
THE INTERNET IN ASIA PACIFIC
The Internet market in Asia Pacific is defined by IDC to include Australia,
New Zealand, Singapore, Hong Kong, Malaysia, China, Taiwan, Thailand,
Philippines, Indonesia, India, South Korea and Vietnam. This market has a
significant growth potential as evidenced by IDC's forecast of an increase in
the number of users from approximately 21 million in 1999 to 77 million in 2003,
representing a compound annual growth rate of 38.4%. As more people are able to
access the Internet across the region, online advertising and e-commerce
spending are expected to increase significantly. According to Zenith Media,
total advertising spending in Asia Pacific was approximately US$67.5 billion in
1999 and is estimated to grow to US$76.6 billion in 2001. According to Forrester
Research, Inc. online advertising spending is projected to grow from US$49
million in 1999 to US$232 million by 2001 in Asia Pacific (not including Japan).
IDC predicts that e-commerce spending will increase from US$2.1 billion in 1999
to US$51.3 billion in 2003 in Asia Pacific. We believe the Indian market will
represent a significant portion of this rapidly growing Asia Pacific Internet
Market.
THE INTERNET IN INDIA
While the Internet is in a relatively early stage of adoption and
development in India, Internet usage rates have grown in recent years. IDC
projects that the number of Internet users in India will increase from 1.0
million in 1999 to over 11.3 million by 2003, which represents a compound annual
growth rate of 86%. IDC estimates that e-commerce spending in India will
increase from US$9.7 million in 1999 to US$1.6 billion by 2003. According to a
report prepared by IDC, the Government of India is expected to continue its
promotion of the Internet for business, educational and home use across India.
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<PAGE> 41
Currently, the Internet usage rate is low in India relative to the United
States. IDC estimates that approximately 1.0 million people used the Internet in
India in 1999. This implies a 0.09% Internet usage rate, which is defined as the
number of Internet users divided by the region's population (total population
986.9 million, source Economist Intelligence Unit, or EIU). In comparison, IDC
estimates that approximately 80.8 million people used the Internet in the United
States in November 1999 which translates into a 29.6% Internet usage rate.
We believe that the following factors have driven the growth in Internet
usage in India:
- declining Internet access costs;
- improved network infrastructure;
- improved telephone line access;
- government support at federal and state levels;
- increasing percentage of Indian economy focused on technology;
- increased awareness of the Internet;
- increased availability of online content and services;
- significant English speaking population; and
- significant number of overseas Indians use the Internet.
The Government of India has also supported initiatives to provide an
Internet connection in villages and cybercafes.
Until November 1998, the only commercial Internet Service Provider
permitted in India was Videsh Sanchar Nigam Limited, or VSNL, a Government of
India sponsored and majority owned entity, which at that time had approximately
150,000 subscribers. VSNL currently has approximately 300,000 Internet
subscribers. In 1998, the Government of India opened the Indian Internet Service
Provider market to private competition. We believe this action by the Government
of India will substantially increase access to the Internet in India. 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. However, Internet access in India is still at lower speeds and
with service that is inferior compared to that of most developed nations.
As the Internet becomes more pervasive in India, the opportunities for
online advertising and e-commerce will also expand. We believe that Internet
users will rely on the web for access to content, community and commerce and
will provide advertisers and merchants with a demographically attractive and
easily targeted audience.
OUR OPPORTUNITY
Internet usage is at an early stage in India, but is experiencing rapid
growth. The growing middle class population is rapidly adopting the Internet
related services and we believe that a dominant online brand that understands
and responds to requirements of the Indian community can capture a large
sustainable market share. High quality, relevant websites will further
accelerate the growth of the Internet in India. We believe our opportunities are
driven by the following four factors:
FEW COMPREHENSIVE, BRANDED PORTALS IN INDIA
Few Internet sites in India have brand recognition on a national basis. We
believe that this is due to a lack of effort by online companies to build a
unified brand. Moreover, most companies that are currently seeking to build
brands are doing so on a segmented or fragmented basis.
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Many of these companies have been content aggregators rather than original
content producers and therefore have limited appeal to users. Currently, there
are only a few sites with a large product offering in the areas of content,
community and commerce. Most Indian sites with in-depth content offerings are
focused on one specific topic, while most broad portals have limited content
offerings. An increasing number of Internet users in India are seeking a
full-service Internet destination portal similar to the leading international
portals that provides them with:
- a variety of in-depth and focused local content;
- an interactive experience that is culturally relevant; and
- sophisticated Internet offerings like chat, personal home-pages, online
shopping, free e-mail, and an India-adapted search engine.
The following diagram illustrates the projected growth of Internet usage
and spending on a regional basis:
[GRAPHIC IMAGE DEPICTING MAP OF WORLD WITH PROJECTED GROWTH RATES FOR VARIOUS
REGIONS OF THE WORLD]
- ---------------
* CAGR means Compound Annual Growth Rate. All amounts except CAGR are shown in
millions.
** Not available.
Sources:
(a) All population data are derived from the Economist Intelligence Unit's
estimates as of December 23, 1999.
(b) All Internet user and e-commerce revenues data Asia Pacific and India are
derived from IDC's reports entitled "The Internet Market in Asia Pacific
(excluding Japan) 1997 - 2004." All Internet user and e-commerce revenues
for the United States are derived from IDC's report entitled "The Global
Market Forecast for Internet Usage and Commerce Market Model, Version 5."
(c) Data for Asia Pacific (excluding Japan) and the United States online
advertising spending are derived from Forrester Research, Inc.'s report
entitled "Internet Advertising Skyrockets."
FEW PORTALS FOCUSED ON INDIANS OVERSEAS
We believe that Indians overseas today access multiple sites to fulfill
their India-related online needs. There is lack of a full service portal that
provides them with relevant content, community and commerce offerings. Although
there are portals that cater to the community needs of Indians overseas, the
users in such countries still access an Indian portal for a large part of their
content requirements.
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UNDERDEVELOPED RETAILING AND E-COMMERCE ENVIRONMENT
The retail industry in India is highly underdeveloped and fragmented. Low
credit card penetration has resulted in an inability for potential customers to
make payments online. Moreover, distribution and fulfillment facilities are not
highly developed in India on a national basis. As a result, people in smaller
cities and towns do not have access to a wide variety of products. E-commerce
provides an opportunity to make a greater variety of goods available to people
in such places more conveniently, particularly through increases in Internet
usage outside large Indian metropolitan areas. Some of these increases in
Internet usage are driven by the Government of India's initiative to provide
Internet access in smaller towns and villages and through the proliferation of
cybercafes. The improvements in infrastructure, increase in credit card
penetration, and development of alternative payment mechanisms for online
purchases such as C.O.D. payments will fuel the growth of e-commerce in India.
LOW LEVELS OF ONLINE ADVERTISING IN INDIA
As the usage of the Internet grows in India, we believe advertisers will
increasingly use the Internet as an additional advertising medium. The Internet
allows advertisers to target desired demographic groups or consumers in specific
geographic locations. It also allows them to interact more effectively with
consumers and capture valuable data about buying patterns, preferences and
demands. We believe that most advertisers will advertise on a leading portal
that attracts significant and desirable users.
THE REDIFF.COM SOLUTION
We are one of the leading Internet portals focusing on India and the global
Indian community. We have created highly desirable advertising and e-commerce
offerings for our users. Our monthly page views have grown from approximately
13.2 million in April 1999 to approximately 70 million in March 2000. We believe
that our success to date is attributable to the following four key factors:
CONTENT FOCUSED ON INDIA AND THE GLOBAL INDIAN COMMUNITY
We serve the online needs of the global Indian community, and have
developed our offerings based on the demands and the requirements of our user
base. We have been in business since 1996, and hence have a large archive of
content focused on India and the global Indian community. We provide our users
with:
- up-to-date news focused on India, constantly updated by our in-house
editorial staff, featuring interviews with Indian politicians, movie
stars, celebrities;
- channels that are relevant to Indian interests, including cricket,
finance, Indian music, astrology, weather, airline and train schedules,
e-mail, e-cards and contests;
- a search engine with technology from Inktomi, that has been customized to
provide India relevant content as the top search responses to user
queries; and
- an easy to understand interface that strikes the right balance between an
attractive visual appearance and fast download times for people accessing
the site with low-speed modems.
In addition to our content and services developed for Indian residents, we
believe that the non-resident Indian community needs India-related content that
is relevant to them locally. The U.S. version of our website provides local
news, information on Indian events and tailored e-commerce offerings. We
currently cover several major U.S. cities, including Los Angeles, Washington,
D.C., Boston and Atlanta. This site is also integrated with, and has the same
appearance as, our Indian site.
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We believe that there is a demand for non-English content relevant to
Indians. To address this demand, we offer Hindi, Tamil, Telugu and Gujarati news
editions of our website to attract the large local language speaking population
in India. In addition, we intend to expand our offerings to other Indian
languages and develop original content in these other languages.
INTERNET COMMUNITY OFFERINGS DESIGNED WITH INDIAN CULTURAL INSIGHTS
We have a comprehensive community offering which is designed to meet the
demand of users with significant Indian interests. We respond to the needs of
our users in India and overseas by tailoring our community offerings with
important cultural insights. We draw from the diverse backgrounds of our Indian
employees and consultants to constantly innovate and upgrade our offerings. Our
community offerings include, among others:
- a chat channel which allows our users to interact with each other and
with Indian leaders, performers, sports stars and people in the news as
well as a free e-mail service with over 650,000 registered users; and
- an intermediate web page linked to a recruiting site, NetPilgrim.com, for
Indian computer professionals seeking jobs overseas.
COMPREHENSIVE E-COMMERCE SOLUTIONS
We are among the pioneers of e-commerce in India. We believe that we
offered the first online book shop, music shop, and gift shop in India. Our
offerings include apparel, confectionary, books, music, art, flowers, and
luggage. We also provide users with the ability to use gift certificates for
making purchases in several of the online stores on our site. We were one of the
first companies in India to accept credit cards as a method of online payment,
and were one of the first companies in India to offer customers C.O.D. as a
method of payment for online purchases. We believe that we are also the first
e-commerce company in India to provide 24-hour live customer support service.
Our customer care team solicits feedback from our customers to continually
improve our service and product offerings. Moreover, we have entered into a
memorandum of understanding with IBM for their e-commerce technology and have
purchased Verisign software for security. We have also worked closely with
Federal Express and the Indian Postal Service for logistics, order-tracking and
fulfillment. To facilitate online payments, we have entered into agreements with
HSBC, Citibank and American Express for payment processing.
We have created the MarketPlace shopping section, which provides Indian
merchants a quick and effective way to move from being only advertisers and
sponsors on our site to selling their goods and services online. The MarketPlace
is the flagship of our e-commerce offerings, and we expect all future merchants
seeking to sell their products through our site to become part of the
MarketPlace. As of March 31, 2000, we had 96 merchants in the MarketPlace. We
are completing implementation of software that will allow merchants to
automatically sign up, create their stores online, and transact business over
the Internet. We have also created a search directory to allow our users to
easily search and find the right goods and services in the MarketPlace.
ATTRACTIVE ADVERTISING PLATFORM
We believe that we provide a new and attractive advertising medium to
advertisers. We believe that most large advertisers and businesses considering
the online medium consider advertising on our site because it gives them access
to:
- one of the leading Internet brands in India;
- a highly desirable user demographic profile; and
- a rapidly growing, global user base.
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Given the early stage of development of online advertising in India, a
significant portion of Indian companies do not have their own websites. Our
sales force introduces such corporate clients to the benefits of having their
own website. To help advertisers reach their target audience, we offer a broad
spectrum of web development services to help them build their sites, design
their banners and lead them through a comprehensive service to assist their
marketing efforts on the Internet. Once we establish a relationship with a
corporate client by building and maintaining their website, we endeavor to make
them advertisers on our site and sometimes our e-commerce partners. As of March
31, 2000, approximately 50% of the clients for whom we had developed websites
had advertised on Rediff.com.
Additionally, we assist our advertisers in developing their online
advertising campaigns by using leading industry advertising methods to:
- target advertising to specific demographic profiles; and
- obtain data to track and analyze user responsiveness.
We provide advertisers with detailed timely feedback on the effectiveness
of their advertising campaigns, as well as recommendations on how to improve
their campaigns. We believe these services differentiate our advertising
services from those of our competitors and provide us with a significant
competitive advantage.
STRATEGY
Our objective is to strengthen our position as the leading Internet portal
focusing on India and the global Indian community. Our principal business
strategies to accomplish this objective are:
AGGRESSIVELY EXTEND OUR BRAND RECOGNITION AND REPUTATION
We will continue to invest in brand building activities in order to
strengthen our brand loyalty with the global Indian community and to make
Rediff.com more attractive to advertisers and businesses conducting e-commerce.
Our brand building activities will continue to include:
- extensive print, television, radio and billboard advertising focused on
the major cities in India and print advertising focused on overseas
Indians;
- marketing and promotion activities focused on cybercafes, universities
and computer training institutes;
- public relations programs;
- co-marketing campaigns with leading technology providers and consumer
brands; and
- new strategic alliances.
Additionally, our market-leading position has made us an attractive partner
for many companies. Rediff.com is a default active channel on a majority of the
Microsoft Internet Explorer versions shipped by Microsoft (India) for use on
desktop personal computers in India. We also have an agreement with Tandem
Computers Asia, Ltd., a subsidiary of Compaq Computer Corporation pursuant to
which the keyboard of every Compaq Presario sold in India contains keys that
automatically send the user to Rediff.com. We have entered co-marketing and
cross-marketing programs with MTV, PepsiCo, Inc., The Gillette Company,
Smirnoff, Longines Watch Co. and Aptech, one of India's largest computer
education companies and MediaScape, an event management company.
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CONTINUE RAPID EXPANSION OF CONTENT AND SERVICES
We intend to continue adding original and innovative content and services
to our site at a rapid pace. We believe that this will:
- encourage users to visit our site more often and to remain there longer;
- increase the number of users;
- further differentiate our site from our competitors; and
- increase the number of revenue-generating features on our site.
Original content and new services include the following categories:
- New channels. We continually conduct market research, solicit user
feedback and benchmark ourselves against leading global portals in order
to identify new content categories, or channels, to be added to our site.
- Indian languages. Although many Indians speak English, some do not, and
may prefer to use Indian languages. To address this demand, accordingly,
we offer an original content site in Hindi, Tamil, Telugu and Gujarati
and intend to expand our offerings to include other local languages.
Furthermore, we will continue to expand the breadth of the content we
provide in these other languages.
- Geographic editions. In addition to our existing U.S. site, we intend to
develop multiple geographic editions that include content specific to the
major overseas Indian communities in the United Kingdom, Singapore and
South Africa.
PROMOTE AND EXPAND E-COMMERCE ACTIVITIES
We believe we have developed a robust platform for premier India-based
e-commerce offerings. In order to grow the volume of e-commerce transactions on
our site, we intend to:
- expand the roster of businesses participating in the MarketPlace;
- continue expanding categories of products offered;
- continue enriching our e-commerce capabilities, for example, by further
improving payment processing methods and by enabling businesses to build
their own stores on our site;
- increase the capability of our site and logistics network to support
greater transaction volumes;
- enhance consumer awareness of e-commerce shopping through creative
marketing campaigns, such as billboard advertising and our co-marketing
programs with leading credit card issuers such as Citibank and leading
consumer brands such as Gillette.
BUILD RELATIONSHIPS WITH TOP ADVERTISERS IN INDIA
Although we believe we receive a significant portion of the total online
advertising revenues in India, the online advertising market in India is still
at an early stage of development. We focus on building relationships with the
top 200 advertisers in India by educating them about the advantages of online
advertising. Our sales team will continue to inform advertisers about online
advertising, monitor and evaluate advertising campaigns and provide reports and
statistical data to advertisers. Of the top 200 advertisers in India, the number
who had purchased advertising on Rediff.com grew from 11 at the end of March 31,
1999 to 24 at the end of March 31, 2000.
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LEVERAGE RELATIONSHIPS WITH OUR STRATEGIC INVESTORS
We have a number of strategic investors who have the potential to help
promote our business. One of our investor's affiliate, Citibank, N.A. is one of
the largest credit card issuers in India and helped promote the use of credit
cards for online transactions on Rediff.com by entering into a co-marketing
program with us. Citibank is also working with us to facilitate debit card
transactions. Another of our investor's affiliates, Pacific Century Cyberworks
has announced that it intends to build a satellite network to provide broadband
Internet access in India and elsewhere. We intend to leverage our relationship
with them to become the default portal site for their broadband Internet access
users.
PURSUE SELECTIVE ACQUISITIONS, INVESTMENTS AND PARTNERSHIPS
We will continue to pursue opportunities to form strategic relationships,
including acquisitions, investments and alliances, in order to expand our
offerings, technology and distribution system. For example, we recently
developed a low-cost distribution system in cooperation with Federal Express
(India) for online ordering and tracking e-commerce transactions.
ENHANCE BROADBAND AND WIRELESS OFFERINGS
As broadband and wireless Internet access becomes more available in India,
we intend to continue to enhance broadband and wireless offerings content
designed to take full advantage of the wider bandwidth such as multimedia
content and mobile delivery such as real-time news updates. We have recently
entered into a memorandum of understanding with Hutchison Max Telecom Limited,
or Max Touch, Mumbai's largest cellular phone service provider, to offer all Max
Touch subscribers cellular phone access to the following content offerings:
- daily horoscope; and
- restaurant guides for Mumbai and Delhi.
OUR PRODUCTS AND SERVICE OFFERINGS
We have organized our product and service offerings into the categories of
content, community and e-commerce.
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OUR CONTENT AND COMMUNITY
Our homepage serves as a single gateway to all of our services and
offerings and is updated continually to provide innovative and current content
and community features for our users. All of these services may be accessed for
free by our users. The following table provides a brief description of each of
the service's features as of March 31, 2000:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
SERVICE OFFERING START DATE BRIEF DESCRIPTION
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CONTENT
- ------------------------------------------------------------------------------------------------
News February 1996 Current news from India as it breaks. Reported and produced
by an in-house team of editors, reporters and contributing
correspondents.
Sports February 1996 Live coverage, commentary updated daily, and chat for all
international cricket games involving India. Reports and
interviews.
Business February 1996 Business news, features, commentary and interviews focused
on India and the global Indian community.
Travel February 1996 Travel news, updated daily, guides to major Indian cities,
travel features, flight information, travel advisory, photo
gallery, restaurant guides and cultural events.
Movies February 1996 Movie reviews, interviews with movie stars, movie clips
using Real Audio's technology and, live chats with movie
stars.
Infotech May 1997 News and features from the Indian hi-tech industry.
Special Event August 1996 Limited duration channels for events including the 50th
anniversary of India's independence, Indian budgets, Indian
elections, birthdays of Indian icons, and the Millenium.
Chartbusters January 1998 The top 20 Hindi film and Indipop songs in Real Audio.
Education January 1999 Free study materials for college entrance and other national
exams; information on university courses and an online
education counselor. Re-launched in March 2000 as a
sponsored partner channel providing hyperlinks to an
education site.
Search May 1999 A directory and search engine adapted for Indian content.
Newsflash August 1996 A free daily e-mail news service currently with
approximately 40,000 subscribers.
Astrology May 1999 Daily, monthly and yearly predictions for free. Bi-annual
and five-year predictions for a fee.
U.S. Edition May 1999 News and features reported daily for the Indian community in
the United States and Canada by a team of contributors based
in North America.
Portfolio Tracker May 1999 An online real-time tracker of stocks on major Indian stock
exchanges.
Airline/Railway
Reservation
Status May 1999 Reservation information for international flights and for
trains departing from Mumbai.
- -------------------
</TABLE>
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<TABLE>
<CAPTION>
- -------------------
SERVICE OFFERING START DATE BRIEF DESCRIPTION
- -------------------
<S> <C> <C>
Shareware May 1999 A channel for Indian software developers to showcase their
products.
Weather August 1999 Weather for approximately 1,500 cities all over the world.
Money Channel October 1999 A comprehensive personal investment channel with portfolio
and mutual fund trackers, stock market, an online tax
counselor, analyses of investment schemes offered in India.
NewsLinks December 1999 A compilation of headlines and information from various
Indian and international media.
Scoreboard January 2000 A pop-up icon with the latest scores from international
cricket matches.
Women February 2000 Partner channel, with an intermediate web page, linking to
the women's site, footforward.com.
- -------------------
COMMUNITY
- -------------------
Romance March 1999 Singles matchmaking online.
Chat July 1996 Online interactive chat service with other users, Indian
politicians, movie stars, sports stars and people in the
news. Currently, over 200,000 registered users.
Free Home Page June 1998 Up to 10 megabytes of disk storage space for users and easy
to use templates to create web pages.
e-Mail August 1998 Free e-mail service. Currently, over 500,000 registered
users.
e-Cards August 1999 Online electronic greeting cards.
Contests May 1999 Interactive online contests with prizes ranging from
computers to jewelry.
Techjobs September 1999 An intermediate web page linked to the recruiting site
Netpilgrim.com for Indian computer professionals seeking
jobs overseas.
Auto February 2000 Partner channel, with an intermediate web page linked to an
automobile sales site.
Jobs March 2000 Partner channel, providing a link to a recruiting site.
- -------------------------------------------------------------------------------------------------
</TABLE>
Our content and community offerings are designed to be seamlessly
integrated with our e-commerce offerings. Users can make purchasing decisions
by simply clicking on the buttons displayed on content and community sites and
complete the purchase with minimal distraction and separation from the content
or community offering that they are using.
We also recognize the need for user support and communications and have
provided this support through e-mail based correspondence. Help buttons are
strategically displayed throughout our site, and user support staff is
committed to responding to all e-mail support questions within three hours. We
do not charge for these services.
OUR E-COMMERCE OFFERINGS
We began our e-commerce offerings in August 1998 and believe that
e-commerce is a natural complement to our content and community offerings. Since
our philosophy is to provide our users with world class quality and service
levels, we have focused on creating a robust e-commerce platform to provide our
services. When necessary, we have licensed or purchased
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our e-commerce technology from market leaders to maintain our quality standards.
Some of the major components of our technology platform include:
- IBM Global Services India, Ltd.'s Net.Commerce application server
software that manages transactions between the webserver and the browser
client;
- an online order management and tracking system developed in-house with
over 1,800 development man hours;
- live customer service system technology licensed from eShare
Technologies, Inc. that allows us to provide customer service 24 hours
per day, 7 days a week;
- security and encryption software licensed from VeriSign, Inc.;
- the Talisma e-mail management system licensed from Aditi Technologies
Pvt. Ltd.;
- online payment arrangements for credit cards with banks such as Citibank,
HSBC and the American Express;
- C.O.D. payment arrangements through the Indian Postal Service; and
- delivery services using Federal Express, Blue Dart Express Ltd. and the
Indian Postal Service.
We recognize that the Indian e-commerce market is in its early stages when
compared to the U.S. e-commerce market and believe our entry into this market at
such an early stage has given us the opportunity to position our brand as the
market leader for e-commerce in India. To promote consumer usage, we initiated
India's first credit card company alliance to enable online payments.
Additionally, we have worked closely with the Indian Postal Service to develop a
first of its kind system to allow for e-commerce payments by C.O.D. To promote
vendor awareness of the market potential, we have offered them web-enabled
access to our order tracking and management system as well as our website
development services. The following diagram illustrates how we serve our
e-commerce transactions:
[DIAGRAM]
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Currently our e-commerce services are organized into three categories:
- Shops -- these shopping sections include the Gift Shop, Book Shop, Music
Shop and Sports Shop which are designed to offer users a broad selection
of products from various manufacturers and distributors. Each shop is a
separate web page where shoppers can search for and purchase products
based on a product category or a particular manufacturer or vendor.
Pursuant to our agreements with various vendors, the selected products
are sold directly to the user online, and we collect the payment either
through an online credit card, check or C.O.D., and initiate a ship order
to the vendor through our integrated order management system who then
ships the product through our online integrated shipping system. The
products are shipped directly to the user within 72 hours. This system
allows us to maintain minimal inventory and reduce delivery times to the
user.
- MarketPlace -- the MarketPlace shopping section is designed to offer
users direct access to specific branded product lines from various
manufacturers and vendors all over the world by having a separate web
page for each merchant that serves as a storefront. We build a web page
for each merchant using our template so we can ensure consistency, user
friendliness and merchant loyalty within the MarketPlace. Pursuant to our
agreements with various manufacturers and vendors, when a customer
executes an order to purchase a product in the MarketPlace we collect
payment either through an online credit card transaction, check or C.O.D.
The customer's order is communicated to the vendor through our integrated
order management system who then ships the product through our online
integrated shipping system. The products are shipped directly to the user
by the manufacturer or vendor within 72 hours.
- Online Reservations and Ticketing -- these include our Movie Tickets
Online and Hotel Reservations services which offer users the ability to
view time schedules, check availability and make reservations for movies
and hotels. We plan to add other online reservation services similar to
these and will continue to offer users expanded service in our existing
offerings.
ADVERTISING
Advertising on our site currently consists of banner-style advertisements,
buttons and sponsorships. Currently, most of our advertisers enter into
agreements pursuant to which they pay a fixed fee for a fixed time-period. These
agreements range from three months to one year. Some of our advertisers also
enter into agreements pursuant to which they pay a fixed fee or cost for a
guaranteed number of impressions on our site. Our standard cost per thousand
impressions, commonly referred to as CPMs, for banner advertisements varies
depending on location of the advertisements on our site, the targeted country,
and the extent to which the advertisements are targeted to a particular
audience. Some of our advertisers have recently begun to opt for CPM rates.
Discounts from standard CPM rates may be provided for higher volume, longer-term
advertising contracts.
We had 44 advertisers on our site as of March 31, 2000 and a total of 165
advertisers on our site during the fiscal year ended March 31, 2000. The
following is a selected list of our current advertising customers, which are
representative of our advertiser base:
- Hewlett Packard India Pvt. Ltd.
- ABN Amro Bank N.V.
- Discovery Communications, Inc.
- ICICI Limited
- Oracle Software India Ltd.
- The Gillette Company
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- Proctor & Gamble India
- Longines Watch Co.
- L.G. Electronics India Pvt. Ltd.
These advertisers, in the aggregate, accounted for approximately 7% of our
advertising revenues for the fiscal year ended March 31, 2000 and 4.2% of total
advertising revenues for the fiscal year ended March 31, 1999. In the fiscal
year ended March 31, 2000, no advertiser accounted for more than 15.8% of total
advertising revenues. During the same period, our five largest advertisers
accounted for 21% of total advertising revenues.
We also offer website development services with a range of Internet
solutions designed to improve the implementation of Internet technology in
marketing and business development in India. Our services are mainly focused on
strategic consulting, analysis, creative design, and maintenance for customers
on our site. Once we establish a relationship with a corporate client by
building and maintaining their website, we endeavor to make them advertisers on
our site and, if appropriate, our e-commerce partners. We believe that by
helping build the Internet market, we are enhancing our brand identity,
attracting new advertisers and vendors, creating vendor and retailer loyalty and
uniquely blending our services with our role as an advertising host. Our
services include the following:
- Strategic Consulting and Analysis -- We work closely with our clients to
assess their market positioning, needs, capabilities and existing
technology systems to determine and advise them on ways in which an
Internet strategy can be adopted and best utilized.
- Creative Design -- One of our core strengths in assisting clients to
adopt an Internet strategy is in helping them position their products
using creative interface design to engage the user and provide maximum
potential for a successful user experience. We work closely with clients
to understand their objectives and market positioning and then make
creative recommendations. This service blends well with our role as an
advertising host allowing us to help the client simultaneously create a
website solution and an Internet advertising solution.
- Maintenance -- We continually monitor and update our client's websites to
support their ongoing Internet solution needs, by providing new or
updated content.
A few examples of our website development clients are:
- ABN Amro Bank N.V.
- Citibank N.A.
- Hewlett Packard India Pvt. Ltd.
- Hindustan Lever Limited
- Larsen & Toubro Limited
- McKinsey & Company, Inc.
- Pepsico, Inc.
- Reliance Industries Ltd.
SALES AND MARKETING
We pursue a variety of marketing initiatives designed to build brand
awareness, attract additional advertisers and promote our e-commerce and website
development businesses. We maintain a sales department, currently consisting of
37 sales and marketing professionals with average of 5.5 years of experience,
who are responsible for seeking additional advertisers, conducting marketing and
media relation campaigns as well as obtaining and analyzing customer feedback.
BRAND PROMOTION
We believe that building the brand recognition of Rediff.com is critical to
attracting additional traffic, and advertisers. We use multiple advertising
channels to raise visibility and cultivate brand
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identity. Advertisements for Rediff.com appear in a variety of media, including
national newspapers and magazines, national television in India, and outdoor
locations such as billboards, kiosks and banners. Rediff.com is also a default
active channel on all of the Microsoft Internet Explorer versions shipped by
Microsoft India for use on desktop PCs in India. We also have an agreement with
Tandem Computers Asia, Ltd., a subsidiary of the Compaq Computer Corporation,
pursuant to which the keyboard of every Compaq Presario sold in India contain
keys that are default enabled to go to the Rediff.com website. Our marketing
professionals also promote our brand name at cybercafes, universities and
computer training institutes through the sponsorship of events and festivals.
Other promotion efforts include participation in industry exhibitions such as
India Internet World and Comdex.
SALES TO ADVERTISERS
Currently, 26 members of our sales team are assigned to sell advertising
space on our website. They focus their sales efforts on the top 200 advertisers
in India. Currently most of our agreements with advertisers are for fixed
advertising rates for a fixed time-period. We believe that by targeting the top
200 advertisers in India, our sales efforts remain highly focused and we are
able to leverage a relatively small sales force efficiently to generate
advertising sales revenues. Our sales team consults regularly with advertisers
on design and placement of their web-based advertising, provides advertisers
with advertising measurement analysis and focuses on providing a high level of
customer service satisfaction.
SALES AND MARKETING IN E-COMMERCE
As of March 31, 2000, we had a sales team for e-commerce, consisting of
five sales and marketing professionals. We employ a variety of methods to
promote the Shops and the MarketPlace, including advertising on our site,
targeted publications and billboards. Our sales force targets manufacturers and
vendors of the leading products in India in order to secure the leading brands
and products for e-commerce offerings. We also target manufacturers and vendors
that supply products in categories which we have determined are critical to the
breadth of our e-commerce product offerings. We have also entered in to
agreements with Citibank, HSBC and American Express which are among India's
largest credit card issuers to facilitate and promote shopping on our site. We
require merchants participating in our e-commerce programs to pay a one-time
entry fee and they charge us a discounted price for goods sold under the
programs. We seek to enhance our e-commerce offerings by offering merchants the
advice and opportunity to create, implement and monitor an Internet sales
strategy through our web development services. Our sales efforts target existing
and potential clients interested in developing an Internet sales strategy.
TECHNOLOGY AND NETWORK INFRASTRUCTURE
We maintain our production servers at the Santa Clara, California data
center of Exodus Communications, Inc. and at the Mumbai, India co-location
facility of Videsh Sanchar Nigam Limited, or VSNL. Our operating infrastructure
is designed to serve and deliver sufficient page views a day to allow India
based users to access India specific services quickly. We continually update our
capacity on these servers as our page views and web base increases.
Exodus Communications, Inc. provides us with a 10 megabits per second, or
Mbps, burstable to 100 megabits per second ethernet backbone facility and 24
hour per day, 7 day a week support. The architecture of our services and
infrastructure provided by the co-location facilities allow our users to access
our services efficiently regardless of their geographical location.
Our servers run on Red Hat, Inc.'s Linux operating system with an Apache
webserver and on Microsoft India's Windows NT operating system with Internet
Information Services, Inc. and
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IBM's Lotus GO webservers. We endeavor to configure our servers with enough
resources to meet the load requirements of the visitors to our site.
We use in-house and third party monitoring software and tools and have 24
hour per day, 7 day a week monitoring to ensure that all of our services are
available and operational all the time. Our core services run on multiple
servers which provides redundancy and load balancing of the services to ensure
fast and continuous access to all the users.
Sales and advertising support system. In an effort to maintain effective
advertising and measure the success of advertising for our clients, we have
licensed Realmedia Ad Server from Real Media, Inc. and Webtrends Enterprise
Suite from WebTrends Corporation to obtain detailed information on user
behavior.
Content support system. Our content and archives are supported by search
technologies that are internally-developed. Our core search engine is licensed
from Inktomi Corporation. We have licensed a List Server from L-Soft
International, Inc. to send daily news and events to our subscribers' e-mail
inboxes.
Community support system. Most of our community services are
internally-developed. Our e-mail system was developed internally using
OpenSource programming technologies which can be scaled to millions of users
without loss of performance. We have licensed Expressions 4.0 chat software from
eShare Technologies, Inc. to enable our Internet chat service offerings.
E-commerce support system. Our e-commerce service is based on an IBM Global
Services e-business solution and is developed with IBM's support for use on
Microsoft India's Windows NT operating system. We use IBM's DB2 for our database
and IBM's Net.Commerce as our application server software. Our e-commerce
offerings are located on multiple servers to provide increased performance and
redundancy in order to minimize service disruptions.
Components or features of our network including our community support
system and e-commerce support system have in the past suffered outages or
experienced slower response times because of equipment or software downtime.
These events did not have a material adverse effect on our business.
Our internal computer network is protected by Trend Micro Incorporated's
antivirus system for enterprises. We back-up our information and content
regularly to protect our data.
COMPETITION
There are an increasing number of companies that provide websites focusing
on India and the global community. All of these companies compete with us for
visitors, advertising dollars and e-commerce revenues. Competition for visitors
and e-commerce is intense and is expected to increase significantly in the
future because there are no substantial barriers to entry in our market.
Our ability to compete successfully depends on many factors including:
- the quality and timeliness of our content;
- the user friendliness of our services;
- our sales and marketing efforts; and
- the performance of our technology.
Increased competition could result in:
- lower advertising rates;
- price reductions and lower profit margins;
- loss of visitors;
- reduced page views; and
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- loss of market share.
Any one of these factors could materially and adversely affect our
business, financial condition and results of operations.
We compete with providers of Indian content and services over the Internet,
including web directories, search engines, content sites, portals, Internet
Service Providers and sites maintained by government and educational
institutions. Our current and anticipated competitors include:
- America Online, Inc.
- DigitalHT.com
- Excite@Home (At Home Corporation)
- Indiainfo.com (Visual Interactive Pvt. Ltd.)
- IndiaWorld.co.in (India World Communications Pvt. Ltd.)
- IndiaTimes.com (Bennett, Coleman & Co. Ltd.)
- MSNBC.com (Microsoft Corporation)
- Satyam Online (Satyam Infoway Ltd.)
- Yahoo! Inc.
Some of our competitors have:
- longer operating histories;
- greater name recognition;
- larger customer bases; and
- significantly greater financial, technical and marketing resources.
This may allow them to devote greater resources than we can to the
development and promotion of new and existing services. These competitors may
also be able to:
- undertake more extensive marketing campaigns for their brands and
services;
- adopt more aggressive advertising pricing policies;
- use superior technology platforms to deliver their products and services;
and
- make more attractive offers to potential employees, distribution
partners, commerce companies, advertisers and third-party content
providers.
Our competitors may develop content that is equal or superior to ours or
that achieves greater market acceptance. It is also possible that new
competitors may emerge and rapidly acquire significant market share. This could
have a material and adverse effect on our business, financial condition and
results of operations.
We also compete with other forms of media, such as print media, radio and
television, for advertisers and advertising revenue. If advertisers perceive the
Internet or our website to be a limited or an ineffective advertising medium,
they may be reluctant to devote a portion of their advertising budget to
Internet advertising or to advertising on our website.
INTELLECTUAL PROPERTY
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 practicable, vendors 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 must 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
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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 try to obtain or develop
non-infringing technology, obtain a license or cease selling the applications
that contain the infringing technology. If this were to occur, 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. The software developed by these third parties is used in our website to
perform key functions. These and other third-party licenses may not be available
to us on commercially reasonable terms in the future. The loss or inability to
obtain or retain 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.
We have filed trademark applications for "www.rediff.com" and "Rediff On
The Net" in India and for "Rediff On The Net" in the United States. The
applications in India are currently pending and the application in the United
States is currently on file with the U.S. Patent and Trademark office and
subject to certain additional requests for consideration.
GOVERNMENT REGULATION
GENERAL
Currently, there is no Indian legislation in force that specifically
governs our business. However, our business could be subject to regulation by
the Ministry of Information Technology which was formed in October 1999 and is a
part of the Government of India. We also may be subject to regulation by the
Indian Ministries of Communications and Information and Broadcasting. The powers
of the Ministry of Information Technology have not been delineated yet and
consequently it is uncertain whether its jurisdiction will overlap with the
Ministry of Communications and the Ministry of Information and Broadcasting.
In December 1999, the Information Technology Bill, 1999 was presented in
Parliament. The bill has been referred to a committee of Parliament for comments
and review. If Parliament passes the Information Technology Bill, 1999 and on
the bill receiving the President of India's assent, it will become law.
The Information Technology Bill, 1999, if passed in its current form, will
implement the following:
- give legal validity to online contracts;
- give legal validity to digital signatures;
- make electronic records admissible in court in evidentiary proceedings;
- set default rules for time and place of dispatch and receipt of
electronic records;
- allow for filing of documents with the Government of India in electronic
form;
- allow for retention of documents, information or records in electronic
form;
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- set up certifying authorities to issue and supervise digital signatures;
- set up a controller of certifying authorities to monitor and supervise
the certifying authorities;
- set up the Cyber Regulations Appellate Tribunals to act as quasi-judicial
bodies with respect to disputes relating to online transactions; and
- penalize computer crimes.
NEW TELECOM POLICY, 1999
The New Telecom Policy, 1999 deals with restructuring of the
telecommunications sector. The New Telecom Policy states that Internet Service
Providers who wish to provide applications like tele-banking, tele-medicine,
tele-education, tele-trading , and e-commerce, will be allowed to operate by
using infrastructure provided by various Internet access providers. The New
Telecom Policy also provides that no license fees will be charged for providing
the specific services but registration with the Government of India will be
required.
If the New Telecom Policy is passed in its current form, we may have to
register our services with the Government of India and we may also be governed
by the regulations issued by the Telecommunications Regulatory Authority of
India, or TRAI.
The TRAI was established in 1997 by the Government of India under the
provisions of the Telecom Regulatory Authority of India Act, 1997, as an
autonomous body to regulate the telecommunications industry. However, on January
25, 2000 the Government of India passed an ordinance to recast TRAI. The
ordinance also sets up a Telecom Dispute Settlement and Appellate Tribunal to
adjudicate any dispute between a licensor and licensee, between service
providers, appeals of telecom service providers and between service providers
and groups of consumers. The new TRAI will have powers to decide on new licenses
and their terms and conditions, the levy of fees and charges on services,
interconnectivity between the telecom service providers and to perform
administrative and financial functions entrusted to it by the Government of
India. The new TRAI will have no judiciary powers, as these powers will vest in
a telecom dispute settlement and appellate authority. Telecom service providers
can approach this appellate authority and the orders of this authority can be
challenged only in the Supreme Court of India. The ordinance to recast the TRAI
would lapse if the Indian Parliament does not ratify it within six months.
PRIVACY
At present India does not have any specific legislation to prevent invasion
of privacy by private parties. The Constitution of India protects the privacy of
private parties against any invasion by the state or government, but it may not
be possible to invoke this protection against violation by private parties.
There is no pending or proposed legislation that seeks to penalize or regulate
violation of privacy by private parties.
ENCRYPTION
Telecommunications in India are governed by the Indian Telegraph Act, 1885,
or Telegraph Act and the Indian Wireless Telegraphy Act, 1933, or Wireless Act.
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 industry, the Wireless Act
regulates the possession of wireless telegraphy equipment. Encryption hardware
may be considered as an instrument capable of being used for the transmission
and reception of telecommunications signals. Any person intending to use
encryption hardware may be required to obtain prior permission from the
Department of Telecommunication of the Government of India.
The Guidelines for Internet Service Providers permit the use of encryption
equipment for providing secrecy in transmission up to a level of encryption
specified by the Government of India. However, if the encryption equipment of
levels higher than specified is to be deployed,
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Internet Service Providers have to obtain the clearance of the Government of
India and should deposit one set of keys with the Department of
Telecommunication.
These guidelines are applicable to Internet Service Providers and it is
uncertain whether they will apply to us. For using encryption hardware, we may
have to obtain prior approval from the Department of Telecommunication. However,
it is uncertain whether we are required to obtain any approval from the
Department of Telecommunication or any other department for using encryption
software.
INTERNET BASED SECURITIES TRADING AND SERVICES
The Securities and Exchange Board of India has recently introduced
Guidelines for Internet-based securities trading. These Guidelines allow the
Internet to be used as an order routing system through stock brokers registered
with the Securities and Exchange Board of India on behalf of clients for
executing trades on a recognized stock exchange in India. Stock brokers
interested in providing this service are required to apply for permission to the
appropriate stock exchange and to comply with conditions stipulated by the
Securities and Exchange Board of India.
FOREIGN EXCHANGE REGULATIONS
Imports. We may be required to import into India computer hardware and
Internet related software purchased from foreign manufacturers for our business.
These imports will be subject to the Export and Import Policy issued 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 Indian 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.
Ownership of foreign securities. We may wish to invest in the securities of
foreign companies. The Indian Foreign Exchange Regulation Act, 1973 requires
that we obtain permission from the Reserve Bank of India prior to making any
such investment.
EMPLOYEES
As of March 31, 2000, we had 163 employees and full-time consultants. We
also have four contributing editors that are hired on a project-by-project
basis. We currently anticipate hiring an additional 75 to 80 employees in the
next twelve months, most of whom will be hired into our sales and marketing
teams and technical support and customer care teams. Of our current employees,
18 are administrative, 37 are in our sales and marketing teams; 69 are creative
and editorial, 21 are dedicated to technical support and customer care, 13 are
dedicated to e-commerce and 4 are dedicated to business development. None of our
employees are represented by a union. We believe that our relationship with our
employees is good.
FACILITIES
Our 10,800 square foot corporate headquarters are located in Mumbai, India,
and include a fitness center available to all employees. We also have a 1,000
square foot office in New Delhi, India, which serves as a branch office, and an
aggregate of approximately 19,000 square feet of residential flats and
apartments, which we provide to some of our employees as part of their
compensation packages. As we expand our operations, we anticipate leasing
additional facilities in each location in which we develop a presence. We lease
all of our current facilities under leases with terms ranging from 1 to 3 years.
LEGAL PROCEEDINGS
As of the date of this prospectus, we do not have any material legal
proceedings pending against us.
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MANAGEMENT
The following table sets forth, as of March 31, 2000, the name, age and
position of each director and executive officer of our company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Ajit Balakrishnan(1)(2)............... 51 Chairman and Managing Director
Nitin Gupta........................... 39 President and Chief Operating Officer
Rajiv Warrier......................... 33 Chief Financial Officer
Venki Nishtala........................ 41 Chief Technical Officer
Vinayak K. Purohit.................... 44 Vice President, Finance
Aninda Shome.......................... 37 Vice President, Sales & Marketing
Nikhil Lakshman....................... 40 Editor
Diwan Arun Nanda(1)................... 56 Director
Sunil N. Phatarphekar(1)(2)(3)........ 36 Director
Abhay Havaldar(1)(2)(3)............... 38 Director
Charles Robert Kaye(1)(3)............. 35 Director
</TABLE>
- ---------------
(1) Member of the Board of Directors
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
AJIT BALAKRISHNAN is a founder of Rediff.com India Limited, and has been a
director since its inception in December 1995. He was appointed Managing
Director in August 1998. Mr. Balakrishnan is also a director of
Rediffusion-Dentsu, Young & Rubicam Limited, where he has served since March
1993, and a director of Rediffusion Advertising Private Limited, and PSI Data
Systems Limited. Mr. Balakrishnan holds a B.Sc. degree in Physics from Kerala
University, and a Post Graduate Diploma in Management from the Indian Institute
of Management, Calcutta.
NITIN GUPTA has been President and Chief Operating Officer of Rediff.com
India Limited since February 2000. From September 1997 to January 2000, he
served as President, Retail Finance of GE Capital Services India, and from
October 1992 to September 1997, he served as Executive Vice President of
Contract Advertising India Limited. Mr. Gupta holds a B.A. degree in Economics
from Delhi University, an L.L.B. degree from Bombay University, and a Post
Graduate Diploma in Management from the Indian Institute of Management,
Ahmedabad.
RAJIV WARRIER has been the Chief Financial Officer of Rediff.com India
Limited since June 1998. Prior to joining Rediff.com India Limited, he was a
Deputy Manager at ICICI Limited, and an Assistant Manager at SCICI Limited.
Prior to his association with SCICI Limited, Mr. Warrier was with the Essar
Group of Companies. Mr. Warrier holds a B.E. degree in Industrial and Production
Engineering from Karnatak University, and a Post Graduate Diploma in Management
from the Indian Institute of Management, Calcutta.
VENKI NISHTALA has been the Chief Technical Officer of Rediff.com India
Limited since December 1999. From May 1995 until joining Rediff.com India
Limited, Mr. Nishtala was with CyberCash, Inc., where he was the Managing
Director of Indian operations, in Bangalore, India. Prior to working at
CyberCash, Inc., Mr. Nishtala worked at Infinite Solutions, Inc., a company
which he founded in 1992. Mr. Nishtala holds a B.E. degree in Electrical
Engineering from University College of Engineering, Osmania University, and
M.E.E. degree from the Indian Institute of Technology, Chennai.
VINAYAK K. PUROHIT has been Vice President, Finance of Rediff.com India
Limited since March 2000. From August 1999 to February 2000, he served as Chief
Financial Officer of United Phosphorous, from July 1997 until August 1999, he
served as Chief Financial Officer of GE-Countrywide and from August 1992 until
July 1997 he served as General Manager-Finance at
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Marico Industries. Mr. Purohit holds a B.Com. degree in Statistics/Econometrics
from Bombay University. He is also a member of the Institute of Chartered
Accountants of India.
ANINDA SHOME has been Vice President, Sales, since 1998. He joined
Rediff.com India Limited as Chief Manager, Advertising Sales in February 1996.
Prior to joining Rediff.com India Limited, he was a Manager at the Times of
India. Mr. Shome holds a Diploma in Hotel Management from the Institute of Hotel
Management, Calcutta and a B.A. degree in Arts from the University of Osmania,
Hyderabad.
DIWAN ARUN NANDA is a founder of Rediff.com India Limited, and has been a
director of Rediff.com Limited since its inception in December 1995. Diwan Nanda
is currently the Chairman and Managing Director of Rediffusion-Dentsu, Young &
Rubicam Limited, where he has served since March 1993. He also serves as a
director of Rediffusion Advertising Private Limited. Diwan Nanda holds a B.Com.
degree in Accountancy from Loyola College, Chennai University, and a
Post-Graduate Diploma in Business Management from the Indian Institute of
Management, Ahmedabad.
SUNIL N. PHATARPHEKAR has been a director of Rediff.com India Limited since
February 1998. Mr. Phatarphekar has also been partner of Shah Desai Doijode &
Phatarphekar since January 1996. From February 1994 to December of 1995, he was
a partner at Mahimtura & Co.. Prior to that, Mr. Phatarphekar was with Crawford
Bayley & Company, a Mumbai law firm. Mr. Phatarphekar holds a B.Com. degree in
Economics and Accounts from the Jai Hind College of Bombay University, and an
L.L.B. degree in Law from the Government Law College of Bombay University.
ABHAY HAVALDAR has been a director of Rediff.com India Limited since August
1998. Since December 1995, Mr. Havaldar has also been a Managing Director of
Draper International (India) Private Limited. Prior to that, he was Country
Manager, Financial Systems Group of HCL Infosystems Ltd.. Mr. Havaldar holds a
B.E. degree in Electrical Engineering from Bombay University, and an M.S.C.
degree from the London Business School.
CHARLES R. KAYE has been director of Rediff.com India Limited since June
1999. Since June 1986, he has also been a Managing Director of E.M. Warburg,
Pincus & Co.. Mr. Kaye holds a B.A. degree from the University of Texas.
BOARD COMPOSITION
On March 16, 2000, we amended our Articles of Association. Our Amended
Articles of Association set the minimum number of directors at three and the
maximum number of directors at seven. We currently have five directors. Our
Articles of Association provide as follows:
- Ajit Balakrishnan, Arun Nanda and Rediffusion Advertising Private
Limited, the promoters, are entitled to nominate up to two directors on
the Board of Directors as long as they hold not less than 10% of the
issued, subscribed and paid up capital of Rediff.com. These directors
serve indefinite terms and are not required to retire by rotation.
Currently, these directors are Messrs. Balakrishnan and Nanda.
- The remaining directors on the Board of Directors are non-permanent
directors, and one-third of these non-permanent directors shall serve
staggered three-year terms and shall be required to retire by rotation
each year, the members of the Board having served the longest retiring
first.
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
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auditors, the performance of our independent auditors and our accounting
practices. The members of the Audit Committee are Messrs. Charles R. Kaye, Sunil
N. Phatarphekar and Abhay Havaldar.
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 us. The Compensation Committee
also administers our compensation plans. The members of the Compensation
Committee are Messrs. Ajit Balakrishnan, Sunil N. Phatarphekar and Abhay
Havaldar.
DIRECTOR COMPENSATION
Our Amended and Restated Articles of Association provide that each of our
directors may receive an attendance fee for every Board and Committee meeting,
provided that no director shall be entitled to an attendance fee in excess of
US$44 (Rs. 2,000) per meeting. In fiscal 2000, we did not pay any fees to our
non-employee directors. Mr. Ajit Balakrishnan, who is our Managing Director,
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 August 25, 1998, our Board of Directors approved the appointment of Mr.
Ajit Balakrishnan as Managing Director of Rediff.com India Limited for a term of
five years, effective August 25, 1998. Mr. Ajit Balakrishnan's appointment as
Managing Director was approved by our shareholders as required under the
Companies Act on August 25, 1998.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to Mr. Ajit Balakrishnan, our Managing Director, during the fiscal year
ended March 31, 2000 for services rendered in all capacities to us during the
fiscal year ended March 31, 2000. Mr. Ajit Balakrishnan was appointed Managing
Director of our company on August 25, 1998. None of our other executive officers
earned a combined salary and bonus in excess of US$100,000 during any of the
last three fiscal years. In accordance with the rules of the Securities and
Exchange Commission, 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 US$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 Rupees per
United States dollar on the dates of the transactions. The total remuneration
received by our officers and directors for their services to us for the fiscal
year ended March 31, 2000 was approximately US$127,565 (Rs.5.5 million).
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------- ALL OTHER
NAME AND SALARY BONUS COMPENSATION
PRINCIPAL POSITION YEAR (US$) (US$) (US$)(2)
------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Ajit Balakrishnan,................................... 1998 -- -- 314,700
Chairman and Managing Director(1) 1999 -- -- 70,700
2000 -- -- --
</TABLE>
- ---------------
(1) Mr. Ajit Balakrishnan does not receive salary or bonus compensation from
Rediff.com India Limited.
(2) Represents stock-based compensation related to purchases of equity shares of
Rediff.com India Limited, translated at the noon buying rate on the date of
each transaction. Please see "Certain Transactions" on page 66.
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OPTION GRANTS IN LAST YEAR
There were no option grants to our Managing Director during the fiscal year
ended March 31, 2000.
FISCAL YEAR-END OPTION VALUES
Our Managing Director did not exercise or hold any options during the
fiscal year ended March 31, 2000.
EMPLOYEE BENEFIT PLANS
Employee Stock Option Plan 1999
We have an Employee Stock Option Plan 1999, or 1999 ESOP, which allows for
the grant to our employees of warrants to purchase our equity shares. Each
warrant granted gives the employee the right to purchase 125 equity shares of
Rediff.com India Limited. The 1999 ESOP was approved by our Board of Directors
in August 1998 and by our Shareholders in February 1999. A total of 700,000
equity shares, after giving effect to our 5 for 1 share split effective January
6, 2000, were reserved for issuance under the 1999 ESOP. As of March 31, 2000,
we had granted, under the ESOP, an aggregate of 4,446 warrants, equivalent to
the right to purchase 555,750 equity shares, after giving effect to our 5 for 1
share split effective as of January 6, 2000, at a weighted average exercise
price of US$2.69 (Rs. 117) per share.
Unless otherwise determined by the Board of Directors, the warrants granted
under the 1999 ESOP vest at a rate of 25% on each successive anniversary of the
grant date, until fully vested. Equity shares acquired pursuant to the 1999 ESOP
are subject to a 4-year lock-up period from the date of grant of the respective
warrants. In the case of termination of the employee, the employee shall have
the right to exercise only the warrants vested up to the time of termination,
and the unvested warrants shall lapse. In the case of death, incapacitation, or
retirement at the normal retirement age of an employee, all warrants granted to
him or her shall vest in full either on the employee or his or her legal heirs,
as appropriate. The period during which vested warrants may be exercised expires
5 years after the date of grant.
Associate Stock Option Plan 1999
We have an Associate Stock Option Plan 1999, or 1999 ASOP, which allows for
the grant to our associates, such as key vendors, software developers,
retainers, consultants, and all other persons or legal entities not eligible to
participate in the 1999 ESOP, of warrants to purchase our equity shares. Each
warrant granted gives the associate the right to purchase 125 equity shares of
Rediff.com India Limited. The 1999 ASOP was approved by our Board of Directors
in April 1999 and by our shareholders in February 1999. A total of 495,000
equity shares, after giving effect to our 5 for 1 share split effective January
6, 2000, were reserved for issuance under the 1999 ASOP. As of March 31, 2000,
we had granted an aggregate of 1,472 warrants under the 1999 ASOP, equivalent to
the right to purchase 184,000 equity shares, after giving effect to our 5 for 1
share split effective as of January 6, 2000, at an exercise price of US$4.69
(Rs. 204) per share.
The warrants granted under the 1999 ASOP vest at rates set forth on each
warrant. Equity shares acquired pursuant to the 1999 ASOP are subject to a
4-year lock-up period from the date of grant of the respective warrants. In the
case of termination of the relationship, the associate shall have the right to
exercise only the warrants vested up to the time of termination, and the
unvested warrants shall lapse. In the case of death of the associate, all
warrants granted to him or her shall vest in full on his or her legal heirs, as
appropriate. The period during which vested warrants may be exercised expires 5
years after the date of grant.
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2000 Stock Option Plan
The Rediff.com India Limited 2000 Stock Option Plan, referred to as the
"2000 Plan," provides for the grant of two types of options to our employees.
Incentive stock options may provide our employees with beneficial tax treatment
and nonstatutory stock options don't qualify as incentive stock options. The
2000 Plan was approved by our Board of Directors in February 2000. Unless
terminated sooner by the Board, the 2000 Plan will terminate automatically in
February 2010. A total of 200,000, after giving effect to our 5 for 1
share-split effective as of January 6, 2000, of our equity shares are currently
reserved for issuance pursuant to the 2000 Plan. All options under the 2000 Plan
will be exercisable for ADSs.
Either our Board of Directors or a committee of our Board of Directors will
administer the 2000 Plan. The committee has the power to determine the terms of
the options granted, including the exercise price, the number of ADSs subject to
each option, the exercisability thereof, and the form of consideration payable
upon such exercise. In addition, the committee has the authority to amend,
suspend or terminate the 2000 Plan, provided that no such action may affect any
ADS previously issued and sold or any option previously granted under the 2000
Plan.
The 2000 Plan generally does not allow for the transfer of options, and
only the optionee may exercise an option during his or her lifetime. An optionee
generally must exercise an option within three months of termination of service.
If an optionee's termination is due to death or disability, his or her option
will fully vest and become exercisable and the option must be exercised within
twelve months after such termination. The exercise price of incentive stock
options granted under the 2000 Plan must at least equal the fair market value of
the ADSs on the date of grant. The exercise price of nonstatutory stock options
granted under the 2000 Plan must at least equal 90% the fair market value of the
ADSs on the date of grant. The term of options granted under the 2000 Plan may
not exceed ten years.
The 2000 Plan provides that in the event of our merger with or into another
corporation or a sale of substantially all of our assets, the successor
corporation shall either assume the outstanding options or grant equivalent
options to the holders. If the successor corporation neither assumes the
outstanding options nor grants equivalent options, such outstanding options
shall vest immediately, and become exercisable in full.
Retirement Plan
Rediff.com India Limited provides for a gratuity, an unfunded defined
benefit retirement plan covering all its employees, based on actuarial
variations. This plan provides for a lump sum payment to be made to vested
employees at retirement or termination of employment in an amount equivalent to
15 days' salary payable for each completed year of service. Vesting occurs upon
completion of five years of service.
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PRINCIPAL SHAREHOLDERS
The following table provides information relating to the beneficial
ownership of our equity shares as of March 31, 2000, and as adjusted to reflect
the sale of the ADSs offered hereby, by:
- each of the executive officers named in the summary compensation table
and each of our directors;
- all of our directors and executive officers as a group; and
- each person or group of affiliated persons who is known by us to
beneficially own 5% or more of our equity shares.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
equity shares subject to options or warrants held by that person that are
currently exercisable or will become exercisable within 60 days after March 31,
2000, are deemed outstanding, while the shares are not deemed outstanding for
purposes of computing percentage ownership of any other person. Unless otherwise
indicated in the footnotes below, the persons and entities named in the table
have sole voting or investment power with respect to all shares beneficially
owned, subject to community property laws where applicable. Unless otherwise
indicated below, the address of each listed shareholder is c/o Rediff.com India
Limited, Mahalaxmi Engineering Estate, 1st Floor, L.J. First Cross Road, Mahim
(West), Mumbai 400 016, India.
The number and percentage of shares beneficially owned are based on the
aggregate of (i) 25,375,500 equity shares outstanding as of March 31, 2000 and
(ii) -- ADSs, represented by -- equity shares, issued in this offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------------
PERCENT PRIOR PERCENT AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER TO OFFERING OFFERING
------------------------------------ ------ ------------- -------------
<S> <C> <C> <C>
Officers and Directors
Ajit Balakrishnan(1)............................. 8,250,480 32.51% --
Diwan Arun Nanda(1).............................. 8,250,505 32.51% --
Sunil N. Phatarphekar............................ 0 * --
Abhay Havaldar(2)................................ 5,500,000 21.67% --
c/o Draper-India International Limited
c/o Multi Consult Limited
Les Jamalacs, Vieux Conseil Street
Port Louis, Mauritius
Charles Robert Kaye(3)........................... 3,407,500 13.43% --
c/o Warburg, Pincus & Co.
466 Lexington Avenue,
New York, NY 10017
All Directors and Officers as a Group(5
persons)....................................... 19,908,480 78.46% --
5% Shareholders
Rediffusion Advertising Pvt. Ltd.(1)............. 5,500,005 21.67% --
Sterling Centre, 4th Floor
Dr. Annie Besant Road
Worli, Mumbai, 900 018, India
Draper-India International Limited(2)............ 5,500,000 21.67% --
c/o Multi Consult Limited
Les Jamalacs, Vieux Conseil Street
Port Louis, Mauritius
</TABLE>
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<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------------
PERCENT PRIOR PERCENT AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER TO OFFERING OFFERING
------------------------------------ ------ ------------- -------------
<S> <C> <C> <C>
Intel Corporation................................ 1,612,500 6.35% --
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Queenswood Investments Limited(3)................ 3,407,500 13.43% --
c/o Warburg, Pincus & Co.
466 Lexington Avenue,
New York, NY 10017
Pacific Century Cyberworks India Pvt. Ltd........ 1,325,000 5.22% --
22 Kartar Bhavan
Minoo Desai Marg
Calaba, Mumbai 400 005, India
GE Capital Services India........................ 1,325,000 5.22% --
AIFACS Building
1 Rafi Marg
New Delhi 110 001, India
</TABLE>
- ---------------
* Indicates less than 1% of the common stock.
(1) Includes 5,500,005 shares held by Rediffusion Advertising Private Limited,
of which Ajit Balakrishnan is a 50% shareholder and Managing Director and
Arun Nanda is a 50% shareholder and director.
(2) Includes 5,500,000 shares held by Draper-India International Limited. Mr.
Havaldar is a limited partner of Draper India Management L.P., which is the
general partner of Draper India L.P., which holds 99% of the outstanding
equity of Draper-India International Limited. Mr. Havaldar is a director of
Rediff.com India Limited and disclaims beneficial ownership of shares held
by Draper-India International Limited, except to the extent of his
proportional interest arising from his partnership interest in Draper-India
International Limited.
(3) Includes 3,407,500 shares held by Queenswood Investments Limited. Charles
Kaye is a Managing Director and member of E.M. Warburg, Pincus & Co., LLC
and a general partner of Warburg, Pincus & Co. Fifty percent of the
outstanding equity of Queenswood Investments Limited is held by Warburg,
Pincus Equity Partners, L.P. (including three affiliated partnerships)
("WPEP") and 50% of the outstanding equity of Queenswood Investments
Limited is held by Warburg, Pincus Ventures International, L.P. ("WPVI").
Warburg, Pincus & Co. ("WP") is the sole general partner of WPEP and WPVI.
WPEP and WPVI are managed by E.M. Warburg, Pincus & Co., LLC ("EMW LLC").
Lionel I. Pincus is the managing partner of WP and the managing member of
EMW LLC and may be deemed to control both entities. Mr. Kaye may be deemed
to have an indirect pecuniary interest (within the meaning of Rule 16a-1
under the Securities Exchange Act of 1934, as amended) in an indeterminate
portion of the shares beneficially owned by Queenswood Investments Limited.
All shares indicated as held by Mr. Kaye are included because of his
affiliation with the Warburg Pincus entities. Mr. Kaye disclaims beneficial
ownership of all shares held by the Warburg Pincus entities.
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CERTAIN TRANSACTIONS
LEASE AGREEMENT
In October 1998, we entered into an agreement with Rediffusion-Dentsu,
Young & Rubicam Limited, a company in which Mr. Ajit Balakrishnan and Diwan Arun
Nanda are shareholders, whereby we occupy the offices in New Delhi formerly
occupied by Rediffusion-Dentsu, Young & Rubicam Limited, and reimburse
Rediffusion-Dentsu, Young & Rubicam Limited for the respective lease payments.
Currently, the monthly lease payments under this agreement are approximately
US$850 (Rs. 37,000).
EQUIPMENT LEASE AGREEMENT
In April of 1997, we entered into an agreement with Rediff Advertising
Private Ltd., one of our shareholders, whereby we have the right to use some
office equipment leased by Rediff Advertising Private Ltd., and we shall
reimburse Rediff Advertising Private Ltd. for the respective lease payments.
Currently, the monthly lease payments under this agreement are approximately
US$760 (Rs. 32,958).
ADVERTISING SERVICES AGREEMENT
On December 28, 1998, we entered into an agreement with Rediffusion-Dentsu,
Young & Rubicam, a company in which Mr. Ajit Balakrishnan, Diwan Arun Nanda and
Rediffusion Advertising Private Ltd. are shareholders, for advertising services.
Under the engagement letter, Rediffusion-Dentsu, Young & Rubicam Limited agree
to provide advertising services to us, and we agree to pay them a ten percent
commission on the amounts charged by third parties for the execution of such
advertising. Aggregate payments to Rediffusion-Dentsu, Young & Rubicam Limited
for the fiscal year ended March 31, 2000 were approximately US$2,900,000 (Rs.
127,000,000).
TRANSACTIONS WITH THE PROMOTERS
Mr. Ajit Balakrishnan and Diwan Arun Nanda are our promoters. Prior to the
incorporation of Rediff.com India Limited, Mr. Ajit Balakrishnan and Diwan Arun
Nanda entered into a Memorandum of Understanding, whereby they agreed to loan
funds to us. These loans would be payable in equity shares if we repaid them
before we obtained any investments from outside investors or bank loans.
Pursuant to the Memorandum of Understanding, after we obtain any outside
investment or bank loan, the loans from Mr. Ajit Balakrishnan and Diwan Arun
Nanda are no longer payable in equity, but only in cash. Mr. Ajit Balakrishnan
loaned an aggregate of approximately US$773,000 (Rs. 33,633,859) to us,
US$126,400 (Rs. 5,500,000) of which was repaid in equity shares, US$600,600 (Rs.
26,133,859) of which was repaid in cash, and US$46,000 (Rs. 2,000,000) of which
was repaid in equity shares issued to Diwan Arun Nanda, in accordance with an
agreement between Mr. Ajit Balakrishnan and Diwan Arun Nanda. Diwan Arun Nanda
loaned an aggregate of approximately US$80,400 (Rs. 3,500,000) to us, all of
which was repaid in equity shares.
On April 24, 1998, we issued 2,500,000, 2,500,000 and 5,500,000 equity
shares to Mr. Ajit Balakrishnan, Diwan Arun Nanda, and Rediffusion Advertising
Private Ltd., respectively. Mr. Ajit Balakrishnan and Diwan Arun Nanda each hold
50% of the equity shares of Rediffusion Advertising Private Ltd. The shares were
sold at a price per share of Rs. 2, for an aggregate purchase price of
approximately US$567,714 (Rs. 21,000,000).
TRANSACTIONS WITH CITIBANK, N.A.
In May of 1996, we entered into an agreement with Citibank, N.A., an
affiliate of Citicorp Finance (India) Ltd., one of our shareholders. Under this
agreement, we designed and
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developed Citibank, N.A.'s website. Payments to us under the agreement totaled
approximately US$35,500 (Rs. 1,544,215). Citibank, N.A. currently advertises on
our website. We derived a total of approximately US$16,700 (Rs. 725,000) of
advertising revenues from Citibank, N.A. in the fiscal year ended March 31,
2000. Citibank, N.A. is also our commercial bank and the depositary for our
ADSs.
We have a business arrangement with Citibank, N.A. related to our
e-commerce business, whereby we accept credit card payments from customers using
Citibank, N.A.'s Visa, Mastercard, or private credit card. From October 1999 to
December 1999, we and Citibank, N.A. also engaged in a co-promotion campaign,
whereby we and Citibank, N.A. offer each other's customers free gifts.
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DESCRIPTION OF EQUITY SHARES
GENERAL
Our authorized share capital is 50,000,000 shares, par value Rs. 2 per
share. As of March 31, 2000, 25,375,500 equity shares and options to purchase an
additional 739,750 equity shares were issued and outstanding.
The equity shares are our only class of share capital. However, our Amended
and Restated Articles of Association and the Companies Act 1956, or 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.
PRIOR SHAREHOLDER RIGHTS AGREEMENTS
In connection with our sales of equity shares to our investors from April
1998 through December 1999, we entered into nine separate shareholders rights
agreements with our shareholders which provide for, among other things, certain
preemptive, registration, co-sale and information rights, as well as the right
of some shareholders to appoint members or observers of our Board of Directors.
Some of the agreements also provide the shareholders with protective provisions
that require us to obtain our shareholders' consent to take certain actions that
would otherwise only require our Board's approval.
AMENDED AND RESTATED SHAREHOLDERS' RIGHTS AGREEMENT
On February 24, 2000, in contemplation of this offering, we entered into an
Amended and Restated Shareholders' Rights Agreement with all of our shareholders
to amend, restate, supersede and replace all nine previous shareholder
agreements we entered into with our shareholders. The Amended and Restated
Shareholders' Rights Agreement shall become effective on the completion of this
offering and provides for certain shareholder rights, summarized below.
Registration Rights
Holders of at least 30% of our equity shares can require us, subject to
limitations, to effect a registration or qualification of the securities either
with the Nasdaq National Market, the National Stock Exchange of India or The
Stock Exchange, Mumbai. We are not required to effect:
- more than two such registrations or qualifications pursuant to such
demand registration rights;
- a registration or qualification prior to the earlier of December 31,
2002, or six months after the effective date of any Indian law,
regulation or other governmental order which allows our equity shares to
be offered to the public on an Indian stock exchange; or
- a registration for a period not to exceed 120 days, if our Board of
Directors has made a good faith determination that such registration
would be detrimental to us or our shareholders.
At any time after we become eligible to file a registration statement on
Form F-3, holders of our equity shares may require us to file registration
statements on Form F-3 with respect to their equity shares. We are not required
to effect this registration:
- more than once in a twelve month period;
- unless the registration relates to securities that are valued in excess
of US$1,000,000; or
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- if our Board of Directors has made a good faith determination that such
registration would be detrimental to us or our shareholders.
Each of the foregoing registration rights is subject to conditions and
limitations, including the right of the underwriters in any underwritten
offering to limit the number of equity shares to be included in such
registration. We are required to bear all the expenses of all such
registrations, except underwriting discounts and commissions. The registration
rights with respect to any holder thereof terminate upon the earlier of when the
holder may sell the equity shares within a three month period pursuant to Rule
144 of the Securities Act, or the time when the holder is able to convert the
registrable securities into ADSs which are listed on the Nasdaq National Market.
Other Rights
The Amended and Restated Shareholders' Rights Agreement also provides
certain preemptive, information and co-sale rights to our shareholders.
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
Amended and Restated Articles of Association, although the shareholders may, at
the annual general meeting, approve a dividend in an amount less than that
recommended by the Board of Directors, they cannot increase the amount of the
dividend. In India, dividends generally are declared as a percentage of the par
value of a company's equity shares. Any dividend recommended by the Board of
Directors subject to the limitations described above, will be 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 Amended and Restated Articles of Association, our Board of
Directors 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.
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For additional information, please see "Dividend Policy" on page 23. 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 28.
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 of Directors. 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 of Directors 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.
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 of Directors. Our registered office is
located at 4th Floor, Sterling Centre, Dr. Annie Besant Road, Worli, Mumbai 400
018, 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
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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. 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 Amended and
Restated Articles of Association 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
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. Furthermore, in accordance with the provisions
of Section 111A(2) of the Companies Act, our directors may refuse to register a
transfer of shares 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. Pursuant to Section 111A(3), if a transfer of shares contravenes any of
the provisions of the Indian Securities and Exchange Board of India Act, 1992 or
the regulations issued thereunder or the Indian Sick Industrial Companies
(Special Provisions) Act, 1985 or any other Indian laws, the Company Law Board
may, on application made by the company, a depository incorporated in India, an
investor, the Securities and Exchange Board of India or other parties, direct
the rectification of the register of records. The Company Law Board 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.
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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 Mumbai, which is in the state of Maharashtra,
India. Our registered office is located in Mumbai. 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 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. In
addition, private and unlisted public companies would have to comply with the
Private Limited Company and Unlisted Public Limited Company (Buy-back of
Securities) Rules, 1999, notified by the Ministry of Law, Justice and Company
Affairs of the Government of India on July 6, 1999 and public companies which
are listed on a recognized stock exchange in India would have to comply with the
provisions of the Securities and Exchange Board of India (Buy-back of
Securities) Regulations, 1998, or Buy-back Regulations. Since we are not listed
on any recognized stock exchange in India, we would have to comply with the
relevant provisions of the Companies Act and the Private Limited Company and
Unlisted Public Limited Company (Buy-back of Securities) Rules, 1999.
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 upon
those equity shares. All surplus assets after payments to the holders of any
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preference shares at the commencement of the winding-up shall be paid to holders
of equity shares in proportion to their shareholdings.
PROPOSED AMENDMENTS TO THE INDIAN COMPANIES ACT
Some of the provisions specified above are proposed to be amended by the
Companies Bill, 1999. These include the introduction of specific guidelines
regarding declaration of interim dividends, voting by postal ballot, appointment
of directors by nominee shareholders and removal of requirements to disclose
beneficial ownership of securities under Section 187C of the Companies Act.
These changes will become effective only if the Indian Parliament passes the
Bill and the Bill is published in the Official Gazette of India.
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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 10043. 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 400018.
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 reference to the deposit
agreement and not by reference to 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 bank 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 an owner of ADSs and
those of the depositary bank. As an ADS owner 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 of the United States.
As an owner of ADSs, you may own your ADSs either by means of an ADR
registered in your name or through your 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 "owner." When we refer to "you," we assume the reader owns and
will own ADSs at the relevant time.
DIVIDENDS AND DISTRIBUTIONS
As an ADS owner, 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. ADS owners 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.
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DISTRIBUTIONS OF CASH
Whenever we make a cash distribution for the securities on deposit with the
custodian, we will notify the depositary bank and deposit the cash distribution
with the custodian bank. Upon receipt of the distribution 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 owners in proportion to the number of
ADSs held.
The conversion into U.S. dollars will take place only if practicable and if
the U.S. dollars are freely transferable to the United States. The amounts
distributed to ADS owners will be net of the fees, expenses, taxes and
governmental charges payable by ADS owners 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 EQUITY SHARES
Whenever we make a free distribution of equity shares for the securities on
deposit with the custodian bank, we will notify the depositary bank and deposit
such equity shares with the custodian bank. Upon receipt of such distribution,
the depositary bank will either distribute to ADS owners new ADSs representing
the equity shares deposited or modify the ADS-to-equity share(s) ratio, in which
case each ADS you own 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-equity
share(s) ratio upon a distribution of equity shares will be made net of the
fees, expenses, taxes and governmental charges payable by ADS owners 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
(for example, the U.S. securities laws) or if it is not operationally
practicable. If the depositary bank does not distribute new ADSs or modify the
ADS-to-equity share(s) ratio 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. No such cash distribution can be made if
the depositary bank is unable to sell the equity shares.
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 ADS owners.
The depositary bank will establish procedures to distribute rights to
purchase additional ADSs to ADS owners and to enable such ADS owners to exercise
such rights if it is lawful and reasonably practicable to make the rights
available to ADS owners 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:
- timely request that the rights be distributed to you or we request that
the rights not be distributed to you;
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- we fail to deliver satisfactory documentation 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 ADS owners 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.
OTHER DISTRIBUTIONS
Whenever we intend to distribute property other than cash, equity shares or
rights to purchase additional equity shares, we will timely notify the
depositary bank 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 ADS owners in a manner it
deems practicable.
The distribution will be made net of fees, expenses, taxes and governmental
charges payable by ADS owners 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 timely 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 documentation to the depositary bank; or
- the distribution to you is not reasonably practicable.
The proceeds of such a sale will be distributed to ADS owners 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 as soon as practicable prior to
the intended redemption date. If it is reasonably practicable and if we provide
all of the documentation contemplated in the deposit agreement, the depositary
bank will notify the ADS owners of the redemption.
The custodian will be instructed to surrender the securities 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 ADS owners 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 in connection with 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.
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 re-classification of such equity shares or a
recapitalization, reorganization, merger, consolidation or sale of assets.
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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, then under
current Indian laws and regulations, you will be prohibited from re-depositing
those outstanding equity shares with the depositary bank without prior approval
of the Government of India.
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 bank.
The depositary bank will deliver these ADSs to the person you indicate only
after you obtain all necessary approvals and pay any applicable issuance fees
and any charges and taxes payable for the transfer of the equity shares to the
custodian bank.
The issuance of ADSs may be delayed until the depositary bank or the
custodian bank receives confirmation that all required approvals have been given
and that the equity shares have been duly transferred to the custodian bank. 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 EQUITY SHARES UPON CANCELLATION OF ADSS
As an owner of ADSs, you will be entitled to present your ADSs to the
depositary bank for cancellation and then receive the corresponding number of
underlying equity shares at the custodian bank's offices subject to the laws of
India. In order to withdraw the equity shares 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
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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 representing ADSs 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 ADSs owner, 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.
At our request, the depositary bank will distribute to you any notice of
shareholders' meeting timely 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 an owner of
ADSs, it will endeavor to vote the securities represented by the owner's ADSs in
accordance with such voting instructions. In the event that voting takes place
by a show of hands, the depositary bank will cause the custodian to vote all
deposited securities in accordance with the instructions received from owners of
a majority of the ADSs for which the depositary bank receives 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 (except as described above in the event of a vote by
show of hands).
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FEES AND CHARGES
As an ADS owner, 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
Distribution of ADSs............................... Up to 5c per ADS issued
Distribution of cash dividends or other cash
distributions.................................... Up to 2c per ADS held
Transfer of ADSs................................... $1.50 per certificate presented
</TABLE>
As an ADS owner 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 and
in compliance with regulatory requirements applicable to equity shares
and ADSs;
- 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 owners 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 own 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 provide notice to the owners 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.
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- 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 owners of
ADSs in a non-interest bearing account. At that point, the depositary
bank will have no further obligations to owners other than to account for
the funds then held for the owners of ADSs still outstanding.
BOOKS OF DEPOSITARY
The depositary bank will maintain ADR owner 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 owners 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.
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 deposit 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 owner 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
an owner to benefit from any distribution, offering, right or other
benefit which is made available to holders of
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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 for cancellation. 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 distribution the taxes and
governmental charges payable by owners and may sell any and all property on
deposit to pay the taxes and governmental charges payable by owners. 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 owner. The depositary bank and the custodian bank 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 bank proof of taxpayer
status and residence and such other information as the depositary bank and the
custodian bank may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian bank 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 practicable, 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 practicable 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 practicable and lawful and
distribute the U.S. dollars to the owners for whom the conversion and
distribution is lawful and practical;
- distribute the foreign currency to holders for whom the distribution is
lawful and practicable; and
- hold the foreign currency (without liability for interest) for the
applicable owners.
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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Current investment in Indian securities is regulated by the Indian Foreign
Exchange Regulation Act, 1973. Under Section 29(1)(b) of the Indian Foreign
Exchange Regulation Act, 1973, 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 Indian Foreign Exchange Regulation Act, 1973, 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 Indian Foreign Exchange Regulation Act, 1973, 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. However, the Reserve
Bank of India has issued notifications over the past few years relaxing the
restrictions on foreign investment in Indian companies.
The Indian Foreign Exchange Management Act, 1999 contains provisions
regarding current account convertibility and amendments to the definition of a
resident of India. However some of the existing controls and restrictions on
capital account transactions remain in force. While many of the restrictions
imposed by the Indian Foreign Exchange Regulation Act, 1973 have been relaxed
under this new legislation, the Notifications and Guidelines issued by the
Reserve Bank of India which are not inconsistent with the Indian Foreign
Exchange Management Act, 1999 continue to be in force. Any transaction involving
foreign investment in Indian securities is regulated by the provisions of the
Indian Foreign Exchange Management Act, 1999 and continues to be regulated by
the Reserve Bank of India.
ADR GUIDELINES
Shares of Indian companies represented by ADSs are no longer required to be
approved for issuance to foreign investors by the either Ministry of Finance or
the Reserve Bank of India 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. This change was
effected through the guidelines for ADR and GDR issues by Indian companies
issued by the Ministry of Finance on January 19, 2000 and a notification issued
by the Reserve Bank of India. Hence we do not require the approval of the
Ministry of Finance and the Reserve Bank of India under the Issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt
Mechanism) Scheme, 1993. However, we will be required to furnish full
particulars of the issue, including the underlying equity shares representing
the ADRs, to the Ministry of Finance and the Reserve Bank of India within 30
days of the completion of this offering.
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 owners 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
Currently, due to recent changes in Indian policy, subject to certain
exceptions, foreign direct investment and investment by individuals of Indian
nationality or origin residing outside India, or non-resident Indians, and
overseas corporate bodies at least 60% owned by such persons, or overseas
corporate bodies, in Indian companies do not require the approval of the
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Foreign Investment Promotion Board, or FIPB, is a body formed by the Government
of India to negotiate with large foreign companies interested in making
long-term investments in India. Furthermore, henceforth no prior approval of the
Reserve Bank of India is required although a post-investment declaration in
giving details of the foreign investment in the company pursuant to the ADR
issue must be filed with the Reserve Bank of India within thirty days of our ADR
offering.
In cases where FIPB approval is obtained, no prior approval of the Reserve
Bank of India is required, although a declaration in the prescribed form as
mentioned above must be filed with the Reserve Bank of India once the foreign
investment is made in the Indian company. In cases where no prior approval of
the FIPB is required, prior approval of the Reserve Bank of India would also not
be required. However, a declaration in the prescribed form giving details of the
foreign investment must be filed with the Reserve Bank of India once the foreign
investment is made in the Indian company.
Under the current regime we do not require the prior approval of the FIPB,
however, prior to this change we applied for and received the prior approval of
the Reserve Bank of India.
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.
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.
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.
The discussion on the foreign direct investment regime in India set forth
above applies only to a new issuance of shares made by Indian companies, not to
a transfer of shares.
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, which are at least 60% owned by such persons. 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 in the
section titled "--Foreign Direct Investment" on page 80.
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.
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 securities of listed and unlisted companies in India pursuant to the
portfolio investment route. 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 Indian Foreign Exchange
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Regulation Act, 1973. Foreign institutional investors must also comply with the
provisions of the Securities and Exchange Board of India (Foreign Institutional
Investors) Regulations, 1995, or foreign institutional investor regulations.
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 Indian Foreign Exchange Regulation Act, 1973.
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. The foreign
institutional investor regulations also set out the general obligations and
responsibilities and investment conditions and restrictions applicable to
foreign institutional investors. One such restriction is that unless the foreign
Institutional Investor is registered as a debt fund with the Securities 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 a foreign
institutional investor in India.
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 82.
OWNERSHIP RESTRICTIONS
Foreign Institutional Investors, Non-Resident Indians and Overseas Corporate
Bodies
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. 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. Under current Indian law, foreign institutional investors
in the aggregate may hold no more than 24% 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 24% limit referred to above may be increased to 40% if the
shareholders of the company pass a special resolution to that effect. 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.
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.
Takeover Code
Under the Securities and Exchange Board of India (Substantial Acquisition
of Shares and Takeovers) Regulations, 1997, or takeover regulations, approved by
the Securities and Exchange Board of India in January 1997 and notified by the
Government of India in February 1997, 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
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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 owner will be
subject to the new regulations. However, since Rediff.com India Limited is an
unlisted company, the provisions of the takeover regulations will not apply to
us. If our shares are listed on an Indian stock exchange in the future, the
takeover regulations will apply to the owners 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 (under the portfolio investment
route) 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
Currently under Indian regulations we are not required to obtain the prior
approval of the Ministry of Finance and the Reserve Bank of India for this
offering. However, we will be required to furnish full particulars of the issue,
including the number of ADSs issued, the percentage of the foreign shareholding
in Rediff.com subsequent to this offering and detailed parameters of the issue
to the Ministry of Finance and the Reserve Bank of India within 30 days of this
offering. In addition to the details mentioned above, we will be required to
file details of the listing arrangements, total amount raised, the amount
retained abroad and other relevant details regarding the launching and initial
trading of the ADSs with the Reserve Bank of India. We are also required to
furnish to the Reserve Bank of India, the capital structure of Rediff.com prior
to this offering as well as the capital structure after this offering, within 30
days of this offering. We are also required to inform the Reserve Bank of India
of any repatriation of issue proceeds held abroad immediately on such
repatriation. 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. For additional information, please see
"Taxation -- Indian Taxation" on page 88. Copies of the approvals from the
Ministry of Industry and the letter from the Ministry of Finance stating that
the approval of the Ministry of Finance will not be required for this offering
will be made available for public inspection at our corporate office or provided
upon written request to our Chief Financial Officer.
On January 20, 2000, the Reserve Bank of India issued a notification under
the provisions of the Indian Foreign Exchange Regulation Act, 1973 relaxing the
requirement of prior approval for an Indian company issuing ADS, provided that
the issuing company is eligible to issue ADSs in terms of the guidelines issued
by the Ministry of Finance and the issuing company has the necessary approval
from the Foreign Investment Promotion Board. We satisfy both the criteria
mentioned above and hence we will not be required to obtain the prior approval
of the Reserve Bank of India for this offering. Through this notification the
Reserve Bank of India has also granted general permission for the following:
- 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, through an Authorized Dealer, 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 export the equity shares from India for transfer thereof outside of
India upon withdrawal from the depositary facility; and
The Reserve Bank of India has granted general permission for 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 resident of India. Currently investment in Indian securities is
regulated by the Foreign Exchange Regulation Act, 1973, which may be replaced by
the Indian Foreign Exchange Management Act, 1999. For additional information,
please see "Restrictions on Ownership of Indian Securities" on page 82. Pursuant
to the Indian Foreign Exchange Regulation Act, 1973, a resident of 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 resident of India require
approval from the Reserve Bank of
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India under Section 19(5) of the Indian Foreign Exchange Regulation Act, 1973.
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. For additional information, please see
"Taxation -- Indian Taxation -- Taxation of Distributions" on page 88. Since our
equity shares are not presently listed in India, 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.
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 an 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 resident of India would require additional approvals to be obtained from the
Reserve Bank of India. Under current regulations and practice, since we are not
listed on any recognized stock exchange in India, a non-resident of India
intending to sell our securities within India or to a resident of 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 resident of 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 seeking for an exemption from the provisions of the Companies Act, 1956
which make it mandatory for a company making a public offering to distribute a
prospectus within India. 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 Mumbai, in the state Maharashtra. Our registered
office is located in Mumbai.
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.
However, we may be required to list the equity shares on Indian Stock Exchanges
within three years from the time we first earn profits.
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TAXATION
INDIAN TAXATION
General. The following is based on the opinion of Nishith Desai Associates
regarding the principal Indian tax consequences for ADS owners and equity shares
received upon withdrawal of such equity shares by the owners who are not
resident in India, whether of Indian origin or not and resident employees of our
company who receive the employee stock options linked to the ADSs pursuant to an
employee stock option plan, or ESOP. We refer to these persons as non-resident
owners. The following is based on the provisions of the Indian Income-tax Act,
1961, or Income-Tax Act, including the special tax regime contained in Section
115AC and 115ACA of the Income-tax Act read with the Issue of Foreign Currency
Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism)
Scheme, 1993, as amended by the Notification issued by the Ministry of Finance,
F. No. 1517199-NRI dated January 19, 2000, hereafter referred to as the Issue of
Foreign Currency Convertible Bonds and Ordinary Shares Scheme. 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 Sections 115AC and 115ACA may be amended or
changed by future amendments of the Income-tax Act.
This opinion is valid as of the date hereof and is not intended to
constitute a complete analysis of the individual tax consequences to
non-resident owners or resident employees under Indian law for the acquisition,
ownership and sale of ADSs and equity shares by non-resident owners or resident
employees. Personal tax consequences of an investment may vary 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, 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 (regardless of whether such shareholders
are resident in India or not) no longer applies. However, the company paying the
dividend is subject to a dividend distribution tax of 11% including the
presently applicable surcharge, on the total amount it distributes, declares or
pays as a dividend in addition to the normal corporate tax.
Any distributions of additional ADSs or equity shares made to resident or
non-resident owners will not be subject to Indian tax. Redemption of ADSs for
the underlying equity shares is not a taxable event. Therefore, the appreciation
in value of the underlying equity shares from the sale price of ADSs to the
price at the time of the conversion into equity shares is not taxable in India.
Taxation of Capital Gains. Any gain realized on the sale of our ADSs by a
non-resident owner to any non-resident outside India is not subject to Indian
capital gains tax.
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Since the offering falls within the Issue of Foreign Currency Convertible
Bonds and Ordinary Shares Scheme, non-resident owners of the ADSs will have the
benefit of tax concessions available under Section 115AC of the Income Tax Act,
and resident employees will have the benefit of tax concessions available under
Section 115ACA of the Income Tax Act. Under these sections, taxable gain
realized on the sale of equity shares held for more than 12 months, or long-term
gain, is subject to tax at the rate of 10% in the case of non-residents and 11%
(including the presently applicable surcharge) in the case of resident
employees. Taxable gain realized on the sale 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% in the case of a foreign company, 30% in the case of individuals and
33% (including the presently applicable surcharge) in the case of resident
employees.
The capital gains tax is computed by applying these rates to the difference
between the sale price and the purchase price of the equity shares.
Under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares
Scheme, the purchase price of equity shares received in exchange for ADSs will
be the price 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 purchase price
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 and Section 115ACA do not
provide a basis for determining the purchase price 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. Therefore, in the case of
our company, which is not listed on either the Stock Exchange, Mumbai, or the
National Stock Exchange, the determination of the purchase price of equity
shares is unclear. Hence, the original purchase price of the ADSs may be treated
as the purchase price for purposes of computing capital gains.
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 for equity shares
received in exchange for ADSs begins on the date of the notice of the redemption
by the depositary to the custodian. 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 for rupees, they will no longer be eligible
for the preferential tax treatment.
It is unclear whether the preferential tax treatment under sections 115AC
and 115ACA and the Issue of Foreign Currency Convertible Bonds and Ordinary
Shares Scheme 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 preferential 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 in the section titled
"Customary Capital Gains Tax" below.
Subscription rights or other rights attached to the ADSs are not expressly
covered by Sections 115AC and Section 115ACA. It is therefore unclear whether
capital gains derived from the sale of subscription rights or other rights by a
non-resident holder not entitled to an exemption under a tax treaty or a
resident holder to any non-resident outside India will be subject to Indian
capital gains tax. If such subscription rights or other rights are deemed by the
Indian tax authorities to be situated within India, the gains realized on the
sale of such subscription rights or other rights will be subject to customary
Indian taxation on capital gains as discussed in the section titled "Customary
Capital Gains Tax" below.
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Customary Capital Gains Tax: If Sections 115AC and 115ACA are not
applicable, then a tax rate of 20% and 22% (including the presently applicable
surcharge) applies to long-term capital gains earned by non-residents and
resident employees, respectively, in case of sale of shares of an unlisted
company. The short-term gains are subject to tax at variable rates with a
maximum rate of 48% in case of a foreign company, 30% in case of non-resident
individuals, and 33% (including the presently applicable surcharge) in case of
resident employees.
Non-resident holders will be able to avail themselves of the benefit of
exchange rate fluctuations for computing customary gains tax.
Changes proposed by the Finance Bill 2000. On February 29, 2000, the
Minister of Finance presented the Finance Bill, 2000 to Parliament for final
enactment. The Finance Bill, 2000 contains certain changes to the provisions
described above. We believe the Finance Bill, 2000 will be enacted by Parliament
by the end of May 2000. If enacted, the Finance Bill, 2000 will be retroactively
effective as of April 1, 2000.
The changes proposed by the Finance Bill, 2000 include:
- Increasing the tax payable by a company on any dividends it distributes,
declares or pays to 22% (including the currently applicable surcharge).
- Increasing the surcharge on the long term capital gains tax for employees
from 10% to 15%, in the case of individuals with taxable income greater
than $3,436 (Rs. 150,000), bringing the total applicable rate up to 11%.
- Increasing the surcharge on the short term capital gains tax for
employees from 10% to 15%, in the case of individuals with taxable income
greater than $3,436 (Rs. 150,000, bringing the applicable rate up to
34.5%.
- Increasing the customary capital gains tax for resident employees from
22% to 23%, in the case of individuals with taxable income greater than
$3,436 (Rs. 150,000).
Withholding Tax on Capital Gains. Subject to any relief provided pursuant
to an applicable tax treaty, any gains realized on the sale, inside India, of
equity shares to a non-resident, will be subject to Indian capital gains tax,
which must be withheld at the source by the buyer. The current India-U.S. tax
treaty does not provide for an exemption from Indian capital gains tax.
Buy-back of Securities. 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 resulting gain. In this case the company would be required to withhold
tax at the source in accordance with the capital gains tax liability of the
non-resident shareholder.
Stamp Duty and Transfer Tax. Upon issuance of the equity shares underlying
our ADSs, we will be required to pay a stamp duty of 0.1% per share of the issue
price of the underlying equity shares. A transfer of ADSs is not subject to
Indian stamp duty. However, upon the acquisition of equity shares from the
depositary in exchange for ADSs, the non-resident owner, or the resident
employee, as the case may be, 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 or a resident employee, 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 resident employees or
non-resident owners and the holding of the underlying equity shares by the
depositary as a fiduciary will be exempt from Indian wealth tax. Non-resident
owners are advised to consult their own tax advisers in this context.
Gift Tax and Estate Duty. Gift tax was abolished in India effective as of
October 1998, although it may be restored in the future. Estate duty was
abolished in India effective as of March
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1985. As a result, no estate duty will applicable to resident or non-resident
owners. Non-resident owners are advised to consult their own tax advisors in
this context.
Service Tax. Brokerage fees or commissions paid to stock brokers in
connection with the sale or purchase of shares are subject to a service tax of
5%. The stock broker is responsible for collecting the service tax from the
shareholder and paying it to the relevant authority.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO INDIAN AND LOCAL TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING OF EQUITY
SHARES OR ADSS.
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 own equity shares or ADSs as capital assets
and owners that are not U.S. persons. We refer to these persons as U.S. owners
and non-U.S. owners, respectively. This summary does not address tax
considerations applicable to owners 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 owners 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 owners
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. owner 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. owners. 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. owner 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
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holding at least 10% of the Indian company paying the dividends. U.S. owners
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. owner 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. owner, 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.
A non-U.S. owner 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. owner 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.
owner'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. owner 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.
owner of a trade or business in the U.S.; or
- in the case of any gain realized by an individual non-U.S. owner, 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 owner 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 owner included in his or her gross estate
for U.S. federal estate tax purposes. An individual owner 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. owner, other than an "exempt recipient," including a corporation, a
payee that is a non-U.S. owner 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 an owner, other
than an "exempt recipient," if such owner fails to furnish its correct taxpayer
identification number or otherwise fails to comply with such backup withholding
requirements.
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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.
Based on our current projections we do not believe that we satisfy either
of the tests for passive foreign investment company status. However, the
determination of whether we are a passive foreign investment will depend on
facts and circumstances relating to future operations. If we were to be a
passive foreign investment company for any taxable year, U.S. owners 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;
- 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 or equity
shares for future sale will have on the market price of the ADSs prevailing from
time to time. Nevertheless, sales of substantial amounts of ADSs or equity
shares in the public market or otherwise, 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 market price of
our ADSs" on page 5.
Upon the closing of this offering, we will have an aggregate of -- equity
shares outstanding, assuming no exercise of the underwriters' overallotment
option or outstanding employee stock options. Of the outstanding equity shares,
the ADSs sold in this offering will be freely tradable, except that any ADSs
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 under the Securities Act,
other than the 1,612,500 shares issued to Intel Corporation, which were issued
pursuant to Regulation D under the Securities Act. None of these shares may,
under present law, be converted into ADSs without approval by the Government of
India. 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.
On February 24, 2000, we entered into an Amended and Restated Shareholders'
Rights Agreement with all of our shareholders relating to equity shares of our
company owned by them. Commencing 180 days after the completion of this
offering, holders of the majority of our outstanding equity shares may make up
to two requests for our company to register their equity shares for trading on a
recognized national stock exchange in the United States or India.
All of our officers, directors and substantially all of our shareholders
have signed a lock-up agreement under which they have agreed not to transfer or
dispose of, directly of indirectly, or engage in hedging transactions with
respect to any shares or any securities convertible into or exercisable or
exchangeable for shares, for a period of 180 days after the date of this
prospectus. Transfers or dispositions can be made sooner:
- with the prior written consent of Rediff.com and Goldman, Sachs & Co.;
- in the case of transfers to some affiliates;
- as a bona fide gift; or
- to any trust.
92
<PAGE> 95
UNDERWRITING
We and the underwriters named below have entered into an underwriting
agreement with respect to the ADSs being offered. Subject to the conditions set
forth in the underwriting agreement, each underwriter has severally agreed to
purchase the number of ADSs indicated in the table below. Goldman, Sachs & Co.,
Credit Suisse First Boston Corporation and Robert Fleming Inc. are the
representatives of the underwriters.
<TABLE>
<CAPTION>
Underwriters Number of ADSs
------------ --------------
<S> <C>
Goldman, Sachs & Co.........................................
Credit Suisse First Boston Corporation......................
Robert Fleming Inc. ........................................
--........................................................
--------
Total..................................................... --
========
</TABLE>
If the underwriters sell more ADSs than the total number set forth in the
table above, the underwriters have the option to buy up to an additional -- ADSs
from Rediff.com India Limited to cover such sales. They may exercise that option
for 30 days. If any ADSs are purchased pursuant to this option, the underwriters
will severally purchase ADSs in approximately the same proportion as set forth
in the table above.
The following table shows the per ADS and total underwriting discounts and
commissions to be paid to the underwriters by us. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase -- additional ADSs.
<TABLE>
<CAPTION>
Paid by Rediff
----------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per ADS...............................................
-------- --------
Total...............................................
======== ========
</TABLE>
ADSs sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
ADSs sold by the underwriters to securities dealers may be sold at a discount of
up to US$ per ADS from the initial public offering price. Any of
such securities dealers may resell any securities purchased from the
underwriters to other brokers or dealers at a discount of up to
US$ per ADS from the initial public offering price. If all the
ADSs are not sold at the initial public offering price, the representatives may
change the offering price and the other selling terms.
We have been advised by the underwriters that certain of the underwriters
are expected to make offers and sales both inside and outside of the United
States through their respective selling agents.
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.
Our company, each of our executive officers and directors and substantially
all of our shareholders have agreed not to offer, sell, contract to sell or
otherwise dispose of or hedge 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, except with the prior
written consent of Rediff.com and Goldman, Sachs & Co. See "Shares Eligible for
Future Sales" on page 93 for a discussion of certain transfer restrictions.
Each underwriter has represented and agreed that (1) it has not offered or
sold and prior to the date six months after the date of issue of the ADSs will
not offer or sell any ADSs to
93
<PAGE> 96
persons in the United Kingdom, except to persons whose ordinary activities
involve in them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances that 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 complied, and will comply with, all
applicable provisions of the Financial Services Act 1986 of Great Britain 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 issuance 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 of Great Britain or is a person to whom the document may
lawfully be issued or passed on.
Each underwriter has acknowledged 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, 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. As part of the offering, the underwriters may offer ADSs in Japan
to a list of 48 offerees in accordance with the above provisions.
This prospectus has not been delivered for registration to the Registrar of
Companies in Hong Kong and, accordingly, must not be issued, circulated or
distributed in Hong Kong other than to persons whose ordinary business it is to
buy or sell shares or debentures, whether as principal or agent, within the
meaning of the Hong Kong Companies Ordinance or in circumstances which do not
constitute an offer to the public for the purposes of the Hong Kong Companies
Ordinance. Unless permitted by the securities laws of Hong Kong, no person may
issue or cause to be issued in Hong Kong this prospectus or any amendment or
supplement hereto or other invitation, advertisement or document relating to the
shares of common shares to anyone other than a person whose business involves
the acquisition and disposal, or holding, of securities whether as principal or
agent.
Each of the underwriters acknowledges that this prospectus has not been
registered as a prospectus with the Registrar of Companies and Businesses in
Singapore. Accordingly, each of the underwriters represents and agrees that it
has not offered or sold, and will not offer or sell, any ADSs, nor will it
circulate or distribute this Prospectus or any other offering document or
material relating to the ADSs, directly or indirectly, to the public or any
member of the public in Singapore other than (i) to an institutional investor or
other person specified in Section 106C of the Companies Act, Chapter 50 of
Singapore, or the Singapore Companies Act, (ii) to a sophisticated investor, and
in accordance with the conditions, specified in Section 106D of the Singapore
Companies Act, or (iii) otherwise pursuant to, and in accordance with the
conditions of, any applicable provision of the Singapore Companies Act.
Each 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 the 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 not permitted to purchase the
ADSs under applicable laws.
No action has been or will be taken in any jurisdiction other than the
United States that would permit a public offering of the ADSs or the possession,
circulation or distribution of this prospectus in any jurisdiction where action
for that purpose is required. Accordingly, the ADSs may not be offered or sold,
directly or indirectly, and neither this prospectus nor any other offering
material or advertisements in connection with the ADSs may be distributed or
published in or from any country or jurisdiction except under circumstances that
will result in compliance with any applicable rules and regulations of any such
country or jurisdiction.
94
<PAGE> 97
Pursuant to a directed shares program, at the request of Rediff.com India
Limited, the underwriters have reserved up to -- ADSs for sale at our request to
certain family members of employees, as well as individuals with whom we have
had business associations in the past or may seek business associations in the
future, at the same price and on the same terms as the shares sold by the
underwriters to the general public. In addition, pursuant to an affinity
marketing program, at the request of Rediff.com India Limited, the underwriters
have reserved up to -- ADSs for sale at our request to approximately 2,300
subscribers to Rediff.com 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. There can be no assurance that any of the reserved shares will be so
purchased. Any reserved ADSs not so purchased will be offered by the
underwriters on the same basis as the other ADSs offered hereby.
A prospectus in electronic format may be made available on the web sites
maintained by one or more underwriters or securities dealers. The
representatives of the underwriters may agree to allocate a number of ADSs to
the underwriters for sale to their online brokerage account holders. ADSs to be
sold pursuant to an Internet distribution will be allocated by the
representatives to the underwriters that may make Internet distributions on the
same basis as other allocations. In addition, ADSs may be sold by the
underwriters to securities dealers who resell ADSs to online brokerage account
holders.
Prior to the offering, there has been no public market for our equity
shares and ADSs. The initial public offering price will be negotiated between
Rediff.com India Limited and the representatives. Among the factors to be
considered in determining the initial public offering price of our ADSs, in
addition to prevailing market conditions, will be our historical performance,
estimates of our business, potential and earnings prospects, an assessment of
our management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
We have made application to have our ADSs approved for quotation on the
Nasdaq National Market under the symbol "REDF".
In connection with the offering, the 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.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discounts and commissions received by it because the representatives have
repurchased ADSs sold by or for the account of such underwriter in stabilizing
or short covering transactions.
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, they 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.
The underwriters do not expect sales to discretionary accounts to exceed
-- percent of the total number of shares offered.
The expenses of the offering, exclusive of the underwriting discount and
commissions, are estimated at US$-- million and are payable by us.
95
<PAGE> 98
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.
96
<PAGE> 99
VALIDITY OF SECURITIES
The validity of the ADSs offered hereby will be passed upon for Rediff.com
India Limited by Wilson Sonsini Goodrich & Rosati, Palo Alto, California. The
validity of the equity shares represented by the ADSs offered hereby and the
principal Indian tax consequences for owners of ADSs and equity shares received
upon withdrawal of such equity shares who are not resident in India will be
passed upon by Nishith Desai Associates, Mumbai, India, Indian counsel for
Rediff.com India Limited. The validity of the ADSs offered hereby will be passed
upon on behalf of the underwriters by Sullivan & Cromwell, New York, New York,
and certain legal matters as to Indian law will be passed upon for the
underwriters by Amarchand & Mangaldas & Suresh A. Shroff & Co., Mumbai, India.
Wilson Sonsini Goodrich & Rosati may rely upon Nishith Desai Associates with
respect to matters governed by Indian law.
EXPERTS
The U.S. GAAP financial statements of Rediff.com India Limited as of March
31, 1998, 1999 and 2000 have been included herein in reliance upon the report of
Deloitte Haskins & Sells, India, Chartered Accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in auditing and
accounting.
CHANGE OF ACCOUNTANTS
Effective September 1998, we decided to replace Patkar & Pendse with
Deloitte Haskins & Sells, Chartered Accountants, as our external auditors. The
decision to change auditors from Patkar & Pendse to Deloitte Haskins & Sells was
approved by our board of directors and at the annual general meeting held on
September 22, 1998.
We believe, and have been advised by Patkar & Pendse that it concurs in
such belief, that, in connection with the audits of the fiscal years in the
period ended March 31, 1998, there were no disagreements between us and Patkar &
Pendse 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 Patkar & Pendse, would have caused them to make reference
to the matter in their report on our financial statements. The audit reports of
Patkar & Pendse for our financial statements 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, audit scope or
accounting principles.
97
<PAGE> 100
WHERE YOU CAN FIND MORE 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. For
further information with respect to our company and the ADSs offered by this
prospectus, please refer to the registration statement on Form F-1. In addition,
wherever a reference is made in this prospectus to a contract or other document
of our company, please be aware that such reference is not necessarily complete
and that you should refer to the exhibits and schedules that are part of the
registration statement for a copy of the contract or other document.
You may read and copy all or any portion of the registration statements 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."
98
<PAGE> 101
REDIFF.COM INDIA LIMITED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of March 31, 1999 and 2000................ F-3
Statements of Operations for each of the years ended March
31, 1998, 1999 and 2000................................... F-4
Statements of Shareholders' Equity (Deficit) for each of the
years ended March 31, 1998, 1999, and 2000................ F-5
Statements of Cash Flows for each of the years ended March
31, 1998, 1999 and 2000................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 102
The accompanying financial statements do not give effect to the reverse
split of the Company's capital, which was effected on May 3, 2000 and which will
be reflected in the next Amendment of this Registration Statement. The following
report is in the form which will be furnished by Deloitte Haskins & Sells upon
such change being made in the Company's financial statements and assuming that
from May 3, 2000 to the date of the next Amendment filed no other material
events have occurred that would affect the accompanying financial statements,
the required disclosures therein.
/s/ DELOITTE HASKINS & SELLS
Dated: May 3, 2000
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Rediff.com India Limited
We have audited the accompanying balance sheets of Rediff.com India
Limited, (the "Company") as of March 31, 1999 and 2000, and the related
statements of operations, cash flows and shareholders' equity (deficit) for each
of the years ended March 31, 1998, 1999 and 2000. 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 auditing standards generally
accepted in the United States of America. 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 Rediff.com India Limited as
of March 31, 1999 and 2000, and the results of its operations and its cash flows
for each of the years ended March 31, 1998, 1999 and 2000 in conformity with
accounting principles generally accepted in the United States of America.
As described in Note 2(a), these financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America, which differ in certain material respects from accounting principles
generally accepted in India, which form the basis of the Company's general
purpose financial statements.
F-2
<PAGE> 103
REDIFF.COM INDIA LIMITED
BALANCE SHEETS
AS OF MARCH 31, 1999 AND 2000
<TABLE>
<CAPTION>
MARCH 31,
------------------------------
1999 2000
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................. US$ 247,363 US$11,575,827
Trade accounts receivable,
(net of allowances of US$63,211 and US$50,389 at
March 31, 1999 and 2000, respectively)........... 337,686 827,216
Prepaid expenses and other current assets............. 175,879 1,670,908
Prepaid income taxes.................................. 32,235 60,635
------------- -------------
Total current assets............................. 793,163 14,134,586
Property, plant and equipment -- net.................... 279,424 1,789,674
Investments available for sale.......................... -- 137,612
------------- -------------
TOTAL ASSETS..................................... US$ 1,072,587 US$16,061,872
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable...................................... US$ 315,208 US$ 3,021,777
Other accrued liabilities............................. 7,751 7,053
Unearned revenues..................................... 13,383 311,223
Loans payable to related parties...................... 449,257 --
------------- -------------
Total current liabilities........................ 785,599 3,340,053
Commitments and contingencies......................... -- --
SHAREHOLDERS' EQUITY
Equity shares: par value -- Rs.2
Authorized: 25,000,000 shares and 50,000,000 shares at
March 31, 1999 and 2000, respectively; Issued and
outstanding: 18,113,500 shares and 25,375,500
shares at March 31, 1999 and 2000, respectively
(See Note 7)....................................... 901,705 1,236,913
Additional paid in capital............................ 1,183,501 19,945,342
Accumulated deficit................................... (1,897,858) (8,563,555)
Cumulative translation adjustment..................... 99,640 103,119
------------- -------------
TOTAL SHAREHOLDERS' EQUITY.............................. 286,988 12,721,819
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. US$ 1,072,587 US$16,061,872
============= =============
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE> 104
REDIFF.COM INDIA LIMITED
STATEMENTS OF OPERATIONS
FOR EACH OF THE YEARS ENDED MARCH 31, 1998, 1999 AND 2000
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------------
1998 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING REVENUES
Advertising and services........................... US$ 515,689 US$ 785,410 US$ 1,464,648
E-commerce......................................... -- 69,424 441,452
------------- ------------- -------------
Total revenues..................................... 515,689 854,834 1,906,100
COST OF REVENUES..................................... 175,079 321,017 952,559
------------- ------------- -------------
Gross profit......................................... 340,610 533,817 953,541
------------- ------------- -------------
OPERATING EXPENSES
Sales and marketing................................ 144,479 388,817 5,275,918
Product development................................ 152,266 306,797 866,170
General and administrative......................... 395,727 849,598 1,726,532
------------- ------------- -------------
Total operating expenses........................... 692,472 1,545,212 7,868,620
------------- ------------- -------------
Loss from operations................................. (351,862) (1,011,395) (6,915,079)
Other income......................................... -- 31,138 252,838
------------- ------------- -------------
Loss before income taxes............................. (351,862) (980,257) (6,662,241)
Provision for income taxes........................... -- (4,346) (3,456)
------------- ------------- -------------
NET LOSS............................................. US$ (351,862) US$ (984,603) US$(6,665,697)
============= ============= =============
Weighted average number of equity shares -- basic.... 9,079,905 15,972,920 21,913,737
============= ============= =============
Weighted average number of equity shares --diluted... 9,079,905 15,972,920 21,944,273
============= ============= =============
Loss per share -- basic and diluted.................. US$ (0.04) US$ (0.06) US$ (0.30)
============= ============= =============
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 105
REDIFF.COM INDIA LIMITED
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR EACH OF THE YEARS ENDED MARCH 31, 1998, 1999 AND 2000
<TABLE>
<CAPTION>
EQUITY SHARES
(SEE NOTE 7) ADVANCES
------------------------- ADDITIONAL OTHER RECEIVED
NUMBER PAID IN COMPREHENSIVE FOR EQUITY ACCUMULATED
OF SHARES AMOUNT CAPITAL INCOME SHARES DEFICIT TOTAL
---------- ------------ ------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, AS OF APRIL 1,
1997................. 1,000 US$ 59 US$ -- US$ 1,952 US$ 315,570 US$ (561,393) US$ (243,812)
Advances received for
equity shares........ 289,965 289,965
Net loss............... (351,862) (351,862)
Other comprehensive
income-translation
adjustment........... 42,141 42,141
---------- ------------ ------------- ---------- ----------- ------------- -------------
BALANCE, AS OF MARCH
31, 1998............. 1,000 US$ 59 US$ -- US$ 44,093 US$ 605,535 US$ (913,255) US$ (263,568)
Refund of surplus
advances received for
equity shares........ (37,821) (37,821)
Conversion of advances
received for equity
shares into equity
shares............... 10,500,000 567,714 (567,714) --
Issue of new equity
shares net of
expenses............. 7,612,500 333,932 1,040,712 1,374,644
Stock based
compensation
expense.............. 142,789 142,789
Net loss............... (984,603) (984,603)
Other comprehensive
income-translation
adjustment........... 55,547 55,547
---------- ------------ ------------- ---------- ----------- ------------- -------------
BALANCE, AS OF MARCH
31, 1999............. 18,113,500 US$ 901,705 US$ 1,183,501 US$ 99,640 US$ -- US$(1,897,858) US$ 286,988
Issue of new equity
shares net of
expenses............. 7,262,000 335,208 18,761,841 19,097,049
Net loss............... (6,665,697) (6,665,697)
Other comprehensive
income-translation
adjustment........... 3,479 3,479
---------- ------------ ------------- ---------- ----------- ------------- -------------
BALANCE, AS OF MARCH
31, 2000............. 25,375,500 US$1,236,913 US$19,945,342 US$103,119 US$ -- US$(8,563,555) US$12,721,819
========== ============ ============= ========== =========== ============= =============
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE> 106
REDIFF.COM INDIA LIMITED
STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS ENDED MARCH 31, 1998, 1999 AND 2000
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------------------------
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. US$(351,862) US$ (984,603) US$(6,665,697)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 30,471 72,570 229,344
Loss on sale of property, plant and equipment........... -- -- 4,246
Stock based compensation expense........................ -- 142,789 --
Changes in assets and liabilities:
Trade accounts receivable............................. (127,855) (203,164) (489,530)
Prepaid expenses and other current assets............. (95,254) (5,099) (1,495,029)
Accounts payable...................................... 188,970 66,954 2,706,569
Other accrued liabilities............................. 1,035 6,043 (698)
Unearned revenues..................................... -- 13,383 297,840
Prepaid income taxes.................................. (11,372) (19,811) (28,400)
----------- ------------ -------------
Net cash used in operating activities............... (365,867) (910,938) (5,441,355)
----------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment................ (121,182) (195,708) (1,754,322)
Purchases of available for sale investments............... -- -- (137,612)
Proceeds from sale of property, plant and equipment....... -- -- 10,482
----------- ------------ -------------
Net cash used in investing activities............... (121,182) (195,708) (1,881,452)
----------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans from related parties.................. 194,150 -- 163,660
Repayment of loans to related parties..................... -- -- (612,917)
Net proceeds from issue of equity shares and advances
received for equity shares.............................. 289,965 1,313,336 19,097,049
----------- ------------ -------------
Net cash provided by financing activities........... 484,115 1,313,336 18,647,792
----------- ------------ -------------
Effect of exchange rate changes on cash..................... 11,320 20,629 3,479
Net increase in cash and cash equivalents................... 8,386 227,319 11,328,464
Cash and cash equivalents at the beginning of the year...... 11,658 20,044 247,363
----------- ------------ -------------
Cash and cash equivalents at the end of the year............ US$ 20,044 US$ 247,363 US$11,575,827
=========== ============ =============
Supplemental disclosure of cash flow information:
U.S. Federal Income taxes paid............................ US$ -- US$ 798 US$ 50
Supplemental disclosure of non-cash activity:
Repayment of long term loan to related parties through
issuance of equity shares............................... US$ -- US$ 23,487 US$ --
Barter transaction included as revenue and expense (See
Note 2(c)).............................................. US$ -- US$ -- US$ 9,813
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE> 107
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Rediff.com India Limited (the "Company") was incorporated in India on
January 9, 1996 as Rediff Communication Private Limited under the Indian
Companies Act, 1956. It was converted to a public limited Company on May 29,
1998. The Company's name was changed on February 15, 2000.
The Company is one of the leading Internet portals focusing on India and
Indians worldwide. Its website consists of interest specific channels relevant
to Indian interests including cricket and movies, extensive community features
including e-mail and chat, and e-commerce offerings. The company also offers
broadband and wireless content to users who have access to these services.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States ("US GAAP"). All
amounts have been stated in U.S. dollars. US GAAP differs in certain material
respects from accounting principles generally accepted in India, which form the
basis of the Company's general-purpose financial statements.
(b) 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 on 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.
(c) REVENUE RECOGNITION
ADVERTISING AND SERVICES
Revenue from banners and sponsorships is recognized ratably over the
contractual period of the advertisement, commencing when the advertisement is
placed on the website. Revenues are also derived from sponsor buttons placed in
specific areas of the Company's website, which generally provides users with
direct links to sponsor websites. These revenues are recognized ratably over the
period in which the advertisement is displayed, provided that no significant
Company obligations remain and collection of the resulting receivable is
probable. Company obligations may include guarantees of a minimum number of
impressions, or times, that an advertisement appears in pages viewed by users of
the Company's portal. To the extent that minimum guaranteed impressions are not
met, the Company defers recognition of the corresponding revenues until the
guaranteed impression levels are achieved.
The Company also earns revenues on sponsorship contracts for fees relating
to the design, coordination, and integration of the customers' content. Revenue
related to the design, coordination and integration of the customer's content is
recognized ratably over the term of the contract.
Website development services principally comprise services relating to the
designing a client's Internet strategy, marketing approach and assistance with
graphics, layout, artwork and content of the client's website. Revenue from such
services is recognized upon completion of
F-7
<PAGE> 108
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
milestones specified in the contract. At each such milestone, the services are
either billed or billable, and as they relate to completed work, are earned.
E-COMMERCE
Revenue from e-commerce activities primarily consists of sales of books,
music, movie tickets, apparel, confectionaries and gift items to retail
customers who shop at the Company's online store. The Company sources these
products from a network of vendors with whom it has established contractual
relationships relating to terms of supply and pricing. When a customer places an
order with the Company, the Company places a corresponding order with the
appropriate vendor. Once the goods are dispatched by the vendor, the Company
books a receivable (from the customer in the case of C.O.D. orders, or from the
Company's bank or credit card processing agent, in the case of credit card
orders), and a payable to the vendor. Upon dispatch of the goods, the Company
normally takes on inventory and credit risk, as well as an obligation to pay the
vendor. The Company therefore must bear losses related to undelivered, damaged
or returned goods. The Company controls the selling price to the customer. The
Company is the "principal" in such transactions, and therefore recognizes as
revenue the gross value of such sales upon dispatch. Revenues are recorded net
of sales discounts and returns.
Revenue from e-commerce activities also includes fees charged to vendors
for creating, designing, and hosting the vendors' product information on the
Company's website. Such fees are amortized over the hosting contract period.
NON-MONETARY EXCHANGES
The Company enters into barter arrangements with other parties for
advertising on the Company's website in exchange for the Company's advertising
on the other party's media. Such transactions are recorded at the fair value of
the services received from the other party, or at the fair value of the service
provided by the Company if it is not feasible to determine the fair value of the
services received. Revenue from non-monetary transactions for the year ended
March 31, 2000 was US$9,813; there was no revenue from non-monetary transactions
in prior years.
Advertising revenue is a main source of revenue for the Company, and the
surrendered transactions would be no different from the routine transactions
that the company enters in the normal course of its business. Management
believes that the application of EITF 99-17 will have no impact on the Company's
financial position and results of operations in future periods.
(D) COSTS AND EXPENSES
Costs and expenses have been classified according to their primary
functions within the enterprise in the following categories:
COST OF REVENUES
These costs primarily include employee compensation of editorial staff that
are directly related to the production of services, fees paid to third-party
content providers and costs of products purchased from vendors for sale to
e-commerce customers.
SALES AND MARKETING
These costs primarily include employee compensation to sales personnel,
travel costs, advertising, business promotion expenses and market research
costs.
F-8
<PAGE> 109
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PRODUCT DEVELOPMENT
These costs primarily include employee compensation, purchased software
costs and development to enhance the features and functionality of the Company's
website as well as Internet communication costs.
GENERAL AND ADMINISTRATIVE
These costs include employee compensation of administrative, operations and
supervisory staff whose time is mainly devoted to strategic and managerial
functions, depreciation, rent, repairs, electricity and other general expenses.
(E) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a remaining
maturity at the date of purchase of three months or less to be cash equivalents.
Cash and cash equivalents consist of cash on hand and cash on deposit with
banks.
(F) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company computes
depreciation for all property, plant and equipment using the straight line
method over the estimated useful lives of assets. The estimated useful lives of
assets are as follows:
<TABLE>
<S> <C>
Furniture and fixtures...................................... 10 years
Computer equipment.......................................... 3 years
Office equipment............................................ 10 years
Vehicles.................................................... 8 years
Leasehold improvements...................................... 6 years
</TABLE>
The cost of software purchased for use in product development and services
is charged to operations as incurred. Third-party software expenses in the years
ended March 31, 1998, 1999 and 2000 were US$13,553, US$61,291 and US$159,536,
respectively.
(G) FOREIGN CURRENCY TRANSLATION
The accompanying financial statements are reported in U.S. dollars. The
functional currency of the Company is the Indian rupee ("Rs." or "rupee"). The
translation of rupees into U.S. dollars is performed for balance sheet accounts
using the exchange rate in effect at the balance sheet date, and for revenue and
expense accounts using a weighted-average exchange rate for the respective
periods. The gains or losses resulting from such translation are reported as
other comprehensive income which is a separate component of shareholders'
equity. Such translation should not be construed as representation that the
rupee amounts have been or could be translated into U.S. dollars at any
particular rate, or at all.
Transactions in foreign currency are recorded at the original rates of
exchange in force at the time the transactions are effected. Monetary items
denominated in a foreign currency are restated using the exchange rates
prevailing at the date of the balance sheet. Exchange differences arising on
settlement of transactions and restatement of assets and liabilities at the
balance sheet date are recognized in operations.
F-9
<PAGE> 110
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(H) LOSS PER SHARE
The Company reports basic and diluted loss per share in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.
Basic loss per share has been computed by dividing the net loss for the year by
the weighted average number of equity shares outstanding during the period
including equity share equivalents for advances received for equity shares.
Diluted loss per share is computed using the weighted average number of equity
shares including equity share equivalents for advances received for equity
shares and dilutive potential equity shares outstanding during the period, using
the treasury stock method for options and warrants, except where the results
would be anti-dilutive.
(I) INCOME TAXES
Income taxes are accounted for using the liability method. Deferred tax
assets and liabilities are recognized for future tax consequences attributable
to temporary differences between the carrying amounts of assets and liabilities
and their respective tax bases and operating loss carry-forwards, measured using
the enacted tax rates expected to apply in the years in which such temporary
differences are expected to be recovered or settled. The effect of changes in
tax rates is recognized 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 for which future realization is uncertain.
(J) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, cash equivalents, accounts receivable,
accounts payable and borrowings approximate their fair values due to the short
maturity of these instruments.
(K) INVESTMENTS
The Company classifies investments into held to maturity, trading or
available for sale based on management's intent at the time of purchase. As of
March 31, 2000, all investments are classified as available for sale and carried
at fair value. Unrealized gains or losses on available for sale securities are
treated as other comprehensive income, a separate component of shareholders'
equity.
(L) IMPAIRMENT OF LONG LIVED ASSETS
Whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, the Company subjects such long lived
assets to a test of recoverability, based on the undiscounted cash flows
expected from use or disposition of such assets. If the asset is impaired, the
Company recognizes an impairment loss.
(M) STOCK BASED COMPENSATION
The Company uses the intrinsic value method specified under APB Opinion No.
25 to account for the compensation cost of stock options and awards granted to
officers, employees and retainers in full time service of the Company. Pro forma
disclosures required under SFAS No. 123 have been provided in Note 15.
F-10
<PAGE> 111
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS AVAILABLE FOR SALE
Investments available for sale comprised of:
<TABLE>
<CAPTION>
GROSS UNREALIZED
-----------------------
COST GAINS LOSSES FAIR VALUE
AS AT MARCH 31, 2000 ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Optionally convertible
preference shares............ US$ 68,807 -- -- US$ 68,807
---------- ---------- ---------- ----------
68,805 -- -- 68,805
---------- ---------- ---------- ----------
US$137,612 -- -- US$137,612
========== ========== ========== ==========
</TABLE>
The investments above have been made in Internet companies incorporated in
India, which as of March 31, 2000, had either not commenced commercial
operations or commenced commercial operations recently. The fair value of the
investments at March 31, 2000 approximates its cost due to the close proximity
of the transactions to the end of the year.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets are comprised of:
<TABLE>
<CAPTION>
AS OF
MARCH 31,
--------------------------
1999 2000
---------- ------------
<S> <C> <C>
Rent deposits............................................... US$100,259 US$ 368,054
Loans to employees.......................................... 4,852 30,564
Prepaid expenses............................................ 61,488 272,521
Advance payment for investment(1)........................... -- 34,404
Other deposits and advances (net of allowance of US$22,936
at March 31, 2000)........................................ 8,196 251,216
Deferred offering expenses.................................. -- 482,724
Accrued interest............................................ 1,084 231,425
---------- ------------
US$175,879 US$1,670,908
---------- ------------
</TABLE>
(1) Advance payment for investment has been made for a prospective investment in
an Internet company. Pending the negotiation and completion of the material
provisions of such an investment, the payment has been treated as an
advance.
F-11
<PAGE> 112
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of:
<TABLE>
<CAPTION>
AS OF
MARCH 31,
--------------------------
1999 2000
---------- ------------
<S> <C> <C>
Furniture and fixtures................................ US$ 66,033 US$ 199,146
Computer equipment.................................... 270,572 1,529,048
Office equipment...................................... 41,112 144,028
Vehicles.............................................. 32,853 130,149
Leasehold Improvements................................ -- 140,214
---------- ------------
Property, plant and equipment, cost................... 410,570 2,142,585
Accumulated depreciation and amortization............. 131,146 352,911
---------- ------------
Property, plant and equipment, net.................. US$279,424 US$1,789,674
---------- ------------
</TABLE>
6. RELATED PARTY TRANSACTIONS
The Company's principal related parties are its founder shareholders and
companies that the founder shareholders control. The Company enters into
transactions with such related parties in the normal course of business.
Included in the determination of net loss are the following significant
transactions with related parties:
<TABLE>
<CAPTION>
YEARS ENDING MARCH 31,
---------------------------------------
1998 1999 2000
--------- ---------- ------------
<S> <C> <C> <C>
Operating lease rent expense.......... US$16,063 US$ 25,457 US$ 18,361
Advertising expense................... US$ -- US$146,373 US$4,215,502
Advertising revenues.................. US$ -- US$ -- US$ 5,876
</TABLE>
Balances with related parties include:
<TABLE>
<CAPTION>
AS OF MARCH 31,
--------------------------
1999 2000
---------- ------------
<S> <C> <C>
Payable for operating expenses.................... US$ 48,469 US$1,457,619
Receivable for advertising income................. US$ -- US$ 1,949
Loans payable..................................... US$449,257 US$ --
</TABLE>
The loans payable were interest free and did not have a specified repayment
schedule. All loan amounts outstanding as of March 31, 1999 were repaid on June
9, 1999.
7. SHAREHOLDERS' EQUITY
On January 6, 2000, the Company effected a 5 for 1 share split, pursuant to
which the company redesignated its authorized capital of 10,000,000 equity
shares with a par value of Rs.10 per share as 50,000,000 equity shares with a
par value of Rs.2 per share, and its issued equity capital of 5,075,100 equity
shares with a par value of Rs.10 per share as 25,375,500 equity shares with a
par value of Rs.2 per share. All share amounts noted in these financial
statements reflect this share split.
F-12
<PAGE> 113
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company has executed the following transactions in its equity shares
during the three years ended March 31, 1998, 1999 and 2000:
On April 24, 1998, the Company completed the issuance of 10,500,000 equity
shares at a price of Rs.2 per share, for an aggregate sale price of US$567,714,
to the founding shareholders and to a party which the founding shareholders
control. The Company received these amounts as advances for the issue of equity
shares on various dates between January 1996 and March 1998 pursuant to the
pre-incorporation understanding and undertakings between the founding
shareholders in November 1995. The fair value of shares issued against the
advances received did not exceed the par value of Rs.2 per equity share at the
formation of the Company.
On April 24, 1998, the Company also issued 5,500,000 equity shares at a
price of Rs.7 per share for an aggregate sale price of US$965,154 to an
unrelated party.
On February 1, 1999, the Company issued 1,612,500 equity shares at a price
of Rs.14 per share for an aggregate sale price of US$528,986 to an unrelated
party.
On February 22, 1999, the Company issued 500,000 equity shares at a price
of Rs.2 per share, for an aggregate sale price of US$23,487, to the founding
shareholders in partial repayment of their loans to the Company. The fair value
of such shares on the date of issue was determined to be Rs.14 per share based
on recent sales of the Company's equity shares to unrelated parties.
Accordingly, the Company has recorded as compensation expense an amount of
US$142,789, which has been included in general and administrative expenses.
On June 2, 1999, the Company issued 3,407,500 equity shares at a price of
Rs.45.50 per share for an aggregate sale price of US$3,593,311 to an unrelated
party.
On December 30, 1999, the Company issued 3,854,500 equity shares at a price
of Rs.180.20 per share for an aggregate sale price of US$15,967,377 to unrelated
parties.
8. RETIREMENT BENEFITS
GRATUITY
The Company provides for gratuity, an unfunded defined benefit retirement
plan covering all its employees, based on third-party actuarial valuations. This
plan provides for a lump-sum payment to be made to vested employees at
retirement or termination of employment in an amount equivalent to 15 days
salary, payable for each completed year of service. These gratuity benefits vest
upon an employee's completion of five years of service.
Net periodic pension cost for the years ended March 31, 1998, 1999, and
2000 and the unfunded benefit liability as of March 31, 1998, 1999 and 2000 are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------
1998 1999 2000
-------- -------- ---------
<S> <C> <C> <C>
Projected benefit obligations -- beginning of the
year................................................. US$ 674 US$1,709 US$ 4,251
-------- -------- ---------
Service cost........................................... 1,023 2,218 9,284
Interest cost.......................................... 118 371 2,100
Amortization of gain................................... 22 107 --
Effect of exchange rate changes........................ (128) (154) (151)
-------- -------- ---------
Net periodic pension cost.............................. 1,035 2,542 11,233
-------- -------- ---------
Projected benefit obligations -- end of the year....... US$1,709 US$4,251 US$15,484
-------- -------- ---------
</TABLE>
F-13
<PAGE> 114
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The assumptions used in accounting for gratuity in the years ended March
31, 1998, 1999 and 2000 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
MARCH 31,
--------------------
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Rupee discount rate......................................... 12% 12% 12%
Rate of increase in rupee compensation...................... 15% 15% 15%
</TABLE>
PROVIDENT FUND
Employees and the Company each contribute at the rate of 10% or 12% of
salaries to a provident fund maintained by the Government of India for the
benefit of employees. The provident fund is a defined contribution plan.
Accordingly, the Company expenses such contributions to operations as incurred.
Amounts contributed by the Company to the provident fund, in the aggregate, were
US$479, US$24,340 and US$32,232 for the years ended March 31, 1998, 1999, and
2000, respectively.
9. LEAVE ENCASHMENT
The Company recently formalized a leave encashment scheme for its employees
under which unutilized leave in excess of sixty days and up to a maximum of
ninety days can be encashed based on the employees' current basic salary. A
liability of US$50,525 has been recorded for leave encashment as of March 31,
2000.
10. OTHER INCOME
Other income comprises the following:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------
1998 1999 2000
---- --------- ----------
<S> <C> <C> <C>
Interest income..................................... US$-- US$28,384 US$248,415
Miscellaneous....................................... -- 2,754 4,423
---- --------- ----------
US$-- US$31,138 US$252,838
==== ========= ==========
</TABLE>
11. OPERATING LEASES
The Company leases office space, computer equipment, high-speed telephone
lines and residential apartments for employees under various operating leases.
Operating lease expense that has been included in the determination of the net
loss is as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Office space.................................... US$ 35,322 US$ 84,583 US$146,302
Computers....................................... 10,094 9,412 8,631
Telecom leased lines............................ 93,897 104,344 254,548
Residential apartments for employees............ 17,697 28,308 62,102
---------- ---------- ----------
Total operating lease expense.............. US$157,010 US$226,647 US$471,583
========== ========== ==========
</TABLE>
F-14
<PAGE> 115
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Future minimum lease rentals payable are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
MARCH 31,
-----------
<S> <C>
2001..................................................... US$521,847
2002..................................................... 162,026
2003..................................................... 73,130
2004..................................................... 2,752
2005 and thereafter...................................... --
----------
Total payments................................... US$759,755
==========
</TABLE>
12. INCOME TAXES
The income tax provision is comprised of:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------
1998 1999 2000
---- -------- --------
<S> <C> <C> <C>
Current Taxes -- all foreign............................ US$-- US$4,346 US$3,456
Deferred Taxes, net of allowance........................ -- -- --
---- -------- --------
Net income tax provision................................ US$-- US$4,346 US$3,456
==== ======== ========
</TABLE>
The tax effects of significant temporary differences that resulted in
deferred tax assets and liabilities, are as follows:
<TABLE>
<CAPTION>
AS OF MARCH 31,
----------------------------
1999 2000
----------- -------------
<S> <C> <C>
Depreciation............................................... US$ (25,709) US$ (149,447)
Bad debt allowance......................................... 22,124 49,506
Net operating loss carryforwards........................... 555,486 3,235,581
Retirement benefits -- Gratuity............................ 1,488 5,962
Other...................................................... 22 23
----------- -------------
553,411 3,141,625
Less: valuation allowance.................................. (553,411) (3,141,625)
----------- -------------
Net deferred tax asset..................................... US$ -- US$ --
=========== =============
</TABLE>
The Company has not generated any taxable income to date, and therefore has
not had to pay any Indian income tax since its inception. The Company has
provided for a full valuation allowance against the deferred tax asset since it
is more likely than not that the asset will not be recovered.
The Company's net operating loss carry forwards aggregating US$8,404,108,
will expire between April 1, 2004 and March 31, 2008.
13. SEGMENTS
Until July 1998, the Company operated in one segment -- Advertising and
services. In August 1998, the Company introduced E-commerce as a second segment.
Advertising and services consists of all services relating to the Internet
portal "Rediff.com". The E-commerce segment primarily consists of purchase and
sale of products and services. The revenues and related expenses and the
Company's recognition policy is set out in Notes 2(c) and 2(d).
F-15
<PAGE> 116
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Summarized segment information for the years ended March 31, 1999 and 2000
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1999 2000
-------------------------- -----------------------------
ADVERTISING ADVERTISING
AND SERVICES E-COMMERCE AND SERVICES E-COMMERCE
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues..........................
Advertising..................... US$ 297,861 US$ 798,410
Services........................ 487,549 666,238
----------- -------------
785,410 US$ 69,424 1,464,648 US$ 441,452
Cost of revenues.................. 245,710 75,307 548,905 403,654
----------- ----------- ------------- -------------
Gross profit/(loss)............... 539,700 (5,883) 915,743 37,798
Operating expenses:
Sales and marketing............. 355,446 33,371 4,037,798 1,238,120
Product development............. 255,394 51,403 744,297 121,873
General and administrative...... 719,320 130,278 1,330,320 396,212
----------- ----------- ------------- -------------
1,330,160 215,052 6,112,415 1,756,205
Operating loss.................... US$(790,460) US$(220,935) US$(5,196,672) US$(1,718,407)
=========== =========== ============= =============
Segment total assets.............. US$ 976,068 US$ 96,519 US$12,509,982 US$ 3,551,890
=========== =========== ============= =============
</TABLE>
The geographical analysis of revenues is as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------
1998 1999 2000
---------- ---------- ------------
<S> <C> <C> <C>
United States................................. US$ -- US$ 28,595 US$ 241,196
India......................................... 462,705 808,703 1,563,310
Rest of the world............................. 52,984 17,536 101,594
---------- ---------- ------------
Total revenues.............................. US$515,689 US$854,834 US$1,906,100
========== ========== ============
</TABLE>
Net property, plant and equipment by location is as follows:
<TABLE>
<CAPTION>
AS OF MARCH 31,
--------------------------
1999 2000
---------- ------------
<S> <C> <C>
United States......................................... US$ 25,683 US$ 147,357
India................................................. 253,741 1,642,317
---------- ------------
Total............................................... US$279,424 US$1,789,674
========== ============
</TABLE>
14. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, cash equivalents and
accounts receivable. The Company maintains the majority of its cash and cash
equivalents with a single bank in India.
The Company's advertising and services revenues are primarily derived from
large corporate clients in India. The Company's e-commerce revenues are derived
from retail customers and do not expose the Company to any material
concentrations of credit risk.
F-16
<PAGE> 117
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIGNIFICANT CLIENTS
No single client accounted for more than 10% of the total revenue for the
years ended March 31, 1999 and 2000.
Two clients accounted for 18.3% and 10.3% of the total revenue,
respectively, during the year ended March 31, 1998. The amounts receivable from
such clients as of March 31, 1998 were US$32,562 and US$17,871, respectively.
15. STOCK BASED COMPENSATION
On February 22, 1999, the Company approved the Employee Stock Option Plan
1999 ("1999 ESOP") and the Associate Stock Option Plan 1999 ("1999 ASOP")
(collectively "Option Plans") which cover present and future employees,
retainers in full time service of the Company and certain associates of the
Company. The 1999 ESOP and 1999 ASOP have similar terms. Under the terms of the
1999 ESOP, a committee of the board may award stock options to eligible
employees in the form of warrants. Such options vest at the rate of 25% on each
successive anniversary of the grant date, until fully vested. Under the terms of
the 1999 ASOP, a committee of the board may award stock options to eligible
associates in the form of warrants. Such warrants vest at the rates set forth in
each warrant.
Each allotted warrant carries with it the right to purchase 125 of the
Company's equity shares at the Exercise Price during the exercise period, which
expires five years from the date of grant.
The Exercise Price is determined by the awarding committee, and is intended
to be at least the fair value of the company's equity shares on the date of the
grant.
Under the Option Plans, the Company has earmarked 5,600 and 3,960 warrants
for the 1999 ESOP and 1999 ASOP, respectively, which would entitle the warrant
holders to purchase 700,000 and 495,000 equity shares, respectively.
The Option Plans also permit the board of directors to earmark further
additional warrants under either plan to be issued to eligible parties on such
terms and conditions as may then be decided by the board at its absolute
discretion.
In April 1999, the Company granted warrants for the purchase of 380,000
shares under the Option Plans to eligible parties at an exercise price of Rs.30
per equity share. In June 1999, the Company granted warrants for the purchase of
17,500 equity shares under the Option Plans to eligible parties at an exercise
price of Rs.45.40 per equity share. In December 1999, the Company granted
warrants for the purchase of 25,000 equity shares under the Option Plans to
eligible parties at an exercise price of Rs.180.20 per equity share. In January
2000, on various dates, the Company granted warrants for the purchase of 37,500
equity shares at an exercise price of Rs.180.20 per equity share, 145,750 equity
shares at an exercise price of Rs.208 per equity share, 109,000 equity shares at
an exercise price of Rs.312 per equity share, and 15,000 equity shares at an
exercise price of Rs.237 per equity share. In March 2000, the Company granted
warrants for the purchase of 35,000 equity shares under the Option Plans to
eligible parties at an exercise price of Rs.350 per equity share.
The Company has elected to use the intrinsic value method of APB Opinion
No. 25 to account for its stock-based compensation plans. Management believes
that the exercise prices above approximate or exceed the fair market value of
the Company's equity shares on the grant dates based on transactions in the
Company's equity shares with unrelated parties.
F-17
<PAGE> 118
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company has adopted the pro forma disclosure provisions of SFAS No.
123. Had compensation cost for the Company's stock-based compensation plans been
determined in a manner consistent with the fair value approach described in SFAS
No. 123, the Company's net loss and basic loss per share as reported would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR
ENDED
MARCH 31, 2000
--------------
<S> <C>
Net Loss
As reported............................................... US$(6,665,697)
Adjusted pro forma........................................ US$(6,705,284)
Loss per share
As reported............................................... US$ (0.30)
Adjusted pro forma........................................ US$ (0.30)
</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>
YEAR ENDED
MARCH 31, 2000
------------------
<S> <C>
Dividend yield.............................................. 0%
Expected life............................................... 4 years
Risk free interest rates.................................... 10%
Volatility.................................................. 0
</TABLE>
EMPLOYEE BENEFIT PLANS
Activity in the warrants of the 1999 ESOP for the year ended March 31, 2000
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 2000
---------------------------------------
WEIGHTED
SHARES ARISING OUT AVERAGE
OF OPTIONS EXERCISE PRICE
------------------ -----------------
<S> <C> <C> <C>
EMPLOYEE STOCK OPTION PLAN 1999:
Outstanding at the beginning of the year........... -- -- --
Granted............................................ 580,750 US$2.61 Rs.114
Forfeit/lapsed..................................... (25,000) US$0.69 Rs. 30
------- ------- ------
Outstanding at the end of the year................. 555,750 US$2.69 Rs.117
------- ------- ------
</TABLE>
Activity in the warrants of the 1999 ASOP for the year ended March 31, 2000
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 2000
---------------------------------------
WEIGHTED
SHARES ARISING OUT AVERAGE
OF OPTIONS EXERCISE PRICE
------------------ -----------------
<S> <C> <C> <C>
ASSOCIATE STOCK OPTION PLAN 1999:
Outstanding at the beginning of the year........... -- -- --
Granted............................................ 184,000 US$4.69 Rs.204
------- ------- ------
Outstanding at the end of the year................. 184,000 US$4.69 Rs.204
------- ------- ------
</TABLE>
F-18
<PAGE> 119
REDIFF.COM INDIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about stock options available as
at March 31, 2000:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------
WEIGHTED
NUMBER OF AVERAGE
SHARES REMAINING
ARISING OUT CONTRACTUAL WEIGHTED AVERAGE
RANGE OF EXERCISE PRICE OF OPTIONS LIFE EXERCISE PRICE
- ----------------------- -------------- ----------- -----------------
<S> <C> <C> <C> <C>
3.44
US$0.69 - 8.03 739,750 years...... US$3.19 Rs.139
</TABLE>
F-19
<PAGE> 120
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is an offer to sell
only the securities offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.............................. 1
Rediff.com India Limited........................ 1
The Offering.................................... 3
Summary Financial Data.......................... 4
Risk Factors.................................... 5
Conventions Which Apply To This Prospectus...... 19
Currency Of Presentation........................ 19
Enforcement Of Civil Liabilities................ 19
Reports To Our Security Holders................. 20
Forward Looking Statements...................... 21
Use Of Proceeds................................. 23
Dividend Policy................................. 23
Capitalization.................................. 24
Exchange Rates.................................. 25
Dilution........................................ 26
Selected Financial Data......................... 27
Management's Discussion And Analysis Of
Financial Condition And Results Of
Operations.................................... 28
Business........................................ 38
Management...................................... 57
Principal Shareholders.......................... 62
Certain Transactions............................ 64
Description Of Equity Shares.................... 66
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................. 92
Underwriting.................................... 93
Validity Of Securities.......................... 97
Experts......................................... 97
Change Of Accountants........................... 97
Where You Can Find More Information............. 98
Index To Financial Statements................... F-1
</TABLE>
------------------------
Through and including --, 2000 (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 a dealer's obligation to deliver a prospectus when acting as
underwriter and with respect to an unsold allotment or subscription.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
REDIFF.COM INDIA LIMITED
--
American Depositary Shares
Representing
-- Equity Shares
------------------------
[REDIFF LOGO]
------------------------
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
ROBERT FLEMING INC.
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 121
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........................................ *
NASD filing fee............................................. *
Nasdaq National Market listing fee.......................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Printing and engraving...................................... *
Blue sky fees and expenses (including legal fees)........... *
Miscellaneous............................................... *
----------
Total..................................................... *
==========
</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 April of
1996:
(1) On April 24, 1998, we sold 5,500,000 equity shares, after giving
effect to the company's 5-to-1 stock split effective as of January 6, 2000,
to Draper-India International, at a per share price of Rs. 35, for an
aggregate purchase price of Rs. 38,500,000 (US$965,154).
II-1
<PAGE> 122
(2) On April 24, 1998, we sold (a) 2,500,000 equity shares, after
giving effect to the company's 5-to-1 share split effective as of January
6, 2000 to Ajit Balakrishnan, (b) 2,500,000 equity shares, after giving
effect to the company's 5-to-1 share split effective as of January 6, 2000
to Arun Nanda, and (c) 5,500,000 equity shares, after giving effect to the
company's 5-to-1 share split effective as of January 6, 2000, to
Rediffusion Advertising Private Ltd., at a per share price of Rs. 10, for
an aggregate purchase price of Rs. 21,000,000 (US$526,447).
(3) On February 1, 1999, we sold 1,612,500 equity shares, after giving
effect to the company's 5-to-1 share split effective as of January 6, 2000,
to Intel Corporation, at a per share price of Rs. 70, for an aggregate
purchase price of Rs. 22,575,000 (US$528,986).
(4) On February 22, 1999, we issued (a) 250,000 equity shares, after
giving effect to the company's 5-to-1 share split effective as of January
6, 2000, to Ajit Balakrishnan, and (b) 250,000 equity shares, after giving
effect to the company's 5-to-1 share split effective as of January 6, 2000,
to Arun Nanda, at a per share price of Rs. 10, paid in the form of partial
cancellation of debt.
(5) On June 2, 1999, we sold 3,407,500 equity shares, after giving
effect to the company's 5-to-1 share split effective as of January 6, 2000,
to Queenswood Investment Limited, at a per share price of Rs. 227.44, for
an aggregate purchase price of Rs. 155,000,000 (US$3,593,311).
(6) On December 30, 1999, we sold (a) 1,325,000 equity shares, after
giving effect to the company's 5-to-1 share split effective as of January
6, 2000, to Pacific Century Cyberworks India Pvt. Ltd., (b) 1,325,000
equity shares, after giving effect to the company's 5-to-1 share split
effective as of January 6, 2000, to GE Capital Services India, and (c)
1,204,500 equity shares, after giving effect to the company's 5-to-1 share
split effective as of January 6, 2000, to Citicorp Finance (India) Ltd., at
a per share price of Rs. 901, for an aggregate purchase price of Rs.
694,580,900 (US$15,967,377).
(7) On January 6, 2000, we declared a 5-to-1 share split of our equity
shares.
U.S. dollar amounts were calculated using the exchange rate in effect at
the time the transactions occurred.
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 (3) 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 Underwriting Agreement.
3.1 Articles of Association, as amended.
3.2 Memorandum of Association, as amended.
3.3 Certificate of Incorporation, as amended.
4.1 Form of Deposit Agreement among Rediff.com, Citibank, N.A.,
and the Holders and Beneficial Owner from time to time of
American Depositary Receipts issued thereunder (including as
an exhibit, the form of American Depositary Receipt).
4.2 Rediff.com's specimen certificate for equity shares.
4.3 Amended and Restated Shareholder Rights Agreement dated
February 24, 2000 between Rediff.com and the shareholders of
Rediff.com.
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati.
</TABLE>
II-2
<PAGE> 123
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
*5.2 Opinion of Nishith Desai Associates.
10.1 1999 Employee Stock Option Plan.
10.2 1999 Associate Stock Option Plan.
10.3 2000 Stock Option Plan.
10.4 Form of Indemnification Agreement.
</TABLE>
<TABLE>
<CAPTION>
10.5 Sublease dated July 5, 1999 between Shreenathji Balaji Computech Private Limited and
Rediff.com.
<C> <S>
10.6 Letter Agreement dated December 28, 1998 between Rediffusion-Dentsu, Young & Rubicam
Limited and Rediff.com.
10.7 Promoters Agreement dated January 9, 1996 between Ajit Balakrishnan and Diwan Arun
Nanda.
16.1 Letter from Patkar & Pendse regarding Change in Certifying Accountants.
*23.1 Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
*23.2 Consent of Nishith Desai Associates (included in Exhibit 5.2).
23.3 Consent of Deloitte Haskins & Sells, India, Independent Auditors.
*23.4 Consent of International Data Corporation.
24.1 Power of Attorney (included on Page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
(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.
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.
II-3
<PAGE> 124
(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> 125
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 Mumbai,
State of Maharashtra, Country of India, on this 19th day of May, 2000.
REDIFF.COM INDIA LIMITED
By: /s/ AJIT BALAKRISHNAN
------------------------------------
Name: Ajit Balakrishnan
Title: Chairman and Managing
Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Ajit Balakrishnan and Rajiv Warrier, and
each of them, his attorney-in-fact, with the power of substitution, for him in
any and all capacities, to sign any amendment or post-effective amendment to
this Registration Statement on Form F-1 or abbreviated registration statement
(including, without limitation, any additional registration filed pursuant to
Rule 462 under the Securities Act of 1933) with respect hereto and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
c
/s/ AJIT BALAKRISHNAN Chairman and Managing Director May 19, 2000
- ----------------------------------------------------- (Principal Executive Officer)
Ajit Balakrishnan
/s/ RAJIV WARRIER Chief Financial Officer May 19, 2000
- ----------------------------------------------------- (Principal Financial and
Rajiv Warrier Accounting Officer)
/s/ DIWAN ARUN NANDA Director May 19, 2000
- -----------------------------------------------------
Diwan Arun Nanda
Director
- -----------------------------------------------------
Sunil N. Phatarphekar
/s/ ABHAY HAVALDAR Director May 19, 2000
- -----------------------------------------------------
Abhay Havaldar
/s/ CHARLES ROBERT KAYE Director May 19, 2000
- -----------------------------------------------------
Charles Robert Kaye
/s/ CHARLES ROBERT KAYE Authorized Representative in the May 19, 2000
- ----------------------------------------------------- United States
Charles Robert Kaye
</TABLE>
II-5
<PAGE> 126
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Articles of Association, as amended.
3.2 Memorandum of Association, as amended.
3.3 Certificate of Incorporation, as amended.
4.1 Form of Deposit Agreement among Rediff.com, Citibank, N.A.,
and holders from time to time of American Depository
Receipts issued thereunder (including as an exhibit, the
form of American Depository Receipt).
4.2 Rediff.com's specimen certificate for equity shares.
4.3 Amended and Restated Shareholder Rights Agreement dated
February 24, 2000 between Rediff.com and the shareholders of
Rediff.com.
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati.
*5.2 Opinion of Nishith Desai Associates.
10.1 1999 Employee Stock Option Plan.
10.2 1999 Associate Stock Option Plan.
10.3 2000 Stock Option Plan.
10.4 Form of Indemnification Agreement.
10.5 Sublease dated 5 July 1999 between Shreenathji Balaji
Computech Private Limited and Rediff.com.
10.6 Letter Agreement dated December 28, 1998 between
Rediffusion-Dentsu, Young & Rubicam Limited and Rediff.com.
10.7 Promoters Agreement dated January 9, 1996 between Ajit
Balakrishnan and Diwan Arun Nanda.
16.1 Letter from Patkar & Pendse regarding Change in Certifying
Accountants.
*23.1 Consent of Wilson Sonsini Goodrich & Rosati (included in
Exhibit 5.1).
*23.2 Consent of Nishith Desai Associates (included in Exhibit
5.2).
23.3 Consent of Deloitte Haskins & Sells, India, Independent
Auditors.
*23.4 Consent of International Data Corporation.
24.1 Power of Attorney (included on Page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
The following set of Articles of Association of the Company have been adopted at
the Extra-ordinary General Meeting of the Company held on 25th February 2000 in
substitution of the then existing set of Articles of Association]
THE COMPANIES ACT, 1956
ARTICLES OF ASSOCIATION
OF
REDIFF.COM INDIA LIMITED
1. CONSTITUTION
1.1. The Regulations contained in Table "A" in the First Schedule to
the Companies Act, 1956 shall apply to this Company.
1.2. The Regulations for the management of the Company and for the
observance of the members thereof shall be such as contained in
these Articles subject however to the exercise of the statutory
powers of the Company in respect of repeal, additions,
alterations, substitution, modifications and variations thereto
as prescribed by the Companies Act, 1956.
2. INTERPRETATION
2.1. In these presents, the following words and expressions shall
have the following meanings, unless excluded by the subject or
context:
2.2. DEFINITIONS
2.2.1. 'The Act' means 'Companies Act, 1956' for the time being
in force and any amendment thereto.
2.2.2. 'Affiliate' means with respect to any Person (the
"Specified Person"), any Person other than the Specified
Person directly or indirectly controlling, controlled by,
or under direct or indirect common control with the
Specified Person.
For the purposes of this definition, the term "control"
when used with respect to any Person means the beneficial
ownership, directly or indirectly, more than 25% of the
voting securities of such Person, or the ability to
control the composition or the decisions of the Board of
Directors, or the possession of the power to direct or
cause the direction of the management and policies of such
Person by virtue of the Articles or an Agreement or
contract or otherwise;
-1-
<PAGE> 2
2.2.3. 'The Board' or 'The Board of Directors' refer to
the Board of Directors of the Company.
2.2.4. 'The Company' or 'This Company' means REDIFF.COM
INDIA LIMITED or such other name as may be changed
in accordance with law.
2.2.5. 'Directors' means the Directors for the time being
of the Company or as the case may be the Directors
assembled at a Board Meeting and shall include
Alternate Directors.
2.2.6. "Fully diluted basis" means the shares then
issued, all the shares comprised in a proposed
issue, the shares underlying all outstanding
warrants, stock options, convertible debentures
and all other similar securities of the Company.
2.2.7. 'Month' shall mean calendar month.
2.2.8. 'The Office' means the Registered Office of the
Company.
2.2.9. 'Paid Up' shall include 'Credited as fully paid
up'.
2.2.10. 'Persons' shall include any corporation as well as
individuals.
2.2.11. `Promoters' shall mean Mr.Ajit Balakrishnan, Mr.
Arun Nanda and Rediffusion Advertising Private
Limited.
2.2.12. 'These Presents' or 'Regulations' means these
Articles of Association as originally framed or
altered from time to time and in force for the
time being and include the Memorandum of
Association where the context so requires.
2.2.13. 'The Register' shall mean the Register of Members
to be kept as required by Section 150 of the Act.
2.2.14. 'The Seal' means the common seal for the time
being of the Company.
2.2.15. 'Section' means Section of the Act.
2.2.16. `Shares' shall include all kinds of shares and
also include any security, instrument or right
(whether vested, deferred or contingent) entitling
or enabling the allottee or holder thereof to
acquire, whether directly or indirectly, shares
of, beneficial interest or voting rights in the
Company.
2.2.17. 'Shareholders' or 'Members' means the duly
registered holders from time to time of the shares
of the Company.
-2-
<PAGE> 3
2.2.18. 'Special Resolution' shall have the meaning assigned
thereto by Section 189 of the Act.
2.2.19. 'Written' or 'In writing' means written or printed or
partly written and partly printed or lithographed or
typewritten or reproduced by any other substitute for
writing.
2.2.20. 'Year' means the financial year of the Company as
defined in the Act.
2.3. INTERPRETATION
2.3.1. Words importing the masculine gender shall include the
feminine gender and vice versa.
2.3.2. Words importing the singular shall include the plural,
and vice versa.
2.3.3. Unless the context otherwise requires, words or
expressions contained in these regulations shall bear
the same meaning as in the Act or any statutory
modification thereof in force at the date at which these
regulations become binding on the Company.
3. CAPITAL
3.1 AUTHORISED CAPITAL
The Authorized share capital of the Company is Rs. 10,00,00,000
(Rupees Ten crores) divided into 5,00,00,000 (Five crores) equity
shares of Rs. 2/- each (Rupees Two) with powers to increase or
reduce the same in accordance with the provisions of the
Companies Act, 1956".
4. ISSUE OF FURTHER SHARES
4.1 SHARES AT THE DISPOSAL OF THE DIRECTORS
Subject to the provisions of these Articles and the Act, the
shares shall be under the control of the Directors who may,
subject to the provisions of sections 78 to 81 of the Act, allot
or otherwise, dispose off the same or any of them to such Persons
and in such proportion and on such terms and conditions and
either at a premium or at par or at a discount and at such time
and for such consideration as the Directors think fit. As regards
the allotment from time to time, the law in force, if any,
relating thereto, shall be complied with, provided that the
option or right to call of shares shall not be given to any
Person or Persons except with the sanction of the Company in
general meeting.
4.2 STOCK OPTION PLANS
The Directors are hereby authorized to issue equity shares or
debentures (whether or not convertible into equity shares) for
offer and allotment to such
-3-
<PAGE> 4
of the officers, employees, workers and associates of the
Company as the Directors may select or the trustees of such
trust as may be set up for the benefit of the officers,
employees, workers and associates in accordance with the terms
and conditions of such scheme, plan or proposal as the Directors
may formulate and subject to such guidelines or regulations as
may be prescribed by any regulatory authority.
4.3 BUY-BACK OF SHARES
Subject to the provisions of section 77-A of the Act and such
other guidelines, rules and regulations as may be prescribed by
any regulatory authority in this regard, the Company shall have
the power to purchase its own shares and other specified
securities at such rates and on such terms and conditions as is
deemed fit by the Board.
4.3.1 Subject as aforesaid and unless otherwise agreed at a
meeting of the Board of Directors all subsequent increases
in capital by issue of further shares/ securities shall be
on the following terms and conditions :
a. They shall be offered to the existing shareholders in
proportion to their shareholding in the Company at the
same price and terms and conditions to all the
shareholders;
b. Shareholders shall have the right of renunciation in
favour of non-shareholder, in respect of the shares so
offered; and
c. The Board of Directors of the Company shall have the right
to issue the shares not subscribed to by the existing
shareholders, to any third party.
4.4 ISSUE OF PREFERENCE SHARES
Subject to the provisions of Section 80, the Company shall have
the power to issue any preference shares which are or at the
option of the Company, are to be liable to be redeemed and the
resolution authorizing such issue shall prescribe the manner,
terms and conditions of redemption.
4.5. RIGHTS ON DIVISION OF SHARE CAPITAL
4.5.1 If at any time the share capital is divided into different
classes of shares, the rights attached to any class
(unless otherwise provided by the terms of issue of the
shares of that class) may, subject to the provisions of
Sections 106 and 107, and whether or not the Company is
being wound up, be varied with the consent in writing of
the holders of three-fourths of the issued shares of that
class, or with the sanction of a special resolution passed
at a separate meeting of the holders of the shares of that
class.
4.5.2 To every such separate meeting, the provisions of these
regulations relating to general meetings shall mutatis
mutandis apply, but so that the necessary quorum shall be
two persons at least holding or representing by proxy
one-third of the issued shares of the class in question.
-4-
<PAGE> 5
4.6 RIGHTS NOT TO BE VARIED
The rights conferred upon the holders of the shares of any class
issued with preferred or other rights shall not, unless otherwise
expressly provided by the terms of issue of the shares of that
class, be deemed to be varied by the creation or issue of further
shares ranking pari passu therewith.
4.7 COMMISSION AND BROKERAGE ON ISSUE OF SHARES
4.7.1 The Company may exercise the powers of paying commissions
conferred by Section 76, provided that the rate percent or
the amount of the commission paid or agreed to be paid
shall be disclosed in the manner required by that section.
4.7.2 The rate of the commission shall not exceed the rate of
five percent of the price at which the shares in respect
whereof the same is paid are issued or an amount equal to
five percent of such price, as the case may be.
4.7.3 The commission may be satisfied by the payment of cash or
the allotment of fully or partly paid shares or partly in
the one way and partly in the other.
4.7.4 The Company may also, on any issue of shares, pay such
brokerage as may be lawful.
4.8 SHARE CERTIFICATES
4.8.1 Every person whose name is entered as a member in the
register of members shall be entitled to receive within
three months after allotment or within two months after
the application for the registration of transfer (or
within such other period as the conditions of issue shall
provide) :
4.8.1.1 one certificate for all his shares without
payment; or
4.8.1.2 several certificates, each for one or more
of his shares, upon payment of one rupee for
every certificate after the first.
4.8.2 Every certificate shall be under the seal and shall
specify the shares to which it relates and the amount paid
up thereon.
4.8.3 In respect of any share or shares held jointly by several
persons, the Company shall not be bound to issue more than
one certificate, and delivery of a certificate for a share
to one of several joint holders shall be sufficient
delivery to all such holders.
4.9 LOSS OF A SHARE CERTIFICATE
If a share certificate is defaced, lost or destroyed, it may be renewed
on payment of such fee, if any, not exceeding [two rupees], and on such
terms, if any, as to evidence and indemnity and the payment of
out-of-pocket expenses incurred by the Company in investigating
evidence, as the Directors think fit.
5. CALLS ON SHARES
5.1 BOARD TO MAKE CALLS
-5-
<PAGE> 6
The Board may, from time to time, make calls upon the members in
respect of any moneys unpaid on their shares (whether on account
of the nominal value of the shares or by way of premium) and not
by the conditions of allotment thereof made payable at fixed
times :
5.2 NOTICE TO MEMBERS
Each member shall, subject to receiving at least fourteen days'
notice specifying the time or times and place of payment, pay to
the Company, at the time or times and place so specified, the
amount called on his shares. However, the time specified by the
Company in such notice shall be extended by the time required by
the shareholder to obtain the necessary approvals of Government
or Regulatory authorities.
5.3 REVOCATION/POSTPONEMENT OF CALLS
A call may be revoked or postponed at the discretion of the
Board.
5.4 BOARD RESOLUTION
A call shall be deemed to have been made at the time when the
resolution of the Board authorising the call was passed and may
be required to be paid by installments.
5.5 LIABILITY TO PAY CALLS
5.5.1 The joint holders of a share shall be jointly and
severally liable to pay all calls in respect thereof.
5.5.2 Any sum which by the terms of issue of a share becomes
payable on allotment or at any fixed date, whether on
account of the nominal value of the share or by way of
premium, shall, for the purposes of these regulations, be
deemed to be a call duly made and payable on the date on
which by the terms of issue such sum becomes payable.
5.5.3 In case of non-payment of such sum, all the relevant
provisions of these regulations as to payment of interest
and expenses, forfeiture or otherwise shall apply as if
such sum had become payable by virtue of a call duly made
and notified.
5.6 INTEREST ON DELAY IN PAYMENT OF CALLS
5.6.1 If a sum called in respect of a share is not paid before
or on the day appointed for payment thereof, the person
from whom the sum is due shall pay interest thereon from
the day appointed for payment thereof to the time of
actual payment calculated at the prime lending rate of the
State Bank of India, existing on the date of default, plus
18% per annum or at such lower rate, as the Board may
determine.
5.6.2 The Board shall be at liberty to waive payment of any such
interest wholly or in part.
5.7 CALLS IN ADVANCE
The Board :
5.7.1 may, if it thinks fit, receive from any member willing to advance
the same, all or any part of the moneys uncalled and unpaid upon
any shares held by him; and
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5.7.2 upon all or any of the moneys so advanced, may (until the same
would, but for such advance, become presently payable) pay
interest at such rate not exceeding, unless the Company in
generalmeeting shall otherwise direct, six percent per annum, as
may be agreed upon between the Board and the member paying the
sum in advance.
6. GENERAL AUTHORITY
6.1 AUTHORITY IN ACCORDANCE WITH THE ACT
Wherever in the Act it has been provided that the Company shall
have any right, privilege or authority or that the Company could
carry out any transaction only if the Company is so authorised by
its Articles, then and in that case by virtue of this Regulation,
the Company is hereby specifically authorised, empowered and
entitled to have such right, privilege or authority, to carry out
such transactions as have been permitted by the Act without there
being any separate Regulations in that behalf, herein provided.
Without limiting the general authority conferred under this
Article, the Company shall have the following rights, privileges,
authorities to carry out the transactions as set out below under
the relevant sections of the Act :
6.1.1 To pay commission on issue of Shares & Debentures.
6.1.2 To issue redeemable, cumulative Preference Shares.
6.1.3 To accept unpaid share capital although not called up.
6.1.4 To pay dividend in proportion to amount paid-up.
6.1.5 To alter the share capital of the Company.
6.1.6 To reduce the share capital of the Company.
6.1.7 To alter the rights of shareholders.
6.1.8 To pay interest out of capital.
6.2 INCREASE IN SHARE CAPITAL
The Company may, from time to time, by ordinary resolution increase the
authorised share capital by such sum, to be divided into shares of such
amount, as may be specified in the resolution.
6.3 CONSOLIDATION, SUB-DIVISION AND CANCELLATION OF SHARES
The Company may, by ordinary resolution :
6.3.1 consolidate and divide all or any of its share capital
into shares of larger amount than its existing shares;
6.3.2 sub-divide its existing shares or any of them into shares
of smaller amount that is fixed by the memorandum,
subject, nevertheless, to the provisions of Clause (d) of
sub-section (1) of Section 94; and
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6.3.3 cancel any shares which, at the date of the passing of the
resolution, have not been taken or agreed to be taken by
any person.
6.4 REDUCTION OF CAPITAL
The Company may, by special resolution, reduce in any manner and
with, and subject to, any incident authorised and consent
required by law :
6.4.1 its share capital;
6.4.2 any capital redemption reserve amount; or
6.4.3 any share premium account.
7. TRANSFER AND TRANSMISSION OF SHARES
7.1 INSTRUMENT OF TRANSFER
7.1.1 The instrument of transfer of any share in a Company shall
be executed by or on behalf of both the transferor and
transferee.
7.1.2 The transferor shall be deemed to remain a holder of the
share until the name of the transferee is entered in the
Register of Members in respect thereof.
7.2 REFUSAL TO TRANSFER
7.2.1 Subject to the provisions of by Section 111A of the Act,
the Board may, at its own discretion, and without
assigning any reason, decline to register or acknowledge
any transfer of shares, whether fully paid or not,
(notwithstanding that the proposed transferee is already
a member), but any such refusal shall be conveyed to the
transferee and the transferor within one month from the
date on which the instrument of transfer was lodged with
the Company.
7.2.2 THE COMPANY SHALL INCUR NO LIABILITY FOR DISREGARD OF A
NOTICE PROHIBITING REGISTRATION OF A TRANSFER
Neither the Company nor the Directors shall incur any
liability or responsibility whatsoever in consequence of
their registering or giving effect to any transfer of
shares made or purporting to be made by any apparent legal
owner thereof (as shown or appearing in the Register of
Members) to the prejudice of a Person or Persons having or
claiming any equitable right, title or interest to or in
the shares, notwithstanding the Company and the Directors
may have any notice of such equitable right, title or
interest or notice prohibiting the registration of such
transfer and may have entered such notice or reference
thereto, in any book of the Company , and neither the
Company nor the Directors shall be bound or required to
regard or attend or give effect to any such notice.
However, the Company and the Directors, shall nevertheless
be at liberty to regard and attend to any such notice and
give effect thereto if they shall so think fit.
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7.2.3 The Board may also decline to recognise any instrument of
transfer unless :
7.2.3.1 a fee of two rupees is paid to the Company in
respect thereof;
7.2.3.2 the instrument of transfer is accompanied by the
certificate of the shares to which it relates, and
such other evidence as the Board may reasonably
require to show the right of the transferor to
make the transfer; and
7.2.3.3 the instrument of transfer is in respect of only
one class of shares.
7.2.4 Subject to the provisions of Section 154, the registration
of transfers may be suspended at such times and for such
periods as the Board may
7.2.5 Provided that such registration shall not be suspended for
more than thirty days at any one time or for more than
forty-five days in the aggregate in any year.
7.3 TRANSMISSION OF SHARES
7.3.1 The Company shall be entitled to charge a fee not
exceeding two rupees on the registration of every
probate, letters of administration, certificate of death
or marriage, power of attorney, or other instrument,
where applicable.
7.3.2 In case of liquidation or winding up of any Shareholder
being a company, the shares of such Shareholder shall be
transferred to the other solvent Shareholders of the
Company in proportion to their shareholding in the
Company.
7.3.3 On the death of a member, being an individual, the
survivor or survivors where the member was a joint holder,
and his legal representatives where he was a sole holder,
shall be the only persons recognised by the Company as
having any title to his interest in the shares.
7.3.4 Nothing shall affect release the estate of a deceased
joint holder from any liability in respect of any share
which had been jointly held by him with other persons.
7.3.5 Any person becoming entitled to a share in consequence of
the death or insolvency of a member may, upon such
evidence being produced as may hereinafter provided,
elect, either :
7.3.5.1 to be registered himself as holder of the share;
or
7.3.5.2 to make such transfer of the share as the
deceased or insolvent member could have made.
7.3.6 The Board shall, in either case, have the same right to
decline or suspend registration as it would have had, if
the deceased or insolvent member had transferred the share
before his death or insolvency.
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7.3.7 If the person so becoming entitled shall elect to be
registered as holder of the share himself, he shall
deliver or sent to the Company a notice in writing signed
by him stating that he so elects.
7.3.8 If the person aforesaid shall elect to transfer the share,
he shall testify his election by executing a transfer of
the share.
7.3.9 All the limitations, restrictions and provisions of these
regulations relating to the right to transfer and the
registration of transfers of shares shall be applicable to
any such notice or transfer as aforesaid as if the death
or insolvency of the member had not occurred and the
notice or transfer were a transfer signed by that member.
7.3.10 A person becoming entitled to a share by reason of the
death or insolvency of the holder shall be entitled to the
same dividends and other advantages to which he would be
entitled if he were the registered holder of the share,
except that he shall not before being registered as a
member in respect of the share, be entitled in respect of
it to exercise any right conferred by membership in
relation to meetings of the Company :
7.3.11 Provided that the Board may, at any time, give notice
requiring any such person to elect either to be registered
himself or to transfer the share, and if the notice is not
complied with within ninety days, the Board may thereafter
withhold payment of all dividends, bonuses or other moneys
payable in respect of the share, until the requirements of
the notice have been complied with.
8. LIEN ON SHARES
8.1 COMPANY TO HAVE FIRST LIEN
The Company shall have a first and paramount lien :
8.1.1 on every share (not being a fully-paid share), for all
moneys (whether presently payable or not) called, or
payable at a fixed time, in respect of the said share; and
8.1.2 on all shares (not being fully-paid shares) standing
registered in the name of a single person, for all moneys
presently payable by him or his estate to the Company in
respect of the said shares.
8.1.3 Provided that the Board of Directors may at any time
declare any share to be wholly or in part exempt from the
provisions of this clause.
8.2 LIEN TO EXTEND TO ALL DIVIDENDS PAYABLE
The Company's lien, if any, on a share shall extend to all
dividends payable thereon.
8.3 RIGHTS OF THE COMPANY OVER THE SHARES ON WHICH COMPANY HAS A LIEN
8.3.1 The Company may sell, in such manner as the Board thinks
fit, any shares on which the Company has a lien.
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8.3.2 Provided that no sale shall be made :
8.3.2.1 unless a sum in respect of which the lien
exists is presently payable; or
8.3.2.2 until the expiration of fourteen days after a
notice in writing stating and demanding payment
of such part of the amount in respect of which
the lien exists as is presently payable, has
been given to the registered holder for the
time being of the share or the person entitled
thereto by reason of his death or insolvency.
8.4 PROCEDURE FOR SALE
8.4.1 To give effect to any such sale, the Board may authorise
some person to transfer the shares sold to the Purchaser
thereof.
8.4.2 The Purchaser shall be registered as the holder of the
shares comprised in any such transfer.
8.4.3 The Purchaser shall not be bound to see to the application
of the purchase money, nor shall his title to the shares
be affected by any irregularity or invalidity in the
proceedings in reference to the sale.
8.5 PROCEEDS OF SALE
8.5.1 The proceeds of the sale shall be received by the Company
and applied in payment of such part of the amount in
respect of which the lien exists as is presently payable.
8.5.2 The residue, if any, shall be paid to the person entitled
to the shares at the date of the sale, subject to a like
lien for sums not presently payable as existed upon the
shares before the sale.
9. FORFEITURE OF SHARES
9.1 SERVICE OF NOTICE
Subject to the provisions of Article 5.2 above, if a member fails
to pay any call, or installment of a call, on the day appointed
for payment thereof, the Board may, at any time, thereafter
during such time as any part of the call or installment remains
unpaid, serve a notice on him requiring payment of so much of the
call or installment as is unpaid together with any interest which
may have accrued.
9.2 NOTICE
The notice aforesaid shall :
9.2.1 name a further day (not being earlier than the expiry of
fourteen days required by the notice is to be made; and
9.2.2 state that, in the event of non-payment on or before the
day so named, the shares in respect of which the call was
made will be liable to be forfeited.
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9.3 FORFEITURE
If the requirements of any such notice as aforesaid are not
complied with, any share in respect of which the notice has been
given may, at any time thereafter, before the payment required by
the notice has been made, be forfeited by a resolution of the
Board to that effect.
9.4 TREATMENT OF FORFEITED SHARES
9.4.1 A forfeited share may be sold or otherwise disposed of on
such terms and in such manner as the Board thinks fit.
9.4.2 At any time before a sale or disposal as aforesaid, the
Board may cancel the forfeiture on such terms as it thinks
fit.
9.4.3 A duly verified declaration in writing that the declarant
is a director (the managing agent, the secretaries and
treasurers), the manager or the secretary of the Company,
and that a share in the Company has been duly forfeited on
a date stated in the declaration, shall be conclusive
evidence of the facts therein stated as against all
persons claiming to be entitled to the share.
9.4.4 The Company may receive the consideration, if any, given
for the share on any sale or disposal thereof and may
execute a transfer of the share in favour of the person to
whom the share is sold or disposed of.
9.4.5 The Transferee shall thereupon be registered as the holder
of the share.
9.4.6 The Transferee shall not be bound to see to the
application of the purchase money, if any, nor shall his
title to the share be affected by any irregularity or
invalidity in the proceedings in reference to the
forfeiture, sale or disposal of the share.
9.5 LIABILITY OF A MEMBER WHOSE SHARES ARE FORFEITED
9.5.1 A person whose shares have been forfeited shall cease to
be a member in respect of the forfeited shares, but shall,
notwithstanding the forfeiture, remain liable to pay to
the Company all moneys which, at the date of forfeiture,
were presently payable by him to the Company in respect of
the shares.
9.5.2 The liability of such person shall cease if and when the
Company shall have received payment in full of all such
moneys in respect of the shares.
9.6 APPLICABILITY
The provisions of these regulations as to forfeiture shall apply in the
case of non-payment of any sum which, by the terms of issue of a share,
becomes payable at a fixed time, whether on account of the nominal value
of the share or by way of premium, as if the same had been payable by
virtue of a call duly made and notified.
10. CONVERSION OF SHARES INTO STOCK
10.1 BY COMPANY
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The Company may, by ordinary resolution, :
10.1.1 convert any paid-up shares into stock; and
10.1.2 reconvert any stock into paid-up shares of any
denomination.
10.2 BY HOLDERS
10.2.1 The holders of stock may transfer the same or any part
thereof in the same manner as, and subject to the same
regulations under which, the shares from which the stock
arose might before the conversion have been transferred,
or as near thereto as circumstances admit :
10.2.2 Provided that the Board may, from time to time, fix the
minimum amount of stock transferable, so however that such
minimum shall not exceed the nominal amount of the shares
from which the stock arose.
10.3 RIGHTS AND PRIVILEGES OF HOLDERS OF STOCK
The holders of stock shall, according to the amount of stock held
by them, have the same rights, privileges and advantages as
regards dividends, voting at meetings of the Company, and other
matters, as if they held the shares from which the stock arose;
but no such privilege or advantage (except participation in the
dividends and profits of the Company and in the assets on winding
up) shall be conferred by an amount of stock which would not, if
existing in shares, have conferred that privilege or advantage.
10.4 APPLICABILITY
Such of the regulations of the Company (other than those relating
to share warrants), as are applicable to paid-up shares shall
apply to stock and the words "share" and "shareholder" in those
regulations shall include "stock" and "stock-holder"
respectively.
11. SHARE WARRANTS
11.1 ISSUE OF SHARE WARRANTS
The Company may issue share warrants subject to, and in
accordance with, the provisions of Sections 114 and 115; and
accordingly the Board may in its discretion, with respect to any
share which is fully paid up, on application in writing signed by
the person registered as holder of the share and authenticated by
such evidence (if any) as the Board may, from time to time,
require as to the identity of the person signing the application,
and on receiving the certificate (if any) of the share, and the
amount of the stamp duty on the warrant and such fee as the Board
may from time to time require, issue a share warrant.
11.2 DEPOSIT OF SHARE WARRANTS
11.2.1 The bearer of a share warrant may at any time
deposit the warrant at the office of the Company, and so
long as the warrant remains so deposited, the depositor
shall have the same right of signing a requisition for
calling a meeting of the Company, and of
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attending, and voting and exercising the other privileges
of a member at any meeting held after the expiry of two
clear days from the time of deposit, as if his name were
inserted in the register of members as the holder of the
shares included in the deposited warrant.
11.2.2 Not more than one person shall be recognised as depositor
of the share warrant.
11.2.3 The Company shall, on two days' written notice, return the
deposited share warrant to the depositor.
11.3 RIGHT TO VOTE
11.3.1 Subject as herein otherwise expressly provided, no person
shall, as bearer of a share warrant, sign a requisition
for calling a meeting of the Company, or attend, or vote
or exercise any other privilege of a member at a meeting
of the Company, or be entitled to receive any notices from
the Company.
11.3.2 The bearer of a share warrant shall be entitled in all
other respects to the same privileges and advantages as if
he were named in the register of members as the holder of
the shares included in the warrant, and he shall be a
member of the Company.
11.4 LOSS OF A SHARE WARRANT
The Board may, from time to time, make rules as to the terms on which
(if it shall think fit) a new share warrant or coupon may be issued by
way of renewal in case of defacement, loss or destruction.
12. DIRECTORS
12.1 CONSTITUTION OF THE BOARD AND APPOINTMENT OF DIRECTORS
12.1.1 The Board of Directors of the Company shall comprise of
not less than three and not more than seven Directors. The
first Directors of the Company are
1. Ajit Balakrishnan
2. Diwan Arun Nanda
12.1.2 As on the date of adoption of these Articles of
Association, Mr. Ajit Balakrishnan is a director on the
board of the Company.
12.1.3 So long as the Promoters hold not less than 10% of the
issued, subscribed and paid up capital of the Company the
Promoters shall be entitled to appoint Mr. Ajit
Balakrishnan as a director on the board of the Company. He
shall not be liable to retire.
12.1.4 Mr. Ajit Balakrishnan shall be the Managing Director of
the Company and Mr. Arun Nanda shall be a director of the
Company.
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12.1.5 The remaining directors shall be appointed by a system of
cumulative voting, the appointments being made once in
three years.
12.1.6 APPOINTMENT OF ADDITIONAL DIRECTORS
The Board shall have power at any time, and from time to
time, to appoint a person as an additional director
provided that the number of Directors and additional
directors taken together shall not at any time, exceed the
maximum strength fixed for the Board by these Articles.
Any Director so appointed shall hold office only upto the
date of the next annual general meeting of the Company but
shall be eligible for re-appointment subject to provisions
of the Act and these Articles.
12.1.7 CASUAL VACANCY
Subject to the provision of Section 262 of the Act, in the
event a casual vacancy is caused in the office of any of
the Directors appointed as per the provisions of these
Articles, either by reason of his/her resignation, death,
or otherwise or as an addition to the Board, the original
party appointing the Director vacating office shall have a
right to appoint some other person as Director in his/her
place. Any appointment as aforesaid shall be in writing
and shall be signed by the Shareholder appointing the
original Director. ( ) Such appointment shall take effect
as from the date of its receipt at the office of the
Company or the date of appointment specified in the
notice, whichever is later and subject to the provisions
of the Act.
12.1.8 The continuing Directors may act notwithstanding any
vacancy in the Board; but, if and so long as their number
is reduced below the quorum fixed by the Act for a meeting
of the Board, the continuing directors or director may act
for the purpose of increasing the number of directors to
that fixed for the quorum, or of summoning a general
meeting of the Company, but for no other purpose.
12.2 QUALIFICATION SHARES
A Director need not hold any qualification shares in the Company.
12.3 ALTERNATE DIRECTOR
Subject to the provisions of the Act, the Board of Directors
shall have a right to appoint an Alternate Director to act for a
director (Original Director) during his absence.
12.4 CHAIRMAN
12.4.1 The Chairman shall preside at all meetings of the Board as
well as all General Meetings and Extraordinary General
Meetings of the Company.
12.4.2 As on the date of adoption of these Articles of
Association, Mr. Ajit Balakrishnan is the Chairman of
the board of the Company.
12.4.3 So long as the Promoters hold not less than 10% of the
issued, subscribed and paid up capital of the Company the
Promoters shall be entitled to appoint Mr. Ajit
Balakrishnan as Chairman of the Board of the Company.
12.4.4 The Chairman shall have a second or casting vote.
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12.5 MANAGING DIRECTOR
12.5.1 The day to day management of the Company shall be vested
in the Managing Director subject to the superintendence,
guidance and direction of the Board of Directors.
12.5.2 As on the date of adoption of these Articles of
Association, Mr. Ajit Balakrishnan is the Managing
Director of the Company.
12.5.3 So long as the Promoters hold not less than 10% of the
issued, subscribed and paid up capital of the Company the
Promoters shall be entitled to appoint the Managing
Director of the Company.
12.5 ADMINISTRATIVE MATTERS
12.5.1 The Company may exercise the powers conferred by Section
50 with regard to having an official seal for use abroad,
and such powers shall be vested in the Board.
12.5.2 The Company may exercise the powers conferred on it by
Sections 157 and 158 with regard to the keeping of a
foreign register; and the Board may (subject to the
provisions of those sections) make and vary such
regulations as it may think fit respecting the keeping of
any such register.
12.5.3 All cheques, promissory notes, drafts, hundis, bills of
exchange and other negotiable instruments, and all
receipts for moneys paid to the Company, shall be signed,
drawn, accepted, endorsed, or otherwise executed, as the
case may be, by such person and in such manner as the
Board shall from time to time by resolution determine.
12.5.4 Register every Director present at any meeting of the
Board or of a committee thereof shall sign his name in a
register to be kept for that purpose.
12.6 QUORUM
12.6.1 The quorum for the Meeting of the Board necessary for the
transaction of business by the Board shall be at least 2
(two) or one third of the total number of Directors on the
Board, whichever is higher. If within half an hour of the
time appointed for the meeting, a quorum is not present,
the meeting shall be adjourned. No fresh notice of the
meeting shall have to be given in such case. However, the
agenda shall not be changed in any manner whatsoever.
12.7 MEETINGS
12.7.1 The Board of Directors may meet for the dispatch of
business, adjourn and otherwise regulate its meetings, as
it thinks fit.
12.7.2 A Director may, and the Company Secretary, on the
requisition of a Director shall, at any time, summon a
meeting of the Board.
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12.8 NOTICE FOR HOLDING MEETING
12.8.1 22 clear days' notice of every meeting of the Board of
Directors shall be given in writing to every Director
(whether original or alternate) at his usual address,
whether in India or abroad. Where a notice of meeting is
required to be given to a Director abroad, the notice
shall be given simultaneously by a registered air mail
letter and by telefax on a telefax number if any provided
by such Director. A meeting of the Board may be called by
a shorter notice with the consent of majority of
Directors.
12.8.2 The Board shall meet at least once in every calendar
quarter. In addition to personal meetings, the Board may
act by circular resolution on any matter except matters
which by law may only be acted upon at a meeting. Such
draft of a proposed resolution must be circulated to every
member of the Board whether in India or not and to Intel.
12.8.3 Every notice convening a meeting of the Board shall set
out the agenda in full and in sufficient details of the
business to be transacted there at and no item or business
shall be transacted at such meeting unless the same has
been stated at full and in sufficient details in the said
notice convening the meeting, provided however that,
subject to Article 13, with the consent of a majority of
all the Board present at the meeting, any item or business
not included in the agenda may be transacted at the
meeting.
12.9 AGENDA FOR CONVENING A BOARD MEETING AND DELEGATION OF POWERS
Every notice convening a meeting of the Board shall set out the
agenda of the business to be transacted at such meeting in full
and sufficient detail. In the meetings, only such agenda will be
placed as is specified in the notice or shorter notice to the
Directors and the agenda shall not be changed in any manner
unless prior approval of a majority of the Directors is obtained.
12.9.1 The Board may, subject to the provisions of the Act,
delegate any of its powers to committees consisting of
such member or members of its body as it thinks fit.
12.9.2 Any committees so formed shall, in the exercise of the
powers so delegated, conform to any regulations that may
be imposed on it by the Board.
12.9.3 A committee may elect a Chairman of its meetings.
12.9.4 If no such Chairman is elected, or if at any meeting, the
Chairman is not present within five minutes after the time
appointed for holding the meeting, the members present may
choose one of their number to be Chairman of the meeting.
12.9.5 A committee may meet and adjourn as it thinks proper.
12.9.6 Questions arising at any meeting of a committee shall be
determined by a majority of votes of the members present.
12.9.7 All acts done by any meeting of the Board or of a
committee thereof or by any person acting as a Director,
shall, notwithstanding that it may be afterwards
discovered that there was some defect in the appointment
of any one or more of such Directors or of any person
acting as aforesaid, or that they or any of them were
disqualified, be as
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valid as if every such director or such person had been
duly appointed and was qualified to be a Director.
12.9.8 Save as otherwise expressly provided in the Act, a
resolution in writing, signed by all the members of the
Board or of a committee thereof, for the time being
entitled to receive notice of a meeting of the Board or
committee, shall be as valid and effectual as if it had
been passed at a meeting of the Board or committee, duly
convened and held.
13. MATTERS REQUIRING SPECIFIC CONSENT
13.1 All questions arising at the meeting of the Board shall be
decided by a majority of votes of the Directors present and
entitled to vote.
14. REMUNERATION OF DIRECTORS
REMUNERATION OF DIRECTORS
14.1 Subject to the provisions of the Act, The remuneration of
Directors of the Company, including the sitting fees payable to
the Directors for attending the meeting of the Board or the
Committees of the Board, shall be determined by the Board of
Directors from time to time, provided that no Director shall be
entitled to a sitting fee in excess of Rs.2000/- for attending
the meetings of the Board..
14.2 If any Director being willing, shall be called upon to perform
extra services or special exertions or efforts (which expression
shall include work done by a Director as member of any committee
formed by the Directors) or to travel on the Company's business
the Board may arrange with such Director for such special
remuneration for such extra services or special exertions or
efforts either by way of a daily allowance or payment of a
lumpsum amount or otherwise as they may think fit.
14.3 The remuneration to be paid to the Managing Director of the
Company shall be as determined by the Board of Directors.
14.4 AB shall, if he so desires, subject to statutory and regulatory
approvals, if any, be entitled to remuneration and enjoy
perquisites which are commensurate with companies engaged in
similar businesses.
15. GENERAL POWERS OF THE BOARD
The Board of Directors shall be entitled to exercise all such powers and
to do all such acts and things as the Company is authorised to exercise
and do, provided that the Board shall not exercise any power or do any
act or thing, which is directed or required by the Act or any other
provisions of law or by the Memorandum of Association of the Company or
by these Articles to be exercised or done by the Company in General
Meeting.
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16. DIRECTORS MAY CONTRACT WITH THE COMPANY
16.1 Any Director or other persons referred to in Section 314 of the
Act may be appointed to or hold any office or place of profit in
the Company or in any subsidiary of the Company, in accordance
with the provisions of Section 314 of the Act.
16.2 A Director of this Company may be or become Director of any other
Company promoted by this Company or in which it may be interested
as vendor, shareholder or otherwise and no such Director shall be
accountable for any benefits received as a director or member of
such Company.
16.3 Subject to the provisions of Section 297 of the Act, a Director
shall not be disqualified from contracting with the Company
either as vendor or purchaser of goods, materials or services or
for underwriting the subscription of any shares in or debentures
of the Company nor shall any such contract or arrangement entered
into by or on behalf of the Company with a relative of such
Director, or a firm in which such Director or relative is a
partner or with any other partner in such firm or with a private
Company of which such Director is a member or director, be
avoided nor shall any Director so contracting or being such
member or so interested be liable to account to the Company for
any profit realised by any such contract or arrangement by reason
of such Director holding office or of the fiduciary relation
thereby established.
17. GENERAL MEETING
17.1 The Company shall in each year hold a General Meeting as its
Annual General Meeting in additional to any other meetings in
that year. All General Meetings, other than Annual General
Meetings, shall be called Extraordinary General Meetings. The
Annual General Meeting shall be held within six months after the
expiry of such financial year, provided that not more than
fifteen months shall lapse between the date of one Annual General
Meeting and that of the next. Nothing contained in the foregoing
provisions shall be taken as affecting the right conferred upon
the Register under the provision of Section 166 (I) of the Act to
extend the time within which any Annual General Meeting may be
held. Every Annual General Meeting shall be called for a time
during business hours, on a day that is not a public holiday, and
shall be held at the Office of the Company or at some other place
within the city in which the Office of the Company is situated as
the Board may think and determine and the notices calling the
Meeting shall specify it as the Annual General Meeting. Every
member of the Company shall be entitled to attend either in
person or by proxy and the Auditor of the Company shall have the
right to attend and to be heard at any General Meeting which he
attends on any part of the business which concerns him as
Auditor. At every Annual General Meeting of the Company, there
shall be laid on the table the Directors' Report and Audited
Statement of Accounts, Auditors Report (if not already
incorporated in the Audited Statement of Accounts), the proxy
Register with proxies and the Register of Directors' shareholding
which Register shall remain open and accessible during the
continuance of the meeting. The Board of Directors shall prepare
the Annual List of Members, Summary of the Share Capital, Balance
Sheet and Profit and Loss Account forward the same to the
Registrar in accordance with Sections 159, 161 and 220 of the
Act.
17.2 The Board may, whenever it thinks fit, call an Extraordinary
General Meeting.
17.3 Twenty-one days notice at least of every General Meeting,
Annual or Extraordinary, and by whomsoever called, specifying the
day place and hour of meeting, and the general nature of the
business to be transacted thereat, shall be given in the manner
hereinafter provided, to
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such persons as are under these Articles entitled to receive
notice from the Company, provided that in the case of an Annual
General Meeting, with the consent in writing of all the members
entitled to vote there at, and in case of any other meeting with
the consent of membersholding not less than 95 percent of such
part of the paid up share capital of the Company as gives a right
to vote at the meeting, a meeting may be convened by a shorter
notice. In the case of an Annual General Meeting, if any business
other than (I) the consideration of the accounts, balance sheets
and report of Board and the Auditors, (ii) the declaration of
dividend, (iii) the appointment of Directors in place of those
retiring, (iv) the appointment of, and fixing the remuneration
of, the Auditors, if to be transacted and in the case of any
other meeting in any event, there shall be annexed to the notice
of the meeting a statement setting out all material facts
concerning each such item of business, including in particular
the nature and extent of the interest, if any, therein of every
Director and the Manager (if any), where any such item of special
business relates to, or affects any other company, the extent of
shareholding interest is not less than 20 percent of the paid-up
share capital of that other company. Where any item of business
consists of the according of approval to of the members, or the
non-receipt thereof, shall not invalidate any resolution the
notice or notices upon which it was convened.
18. PROCEEDINGS AT GENERAL MEETINGS
18.1 QUORUM
18.1.1 No business shall be transacted at any general meeting
unless a quorum of members is present at the time when the
meeting proceeds to business.
18.1.2 Save as herein otherwise provided, five members present in
person shall be a quorum.
18.2 CHAIRMAN TO PRESIDE
The Chairman, if any, of the Board shall preside as Chairman at
every General Meeting of the Company.
18.3 DIRECTORS TO ELECT CHAIRMAN
If there is no such Chairman, or if he is not present within
fifteen minutes after the time appointed for holding the meeting,
or is unwilling to act as Chairman of the meeting, the Directors
present shall elect one of their number to be Chairman of the
meeting.
18.4 MEMBERS TO ELECT CHAIRMAN
If at any meeting no Director is willing to act as Chairman or if
no Director is present within fifteen minutes after the time
appointed for holding the meeting, the members present shall
choose one of their number to be Chairman of the meeting.
18.5 ADJOURNMENT
18.5.1 The Chairman may, with the consent of any meeting at which
a quorum is present, and shall, if so directed by the
meeting, adjourn the meeting
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18.5.2 No business shall be transacted at any adjourned meeting
other than the business left unfinished at the meeting
from which the adjournment took place.
18.5.3 When a meeting is adjourned for thirty days or more,
notice of the adjourned meeting shall be given as in the
case of an original meeting.
18.5.4 Save as aforesaid, it shall not be necessary to give any
notice of an adjournment or of the business to be
transacted at an adjourned meeting.
18.6 OTHER BUSINESS
Any business other than that upon which a poll has been demanded
may be proceeded with, pending the taking of the poll.
19. VOTING
19.1 At any General Meeting a resolution put to vote of a meeting
shall be decided on a show of hands unless a poll is demanded
before or on the declaration of the result of the show of hands.
A poll shall be demanded by a member or members present in person
or by proxy and holding shares which confer a power to vote on
the resolution not being less than 1/10th of the total voting
power or on which an aggregate sum of Rs.50, 000/- has been
paid-up. The demand for a poll may be withdrawn at any point of
time by the person or persons who made the demand.
19.2 Subject to any rights or restrictions attached to any shares, on
a show of hands every member who (being an individual) is present
in person or by proxy, or (being a corporation) is present by a
duly authorized representative, not being himself a member
entitled to vote, shall have one vote and on a poll every member
present in person or by proxy, shall be in proportion to his
share of the paid-up equity capital of the Company.
19.3 JOINT HOLDERS
19.3.1 In the case of joint holders, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be
accepted to the exclusion of the votes of the other joint
holders.
19.3.2 For this purpose, seniority shall be determined by the
order in which the names stand in the register of members.
19.4 VOTING BY A PERSON OF UNSOUND MIND
A member of unsound mind, or in respect of whom an order has been
made by any Court having jurisdiction in lunacy, may vote,
whether on a show of hands or on a poll, by his committee or
other legal guardian, and any such committee or guardian may, on
a poll, vote by proxy.
19.5 CALLS TO BE PAID
No member shall be entitled to vote at any general meeting unless
all calls or other sums presently payable by him in respect of
shares in the Company have been paid.
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19.6 QUALIFICATION OF VOTER
19.6.1 No objection shall be raised to the qualification of any
voter except at the meeting or adjourned meeting at which
the vote objected to is given or tendered, and every vote
not disallowed at such meeting shall be valid for all
purposes.
19.6.2 Any such objection made in due time shall be referred to
the Chairman of the meeting, whose decision shall be final
and conclusive.
19.7 PROXY
19.7.1 The instrument appointing a proxy and the power of
attorney or other authority, if any, under which it is
signed or a notarially certified copy of that power or
authority, shall be deposited at the registered office of
the Company not less than 48 hours before the time for
holding the meeting or adjourned meeting at which the
person named in the instrument proposes to vote, or, in
the case of a poll, not less than 24 hours before the time
appointed for the taking of the poll; and in default the
instrument of proxy shall not be treated as valid.
19.7.2 An instrument appointing a proxy shall be in either of the
forms in Schedule IX to the Act or a form as near thereto
as circumstances admit.
19.7.3 A vote given in accordance with the terms of an instrument
of proxy shall be valid, notwithstanding the previous
death or insanity of the principal or the revocation of
the proxy or of the authority under which the proxy was
executed, or the transfer of the shares in respect of
which the proxy is given:
19.7.4 Provided that no intimation in writing of such death,
insanity, revocation or transfer shall have been received
by the Company at its office before the commencement of
the meeting or adjourned meeting at which the proxy is
used.
20. DIVIDENDS AND RESERVES
20.1 The profits of the Company shall be divisible subject to these
Articles among the members in proportion to the amount of capital
paid up on shares held by them respectively.
20.2 The Board shall have authority to recommend the amounts, timing
and currency of payment of any dividend or other distribution to
be made by the Company.
20.3 The Company may at an Annual General Meeting or Extraordinary
General Meeting declare a dividend to be paid to the members
according to their rights and interest in the profits and may fix
the time for payments not exceeding forty two days from the
declaration thereof but no dividend shall exceed the amount
recommended by the Board.
20.4 If two or more persons are registered as joint holders of any
shares, any of such persons may give effectual receipts for any
dividends or other monies payable in respect of such shares.
20.5 The Company, in a General Meeting may, upon the recommendation of
the Board resolve to capitalize any part of the amount for the
time being standing to the credit of any of the Company's reserve
accounts, share premium account or to the credit of the Profit
and Loss
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Account, or otherwise available for distribution as bonus shares
to be applied for the pre-determined purpose.
20.6 The Board may from time to time pay to the members such interim
dividend as appears to be justified by the profits of the
Company.
21. AUDIT
21.1 The Company shall, at the Annual General Meeting, appoint an
Auditor or Auditors to hold office until the next Annual General
Meeting. Provided however, that the person to be appointed as an
Auditor from time to time shall be nominated shall be a reputed
firm of Chartered Accountants. The Auditors shall be appointed
and their duties shall be regulated in accordance with the
provisions of the Act.
21.2 At the end of each accounting year, an account of the business
carried on in that year will be made and the statement of
accounts, namely a Balance Sheet and Profit and Loss Account
shall be prepared and audited. The accounts shall be signed by at
least two Directors, one of whom shall be the Managing Director
21.3 The accounting year of the Company will end on 31st March of each
calendar year.
22. ACCOUNTS
22.1 The Board shall from time to time determine whether and to what
extent and at what times and places and under what conditions or
regulations, the accounts and books of the Company, or any of
them, shall be open to the inspection of members not being
Directors.
22.2 No member (not being a Director) shall have any right of
inspecting any account or book or document of the Company except
as conferred by law or authorised by the Board or by the Company
in general meeting.
23. CAPITALISATION OF PROFITS
23.1 The Company in general meeting may, upon the recommendation of
the Board, resolve :
23.1.1 that it is desirable to capitalise any part of the amount
for the time being standing to the credit of any of the
Company's reserve accounts, or to the credit of the profit
and loss account, or otherwise available for distribution;
and
23.1.2 that such sum be accordingly set free for distribution in
the manner specified in Clause (2) amongst the members who
would have been entitled thereto, if distributed by way of
dividend and in the same proportions.
23.2 the sum aforesaid shall not be paid in cash but shall be applied,
subject to the provision contained in Clause 24.1, either in or
towards :
23.2.1 paying up any amounts for the time being unpaid on any
shares held by such members respectively;
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<PAGE> 24
23.2.2 paying up in full, unissued shares of the Company to be
allotted and distributed, credited as fully paid up, to
and amongst such members in the proportions aforesaid; or
23.2.3 partly in the way specified in sub-clause 24.2.1 and
partly in that specified in sub-clause 24.2.2.
23.3 A share premium account and a capital redemption reserve
[account] may, for the purposes of this regulation, only be
applied in the paying up of unissued shares to be issued to
members of the Company as fully paid bonus shares.
23.4 The Board shall give effect to the resolution passed by the
Company in pursuance of this regulation.
23.5 Whenever such a resolution as aforesaid shall have been passed,
the board shall :
23.6 make all appropriations and applications of the undivided profits
resolved to be capitalised thereby, and all allotments and issues
of fully paid shares, if any; and
23.7 generally do all acts and things required to give effect thereto.
23.8 The Board shall have full power :
23.8.1 to make such provision, by the issue of fractional
certificates or by payment in cash or otherwise as it
thinks fit, for the case of shares or debentures becoming
distributable in fractions; and
23.8.2 to authorise any person to enter, on behalf of all the
members entitled thereto, into an agreement with the
Company providing for the allotment to them respectively,
credited as fully paid up, of any further shares to which
they may be entitled upon such capitalisation, or (as the
case may require) for the payment up by the Company on
their behalf, by the application thereto of their
respective proportions of the profits resolved to be
capitalised, of the amounts or any part of the amounts
remaining unpaid on their existing shares.
23.8.3 Any agreement made under such authority shall be effective
and binding on all such members.
24 ACCOUNTING POLICY
24.1 The records and the accounts of the Company will be maintained in
accordance with generally accepted accounting principles in
India, consistently applied and as well as with International
Accounting Principles. Such records and accounts shall be kept at
the offices of the Company and shall be made available during
normal business hours for inspection by members or their
representatives, as the case may be.
24.2 The Company shall provide to its Board of Directors on a monthly
basis and within 30 days of the prior month's end, accounting
statements, reporting or any other information. The minimum level
of reporting shall include income statements, balance-sheets, and
cash flow statements.
25. THE SEAL
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25.1 The Board shall provide for the safe custody of the seal.
25.2 The seal of the Company shall not be affixed to any instrument
except by the authority of a resolution of the Board or of a
committee of the Board authorised by it in that behalf, and
except in the presence of at least two directors and of the
secretary or such other person as the Board may appoint for the
purpose, and those two directors and the secretary or other
person as aforesaid shall sign every instrument to which the seal
of the Company is so affixed in their presence. The seal of the
Company may be used outside India.
26. WINDING UP
26.1 In the event of winding up of the Company, the liquidator may,
with the sanction of a Special Resolution of the Company and any
other sanction required under the Act, divide amongst members, in
specie or in kind the whole or any part of the assets of the
Company, whether they shall consist of property of the same kind
or not.
26.2 For the purpose aforesaid, the liquidator may set such value as
he deems fair upon any property to be divided as aforesaid and
may determine how much division shall be carried out as between
the members or different classes of members.
26.3 The liquidator may, with the like sanction, vest the whole or any
part of such assets in trustees upon such trusts for the benefit
of the contributories as the liquidator, with the like sanction,
shall think fit, but so that no member shall be compelled to
accept any shares or other securities whereon there is any
liability.
27. INDEMNITY
27.1 Subject to the provisions of Section 201 of the Act and so far as
such provisions permit, every Director, Manager, Secretary,
Auditor and other Officer or servant of the Company shall be
indemnified by the Company against any claim, and it shall be the
duty of the Directors, out of the funds, of the Company to pay,
all costs, losses and expenses which any such person may incur or
become liable to incur by reason of any contract entered into or
act or thing done by him as Director, Officer, Auditor or Servant
or in any way in the discharge of his duties including traveling
expenses, and the amount for which indemnity is provided shall
immediately attach as a lien on the property of the Company and
have priority as between the members over all other claims.
27.2 The Company may indemnify any Director, Auditor or Officer of the
Company or any person employed by the Company or Auditor against
any liability incurred by him in defending any proceedings
whether civil or criminal in which judgment is given in his
favour or in which he is acquitted or discharged or in connection
with any application under Section 633 of the Act in which relief
is granted to him by the Court.
28. SECRECY
28.1 Every Director, Auditor, Executor, Trustee, Member of the
Committee, Officer, Servant, Agent, Accountant or other person
employed in the business of the Company shall be deemed to have
pledged himself to observe a strict secrecy in respect of all
transactions of the Company with the customers and the state of
the accounts with individuals in matters relating thereto and
shall be deemed to have pledged not to reveal any of the matters
which come to his
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knowledge in the discharge of his duties except when required to
do so by the Directors or by a Court of Law as the case may be
and except so far as may be necessary in order to comply with
any of the provisions in this presents contained.
28.2 No member, not being a Director shall be entitled, except to the
extent expressly permitted by the Act or these Articles, to enter
upon the property of the Company or to require discovery of any
information respecting any detail of the Company's trading or any
matter which is or may be in the nature of a trade secret, which
may relate to the conduct of the business of the Company and
which, in the opinion of the Board, it will not be expedient in
the interest of the members of the Company to communicate to the
public.
29. INSPECTION
29.1 The Directors shall from time to time determine whether and to
what extent and at what time and place and under what conditions
or regulations, the accounts, books and documents of the Company
or any of them shall be open to the inspection of the members and
no member (not being a Director) shall have any right to
inspecting any accounts or books or documents of the Company
except as conferred by statue or authorised by the Directors or
by a resolution of the Company passed in a General Meeting.
29.2 The Books, Registers, and other documents required to be
maintained by the Company and kept open for inspection under
provision of the Act and particularly Sections 49, 118, 144, 163,
196, 301, 302, 304, 307 and 362 of the Act, shall be available
for inspection at the Registered Office of the Company by the
persons entitled thereto to the extent and in the manner and on
payment of the requisite fees, if any, specified in the aforesaid
provisions, between the hours of 10.30 am and 12.30 p.m. on each
business day or between such other hours or such other time as
the Directors may from time to time determine.
29.3 Provided, however, that the Registers required to be maintained
under Section 307 of the Act shall be open for inspection of the
members and holders of debentures of the Company between the
above mentioned hours only during the period prescribed by
Section 307 of the Act.
30. SHAREHOLDERS' RIGHTS AGREEMENT
The Amended and Restated Shareholders' Rights Agreement dated 24th
February 2000 (the Shareholders' Rights Agreement) shall form part of
these Articles of Association and, notwithstanding anything contained
herein to the contrary, the relationship between the Company and the
parties to the Shareholders' Rights Agreement as members of the Company
shall continue to be governed by the Shareholders' Rights Agreement.
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<PAGE> 1
EXHIBIT 3.2
THE COMPANIES ACT, 1956
A COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
REDIFF.COM INDIA LIMITED
I. The name of the Company is REDIFF.COM INDIA LIMITED.(@)
II. The Registered Office of the Company will be situated in the State of
Maharashtra.
III. The Main Objects of the Company is established are:
A. THE MAIN OBJECTS WHICH THE COMPANY WILL PURSUE ON ITS INCORPORATION
ARE:
1. To carry on and undertake the business of providing on line
information services in various languages via electronic and
other forms of communications for local and other subscribers in
India and abroad and to deal in all materials connected
therewith.(@)
B. OBJECTS INCIDENTAL OR ANCILLARY TO ATTAINMENT OF THE MAIN OBJECTS:
1. To deal in export, import, buy, sell and or otherwise deal,
manufacture, develop in or carry on business in raw materials,
semi finished material or finished material, software, used or
useful in connection with publication of Electronic
Data/Computer Floppies/disks/cassettes and printing of books,
newspaper, journal, magazines, periodicals, directories
souvenirs, year books, etc.
2. To carry on and undertake the business of publishers of dailies,
weeklies, fortnightly, newspapers, periodicals, journals,
magazines, directories, souvenirs, year books and other literary
works in the Electronic and other forms in any language and on
any subject and marketing including exports markets
sell/distribute such published items to subscribers in India &
abroad.
3. To work as Consultants on Marketing, Advertising and Publicity
and Sales Promotion and undertake such work on behalf of
Companies, Corporations, Local Authorities, Government or any
other Customers.
4. To undertake all type of work in the area of Public Relations,
Press Relations and Editorial Publicity.
5. To plan and carry out training and Educational Programmes within
the areas of Advertising Publicity, Marketing, Mass
Communications and the applied Arts.
6. To organise Meetings and classes, Conferences and competitions to
ascertain the popularity of the products on their own or on
their own or on behalf of the customers, to organise
door-to-door publicity and train personnel for the same.
(@) Amended vide Resolution passed at the Annual General Meeting
held on 13th August 1999
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7. To assist customers in their Sales Promotion, Market Research
Programmes, Recruitment of personnel furnishings with
advertisement and Publicity layouts, write-ups and other
materials necessary for effective Sales Promotion.
8. Generally to carry on business as Advertisers, Publishers,
Canvassers etc. and to undertake all such work which falls
within the purview of modern methods of advertising publicity
propaganda, mass communication, marketing including exports
market and the applied Arts.
9. To employ Artists, Authors, Photographers and other personnel
required for the efficiently carrying out the objects of the
Company and to remunerate them from time to time, to enter into
Agreements with them laying down the terms and conditions of
employment, remuneration, etc. etc.
10. To receive money on deposit, merely for the purpose of financing
the Company's business on interest or otherwise and to lend and
advance money and give credit to such persons and on such terms
as may seem expedient and in particular to customers and others
having dealing with the Company and to guarantee the payment of
money or the performance of any obligation or contract.
11. To lend money with or without security to such companies, firms
or persons, and on such terms as may seem expedient and in
particular to customers of and others having dealings with the
Company and to guarantee the performance of contracts by any
persons, firms or companies. Provided that the Company shall not
carry on the Banking business as defined under the Banking
Companies Act.
12. To borrow or raise or secure the payment of money in such manner
as the company shall think fit and in particular by the issue of
debentures or debenture stock, perpetual or otherwise, charged
upon all or any of the company's property (both present and
future), including its uncalled capital and to purchase, or
redeem, any such securities.
13. To guarantee the payment or repayment of any money or
performances of any contracts or obligations by any person, firm
or company, including such companies which are or may come
under the management or control of the Company, and also to give
guarantee in respect of any financial arrangement that may be
made by or on behalf of such Company and if thought fit to
secure or support such guarantee by mortgage, pledge or
hypothecation of any properties of the Company or to mortgage,
pledge or hypothecate any properties of the Company as security
for any advance to be made to, or any debits or obligations of
any person, firm or company.
14. To draw, make, accept, endorse, discount, execute and issue
promissory Notes, Bills of Exchange, Bills of Lading, Warrants,
Debentures and other negotiable or transferable instruments.
15. To invest or otherwise deal with the funds Company and from time
to time to vary or realise such investments.
16. To remunerate the servants of the Company and others out of and
in proportion to the profits of the Company or otherwise as the
Company may think fit.
17. To remunerate any person or company for services rendered or to
be rendered in acting as trustees for debentures or debenture
stock holders or placing or assisting to place or guarantee the
placing of any of the shares in the Company's capital, or any
debentures, debenture stock or other securities of the Company
in or about the formation or promotion of the Company or the
conduct of its business or for guaranteeing payment of such
debentures or debenture stock and interest.
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<PAGE> 3
18. To appoint attorneys and agents whether by commission or otherwise and
constitute agencies and sub-agencies of the Company in India or elsewhere.
19. To allot shares in this Company to be considered as fully or partly paid
up in payment for any property of whatever description which the Company
may acquire or in exchange of services rendered or technical know-how or
goodwill.
20. To adopt such means of making known to the public the business of the
Company as may seem expedient and in particular by advertising in the
press, by circulars and by publication of books and periodicals.
21. To apply for and to acquire any statutory or other powers, rights or
concessions.
22. To provide public or private amusements and entertainments upon any
property of the Company.
23. To acquire or construct, work, maintain, alter, use, deal with and to
sell, let or dispose of any property and/or interest.
24. To acquire and undertake and to work the whole or any part of the
business, property and liabilities of any person, firm or company
carrying on (or in the case of a company formed to carry on) any business
which the company is authorized to carry on, or possessed of property
suitable for the purposes of this company.
25. To enter into partnership or into any agreement for sharing, profits,
union of interests, co-operation, joint adventure, reciprocal concession,
or otherwise with any person, firm or company carrying on or engaged in
or about to carry on or engage in any business or transaction which this
company is authorised to carry on or engage in any business or
transaction capable of being conducted so as directly or indirectly to
benefit this company and to take, subscribe for or otherwise acquire
shares, debentures, and securities of any such company and to hold, sell,
re-issue with or without guarantee or otherwise deal with the same.
26. To acquire from any supreme, municipal, local or other Government or
Authority or from any body or person any concession, charter, contract
right or privilege which may seem desirable for the furtherance of any
object of the company and to make any arrangement which may seem
desirable for the last named purpose with any such Government, Authority,
body or person and to comply with, work, sell or otherwise turn to
account any such concession, charter, contract, right or privilege.
27. To sell, improve, manage, work develop, exchange, lease, mortgage,
charge hypothecate, enfranchise, dispose of, turn to account or
otherwise deal with all or any part of the property and rights of the
company.
28. To carry on any other trade or business of any description whatsoever
(manufacturing, trading or otherwise) which may seem to the company
capable of being advantageously or conveniently carried on including
manufacturing of Capital or Consumers Goods in connection with business
of the Company or otherwise calculated, directly or indirectly, to
enhance the value of any of the Company's property and rights for the
time being or to promote the interests of the company.
29. To amalgamate with any other company having objects altogether or in part
similar to those of this Company.
30. To do all or any of the above things as principals, agents, contractors,
trustees, or otherwise, and by or through trustees, agents or otherwise,
and either along or in conjunction with others, and to establish agencies
or branches for the purposes of the Company's business in such place or
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places as may be considered necessary, and to transact general agency
business.
31. To establish and support or to aid in the establishment and support of
associations, institutions, funds, trusts and conveniences calculated to
benefit employees or ex-employees of the Company or its predecessors in
business or the relative or dependents of such persons and great pensions
or allowances and to subscribe or guarantee money for charitable or
benevolent object or for any exhibition or for any public, general or
useful object.
32. To pay out of the funds of the Company the costs and expenses of and
incidental to the promotion, formation and establishment and registration
of the Company.
33. To sell or dispose of the undertaking of the Company or any part thereof
for such consideration as the Company may think fit and in particular for
shares, fully or partly paid debentures or debenture stock (redeemable or
perpetual) or securities of any other company having objects altogether or
in part similar to those of this Company and to distribute any such
shares, debentures, debenture stock or securities amongst the Members of
the Company and either by way of dividends or upon any return of Capital.
34. To acquire for such consideration as the Company shall think fit in India
or Overseas secret process, inventions, protections, patents, brevets
d'invention and rights in the nature of patent rights therein, the
acquisition of which may seem advantageous or beneficial to the Company
and to test, use exercise, develop or grant licenses in respect of or
otherwise turn to account the property rights or information so acquired.
35. To produce, distribute or exhibit in India or abroad cinematographs,
motion pictures, etc. and for that purpose engage services of Artists,
staff and other personnel required.
36. To acquire by purchase, lease, exchange, hire or otherwise any lands,
tenements and premises of any tenure, or interest in the same whether
subject or not to any charges or encumbrances and to hold or to sell, let,
alienate, mortgage, change or otherwise deal with all or any such lands,
tenements or premises.
37. To construct, erect and maintain either by the Company or other parties,
sewers, roads, streets, brick-kilns and works, buildings, houses, flats,
show-rooms and shops and all other works, erections and things of any
description whatsoever either upon the lands acquired by the Company or
upon other lands and generally to alter and to improve the lands and other
property of the Company.
38. To let on lease any such premises or parts thereof and to provide such
facilities for the occupiers whether members or tenants thereof as are
commonly provided in residential flats, business offices or hotels.
39. To grant easements, profits, a pander or other rights in over or under the
said lands and to acquire such right in, over or under any adjoining lands.
40. To enter into foreign or local collaboration, to start any industry or
business either in India or abroad.
41. To depute any person abroad or in the country or to call for any other
person either from abroad or from this country and pay for all such
expenses.
42. To start, acquire or build new hotels, boarding houses, clubs,
restaurants, cinema houses, theatres, or any other places of recreation.
4
<PAGE> 5
43. To acquire any agency rights, distributorships, etc. for goods of
any nature i.e. capital consumer's otherwise.
44. To purchase from within the country or import from abroad
machinery for manufacturing or resale and also to sell machinery
that may be purchased or imported for manufacturing purposes.
45. To sell or hire out machineries installed-either old or new.
46. Generally to do all such other things as may appear to be
incidental or conducive to the attainment of the above object or
any of them in any part of the world either along or in
conjunction with other objects of the Company mentioned hitherto.
C. OTHER OBJECTS:
1. To deal in shares, stock, Government papers, Debentures,
Debenture stock and securities of all kinds on its own account or
as agents for others, for ready or forward deliveries and also to
underwrite any shares, Debentures or Debenture stock.
2. To carry on the business of trading through Electronic Commerce
i.e. commercial transactions on the Internet facilitating buying
and selling or otherwise dealing in all kinds of merchandise and
services including books & publications, audio & video products,
tourism, jewelry, confectioneries and other food items, personal
& health care products, stationary, consumer utility products,
clothings, watches, sports goods, flowers, computers & computer
related accessories and electronic items.(**)
3. a. To engage in the business of data processing, software
development, computer consultancy and software supply
services.
b. To engage in any business relating to access or computer
resource (as defined under any law relating to information
technology)
c. To engage in any information Technology - enabled business
including relating to the Internet, Intranet, Extranet,
Outernet or any developments thereof and all interactive
services.(@)
IV. The liability of the members is limited.
V. "The Authorized share capital of the company is Rs. 10,00,00,000 (Rupees
Ten crores) divided into 5,00,00,000 (Five crore) equity shares of Rs. 2/-
each with power to increase and reduce the capital of the Company and to
divide the shares in the capital for the time being into several classes
and attach thereto respectively such preferential, deferred, qualified or
special rights, privileges or conditions as may be determined by or in
accordance with the Articles of Association of the Company for the time
being and to vary, modify or abrogate any such rights, privileges or
conditions in such manner as may be permitted by the Companies Act, 1956
or by the Articles of Association of the Company for the time being."(~)
(Amended vide Resolution passed at the Extra-Ordinary General Meeting held
on 20th March, 1998).
(**) Amended vide Resolution passed at the Extra-Ordinary General Meeting
held on 6th July, 1998).
(@) Amended vide Resolution passed at the Annual General Meeting held on
13th August, 1999
(~) Amended vide Resolution passed at the Extra-Ordinary General Meeting
held on 6th January, 2000
----------------
5
<PAGE> 6
We, the several persons whose names, addresses and descriptions are hereunder
subscribed are desirous of being formed into a Company in pursuance of this
Memorandum of Association and we respectively agree to take the number of
shares in the Capital of the Company set opposite to our respective names.
<TABLE>
<CAPTION>
No. of Equity Signature Signature, Name,
Name, Address, Description & Shares taken of the Address Description &
Sr Occupation if any of by each Subscribe Occupation if any of the
No Subscribers. Subscriber. rs Witness.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 AJIT BALAKRISHNAN 100 SD/- WITNESS TO BOTH:
S/O. THAYYAMBALI EQUITY
BALAKRISHNAN SHARES OF
26 D. SAGAR SANGEET RS.10/- SD/-
COLABA, EACH BHARAT M. PENDSE
BOMBAY 400 025 S/O.MADHAV
BUSINESS S.PENDSE
31, PREM MILAN,
87-B, NEPEAN SEA
ROAD
BOMBAY 400 006
2 ARUN NANDA 100 SD/- CHARTERED
S/O.DIWAN NAROTAMLAL EQUITY ACCOUNTANT
NANDA SHARES OF
15. TARANGINI APARTMENTS RS.10/-
VEER SAVARKAR MARG
BOMBAY 400 025
BUSINESS
-----------
TOTAL 200 EQUITY
SHARES OF
RS.10/-EACH
</TABLE>
PLACE: BOMBAY DATE: 14TH DECEMBER, 1995
<PAGE> 1
EXHIBIT 3.3
NO. 96077
FRESH CERTIFICATE OF INCORPORATION
CONSEQUENT ON CHANGE OF NAME
IN THE OFFICE OF THIS REGISTRAR OF COMPANIES, MAHARASHTRA,
MUMBAI
In the matter of REDIFF COMMUNICATION LIMITED
I hereby approve and signify in writing under Section 21 of the Companies
Act, 1956 (Act of 1956) read with the Government of India, Department of Company
Affairs, Notification No. G.S.R. 507E dated the 24th June 1985 the change of
name of the Company:
from REDIFF COMMUNICATION LIMITED
to REDIFF.COM INDIA LIMITED
and I hereby certify that REDIFF COMMUNICATION LIMITED which was originally
incorporated on NINTH day of JANUARY 96 under the Companies Act, 1956 and under
the name REDIFF COMMUNICATION PRIVATE LIMITED having duly passed the necessary
resolution in terms of section 21 of the Companies Act, 1980 the name of the
said Company is this day changed to REDIFF.COM INDIA LIMITED and this
certificate is issued pursuant to Section 23(1) of the said Act.
GIVEN UNDER MY HAND AT MUMBAI THIS FIFTEENTH day of FEBRUARY TWO THOUSAND.
/s/ D. VIJAYA BHASKAR
[SEAL] DY. REGISTRAR OF COMPANIES
MAHARASHTRA, MUMBAI
<PAGE> 1
EXHIBIT 4.1
PBWT DRAFT - MARCH 23, 2000
DEPOSIT AGREEMENT
by and among
REDIFF.COM INDIA LIMITED
AND
CITIBANK, N.A.,
as Depositary,
AND
THE HOLDERS AND BENEFICIAL OWNERS
OF AMERICAN DEPOSITARY SHARES EVIDENCED BY
AMERICAN DEPOSITARY RECEIPTS ISSUED HEREUNDER
Dated as of __________, 2000
DEPOSIT AGREEMENT
<PAGE> 2
DEPOSIT AGREEMENT, dated as of _________, 2000, by and among (i)
REDIFF.COM INDIA LIMITED, a public company with limited liability organized
under the laws of the Republic of India, and its successors (the "Company"),
(ii) CITIBANK, N.A., a national banking association organized under the laws of
the United States of America acting in its capacity as depositary, and any
successor depositary hereunder (the "Depositary"), and (iii) all Holders and
Beneficial Owners of American Depositary Shares evidenced by American Depositary
Receipts issued hereunder (all such capitalized terms as hereinafter defined).
W I T N E S S E T H T H A T:
WHEREAS, the Company has duly authorized and has outstanding equity
shares, each with a par value of Rs.2 per share (the "Shares"); and
WHEREAS, the Company desires to establish with the Depositary an ADR
facility to provide for the deposit of the Shares and the creation of American
Depositary Shares representing the Shares so deposited and for the execution and
delivery of American Depositary Receipts evidencing such American Depositary
Shares, in each case upon the terms and subject to the conditions set forth in
this Deposit Agreement; and
WHEREAS, the Depositary is willing to act as the Depositary for such ADR
facility upon the terms set forth in this Deposit Agreement; and
WHEREAS, the American Depositary Receipts evidencing the American
Depositary Shares issued pursuant to the terms of this Deposit Agreement are to
be substantially in the form of Exhibit A attached hereto, with appropriate
insertions, modifications and omissions as are contemplated in this Deposit
Agreement; and
WHEREAS, American Depositary Shares issuable under the terms of this
Deposit Agreement are to be listed for trading on the NASDAQ National Market;
and
WHEREAS, the Board of Directors of the Company (or an authorized
committee thereof) has duly approved the establishment of an ADR facility upon
the terms set forth in this Deposit Agreement, the execution and delivery of
this Deposit Agreement on behalf of the Company, and the actions of the Company
and the transactions contemplated herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1.
<PAGE> 3
DEFINITIONS
All capitalized terms used, but not otherwise defined, herein shall have
the meanings set forth below, unless otherwise clearly indicated:
Section 1.1. "ADS Record Date" shall have the meaning given to such term
in Section 4.9.
Section 1.2. "Affiliate" shall have the meaning assigned to such term by
the Commission (as hereinafter defined) under Regulation C promulgated under the
Securities Act (as hereinafter defined).
Section 1.3. "American Depositary Receipt(s)"; "Receipt(s)"; and
"ADR(s)" shall mean the certificate(s) issued by the Depositary in substantially
the form of Exhibit A hereto to evidence the American Depositary Shares issued
under the terms of this Deposit Agreement, as such Receipts may be amended from
time to time in accordance with the provisions of this Deposit Agreement. A
Receipt may evidence any number of American Depositary Shares and may, in the
case of American Depositary Shares held through a central depository such as
DTC, be in the form of a "Balance Certificate." Except as specifically provided
in this Deposit Agreement or the applicable American Depositary Receipt(s), the
terms Receipt(s), American Depositary Receipt(s) and ADR(s) include Restricted
ADR(s) issued under the terms of Section 2.12 of this Deposit Agreement.
Section 1.4. "American Depositary Share(s)" and "ADS(s)" shall mean the
rights and interests in the Deposited Securities granted to the Holders and
Beneficial Owners pursuant to the terms and conditions of this Deposit Agreement
and the American Depositary Receipts issued hereunder to evidence such ADSs. As
of the date hereof, each American Depositary Share represents one (1) Share on
deposit with the Custodian (except as contemplated in Section 5.10 of the
Deposit Agreement). In the event of a distribution upon Deposited Securities
referred to in Section 4.2 or a change in Deposited Securities referred to in
Section 4.11 with respect to which additional American Depositary Shares are not
issued, each American Depositary Share shall represent the Deposited Securities
specified in such Sections. Except as specifically provided in this Deposit
Agreement or the applicable American Depositary Receipt(s), the term American
Depositary Share(s) includes Restricted ADS(s) issued under the terms of Section
2.12 of this Deposit Agreement.
The Company and the Depositary may at any time hereafter, subject to
applicable law and the terms of the Deposit Agreement, amend the ADS to Share
ratio, without, however, adversely affecting the rights of Holders under this
Deposit Agreement to withdraw the Deposited Securities represented by the
Holders' ADSs before the effective date of the amendment of the ADS to Share
ratio.
Section 1.5. "Applicant" shall have the meaning given to such term in
Section 5.10.
Section 1.6. "Beneficial Owners" shall mean, as to any ADS, any
person(s) having a beneficial interest deriving from the ownership of such ADS.
A Beneficial Owner of ADSs may or may not be the Holder of the ADR(s) evidencing
such ADSs. A Beneficial Owner shall be able to exercise any right or receive any
benefit hereunder solely through the person who is the Holder of the ADR(s)
evidencing the ADSs owned by such Beneficial Owner. Except as specifically
provided in this Deposit Agreement or the applicable American Depositary
Receipt(s), the term Beneficial Owner(s) shall include Beneficial Owner(s) of
Restricted ADSs.
Section 1.7. "Business Day" shall mean any day on which both the banks
in the Republic of India and the banks in New York are open for business.
Section 1.8. "Commission" shall mean the Securities and Exchange
Commission of the United States or any successor governmental agency in the
United States.
<PAGE> 4
Section 1.9. "Company" shall mean Rediff.com India Limited, a public
company with limited liability organized and existing under the laws of the
Republic of India, and its successors.
Section 1.10. "Custodian" shall mean, as of the date hereof, Citibank,
N.A. - Mumbai Branch, having its principal office at 81 Dr. Annie Besant Road,
Worli, Mumbai 400018, India, as the custodian for the purposes of this Deposit
Agreement, and any other entity that may be appointed by the Depositary pursuant
to the terms of Section 5.5 as successor, substitute or additional custodian
hereunder. The term "Custodian" shall mean any Custodian individually or all
Custodians collectively, as the context requires.
Section 1.11. "Deliver" and "Delivery" shall mean, when used in respect
of ADSs, Deposited Securities and Shares, either (i) the physical delivery of
the certificate(s) representing such securities, or (ii) the electronic delivery
of such securities by means of book-entry transfer, if available.
Section 1.12. "Deposit Agreement" shall mean this Deposit Agreement and
all exhibits hereto, as the same may from time to time be amended and
supplemented in accordance with the terms hereof.
Section 1.13. "Depositary" shall mean Citibank, N.A., a national banking
association organized under the laws of the United States, in its capacity as
depositary under the terms of this Deposit Agreement, and any successor
depositary hereunder.
Section 1.14. "Deposited Securities" shall mean Shares at any time
deposited under this Deposit Agreement and any and all other securities,
property and cash held by the Depositary or the Custodian in respect thereof,
subject, in the case of cash, to the provisions of Section 4.8. The collateral
delivered in connection with Pre-Release Transactions described in Section 5.10
hereof shall not constitute Deposited Securities. Except as specifically
provided in this Deposit Agreement or the applicable Receipt(s), the term
Deposited Securities includes Restricted Shares deposited under the terms of
Section 2.12 of this Deposit Agreement.
Section 1.15. "Dollars" and "$" shall refer to the lawful currency of
the United States.
Section 1.16. "DTC" shall mean The Depository Trust Company, a national
clearinghouse and the central book-entry settlement system for securities traded
in the United States and, as such, the custodian for the securities of DTC
Participants (as hereinafter defined) maintained in DTC, and any successor
thereto.
Section 1.17. "DTC Participant" shall mean any financial institution (or
any nominee of such institution) having one or more participant accounts with
DTC for receiving, holding and delivering the securities, property and cash held
in DTC.
Section 1.18. "Exchange Act" shall mean the United States Securities
Exchange Act of 1934, as from time to time amended.
Section 1.19. "Foreign Currency" shall mean any currency other than
Dollars.
Section 1.20. "Full Entitlement ADR(s)," "Full Entitlement ADS(s)" and
"Full Entitlement Share(s)" shall have the respective meanings set forth in
Section 2.11.
Section 1.21. "Holder(s)" shall mean the person(s) in whose name(s) a
Receipt is registered on the books of the Depositary (or the Registrar, if any)
maintained for such purpose. A Holder may or may not be a Beneficial Owner. If a
Holder is not the Beneficial Owner of the ADSs evidenced by the Receipt
registered in its name, such person shall be deemed to have all requisite
authority to act on behalf of the Beneficial Owners of the ADSs evidenced by
such Receipt.
Section 1.22. "National Securities Depository Limited" and "NSDL" shall
mean the National Securities Depository Limited, which provides the book-entry
settlement system for equity securities in the Republic of India, or any
successor entity thereto.
<PAGE> 5
Section 1.23. "Partial Entitlement ADR(s)," "Partial Entitlement ADS(s)"
and "Partial Entitlement Share(s)" shall have the respective meanings set forth
in Section 2.11.
Section 1.24. "Pre-Release Transaction" shall have the meaning set forth
in Section 5.10.
Section 1.25. "Principal Office", when used with respect to the
Depositary, shall mean the principal office of the Depositary at which at any
particular time its depositary receipts business shall be administered, which,
at the date of this Deposit Agreement, is located at 111 Wall Street, New York,
New York 10043, U.S.A.
Section 1.26. "Registrar" shall mean the Depositary or any bank or trust
company having an office in the Borough of Manhattan, The City of New York,
which shall be appointed by the Depositary to register issuances, transfers and
cancellations of Receipts as herein provided, and shall include any co-registrar
appointed by the Depositary for such purposes. Registrars (other than the
Depositary) may be removed and substitutes appointed by the Depositary. Each
Registrar (other than the Depositary) appointed pursuant to this Deposit
Agreement shall be required to give notice in writing to the Depositary and to
the Company accepting such appointment and agreeing to be bound by the
applicable terms of this Deposit Agreement.
Section 1.27. "Restricted ADR(s)" and "Restricted ADS(s)" shall have the
meaning set forth in Section 2.12.
Section 1.28. "Restricted Securities" shall mean Shares, Deposited
Securities or ADSs which (i) have been acquired directly or indirectly from the
Company or any of its Affiliates in a transaction or chain of transactions not
involving any public offering and are subject to resale limitations under the
Securities Act or the rules issued thereunder, or (ii) are held by an officer or
director (or persons performing similar functions) or other Affiliate of the
Company and are subject to resale limitations under the Securities Act or the
rules issued thereunder, or (iii) are subject to other restrictions on sale,
deposit or transfer under the laws of the United States, the Republic of India,
or under a shareholder agreement or the Articles of Association and Memorandum
of Association of the Company or under the regulations of any applicable
securities exchange unless, in each case, such Shares, Deposited Securities or
ADSs are being transferred or sold to persons other than an Affiliate of the
Company in a transaction (i) covered by an effective resale registration
statement, or (ii) exempt from the registration requirements of the Securities
Act (as hereinafter defined), and the Shares, Deposited Securities or ADSs are
not, when held by such person(s), Restricted Securities.
Section 1.29. "Restricted Share(s)" shall have the meaning set forth in
Section 2.12.
Section 1.30. "Rupees" and "Rs." shall refer to the lawful currency of
the Republic of India.
Section 1.31. "Securities Act" shall mean the United States Securities
Act of 1933, as from time to time amended.
Section 1.32. "Share Registrar" shall mean, as of the date hereof, the
Company and may after the date hereof be any depository institution organized
under the laws of the Republic of India appointed by the Company to carry out
the duties of registrar for the Shares or any successor as Share Registrar for
such Shares appointed by the Company.
Section 1.33. "Shares" shall mean the Company's equity shares, par value
Rs.2 per share, validly issued and outstanding and fully paid and may, if the
Depositary so agrees after consultation with the Company, include evidence of
the right to receive Shares; provided that in no event shall Shares include
evidence of the right to receive Shares with respect to which the full purchase
price has not been paid or Shares as to which preemptive rights have theretofore
not been validly waived or exercised; provided further, however, that, if there
shall occur any change in par value, split-up, consolidation, reclassification,
conversion or any other event described in Section 4.11 in respect of the Shares
of the Company, the term "Shares" shall thereafter, to the maximum extent
permitted by law, represent the successor securities resulting from such change
in par value, split-up, consolidation, exchange,
<PAGE> 6
conversion, reclassification or event. Except as specifically set forth
in this Deposit Agreement or the applicable American Depositary
Receipt(s), the term Share(s) includes Restricted Shares.
Section 1.34. "United States" shall have the meaning assigned to it in
Regulation S as promulgated by the Commission under the Securities Act.
ARTICLE 2.
APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS;
DEPOSIT OF SHARES; EXECUTION
AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS
Section 2.1. Appointment of Depositary. The Company hereby appoints the
Depositary as depositary for the Deposited Securities and hereby authorizes and
directs the Depositary to act in accordance with the terms and conditions set
forth in this Deposit Agreement and the applicable ADRs. Each Holder and each
Beneficial Owner, upon acceptance of any ADSs (or any interest therein) issued
in accordance with the terms of this Deposit Agreement, shall be deemed for all
purposes to (a) be a party to and bound by the terms of this Deposit Agreement
and the applicable ADRs, and (b) appoint the Depositary its attorney-in-fact,
with full power to delegate, to act on its behalf and to take any and all
actions contemplated in this Deposit Agreement and the applicable ADRs, to adopt
any and all procedures necessary to comply with applicable law and to take such
action as the Depositary in its sole discretion may deem necessary or
appropriate to carry out the purposes of this Deposit Agreement (the taking of
such actions to be the conclusive determinant of the necessity and
appropriateness thereof).
Section 2.2. Form and Transferability of Receipts.
2.2.1. Form. ADSs shall be evidenced by definitive Receipts which shall
be engraved, printed, lithographed or produced in such other manner as may be
agreed upon by the Company and the Depositary. Receipts may be issued under the
Deposit Agreement in denominations of any whole number of ADSs. The Receipts
shall be substantially in the form set forth in Exhibit A to the Deposit
Agreement, with any appropriate insertions, modifications and omissions, in each
case as otherwise contemplated in the Deposit Agreement or required by law.
Receipts shall be (i) dated, (ii) signed by the manual or facsimile signature of
a duly authorized signatory of the Depositary, (iii) countersigned by the manual
or facsimile signature of a duly authorized signatory of the Registrar, and (iv)
registered in the books maintained by the Registrar for the registration of
issuances and transfers of Receipts. No Receipt and no ADS evidenced thereby
shall be entitled to any benefits under the Deposit Agreement or be valid or
enforceable for any purpose against the Depositary or the Company, unless such
Receipt shall have been so dated, signed, countersigned and registered. Receipts
bearing the facsimile signature of a duly-authorized signatory of the Depositary
or the Registrar, who at the time of signature was a duly authorized signatory
of the Depositary or the Registrar, as the case may be, shall bind the
Depositary, notwithstanding the fact that such signatory has ceased to be so
authorized prior to the delivery of such Receipt by the Depositary. The Receipts
shall bear a CUSIP number that is different from any CUSIP number that was, is
or may be assigned to any depositary receipts previously or subsequently issued
pursuant to any other arrangement between the Depositary (or any other
depositary) and the Company and which are not Receipts issued hereunder.
2.2.2. Legends. The Receipts may, with the consent of the Company (which
consent shall not be unreasonably withheld) or at the request of the Company
(which shall not be unreasonably made), be endorsed with or have incorporated in
the text thereof such legends or recitals not inconsistent with the provisions
of the Deposit Agreement (i) as may be necessary to enable the Depositary or the
Company to perform their respective obligations hereunder, (ii) as may be
required to comply with any applicable laws or regulations, or with the rules
and regulations of any securities exchange or market upon which ADSs may be
traded, listed or quoted, or to conform with any usage with respect thereto,
(iii) as may be necessary to indicate any special limitations or restrictions to
which any particular Receipts or ADSs are subject by reason of the date or
manner of issuance of the Deposited Securities or otherwise, or (iv) as may be
required by any book-entry system in which the ADSs are held. Holders and
Beneficial Owners shall be deemed, for all purposes, to have notice of, and to
be bound by, the terms and
<PAGE> 7
conditions of the legends set forth, in the case of Holders, on the ADR
registered in the name of the applicable Holder or, in the case of Beneficial
Owners, on the ADR representing the ADSs owned by such Beneficial Owners.
2.2.3. Title. Subject to the limitations contained herein and in the
Receipt, title to a Receipt (and to each ADS evidenced thereby) shall be
transferable upon the same terms as a certificated security under the laws of
the State of New York, provided that such Receipt has been properly endorsed or
is accompanied by proper instruments of transfer. Notwithstanding any notice to
the contrary, the Depositary and the Company may deem and treat the Holder of a
Receipt (that is, the person in whose name a Receipt is registered on the books
of the Depositary) as the absolute owner thereof for all purposes. Neither the
Company nor the Depositary shall have any obligation nor be subject to any
liability under this Deposit Agreement or any Receipt to any holder of a Receipt
or any beneficial owner unless such holder is the Holder of such Receipt or, in
the case of a beneficial owner, such beneficial owner or the Beneficial Owner's
representative is the Holder thereof.
2.2.4. Book-Entry Systems. The Depositary shall make arrangements for
the acceptance of the American Depositary Shares into DTC's book-entry
settlement system. A single ADR in the form of a "Balance Certificate" will
evidence all ADSs held through DTC and will be registered in the name of the
nominee for DTC (currently "Cede & Co.") and will provide that it represents the
aggregate amount of ADSs from time to time indicated in the records of the
Depositary as being issued hereunder and that the aggregate amount of ADSs
represented thereby may from time to time be increased or decreased by making
adjustments on such records of the Depositary and of DTC or its nominee as
hereinafter provided. As such, the nominee for DTC will be the only "Holder" of
the ADR evidencing all ADSs held through DTC. Citibank, N.A. (or such other
entity as is appointed by DTC or its nominee) may hold the "Balance Certificate"
as custodian for DTC or its nominee. Each Beneficial Owner of ADSs held through
DTC must rely upon the procedures of DTC and the DTC Participants to exercise or
be entitled to any rights attributable to such ADSs. The DTC Participants shall
for all purposes be deemed to have all requisite power and authority to act on
behalf of the Beneficial Owners of the ADSs held in the DTC Participants'
respective accounts in DTC and the Depositary shall for all purposes be
authorized to rely upon any instructions and information given to it by DTC
Participants on behalf of Beneficial Owners of ADSs. So long as ADSs are held
through DTC or unless otherwise required by law, ownership of beneficial
interests in the ADR registered in the name of the nominee for DTC will be shown
on, and transfers of such ownership will be effected only through, records
maintained by (i) DTC or its nominee (with respect to the interests of DTC
Participants), or (ii) DTC Participants or their nominees (with respect to the
interests of clients of DTC Participants).
Section 2.3. Deposit with Custodian. Subject to the terms and conditions
of this Deposit Agreement and applicable law, Shares or evidence of rights to
receive Shares may be deposited by any person (including the Depositary in its
individual capacity but subject, however, in the case of the Company or any
Affiliate of the Company, to Section 5.7 hereof) at any time, whether or not the
transfer books of the Company or the Share Registrar, if any, are closed, by
Delivery of the Shares to the Custodian, provided that Restricted Shares may be
deposited only upon the terms expressly permitted by Section 2.12 of the Deposit
Agreement. Every deposit of Shares shall be accompanied by the following: (A)
(i) in the case of Shares represented by certificates issued in registered form,
appropriate instruments of transfer or endorsement (including, if necessary,
fully executed and stamped instruments of transfer as required under the laws of
the Republic of India), in a form satisfactory to the Custodian, (ii) in the
case of Shares represented by certificates in bearer form, of the requisite
coupons and talons pertaining thereto, and (iii) in the case of Shares delivered
by book-entry transfer, confirmation of such book-entry transfer to the
Custodian or that irrevocable instructions have been given to cause such Shares
to be so transferred, (B) such certifications and payments (including, without
limitation, the Depositary's fees and related charges) and evidence of such
payments (including, without limitation, stamping or otherwise marking such
Shares by way of receipt) as may be reasonably required by the Depositary or the
Custodian in accordance with the provisions of this Deposit Agreement and
applicable law, (C) if the Depositary so reasonably requires, a written order
directing the Depositary to execute and deliver to, or upon the written order
of, the person(s) stated in such order a Receipt or Receipts for the number of
American Depositary Shares representing the Shares so deposited, (D) evidence
satisfactory to the Depositary (which may be an opinion of counsel) that all
necessary approvals have been granted by, or there has been compliance with the
rules and regulations of, any applicable governmental agency in the Republic of
India, and (E) if the Depositary so requires, (i) an agreement, assignment or
instrument satisfactory to the Depositary or the Custodian which provides for
the prompt transfer by any person in whose name the Shares are or have been
recorded to the Custodian of any distribution, or right to subscribe for
additional Shares or to receive other property in respect of any such deposited
Shares or, in lieu thereof, such indemnity or other agreement as shall
<PAGE> 8
be satisfactory to the Depositary or the Custodian and (ii) if the Shares are
registered in the name of the person on whose behalf they are presented for
deposit, a proxy or proxies entitling the Custodian to exercise voting rights in
respect of the Shares for any and all purposes until the Shares so deposited are
registered in the name of the Depositary, the Custodian or any nominee.
Without limiting any other provision of this Deposit Agreement, the
Depositary shall instruct the Custodian not to, and the Depositary shall not
knowingly, accept for deposit (a) any Restricted Securities, except as
contemplated by Section 2.12, provided that the Company has restricted transfer
of such Shares to comply with any ownership restrictions referred to in Section
3.5 nor (b) any fractional Shares or fractional Deposited Securities nor (c) a
number of Shares or Deposited Securities which upon application of the ADS to
Shares ratio would give rise to fractional ADSs. No Shares shall be accepted for
deposit unless accompanied by evidence, if any is required by the Depositary,
that is reasonably satisfactory to the Depositary or the Custodian that all
conditions to such deposit have been satisfied by the person depositing such
Shares under the laws and regulations of the Republic of India and any necessary
approval has been granted by any governmental body in the Republic of India, if
any, which is then performing the function of the regulator of currency
exchange. Unless current applicable law changes, once withdrawn from the
depositary facility, the Deposited Securities may not be redeposited with the
Depositary under this Deposit Agreement. The Depositary may issue ADSs against
evidence of rights to receive Shares from the Company, any agent of the Company
or any custodian, registrar, transfer agent, clearing agency or other entity
authorized by the Company to maintain ownership or transaction records in
respect of the Shares. Such evidence of rights shall consist of written blanket
or specific guarantees of ownership of Shares furnished by the Company or any
such custodian, registrar, transfer agent, clearing agency or other entity
authorized by the Company to maintain ownership or transaction records in
respect of the Shares.
Section 2.4. Registration and Safekeeping of Deposited Securities. The
Depositary shall instruct the Custodian upon each Delivery of certificates
representing registered Shares being deposited hereunder with the Custodian (or
other Deposited Securities pursuant to Article IV hereof), together with the
other documents above specified, to present such certificate(s), together with
the appropriate instrument(s) of transfer or endorsement, duly stamped, to the
Share Registrar for transfer and registration of the Shares (as soon as transfer
and registration can be accomplished and at the expense of the person for whom
the deposit is made) in the name of the Depositary, the Custodian or a nominee
of either. Deposited Securities shall be held by the Depositary or by a
Custodian for the account and to the order of the Depositary or a nominee in
each case on behalf of the Holders and Beneficial Owners, at such place or
places as the Depositary or the Custodian shall determine.
Without limitation of the foregoing, the Depositary shall not knowingly
accept for deposit under this Deposit Agreement any Shares or other Deposited
Securities required to be registered under the provisions of the Securities Act,
unless a registration statement is in effect as to such Shares or other
Deposited Securities, or any Shares or other Deposited Securities the deposit of
which would violate any provisions of the Articles of Association, Memorandum of
Association, or any shareholders' agreement of, the Company or applicable law.
Shares may not be deposited by persons located in India or residents of
India or by persons acting on behalf of such persons located in India or
residents of India, except for deposits of Shares by the Company on behalf of
persons located and residing outside India.
Section 2.5. Execution and Delivery of Receipts. The Depositary has made
arrangements with the Custodian to confirm to the Depositary (i) that a deposit
of Shares has been made pursuant to Section 2.3 hereof, (ii)
<PAGE> 9
that such Deposited Securities have been recorded in the name of the Depositary,
the Custodian or a nominee of either on the shareholders' register maintained by
or on behalf of the Company or by the Share Registrar, if any, if registered
Shares have been deposited, or, if deposit is made by book-entry transfer,
confirmation of such transfer in the books of the NSDL, (iii) that all required
documents and approvals have been received, and (iv) the person(s) to whom or
upon whose order American Depositary Shares are deliverable in respect thereof
and the number of American Depositary Shares to be so delivered thereby. Such
notification may be made by letter, cable, telex, SWIFT message or, at the risk
and expense of the person making the deposit, by facsimile or other means of
electronic transmission. Upon receiving such notice from the Custodian, the
Depositary, subject to the terms and conditions of this Deposit Agreement and
applicable law, shall issue the American Depositary Shares representing the
Shares so deposited to or upon the order of the person(s) named in the notice
delivered to the Depositary and shall execute and deliver at its Principal
Office Receipt(s) registered in the name(s) requested by such person(s) and
evidencing the aggregate number of American Depositary Shares to which such
person(s) are entitled, but only upon payment to the Depositary of the charges
of the Depositary for accepting a deposit, issuing American Depositary Shares
and executing and delivering such Receipt(s) (as set forth in Section 5.9 and
Exhibit B hereto) and all taxes and governmental charges and fees payable in
connection with such deposit and the transfer of the Shares and the issuance of
the Receipt(s). The Depositary shall only issue American Depositary Shares in
whole numbers and deliver American Depositary Receipts evidencing whole numbers
of American Depositary Shares. Nothing herein shall prohibit any Pre-Release
Transaction upon the terms set forth in this Deposit Agreement.
Section 2.6. Transfer, Combination and Split-up of Receipts.
2.6.1. Transfer. The Registrar shall register the transfer of Receipts
(and of the ADSs represented thereby) on the books maintained for such purpose
and the Depositary shall cancel such Receipts and execute new Receipts
evidencing the same aggregate number of ADSs as those evidenced by the Receipts
canceled by the Depositary, shall cause the Registrar to countersign such new
Receipts and shall Deliver such new Receipts to or upon the order of the person
entitled thereto, if each of the following conditions has been satisfied: (i)
the Receipts have been duly Delivered by the Holder (or by a duly authorized
attorney of the Holder) to the Depositary at its Principal Office for the
purpose of effecting a transfer thereof, (ii) the surrendered Receipts have been
properly endorsed or are accompanied by proper instruments of transfer
(including signature guarantees in accordance with standard securities industry
practice), (iii) the surrendered Receipts have been duly stamped (if required by
the laws of the State of New York or of the United States, or any other
applicable law), and (iv) all applicable fees and charges of, and expenses
incurred by, the Depositary and all applicable taxes and governmental charges
(as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject,
however, in each case, to the terms and conditions of the applicable Receipts,
of the Deposit Agreement and of applicable law, in each case as in effect at the
time thereof.
2.6.2. Combination & Split Up. The Registrar shall register the split-up
or combination of Receipts (and of the ADSs represented thereby) on the books
maintained for such purpose and the Depositary shall cancel such Receipts and
execute new Receipts for the number of ADSs requested, but in the aggregate not
exceeding the number of ADSs evidenced by the Receipts canceled by the
Depositary, shall cause the Registrar to countersign such new Receipts and shall
Deliver such new Receipts to or upon the order of the Holder thereof, if each of
the following conditions has been satisfied: (i) the Receipts have been duly
Delivered by the Holder (or by a duly authorized attorney of the Holder) to the
Depositary at its Principal Office for the purpose of effecting a split-up or
combination thereof, and (ii) all applicable fees and charges of, and expenses
incurred by, the Depositary and all applicable taxes and governmental charges
(as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject,
however, in each case, to the terms and conditions of the applicable Receipts,
of the Deposit Agreement and of applicable law, in each case as in effect at the
time thereof.
2.6.3. Co-Transfer Agents. The Depositary may appoint one or more
co-transfer agents for the purpose of effecting transfers, combinations and
split-ups of Receipts at designated transfer offices on behalf of the
Depositary. In carrying out its functions, a co-transfer agent may require
evidence of authority and compliance with applicable laws and other requirements
by Holders or persons entitled to such Receipts and will be entitled to
protection and indemnity to the same extent as the Depositary. Such co-transfer
agents may be removed and substitutes may be appointed by the Depositary. Each
co-transfer agent appointed under this Section 2.6 (other than the Depositary)
shall give notice in writing to the Depositary accepting such appointment and
agreeing to be bound by the applicable terms of the Deposit Agreement.
<PAGE> 10
Section 2.7. Surrender of ADSs and Withdrawal of Deposited Securities.
Subject to applicable law, the Holder of ADSs shall be entitled to Delivery (at
the Custodian's designated office) to him or upon his order of the Deposited
Securities at the time represented by the ADS(s) upon satisfaction of each of
the following conditions: (i) the Holder (or a duly authorized attorney of the
Holder) has duly Delivered ADSs to the Depositary at its Principal Office (and
if applicable, the Receipts evidencing such ADSs) for the purpose of withdrawal
of the Deposited Securities represented thereby, (ii) if so required by the
Depositary, the Receipts Delivered to the Depositary for such purpose have been
properly endorsed in blank or are accompanied by proper instruments of transfer
in blank (including signature guarantees in accordance with standard securities
industry practice), (iii) if so required by the Depositary, the Holder of the
ADSs has executed and delivered to the Depositary a written order directing the
Depositary to cause the Deposited Securities being withdrawn to be Delivered to
or upon the written order of the person(s) designated in such order, and (iv)
all applicable fees and charges of, and expenses incurred by, the Depositary and
all applicable taxes and governmental charges (as are set forth in Section 5.9
and Exhibit B hereof) have been paid, subject, however, in each case, to the
terms and conditions of the Receipts evidencing the surrendered ADSs, of the
Deposit Agreement, of the Company's Articles of Association and Memorandum of
Association, of any applicable laws (including the rules of the Reserve Bank of
India), and to any provisions of or governing the Deposited Securities, in each
case as in effect at the time thereof.
Upon satisfaction of each of the conditions specified above, the
Depositary shall (i) cancel the ADSs Delivered to it (and, if applicable, the
Receipts evidencing the ADSs so Delivered), (ii) direct the Registrar to record
the cancellation of the ADSs so Delivered on the books maintained for such
purpose, and (iii) direct the Custodian to Deliver (without unreasonable delay)
at the Custodian's designated office the Deposited Securities represented by the
ADSs so canceled together with any certificate or other document of title for
the Deposited Securities (including, without limitation, stamped instruments of
transfer), or evidence of the electronic transfer thereof (if available), as the
case may be, to or upon the written order of the person(s) designated in the
order delivered to the Depositary for such purpose, subject however, in each
case, to the terms and conditions of the Deposit Agreement, the Receipts
evidencing the ADSs so canceled, the Articles of Association and Memorandum of
Association of the Company, applicable laws, the rules of the Reserve Bank of
India, and to the terms and conditions of or governing the Deposited Securities,
in each case as in effect at the time thereof.
The Depositary shall not accept for surrender ADSs representing less
than one Share. In the case of the Delivery to it of ADSs representing a number
other than a whole number of Shares, the Depositary shall cause ownership of the
appropriate whole number of Shares to be Delivered in accordance with the terms
hereof, and shall, at the discretion of the Depositary, either (i) return to the
person surrendering such ADSs the number of ADSs representing any remaining
fractional Share, or (ii) sell or cause to be sold the fractional Share
represented by the ADS(s) so surrendered and remit the proceeds of such sale
(net of (a) applicable fees and charges of, and expenses incurred by, the
Depositary and (b) taxes withheld) to the person surrendering the ADSs.
Notwithstanding anything else contained in any Receipt or the Deposit
Agreement, the Depositary may make delivery at the Principal Office of the
Depositary of (i) any cash dividends or cash distributions, or (ii) any proceeds
from the sale of any distributions of shares or rights, which are at the time
held by the Depositary in respect of the Deposited Securities represented by the
ADSs surrendered for cancellation and withdrawal. At the request, risk and
expense of any Holder so surrendering ADSs, and for the account of such Holder,
the Depositary shall direct the Custodian to forward (to the extent permitted by
law) any cash or other property (other than
<PAGE> 11
securities) held by the Custodian in respect of the Deposited Securities
represented by such ADSs to the Depositary for delivery at the Principal Office
of the Depositary. Such direction shall be given by letter or, at the request,
risk and expense of such Holder, by cable, telex or facsimile transmission.
The Company and the Depositary have been advised that, as of the date
hereof, a stamp duty of 0.5 percent of the market value of the Shares will be
charged in respect of any withdrawal of Shares and such stamp duty will be
payable by the relevant Holder requesting the withdrawal of the Deposited
Securities. In addition, it will be necessary to obtain the approval of the
Reserve Bank of India for withdrawal of Deposited Securities or for the Company
to register Shares in the name of a person who is not a resident of the Republic
of India upon such withdrawal. Any subsequent transfer of the Deposited
Securities by the holder after withdrawal will require the approval of the
Reserve Bank of India, which approval must be obtained by the transferee and the
Company under Section 29(1)(b) and 19(4), respectively, of the Foreign Exchange
Regulation Act, 1973.
Section 2.8. Limitations on Execution and Delivery, Transfer, etc. of
Receipts; Suspension of Delivery, Transfer, etc.
2.8.1. Additional Requirements. As a condition precedent to the
execution and delivery, registration, registration of issuance, transfer,
split-up, combination or surrender of any Receipt, the delivery of any
distribution thereon, or the withdrawal of any Deposited Securities, the
Depositary or the Custodian may require (i) payment from the depositor of Shares
or presenter of ADSs or of a Receipt of a sum sufficient to reimburse it for any
tax or other governmental charge and any stock transfer or registration fee with
respect thereto (including any such tax or charge and fee with respect to Shares
being deposited or withdrawn) and payment of any applicable fees and charges of
the Depositary as provided in Section 5.9 and Exhibit B hereof, (ii) the
production of proof satisfactory to it as to the identity and genuineness of any
signature or any other matter contemplated by Section 3.1 hereof, and (iii)
compliance with (A) any laws or governmental regulations relating to the
execution and delivery of Receipts or American Depositary Shares or to the
withdrawal of Deposited Securities and (B) such reasonable regulations as the
Depositary and the Company may establish consistent with the provisions of the
applicable Receipt, this Deposit Agreement and applicable law.
2.8.2. Additional Limitations. The issuance of ADSs against deposits of
Shares generally or against deposits of particular Shares may be suspended, or
the deposit of particular Shares may be refused, or the registration of transfer
of Receipts in particular instances may be refused, or the registration of
transfers of Receipts generally may be suspended, during any period when the
transfer books of the Company, the Depositary, a Registrar or the Share
Registrar, if any, are closed or if any such action is deemed necessary or
advisable by the Depositary or the Company, in good faith, at any time or from
time to time because of any requirement of law, any government or governmental
body or commission or any securities exchange on which the ADSs or Shares are
listed, or under any provision of this Deposit Agreement or the applicable
Receipt(s) or under any provision of, or governing, the Deposited Securities, or
because of a meeting of shareholders of the Company or for any other reason,
subject, in all cases, to Section 7.8 hereof.
2.8.3. Regulatory Restrictions. Notwithstanding any provision of this
Deposit Agreement or any Receipt(s) to the contrary, Holders are entitled to
surrender outstanding ADSs to withdraw the Deposited Securities at any time
subject only to (i) temporary delays caused by closing the transfer books of the
Depositary or the Company or the deposit of Shares in connection with voting at
a shareholders' meeting or the payment of dividends, (ii) the payment of fees,
taxes and similar charges, (iii) compliance with any U.S. or foreign laws or
governmental regulations relating to the Receipts or to the withdrawal of the
Deposited Securities, and (iv) other circumstances specifically contemplated by
Section I.A.(l) of the General Instructions to Form F-6 (as such General
Instructions may be amended from time to time).
<PAGE> 12
Section 2.9. Lost Receipts, etc. In case any Receipt shall be mutilated,
destroyed, lost, or stolen, the Depositary shall execute and deliver a new
Receipt of like tenor at the expense of the Holder (a) in the case of a
mutilated Receipt, in exchange of and substitution for such mutilated Receipt
upon cancellation thereof, or (b) in the case of a destroyed, lost or stolen
Receipt, in lieu of and in substitution for such destroyed, lost, or stolen
Receipt, after the Holder thereof (i) has submitted to the Depositary a written
request for such exchange and substitution before the Depositary has notice that
the Receipt has been acquired by a bona fide purchaser, (ii) has provided such
security or indemnity (including an indemnity bond) as may be required by the
Depositary to save it and any of its agents harmless, and (iii) has satisfied
any other reasonable requirements imposed by the Depositary, including, without
limitation, evidence satisfactory to the Depositary of such destruction, loss or
theft of such Receipt, the authenticity thereof and the Holder's ownership
thereof.
Section 2.10. Cancellation and Destruction of Surrendered Receipts;
Maintenance of Records. All Receipts surrendered to the Depositary shall be
canceled by the Depositary. Canceled Receipts shall not be entitled to any
benefits under this Deposit Agreement or be valid or enforceable against the
Depositary for any purpose. The Depositary is authorized to destroy Receipts so
canceled, provided the Depositary maintains a record of all destroyed Receipts.
Any ADSs held in book-entry form (i.e., through accounts at DTC) shall be deemed
canceled when the Depositary causes the number of ADSs evidenced by the Balance
Certificate to be reduced by the number of ADSs surrendered (without the need to
physically destroy the Balance Certificate).
Section 2.11. Partial Entitlement ADSs. In the event any Shares are
deposited which entitle the holders thereof to receive a per-share distribution
or other entitlement in an amount different from the Shares then on deposit (the
Shares then on deposit collectively, "Full Entitlement Shares" and the Shares
with different entitlement, "Partial Entitlement Shares"), the Depositary shall
(i) cause the Custodian to hold Partial Entitlement Shares separate and distinct
from Full Entitlement Shares, and (ii) subject to the terms of this Deposit
Agreement, issue ADSs and deliver ADRs representing Partial Entitlement Shares
which are separate and distinct from the ADSs and ADRs representing Full
Entitlement Shares, by means of separate CUSIP numbering and legending (if
necessary) ("Partial Entitlement ADSs/ADRs" and "Full Entitlement ADSs/ADRs",
respectively). If and when Partial Entitlement Shares become Full Entitlement
Shares, the Depositary shall (a) give notice thereof to Holders of Partial
Entitlement ADSs and give Holders of Partial Entitlement ADRs the opportunity to
exchange such Partial Entitlement ADRs for Full Entitlement ADRs, (b) cause the
Custodian to transfer the Partial Entitlement Shares into the account of the
Full Entitlement Shares, and (c) take such actions as are necessary to remove
the distinctions between (i) the Partial Entitlement ADRs/ADSs, on the one hand,
and (ii) the Full Entitlement ADRs/ADSs on the other. Holders and Beneficial
Owners of Partial Entitlement ADSs shall only be entitled to the entitlements of
Partial Entitlement Shares. Holders and Beneficial Owners of Full Entitlement
ADSs shall be entitled only to the entitlements of Full Entitlement Shares. All
provisions and conditions of this Deposit Agreement shall apply to Partial
Entitlement ADRs/ADSs to the same extent as Full Entitlement ADRs/ADSs, except
as contemplated by this Section 2.11. The Depositary is authorized to take any
and all other actions as may be necessary (including, without limitation, making
the necessary notations on Receipts) to give effect to the terms of this Section
2.11. The Company agrees to give timely written notice to the Depositary if any
Shares issued or to be issued are Partial Entitlement Shares and shall assist
the Depositary with the establishment of procedures enabling the identification
of Partial Entitlement Shares upon Delivery to the Custodian.
Section 2.12. Restricted ADSs. The Depositary shall, at the request and
expense of the Company, establish procedures enabling the deposit hereunder of
Shares that are Restricted Securities in order to enable the holder of such
Shares to hold its ownership interests in such Restricted Shares in the form of
ADSs issued under the terms hereof (such Shares, "Restricted Shares"). Upon
receipt of a written request from the Company to accept Restricted Shares for
deposit hereunder, the Depositary agrees to establish procedures permitting the
deposit of such Restricted Shares and the issuance of one or more series of ADSs
representing such deposited Restricted Shares (such ADSs, the "Restricted ADSs,"
and the ADRs evidencing such Restricted ADSs, the "Restricted ADRs"). The
Company shall assist the Depositary in the establishment of such procedures and
agrees that it shall take all steps necessary and satisfactory to the Depositary
to ensure that the establishment of such procedures does not violate the
provisions of the Securities Act or any other applicable laws. The depositors of
such Restricted Shares and the Holders of the Restricted ADSs may be required
prior to the deposit of such Restricted Shares, the transfer of the Restricted
ADRs and the Restricted ADSs evidenced thereby or the withdrawal of the
Restricted Shares represented by Restricted ADSs to provide such written
certifications or agreements as the Depositary or the Company may require. The
Company shall provide to the Depositary in writing the legend(s) to be affixed
to the Restricted ADRs,
<PAGE> 13
which legends shall (i) be in a form reasonably satisfactory to the Depositary
and (ii) contain the specific circumstances under which the Restricted ADRs and
the Restricted ADSs represented thereby may be transferred or the Restricted
Shares withdrawn. The Restricted ADSs issued upon the deposit of Restricted
Shares shall be separately identified on the books of the Depositary and the
Restricted Shares so deposited shall be held separate and distinct from the
other Deposited Securities held hereunder. The Restricted Shares and the
Restricted ADSs shall not be eligible for Pre-Release Transactions described in
Section 5.10. The Restricted ADSs shall not be eligible for inclusion in any
book-entry settlement system, including, without limitation, DTC and shall not
in any way be fungible with the ADSs issued under the terms hereof that are not
Restricted ADSs. The Restricted ADRs and the Restricted ADSs evidenced thereby
shall be transferable only by the Holder thereof upon delivery to the Depositary
of (i) all documentation otherwise contemplated by this Deposit Agreement and
(ii) an opinion of counsel reasonably satisfactory to the Depositary setting
forth, inter alia, the conditions upon which the Restricted ADR presented is,
and the Restricted ADSs evidenced thereby are, transferable by the Holder
thereof under applicable securities laws and the transfer restrictions contained
in the legend set forth on the Restricted ADR presented for transfer. Except as
(i) set forth in this Section 2.12 and the applicable ADR and (ii) required by
applicable law, the Restricted ADRs and the Restricted ADSs evidenced thereby
shall be treated as ADRs and ADSs issued and outstanding under the terms of the
Deposit Agreement. In the event that the Company makes any distributions upon
Deposited Securities described in Article IV of this Deposit Agreement, the
Depositary shall (i) make the determinations contemplated in Article IV with
respect to the Restricted ADSs independently from the determination for ADSs
that are not Restricted ADSs and (ii) shall make distributions under Article IV
to Holders of Restricted ADSs only on the basis of the distributions received
from the Company in respect of the Restricted Shares corresponding to the
Restricted ADSs held by such Holders. In the event that, in determining the
rights and obligations of parties hereto with respect to any Restricted ADSs,
any conflict arises between (a) the terms of this Deposit Agreement (other than
this Section 2.12) and (b) the terms of (i) this Section 2.12 or (ii) the
applicable Restricted ADR, the terms and conditions set forth in this Section
2.12 and of the Restricted ADR shall be controlling and shall govern the rights
and obligations of the parties to this Deposit Agreement pertaining to the
deposited Restricted Shares, the Restricted ADSs and Restricted ADRs.
ARTICLE 3.
<PAGE> 14
CERTAIN OBLIGATIONS OF HOLDERS
AND BENEFICIAL OWNERS OF ADSS
Section 3.1. Proofs, Certificates and Other Information. Any person
presenting Shares for deposit, any Holder and any Beneficial Owner may be
required by the Company or the Depositary, and every Holder and Beneficial Owner
agrees, from time to time to provide to the Depositary, the Company and the
Custodian such proof of citizenship or residence, taxpayer status, payment of
all applicable taxes or other governmental charges, exchange control approval
and approval for deposit, legal or beneficial ownership of ADSs and Deposited
Securities, compliance with applicable laws and regulations and the terms of
this Deposit Agreement, Receipt(s) and the provisions of, or governing, the
Deposited Securities, to execute such certifications and to make such
representations and warranties, and to provide such other information and
documentation (or, in the case of Shares in registered form presented for
deposit, such information relating to the registration on the books of the
Company or of the Share Registrar as the Depositary or the Custodian may deem
necessary or proper or as the Company may reasonably require by written request
to the Depositary consistent with its obligations under this Deposit Agreement
and the applicable Receipt(s). The Depositary and the Registrar, as applicable,
may withhold the execution or Delivery or registration of transfer of any
Receipt or the distribution or sale of any dividend or distribution of rights or
of the proceeds thereof or, to the extent not limited by the terms of Section
7.8 hereof, the Delivery of any Deposited Securities until such proof or other
information is filed or such certifications are executed, or such
representations are made, or such other documentation or information provided,
in each case to the Depositary's, the Registrar's and the Company's reasonable
satisfaction. The Depositary shall provide the Company, in a timely manner, with
copies or originals (if necessary and appropriate) of (i) any such proofs of
citizenship or residence, taxpayer status, or exchange control approval or
approval for deposit which it receives from Holders and Beneficial Owners, and
(ii) any other information or documents which the Company may reasonably request
and which the Depositary shall request and receive from any Holder or Beneficial
Owner or any person presenting Shares for deposit or ADSs for cancellation and
withdrawal. Nothing herein shall obligate the Depositary to (i) obtain any
information for the Company if not provided by the Holders or Beneficial Owners,
or (ii) verify or vouch for the accuracy of the information so provided by the
Holders or Beneficial Owners.
Section 3.2. Liability for Taxes and Other Charges. Any tax or other
governmental charge payable with respect to any ADR or any Deposited Securities
or American Depositary Shares shall be payable by the Holders and Beneficial
Owners to the Depositary. The Company, the Custodian and/or the Depositary may
withhold or deduct from any distributions made in respect of Deposited
Securities and may sell for the account of a Holder and/or Beneficial Owner any
or all of the Deposited Securities and apply such distributions and sale
proceeds in payment of such taxes (including applicable interest and penalties)
or charges, the Holder and the Beneficial Owner remaining liable for any
deficiency. The Custodian may refuse the deposit of Shares and the Depositary
may refuse to issue ADSs, to deliver ADRs, register the transfer, split-up or
combination of ADRs and (subject to Section 7.8) the withdrawal of Deposited
Securities until payment in full of such tax, charge, penalty or interest is
received. Every Holder and Beneficial Owner agrees to indemnify the Depositary,
the Company, the Custodian, and any of their agents, officers, employees and
Affiliates for, and to hold each of them harmless from, any claims with respect
to taxes (including applicable interest and penalties thereon) arising from any
tax benefit obtained for such Holder and/or Beneficial Owner.
Section 3.3. Representations and Warranties on Deposit of Shares. Each
person depositing Shares under the Deposit Agreement shall be deemed thereby to
represent and warrant that (i) such Shares and the certificates therefor are
duly authorized, validly issued, fully paid, non-assessable and legally obtained
by such person, (ii) all preemptive (and similar) rights, if any, with respect
to such Shares have been validly waived or exercised, (iii) the person making
such deposit is duly authorized so to do, (iv) the Shares presented for deposit
are free and clear of any lien, encumbrance, security interest, charge, mortgage
or adverse claim, and (v) the Shares presented for deposit have not been
stripped of any rights or entitlements. Except as contemplated by Section 2.12
of this Deposit Agreement, each such person shall also be deemed to represent
that Shares deposited by that person are not Restricted Securities, and that the
deposit of Shares or sale of ADSs by that person is not restricted, under the
Securities Act. Such representations and warranties shall survive the deposit
and withdrawal of Shares, the issuance and cancellation of American Depositary
Shares in respect thereof and the transfer of such American Depositary Shares.
If any such representations or warranties are false in any way, the Company and
the Depositary
<PAGE> 15
shall be authorized, at the cost and expense of the person depositing Shares, to
take any and all actions necessary to correct the consequences thereof.
Section 3.4. Compliance with Information Requests. Notwithstanding any
other provision of this Deposit Agreement or any Receipt(s), each Holder and
Beneficial Owner agrees to comply with requests from the Company pursuant to the
rules and requirements of the Commission, the Securities and Exchange Board of
India, the Reserve Bank of India, and any stock exchange on which the Shares
are, or will be, registered, traded or listed, the Articles of Association and
Memorandum of Association of the Company, and any other laws, rules and
regulations which require notification to the Company of interests in Deposited
Securities, inter alia, as to certain acquisitions or depositions of Shares (or
Share equivalents), the capacity in which such Holder or Beneficial Owner owns
American Depositary Shares (and Shares as the case may be) and regarding the
identity of any other person(s) interested in such American Depositary Shares
and the nature of such interest and various other matters, whether or not they
are Holders and/or Beneficial Owners at the time of such request. The Depositary
agrees to use its reasonable efforts to forward, upon the request of the Company
and at the Company's expense, any such request from the Company to the Holders
and to forward to the Company any such responses to such requests received by
the Depositary.
Section 3.5. Ownership Restrictions. Notwithstanding any other provision
in this Deposit Agreement or any Receipt, the Company may restrict transfers of
the Shares where the proposed transfer is in violation of applicable laws, rules
and regulations (including where such transfer might result in ownership of
Shares exceeding limits imposed by applicable law and regulations), or the
Articles of Association and Memorandum of Association of the Company. The
Company may also restrict, in such manner as it deems appropriate, transfers of
the American Depositary Shares where the proposed transfer is in violation of
applicable laws, rules and regulations (including where such transfer may result
in the total number of Shares represented by the American Depositary Shares
beneficially owned by a single Holder or Beneficial Owner to exceed any such
limits). The Company may, in its sole discretion but subject to applicable law,
instruct the Depositary to take action with respect to the ownership interest of
any Holder or Beneficial Owner in excess of the limits set forth in the
preceding sentence, including, but not limited to, the imposition of
restrictions on the transfer of American Depositary Shares, the removal or
limitation of voting rights or mandatory sale or disposition on behalf of a
Holder or Beneficial Owner of the Shares represented by the American Depositary
Shares held by such Holder or Beneficial Owner in excess of such limitations, if
and to the extent such disposition is permitted by applicable law and the
Articles of Association and Memorandum of Association of the Company.
ARTICLE 4.
<PAGE> 16
THE DEPOSITED SECURITIES
Section 4.1. Cash Distributions. Whenever the Depositary receives
confirmation from the Custodian of the receipt of any cash dividend or other
cash distribution on any Deposited Securities, or receives proceeds from the
sale of any Deposited Securities or any other entitlements held in respect of
Deposited Securities under the terms hereof, the Depositary will (i) if at the
time of receipt thereof any amounts received in a Foreign Currency can in the
judgment of the Depositary (pursuant to Section 4.8) be converted on a
practicable basis into Dollars transferable to the United States, promptly
convert or cause to be converted such cash dividend, distribution or proceeds
into Dollars on the terms described in Section 4.8, (ii) if applicable,
establish the ADS Record Date upon the terms described in Section 4.9, and (iii)
distribute promptly the amount thus received (net of (a) the applicable fees and
charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to
the Holders entitled thereto as of the ADS Record Date in proportion to the
number of American Depositary Shares held as of the ADS Record Date. The
Depositary shall distribute only such amount, however, as can be distributed
without attributing to any Holder a fraction of one cent, and any balance not so
distributed shall be held by the Depositary (without liability for interest
thereon) and shall be added to and become part of the next sum received by the
Depositary for distribution to Holders of ADSs outstanding at the time of the
next distribution. If the Company, the Custodian or the Depositary is required
to withhold and does withhold from any cash dividend or other cash distribution
in respect of any Deposited Securities an amount on account of taxes, duties or
other governmental charges, the amount distributed to Holders on the American
Depositary Shares representing such Deposited Securities shall be reduced
accordingly. Such withheld amounts shall be forwarded by the Company, the
Custodian or the Depositary to the relevant governmental authority. Evidence of
payment thereof by the Company shall be forwarded by the Company to the
Depositary upon request.
Section 4.2. Distribution in Shares. If any distribution upon any
Deposited Securities consists of a free distribution of Shares, the Company
shall cause such Shares to be deposited with the Custodian and registered, as
the case may be, in the name of the Depositary, the Custodian or their
respective nominees. Upon receipt of confirmation of such deposit from the
Custodian, the Depositary shall establish the ADS Record Date upon the terms
described in Section 4.9 and either (i) the Depositary shall, subject to Section
5.9 hereof, distribute to the Holders as of the ADS Record Date in proportion to
the number of American Depositary Shares held as of the ADS Record Date,
additional American Depositary Shares, which represent in the aggregate the
number of Shares received as such free distribution, subject to the other terms
of this Deposit Agreement (including, without limitation, payment of (a) the
applicable fees and charges of, and expenses incurred by, the Depositary as set
forth in Exhibit B hereto and (b) taxes), or (ii) if additional American
Depositary Shares are not so distributed, each American Depositary Share issued
and outstanding after the ADS Record Date shall, to the extent permissible by
law, thenceforth also represent rights and interests in the additional integral
number of Shares distributed upon the Deposited Securities represented thereby
(net of (a) the applicable fees and charges of, and expenses incurred by, the
Depositary and (b) taxes). In lieu of delivering fractional American Depositary
Shares, the Depositary shall sell the number of Shares or American Depositary
Shares, as the case may be, represented by the aggregate of such fractions and
distribute the net proceeds upon the terms described in Section 4.1. In the
event that the Depositary determines that any distribution in property
(including Shares) is subject to any tax or other governmental charges which the
Depositary is obligated to withhold, or, if the Company in the fulfillment of
its obligation under Section 5.7 hereof, has furnished an opinion of U.S.
counsel determining that Shares must be registered under the Securities Act or
other laws in order to be distributed to Holders (and no such registration
statement has been declared effective), the Depositary may dispose of all or a
portion of such property (including Shares and rights to subscribe therefor) in
such amounts and in such manner, including by public or private sale, as the
Depositary deems necessary and practicable, and the Depositary shall distribute
the net proceeds of any such sale (after deduction of such (a) taxes and (b)
fees and charges of, and expenses incurred by, the Depositary) to Holders
entitled thereto upon the terms described in Section 4.1. The Depositary shall
hold and/or distribute any unsold balance of such property in accordance with
the provisions of this Deposit Agreement.
Section 4.3. [INTENTIONALLY OMITTED].
Section 4.4. Distribution of Rights to Purchase Additional ADSs.
<PAGE> 17
4.4.1. Distribution to ADS Holders. Whenever the Company intends to
distribute to the holders of the Deposited Securities rights to subscribe for
additional Shares, the Company shall give notice thereof to the Depositary at
least 60 days prior to the proposed distribution stating whether or not it
wishes such rights to be made available to Holders of ADSs. Upon timely receipt
of a notice indicating that the Company wishes such rights to be made available
to Holders of ADSs, the Depositary shall consult with the Company to determine,
and the Company shall assist the Depositary in its determination, whether it is
lawful and reasonably practicable to make such rights available to the Holders.
The Depositary shall make such rights available to Holders only if (i) the
Company shall have timely requested that such rights be made available to
Holders, (ii) the Depositary shall have received satisfactory documentation
within the terms of Section 5.7, and (iii) the Depositary shall have determined
that such distribution of rights is reasonably practicable. In the event any of
the conditions set forth above are not satisfied or if the Company requests that
the rights not be made available to Holders of ADSs, the Depositary shall
proceed with the sale of the rights as contemplated in Section 4.4(b) below. In
the event all conditions set forth above are satisfied, the Depositary shall
establish an ADS Record Date (upon the terms described in Section 4.9) and
establish procedures to (x) distribute rights to purchase additional ADSs (by
means of warrants or otherwise), (y) to enable the Holders to exercise such
rights (upon payment of the subscription price and of the applicable (a) fees
and charges of, and expenses incurred by, the Depositary and (b) taxes), and (z)
to deliver ADSs upon the valid exercise of such rights. The Company shall assist
the Depositary to the extent necessary in establishing such procedures. Nothing
herein shall obligate the Depositary to make available to the Holders a method
to exercise rights to subscribe for Shares (rather than ADSs).
4.4.2. Sale of Rights. If (i) the Company does not timely request the
Depositary to make the rights available to Holders or requests that the rights
not be made available to Holders, (ii) the Depositary fails to receive
satisfactory documentation within the terms of Section 5.7 or determines that it
is not reasonably practicable to make the rights available to Holders, or (iii)
any rights made available are not exercised and appear to be about to lapse, the
Depositary shall, upon consultation with the Company, determine whether it is
lawful and reasonably practicable to sell such rights, in a riskless principal
capacity, at such place and upon such terms (including public or private sale)
as it may deem practical. The Company shall assist the Depositary to the extent
necessary to determine such legality and practicability. The Depositary shall,
upon such sale, convert and distribute proceeds of such sale (net of applicable
(a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes)
upon the terms set forth in Section 4.1.
4.4.3. Lapse of Rights. If the Depositary is unable to make any rights
available to Holders upon the terms described in Section 4.4(a) or to arrange
for the sale of the rights upon the terms described in Section 4.4(b), the
Depositary shall allow such rights to lapse.
The Depositary shall not be responsible for (i) any failure to determine
that it may be lawful or practicable to make such rights available to Holders in
general or any Holders in particular, or (ii) any foreign exchange exposure or
loss incurred in connection with such sale, or exercise, or (iii) the content of
any materials forwarded to the Holders by the Company in connection with the
rights distribution.
Notwithstanding anything to the contrary in this Section 4.4, if
registration (under the Securities Act or any other applicable law) of the
rights or the securities to which any rights relate may be required in order for
the Company to offer such rights or such securities to Holders and to sell the
securities represented by such rights, the Depositary will not distribute such
rights to the Holders (i) unless and until a registration statement under the
Securities Act (and other applicable law) covering such offering is in effect or
(ii) unless the Company furnishes the Depositary opinion(s) of counsel for the
Company in the United States and counsel to the Company in any other applicable
country in which rights would be distributed, in each case reasonably
satisfactory to the Depositary, to the effect that the offering and sale of such
securities to Holders and Beneficial Owners are exempt from, or do not require
registration under, the
<PAGE> 18
provisions of the Securities Act or any other applicable laws. The rights issued
by the Company may not be negotiable and, if negotiable, a liquid market for
rights may not exist. This may adversely affect (1) the ability of the
Depositary to dispose of such rights or (2) the amount the Depositary would
realize upon disposal of rights.
In the event that the Company, the Depositary or the Custodian shall be
required to withhold and does withhold from any distribution of property
(including rights) an amount on account of taxes or other governmental charges,
the amount distributed to the Holders of American Depositary Shares representing
such Deposited Securities shall be reduced accordingly. In the event that the
Depositary determines that any distribution in property (including Shares and
rights to subscribe therefor) is subject to any tax or other governmental
charges which the Depositary is obligated to withhold, the Depositary may
dispose of all or a portion of such property (including Shares and rights to
subscribe therefor) in such amounts and in such manner, including by public or
private sale, as the Depositary deems necessary and practicable to pay any such
taxes or charges.
There can be no assurance that Holders generally, or any Holder in
particular, will be given the opportunity to receive or exercise rights on the
same terms and conditions as the holders of Shares or be able to exercise such
rights. Nothing herein shall obligate the Company to file any registration
statement in respect of any rights or Shares or other securities to be acquired
upon the exercise of such rights.
Section 4.5. Distributions Other Than Cash, Shares or Rights to Purchase
Shares.
4.5.1. Whenever the Company intends to distribute to the holders of
Deposited Securities property other than cash, Shares or rights to purchase
additional Shares, the Company shall give timely notice thereof to the
Depositary and shall indicate whether or not it wishes such distribution to be
made to Holders of ADSs. Upon receipt of a notice indicating that the Company
wishes such distribution be made to Holders of ADSs, the Depositary shall
consult with the Company, and the Company shall assist the Depositary, to
determine whether such distribution to Holders is lawful and reasonably
practicable. The Depositary shall not make such distribution unless (i) the
Company shall have requested the Depositary to make such distribution to
Holders, (ii) the Depositary shall have received satisfactory documentation
within the terms of Section 5.7, and (iii) the Depositary shall have determined
that such distribution is reasonably practicable.
4.5.2. Upon receipt of satisfactory documentation and the request of the
Company to distribute property to Holders of ADSs and after making the requisite
determinations set forth in (a) above, the Depositary shall distribute the
property so received to the Holders of record, as of the ADS Record Date, in
proportion to the number of ADSs held by them respectively and in such manner as
the Depositary may deem practicable for accomplishing such distribution (i) upon
receipt of payment or net of the applicable fees and charges of, and expenses
incurred by, the Depositary and (ii) net of any taxes withheld. The Depositary
may dispose of all or a portion of the property so distributed and deposited, in
such amounts and in such manner (including public or private sale) as the
Depositary may deem practicable or necessary to satisfy any taxes (including
applicable interest and penalties) or other governmental charges applicable to
the distribution.
4.5.3. If (i) the Company does not request the Depositary to make such
distribution to Holders or requests not to make such distribution to Holders,
(ii) the Depositary does not receive satisfactory documentation within the terms
of Section 5.7, or (iii) the Depositary determines that all or a portion of such
distribution is not reasonably practicable, the Depositary shall sell or cause
such property to be sold in a public or private sale, at such place or places
and upon such terms as it may deem practicable and shall (i) cause the proceeds
of such sale, if any, to be converted into Dollars and (ii) distribute the
proceeds of such conversion received by the Depositary (net of applicable (a)
fees and charges of, and expenses incurred by, the Depositary and (b) taxes) to
the Holders as of the ADS Record Date upon the terms of Section 4.1. If the
Depositary is unable to sell such property, the Depositary
<PAGE> 19
may dispose of such property for the account of Holders of ADSs in any way it
deems reasonably practicable under the circumstances.
Section 4.6. Distributions with Respect to Deposited Securities in
Bearer Form. Subject to the terms of this Article IV, distributions in respect
of Deposited Securities that are held by the Depositary in bearer form shall be
made to the Depositary for the account of the respective Holders of Receipts
with respect to which any such distribution is made upon due presentation by the
Depositary or the Custodian to the Company of any relevant coupons, talons, or
certificates. The Company shall promptly notify the Depositary of such
distributions. The Depositary or the Custodian shall promptly present such
coupons, talons or certificates, as the case may be, in connection with any such
distribution.
Section 4.7. Redemption. If the Company intends to exercise any right of
redemption in respect of any of the Deposited Securities, the Company shall give
notice thereof to the Depositary at least 60 days prior to the intended date of
redemption which notice shall set forth the particulars of the proposed
redemption. Upon receipt of (i) such notice and (ii) satisfactory documentation
given by the Company to the Depositary within the terms of Section 5.7, and only
if the Depositary shall have determined that such proposed redemption is
practicable, the Depositary shall provide to each Holder a notice setting forth
the intended exercise by the Company of the redemption rights and any other
particulars set forth in the Company's notice to the Depositary. The Depositary
shall instruct the Custodian to present to the Company the Deposited Securities
in respect of which redemption rights are being exercised against payment of the
applicable redemption price. Upon receipt of confirmation from the Custodian
that the redemption has taken place and that funds representing the redemption
price have been received, the Depositary shall convert, transfer, and distribute
the proceeds (net of applicable (a) fees and charges of, and the expenses
incurred by, the Depositary and (b) taxes), retire ADSs and cancel ADRs upon
delivery of such ADSs by Holders thereof and the terms set forth in Section 4.1
hereof. If less than all outstanding Deposited Securities are redeemed, the ADSs
to be retired will be selected by lot or on a pro rata basis, as may be
determined by the Depositary. The redemption price per ADS shall be the per
share amount received by the Depositary upon the redemption of the Deposited
Securities represented by American Depositary Shares (subject to the terms of
Section 4.8 hereof and the applicable fees and charges of, and expenses incurred
by, the Depositary, and taxes) multiplied by the number of Deposited Securities
represented by each ADS redeemed.
Section 4.8. Conversion of Foreign Currency. Whenever the Depositary or
the Custodian shall receive Foreign Currency, by way of dividends or other
distributions or the net proceeds from the sale of securities, property or
rights, which in the judgment of the Depositary can at such time be converted on
a practicable basis, by sale or in any other manner that it may determine in
accordance with applicable law, into Dollars transferable to the United States
and distributable to the Holders entitled thereto, the Depositary shall convert
or cause to be converted, by sale or in any other manner that it may determine,
such Foreign Currency into Dollars, and shall distribute such Dollars (net of
any applicable fees, any reasonable and customary expenses incurred in such
conversion and any expenses incurred on behalf of the Holders in complying with
currency exchange control or other governmental requirements) in accordance with
the terms of the applicable sections of this Deposit Agreement. If the
Depositary shall have distributed warrants or other instruments that entitle the
holders thereof to such Dollars, the Depositary shall distribute such Dollars to
the holders of such warrants and/or instruments upon surrender thereof for
cancellation, in either case without liability for interest thereon. Such
distribution may be made upon an averaged or other practicable basis without
regard to any distinctions among Holders on account of any application of
exchange restrictions or otherwise.
If such conversion or distribution generally or with regard to a
particular Holder can be effected only with the approval or license of any
government or agency thereof, the Depositary shall have authority to file such
application for approval or license, if any, as it may deem desirable. In no
event, however, shall the Depositary be obligated to make such a filing.
If at any time the Depositary shall determine that in its judgment the
conversion of any Foreign Currency and the transfer and distribution of proceeds
of such conversion received by the Depositary is not practical or lawful, or if
any approval or license of any governmental authority or agency thereof that is
required for such conversion, transfer and distribution is denied or, in the
opinion of the Depositary, not obtainable at a reasonable cost or within a
<PAGE> 20
reasonable period, the Depositary may, in its discretion, (i) make such
conversion and distribution in Dollars to the Holders for whom such conversion,
transfer and distribution is lawful and practicable, (ii) distribute the Foreign
Currency (or an appropriate document evidencing the right to receive such
Foreign Currency) to Holders for whom this is lawful and practicable or (iii)
hold (or cause the Custodian to hold) such Foreign Currency (without liability
for interest thereon) for the respective accounts of the Holders entitled to
receive the same.
Section 4.9. Fixing of ADS Record Date. Whenever the Depositary shall
receive notice of the fixing of a record date by the Company for the
determination of holders of Deposited Securities entitled to receive any
distribution (whether in cash, Shares, rights, or other distribution), or
whenever for any reason the Depositary causes a change in the number of Shares
that are represented by each American Depositary Share, or whenever the
Depositary shall receive notice of any meeting of, or solicitation of consents
or of proxies, of holders of Shares or other Deposited Securities, or whenever
the Depositary shall find it necessary or convenient in connection with the
giving of any notice, solicitation of any consent or any other matter, the
Depositary shall fix a record date (the "ADS Record Date") for the determination
of the Holders of Receipts who shall be entitled to receive such distribution,
to give instructions for the exercise of voting rights at any such meeting, to
give or withhold such consent, to receive such notice or solicitation or to
otherwise take action, or to exercise the rights of Holders with respect to such
changed number of Shares represented by each American Depositary Share. The
Depositary shall make reasonable efforts to establish the ADS Record Date as
closely as possible to the applicable record date for the Deposited Securities
(if any) set by the Company in the Republic of India. Subject to applicable law
and the provisions of Section 4.1 through 4.8 and to the other terms and
conditions of this Deposit Agreement, only the Holders of Receipts at the close
of business in New York on such ADS Record Date shall be entitled to receive
such distribution, to give such voting instructions, to receive such notice or
solicitation, or otherwise take action.
Section 4.10. Voting of Deposited Securities.
4.10.1. ADS Voting Instructions. As soon as practicable after receipt of
notice of any meeting at which the holders of Deposited Securities are entitled
to vote, or of solicitation of consents or proxies from holders of Deposited
Securities, the Depositary shall fix the ADS Record Date in respect of such
meeting or solicitation of consent or proxy. The Depositary shall, if requested
by the Company in writing in a timely manner (the Depositary having no
obligation to take any further action if the request shall not have been
received by the Depositary at least 30 days prior to the date of such vote or
meeting), at the Company's expense and provided no U.S. legal prohibitions
exist, distribute to Holders as of the ADS Record Date: (a) such notice of
meeting or solicitation of consent or proxy, (b) a statement that the Holders at
the close of business on the ADS Record Date will be entitled, subject to any
applicable law, the provisions of this Deposit Agreement, the Articles of
Association and Memorandum of Association of the Company and the provisions of
or governing the Deposited Securities (which provisions, if any, shall be
summarized in pertinent part by the Company), to instruct the Depositary as to
the exercise of the voting rights, if any, pertaining to the Deposited
Securities represented by such Holder's ADSs, (c) a brief statement as to the
manner in which such voting instructions may be given, and (d) summaries of any
materials and other documents provided by the Company for the purpose of
enabling such Holders to exercise such voting rights. Voting instructions may be
given only in respect of a number of ADSs representing an integral number of
Deposited Securities.
Upon the timely receipt from a Holder of ADSs as of the ADS Record Date
of voting instructions in the manner specified by the Depositary, the Depositary
shall endeavor, insofar as practicable and permitted under applicable law, the
provisions of this Deposit Agreement, the Articles of Association and Memorandum
of Association of the Company and the provisions of the Deposited Securities, to
vote or cause the Custodian to vote the Shares and/or other Deposited Securities
(in person or by proxy) represented by such Holder's American Depositary Shares,
either (x) in the event of voting on a show of hands, in which case the
Depositary shall vote, or shall instruct the Custodian to vote, all Shares
and/or other Deposited Securities held under the terms hereof in accordance with
instructions received from Holders of a majority of the
<PAGE> 21
American Depositary Shares for which voting instructions have been timely given
to the Depositary, or (y) in the event of voting on a poll, in which case the
Depositary shall vote, or shall instruct the Custodian to vote, the Shares
and/or other Deposited Securities in accordance with the voting instructions
timely received from the Holders giving instructions.
For the purpose of this Section 4.10, in the event that the Depositary
receives an express instruction from a Holder as of the ADS Record Date to
demand a poll with respect to any matter to be voted on by Holders of the
American Depositary Shares, the Depositary shall notify the Chairman of the
Company or a person designated by the Chairman of such instruction and request
the Chairman or such designee to demand a poll with respect to such matters. The
Company agrees that the Chairman or such designee will use their reasonable best
efforts to demand a poll at the meeting at which such matters are to be voted on
and to vote such Shares in accordance with the instructions of the Holders of
the American Depositary Shares.
The Depositary has been advised that under Indian law, as in effect as
of the date hereof, voting of Shares is by show of hands (in which case each
shareholder has one (1) vote regardless of the number of Shares owned) unless a
poll is validly demanded, and that a proxy holder may not vote except in a poll
vote. In addition, the Company's Articles of Association and Memorandum of
Association, as in effect as of the date hereof, provide that a poll may be
demanded at any general meeting by a holder or holders holding (a) at least 10%
of the total Shares entitled to vote on a resolution or (b) Shares with an
aggregate paid up capital of at least Rs.50,000. As a result, unless
specifically instructed by a Holder or Holders holding (a) at least 10% of the
total Shares (represented by such Holder(s)' American Depositary Shares)
entitled vote on a resolution or (b) Shares (represented by such Holder(s)'
American Depositary Shares) with an aggregate paid-up capital of at least
Rs.50,000, the Chairman of the Company or his designee may not be able to demand
a poll at the instruction of Holders. The Company's Articles of Association and
Memorandum of Association (as in effect on the date hereof) further provide that
the Chairman of the Company shall cast the deciding vote, in the event of a tie.
(b) Neither the Depositary nor the Custodian shall, under any
circumstances exercise any discretion as to voting and neither the Depositary
nor the Custodian shall vote, attempt to exercise the right to vote, or in any
way make use of for purposes of establishing a quorum or otherwise, Deposited
Securities represented by ADSs except (a) pursuant to and in accordance with the
voting instructions timely received from Holders or (b) as otherwise
contemplated herein in the event of voting by show of hands. If the Depositary
timely receives from a Holder voting instructions which fail to specify the
manner in which the Depositary is to vote the Deposited Securities represented
by such Holder's ADSs, the Depositary will deem such Holder (unless otherwise
specified in the notice distributed to Holders) to have instructed the
Depositary to vote in favor of the items set forth in such voting instructions.
Deposited Securities represented by ADSs for which no specific voting
instructions are received by the Depositary from the Holder shall not be voted.
Notwithstanding anything else contained in this Deposit Agreement, the
Depositary shall not have any obligation to take any action with respect to any
meeting, or solicitation of consents or proxies, of holders of Deposited
Securities if the taking of such action would violate U.S. laws. The Company
agrees to take any and all actions reasonably necessary to enable Holders
<PAGE> 22
and Beneficial Owners to exercise the voting rights accruing to the Deposited
Securities and to deliver to the Depositary an opinion of U.S. counsel
addressing any actions requested to be taken if so requested by the Depositary.
There can be no assurance that Holders generally or any Holder in
particular will receive the notice described above with sufficient time to
enable the Holder to return voting instructions to the Depositary in a timely
manner.
Section 4.11. Changes Affecting Deposited Securities. Upon any change in
nominal or par value, split-up, cancellation, consolidation or any other
reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting the Company
or to which it is a party, any securities which shall be received by the
Depositary or the Custodian in exchange for, or in conversion of or replacement
of or otherwise in respect of, such Deposited Securities shall, to the extent
permitted by law, be treated as new Deposited Securities under this Deposit
Agreement, and the Receipts shall, subject to the provisions of this Deposit
Agreement and applicable law, evidence American Depositary Shares representing
the right to receive such additional securities. The Depositary may, with the
Company's approval, and shall, if the Company shall so request, subject to the
terms of the Deposit Agreement and receipt of an opinion of counsel to the
Company reasonably satisfactory to the Depositary that such distributions are
not in violation of any applicable laws or regulations, execute and deliver
additional Receipts as in the case of a stock dividend on the Shares, or call
for the surrender of outstanding Receipts to be exchanged for new Receipts, in
either case, as well as in the event of newly deposited Shares, with necessary
modifications to the form of Receipt contained in Exhibit A hereto, specifically
describing such new Deposited Securities or corporate change. The Company agrees
to, jointly with the Depositary, amend the Registration Statement on Form F-6 as
filed with the Commission to permit the issuance of such new form of Receipts.
Notwithstanding the foregoing, in the event that any security so received may
not be lawfully distributed to some or all Holders, the Depositary may, with the
Company's approval, and shall, if the Company requests, subject to receipt of an
opinion of Company's counsel reasonably satisfactory to the Depositary that such
action is not in violation of any applicable laws or regulations, sell such
securities at public or private sale, at such place or places and upon such
terms as it may deem proper and may allocate the net proceeds of such sales (net
of (a) fees and charges of, and expenses incurred by, the Depositary and (b)
taxes) for the account of the Holders otherwise entitled to such securities upon
an averaged or other practicable basis without regard to any distinctions among
such Holders and distribute the net proceeds so allocated to the extent
practicable as in the case of a distribution received in cash pursuant to
Section 4.1. The Depositary shall not be responsible for (i) any failure to
determine that it may be lawful or feasible to make such securities available to
Holders in general or to any Holder in particular, (ii) any foreign exchange
exposure or loss incurred in connection with such sale, or (iii) any liability
to the purchaser of such securities.
Section 4.12. Available Information. The Company is subject to the
periodic reporting requirements of the Exchange Act and accordingly files
certain information with the Commission. These reports and documents can be
inspected and copied at the public reference facilities maintained by the
Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C.
20549.
Section 4.13. Reports. The Depositary shall make available for
inspection by Holders at its Principal Office any reports and communications,
including any proxy soliciting materials, received from the Company which are
both (a) received by the Depositary, the Custodian, or the nominee of either of
them as the holder of the Deposited Securities and (b) made generally available
to the holders of such Deposited Securities by the Company. The Depositary shall
also provide to Holders copies of such reports when furnished by the Company
pursuant to Section 5.6.
Section 4.14. List of Holders. Promptly upon written request by the
Company, the Depositary shall furnish to it a list, as of a recent date, of the
names, addresses and holdings of American Depositary Shares of all Holders.
Section 4.15. List of Restricted Securities Owners. Upon each issuance
by the Company of any securities that are Restricted Securities, the Company
shall (1) advise in writing each person to whom Restricted
<PAGE> 23
Securities are issued that such Restricted Securities are not eligible for
deposit hereunder (except, to the extent applicable, as contemplated by Section
2.12 hereof) and (ii) obtain from each such person, to the extent possible, a
written undertaking that such person will not deposit such Restricted Securities
(or any securities obtained upon conversion of such Restricted Securities)
hereunder so long as such securities constitute "Restricted Securities" and will
use reasonable endeavors to obtain from their respective transferees a similar
undertaking.
Section 4.16. Taxation. The Depositary will, and will instruct the
Custodian to, forward to the Company or its agents such information from its
records as the Company may reasonably request to enable the Company or its
agents to file the necessary tax reports with governmental authorities or
agencies. The Depositary, the Custodian or the Company and its agents may file
such reports as are necessary to reduce or eliminate applicable taxes on
dividends and on other distributions in respect of Deposited Securities under
applicable tax treaties or laws for the Holders and Beneficial Owners. In
accordance with instructions from the Company and to the extent practicable, the
Depositary or the Custodian will take reasonable administrative actions to
obtain tax refunds, reduced withholding of tax at source on dividends and other
benefits under applicable tax treaties or laws with respect to dividends and
other distributions on the Deposited Securities. As a condition to receiving
such benefits, Holders and Beneficial Owners of American Depositary Shares may
be required from time to time, and in a timely manner, to file such proof of
taxpayer status, residence and beneficial ownership (as applicable), to execute
such certificates and to make such representations and warranties, or to provide
any other information or documents, as the Depositary or the Custodian may deem
necessary or proper to fulfill the Depositary's or the Custodian's obligations
under applicable law. The Holders and Beneficial Owners shall indemnify the
Depositary, the Company, the Custodian and any of their respective directors,
employees, agents and Affiliates against, and hold each of them harmless from,
any claims by any governmental authority with respect to taxes, additions to
tax, penalties or interest arising out of any refund of taxes, reduced rate of
withholding at source or other tax benefit obtained.
If the Company (or any of its agents) withholds from any distribution
any amount on account of taxes or governmental charges, or pays any other tax in
respect of such distribution (i.e. stamp duty tax, capital gains or other
similar tax), the Company shall (or shall cause such agent to) remit promptly to
the Depositary information about such taxes or governmental charges withheld or
paid, and, if so requested, the tax receipt (or other proof of payment to the
applicable governmental authority) therefor, in each case, in a form reasonably
satisfactory to the Depositary. The Depositary shall, to the extent required by
U.S. law, report to Holders any taxes withheld by it or the Custodian, and, if
such information is provided to it by the Company, any taxes withheld by the
Company. The Depositary and the Custodian shall not be required to provide the
Holders with any evidence of the remittance by the Company (or its agents) of
any taxes withheld, or of the payment of taxes by the Company, except to the
extent the evidence is provided by the Company to the Depositary or the
Custodian, as applicable. Neither the Depositary nor the Custodian shall be
liable for the failure by any Holder or Beneficial Owner to obtain the benefits
of credits on the basis non-U.S. tax paid against such Holder's or Beneficial
Owner's income tax liability.
The Depositary is under no obligation to provide the Holders and
Beneficial Owners with any information about the tax status of the Company. The
Depositary shall not incur any liability for any tax consequences that may be
incurred by Holders and Beneficial Owners on account of their ownership of the
American Depositary Shares, including without limitation, tax consequences
resulting from the Company (or any of its subsidiaries) being treated as a
"Foreign Personal Holding Company," or as a "Passive Foreign Investment Company"
(in each case as defined in the U.S. Internal Revenue Code and the regulations
issued thereunder) or otherwise.
<PAGE> 24
ARTICLE 5.
THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY
Section 5.1. Maintenance of Office and Transfer Books by the Registrar.
Until termination of this Deposit Agreement in accordance with its terms, the
Registrar shall maintain in the Borough of Manhattan, the City of New York, an
office and facilities for the execution and delivery, registration of issuances,
registration of transfers, combination and split-up of Receipts, and the
surrender of Receipts for the purpose of withdrawal of Deposited Securities in
accordance with the provisions of this Deposit Agreement.
The Registrar shall keep books for the registration of issuances and
transfers of Receipts which at all reasonable times shall be open for inspection
by the Company and by the Holders of such Receipts, provided that such
inspection shall not be, to the Registrar's knowledge, for the purpose of
communicating with Holders of such Receipts in the interest of a business or
object other than the business of the Company or other than a matter related to
this Deposit Agreement or the Receipts.
The Registrar may close the transfer books with respect to the Receipts,
at any time or from time to time, when deemed necessary or advisable by it in
good faith in connection with the performance of its duties hereunder, or at the
reasonable written request of the Company subject, in all cases, to Section 7.8
hereof.
If any Receipts or the American Depositary Shares evidenced thereby are
listed on one or more stock exchanges or automated quotation systems in the
United States, the Depositary shall act as Registrar or appoint a Registrar or
one or more co-registrars for registration of Receipts and transfers,
combinations and split-ups, and to countersign such Receipts in accordance with
any requirements of such exchanges or systems. Such Registrar or co-registrars
may be removed and a substitute or substitutes appointed by the Depositary which
shall notify the Company of such removal or appointment of a Registrar or
co-registrar.
Section 5.2. Exoneration. Neither the Depositary nor the Company shall
be obligated to do or perform any act which is inconsistent with the provisions
of this Deposit Agreement or incur any liability (i) if the Depositary or the
Company shall be prevented or forbidden from, or delayed in, doing or performing
any act or thing required by the terms of this Deposit Agreement, by reason of
any provision of any present or future law or regulation of the United States,
the Republic of India or any other country, or of any other governmental
authority or regulatory authority or stock exchange, or on account of the
possible criminal or civil penalties or restraint, or by reason of any
provision, present or future of the Articles of Association and Memorandum of
Association of the Company or any provision of or governing any Deposited
Securities, or by reason of any act of God or war or other circumstances beyond
its control (including, without limitation, nationalization, expropriation,
currency restrictions, work stoppage, strikes, civil unrest, revolutions,
rebellions, explosions and computer failure), (ii) by reason of any exercise of,
or failure to exercise, any discretion provided for in this Deposit Agreement or
in the Articles of Association and Memorandum of Association of the Company or
provisions of or governing Deposited Securities, (iii) for any action or
inaction in reliance upon the advice or information from legal counsel,
accountants, any person presenting Shares for deposit, any Holder, any
Beneficial Owner or authorized representative thereof, or any other person
believed by it in good faith to be competent to give such advice or information,
(iv) for the inability by a Holder or Beneficial Owner to benefit from any
distribution, offering, right or other benefit which is made available to
holders of Deposited Securities but is not, under the terms of this Deposit
Agreement, made available to Holders of American Depositary Shares or (v) for
any consequential or punitive damages for any breach of the terms of this
Deposit Agreement.
<PAGE> 25
The Depositary, its controlling persons, its agents, any Custodian and
the Company, its controlling persons and its agents may rely and shall be
protected in acting upon any written notice, request or other document believed
by it to be genuine and to have been signed or presented by the proper party or
parties.
No disclaimer of liability under the Securities Act is intended by any
provision of this Deposit Agreement.
Section 5.3. Standard of Care. The Company and its agents assume no
obligation and shall not be subject to any liability under this Deposit
Agreement or the Receipts to Holders or Beneficial Owners or other persons,
except that the Company and its agents agree to perform their obligations
specifically set forth in this Deposit Agreement without negligence or bad
faith.
The Depositary and its agents assume no obligation and shall not be
subject to any liability under this Deposit Agreement or the Receipts to Holders
or Beneficial Owners or other persons, except that the Depositary and its agents
agree to perform their obligations specifically set forth in this Deposit
Agreement without negligence or bad faith.
Without limitation of the foregoing, neither the Depositary, nor the
Company, nor any of their respective controlling persons, or agents, shall be
under any obligation to appear in, prosecute or defend any action, suit or other
proceeding in respect of any Deposited Securities or in respect of the Receipts,
which in its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense (including fees and disbursements of
counsel) and liability be furnished as often as may be required (and no
Custodian shall be under any obligation whatsoever with respect to such
proceedings, the responsibility of the Custodian being solely to the
Depositary).
The Depositary and its agents shall not be liable for any failure to
carry out any instructions to vote any of the Deposited Securities, or for the
manner in which any vote is cast or the effect of any vote, provided that any
such action or omission is in good faith and in accordance with the terms of
this Deposit Agreement. The Depositary shall not incur any liability for any
failure to determine that any distribution or action may be lawful or reasonably
practicable, for the content of any information submitted to it by the Company
for distribution to the Holders or for any inaccuracy of any translation
thereof, for any investment risk associated with acquiring an interest in the
Deposited Securities, for the validity or worth of the Deposited Securities or
for any tax consequences that may result from the ownership of ADSs, Shares or
Deposited Securities, for the credit-worthiness of any third party, for allowing
any rights to lapse upon the terms of this Deposit Agreement or for the failure
or timeliness of any notice from the Company.
Section 5.4. Resignation and Removal of the Depositary; Appointment of
Successor Depositary. The Depositary may at any time resign as Depositary
hereunder by written notice of resignation delivered to the Company, such
resignation to be effective on the earlier of (i) the 60th day after delivery
thereof to the Company (whereupon the Depositary shall be entitled to take the
actions contemplated in Section 6.2 hereof), or (ii) the appointment by the
Company of a successor depositary and its acceptance of such appointment as
hereinafter provided.
<PAGE> 26
The Depositary may at any time be removed by the Company by written
notice of such removal, which removal shall be effective on the earlier of (i)
the 60th day after delivery thereof to the Depositary (whereupon the Depositary
shall be entitled to take the actions contemplated in Section 6.2 hereof), or
(ii) upon the appointment by the Company of a successor depositary and its
acceptance of such appointment as hereinafter provided.
In case at any time the Depositary acting hereunder shall resign or be
removed, the Company shall use its best efforts to appoint a successor
depositary, which shall be a bank or trust company having an office in the
Borough of Manhattan, the City of New York. Every successor depositary shall be
required by the Company to execute and deliver to its predecessor and to the
Company an instrument in writing accepting its appointment hereunder, and
thereupon such successor depositary, without any further act or deed (except as
required by applicable law), shall become fully vested with all the rights,
powers, duties and obligations of its predecessor (other than as contemplated in
Sections 5.8 and 5.9). The predecessor depositary, upon payment of all sums due
it and on the written request of the Company shall, (i) execute and deliver an
instrument transferring to such successor all rights and powers of such
predecessor hereunder (other than as contemplated in Sections 5.08 and 5.09),
(ii) duly assign, transfer and deliver all right, title and interest to the
Deposited Securities to such successor, and (iii) deliver to such successor a
list of the Holders of all outstanding Receipts and such other information
relating to Receipts and Holders thereof as the successor may reasonably
request. Any such successor depositary shall promptly provide notice of its
appointment to such Holders.
Any corporation into or with which the Depositary may be merged or
consolidated shall be the successor of the Depositary without the execution or
filing of any document or any further act.
Section 5.5. The Custodian. The Depositary has initially appointed
Citibank, N.A. - Mumbai Branch as Custodian for the purpose of this Deposit
Agreement. The Custodian or its successors in acting hereunder shall be subject
at all times and in all respects to the direction of the Depositary for the
Shares for which the Custodian acts as custodian and shall be responsible solely
to it. If any Custodian resigns or is discharged from its duties hereunder with
respect to any Deposited Securities and no other Custodian has previously been
appointed hereunder, the Depositary shall promptly appoint a substitute
custodian that is organized under the laws of the Republic of India. The
Depositary shall require such resigning or discharged Custodian to deliver the
Deposited Securities held by it, together with all such records maintained by it
as Custodian with respect to such Deposited Securities as the Depositary may
request, to the Custodian designated by the Depositary. Whenever the Depositary
determines, in its discretion, that it is appropriate to do so, it may appoint
an additional custodian with respect to any Deposited Securities, or discharge
the Custodian with respect to any Deposited Securities and appoint, upon notice
to the Company, a substitute custodian, which shall thereafter be Custodian
hereunder with respect to the Deposited Securities. Immediately upon any such
change, the Depositary shall give notice thereof in writing to all Holders of
Receipts, each other Custodian and the Company.
Upon the appointment of any successor depositary, any Custodian then
acting hereunder shall, unless otherwise instructed by the Depositary, continue
to be the Custodian of the Deposited Securities without any further act or
writing, and shall be subject to the direction of the successor depositary. The
successor depositary so appointed shall, nevertheless, on the written request of
any Custodian, execute and deliver to such Custodian all such instruments as may
be proper to give to such Custodian full and complete power and authority to act
on the direction of such successor depositary.
<PAGE> 27
Section 5.6. Notices and Reports. On or before the first date on which
the Company gives notice, by publication or otherwise, of any meeting of holders
of Shares or other Deposited Securities, or of any adjourned meeting of such
holders, or of the taking of any action by such holders other than at a meeting,
or of the taking of any action in respect of any cash or other distributions or
the offering of any rights in respect of Deposited Securities, the Company shall
transmit to the Depositary and the Custodian a copy of the notice thereof in the
English language but otherwise in the form given or to be given to holders of
Shares or other Deposited Securities. The Company shall also furnish to the
Custodian and the Depositary a summary, in English, of any applicable provisions
or proposed provisions of the Articles of Association and Memorandum of
Association of the Company that may be relevant or pertain to such notice of
meeting or be the subject of a vote thereat.
The Company will also transmit to the Depositary (a) an English language
version of the other notices, reports and communications which are made
generally available by the Company to holders of its Shares or other Deposited
Securities and (b) the English-language versions of the Company's annual and
semi-annual reports prepared in accordance with the applicable requirements of
the Commission. The Depositary shall arrange, at the request of the Company and
at the Company's expense, to provide copies thereof to all Holders or make such
notices, reports and other communications available to all Holders on a basis
similar to that for holders of Shares or other Deposited Securities or on such
other basis as the Company may advise the Depositary or as may be required by
any applicable law, regulation or stock exchange requirement. The Company has
delivered to the Depositary and the Custodian a copy of the Company's Articles
of Association and Memorandum of Association along with the provisions of or
governing the Shares and any other Deposited Securities issued by the Company or
any Affiliate of the Company in connection with such Shares, and promptly upon
any amendment thereto or change therein, the Company shall deliver to the
Depositary and the Custodian a copy of such amendment thereto or change therein.
The Depositary may rely upon such copy for all purposes of this Deposit
Agreement. The Depositary will, at the expense of the Company, make available a
copy of any such notices, reports or communications issued by the Company and
delivered to the Depositary for inspection by the Holders of the Receipts
evidencing the American Depositary Shares representing such Shares governed by
such provisions at the Depositary's Principal Office, at the office of the
Custodian and at any other designated transfer office.
Section 5.7. Issuance of Additional Shares, ADSs etc. The Company agrees
that in the event it or any of its Affiliates proposes (i) an issuance, sale or
distribution of additional Shares, (ii) an offering of rights to subscribe for
Shares or other Deposited Securities, (iii) an issuance of securities
convertible into or exchangeable for Shares, (iv) an issuance of rights to
subscribe for securities convertible into or exchangeable for Shares, (v) an
elective dividend of cash or Shares, (vi) a redemption of, or self-tender for,
or repurchase of, Deposited Securities, (vii) a meeting of holders of Deposited
Securities, or solicitation of consents or proxies, relating to any
reclassification of securities, merger or consolidation or transfer of assets,
or (viii) any reclassification, recapitalization, reorganization, merger,
consolidation or sale of assets which affects the Deposited Securities, it will
obtain U.S. legal advice and take all steps necessary to ensure that the
application of the proposed transaction to Holders and Beneficial Owners does
not violate the registration provisions of the Securities Act, or any other
applicable laws (including, without limitation, the Investment Company Act of
1940, as amended, the Exchange Act or the securities laws of the states of the
United States). In support of the foregoing, the Company will furnish to the
Depositary (a) a written opinion of U.S. counsel (reasonably satisfactory to the
Depositary) stating whether or not application of such transaction to Holders
and Beneficial Owners (1) requires a registration statement under the Securities
Act to be in effect or (2) is exempt from the registration requirements of the
Securities Act and (b) an opinion of the Republic of India counsel stating that
(1) making the transaction available to Holders and Beneficial Owners does not
violate the laws or regulations of the Republic of India and (2) all requisite
regulatory consents and approvals have been obtained in the Republic of India.
If the filing of a registration statement is required, the Depositary shall not
have any obligation to proceed with the transaction unless it shall have
received evidence reasonably satisfactory to it that such registration statement
has been declared effective. If, being advised by
<PAGE> 28
counsel, the Company determines that a transaction is required to be
registered under the Securities Act, the Company will either (i)
register such transaction to the extent necessary, (ii) alter the terms
of the transaction to avoid the registration requirements of the
Securities Act or (iii) direct the Depositary to take specific measures,
in each case as contemplated in this Deposit Agreement, to prevent such
transaction from violating the registration requirements of the
Securities Act. The Company agrees with the Depositary that neither the
Company nor any of its Affiliates will at any time (i) deposit any
Shares or other Deposited Securities, either upon original issuance or
upon a sale of Shares or other Deposited Securities previously issued
and reacquired by the Company or by any such Affiliate, or (ii) issue
additional Shares, rights to subscribe for such Shares, securities
convertible into or exchangeable for Shares or rights to subscribe for
such securities, unless such transaction and the securities issuable in
such transaction are exempt from registration under the Securities Act
and, if applicable, the Exchange Act or have been registered under the
Securities Act and, if applicable, the Exchange Act (and such
registration statement has been declared effective).
Notwithstanding anything else contained in this Deposit Agreement,
nothing in this Deposit Agreement shall be deemed to obligate the Company to
file any registration statement in respect of any proposed transaction.
Section 5.8. Indemnification. The Depositary agrees to indemnify the
Company and its directors, officers, employees, agents and Affiliates against,
and hold each of them harmless from, any direct loss, liability, tax, charge or
expense of any kind whatsoever (including, but not limited to, the reasonable
fees and expenses of counsel) which may arise out of acts performed or omitted
by the Depositary under the terms hereof due to the negligence or bad faith of
the Depositary.
The Company agrees to indemnify the Depositary, the Custodian and any of
their respective directors, officers, employees, agents and Affiliates against,
and hold each of them harmless from, any direct loss, liability, tax, charge or
expense of any kind whatsoever (including, but not limited to, the reasonable
fees and expenses of counsel) that may arise (a) out of or in connection with
any offer, issuance, sale, resale, transfer, deposit or withdrawal of Receipts,
American Depositary Shares, the Shares, or other Deposited Securities, as the
case may be, (b) out of or as a result of any offering documents in respect
thereof issued by, or with the approval of, the Company, or (c) out of acts
performed or omitted, including, but not limited to, any delivery by the
Depositary on behalf of the Company of information regarding the Company in
connection with this Deposit Agreement, the Receipts, the ADSs, the Shares, or
any Deposited Securities, in any such case (i) by the Depositary, the Custodian
or any of their respective directors, officers, employees, agents and Affiliates
under the terms of this Deposit Agreement, except to the extent such loss,
liability, tax, charge or expense is due to the negligence or bad faith of any
of them, or (ii) by the Company or any of its directors, officers, employees,
agents and Affiliates.
The obligations set forth in this Section shall survive the termination
of this Deposit Agreement and the succession or substitution of any party
hereto.
Any person seeking indemnification hereunder (an "indemnified person")
shall notify the person from whom it is seeking indemnification (the
"indemnifying person") of the commencement of any indemnifiable action or claim
promptly after such indemnified person becomes aware of such commencement
(provided that the failure to make such notification shall not affect such
indemnified person's rights to seek indemnification except to the extent the
indemnifying person is materially prejudiced by such failure) and shall consult
in good faith with the indemnifying person as to the conduct of the defense of
such action or claim that may give
<PAGE> 29
rise to an indemnity hereunder, which defense shall be reasonable in the
circumstances. No indemnified person shall compromise or settle any action or
claim that may give rise to an indemnity hereunder without the consent of the
indemnifying person, which consent shall not be unreasonably withheld.
Section 5.9. Fees and Charges of Depositary. The Company, the Holders,
the Beneficial Owners, and persons depositing Shares or surrendering ADSs for
cancellation and withdrawal of Deposited Securities, as the case may be, shall
be required to pay to the Depositary the Depositary's fees and related charges
identified as payable by them respectively in the Fee Schedule attached hereto
as Exhibit B. All fees and charges so payable may, at any time and from time to
time, be changed by agreement between the Depositary and the Company, but, in
the case of fees and charges payable by Holders and Beneficial Owners, only in
the manner contemplated in Section 6.1. The Depositary shall provide, without
charge, a copy of its latest fee schedule to anyone upon request.
The Company agrees to promptly pay to the Depositary such other fees and
charges and to reimburse the Depositary for such out-of-pocket expenses as the
Depositary and the Company may agree to in writing from time to time.
Responsibility for payment of such charges may at any time and from time to time
be changed by agreement between the Company and the Depositary. Unless otherwise
agreed, the Depositary shall present its statement for such expenses and fees or
charges to the Company once every three months. The charges and expenses of the
Custodian are for the sole account of the Depositary.
The right of the Depositary to receive payment of fees, charges and
expenses as provided above shall survive the termination of this Deposit
Agreement. As to any Depositary, upon the resignation or removal of such
Depositary as described in Section 5.4 hereof, such right shall extend for those
fees, charges and expenses incurred prior to the effectiveness of such
resignation or removal.
Section 5.10. Pre-Release Transactions. Subject to the further terms and
provisions of this Section 5.10, the Depositary, its Affiliates and their
agents, on their own behalf and on behalf of their clients, may own and deal in
any class of securities of the Company and its Affiliates and in ADSs. In its
capacity as Depositary, the Depositary shall not lend Shares or ADSs; provided,
however, that the Depositary may, except in the case of Restricted ADSs, (i)
issue ADSs prior to the receipt of Shares pursuant to Section 2.3 and (ii)
deliver Shares prior to the receipt of ADSs for withdrawal of Deposited
Securities pursuant to Section 2.7, including ADSs which were issued under (i)
above but for which Shares may not have been received (each such transaction a
"Pre-Release Transaction"). The Depositary may receive ADSs in lieu of Shares
under (i) above and receive Shares in lieu of ADSs under (ii) above. Each such
Pre-Release Transaction will be (a) subject to a written agreement whereby the
person or entity (the "Applicant") to whom ADSs or Shares are to be delivered
(w) represents that at the time of the Pre-Release Transaction the Applicant or
its customer owns the Shares or ADSs that are to be delivered by the Applicant
under such Pre-Release Transaction, (x) agrees to indicate the Depositary as
owner of such Shares or ADSs in its records and to hold such Shares or ADSs in
trust for the Depositary until such Shares or ADSs are delivered to the
Depositary or the Custodian, (y) unconditionally guarantees to deliver to the
Depositary or the Custodian, as applicable, such Shares or ADSs, and (z) agrees
to any additional restrictions or requirements that the Depositary deems
appropriate, (b) at all times fully collateralized with cash, United States
government securities or such other collateral as the Depositary deems
appropriate, (c) terminable by the Depositary on not more than five (5) business
days' notice and (d) subject to such further indemnities and credit regulations
as the Depositary deems appropriate. The Depositary will normally limit the
number of ADSs and Shares involved in such Pre-Release Transactions at any one
time to thirty percent (30%) of the ADSs outstanding (without giving effect to
ADSs outstanding under (i) above), provided, however, that the Depositary
reserves the right to change or disregard such limit from time to time as it
deems appropriate.
The Depositary may also set limits with respect to the number of ADSs
and Shares involved in Pre-Release Transactions with any one person on a case by
case basis as it deems appropriate. The Depositary may retain for its own
account any compensation received by it in
<PAGE> 30
conjunction with the foregoing. Collateral provided pursuant to (b) above, but
not the earnings thereon, shall be held for the benefit of the Holders (other
than the Applicant).
Section 5.11. Restricted Securities Owners. The Company agrees to advise
in writing each of the persons or entities who, to the knowledge of the Company,
holds Restricted Securities that such Restricted Securities are ineligible for
deposit hereunder and, to the extent practicable, shall require each of such
persons to represent in writing that such person will not deposit such
Restricted Securities hereunder.
ARTICLE 6.
AMENDMENT AND TERMINATION
Section 6.1. Amendment/Supplement. Subject to the terms and conditions
of this Section 6.1 and applicable law, the Receipts outstanding at any time,
the provisions of this Deposit Agreement and the form of Receipt attached hereto
and to be issued under the terms hereof may at any time and from time to time be
amended or supplemented by written agreement between the Company and the
Depositary in any respect which they may deem necessary or desirable without the
prior written consent of the Holders or Beneficial Owners. Any amendment or
supplement which shall impose or increase any fees or charges (other than
charges in connection with foreign exchange control regulations, and taxes and
other governmental charges, delivery and other such expenses), or which shall
otherwise materially prejudice any substantial existing right of Holders or
Beneficial Owners, shall not, however, become effective as to outstanding
Receipts until the expiration of 30 days after notice of such amendment or
supplement shall have been given to the Holders of outstanding Receipts. The
parties hereto agree that any amendments or supplements which (i) are reasonably
necessary (as agreed by the Company and the Depositary) in order for (a) the
American Depositary Shares to be registered on Form F-6 under the Securities Act
or (b) the American Depositary Share(s) to be traded solely in electronic
book-entry form and (ii) do not in either such case impose or increase any fees
or charges to be borne by Holders, shall be deemed not to materially prejudice
any substantial rights of Holders or Beneficial Owners. Every Holder and
Beneficial Owner at the time any amendment or supplement so becomes effective
shall be deemed, by continuing to hold such American Depositary Share(s), to
consent and agree to such amendment or supplement and to be bound by the Deposit
Agreement and the Receipt as amended and supplemented thereby. In no event shall
any amendment or supplement impair the right of the Holder to surrender such
Receipt and receive therefor the Deposited Securities represented thereby,
except in order to comply with mandatory provisions of applicable law.
Notwithstanding the foregoing, if any governmental body should adopt new laws,
rules or regulations which would require an amendment or supplement of the
Deposit Agreement to ensure compliance therewith, the Company and the Depositary
may amend or supplement the Deposit Agreement and the Receipts at any time in
accordance with such changed laws, rules or regulations. Such amendment or
supplement to the Deposit Agreement and the Receipts in such circumstances may
become effective before a notice of such amendment or supplement is given to
Holders or within any other period of time as required for compliance with such
laws, rules or regulations.
Section 6.2. Termination. The Depositary shall, at any time at the
written direction of the Company, terminate this Deposit Agreement by providing
notice of such termination to the Holders of all Receipts then outstanding at
least 30 days prior to the date fixed in such notice for such termination. If 60
days shall have expired after (i) the Depositary shall have delivered to the
Company a written notice of its election to resign, or (ii) the Company shall
have delivered to the Depositary a written notice of the removal of the
Depositary, and in either case a successor depositary shall not have been
appointed and accepted its appointment as provided in Section 5.4, the
Depositary may terminate this Deposit Agreement by providing notice of such
termination to the Holders of all Receipts then outstanding at least 30 days
prior to the date fixed for such termination. On and after the date of
termination of this Deposit Agreement, the Holder of a Receipt will, upon
surrender of such Receipt at the Principal Office of the Depositary, upon the
payment of the charges of the Depositary for the surrender of Receipts referred
to in Section 2.7 and subject to the conditions and restrictions therein set
forth, and upon payment of any applicable taxes or governmental charges, be
entitled to Delivery, to him or upon his order, of the amount of Deposited
Securities represented by such Receipt. If any Receipts shall remain outstanding
after the date of termination of this Deposit Agreement, the Registrar
thereafter shall discontinue the registration of transfers of Receipts, and the
<PAGE> 31
Depositary shall suspend the distribution of dividends to the Holders thereof,
and shall not give any further notices or perform any further acts under this
Deposit Agreement, except that the Depositary shall continue to collect
dividends and other distributions pertaining to Deposited Securities, shall sell
rights as provided in this Deposit Agreement, and shall continue to deliver
Deposited Securities, subject to the conditions and restrictions set forth in
Section 2.7, together with any dividends or other distributions received with
respect thereto and the net proceeds of the sale of any rights or other
property, in exchange for Receipts surrendered to the Depositary (after
deducting, or charging, as the case may be, in each case, the charges of the
Depositary for the surrender of a Receipt, any expenses for the account of the
Holder in accordance with the terms and conditions of this Deposit Agreement and
any applicable taxes or governmental charges or assessments). At any time after
the expiration of six months from the date of termination of this Deposit
Agreement, the Depositary may sell the Deposited Securities then held hereunder
and may thereafter hold uninvested the net proceeds of any such sale, together
with any other cash then held by it hereunder, in an unsegregated account,
without liability for interest for the pro rata benefit of the Holders whose
Receipts have not theretofore been surrendered. After making such sale, the
Depositary shall be discharged from all obligations under this Deposit Agreement
with respect to the Receipts, the Deposited Securities and the American
Depositary Shares, except to account for such net proceeds and other cash (after
deducting, or charging, as the case may be, in each case, the charges of the
Depositary for the surrender of a Receipt, any expenses for the account of the
Holder in accordance with the terms and conditions of this Deposit Agreement and
any applicable taxes or governmental charges or assessments). Upon the
termination of this Deposit Agreement, the Company shall be discharged from all
obligations under this Deposit Agreement except for its obligations to the
Depositary under Sections 5.8, 5.9 and 7.6 hereof.
ARTICLE 7.
MISCELLANEOUS
Section 7.1. Counterparts. This Deposit Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
such counterparts together shall constitute one and the same agreement. Copies
of this Deposit Agreement shall be maintained with the Depositary and shall be
open to inspection by any Holder during business hours.
Section 7.2. No Third-Party Beneficiaries. This Deposit Agreement is for
the exclusive benefit of the parties hereto (and their successors) and shall not
be deemed to give any legal or equitable right, remedy or claim whatsoever to
any other person, except to the extent specifically set forth in this Deposit
Agreement. Nothing in this Deposit Agreement shall be deemed to give rise to a
partnership or joint venture among the parties nor establish a fiduciary or
similar relationship among the parties. The parties hereto acknowledge and agree
that (i) the Depositary and its Affiliates may at any time have multiple banking
relationships with the Company and its Affiliates, (ii) the Depositary and its
Affiliates may be engaged at any time in transactions in which parties adverse
to the Company or the Holders or Beneficial Owners may have interests and (iii)
nothing contained in this Agreement shall (a) preclude the Depositary or any of
its Affiliates from engaging in such transactions or establishing or maintaining
such relationships, or (b) obligate the Depositary or any of its Affiliates to
disclose such transactions or relationships or to account for any profit made or
payment received in such transactions or relationships.
Section 7.3. Severability. In case any one or more of the provisions
contained in this Deposit Agreement or in the Receipts should be or become
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall in
no way be affected, prejudiced or disturbed thereby.
Section 7.4. Holders and Beneficial Owners as Parties; Binding Effect.
The Holders and Beneficial Owners from time to time of American Depositary
Shares shall be parties to the Deposit Agreement and shall be bound by all of
the terms and conditions thereof and of any Receipt by acceptance thereof of any
beneficial interest therein.
<PAGE> 32
Section 7.5. Notices. Any and all notices to be given to the Company
shall be deemed to have been duly given if personally delivered or sent by mail,
air courier or cable, telex or facsimile transmission, confirmed by letter
personally delivered or sent by mail or air courier, addressed to Mahalaxmi
Engineering Estate, 1st Floor, L.J. First Cross Road, Mahim (West), Mumbai 400
016, India, Attention: Mr. Ajit Balakrishnan, or to any other address which the
Company may specify in writing to the Depositary.
Any and all notices to be given to the Depositary shall be deemed to
have been duly given if personally delivered or sent by mail, air courier or
cable, telex or facsimile transmission, confirmed by letter personally delivered
or sent by mail or air courier, addressed to Citibank, N.A., 111 Wall Street,
New York, New York 10043, U.S.A., Attention: Depositary Receipts Department, or
to any other address which the Depositary may specify in writing to the Company.
Any and all notices to be given to any Holder shall be deemed to have
been duly given if (a) personally delivered or sent by mail or cable, telex or
facsimile transmission, confirmed by letter, addressed to such Holder at the
address of such Holder as it appears on the books of the Depositary or, if such
Holder shall have filed with the Depositary a request that notices intended for
such Holder be mailed to some other address, at the address specified in such
request, or (b) if a Holder shall have designated such means of notification as
an acceptable means of notification under the terms of this Deposit Agreement,
by means of electronic messaging addressed for delivery to the e-mail address
designated by the Holder for such purpose. Notice to Holders shall be deemed to
be notice to Beneficial Owners for all purposes of this Deposit Agreement.
Failure to notify a Holder or any defect in the notification to a Holder shall
not affect the sufficiency of notification to other Holders or to the Beneficial
Owners of ADSs held by such other Holders.
Delivery of a notice sent by mail, air courier or cable, telex or
facsimile transmission shall be deemed to be effective at the time when a duly
addressed letter containing the same (or a confirmation thereof in the case of a
cable, telex or facsimile transmission) is deposited, postage prepaid, in a
post-office letter box or delivered to an air courier service, without regard
for the actual receipt or time of actual receipt thereof by a Holder. The
Depositary or the Company may, however, act upon any cable, telex or facsimile
transmission received by it from any Holder, the Custodian or the Company,
notwithstanding that such cable, telex or facsimile transmission shall not be
subsequently confirmed by letter.
Delivery of a notice by means of electronic messaging shall be deemed to
be effective at the time of the initiation of the transmission by the sender (as
shown on the sender's records), notwithstanding that the intended recipient
retrieves the message at a later date, fails to retrieve such message, or fails
to receive such notice on account of its failure to maintain the designated
e-mail address, its failure to designate a substitute e-mail address or for any
other reason.
Section 7.6. Governing Law and Jurisdiction. This Deposit Agreement and
the Receipts shall be interpreted in accordance with, and all rights hereunder
and thereunder and provisions hereof and thereof shall be governed by, the laws
of the State of New York without reference to the principles of choice of law
thereof. Notwithstanding anything contained in this Deposit Agreement, any
Receipt or any present or future provisions of the laws of the State of New
York, the rights of holders of Shares and of any other Deposited Securities and
the obligations and duties of the Company in respect of the holders of Shares
and other Deposited Securities, as such, shall be governed by the laws of the
Republic of India (or, if applicable, such other laws as may govern the
Deposited Securities).
<PAGE> 33
Except as set forth in the following paragraph of this Section 7.6, the
Company and the Depositary agree that the federal or state courts in the City of
New York shall have jurisdiction to hear and determine any suit, action or
proceeding and to settle any dispute between them that may arise out of or in
connection with this Deposit Agreement and, for such purposes, each irrevocably
submits to the non-exclusive jurisdiction of such courts. The Company hereby
irrevocably designates, appoints and empowers CT Corporation System (the
"Agent") now at 111 Eighth Avenue, New York, New York 10011, telephone number
(212) 590-9200 as its authorized agent to receive and accept for and on its
behalf, and on behalf of its properties, assets and revenues, service by mail of
any and all legal process, summons, notices and documents that may be served in
any suit, action or proceeding brought against the Company in any federal or
state court as described in the preceding sentence or in the next paragraph of
this Section 7.6. If for any reason the Agent shall cease to be available to act
as such, the Company agrees to designate a new agent in New York on the terms
and for the purposes of this Section 7.6 reasonably satisfactory to the
Depositary. The Company further hereby irrevocably consents and agrees to the
service of any and all legal process, summons, notices and documents in any
suit, action or proceeding against the Company, by service by mail of a copy
thereof upon the Agent (whether or not the appointment of such Agent shall for
any reason prove to be ineffective or such Agent shall fail to accept or
acknowledge such service), with a copy mailed to the Company by registered or
certified air mail, postage prepaid, to its address provided in Section 7.5
hereof. The Company agrees that the failure of the Agent to give any notice of
such service to it shall not impair or affect in any way the validity of such
service or any judgment rendered in any action or proceeding based thereon.
Notwithstanding the foregoing, the Depositary and the Company
unconditionally agree that in the event that a Holder or Beneficial Owner brings
a suit, action or proceeding against (a) the Company, (b) the Depositary in its
capacity as Depositary under this Deposit Agreement or (c) against both the
Company and the Depositary, in any such case, in any state or federal court of
the United States, and the Depositary or the Company have any claim, for
indemnification or otherwise, against each other arising out of the subject
matter of such suit, action or proceeding, then the Company and the Depositary
may pursue such claim against each other in the state or federal court in the
United States in which such suit, action, or proceeding is pending and, for such
purposes, the Company and the Depositary irrevocably submit to the non-exclusive
jurisdiction of such courts. The Company agrees that service of process upon the
Agent in the manner set forth in the preceding paragraph shall be effective
service upon it for any suit, action or proceeding brought against it as
described in this paragraph.
The Company irrevocably and unconditionally waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of venue of any actions, suits or proceedings brought in any court as
provided in this Section 7.6, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
The Company irrevocably and unconditionally waives, to the fullest
extent permitted by law, and agrees not to plead or claim, any right of immunity
from legal action, suit or
<PAGE> 34
proceeding, from setoff or counterclaim, from the jurisdiction of any court,
from service of process, from attachment upon or prior to judgment, from
attachment in aid of execution or judgment, from execution of judgment, or from
any other legal process or proceeding for the giving of any relief or for the
enforcement of any judgment, and consents to such relief and enforcement against
it, its assets and its revenues in any jurisdiction, in each case with respect
to any matter arising out of, or in connection with, the Deposit Agreement, any
Receipt or the Deposited Securities.
No disclaimer of liability under the Securities Act is intended by any
provision of the Deposit Agreement. The provisions of this Section 7.6 shall
survive any termination of this Deposit Agreement, in whole or in part.
Section 7.7. Assignment. Subject to the provisions of Section 5.4
hereof, this Deposit Agreement may not be assigned by either the Company or the
Depositary.
Section 7.8. Compliance with U.S. Securities Laws. Notwithstanding
anything in this Deposit Agreement to the contrary, the withdrawal or delivery
of Deposited Securities will not be suspended by the Company or the Depositary
except as would be permitted by Instruction I.A.(1) of the General Instructions
to Form F-6 Registration Statement, as amended from time to time, under the
Securities Act.
Section 7.9. Titles and References. All references in this Deposit
Agreement to exhibits, articles, sections, subsections, and other subdivisions
refer to the exhibits, articles, sections, subsections and other subdivisions of
this Deposit Agreement unless expressly provided otherwise. The words "this
Deposit Agreement", "herein", "hereof", "hereby", "hereunder", and words of
similar import refer to the Deposit Agreement as a whole as in effect between
the Company, the Depositary and the Holders and Beneficial Owners of ADSs and
not to any particular subdivision unless expressly so limited. Pronouns in
masculine, feminine and neuter gender shall be construed to include any other
gender, and words in the singular form shall be construed to include the plural
and vice versa unless the context otherwise requires. Titles to sections of this
Deposit Agreement are included for convenience only and shall be disregarded in
construing the language contained in this Deposit Agreement. References to
"applicable laws and regulations" shall refer to laws and regulations applicable
to ADRs, ADSs or Deposited Securities as in effect at the relevant time of
determination, unless otherwise required by law or regulation.
IN WITNESS WHEREOF, REDIFF.COM INDIA LIMITED and CITIBANK, N.A. have
duly executed this Deposit Agreement as of the day and year first above set
forth and all Holders and Beneficial Owners shall become parties hereto upon
acceptance by them of American Depositary Shares evidenced by Receipts issued in
accordance with the terms hereof, or upon acquisition of any beneficial interest
therein.
REDIFF.COM INDIA LIMITED
By:
---------------------------------
Name:
Title:
<PAGE> 35
CITIBANK, N.A.
By:
---------------------------------
Name:
Title:
<PAGE> 36
EXHIBIT A
[FORM OF RECEIPT]
Number CUSIP NUMBER: ________
American Depositary Shares
(each American Depositary
Share representing one (1)
equity share, par value Rs.2
per share)
AMERICAN DEPOSITARY RECEIPT
FOR
AMERICAN DEPOSITARY SHARES
representing
DEPOSITED EQUITY SHARES
of
REDIFF.COM INDIA LIMITED
(a public company with limited liability organized under the laws of the
Republic of India)
CITIBANK, N.A., a national banking association organized and existing
under the laws of the United States of America, as depositary (the
"Depositary"), hereby certifies that _____________is the owner of ______________
American Depositary Shares (hereinafter "ADS"), representing deposited equity
shares, each of par value of Rs.2 per share, including evidence of rights to
receive such equity shares (the "Shares"), of REDIFF.COM INDIA LIMITED, a public
company with limited liability organized under the laws of the Republic of India
(the "Company"). As of the date of the Deposit Agreement (as hereinafter
defined), each ADS represents one (1) Share deposited under the Deposit
Agreement with the Custodian, which at the date of execution of the Deposit
Agreement is Citibank, N.A. - Mumbai Branch (the "Custodian"). The ratio of
American Depositary Shares to Shares is subject to amendment as provided in the
Deposit Agreement. The Depositary's Principal Office is located at 111 Wall
Street, New York, New York 10043, U.S.A.
(1) The Deposit Agreement. This American Depositary Receipt is one of an
issue of American Depositary Receipts ("Receipts"), all issued and to be issued
upon the terms and conditions set forth in the Deposit Agreement, dated as of
__________, 2000 (as amended from
<PAGE> 37
time to time, the "Deposit Agreement"), by and among the Company, the
Depositary, and all Holders and Beneficial Owners from time to time of American
Depositary Shares ("ADSs") evidenced by Receipts issued thereunder, each of whom
by accepting an ADS (or an interest therein) agrees to become a party thereto
and becomes bound by all the terms and conditions thereof. The Deposit Agreement
sets forth the rights and obligations of Holders and Beneficial Owners of
Receipts and the rights and duties of the Depositary in respect of the Shares
deposited thereunder and any and all other securities, property and cash from
time to time received in respect of such Shares and held thereunder (such
Shares, securities, property and cash are herein called "Deposited Securities").
Copies of the Deposit Agreement are on file at the Principal Office of the
Depositary and with the Custodian.
The statements made on the face and reverse of this Receipt are
summaries of certain provisions of the Deposit Agreement and the Articles of
Association and Memorandum of Association of the Company (as in effect on the
date of the signing of the Deposit Agreement) and are qualified by and subject
to the detailed provisions of the Deposit Agreement and the Articles of
Association and Memorandum of Association, to which reference is hereby made.
All capitalized terms used herein which are not otherwise defined herein shall
have the meanings ascribed thereto in the Deposit Agreement. The Depositary
makes no representation or warranty as to the validity or worth of the Deposited
Securities. The Depositary has made arrangements for the acceptance of the ADSs
into DTC. Each Beneficial Owner of ADSs held through DTC must rely on the
procedures of DTC and the DTC Participants to exercise and be entitled to any
rights attributable to such ADSs.
(2) Surrender of Receipts and Withdrawal of Deposited Securities.
Subject to applicable law, the Holder of this Receipt (and of the ADSs
evidenced hereby) shall be entitled to Delivery (at the Custodian's designated
office) to him or upon his order of the Deposited Securities at the time
represented by the ADS(s) evidenced hereby upon satisfaction of each of the
following conditions: (i) the Holder (or a duly authorized attorney of the
Holder) has duly Delivered to the Depositary at its Principal Office the ADSs
evidenced hereby (and, if applicable, this Receipt) for the purpose of
withdrawal of the Deposited Securities represented thereby, (ii) if so required
by the Depositary, this Receipt has been properly endorsed in blank or is
accompanied by proper instruments of transfer in blank (including signature
guarantees in accordance with standard securities industry practice), (iii) if
so required by the Depositary, the Holder of the ADSs has executed and delivered
to the Depositary a written order directing the Depositary to cause the
Deposited Securities being withdrawn to be Delivered to or upon the written
order of the person(s) designated in such order, and (iv) all applicable fees
and charges of, and expenses incurred by, the Depositary and all applicable
taxes and governmental charges (as are set forth in Section 5.9 and Exhibit B to
the Deposit Agreement) have been paid, subject, however, in each case, to the
terms and conditions of this Receipt, of the Deposit Agreement, of the Company's
Articles of Association and Memorandum of Association, of any applicable laws
(including the rules of the Reserve Bank of India), and to any provisions of or
governing the Deposited Securities, in each case as in effect at the time
thereof. Unless Indian law, as in effect as of the date of the Deposit
Agreement, changes, once withdrawn from the depositary facility, Shares may not
be redeposited with the Depositary under the Deposit Agreement.
<PAGE> 38
Upon satisfaction of each of the conditions specified above, the
Depositary shall (i) cancel the ADSs Delivered to it (and, if applicable, the
Receipt evidencing the ADSs so Delivered), (ii) direct the Registrar to record
the cancellation of the ADSs so Delivered on the books maintained for such
purpose, and (iii) direct the Custodian to Deliver (without unreasonable delay)
at the Custodian's designated office the Deposited Securities represented by the
ADSs so canceled together with any certificate or other document of title for
the Deposited Securities (including, without limitation, stamped instruments of
transfer), or evidence of the electronic transfer thereof (if available), as the
case may be, to or upon the written order of the person(s) designated in the
order delivered to the Depositary for such purpose, subject however, in each
case, to the terms and conditions of the Deposit Agreement, of this Receipt, of
the Articles of Association and Memorandum of Association of the Company,
applicable laws, the rules of the Reserve Bank of India, and to the terms and
conditions of or governing the Deposited Securities, in each case as in effect
at the time thereof.
The Depositary shall not accept for surrender ADSs representing less
than one Share. In the case of Delivery of ADSs representing other than a whole
number of Shares, the Depositary shall cause ownership of the appropriate whole
number of Shares to be Delivered in accordance with the terms hereof, and shall,
at the discretion of the Depositary, either (i) return to the person
surrendering such ADSs the number of ADSs representing any remaining fractional
Share, or (ii) sell or cause to be sold the fractional Share represented by the
ADS(s) so surrendered and remit the proceeds of such sale (net of (a) applicable
fees and charges of, and expenses incurred by, the Depositary and (b) taxes
withheld) to the person surrendering the ADSs. Notwithstanding anything else
contained in this Receipt or the Deposit Agreement, the Depositary may make
delivery at the Principal Office of the Depositary of (i) any cash dividends or
cash distributions, or (ii) any proceeds from the sale of any distributions of
shares or rights, which are at the time held by the Depositary in respect of the
Deposited Securities represented by the ADSs evidenced by this Receipt. At the
request, risk and expense of any Holder so surrendering ADSs, represented by
this Receipt, and for the account of such Holder, the Depositary shall direct
the Custodian to forward (to the extent permitted by law) any cash or other
property (other than securities) held by the Custodian in respect of the
Deposited Securities represented by such ADSs to the Depositary for delivery at
the Principal Office of the Depositary. Such direction shall be given by letter
or, at the request, risk and expense of such Holder, by cable, telex or
facsimile transmission.
The Company and the Depositary have been advised that, as of the date of
the Deposit Agreement, a stamp duty of 0.5 percent of the market value of the
Shares will be charged in respect of any withdrawal of Shares and such stamp
duty will be payable by the relevant Holder requesting the withdrawal of the
Deposited Securities. In addition, it will be necessary to obtain the approval
of the Reserve Bank of India for withdrawal of Deposited Securities or for the
Company to register Shares in the name of a person who is not a resident of the
Republic of India upon such withdrawal. Any subsequent transfer of the Deposited
Securities by the holder after withdrawal will require the approval of the
Reserve Bank of India, which approval must be obtained by the transferee and the
Company under Section 29(1)(b) and 19(4), respectively, of the Foreign Exchange
Regulation Act, 1973.
<PAGE> 39
(3) Transfer, Combination and Split-Up of Receipts. The Registrar shall
register the transfer of this Receipt (and of the ADSs represented hereby) on
the books maintained for such purpose and the Depositary shall cancel this
Receipt and execute new Receipts evidencing the same aggregate number of ADSs as
those evidenced by this Receipt when canceled, shall cause the Registrar to
countersign such new Receipts and shall Deliver such new Receipts to or upon the
order of the person entitled thereto, if each of the following conditions has
been satisfied: (i) this Receipt has been duly Delivered by the Holder (or by a
duly authorized attorney of the Holder) to the Depositary at its Principal
Office for the purpose of effecting a transfer thereof, (ii) this Receipt has
been properly endorsed or is accompanied by proper instruments of transfer
(including signature guarantees in accordance with standard securities industry
practice), (iii) this Receipt has been duly stamped (if required by the laws of
the State of New York or of the United States, or any other applicable law), and
(iv) all applicable fees and charges of, and expenses incurred by, the
Depositary and all applicable taxes and governmental charges (as are set forth
in Section 5.9 and Exhibit B to the Deposit Agreement) have been paid, subject,
however, in each case, to the terms and conditions of this Receipt, of the
Deposit Agreement and of applicable law, in each case as in effect at the time
thereof.
The Registrar shall register the split-up or combination of this Receipt
(and of the ADSs represented hereby) on the books maintained for such purpose
and the Depositary shall cancel this Receipt and execute new Receipts for the
number of ADSs requested, but in the aggregate not exceeding the number of ADSs
evidenced by this Receipt when canceled by the Depositary, shall cause the
Registrar to countersign such new Receipts and shall Deliver such new Receipts
to or upon the order of the Holder thereof, if each of the following conditions
has been satisfied: (i) this Receipt has been duly Delivered by the Holder (or
by a duly authorized attorney of the Holder) to the Depositary at its Principal
Office for the purpose of effecting a split-up or combination hereof, and (ii)
all applicable fees and charges of, and expenses incurred by, the Depositary and
all applicable taxes and government charges (as are set forth in Section 5.9 and
Exhibit B to the Deposit Agreement) have been paid, subject, however, in each
case, to the terms and conditions of this Receipt, of the Deposit Agreement and
of applicable law, in each case as in effect at the time thereof.
(4) Pre-Conditions to Registration, Transfer, Etc. As a condition
precedent to the execution and delivery, registration of issuance, transfer,
split-up, combination or surrender of any Receipt, the delivery of any
distribution thereon, or the withdrawal of any Deposited Securities, the
Depositary or the Custodian may require (i) payment from the depositor of Shares
or presenter of ADSs or of a Receipt of a sum sufficient to reimburse it for any
tax or other governmental charge and any stock transfer or registration fee with
respect thereto (including any such tax or charge and fee with respect to Shares
being deposited or withdrawn) and payment of any applicable fees and charges of
the Depositary as provided in the Deposit Agreement and in this Receipt, (ii)
the production of proof satisfactory to it as to the identity and genuineness of
any signature or any other matters contemplated in the Deposit Agreement, and
(iii) compliance with (A) any laws or governmental regulations relating to the
execution and delivery of Receipts or ADSs or to the withdrawal of Deposited
Securities and (B) such reasonable regulations as the Depositary or the Company
may establish consistent with the provisions of this Receipt, the Deposit
Agreement and applicable law.
<PAGE> 40
The issuance of ADSs against deposits of Shares generally or against
deposits of particular Shares may be suspended, or the deposit of particular
Shares may be refused, or the registration of transfer of Receipts in particular
instances may be refused, or the registration of transfer of outstanding
Receipts generally may be suspended, during any period when the transfer books
of the Company, the Depositary, a Registrar or the Share Registrar, are closed
or if any such action is deemed necessary or advisable by the Depositary or the
Company, in good faith, at any time or from time to time because of any
requirement of law, any government or governmental body or commission or any
securities exchange upon which the Shares or ADSs are listed, or under any
provision of the Deposit Agreement or this Receipt, or under any provision of,
or governing, the Deposited Securities, or because of a meeting of shareholders
of the Company or for any other reason, subject in all cases to Article (24)
hereof. Notwithstanding any provision of the Deposit Agreement or this Receipt
to the contrary, Holders are entitled to surrender outstanding ADSs to withdraw
the Deposited Securities at any time subject only to (i) temporary delays caused
by closing the transfer books of the Depositary or the Company or the deposit of
Shares in connection with voting at a shareholders' meeting or the payment of
dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance
with any U.S. or foreign laws or governmental regulations relating to the
Receipts or to the withdrawal of the Deposited Securities, and (iv) other
circumstances specifically contemplated by Section I.A.(l) of the General
Instructions to Form F-6 (as such General Instructions may be amended from time
to time).
(5) Compliance With Information Requests. Notwithstanding any other
provision of the Deposit Agreement or this Receipt, each Holder and Beneficial
Owner of the ADSs represented hereby agrees to comply with requests from the
Company pursuant to the rules and requirements of the Commission, the Securities
and Exchange Board of India, Reserve Bank of India, and of any stock exchange on
which Shares are, or will be registered, traded or listed, the Articles of
Association and Memorandum of Association of the Company and any other laws,
rules and regulations, which require notification to the Company of interest in
Deposited Securities, inter alia, as to certain acquisitions or dispositions of
shares (or share equivalents), the capacity in which such Holder or Beneficial
Owner owns ADSs (and Shares, as the case may be) and regarding the identity of
any other person(s) interested in such ADSs and the nature of such interest and
various other matters, whether or not they are Holders and/or Beneficial Owners
at the time of such request.
(6) Ownership Restrictions. Notwithstanding any provision of this
Receipt or of the Deposit Agreement, the Company may restrict transfers of the
Shares where the proposed transfer is in violation of applicable laws, rules and
regulations (including where such transfer might result in ownership of Shares
exceeding limits imposed under applicable laws and regulations), or the Articles
of Association and Memorandum of Association of the Company. The Company may
also restrict, in such manner as it deems appropriate, transfers of ADSs where
the proposed transfer is in violation of applicable laws, rules and regulations
(including where such transfer may result in the total number of Shares
represented by the ADSs owned by a single Holder or Beneficial Owner to exceed
any such limits). The Company may, in its sole discretion but subject to
applicable law, instruct the Depositary to take action with respect to the
ownership interest of any Holder or Beneficial Owner in excess of the limits set
forth in the preceding sentence, including but not limited to, the imposition of
restrictions on the transfer of
<PAGE> 41
ADSs, the removal or limitation of voting rights or a mandatory sale or
disposition on behalf of a Holder or Beneficial Owner of the Shares represented
by the ADSs held by such Holder or Beneficial Owner in excess of such
limitations, if and to the extent such disposition is permitted by applicable
law and the Articles of Association and Memorandum of Association of the
Company.
(7) Liability of Holder for Taxes and Other Charges. Any tax or other
governmental charge payable with respect to this ADR or any Deposited Securities
or ADSs evidenced hereby shall be payable by the Holders and Beneficial Owners
to the Depositary. The Company, the Custodian and/or Depositary may withhold or
deduct from any distributions made in respect of Deposited Securities and may
sell for the account of Holder and/or Beneficial Owner any or all of the
Deposited Securities and apply such distributions and sale proceeds in payment
of such taxes (including applicable interest and penalties) or charges, the
Holder and the Beneficial Owner hereof remaining liable for any deficiency. The
Custodian may refuse the deposit of Shares and the Depositary may refuse to
issue ADSs, to deliver ADRs, register the transfer, split-up or combination of
ADRs and (subject to Article (24) hereof) the withdrawal of Deposited Securities
until payment in full of such tax, charge, penalty or interest is received.
Every Holder and Beneficial Owner agrees to indemnify the Depositary, the
Company, the Custodian, and any of their agents, officers, employees and
Affiliates for, and to hold each of them harmless from, any claims with respect
to taxes (including applicable interest and penalties thereon) arising from any
tax benefit obtained for such Holder and/or Beneficial Owner.
(8) Representations and Warranties of Depositors. Each person depositing
Shares under the Deposit Agreement shall be deemed thereby to represent and
warrant that (i) such Shares and the certificates therefor are duly authorized,
validly issued, fully paid, non-assessable and legally obtained by such person,
(ii) all preemptive (and similar) rights, if any, with respect to such Shares
have been validly waived or exercised, (iii) the person making such deposit is
duly authorized so to do, (iv) the 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, and (v) the Shares presented for deposit have not been
stripped of any rights or entitlements. Except as contemplated by Section 2.12
of the Deposit Agreement, each such person shall also be deemed to represent
that Shares deposited by that person are not Restricted Securities, and that the
deposit of Shares or sale of ADSs by that person is not restricted, under the
Securities Act. Such representations and warranties shall survive the deposit of
Shares and issuance of ADSs in respect thereof. If any such representations or
warranties are false in any way, the Company and the Depositary shall be
authorized, at the cost and expense of the person depositing Shares, to take any
and all actions necessary to correct the consequences thereof.
(9) Filing Proofs, Certificates and Other Information. Any person
presenting Shares for deposit, any Holder and any Beneficial Owner may be
required by the Company or the Depositary, and every Holder and Beneficial Owner
agrees, from time to time to provide to the Depositary, the Company and the
Custodian such proof of citizenship or residence, taxpayer status, payment of
all applicable taxes or other governmental charges, exchange control approval
and approval for deposit, legal or beneficial ownership of ADSs and Deposited
Securities, compliance with applicable laws and regulations and the terms of the
Deposit Agreement and the
<PAGE> 42
provisions of, or governing, the Deposited Securities, to execute such
certifications and to make such representations and warranties, and to provide
such other information or documentation (or, in the case of Shares in registered
form presented for deposit, such information relating to the registration of
Shares on the books of the Company or of the appointed agent of the Company for
the registration and transfer of Shares) as the Depositary or the Custodian may
deem reasonably necessary or proper or as the Company may reasonably require by
written request to the Depositary consistent with its obligations under the
Deposit Agreement. The Depositary and the Registrar, as applicable, may withhold
the execution or Delivery or registration of transfer of any Receipt or the
distribution or sale of any dividend or other distribution of rights or of the
proceeds thereof or, to the extent not limited by Article 24 hereof, the
Delivery of any Deposited Securities until such proof or other information is
filed or such certificates are executed, or such representations are made or
such information and documentation are provided, in each case to the
Depositary's, the Registrar's and the Company's reasonable satisfaction.
(10) Charges of Depositary. The Depositary shall charge the following
fees for the services performed under the terms of the Deposit Agreement:
(i) to any person to whom ADSs are issued upon the
deposit of Shares, a fee not in excess of U.S. $5.00
per 100 ADSs (or portion thereof) so issued under the
terms of the Deposit Agreement (excluding issuances
pursuant to paragraphs (iii) and (iv) below);
(ii) to any person surrendering ADSs for cancellation and
withdrawal of Deposited Securities, a fee not in
excess of U.S. $5.00 per 100 ADSs (or portion
thereof) so surrendered;
(iii) to any Holder of ADRs, a fee not in excess of U.S.
$2.00 per 100 ADSs (or portion thereof) held for the
distribution of cash dividends or other cash
distributions (i.e. upon the sale of rights and other
entitlements);
(iv) to any Holder of ADRs, a fee not in the excess of
U.S. $5.00 per 100 ADSs (or portion thereof) issued
upon the distribution of ADSs pursuant to (a) a stock
dividend, stock split or other free distribution of
stock or (b) the exercise of rights; and
(v) to any person presenting an ADR for transfer, U.S.
$1.50 per certificate presented for transfer.
In addition, Holders, Beneficial Owners, persons depositing
Shares for deposit and persons surrendering ADSs for cancellation and withdrawal
of Deposited Securities will be required to pay the following charges:
(i) taxes (including applicable interest and penalties)
and other governmental charges;
(ii) such registration fees as may from time to time be in
effect for the registration of Shares or other
Deposited Securities on the share register
<PAGE> 43
and applicable to transfers of Shares or other
Deposited Securities to or from the name of the
Custodian, the Depositary or any nominees upon the
making of deposits and withdrawals, respectively;
(iii) such cable, telex and facsimile transmission and
delivery expenses as are expressly provided in the
Deposit Agreement to be at the expense of the person
depositing or withdrawing Shares or Holders and
Beneficial Owners of ADSs;
(iv) the expenses and charges incurred by the Depositary
in the conversion of foreign currency;
(v) such fees and expenses as are incurred by the
Depositary in connection with compliance with
exchange control regulations and other regulatory
requirements applicable to Shares, Deposited
Securities, ADSs and ADRs; and
(vi) the fees and expenses incurred by the Depositary in
connection with the delivery of Deposited Securities.
Any other charges and expenses of the Depositary under the Deposit
Agreement will be paid by the Company upon agreement between the Depositary and
the Company. All fees and charges may, at any time and from time to time, be
changed by agreement between the Depositary and Company but, in the case of fees
and charges payable by Holders or Beneficial Owners, only in the manner
contemplated by Article (22) of this Receipt. The Depositary will provide,
without charge, a copy of its latest fee schedule to anyone upon request. The
charges and expenses of the Custodian are for the sole account of the
Depositary.
(11) Title to Receipts. It is a condition of this Receipt, and every
successive Holder of this Receipt by accepting or holding the same consents and
agrees, that title to this Receipt (and to each ADS evidenced hereby) shall be
transferable on the same terms as a certificated security under the laws of the
State of New York, provided that the Receipt has been properly endorsed or is
accompanied by proper instruments of transfer. Notwithstanding any notice to the
contrary, the Depositary and the Company may deem and treat the Holder of this
Receipt (that is, the person in whose name this Receipt is registered on the
books of the Depositary) as the absolute owner thereof for all purposes. Neither
the Company nor the Depositary shall have any obligation nor be subject to any
liability under the Deposit Agreement or this Receipt to any holder of this
Receipt or any Beneficial Owner unless such holder is the registered Holder of
this Receipt or, in the case of a Beneficial Owner, such Beneficial Owner or the
Beneficial Owner's representative is the registered Holder thereof.
(12) Validity of Receipt. The Holder(s) of this Receipt (and the ADSs
represented hereby) shall not be entitled to any benefits under the Deposit
Agreement or be valid or enforceable for any purpose against the Depositary or
the Company unless this Receipt has been (i) dated, (ii) signed by the manual or
facsimile signature of a duly authorized signatory of the Depositary, (iii)
countersigned by the manual or facsimile signature of a duly authorized
<PAGE> 44
signatory of the Registrar, and (iv) registered in the books maintained by the
Registrar for the registration of issuances and transfers of Receipts. Receipts
bearing the facsimile signature of a duly-authorized signatory of the Depositary
or the Registrar, who at the time of signature was a duly authorized signatory
of the Depositary or the Registrar, as the case may be, shall bind the
Depositary, notwithstanding the fact that such signatory has ceased to be so
authorized prior to the delivery of such Receipt by the Depositary.
(13) Available Information; Reports; Inspection of Transfer Books. The
Company is subject to the periodic reporting requirements of the Exchange Act
and accordingly files certain information with the Commission. These reports and
documents can be inspected and copied at the public reference facilities
maintained by the Commission located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549. The Depositary shall make available for inspection by
Holders at its Principal Office any reports and communications, including any
proxy soliciting materials, received from the Company which are both (a)
received by the Depositary, the Custodian, or the nominee of either of them as
the holder of the Deposited Securities and (b) made generally available to the
holders of such Deposited Securities by the Company.
The Registrar shall keep books for the registration of issuances and
transfers of Receipts which at all reasonable times shall be open for inspection
by the Company and by the Holders of such Receipts, provided that such
inspection shall not be, to the Registrar's knowledge, for the purpose of
communicating with Holders of such Receipts in the interest of a business or
object other than the business of the Company or other than a matter related to
the Deposit Agreement or the Receipts.
The Registrar may close the transfer books with respect to the Receipts,
at any time or from time to time, when deemed necessary or advisable by it in
good faith in connection with the performance of its duties hereunder, or at the
reasonable written request of the Company subject, in all cases, to Article (24)
hereof.
Dated: CITIBANK, N.A.,
----------------------------- as Depositary
CITIBANK, N.A.
Transfer Agent and Registrar
By:
---------------------------------
Authorized Signatory
By:
--------------------------------
Authorized Signatory
The address of the Principal Office of the Depositary is 111 Wall Street, New
York, New York 10043, U.S.A.
<PAGE> 45
[FORM OF REVERSE OF RECEIPT]
SUMMARY OF CERTAIN ADDITIONAL PROVISIONS
OF THE DEPOSIT AGREEMENT
(14) Dividends and Distributions in Cash, Shares, etc. Whenever the
Depositary receives confirmation from the Custodian of receipt of any cash
dividend or other cash distribution on any Deposited Securities, or receives
proceeds from the sale of any Deposited Securities or of any entitlements held
in respect of Deposited Securities under the terms of the Deposit Agreement, the
Depositary will (i) if at the time of receipt thereof any amounts received in a
Foreign Currency can in the judgment of the Depositary be converted such
dividend, distribution or proceeds into Dollars upon the terms of the Deposit
Agreement on a practicable basis into Dollars transferable to the United States,
promptly convert or cause to be converted), (ii) if applicable, establish the
ADS Record Date upon the terms described in Section 4.9 of the Deposit
Agreement, and (iii) distribute the amount thus received (net of (a) applicable
fees and charges of, and expenses incurred by, the Depositary as provided in the
Deposit Agreement and (b) taxes withheld) to the Holders entitled thereto as of
the ADS Record Date in proportion to the number of ADS held as of the ADS Record
Date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any Holder a fraction of one cent, and any
balance not so distributed shall be held by the Depositary (without liability
for interest thereon) and shall be added to and become part of the next sum
received by the Depositary for distribution to Holders of ADSs then outstanding.
If the Company, the Custodian or the Depositary is required to withhold and does
withhold from any cash dividend or other cash distribution in respect of any
Deposited Securities an amount on account of taxes, duties or other governmental
charges, the amount distributed to Holders on the ADSs representing such
Deposited Securities shall be reduced accordingly. Such withheld amounts shall
be forwarded by the Company, the Custodian or the Depositary to the relevant
governmental authority.
If any distribution upon any Deposited Securities consists of a free
distribution of Shares, the Company shall or cause such Shares to be deposited
with the Custodian and registered, as the case may be, in the name of the
Depositary, the Custodian or their respective nominees. Upon receipt of
confirmation of such deposit from the Custodian, the Depositary shall, subject
to and in accordance with the Deposit Agreement, establish the ADS Record Date
and either (i) the Depositary shall distribute to the Holders as of the ADS
Record Date in proportion to the number of ADSs held as of the ADS Record Date,
additional ADSs, which represent in aggregate the number of Shares received as
such free distribution, subject to the terms of the Deposit Agreement
(including, without limitation, payment of (a) the applicable fees and charges
of, and expenses incurred by, the Depositary as provided in the Deposit
Agreement and (b) taxes), or (ii) if additional ADSs are not so distributed,
each ADS issued and outstanding after the ADS Record Date shall, to the extent
permissible by law, thenceforth also represent rights and interest in the
additional integral number of Shares distributed upon the Deposited Securities
represented thereby (net (a) of the applicable fees and charges of, and the
expenses incurred by, the Depositary, as provided in the Deposit Agreement and
(b) taxes). In lieu of delivering fractional ADSs, the Depositary shall sell the
number of Shares or ADSs, as the case may be, represented
<PAGE> 46
by the aggregate of such fractions and distribute the net proceeds upon the
terms set forth in the Deposit Agreement.
In the event that the Depositary determines that any distribution in
property (including Shares) is subject to any tax or other governmental charges
which the Depositary is obligated to withhold, or, if the Company in the
fulfillment of its obligations under the Deposit Agreement, has furnished an
opinion of U.S. counsel determining that Shares must be registered under the
Securities Act or other laws in order to be distributed to Holders (and no such
registration statement has been declared effective), the Depositary may dispose
of all or a portion of such property (including Shares and rights to subscribe
therefor) in such amounts and in such manner, including by public or private
sale, as the Depositary deems necessary and practicable and the Depositary shall
distribute the net proceeds of any such sale (after deduction of such (a) taxes
and (b) fees and charges of, and expenses incurred by, the Depositary) to
Holders entitled thereto upon the terms of the Deposit Agreement. The Depositary
shall hold and/or distribute any unsold balance of such property in accordance
with the provisions of the Deposit Agreement.
Upon timely receipt by the Depositary of a notice indicating that the
Company wishes rights to subscribe for additional Shares to be made available to
Holders of ADSs, the Depositary upon consultation with the Company, shall
determine, whether it is lawful and reasonably practicable to make such rights
available to the Holders. The Depositary shall make such rights available to any
Holders only if (i) the Company shall have timely requested that such rights be
made available to Holders, (ii) the Depositary shall have received the
documentation contemplated in the Deposit Agreement, and (iii) the Depositary
shall have determined that such distribution of rights is reasonably
practicable. If such conditions are not satisfied or if the Company requests
that the rights not be made available to Holders of ADSs, the Depositary shall
sell the rights as described below. In the event all conditions set forth above
are satisfied, the Depositary shall establish an ADS Record Date (upon the terms
described in the Deposit Agreement) and establish procedures (x) to distribute
rights to purchase additional ADSs (by means of warrants or otherwise), (y) to
enable the Holders to exercise the rights (upon payment of the subscription
price and of the applicable (a) fees and charges of, and expenses incurred by,
the Depositary as provided in the Deposit Agreement and (b) taxes), and (z) to
deliver ADSs upon the valid exercise of such rights. The Company shall assist
the Depositary to the extent necessary in establishing such procedures. Nothing
herein or in the Deposit Agreement shall obligate the Depositary to make
available to the Holders a method to exercise rights to subscribe for Shares
(rather than ADSs). If (i) the Company does not timely request the Depositary to
make the rights available to Holders or if the Company requests that the rights
not be made available to Holders, (ii) the Depositary fails to receive the
documentation required by the Deposit Agreement or determines that it is not
reasonably practicable to make the rights available to Holders, or (iii) any
rights made available are not exercised and appear to be about to lapse, the
Depositary shall determine whether it is lawful and reasonably practicable to
sell such rights, in a riskless principal capacity, at such place and upon such
terms (including public or private sale) as it may deem practical. The Company
shall assist the Depositary to the extent necessary to determine such legality
and practicability. The Depositary shall, upon such sale, convert and distribute
proceeds of such sale (net of (a) applicable fees and charges of, and expenses
incurred by, the Depositary and (b) taxes) upon the terms hereof and of the
Deposit Agreement. If the Depositary is unable to make any rights available to
Holders or to arrange for the sale of the
<PAGE> 47
rights upon the terms described above, the Depositary shall allow such rights to
lapse. The Depositary shall not be responsible for (i) any failure to determine
that it may be lawful and practicable to make such rights available to Holders
in general or any Holders in particular, (ii) any foreign exchange exposure or
loss incurred in connection with such sale or exercise, or (iii) the content of
any materials forwarded to the ADR Holders by the Company in connection with the
rights distribution.
Notwithstanding anything herein or in the Deposit Agreement to the
contrary, if registration (under the Securities Act or any other applicable law)
of the rights or the securities to which any rights relate may be required in
order for the Company to offer such rights or such securities to Holders and to
sell the securities represented by such rights, the Depositary will not
distribute such rights to the Holders (i) unless and until a registration
statement under the Securities Act (and other applicable law) covering such
offering is in effect or (ii) unless the Company furnishes the Depositary
opinion(s) of counsel for the Company in the United States and counsel to the
Company in any other applicable country in which rights would be distributed, in
each case reasonably satisfactory to the Depositary, to the effect that the
offering and sale of such securities to Holders and Beneficial Owners are exempt
from, or do not require registration under, the provisions of the Securities Act
or any other applicable laws. In the event that the Company, the Depositary or
the Custodian shall be required to withhold and does withhold from any
distribution of property (including rights) an amount on account of taxes or
other governmental charges, the amount distributed to the Holders of ADSs
representing such Deposited Securities shall be reduced accordingly. In the
event that the Depositary determines that any distribution in property
(including Shares and rights to subscribe therefor) is subject to any tax or
other governmental charges which the Depositary is obligated to withhold, the
Depositary may dispose of all or a portion of such property (including Shares
and rights to subscribe therefor) in such amounts and in such manner, including
by public or private sale, as the Depositary deems necessary and practicable to
pay any such taxes or charges. The rights issued by the Company may not be
negotiable, and if negotiable, a liquid market for rights may not exist. This
may adversely affect (1) the ability of the Depositary to dispose of such rights
or (2) the amount the Depositary would realize upon disposal of rights.
There can be no assurance that Holders generally, or any Holder in
particular, will be given the opportunity to exercise rights on the same terms
and conditions as the holders of Shares or to exercise such rights. Nothing
herein or in the Deposit Agreement shall obligate the Company to file any
registration statement in respect of any rights or Shares or other securities to
be acquired upon the exercise of such rights.
Upon receipt of a notice indicating that the Company wishes property
other than cash, Shares or rights to purchase additional Shares to be made to
Holders of ADSs, the Depositary shall determine whether such distribution to
Holders is lawful and reasonably practicable. The Depositary shall not make such
distribution unless (i) the Company shall have requested the Depositary to make
such distribution to Holders, (ii) the Depositary shall have received the
documentation contemplated in the Deposit Agreement, and (iii) the Depositary
shall have determined that such distribution is reasonably practicable. Upon
satisfaction of such conditions, the Depositary shall distribute the property so
received to the Holders of record, as of the ADS Record Date, in proportion to
the number of ADSs held by them respectively and in such manner
<PAGE> 48
as the Depositary may deem practicable for accomplishing such distribution (i)
upon receipt of payment or net of the applicable fees and charges of, and
expenses incurred by, the Depositary, and (ii) net of any taxes withheld. The
Depositary may dispose of all or a portion of the property so distributed and
deposited, in such amounts and in such manner (including public or private sale)
as the Depositary may deem practicable or necessary to satisfy any taxes
(including applicable interest and penalties) or other governmental charges
applicable to the distribution.
If the conditions above are not satisfied, the Depositary shall sell or
cause such property to be sold in a public or private sale, at such place or
places and upon such terms as it may deem practicable and shall, (i) cause the
proceeds of such sale, if any, to be converted into Dollars and (ii) distribute
the proceeds of such conversion received by the Depositary (net of (a)
applicable fees and charges of, and expenses incurred by, the Depositary as
provided in the Deposit Agreement , and (b) taxes) to the Holders as of the ADS
Record Date upon the terms hereof and of the Deposit Agreement. If the
Depositary is unable to sell such property, the Depositary may dispose of such
property for the account of Holders of ADSs in any way it deems reasonably
practicable under the circumstances.
(15) Redemption. Upon timely receipt of notice from the Company that it
intends to exercise its right of redemption in respect of any of the Deposited
Securities, and satisfactory documentation as contemplated by the Deposit
Agreement, and upon determining that such proposed redemption is practicable,
the Depositary shall (to the extent practicable) provide to each Holder a notice
setting forth the Company's intention to exercise the redemption rights and any
other particulars set forth in the Company's notice to the Depositary. The
Depositary shall instruct the Custodian to present to the Company the Deposited
Securities in respect of which redemption rights are being exercised against
payment of the applicable redemption price. Upon receipt of confirmation that
the redemption has taken place and that funds representing the redemption price
have been received, the Depositary shall convert, transfer, distribute the
proceeds (net of applicable (a) fees and charges of, and expenses incurred by,
the Depositary as provided in the Deposit Agreement, and (b) taxes), retire ADSs
and cancel ADRs upon delivery of such ADSs by Holders thereof upon the terms of
the Deposit Agreement. If less than all outstanding Deposited Securities are
redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis,
as may be determined by the Depositary. The redemption price per ADS shall be
the dollar equivalent of per share amount received by the Depositary upon the
redemption of the Deposited Securities represented by American Depositary Shares
(subject to the terms of the Deposit Agreement and the applicable fees and
charges of, and expenses incurred by, the Depositary, and taxes) multiplied by
the number of Deposited Securities represented by each ADS redeemed.
(16) Fixing of ADS Record Date. Whenever the Depositary shall receive
notice of the fixing of a record date by the Company for the determination of
holders of Deposited Securities entitled to receive any distribution (whether in
cash, Shares, rights or other distribution), or whenever for any reason the
Depositary causes a change in the number of Shares that are represented by each
ADS, or whenever the Depositary shall receive notice of any meeting of, or
solicitation of consents or proxies of, holders of Shares or other Deposited
Securities, or whenever the Depositary shall find it necessary or convenient in
connection with the giving of any notice, solicitation of any consent or any
other matter, the Depositary shall fix a record date
<PAGE> 49
("ADS Record Date") for the determination of the Holders of Receipts who shall
be entitled to receive such distribution, to give instructions for the exercise
of voting rights at any such meeting, to give or withhold such consent, to
receive such notice or solicitation or to otherwise take action, or to exercise
the rights of Holders with respect to such changed number of Shares represented
by each ADS. The Depositary shall make reasonable efforts to establish the ADS
Record Date as closely as possible to the applicable record date for the
Deposited Securities (if any) set by the Company in the Republic of India.
Subject to applicable law and the terms and conditions of this Receipt and the
Deposit Agreement, only the Holders of Receipts at the close of business in New
York on such ADS Record Date shall be entitled to receive such distributions, to
give such instructions, to receive such notice or solicitation, or otherwise
take action.
(17) Voting of Deposited Securities.
7.9.1. ADS Voting Instructions. As soon as practicable after receipt of
notice of any meeting at which the holders of Deposited Securities are entitled
to vote, or of solicitation of consents or proxies from holders of Deposited
Securities, the Depositary shall fix the ADS Record Date in respect of such
meeting or solicitation of such consent or proxy. The Depositary shall, if
requested in writing in a timely manner by the Company (the Depositary having no
obligation to take any further action if the request shall not have been
received by the Depositary at least 30 days prior to the date of such vote or
meeting), at the Company's expense and provided no U.S. legal prohibitions
exist, distribute to Holders: (a) such notice of meeting or solicitation of
consent or proxy, (b) a statement that the Holders as of the ADS Record Date
will be entitled, subject to any applicable law, the provisions of the Deposit
Agreement, the Company's Articles of Association and Memorandum of Association
and the provisions of or governing Deposited Securities (which provisions, if
any, shall be summarized in pertinent part by the Company), to instruct the
Depositary as to the exercise of the voting rights, if any, pertaining to the
Deposited Securities represented by such Holder's ADSs, (c) a brief statement as
to the manner in which such voting instructions may be given, and (d) summaries
of any materials and other documents provided by the Company for the purpose of
enabling such Holders to exercise such voting rights. Voting instructions may be
given only in respect of a number of ADSs representing an integral number of
Deposited Securities. Upon the timely receipt of voting instructions from a
Holder of ADSs as of the ADS Record Date in the manner specified by the
Depositary, the Depositary shall endeavor, insofar as practicable and permitted
under applicable law, the provisions of the Deposit Agreement, the provisions of
the Articles of Association and Memorandum of Association of the Company and the
provisions of the Deposited Securities, to vote or cause the Custodian to vote
the Shares and/or other Deposited Securities represented by ADSs held by such
Holder, either (x) in the event of voting on a show of hands, in which case the
Depositary shall vote, or shall instruct the Custodian to vote, all Shares
and/or other Deposited Securities held under the terms of the Deposit Agreement
in accordance with instructions timely received from Holders of a majority of
the American Depositary Shares for which instructions have been given to the
Depositary, or (y) in the event of voting on a poll, in which case the
Depositary shall vote, or shall instruct the Custodian to vote, the Shares
and/or Deposited Securities in accordance with the instructions timely received
from the Holders giving instructions.
For the purpose of this Receipt and the Deposit Agreement, in the event
that the Depositary receives an express instruction from a Holder as of the ADS
Record Date to demand a poll with respect to any matter to be voted on by
Holders of the American Depositary Shares, the Depositary shall notify the
Chairman of the Company or a person designated by the Chairman of such
instruction and request the Chairman of the Company or such designee to demand a
poll with respect to such matters. The Company agrees that the Chairman of the
Company or such designee will make their reasonable best efforts to demand a
poll at the meeting at which such matters are to be voted on and to vote such
Shares in accordance with the instructions of the Holders of the American
Depositary Shares.
<PAGE> 50
The Depositary has been advised that under Indian law, as in effect as
of the date of the Deposit Agreement, voting of Shares is by show of hands (in
which case each shareholder has one (1) vote regardless of the number of Shares
owned) unless a poll is validly demanded and a proxy holder may not vote except
in a poll vote. In addition, the Company's Articles of Association and
Memorandum of Association, as in effect as of the date hereof, provide that a
poll may be demanded at any general meeting by a holder or holders holding (a)
at least 10% of the total Shares entitled to vote on a resolution or (b) Shares
with an aggregate paid up capital of at least Rs.50,000. As a result, unless
specifically instructed by a Holder or Holders holding (a) at least 10% of the
total Shares (represented by such Holder(s)' American Depositary Shares)
entitled vote on a resolution or (b) Shares (represented by such Holder(s)'
American Depositary Shares) with an aggregate paid-up capital of at least
Rs.50,000, the Chairman of the Company or his designee may not be able to demand
a poll at the instruction of Holders. The Company's Articles of Association and
Memorandum of Association (as in effect on the date hereof) further provide that
the Chairman shall cast the deciding vote, in the event of a tie.
(b) Neither the Depositary nor the Custodian shall, under any
circumstances exercise any discretion as to voting and neither the Depositary
nor the Custodian shall vote, attempt to exercise the right to vote, or in any
way make use of for purposes of establishing a quorum or otherwise, Deposited
Securities represented by ADSs except (a) pursuant to and in accordance with the
voting instructions timely received from Holders, or (b) as otherwise
contemplated herein in the event of voting by show of hands. If the Depositary
timely receives voting instructions from a Holder which fail to specify the
manner in which the Depositary is to vote the Deposited Securities represented
by such Holder's ADSs, the Depositary will deem such Holder (unless otherwise
specified in the notice distributed to Holders) to have instructed the
Depositary to vote in favor of the items set forth in such instructions.
Deposited Securities represented by ADSs for which no specific voting
instructions are received by the Depositary from the Holder shall not be voted.
Notwithstanding anything else contained in the Deposit Agreement or this
Receipt, the Depositary shall not have any obligation to take any action with
respect to any meeting, or solicitation or consents or proxies, of holders of
Deposited Securities if the taking of such action would violate U.S. laws. The
Company agrees to take any and all actions reasonably necessary to enable
Holders and Beneficial Owners to exercise the voting rights accruing to the
Deposited Securities and to deliver to the Depositary an opinion of U.S. counsel
addressing any actions requested to be taken if so requested by the Depositary.
There can be no assurance that Holders generally or any Holder in particular
will receive the notice described above with sufficient time to enable the
Holder to return voting instructions to the Depositary in a timely manner.
(18) Changes Affecting Deposited Securities. Upon any change in nominal
or par value, split-up, cancellation, consolidation or any other
reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting the Company
or to which it is a party, any securities which shall be received by the
Depositary or the Custodian in exchange for, or in conversion of or replacement
of or otherwise in respect of, such Deposited Securities shall, to the extent
permitted by law, be treated as new Deposited Securities under the Deposit
Agreement, and the Receipts shall, subject to the provisions of the Deposit
Agreement and applicable law, evidence ADSs representing the right to receive
such additional securities. The Depositary may, with the Company's approval, and
shall, if the
<PAGE> 51
Company shall so request, subject to the terms of the Deposit Agreement and
receipt of satisfactory documentation contemplated by the Deposit Agreement,
execute and deliver additional Receipts as in the case of a stock dividend on
the Shares, or call for the surrender of outstanding Receipts to be exchanged
for new Receipts, in either case, as well as in the event of newly deposited
Shares, with necessary modifications to the form of Receipt contained in this
Exhibit A to the Deposit Agreement, specifically describing such new Deposited
Securities or corporate change. Notwithstanding the foregoing, in the event that
any security so received may not be lawfully distributed to some or all Holders,
the Depositary may, with the Company's approval, and shall if the Company
requests, subject to receipt of satisfactory legal documentation contemplated in
the Deposit Agreement, sell such securities at public or private sale, at such
place or places and upon such terms as it may deem proper and may allocate the
net proceeds of such sales (net of (a) fees and charges of, and expenses
incurred by, the Depositary as provided in the Deposit Agreement and (b) taxes)
for the account of the Holders otherwise entitled to such securities and
distribute the net proceeds so allocated to the extent practicable as in the
case of a distribution received in cash pursuant to the Deposit Agreement. The
Depositary shall not be responsible for (i) any failure to determine that it may
be lawful or feasible to make such securities available to Holders in general or
any Holder in particular, (ii) any foreign exchange exposure or loss incurred in
connection with such sale, or (iii) any liability to the purchaser of such
securities.
(19) Exoneration. Neither the Depositary nor the Company shall be
obligated to do or perform any act which is inconsistent with the provisions of
the Deposit Agreement or incur any liability (i) if the Depositary or the
Company shall be prevented or forbidden from, or subjected to any civil or
criminal penalty or restraint on account of, or delayed in, doing or performing
any act or thing required by the terms of the Deposit Agreement and this
Receipt, by reason of any provision of any present or future law or regulation
of the United States, the Republic of India or any other country, or of any
other governmental authority or regulatory authority or stock exchange, or on
account of the possible criminal or civil penalties or restraint, or by reason
of any provision, present or future of the Articles of Association and
Memorandum of Association of the Company or any provision of or governing any
Deposited Securities, or by reason of any act of God or war or other
circumstances beyond its control (including, without limitation,
nationalization, expropriation, currency restrictions, work stoppage, strikes,
civil unrest, revolutions, rebellions, explosions and computer failure), (ii) by
reason of any exercise of, or failure to exercise, any discretion provided for
in this Deposit Agreement or in the Articles of Association and Memorandum of
Association of the Company or provisions of or governing Deposited Securities,
(iii) for any action or inaction in good faith reliance upon the advice of or
information from legal counsel, accountants, any person presenting Shares for
deposit, any Holder, any Beneficial Owner or authorized representative thereof,
or any other person believed by it in good faith to be competent to give such
advice or information, (iv) for any inability by a Holder or Beneficial Owner to
benefit from any distribution, offering, right or other benefit which is made
available to holders of Deposited Securities but is not, under the terms of this
Deposit Agreement, made available to Holders of ADS or (v) for any consequential
or punitive damages for any breach of the terms of this Deposit Agreement. The
Depositary, its controlling persons, its agents, any Custodian and the Company,
its controlling persons and its agents may rely and shall be protected in acting
upon any written notice, request or other document believed by it to be genuine
and to have been signed or presented by the proper party or parties. No
<PAGE> 52
disclaimer of liability under the Securities Act is intended by any provision of
the Deposit Agreement or this Receipt.
(20) Standard of Care. The Company and its agents assume no obligation
and shall not be subject to any liability under this Deposit Agreement or the
Receipts to Holders or Beneficial Owners or other persons, except that the
Company and its agents agree to perform their obligations specifically set forth
in this Deposit Agreement without negligence or bad faith. The Depositary and
its agents assume no obligation and shall not be subject to any liability under
this Deposit Agreement or the Receipts to Holders or Beneficial Owners or other
persons, except that the Depositary and its agents agree to perform their
obligations specifically set forth in this Deposit Agreement without negligence
or bad faith. The Depositary and its agents shall not be liable for any failure
to carry out any instructions to vote any of the Deposited Securities, or for
the manner in which any vote is cast or the effect of any vote, provided that
any such action or omission is in good faith and in accordance with the terms of
this Deposit Agreement. The Depositary shall not incur any liability for any
failure to determine that any distribution or action may be lawful or reasonably
practicable, for the content of any information submitted to it by the Company
for distribution to the Holders or for any inaccuracy of any translation
thereof, for any investment risk associated with acquiring an interest in the
Deposited Securities, for the validity or worth of the Deposited Securities or
for any tax consequences that may result from the ownership of ADSs, Shares or
Deposited Securities, for the credit-worthiness of any third party, for allowing
any rights to lapse upon the terms of this Deposit Agreement or for the failure
or timeliness of any notice from the Company.
(21) Resignation and Removal of the Depositary; Appointment of Successor
Depositary. The Depositary may at any time resign as Depositary under the
Deposit Agreement by written notice of resignation delivered to the Company,
such resignation to be effective on the earlier of (i) the 60th day after
delivery thereof to the Company (whereupon the Depositary shall be entitled to
take the actions contemplated in Article (23) hereof), or (ii) the appointment
by the Company of a successor depositary and its acceptance of such appointment
as provided in the Deposit Agreement. The Depositary may at any time be removed
by the Company by written notice of such removal which notice shall be effective
on the earlier of (i) the 60th day after delivery thereof to the Depositary
(whereupon the Depositary shall be entitled to take the actions contemplated in
Article (23) hereof), or (ii) upon the appointment of a successor depositary and
its acceptance of such appointment as provided in the Deposit Agreement. In case
at any time the Depositary acting hereunder shall resign or be removed, the
Company shall use its best efforts to appoint a successor depositary, which
shall be a bank or trust company having an office in the Borough of Manhattan,
the City of New York. Every successor depositary shall execute and deliver to
its predecessor and to the Company an instrument in writing accepting its
appointment hereunder, and thereupon such successor depositary, without any
further act or deed (except as required by applicable law), shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
(other than as contemplated in the Deposit Agreement). The predecessor
depositary, upon payment of all sums due it and on the written request of the
Company, shall (i) execute and deliver an instrument transferring to such
successor all rights and powers of such predecessor hereunder (other than as
contemplated in the Deposit Agreement), (ii) duly assign, transfer and deliver
all right, title and interest to the Deposited Securities to such successor, and
(iii) deliver to such successor a list of the Holders of all outstanding
Receipts and
<PAGE> 53
such other information relating to Receipts and Holders thereof as the successor
may reasonably request. Any such successor depositary shall promptly notify
Holders of its appointment. Any corporation into or with which the Depositary
may be merged or consolidated shall be the successor of the Depositary without
the execution or filing of any document or any further act.
(22) Amendment/Supplement. Subject to the terms and conditions of this
Article 22, the Deposit Agreement and applicable law, any provisions of this
Receipt or the Deposit Agreement may at any time and from time to time be
amended or supplemented by written agreement between the Company and the
Depositary in any respect which they may deem necessary or desirable without the
prior written consent of the Holders or Beneficial Owners. Any amendment or
supplement which shall impose or increase any fees or charges (other than the
charges in connection with foreign exchange control regulations, and taxes and
other governmental charges, delivery and other such expenses), or which shall
otherwise materially prejudice any substantial existing right of Holders or
Beneficial Owners, shall not, however, become effective as to outstanding
Receipts until the expiration of 30 days after notice of such amendment or
supplement shall have been given to the Holders of outstanding Receipts. The
parties hereto agree that any amendments or supplements which (i) are reasonably
necessary (as agreed by the Company and the Depositary) in order for (a) the
ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs to be
traded solely in electronic book-entry form and (ii) do not in either such case
impose or increase any fees or charges to be borne by Holders, shall be deemed
not to materially prejudice any substantial rights of Holders or Beneficial
Owners. Every Holder and Beneficial Owner at the time any amendment or
supplement so becomes effective shall be deemed, by continuing to hold such
ADS(s), to consent and agree to such amendment or supplement and to be bound by
the Deposit Agreement as amended or supplemented thereby. In no event shall any
amendment or supplement impair the right of the Holder to surrender such Receipt
and receive therefor the Deposited Securities represented thereby, except in
order to comply with mandatory provisions of applicable law. Notwithstanding the
foregoing, if any governmental body should adopt new laws, rules or regulations
which would require amendment or supplement of the Deposit Agreement to ensure
compliance therewith, the Company and the Depositary may amend or supplement the
Deposit Agreement and this Receipt at any time in accordance with such changed
laws, rules or regulations. Such amendment or supplement to the Deposit
Agreement in such circumstances may become effective before a notice of such
amendment or supplement is given to Holders or within any other period of time
as required for compliance with such laws, or rules or regulations.
(23) Termination. The Depositary shall, at any time at the written
direction of the Company, terminate the Deposit Agreement by providing notice of
such termination to the Holders of all Receipts then outstanding at least 30
days prior to the date fixed in such notice for such termination. If 60 days
shall have expired after (i) the Depositary shall have delivered to the Company
a written notice of its election to resign, or (ii) the Company shall have
delivered to the Depositary a written notice of the removal of the Depositary,
and in either case a successor depositary shall not have been appointed and
accepted its appointment as provided in herein and in the Deposit Agreement, the
Depositary may terminate the Deposit Agreement by providing notice of such
termination to the Holders of all Receipts then outstanding at least 30 days
prior to the date fixed for such termination. On and after the date of
termination of the Deposit
<PAGE> 54
Agreement, the Holder will, upon surrender of such Holders' Receipt(s) at the
Principal Office of the Depositary, upon the payment of the charges of the
Depositary for the surrender of ADSs referred to in Article (2) hereof and in
the Deposit Agreement and subject to the conditions and restrictions therein set
forth, and upon payment of any applicable taxes or governmental charges, be
entitled to Delivery, to him or upon his order, of the amount of Deposited
Securities represented by such Receipt. If any Receipts shall remain outstanding
after the date of termination of the Deposit Agreement, the Registrar thereafter
shall discontinue the registration of transfers of Receipts, and the Depositary
shall suspend the distribution of dividends to the Holders thereof, and shall
not give any further notices or perform any further acts under the Deposit
Agreement, except that the Depositary shall continue to collect dividends and
other distributions pertaining to Deposited Securities, shall sell rights as
provided in the Deposit Agreement, and shall continue to deliver Deposited
Securities, subject to the conditions and restrictions set forth in the Deposit
Agreement, together with any dividends or other distributions received with
respect thereto and the net proceeds of the sale of any rights or other
property, in exchange for Receipts surrendered to the Depositary (after
deducting, or charging, as the case may be, in each case the charges of the
Depositary for the surrender of a Receipt, any expenses for the account of the
Holder in accordance with the terms and conditions of the Deposit Agreement and
any applicable taxes or governmental charges or assessments). At any time after
the expiration of six months from the date of termination of the Deposit
Agreement, the Depositary may sell the Deposited Securities then held hereunder
and may thereafter hold uninvested the net proceeds of any such sale, together
with any other cash then held by it hereunder, in an unsegregated account,
without liability for interest for the pro rata benefit of the Holders whose
Receipts have not theretofore been surrendered. After making such sale, the
Depositary shall be discharged from all obligations under the Deposit Agreement
with respect to the Receipts and the Shares, the Deposited Securities and the
ADSs, except to account for such net proceeds and other cash (after deducting,
or charging, as the case may be, in each case the charges of the Depositary for
the surrender of a Receipt, any expenses for the account of the Holder in
accordance with the terms and conditions of the Deposit Agreement and any
applicable taxes or governmental charges or assessments). Upon the termination
of the Deposit Agreement, the Company shall be discharged from all obligations
under the Deposit Agreement except as set forth in the Deposit Agreement.
(24) Compliance with U.S. Securities Laws. Notwithstanding any
provisions in this Receipt or the Deposit Agreement to the contrary, the
withdrawal or delivery of Deposited Securities will not be suspended by the
Company or the Depositary except as would be permitted by Section I.A.(1) of the
General Instructions to the Form F-6 Registration Statement, as amended from
time to time, under the Securities Act of 1933.
(25) Certain Rights of the Depositary; Limitations. Subject to the
further terms and provisions of this Article (25), the Depositary, its
Affiliates and their agents, on their own behalf and on behalf of their clients,
may own and deal in any class of securities of the Company and its Affiliates
and in ADSs. The Depositary may issue ADSs against evidence of rights to receive
Shares from the Company, any agent of the Company or any custodian, registrar,
transfer agent, clearing agency or other entity involved in ownership or
transaction records in respect of the Shares. Such evidence of rights shall
consist of written blanket or specific guarantees of ownership of Shares. In its
capacity as Depositary, the Depositary shall not lend Shares or
<PAGE> 55
ADSs; provided, however, that the Depositary may, except in the case of
Restricted ADSs, (i) issue ADSs prior to the receipt of Shares pursuant to
Section 2.3 of the Deposit Agreement and (ii) deliver Shares prior to the
receipt of ADSs for withdrawal of Deposited Securities pursuant to Section 2.7
of the Deposit Agreement, including ADSs which were issued under (i) above but
for which Shares may not have been received (each such transaction a
"Pre-Release Transaction"). The Depositary may receive ADSs in lieu of Shares
under (i) above and receive Shares in lieu of ADSs under (ii) above. Each such
Pre-Release Transaction will be (a) accompanied by or subject to a written
agreement whereby the person or entity (the "Applicant") to whom ADSs or Shares
are to be delivered (w) represents that at the time of the Pre-Release
Transaction the Applicant or its customer owns the Shares or ADSs that are to be
delivered by the Applicant under such Pre-Release Transaction, (x) agrees to
indicate the Depositary as owner of such Shares or ADSs in its records and to
hold such Shares or ADSs in trust for the Depositary until such Shares or ADSs
are delivered to the Depositary or the Custodian, (y) unconditionally guarantees
to deliver to the Depositary or the Custodian, as applicable, such Shares or
ADSs and (z) agrees to any additional restrictions or requirements that the
Depositary deems appropriate, (b) at all times fully collateralized with cash,
U.S. government securities or such other collateral as the Depositary deems
appropriate, (c) terminable by the Depositary on not more than five (5) business
days' notice and (d) subject to such further indemnities and credit regulations
as the Depositary deems appropriate. The Depositary will normally limit the
number of ADSs and Shares involved in such Pre-Release Transactions at any one
time to thirty percent (30%) of the ADSs outstanding (without giving effect to
ADSs outstanding under (i) above), provided, however, that the Depositary
reserves the right to change or disregard such limit from time to time as it
deems appropriate. The Depositary may also set limits with respect to the number
of ADSs and Shares involved in Pre-Release Transactions with any one person on a
case by case basis as it deems appropriate. The Depositary may retain for its
own account any compensation received by it in conjunction with the foregoing.
Collateral provided pursuant to (b) above, but not earnings thereon, shall be
held for the benefit of the Holders (other than the Applicant).
<PAGE> 56
(ASSIGNMENT AND TRANSFER SIGNATURE LINES)
FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and
transfer(s) unto ______________________________ whose taxpayer identification
number is _______________________ and whose address including postal zip code is
________________, the within Receipt and all rights thereunder, hereby
irrevocably constituting and appointing ________________________
attorney-in-fact to transfer said Receipt on the books of the Depositary with
full power of substitution in the premises.
Dated:
Name:
-----------------------------------------
By:
Title:
NOTICE: The signature of the Holder to this
assignment must correspond with the name as
written upon the face of the within instrument
in every particular, without alteration or
enlargement or any change whatsoever.
If the endorsement be executed by an attorney,
executor, administrator, trustee or guardian,
the person executing the endorsement must give
his/her full title in such capacity and proper
evidence of authority to act in such capacity,
if not on file with the Depositary, must be
forwarded with this Receipt.
- --------------------------
SIGNATURE GUARANTEED All endorsements or assignments of
Receipts must be guaranteed by a member of a
Medallion Signature Program approved by the
Securities Transfer Association, Inc.
LEGENDS
[THE RECEIPTS ISSUED IN RESPECT OF PARTIAL ENTITLEMENT AMERICAN
DEPOSITARY SHARES SHALL BEAR THE FOLLOWING LEGEND ON THE FACE OF
THE RECEIPT: "THIS
<PAGE> 57
RECEIPT EVIDENCES AMERICAN DEPOSITARY SHARES REPRESENTING
PARTIAL ENTITLEMENT' EQUITY SHARES, PAR VALUE RS.2 PER SHARE
("SHARES"), OF REDIFF.COM INDIA LIMITED AND AS SUCH DO NOT
ENTITLE THE HOLDERS THEREOF TO THE SAME PER-SHARE ENTITLEMENT AS
OTHER SHARES (WHICH ARE "FULL ENTITLEMENT" SHARES) ISSUED AND
OUTSTANDING AT SUCH TIME. THE AMERICAN DEPOSITARY SHARES
REPRESENTED BY THIS RECEIPT SHALL ENTITLE HOLDERS TO
DISTRIBUTIONS AND ENTITLEMENTS IDENTICAL TO OTHER AMERICAN
DEPOSITARY SHARES WHEN THE SHARES REPRESENTED BY SUCH AMERICAN
DEPOSITARY SHARES BECOME "FULL ENTITLEMENT" SHARES.]
[THIS CERTIFICATE REPRESENTS "RESTRICTED ADSS" ISSUED UPON THE
TERMS OF SECTION 2.12 OF THE DEPOSIT AGREEMENT (AS HEREINAFTER
DEFINED). THIS CERTIFICATE AND THE RESTRICTED ADSS REPRESENTED
HEREBY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT IS AVAILABLE FOR SUCH SALE OR
TRANSFER.]
<PAGE> 58
EXHIBIT B
FEE SCHEDULE
DEPOSITARY FEES AND RELATED CHARGES
All capitalized terms used but not otherwise defined herein shall have
the meaning given to such terms in the Deposit Agreement.
I. DEPOSITARY FEES
The Company, the Holders, the Beneficial Owners and the persons
depositing Shares or surrendering ADSs for cancellation agree to pay the
following fees of the Depositary:
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------- -------------------------------------
SERVICE RATE BY WHOM PAID
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
(1) Issuance of ADSs upon deposit Up to $5.00 per 100 ADSs (or Person for whom deposits are made
of Shares (excluding issuances fraction thereof) issued. or party receiving ADSs.
contemplated by paragraph (4) below).
- ---------------------------------------- ------------------------------------- -------------------------------------
(2) Delivery of Deposited Up to $5.00 per 100 ADSs (or Person surrendering ADSs or making
Securities, property and cash fraction thereof) surrendered. withdrawal.
against surrender of ADSs.
- ---------------------------------------- ------------------------------------- -------------------------------------
(3) Distribution of cash dividends Up to $2.00 per 100 ADSs (or Person to whom distribution is made.
or other cash distributions fraction thereof) held.
(i.e., sale of rights and other
entitlements).
- ---------------------------------------- ------------------------------------- -------------------------------------
(4) Distribution ADSs pursuant to Up to $5.00 per 100 ADSs (or Person to whom distribution is made.
(i) stock dividends, stock splits or fraction thereof) issued.
other free stock distributions, or
(ii) exercise of rights.
- ---------------------------------------- ------------------------------------- -------------------------------------
(5) Transfer of ADRs $1.50 per certificate presented Person presenting certificate for
transfer.
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
II. CHARGES
Holders, Beneficial Owners, persons depositing Shares for
deposit and persons surrendering ADSs for cancellation and for the
purpose of withdrawing Deposited Securities shall be responsible for the
following charges:
(i) taxes (including applicable interest and penalties) and other
governmental charges;
(ii) such registration fees as may from time to time be in effect for the
registration of Shares or other Deposited Securities on the share
register and applicable to transfers of Shares or other Deposited
Securities to or from the name of the Custodian, the Depositary or any
nominees upon the making of deposits and withdrawals, respectively;
<PAGE> 59
(iii) such cable, telex and facsimile transmission and delivery expenses as
are expressly provided in the Deposit Agreement to be at the expense of
the person depositing Shares or Holders and Beneficial Owners of ADSs;
(iv) the expenses and charges incurred by the Depositary in the conversion
of foreign currency;
(v) such fees and expenses as are incurred by the Depositary in connection
with compliance with exchange control regulations and other regulatory
requirements applicable to Shares, Deposited Securities, ADSs and ADRs;
and
(vi) the fees and expenses incurred by the Depositary in connection with the
delivery of Deposited Securities.
<PAGE> 60
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS 2
Section 1.1 ADS Record Date 2
Section 1.2 Affiliate 2
Section 1.3 American Depositary Receipt(s); Receipt(s); and ADR(s) 2
Section 1.4 American Depositary Share(s) 2
Section 1.5 Applicant 3
Section 1.6 Beneficial Owners 3
Section 1.7 Business Day 3
Section 1.8 Commission 3
Section 1.9 Company 3
Section 1.10 Custodian 3
Section 1.11 Deliver 3
Section 1.12 Deposit Agreement 3
Section 1.13 Depositary 3
Section 1.14 Deposited Securities 3
Section 1.15 Dollars 4
Section 1.16 DTC 4
Section 1.17 DTC Participant 4
Section 1.18 Exchange Act 4
Section 1.19 Foreign Currency 4
Section 1.20 Full Entitlement ADR(s), Full Entitlement ADS(s) and
Full Entitlement Share(s) 4
Section 1.21 Holder(s) 4
Section 1.22 National Securities Depository Limited and NSDL 4
Section 1.23 Partial Entitlement ADR(s), Partial Entitlement ADS(s)
and Partial Entitlement Share(s) 4
Section 1.24 Pre-Release Transaction 4
Section 1.25 Principal Office 4
Section 1.26 Registrar 5
Section 1.28 Restricted Securities 5
Section 1.30 Rupees and Rs. 5
Section 1.31 Securities Act 5
Section 1.32 Share Registrar 5
Section 1.33 Shares 5
Section 1.34 United States 6
ARTICLE II APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS; DEPOSIT OF
SHARES; EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS 6
Section 2.1 Appointment of Depositary. 6
Section 2.2 Form and Transferability of Receipts. 6
Section 2.3 Deposit with Custodian. 8
Section 2.4 Registration and Safekeeping of Deposited Securities. 9
Section 2.5 Execution and Delivery of Receipts. 10
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<TABLE>
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Section 2.6 Transfer, Combination and Split-up of Receipts 10
Section 2.7 Surrender of ADSs and Withdrawal of Deposited Securities. 11
Section 2.8 Limitations on Execution and Delivery, Transfer, etc. of
Receipts; Suspension of Delivery, Transfer, etc. 13
Section 2.9 Lost Receipts, etc. 14
Section 2.10 Cancellation and Destruction of Surrendered Receipts;
Maintenance of Records. 14
Section 2.11 Partial Entitlement ADSs. 14
ARTICLE III CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF ADSs 16
Section 3.1 Proofs, Certificates and Other Information 16
Section 3.2 Liability for Taxes and Other Charges 17
Section 3.3 Representations and Warranties on Deposit of Shares 17
Section 3.4 Compliance with Information Requests 18
Section 3.5 Ownership Restrictions. 18
ARTICLE IV THE DEPOSITED SECURITIES 19
Section 4.1 Cash Distributions 19
Section 4.2 Distribution in Shares 19
Section 4.3 [Intentionally omitted] 20
Section 4.4 Distribution of Rights to Purchase Additional ADSs 20
Section 4.5 Distributions Other Than Cash, Shares or Rights to
Purchase Shares 22
Section 4.6 Distributions with Respect to Deposited Securities
in Bearer Form 23
Section 4.7 Redemption 23
Section 4.8 Conversion of Foreign Currency 24
Section 4.9 Fixing of ADS Record Date 24
Section 4.10 Voting of Deposited Securities 25
Section 4.11 Changes Affecting Deposited Securities 27
Section 4.12 Available Information 28
Section 4.13 Reports 28
Section 4.14 List of Holders 28
Section 4.16 Taxation 28
ARTICLE V THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY 29
Section 5.1 Maintenance of Office and Transfer Books by the Registrar 29
Section 5.2 Exoneration 30
Section 5.3 Standard of Care 31
Section 5.4 Resignation and Removal of the Depositary; Appointment
of Successor Depositary 32
Section 5.5 The Custodian 32
Section 5.6 Notices and Reports 33
Section 5.7 Issuance of Additional Shares, ADSs etc 34
Section 5.8 Indemnification 35
</TABLE>
<PAGE> 62
<TABLE>
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Section 5.9 Fees and Charges of Depositary 36
Section 5.10 Pre-Release Transactions 36
Section 5.11 Restricted Securities Owners 37
ARTICLE VI AMENDMENT AND TERMINATION 37
Section 6.1 Amendment/Supplement 37
Section 6.2 Termination 38
ARTICLE VII MISCELLANEOUS 39
Section 7.1 Counterparts 39
Section 7.2 No Third-Party Beneficiaries 39
Section 7.3 Severability 39
Section 7.4 Holders and Beneficial Owners as Parties; Binding Effect 39
Section 7.5 Notices 40
Section 7.6 Governing Law and Jurisdiction 41
Section 7.7 Assignment 42
Section 7.8 Compliance with U.S. Securities Laws 42
Section 7.9 Titles and References 42
EXHIBITS
Exhibit A Form of Receipt
Exhibit B Fee Schedule
</TABLE>
<PAGE> 1
Exhibit 4.2
REDIFF.COM INDIA LIMITED
(INCORPORATED UNDER THE COMPANIES ACT 1956)
REGISTERED OFFICE, STERLING CENTRE, 4TH FLOOR, DR. ANNIE BESANT ROAD, WORLI
MUMBAI-400 018
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 upon each such share.
EQUITY SHARES EACH OF RS, 2/-
AMOUNT PAID UP PER SHARE RS, 2/-
Reg. Folio No. Certificate No.
Name(s) of Holder(s)
No. of Share(s) held
Distinctive No.(s)
Given under the Common Seal of the Company at BOMBAY this __ day of ___________
2000
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Director Director Authorized Signatory
Note: No transfer of shares comprised in this certificate will be registered
unless accompanied by this certificate.
<PAGE> 2
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MEMORANDUM OF TRANSFER OF SHARE(S) MENTIONED OVERLEAF
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DATE TRANSFER REGISTER NAME(S) OF TRANSFEREE(S) INITIALS AUTHORIZED
NO. FOLIO SIGNATORY
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</TABLE>
<PAGE> 1
EXHIBIT 4.3
REDIFF COMMUNICATION LIMITED
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AMENDED AND RESTATED SHAREHOLDERS' RIGHTS AGREEMENT
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Information and Inspection Rights........................................................2
1.1 Annual Financial Statements.......................................................2
1.2 Quarterly Financial Statements....................................................2
1.3 Monthly Financial Statements......................................................2
1.4 Annual Budget and Business Plan...................................................2
1.5 Additional Information............................................................3
1.6 Termination of Covenants..........................................................3
2. Registration Rights......................................................................3
2.1 Certain Definitions...............................................................3
2.2 Demand Registration...............................................................5
2.3 Company Registration..............................................................6
2.4 Expenses of Registration..........................................................7
2.5 Registration on Form F-3..........................................................7
2.6 Registration Procedures...........................................................8
2.7 Delay of Registration.............................................................9
2.8 Information by Holder.............................................................9
2.9 Rule 144 Reporting................................................................9
2.10 Transfer of Registration Rights..................................................10
2.11 Standoff Agreement...............................................................10
2.12 Termination of Registration Rights...............................................10
2.13 Allocation of Registration Opportunities.........................................10
3. Preemptive Rights.......................................................................11
3.1 General..........................................................................11
3.2 Right of First Refusal...........................................................11
3.3 Termination of Right of First Refusal...........................................12
4. Co-Sale Rights..........................................................................12
4.1 General..........................................................................12
4.2 Notice of Proposed Transfer......................................................12
4.3 Right to Participate.............................................................13
4.4 Qualified Participation..........................................................13
4.5 Deed of Adherence................................................................13
4.6 Restrictions Imposed by Transferee...............................................13
4.7 Continuing Rights................................................................13
4.8 Invalid Transfers................................................................13
4.9 Permitted Transferees............................................................13
4.10 Termination of Co-Sale Rights....................................................14
5. Company Covenants.......................................................................14
5.1 Employment Labor Laws............................................................14
5.2 Insurance........................................................................14
5.3 Resignation of Directors.........................................................14
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
5.4 Compliance with Environmental, Health and Safety Laws............................14
5.5 Share Certificates...............................................................14
5.6 Material Events..................................................................15
5.7 Force Majeure....................................................................15
5.8 Investor Consents................................................................15
5.9 Confidentiality..................................................................15
6. Miscellaneous...........................................................................16
6.1 Creation of Encumbrance on Equity Shares.........................................16
6.2 Additional Investors.............................................................16
6.3 Waivers and Amendments...........................................................16
6.4 Notices..........................................................................17
6.5 Descriptive Headings.............................................................17
6.6 Governing Law....................................................................17
6.7 Counterparts.....................................................................17
6.8 Expenses.........................................................................17
6.9 Successors and Assigns...........................................................17
6.10 Entire Agreement.................................................................17
6.11 Separability; Severability.......................................................17
6.12 Stock Splits.....................................................................17
6.13 Aggregation of Stock.............................................................17
7. Arbitration.............................................................................18
8. Termination.............................................................................18
9. Supercession............................................................................18
</TABLE>
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<PAGE> 4
REDIFF.COM INDIA LIMITED
AMENDED AND RESTATED SHAREHOLDERS'RIGHTS AGREEMENT
THIS AGREEMENT is made as of February ____, 2000, among Rediff.com India
Limited, formerly Rediff Communication Limited, a public company with limited
liability incorporated in the Republic of India (the "Company") and the holders
of the Company's equity shares (the "Shares") listed on Exhibit A hereto (each
either an "Investor" or "Promoter" as listed on Exhibit A hereto, and
collectively hereinafter referred to as "Shareholders").
RECITALS
WHEREAS, the Company the Shareholders have previously entered into
agreements governing the registration and other rights of the Shareholders in
the following nine agreements (collectively, the "Prior Agreements"):
1) Shareholders Agreement dated April 3, 1998 between the Company
and Draper-India International;
2) Share Agreement dated August 25, 1998 between the Company and
Intel Corporation;
3) Shareholder Agreement dated April 23, 1999 between the Company
and Queenswood Investments Limited;
4) Share Subscription Agreement dated December 28, 1999 between the
Company and Pacific Century Cyberworks India Private Limited;
5) Share Subscription Agreement dated December 28, 1999 between the
Company and Citicorp Finance (India) Limited;
6) Shareholder Agreement dated December 28, 1999 between the
Company and GE Capital Services India;
7) Promoters Agreement dated December 28, 1999 between the
Promoters and GE Capital Services India;
8) Promoters Agreement dated December 28, 1999 between the
Promoters and Citicorp Finance (India) Limited; and
9) Promoters Agreement dated December 28, 1999 between the
Promoters and Pacific Century Cyberworks India Private Limited.
WHEREAS, the parties desire to supercede and replace in their entirety
the Prior Agreements with the Agreement, which shall provide for certain rights
regarding registration of the Company's securities under the laws and
regulations of India ("Registration Rights"), certain preemptive rights
regarding the Company's equity offerings ("Preemptive Rights"), certain rights
to information ("Information Rights") and certain other rights and covenants
("Other Rights").
<PAGE> 5
NOW, THEREFORE, the parties agree as follows:
1. Information and Inspection Rights.
1.1 Annual Financial Statements. So long as a Shareholder (and
its affiliates) holds any equity shares of the Company, the Company will provide
to each Shareholder as soon as practicable after the end of each fiscal year,
and in any event within 90 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income, stockholders' equity and cash flows of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
United States generally accepted accounting principles ("GAAP") and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and all certified by an internationally recognized
public accounting firm.
1.2 Quarterly Financial Statements. So long as a Shareholder (and
its affiliates) holds any equity shares of the Company, the Company shall
provide such Shareholder as soon as practicable after the end of each quarter
and in any event within 30 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarter,
consolidated statements of income, and a consolidated statement of cash flow of
the Company and its subsidiaries for such period and for the current fiscal year
to date, and setting forth in each case in comparative form the figures for
corresponding periods in the previous fiscal year, and setting forth in
comparative form the budgeted figures for such period and for the current fiscal
year then reported, prepared in accordance with GAAP consistently applied with
prior practice for earlier periods (with the exception of footnotes that may be
required by GAAP and provided that the foregoing shall not restrict the right of
the Company to change its accounting principles consistent with GAAP, if the
Board of Directors determines that it is in the best interest of the Company to
do so), subject to changes resulting from year-end audit adjustments, all in
reasonable detail and signed by the principal financial or accounting officer of
the Company.
1.3 Monthly Financial Statements. So long as a Shareholder (and
its affiliates) holds at least three percent (3%) of the current outstanding
equity shares of the Company, the Company shall provide such Shareholder as soon
as practicable after the end of each month and in any event within 20 days
thereafter, a consolidated balance sheet of the Company and its subsidiaries, if
any, as of the end of each such month, consolidated statements of income, and a
consolidated statement of cash flow of the Company and its subsidiaries for such
period prepared in accordance with GAAP consistently applied with prior practice
for earlier periods (with the exception of footnotes that may be required by
GAAP and provided that the foregoing shall not restrict the right of the Company
to change its accounting principles consistent with GAAP, if the Board of
Directors determines that it is in the best interest of the Company to do so),
subject to changes resulting from audit adjustments, all in reasonable detail
and signed by the principal financial or accounting officer of the Company.
1.4 Annual Budget and Business Plan. So long as a Shareholder
(and its affiliates) holds any equity shares of the Company, the Company shall
provide, as soon as practicable, but in any event thirty (30) days prior to the
end of each fiscal year, a budget and business plan for the next fiscal year,
prepared on a monthly basis, including balance sheets and sources and
applications of
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<PAGE> 6
funds statements for such months, and as soon as prepared, any other budgets or
revised budgets prepared by the Company.
1.5 Additional Information. So long as a Shareholder (and its
affiliates) holds at least three percent (3%) of the current outstanding equity
shares of the Company, the Company will allow such Shareholder to visit and
inspect any of the properties of the Company (upon reasonable advance notice)
and will deliver or provide to such Shareholder with reasonable promptness, (i)
copies of all notices, minutes, consents and the like provided to the Board of
Directors of the Company, and (ii) such other information and data, including
access to books, records, officers and accountants, with respect to the Company
and its subsidiaries as any such Shareholder may from time to time reasonably
request; provided, however, that the Company shall not be obligated to provide
any information that it considers in good faith to be a trade secret, to contain
confidential or classified information or to conflict with its competitive
interests.
1.6 Termination of Covenants. The rights set forth in this
Section 1 shall terminate and be of no further force or effect upon the closing
of a public offering of the Company's securities pursuant to an effective
registration statement filed by the Company under the Securities Act of 1933, as
amended (the "Securities Exchange Act"), or on the date the Company otherwise
becomes subject to the reporting requirements under Section 13 or 15(d) of the
Securities Exchange Act, as amended, whichever first occurs; provided, however
that the Company shall be required to comply with the covenants in this Section
1 so long as it does not report pursuant to the reporting requirements of a
United States domestic corporation under Section 13 or 15(d) of the Securities
and Exchange Act.
2. Registration Rights.
2.1 Certain Definitions As used in this Section 2, the following
terms shall have the following respective meanings:
(a) "Affiliate" means with respect to any Person (the
"Specified Person"), any Person other than the Specified Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with the Specified Person. For purposes of this definition, the term
"control" when used with respect to any Person means the beneficial ownership,
directly or indirectly, of more than 25% of the voting securities of such
Person, or the ability to control the composition or the decisions of the Board
of Directors, or the possession of the power to direct or cause the direction of
the management and policies of such Person by virtue of the Articles of
Association or an Agreement or contract or otherwise. For purposes hereof, the
term "Person" includes any legal or natural person, partnership, firm, trust,
corporation, government or local municipality, department or other body (whether
corporate or unincorporated).
(b) "Commission" shall mean (i) with respect to U.S.
registration (as defined below) the United States Securities and Exchange
Commission or any other federal United States agency at the time administering
the Securities Act and (ii) with respect to an Indian registration (as defined
below), the Securities and Exchange Board of India or any successor agency.
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<PAGE> 7
(c) "Holder" shall mean the Investors holding Registrable
Securities or securities convertible or exercisable into Registrable Securities
and any person holding such securities to whom the rights under this Section 2
have been transferred in accordance with Section 2.11 hereof.
(d) "Initiating Holders" shall mean any Holder or Holders
who in the aggregate hold at least 30% of the Registrable Securities.
(e) "Participating Holders" shall mean any Holder or
Holders who propose to distribute their securities through a registration
pursuant to this Section 2.
(f) "Registrable Securities" means the equity shares
issued by the Company and any other securities issuable upon any stock split,
stock dividend, recapitalization, or similar event; provided however, with
respect to a U.S. registration that equity shares or other securities shall only
be treated as Registrable Securities for purposes of Section 2.3 hereof (A) if
and so long as they have not been sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (B)
prior to the date such securities have been sold or are all available for
immediate sale in the opinion of counsel to the Company in a transaction exempt
from the prospectus delivery requirements of the Securities Act so that all
transfer restrictions and legends with respect thereto are removed upon the
consummation of such sale.
(g) The terms "register," "registered" and "registration"
refer to (i) a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement (a "U.S. registration") or
(ii) a listing of any Registrable Securities, on either the National Stock
Exchange or the Stock Exchange, Mumbai in accordance with the by-laws, rules and
regulations of the appropriate stock exchance and the guidelines, rules and
regulations of the Commission (an "Indian registration").
(h) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Sections 2.2 and 2.3 hereof (but
excluding underwriting discounts and commissions).
(i) "Restricted Securities" shall mean the securities of
the Company required to bear a legend indicating that transfer is restricted in
the absence of registration.
(j) "Securities Act" shall mean (i) with respect to a U.S.
registration the United States Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time and (ii) with respect
to an Indian registration, the securities laws of India.
(k) "Selling Expenses" shall mean all underwriting
discounts, selling commissions and stock transfer taxes, if any, applicable to
the securities registered by the Holders.
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<PAGE> 8
2.2 Demand Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect a
registration, qualification or compliance with respect to shares of Registrable
Securities on either the Nasdaq National Market, the National Stock Exchange of
India or the Stock Exchange, Mumbai (the "Stock Exchanges"), the Company will
(1) within ten days of the receipt by the Company of such notice, give written
notice of the proposed registration, qualification or compliance to all other
Holders and (2) as soon as practicable (but within 120 days after receipt of the
request of the Initiating Holders), use its commercially reasonable best efforts
to effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable state securities laws and
appropriate compliance with applicable federal regulations and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within 20 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to take any action to effect
any such registration, qualification or compliance pursuant to this Section
2.2(a):
(i) Prior to the earlier of December 31, 2002; or six
(6) months after the effective date of any Indian law, regulation, or other
governmental order allowing the Company's equity shares to be offered to the
public on a Stock Exchange;
(ii) After the Company has effected two registrations
pursuant to this Section 2.2(a), which registrations have been declared or
ordered effective;
(iii) If the Company shall furnish to such Holders a
certificate signed by the Managing Director of the Company stating that in the
good faith judgment of the Board of Directors it would be detrimental to the
Company or its shareholders for a registration statement to be filed in the near
future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 2.2 shall be deferred for a period not to
exceed 120 days from the date of receipt of written request from the Initiating
Holders; provided, however, that the Company shall not exercise such right more
than once in any twelve-month period.
(b) Underwriting. In the event that a registration
pursuant to this Section 2.2 is for a registered public offering on a Stock
Exchange involving an underwriting, the Company shall so advise the Holders as
part of the notice given pursuant to Section 2.2(a). In such event, the right of
any Holder to registration pursuant to this Section 2.2 shall be conditioned
upon such Holder's participation in the underwriting arrangements required by
this Section 2.2, and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent requested shall be limited to the extent provided
herein.
(i) The Company shall, together with all Participating
Holders, enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company and
reasonably acceptable to a majority of the Participating
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<PAGE> 9
Holders. Notwithstanding any other provision of this Section 2.2, if the
managing underwriter advises the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement; provided,
however, that the number of shares of Registrable Securities to be included in
such underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting. No Registrable Securities excluded from
the underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
(ii) If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company, the managing underwriter and the
Initiating Holders. The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 90 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
2.3 Company Registration
(a) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights (other than
pursuant to Section 2.2 or 2.5 hereof), other than a registration relating
solely to employee benefit plans, or a registration relating to a corporate
reorganization or other transaction under Rule 145 of the Securities Act, or a
registration on any registration form that does not permit secondary sales, the
Company will:
(i) Promptly give to each Holder written notice
thereof; and
(ii) Use its commercially reasonable best efforts to
include in such registration (and any related qualification under blue sky laws
or oher compliance), except as set forth in Section 2.3 below, and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made by any Holder and received by the Company
within ten (10) days after the written notice of the Company described in clause
(i) above is mailed or delivered by the Company. Such written notice may specify
all or a part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the holders of securities of the Company with
registration rights to participate therein distributing their securities through
such underwriting) enter into an agreement with the underwriter or underwriters
selected by the Company.
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<PAGE> 10
Notwithstanding any other provision in this Section 2.3,
if the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in the registration and underwriting. The
Company shall so advise all holders of securities requesting registration and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in Section
2.13. If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(i) If shares are so withdrawn from the registration
or if the number of shares of Registrable Securities to be included in such
registration was previously reduced as a result of marketing factors, the
Company shall then offer to all persons who have retained the rights to include
securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so withdrawn,
with such shares to be allocated among the persons requesting additional
inclusion in accordance with Section 2.13 hereof.
2.4 Expenses of Registration. All Registration Expenses,
including the reasonable fees and expenses of one (1) special counsel to the
selling Holders, incurred in connection with registrations pursuant to Sections
2.2, 2.3 and 2.5 hereof shall be borne by the Company; provided, however, that
if the Holders bear the Registration Expenses for any registration proceeding
begun pursuant to Section 2.2 and subsequently withdrawn by the holders
registering shares therein, such registration proceeding shall not be counted as
a requested registration pursuant to Section 2.2 hereof. All Selling Expenses
relating to securities registered on behalf of the Holders shall be borne by the
holders of securities included in such registration pro rata with the Company
and among each other on the basis of the number of shares so registered.
2.5 Registration on Form F-3.
(a) After its initial public offering, the Company shall
use its best efforts to qualify for registration on Form F-3 or any comparable
or successor form or forms. After the Company has qualified for the use of Form
F-3, in addition to the rights contained in the foregoing provisions of this
Section 2, the Holders of Registrable Securities shall have the right to request
registrations on Form F-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or Holders), provided,
however, that the Company shall not be obligated to effect any such registration
if (i) the holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form F-3 at an aggregate price
to the public of less than $1,000,000, or (ii) in the event that the Company
shall furnish the certification described in paragraph 2.2(a)(iii) (but subject
to the limitations set forth therein) or (iii) in a given twelve-month period,
the Company has
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effected one (1) such registration in such period or (iv) it is to be effected
more than five (5) years after the Company's initial public offering.
(b) If a request complying with the requirements of
Section 2.6(a) hereof is delivered by the Company, the provisions of Sections
2.2(a)(1) and (2) hereof shall apply to such registration. If the registration
is for an underwritten offering, the provisions of Section 2.2(b) hereof shall
apply to such registration.
2.6 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 2,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement or equivalent thereof with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective
until the distribution described in the Registration Statement has been
completed;
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of Indian law with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Participating Holders and to the
underwriters of the securities being registered such reasonable number of copies
of the registration statement, preliminary prospectus, final prospectus and such
other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
(d) Use its commercially reasonable best efforts to
register and qualify the securities covered by such registration statement under
such other securities laws of such jurisdictions as shall be reasonably
requested by the Participating Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions, unless the Company is already subject to service in such
jurisdiction.
(e) In the event of any underwritten public offering on a
Stock Exchange, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Participating Holder at any time when a
prospectus relating thereto is required to be delivered under Indian law or upon
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
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<PAGE> 12
(g) Cause all securities covered by such registration
statement to be listed on at least one of the Stock Exchanges and for this
purpose enter into and perform its obligations under any listing agreement or
other agreement as may be required.
(h) Provide a transfer agent and registrar for all
securities covered by such registration statement.
(i) Furnish, at the request of any Participating Holder,
on the date that the securities are delivered to the underwriters for sale in
connection with a registration being sold through underwriters, (i) to the
extent customary with Indian practices, an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering on a Stock Exchange, addressed to the underwriters, if any, and to the
Participating Holders and (ii) to the extent customary with Indian practices, a
letter dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering on a Stock
Exchange, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
2.7 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.8 Information by Holder. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of any selling Holder that such holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
2.9 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the United States Securities and Exchange
Commission which may at any time permit the sale of the Restricted Securities to
the public without registration, after such time as a public market exists for
the equity shares of the Company, the Company agrees to use its commercially
reasonable best efforts to:
(a) Make and keep public information available, as those
terms are defined in Rule 144 under the Securities Act, at all times after the
effective date that the Company becomes subject to the reporting requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) File with the United States Securities and Exchange
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements);
(c) So long as a Shareholder owns any Restricted
Securities, upon request, (i) a written statement by the Company as to its
compliance with the reporting requirements of said
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<PAGE> 13
Rule 144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public in the United States), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company and (iii) such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as a
Shareholder may reasonably request in availing itself of any rule or regulation
of the United States Securities and Exchange Commission allowing a Shareholder
to sell any such securities without registration in the United States.
2.10 Transfer of Registration Rights. The rights to cause the Company to
register securities granted Holders under Sections 2.2 may be assigned (i) to a
transferee or assignee in connection with any transfer or assignment of
Registrable Securities by a Holder of not less than 10,000 equity shares (or any
lesser amount if all of such Holder's Registrable Securities are transferred or
assigned to a transferee) of Registrable Securities, or (ii) to any transferee
or assignee that is a constituent partner or an Affiliate of a Holder or the
estate of such constituent partner, or to any transferee or assignee who is a
family member of the Holder or a trust for the benefit of the Holder or any
family member of the Holder, provided that, with respect to each such transfer
or assignment, the Company be give a prior written notice of the transfer, the
transferee or assignee agree in writing to all provisions contained in this
Section 2 and that such transfer otherwise be effected in accordance with
applicable securities laws.
2.11 Standoff Agreement. Each Shareholder agrees in connection with the
Company's initial public offering of the Company's securities in the United
States, upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities (other than those included in the registration) without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed one hundred eighty (180) days) from
the effective date of such registration as may be requested by the underwriters.
2.12 Termination of Registration Rights. The rights granted under this
Section 2 shall terminate on the first to occur of (i) as to any Holder, at such
time as such Holder is able to offer for sale all of its Registrable Securities
within a given three-month period pursuant to Rule 144 of the Securities Act; or
(ii) as to any Holder, at such time as such Holder is able to convert its
Registrable Securities to American Depositary Shares which are listed on the
Nasdaq National Market pursuant to an effective registration statement filed
pursuant to the Securities Act.
2.13 Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and other shares of the Company with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registerable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and other selling stockholders requesting
inclusion of shares pro rata on the basis of the number of shares of
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<PAGE> 14
Registrable Securities and Other Shares that would be held by such Holders and
other selling stockholders; provided, however, that such allocation shall not
operate to reduce the aggregate number of Registrable Securities and Other
Shares to be included in such registration. If any Holder or other selling
stockholder does not request inclusion of the maximum number of shares of
Registrable Securities and Other Shares allocated to him pursuant to the
above-described procedure, the remaining portion of his allocation shall be
reallocated among those requesting Holders and other selling stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held be such
Holders and other selling stockholders, assuming conversion, and this procedure
shall be repeated until all of the shares of Registrable Securities and Other
Shares which may be included in the registration on behalf of the Holders and
other selling stockholders have been so allocated. The Company shall not limit
the number of Registrable Securities to be included in a registration pursuant
to this Agreement in order to include shares held by stockholders with no
registration rights or pursuant to any stock option plan or with respect to
registrations under Sections 2.2 or 2.5 hereof, in order to include in such
registration securities registered for the Company's own account.
3. Preemptive Rights.
3.1 General. Except for (i) securities issued pursuant to a
public offering pursuant to an effective registration statement under the
Securities Act, (ii) securities issued in connection with any stock split or
stock dividend of the Company, or (v) equity shares of the Company's issued to
the Promoters, employees, officers, or directors of, or contractors, consultants
or advisors to, the Company pursuant to stock purchase or stock option plans,
stock bonuses or awards, that are approved by the Company's Board of Directors,
the Company or any of the Company's subsidiaries will not, nor will it permit
any subsidiary to, authorize or issue any shares of stock of the Company or any
of the Company's subsidiaries of any class and will not authorize, issue or
grant any options, warrants, conversion rights or other rights to purchase or
acquire any shares of stock of the Company of any class without offering the
Shareholders the right of first refusal described below.
3.2 Right of First Refusal. Each Shareholder holding equity
shares of the Company shall have a right of first refusal to purchase an amount
of securities of the Company of any class or kind which the Company proposes to
sell in a non-registered private placement (other than the issuance of shares
contemplated by Section 3.1 above) ("Preemptive Securities") sufficient to
maintain such Shareholder's proportionate beneficial ownership interest in the
Company (on an as-converted, fully diluted basis). If the Company wishes to make
any such sale of Preemptive Securities, it shall give the Shareholders written
notice of the proposed sale. The notice shall set forth (i) the Company's bona
fide intention to offer Preemptive Securities and (ii) the material terms and
conditions of the proposed sale (including the number of shares to be offered
and the price, if any, for which the Company proposes to offer such shares), and
shall constitute an offer to sell Preemptive Securities to the Shareholders on
such terms and conditions. Any Shareholder may accept such offer by delivering a
written notice of acceptance (an "Acceptance Notice") to the Company within ten
(10) days after receipt of the Company's notice of the proposed sale. Any
Shareholder exercising its right of first refusal shall be entitled to
participate in the purchase of Preemptive Securities on a pro rata basis to the
extent necessary to maintain such Shareholder's proportionate beneficial
ownership
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<PAGE> 15
interest in the Company (such Shareholder's "Pro Rata Portion") (for
purposes of determining such Shareholder's Pro Rata Portion, any Shareholder or
other security holder shall be treated as owning that number of equity shares
into which any outstanding convertible securities may be converted and for which
any outstanding options may be exercised). The Company shall, in writing, inform
each Shareholder which elects to purchase its Pro Rata Portion of Preemptive
Securities of any other Shareholder's failure to do so, in which case the
Shareholders electing to purchase such shares of Preemptive Securities shall
have the right to purchase all of such shares on a pro rata basis. If any
Shareholder who elects to exercise its right of first refusal does not complete
the purchase of such Preemptive Securities within ten (10) days after delivery
of its Acceptance Notice to the Company, the Company may complete the sale of
Preemptive Securities on the terms and conditions specified in the Company's
notice within the ninety (90) day period following the expiration of such ten
(10) day period. If the Company does not enter into an agreement for the sale of
such shares within such ten (10) day period, or if such agreement is not
consummated within such ninety (90) day period, the right provided hereunder
shall be deemed to be revived and all future shares of Preemptive Securities
shall not be offered unless first re-offered to the Shareholders in accordance
with this Section 3. A Shareholder shall be entitled to apportion the right of
first refusal hereby granted among itself and its partners and affiliates in
such proportions it deems appropriate.
3.3 Termination of Right of First Refusal. The right of first
refusal granted under this Agreement shall terminate on the first to occur of
(i) as to any Holder, at such time as such Holder is able to offer for sale all
of its Registrable Securities within a given three-month period pursuant to Rule
144 of the Securities Act; or (ii) as to any Holder, at such time as such Holder
is able to convert its Registrable Securities to American Depositary Shares
which are listed on the Nasdaq National Market pursuant to an effective
registration statement filed pursuant to the Securities Act.
4. Co-Sale Rights.
4.1 General. Before any equity shares of the Company held by the
Promoters may be sold or otherwise transferred (the "Offered Securities") by the
Promoters (including transfer by gift, operation of law or other involuntary
transfer, such as divorce or death, but excluding on death a transfer to the
Promoter's Immediate Family as set forth in Section 4.9 below, but except in the
event there is a registration statement covering the proposed transfer), each
Investor holding the Company's equity shares shall have the right to participate
in any sale to the Proposed Transferee (as defined below) upon the same terms
and conditions as set forth in the Transfer Notice (as defined below), subject
to the terms and conditions set forth in this Section 4.
4.2 Notice of Proposed Transfer. Before the transfer of any
Offered Securities, the Promoters shall deliver to the Company and the Investors
a written notice (the "Transfer Notice") stating: (i) the Promoters' bona fide
intention to sell or otherwise transfer such Offered Securities; (ii) the name
of each proposed purchaser or other transferee (a "Proposed Transferee"); (iii)
the number of Offered Securities to be transferred to each Proposed Transferee;
and (iv) the bona fide cash price or other consideration for which the Promoter
proposes to transfer the Offered Securities (the "Offered Price").
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<PAGE> 16
4.3 Right to Participate. An Investor shall exercise its right by
delivering to the Promoters within ten (10) United States business days after
receipt of the Transfer Notice, written notice of its intention to participate,
specifying the number of shares Investor desires to sell to the Proposed
Transferee. At the closing of the transaction, Investor shall deliver one or
more certificates representing the number of equity shares which Investor elects
to sell hereunder, duly endorsed for transfer to the Proposed Transferee.
4.4 Qualified Participation. Each Investor shall have the right
to sell up to that number of equity shares equal to the product of (i) the
amount of Offered Securities multiplied by (ii) a fraction, the numerator of
which is the number of equity shares owned by such Investor on the date of the
Transfer Notice, and the denominator of which is the total number of equity
shares owned by the Promoters, plus their Permitted Transferees pursuant to
Section 4.9 hereof, plus the total number of equity shares owned by the
Investors as a group. In the event that Proposed Transferee desires to purchase
a number of equity shares different from the amount of the Offered Securities,
the amount that the Proposed Transferee desires to purchase shall be substituted
for Offered Securities in the above equation for the purpose of determining each
Investor's participation rights. In the event of Investor participation, the
Promoters shall include such Investor equity shares in the sale at the
consummation of the sale of the Offered Securities.
4.5 Deed of Adherence. A sale to a Proposed Transferee will be
valid only if such Proposed Transferee executes a Deed of Adherence in the form
attached hereto in Exhibit B.
4.6 Restrictions Imposed by Transferee. To the extent that any
Proposed Transferee prohibits such assignment or otherwise refuses to purchase
equity shares from any Investor exercising its rights of co-sale hereunder, the
Promoters shall not sell to the Proposed Transferee any equity shares unless and
until, simultaneously with such sale or transfer, the Promoters shall purchase
such Shares from Investor on the same terms and conditions specified in the
Transfer Notice.
4.7 Continuing Rights. The exercise or non-exercise of the right
to participate hereunder with respect to a particular sale by a Promoter shall
not adversely affect any Investor's right to participate in subsequent sales by
the Promoters pursuant to this Section 4.
4.8 Invalid Transfers. Any sale, assignment or other transfer of
Offered Securities by the Promoters contrary to the provisions of this Section 4
hereof shall be null and void, and the transferee shall not be recognized by the
Company as the holder or owner of the Offered Securities sold, assigned, or
transferred for any purpose (including, without limitation, voting or dividend
rights), unless and until the Promoters have satisfied the requirements of this
Section 4 with respect to such sale. The Promoters, as the case may be, shall
provide the Company and the Investors with written evidence that such
requirements have been met or waived prior to consummating any sale, assignment
or other transfer of equity shares, and no equity shares shall be transferred on
the books of the Company until such written evidence has been received by the
Company and the Investors.
4.9 Permitted Transferees. The participation rights set forth in
Sections 3 and 4 above shall not apply to (i) any pledge of the Company's equity
shares made by the Promoters which creates a mere security interest; (ii) the
transfer to the Promoters' relatives by blood, marriage or adoption
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<PAGE> 17
(each a member of the Promoters' "Immediate Family"); (iii) the transfer to a
trust established by the Promoters for the benefit of one or more members of the
Promoters' Immediate Family; or (iv) the transfer of shares currently held by an
individual Promoter to another Promoter that was approved by the Company's Board
of Directors, which approval shall not be unreasonably withheld, provided in
each case that the recipient of such equity shares shall receive and hold such
equity shares so transferred subject to the provisions of this Agreement.
4.10 Termination of Co-Sale Rights. The rights granted under this
Section 4 shall terminate on the first to occur of (i) the consummation of the
initial public offering of the Company's securities pursuant to a effective
registration statement filed under Indian law for a offering of the Company's
securities on a Stock Exchange; (ii) as to any Holder, at such time as such
Holder is able to offer for sale all of its Registrable Securities within a
given three-month period pursuant to Rule 144 of the Securities Act; (iii) as to
any Holder, at such time as such Holder is able to convert its Registrable
Securities to American Depositary Shares which are listed on the Nasdaq National
Market pursuant to an effective registration statement filed pursuant to the
Securities Act; or (iii) the occurrence of the merger or consolidation of the
Company into, or the sale of all or substantially all of the Company's assets to
another corporation, unless the shareholders of the Company shall own at least
51% of the capital stock of such other corporation immediately after such
merger, consolidation or sale.
5. Company Covenants.
5.1 Employment Labor Laws. The Company shall observe on a
continuing basis all applicable laws relating to child labor, acceptable work
conditions, minimum wages, work hours, occupational health and safety,
applicable to the business in which the Company is engaged. The Company shall
not use forced labor or prevent employees from lawfully exercising their right
of free association and to organize and bargain collectively.
5.2 Insurance. The Company shall maintain in full force and
effect, public liability and other insurance cover in respect of all its assets
in accordance with sound commercial practice for the business in which the
Company is engaged.
5.3 Resignation of Directors. The Company hereby confirms that in
accordance with the provisions of its Articles of Association resignation by any
director appointed by the Investors is not required to be approved by the Board
of Directors for the same becoming effective.
5.4 Compliance with Environmental, Health and Safety Laws. The
Company shall comply on a continuing basis with the provisions of all Indian
environmental, health and safety laws, rules and regulations and the
environmental standards promulgated by the World Bank from time to time as
applicable to the business in which the Company is engaged, and shall, upon
request, furnish to the Investors a certificate to that effect within 15 days of
the end of each calendar year.
5.5 Share Certificates. The Company shall issue share
certificates in such lots, as may be required by the Investors, and shall agree
to sub-divide or consolidate the same at any time, if required by the Investors,
without payment of any fee.
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5.6 Material Events. The Company shall inform the Investors
promptly of all material events such as labor strikes, lockouts, shutdowns,
fires or other similar events reasonably likely to have a material adverse
affect on the operations of the Company.
5.7 Force Majeure. The Company shall promptly inform the
Investors of any loss or damage that the Company may suffer due to any force
majeure circumstances or act of God, such as earthquake, flood, tempest or
typhoon, against which the Company may not have insured its properties.
5.8 Investor Consents. So long as the equity shares of the
Company are not traded on either the Nasdaq National Market or a Stock Exchange,
the Company, without the written consent of a majority of the equity shares then
held by the Investors, shall not:
(a) pay any commission to its promoters, directors,
managers or other persons for furnishing guarantees, counter guarantees or
indemnities or for undertaking any other liability in connection with any
financial assistance obtained for or to the Company.
(b) undertake any new project, diversification
modernization or substantial expansion of its existing projects, The word
"substantial" shall have the same meaning as under the Industries (Development
and Regulation) Act, 1951.
(c) issue any debentures, raise any loans, accept deposits
from public, issue equity or preference capital, change its capital structure or
create any charge on its assets or give any guarantees. This provision shall not
apply to normal trade guarantees or temporary loans and advances granted to
staff or contractors or suppliers in the ordinary course of business or to
raising of unsecured loans, overdrafts, cash credit or other facilities from
bank in the ordinary course of business. Additionally, the Company shall not
sanction any loans to any of its Directors or to any persons having substantial
managerial powers.
5.9 Confidentiality. The terms and conditions of this Agreement,
including its existence, shall be considered confidential information and shall
not be disclosed by any party hereto to any third party, except in accordance
with the provisions set forth below:
(a) Press Releases. Within 60 (sixty) days of the
Effective Date, the Company may issue a press release disclosing that an
Investor has agreed to invest in the Company, provided that the release does not
disclose any of the terms of this Agreement and is approved in advance and in
writing by such Investor. No announcement regarding any Investor in a press
release, conference, advertisement, announcement, professional or trade
publication, mass marketing materials or otherwise to the general public, may be
made without such Investor's prior written consent.
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(b) Permitted Disclosures. Notwithstanding the foregoing,
(i) any party may disclose any of the terms of this Agreement to its current or
bona fide prospective investors, employees, investment bankers, lenders,
accountants and attorneys, in each case, only where such persons or entities are
under appropriate nondisclosure obligations; (ii) any party may disclose (other
than in a press release or other public announcement described above) solely the
fact that an Investor is an investor in the Company to any third parties without
the requirement of consent of any other party or nondisclosure obligations; and
(iii) an Investor may disclose its investment in the Company and the terms of
this Agreement to third parties or to the public at its sole discretion and, if
it does so, the Company shall have the right to disclose to third parties any
such information disclosed in a press release or other public announcement by an
Investor.
(c) Legally Compelled Disclosure. In the event that any
party is requested or becomes legally compelled (including without limitation,
pursuant to any security laws and regulations) to disclose the existence of this
Agreement or any of the terms hereof in contravention of the foregoing
provisions, such party (the "Disclosing Party") shall provide to the other
parties ("Nondisclosing Parties") with prompt written notice of the fact so that
the appropriate party may seek (with the cooperation and reasonable efforts of
the other parties) a protective order, confidential treatment or other
appropriate remedy. In such event, the Disclosing Party shall furnish only that
portion of the information which is legally required and shall exercise
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded such information to the extent reasonably requested by any
Nondisclosing Party.
6. Miscellaneous.
6.1 Creation of Encumbrance on Equity Shares. Unless otherwise
permitted by this Agreement, no Shareholder shall be entitled to pledge,
hypothecate, create a charge or encumbrance or otherwise create any security,
interest or lien, either directly or indirectly, in any manner, on all or any of
its equity shares in the Company.
6.2 Additional Investors. Additional Shareholders may be added to
this Agreement and such Shareholders may become party to this Agreement, upon
execution and delivery to the Company of signature pages hereto.
6.3 Waivers and Amendments. With the written consent of the
record or beneficial holders of the equity shares then held by the Investors,
the rights and obligations of the Company and the holders of Registrable
Securities under this Agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely), and with the same consent, the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however, that no such consent shall be required for the purpose of
adding to this Agreement a Shareholder pursuant to Section 6.2. This Agreement
or any provision hereof may be changed, waived, discharged or terminated only by
a statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, except to the extent
provided in this Section 6.3.
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6.4 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, except as otherwise noted herein,
shall be deemed effectively given upon personal delivery, delivery by an
internationally recognized courier or forty-eight (48) hours after being
deposited with the Post Office, (by registered mail, postage prepaid) addressed:
(a) if to the Company, at Sterling Center, 4th Floor, Dr. Annie Besant Road,
Worli, Mumbai, 400 018 India (or at such other address as the Company shall have
furnished to the Holders in writing) attention of President and (b) if to a
Holder, at the latest address of such person shown on the Company's records.
6.5 Descriptive Headings. The descriptive headings herein have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.
6.6 Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Republic of India.
6.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument, but only one of which
need be produced.
6.8 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
6.9 Successors and Assigns. Except as otherwise expressly
provided in this Agreement, this Agreement shall benefit and bind the
successors, assigns, heirs, executors and administrators of the parties to this
Agreement.
6.10 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter of this Agreement.
6.11 Separability; Severability. Unless expressly provided in
this Agreement, the rights of each Shareholder under this Agreement are several
rights, not rights jointly held with any other Shareholder. Any invalidity,
illegality or limitation on the enforceability of this Agreement with respect to
any Shareholder shall not affect the validity, legality or enforceability of
this Agreement with respect to the other Shareholder. If any provision of this
Agreement is judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired.
6.12 Stock Splits. All references to numbers of equity shares in
this Agreement shall be appropriately adjusted to reflect any stock dividend,
split, combination or other recapitalization of shares by the Company occurring
after the date of this Agreement.
6.13 Aggregation of Stock. All equity shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
-17-
<PAGE> 21
7. Arbitration. In the event a dispute arises in connection with the
interpretation or implementation of this Agreement, the parties shall attempt in
the first instance to resolve such dispute through friendly consultations. If
the dispute is not resolved through friendly consultations within sixty (60)
days after commencement of discussions or such longer period as the parties
agree to in writing, then either party may refer the dispute for resolution by
arbitration in accordance with the Arbitration and Conciliation Act, 1996 as
follows:
(a) All proceedings in any such arbitration shall be
conducted in English. The venue of the arbitration proceedings shall be Mumbai,
India.
(b) There shall be three (3) arbitrators, all of whom
shall be fluent in English a majority of the equity shares then held by the
Investors and the Promoters shall each appoint one arbitrator and the appointed
arbitrators shall appoint the third arbitrator who shall serve as the presiding
arbitrator.
(c) The arbitration award shall be final and binding on
the parties, and the parties agree to be bound thereby and to act accordingly.
(d) The panel may, (but shall not be required to), award
to a party that substantially prevails on merits, its costs and reasonable
expenses (including reasonable fees of its counsel).
(e) When any dispute is under arbitration, except for the
matters under dispute, the parties shall continue to exercise their remaining
respective rights and fulfill their remaining respective obligations under this
Agreement.
8. Termination. The Agreement shall terminate with regard to a
Shareholder who transfers all its shares and no longer holds any equity shares
of the Company.
9. Supercession. Upon the completion of a public offering of its
securities by the Company in the United States, this Agreement shall amend and
restate in their entirety, the Prior Agreements; provided, however that any
representations (but not covenants) made by the Company and the Promoters in the
Prior Agreements shall survive and not be amended and restated hereby.
10. Transferability of Equity Securities. Each of the Investors may
transfer any or all of the equity securities of the Company that it owns to an
Affiliate (which in turn may transfer any or all of those securities to another
Affiliate of such Investor), and such transfers shall not be subject to the
participation rights set forth in Sections 3 and 4 hereof.
-18-
<PAGE> 22
The foregoing Agreement is hereby executed as of the date first above
written.
REDIFF COMMUNICATION LIMITED
By: /s/ AJIT BALAKRISHNAN
-----------------------------------
Name: Ajit Balakrishnan
---------------------------------
Title:
--------------------------------
THE PROMOTERS: /s/ AJIT BALAKRISHNAN
---------------------------------------
Ajit Balakrishnan
/s/ AJIT BALAKRISHNAN
---------------------------------------
Rediffusion Advertising Private Limited
/s/ ARUN NANDA
---------------------------------------
Diwan Arun Nanda
[SIGNATURE PAGE TO AMENDED AND RESTATED SHAREHOLDERS' RIGHTS AGREEMENT]
<PAGE> 23
THE INVESTORS: Draper India International
By: /s/ WILLIAM H. DRAPER, III
-----------------------------------
Name: William H. Draper, III
---------------------------------
Title:
--------------------------------
Queenswood Investments Limited
By: /s/ DALIP PATHAK
-----------------------------------
Name: Dalip Pathak
---------------------------------
Title: Director
--------------------------------
Intel Corporation
By: /s/ NOEL LAZO
-----------------------------------
Name: Noel Lazo
---------------------------------
Title: Assistant Treasurer
--------------------------------
Pacific Century Cyberworks (India)
Limited
By: /s/ MICHAEL CHUNG
-----------------------------------
Name: Michael Chung
---------------------------------
Title: Director
--------------------------------
Citicorp. Finance (India) Limited
By: /s/ S. VENKATACHALAN
-----------------------------------
Name: S. Venkatachalan
---------------------------------
Title: Director
--------------------------------
GE Capital Services India
By: /s/ KISLAY KUMAR KANTH
-----------------------------------
Name: Kislay Kumar Kanth
---------------------------------
Title: AVP (Equity Group)
--------------------------------
[SIGNATURE PAGE TO AMENDED AND RESTATED SHAREHOLDERS' RIGHTS AGREEMENT]
<PAGE> 24
EXHIBIT A
SCHEDULE OF SHAREHOLDERS
<TABLE>
<CAPTION>
Type of Shareholder Number of Pre-SplitShares
------------------- -------------------------
<S> <C>
Investors:
- ----------
Draper-India International 1,100,000
Intel Corporation 322,500
Queenswood Investments Limited 681,500
Citicorp Finance (India) Limited 240,900
Pacific Century Cyberworks (India) 265,000
Limited
GE Capital Services India 265,000
Promoters:
- ----------
Ajit Balakrishnan 550,095
Rediffusion Advertising Private
Limited 1,100,001
Diwan Arun Nanda 550,100
Total 4,810,096
</TABLE>
<PAGE> 25
EXHIBIT C
DEED OF ADHERENCE
This Deed of Adherence is made this ____day of ________, ____.
BETWEEN
____________, hereinafter called "the Covenantor" which expression
shall, unless repugnant to the meaning or context thereof be deemed to include
its successors and permitted assigns) to whom the Shares of ____________
(hereinafter referred to as "the Company") have been transferred by ____________
("the Transferor");
AND
The Company
AND
____________, ("the Continuing Shareholders").
THIS DEED IS SUPPLEMENTAL to the Shareholders Agreement ("the
Agreement") made the _________day of ____________, 1999 between the Transferor,
the Company, and the Continuing Shareholders.
NOW THEREFORE THIS DEED OF ADHERENCE WITNESSETH AS FOLLOWS:
In consideration of the Transferor having transferred its Shares to the
Covenantor and in consideration of having agreed to such transfer, the
Covenantor hereby agrees and undertakes as follows:
1. The Covenantor hereby confirms that a copy of the Agreement and the
Articles of Association of the Company have been made available to it and hereby
covenants with the Continuing Shareholders and the Company to observe, perform
and be bound by all the terms, obligations, rights and liabilities which are
capable of applying to the Covenantor and the Covenantor shall be deemed to be a
Shareholder with effect from the date on which the Covenantor is registered as a
member of the Company to be a Party to the Agreement and to be a shareholder.
<PAGE> 26
2. The Covenantor hereby covenants that it shall do nothing that
derogates from the provisions of the Agreement or the Articles of Association.
3. The Covenantor undertakes with the Transferor that he will enter into
such affairs which the Transferor may have entered into and shall use its
reasonable endeavors to obtain the Transferor's release therefrom as soon as
reasonably practicable. Until such release is obtained, the Covenantor
undertakes to indemnify the Transferor and keep the Transferor fully and
effectively indemnified against all liabilities that the Transferor may incur in
respect of such guarantees or indemnities.
This Deed of Adherence shall be governed in all respects by the laws of
India. Executed as a DEED the day and year first before written.
For the Covenantor
- ------------------------------
By:
Title:
For the Transferor
- ------------------------------
By:
Title:
For the Continuing Shareholders
- ------------------------------
By:
Title:
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
Rediff.com India Limited
- --------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION PLAN 1999 ("ESOP")
CONTENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NO. PARTICULARS PAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
I. INTRODUCTION 1
- --------------------------------------------------------------------------------
II. DEFINITIONS 2
- --------------------------------------------------------------------------------
III. OBJECTIVES 3
- --------------------------------------------------------------------------------
IV. ESOP FEATURES 4
- --------------------------------------------------------------------------------
V. ELIGIBLE PERSONS 5
- --------------------------------------------------------------------------------
VI. ESOP COMMITTEE 6
- --------------------------------------------------------------------------------
VII. WARRANTS 8
- --------------------------------------------------------------------------------
VIII. EQUITY SHARES 12
- --------------------------------------------------------------------------------
IX. EXIT MECHANISM 13
- --------------------------------------------------------------------------------
X. VARIATION OF TERMS OF ESOP 14
- --------------------------------------------------------------------------------
XI. APPLICABLE LAWS 15
- --------------------------------------------------------------------------------
XII. REPRESENTATION 16
- --------------------------------------------------------------------------------
XIII. ILLUSTRATION 17
- --------------------------------------------------------------------------------
XIV. SPECIMEN LETTER FOR APPLICATION FOR EQUITY SHARES 19
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
- --------------------------------------------------------------------------------
Rediff.com India Limited
- --------------------------------------------------------------------------------
I. INTRODUCTION
1.1 This Document explains the SCHEME called the "EMPLOYEE STOCK OPTION PLAN
1999" ("ESOP ") formulated by REDIFF.COM INDIA LIMITED for the grant of
Stock Options in the form of warrants to enable its eligible employees
and directors to subscribe to the Equity Shares in the company.
1.2 Every person who is eligible to participate in the ESOP does so subject
to the provisions contained in this Scheme.
1.3 Rediff.com India Limited is a company currently engaged in online
Services including E-Commerce Services.
1
<PAGE> 3
II. DEFINITIONS
The following definitions apply throughout this Plan :
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
NO. TERMS DEFINITIONS
--------------------------------------------------------------------------
<S> <C> <C>
1. ESOP Employee Stock Option Plan of 1999 formulated by
the Company
--------------------------------------------------------------------------
2. COMPANY REDIFF.COM INDIA LIMITED, a company formed and
registered under the Companies Act, 1956 and
whose shares are being offered to the EMPLOYEES
as Stock Options under this Scheme
--------------------------------------------------------------------------
3. EMPLOYEES All the Eligible EMPLOYEES and DIRECTORS of the
COMPANY, as defined in Para V of this Scheme
--------------------------------------------------------------------------
4. WARRANTS The WARRANTS issued by the COMPANY to the
EMPLOYEES to enable the holders to subscribe to
the EQUITY SHARES of the COMPANY in future at a
predetermined price
--------------------------------------------------------------------------
5. ESOP COMMITTEE A Committee comprising of some of the Directors
of the COMPANY constituted for the purposes of
ESOP
--------------------------------------------------------------------------
6. EQUITY SHARE Equity Share in the COMPANY of the Face Value
(Par Value) of Rs. 10 each or where the Equity
Share of the COMPANY has been split up into a
Par Value of less than Rs. 10, then the
equivalent number of equity shares for the
revised Par Value per Share.
--------------------------------------------------------------------------
</TABLE>
2
<PAGE> 4
III. OBJECTIVES OF ESOP
The following are the objectives of this ESOP :
- as a part of employee Remuneration
- to reward employees for their contributions - a performance-linked
bonus
- to encourage employees to contribute their best
- to attract capable people
- to retain capable employees
- to enhance Employees' wealth
- to give co-ownership to employees
- to reward Directors
3
<PAGE> 5
IV. ESOP FEATURES
4.1 In this Paragraph, a broad overview of the ESOP is given and each of the
features is explained in detail later on. The basic features of the ESOP
are as follows :
(a) The ESOP is instituted with effect from April 12, 1999.
(b) An ESOP COMMITTEE has been constituted to determine the EMPLOYEES
eligible for the ESOP, the number of warrants be allotted to those
EMPLOYEES and other related matters.
(c) The COMPANY has created certain number of WARRANTS for issue to the
EMPLOYEES.
(d) These WARRANTS would be allotted from time to time by the COMPANY to
the eligible EMPLOYEES as per the decision of the ESOP COMMITTEE.
(e) One WARRANT would entitle the Warrant Holder to subscribe to TWENTY-
FIVE EQUITY SHARES in the COMPANY. Provided however that if the
EQUITY SHARE of the COMPANY is split up into a face (par) value of
less than Rs. 10, then the EMPLOYEE would be entitled to the
equivalent number of EQUITY SHARES of the revised face (par) value
per Share. For example, if the Company's equity share of the face
value of Rs. 10 is split up into a share of the face (par) value of
Rs. 5, then the entitlement to the number of equity shares of Rs. 5
each would be 50 per WARRANT.
(f) The WARRANT Certificate would specify the timing for exercising the
WARRANT , i.e., for subscribing to the EQUITY SHARES in the COMPANY
and the other terms and conditions.
(g) The EQUITY SHARES would be issued on the terms and conditions
specified later on in this Scheme.
4
<PAGE> 6
V. ELIGIBLE PERSONS
5.1 All present and future permanent employees of the COMPANY or of its
Subsidiary Companies or Holding Companies are eligible to participate in
the ESOP.
5.2 All present and future directors of the COMPANY, or of its Subsidiary
Companies or Holding Companies are eligible to participate in the ESOP,
unless they are prohibited to participate in the ESOP under any law or
regulations for the time being in force.
5.3 All the above-mentioned persons who are eligible to participate in the
ESOP are for the sake of brevity referred to as "the EMPLOYEES" or "the
EMPLOYEE", as the case may be.
5
<PAGE> 7
VI. ESOP COMMITTEE
6.1 For the effective implementation and monitoring of the ESOP, the Board
of Directors of the COMPANY has been authorised to constitute an ESOP
COMMITTEE. The Board of Directors has, in its absolute discretion, power
to change the composition of the ESOP COMMITTEE from time to time.
Accordingly, the Board of Directors of the COMPANY has constituted an
ESOP COMMITTEE consisting of the Chief Executive Officer of the COMPANY
and Two Independent Directors.
6.2 The ESOP COMMITTEE would decide the criteria for selecting the EMPLOYEES
who would be eligible for allotment of the WARRANTS. Further, the ESOP
COMMITTEE would select from time to time the EMPLOYEES to whom the
WARRANTS should be allotted and determine the number of WARRANTS to be
allotted to them. The ESOP COMMITTEE may decide to allot different
number of WARRANTS to different EMPLOYEES or to different categories of
EMPLOYEES. The ESOP COMMITTEE may decide to allot the WARRANTS to a Team
of employees to encourage team spirit, in which event the allocation of
the WARRANTS among the team members would be made in accordance with the
principles laid down/approved by the ESOP COMMITTEE. The decision of the
ESOP COMMITTEE would be final and binding.
6.3 The major Criteria involved in selection of the Eligible EMPLOYEES would
include the following factors :
EMPLOYEES in key functional areas
Managerial Cadre
Past Service / Performance
Current Performance Evaluation
Expected Future Performance / Contribution
Minimum years of Future Service
6.4 The ESOP COMMITTEE shall also frame suitable policies and systems to
ensure that there is no violation of:
a) Securities and Exchange Board of India (Insider Trading)
Regulations,1992; and
b) Securities and Exchange Board of India (Prohibition of Fraudulent
and Unfair Trade Practices relating to the Securities Market)
Regulations,1995, by any EMPLOYEE.
6
<PAGE> 8
6.5 With respect to any matters that are not specifically provided for, the
ESOP COMMITTEE shall have absolute discretion to decide such matters in
the manner deemed fit by it in the best interest of the EMPLOYEES, and
any such decision of the ESOP COMMITTEE shall be binding on all the
EMPLOYEES.
7
<PAGE> 9
VII. WARRANTS
7.1(a) The COMPANY has created WARRANTS for ESOP, with the rights and
conditions attached to them as specified in the Scheme.
(b) The total number of WARRANTS to be issued by the COMPANY to the
EMPLOYEES are 5,600 (five thousand six hundred ) WARRANTS entitling
the WARRANT Holders to subscribe to 1,40,000 (one hundred forty
thousand only) EQUITY SHARES.
(c) The COMPANY has also authorised the Board of Directors of the COMPANY
to issue and allot, in addition to the WARRANTS mentioned above, such
number of further WARRANTS to its EMPLOYEES, at such Exercise Price
and on such other terms and conditions, as the Board of Directors may,
in its absolute discretion decide, subject to compliance with the
applicable laws.
(d) Simultaneously, with the institution of the ESOP, the COMPANY has
decided to institute ASSOCIATE STOCK OPTION PLAN 1999 (hereinafter
referred to as "THE ASOP"), for the purpose of encouraging various
associates of the COMPANY, such as vendors, consultants, etc., to
contribute their best for the growth of the COMPANY as well as to
reward those who assist the COMPANY in its growth. Under the ASOP, the
COMPANY has decided to allot 3,960 WARRANTS to the associates which
would entitle them to subscribe to 99,000 (NINETY NINE THOUSAND)
EQUITY SHARES.
7.2 The existing issued and paid-up capital of the COMPANY consists of
3,622,700 EQUITY SHARES of the face (par) value of Rs.10 each. The
EQUITY SHARES aggregating to 1,40,000 to be issued under the ESOP
would constitute 3.63 % of the Capital of the COMPANY and the 99,000
EQUITY SHARES to be issued under the ASOP would constitute 2.56 % of
the Capital of the COMPANY, after considering the issue of the
additional EQUITY SHARES under the ESOP and the ASOP.
7.3 The COMPANY reserves the right to issue / earmark further EQUITY
SHARES/WARRANTS, at its discretion, for the purposes of the ESOP
and/or the ASOP, subject to compliance with the applicable laws.
7.4 Each Warrant will specify the Exercise Price, i.e., the price per
share to be paid by the WARRANT Holder to the COMPANY for subscribing
to the EQUITY SHARES which his WARRANT entitles him to.
The Exercise Price for the WARRANTS will be decided by the ESOP
Committee at the time of allotment of the WARRANTS. The Exercise Price
will be at or around the Fair Market Value of the Equity Shares at
that time.
8
<PAGE> 10
Provided However That, in respect of the further WARRANTS which may be
issued by the Board of Directors of the COMPANY under the authorisation
given by the COMPANY as mentioned in Para 7.1(c) above, the Board of
Directors will have the absolute discretion to determine the Exercise
Price.
7.5 The COMPANY would, on the basis of the decision of the ESOP COMMITTEE,
allot from time to time the WARRANTS (also known as "GRANT OF OPTION")
to the eligible EMPLOYEES, without any consideration, along with a
covering letter.
7.6 Each WARRANT would grant an OPTION, i.e., entitle the WARRANT Holder, to
subscribe to 25 (TWENTY FIVE ) EQUITY SHARES at the Exercise Price.
However, the WARRANT Holder is not obliged to exercise the Option.
7.7 Every WARRANT will have the minimum and the maximum time for exercising
the option under the WARRANT. Once the minimum holding period for the
WARRANT is over, the WARRANT Holder would become eligible for exercising
the Option granted to him (also known as "VESTING OF THE OPTION"), i.e.,
he would be entitled to subscribe to the EQUITY SHARES.
At the time of allotment of the WARRANT, the COMPANY would specify, in
accordance with the ESOP, the Minimum Holding Period (also known as "THE
MINIMUM EXERCISE PERIOD" or "THE VESTING PERIOD ") for each WARRANT,
i.e., the time period after which the WARRANT Holder would be eligible
for exercising the option.
The WARRANT Holder shall be entitled to exercise 25% of the WARRANTS
allotted to him after every 12 months and the first exercise period
shall commence 12 months after the date of the allotment of the WARRANTS
to him. Thus, every time an EMPLOYEE has been allotted WARRANTS, he will
be entitled to exercise the option over a minimum period of FOUR years
and 25% each year.
Provided However That, in respect of all the WARRANTS which have yet not
been issued and / or exercised or such of these WARRANTS as may be
selected by the Board of Directors of the COMPANY, the Board of
Directors is authorised, in its absolute discretion, to prescribe no
minimum holding period (i.e., vesting period) or a lesser holding
period, for exercise of the WARRANTS.
7.8 The Maximum Period for exercising the option would be 5 years from the
date of allotment of the WARRANT and the WARRANT allotted to an EMPLOYEE
would lapse if it is not exercised by him within the maximum period of 5
years from the date of its allotment to him.
7.9 Once WARRANTS become vested in an EMPLOYEE, he may exercise the Option
under different WARRANTS at various points of time within the Maximum
Period for exercising the option. However, he must exercise the Option
under a particular WARRANT (for 25 EQUITY SHARES) at one time.
9
<PAGE> 11
7.10 If any Bonus and / or Rights Shares are issued by the COMPANY or the
EQUITY SHARES of the COMPANY are split up reducing the face (par) value
per share, then the Board of Directors of the COMPANY would, on the
recommendations of the ESOP COMMITTEE, make a fair and reasonable
adjustment to the number of outstanding WARRANTS and / or to the
exercise price.
Similarly, if the COMPANY takes any action which in the opinion of the
ESOP COMMITTEE requires any adjustment to the number of outstanding
WARRANTS and / or the exercise price, then Board of Directors of the
COMPANY would, on the recommendations of the ESOP COMMITTEE, make a fair
and reasonable adjustment to the number of outstanding WARRANTS and / or
to the exercise price.
7.11 The WARRANTS granted to an EMPLOYEE shall not be transferable to any
person.
7.12 No person other than the EMPLOYEE to whom the WARRANTS are allotted
shall be entitled to exercise the Option, except in the circumstances
provided hereinafter.
7.13 The EMPLOYEE to whom the WARRANTS are allotted shall not be entitled to
pledge, mortgage, hypothecate or otherwise alienate them in any manner.
7.14 A WARRANT Holder shall be entitled, at anytime to nominate a person /
(s) who shall be eligible to exercise the WARRANT, allotted to him in
the event of the death of the WARRANT Holder.
7.15 In the event of death of an EMPLOYEE while in employment, all the
WARRANTS allotted to him till the date of his death shall automatically
vest in his nominees as provided in Para 7.14. In the event an EMPLOYEE
has not made a nomination, then the WARRANTS shall automatically vest in
his legal heirs.
Similarly, in case of permanent incapacitation of an EMPLOYEE while in
employment, all the WARRANTS allotted to him till the date of his
incapacitation shall automatically vest in him.
7.16 The WARRANTS allotted to an EMPLOYEE would lapse in the following
circumstances :
(a) if the WARRANTS are not exercised within the Maximum Period for
exercising the Option, i.e., 5 years from the date of allotment of
the WARRANTS to the WARRANT Holder
(b) in case the EMPLOYEE resigns, all the WARRANTS allotted to him for
which the Minimum Holding Period is not over, i.e., the Option has
not vested in him, shall lapse. If the Warrant has already vested in
him at the time of the resignation, then that WARRANT will not
lapse.
10
<PAGE> 12
(c) in case of termination of the employment of the WARRANT Holder for
any reason, all the WARRANTS allotted to him for which the Minimum
Holding Period is not over, i.e., the Option is not vested in him,
shall lapse. If the Option has already vested in him at the time of
the termination, then the WARRANTS will not lapse. However, if the
termination of the employment is on account of misconduct of the
EMPLOYEE, then even the WARRANTS for which the Option has already
vested in him shall lapse.
When a WARRANT lapses under any of the circumstances mentioned above,
then the WARRANT Holder shall have no right, title or interest in
respect thereof or any claim against the COMPANY. In the event of the
lapse of any WARRANTS, the Board of Directors of the COMPANY shall be
entitled, but not obliged, to issue fresh WARRANTS in lieu of the lapsed
WARRANTS.
7.17 In case of Retirement at the Normal Retirement age as per the policy of
the COMPANY, in respect of all the WARRANTS allotted to an EMPLOYEE
whether they have vested or not at the time of the retirement, the
EMPLOYEE shall be entitled to retain them and exercise the Option in
accordance with this Scheme.
7.18 An EMPLOYEE shall not have a right to receive any dividend or to vote or
in any manner enjoy the benefits of a shareholder in respect of the
WARRANTS allotted to him, till the EQUITY SHARES are issued and allotted
to him on exercise of the Option.
7.19 ILLUSTRATION
An Illustration explaining the provisions relating to vesting of the
Warrants, Minimum Holding Period and the Maximum Period for exercising
the option, Amount Payable, etc., is given in EXHIBIT - 1 attached
herewith.
11
<PAGE> 13
VIII. EQUITY SHARES
8.1 After the Minimum Holding Period specified in Para VII above, the
EMPLOYEE to whom WARRANTS have been issued may exercise his Option to
subscribe to the EQUITY SHARES of the COMPANY at the predetermined
Exercise Price specified in Para VII above by making a written
application to the COMPANY. The application shall also be accompanied by
the relevant WARRANTS which shall be cancelled by the COMPANY. The
EQUITY SHARES along with the duly executed share transfer forms shall be
delivered by the COMPANY to the WARRANT Holder against the payment by
the WARRANT Holder to the COMPANY of the Exercise Price as specified in
Para VII above, in one or more instalments as the ESOP COMMITTEE may, in
its absolute discretion, decide.
8.2 The EQUITY SHARES would be of the face (par) value of Rs. 10 each. In
the event the COMPANY splits up its EQUITY SHARES thereby reducing the
face (par) value per share after the allotment of the WARRANTS to an
EMPLOYEE which have yet not been exercised by the EMPLOYEE, then the
ESOP COMMITTEE would make a fair and reasonable adjustment to the number
of WARRANTS allotted to the Employee and / or to the exercise price.
8.3 The EQUITY SHARES once acquired pursuant to WARRANTS would be subjected
to a lock-in period of 4 years from the date of the allotment of the
WARRANTS to an EMPLOYEE. For example, if a WARRANT is allotted to an
EMPLOYEE on 1st January, 2000, and the EQUITY SHARES are allotted to the
WARRANT Holder on 1st January, 2001, then they would be subject to a
lock-in till 31st December, 2003 and the EMPLOYEES would be free to
transfer those shares at any time only after that date.
Provided however that the ESOP COMMITTEE is entitled to prescribe from
time to time, in its absolute discretion, a lesser or no lock-in period
for the EQUITY SHARES in which event the Equity Shares already issued
under the ESOP as well as those which may be issued under the ESOP
thereafter, will be subject to lock-in accordingly.
8.4 The EQUITY SHARES would carry Voting Rights and other rights in
accordance with the provisions of the Companies Act, 1956 or its
modification from time to time or re-enactment, and the Articles of
Association of the COMPANY as in force from time to time.
8.5 ILLUSTRATION
An Illustration explaining the provisions relating to the Exercise of
Options, the Lock-in Period, etc., is given in EXHIBIT - 1 attached
herewith.
12
<PAGE> 14
IX. EXIT MECHANISM
9.1 After the lock-in period for the EQUITY SHARES, as specified in Para
VIII above, the EMPLOYEE would be free to transfer those shares at any
time in accordance with the provisions of the Articles of Association of
the COMPANY and the other applicable laws.
9.2 In future, the COMPANY may, but is not obliged to, buy back the whole or
any part of the EQUITY SHARES from the EMPLOYEES, in accordance with the
provisions of the Companies Act, 1956 or its modification or
re-enactment.
9.3 In future, the COMPANY may, but is not obliged to, go in for listing of
its EQUITY SHARES on any of the recognised Stock Exchanges in accordance
with the provisions of the applicable laws at that time.
13
<PAGE> 15
X. VARIATION OF TERMS OF ESOP
10.1 In addition to what is provided in Para 7.7 hereinabove, the COMPANY may
by a special resolution in a general meeting vary the terms of the ESOP
in respect of the WARRANTS which have yet not been allotted to the
EMPLOYEES.
10.2 Subject to what is provided in Para 7.7 hereinabove, the COMPANY will not
vary the terms of the ESOP in any manner which may be detrimental to the
interests of the WARRANT Holders.
14
<PAGE> 16
XI. APPLICABLE LAWS
11.1 The issue of WARRANTS and EQUITY SHARES would be subject to the
applicable provisions of the Income Tax Act, 1961.
Accordingly, the eligible EMPLOYEES would accept the WARRANTS and
exercise them subject to the applicable tax provisions from time to
time.
11.2 The ESOP would be subject to all applicable laws at present and those
which may become applicable in the future.
11.3 All disputes, differences, claims and questions which shall arise
between the COMPANY and the EMPLOYEES in relation to the ESOP, shall be
amicably settled. In the event of the failure to do so, the same shall
be settled by an arbitration in accordance with the provisions of the
Arbitration and Conciliation Act, 1996. The site of the Arbitration
shall be Mumbai, Maharashtra, India.
11.4 This Scheme is subject to the jurisdiction of Mumbai, Maharashtra,
India.
15
<PAGE> 17
XII. REPRESENTATION
12.1 Neither the COMPANY nor the ESOP COMMITTEE makes any representation
regarding the performance of the COMPANY or the future value of the
EQUITY SHARES. Each EMPLOYEE should take the decision to exercise the
WARRANTS allotted to him after considering all the Provisions of this
Scheme and other relevant factors.
12.2 This represents the Complete Scheme for ESOP.
REDIFF- ESOP-SCHEME
16
<PAGE> 18
EXHIBIT-1
ESOP
ILLUSTRATION EXPLAINING PROVISIONS RELATING TO WARRANTS,
SHARES AND LOCK-IN PERIOD
1. Let us assume that Mr. A is allotted 40 WARRANTS on 31st December, 1999
and the Exercise Price fixed is Rs. 300.
2. These WARRANTS would entitle him to subscribe to 1,000 EQUITY SHARES (400
Warrants * 25 Shares per Warrant) of the Face Value of Rs.10 each and he
would be required to pay to the COMPANY Rs. 300 per EQUITY SHARE
aggregating to Rs. 3,00,000.
3. His entitlement to exercise the Option will be spread over 4 years. The
timing for exercise of the Option granted under the WARRANT to subscribe
to the EQUITY SHARES, the amount payable and the lock-in period for the
EQUITY SHARES would be as shown in the table below :
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
WHEN OPTION CAN NO. OF NO. OF AMOUNT LOCK-IN
BE EXERCISED WARRANTS EQUITY PAYABLE @ PERIOD FOR
SHARES OF RS. 300 / THE SHARES
FACE VALUE SHARE
OF RS. 10 RS.
EACH
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. On or after 1st 10 250 75,000 1st January,
January, 2001 2004
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2. On or after 1st 10 250 75,000 1st January,
January, 2002 2004
--------------------------------------------------------------------------
--------------------------------------------------------------------------
3. On or after 1st 10 250 75,000 1st January,
January, 2003 2004
--------------------------------------------------------------------------
--------------------------------------------------------------------------
4. On or after 1st 10 250 75,000 1st January,
January, 2004 2004
--------------------------------------------------------------------------
--------------------------------------------------------------------------
TOTAL 40 1,000 300,000
--------------------------------------------------------------------------
</TABLE>
NOTES :
1. Mr. A must exercise his Option in respect of all the 40 WARRANTS
before 1st January 2005 (i.e., 5 years from the date of allotment of
the Warrants) . After 1st January, 2005, all the WARRANTS in respect
of which the Option has not been exercised, would lapse.
17
<PAGE> 19
2. Once Mr. A becomes eligible to exercise the Option, i.e., a
particular lot of WARRANTS vests in him, he can exercise his Option
in respect of all the WARRANTS in that lot at one time or in
instalments at different times. For example, in respect of the 10
WARRANTS which vest in him on 1st January, 2001, he can exercise his
Option for all the 250 EQUITY SHARES at one time or he may exercise
his Option in instalments at different times, e.g., 100 EQUITY
SHARES on 1st January, 2001, another 100 EQUITY SHARES on 15th June,
2001 and the balance 50 EQUITY SHARES on 15th February, 2002.
However, he must exercise his Option in respect of all the EQUITY
SHARES covered by one WARRANT at one time.
3. Mr. A need not exercise his Option in respect of all the WARRANTS
allotted to him, if he so chooses. In that event the WARRANTS for
which he has not exercised the Option would lapse.
18
<PAGE> 20
EXHIBIT -2
SPECIMEN LETTER FOR APPLICATION OF EQUITY SHARES
DATE :
Dear Sir,
SUB : APPLICATION FOR EQUITY SHARES
1. I am glad to inform you that I would like to subscribe to______
(__________________) Equity Shares of Rediff.com India Limited. of the
face value of Rs.10 each at the Exercise Price of Rs. ___ per share
pursuant to the Warrants issued to me under the EMPLOYEE STOCK OPTION
PLAN 1999, as per your letter dated ___________.
2. For this purpose, I enclose herewith the following :
(a) A Share Application in the format prescribed by the Company
(b) The Warrant Certificates No. ___________ dated _____________
(c) A Cheque of Rs. ________ (Rupees ______________________ only) as
subscription money for the Equity Shares.
3. Please issue to me the aforesaid Equity Shares at your earliest.
Thanking you,
( )
------------------------------------
DATED , 1999
------------------------------------
REDIFF.COM INDIA LIMITED
19
<PAGE> 21
================================================================================
REDIFF.COM INDIA LIMITED
(Incorporated in India under the Companies Act, 1956)
Regd. Office: Sterling Centre, 4th Floor, Dr.Annie Besant Road, Worli
Mumbai 400 016, India
________________________________________________________________
WARRANT CERTIFICATE
(ISSUED PURSUANT TO EMPLOYEE STOCK OPTION PLAN 1999)
- --------------------------------------------------------------------------------
REGD. FOLIO NO. : 1
CERTIFICATE NO. : 1
NO. OF WARRANTS : ONE
- --------------------------------------------------------------------------------
Based on the decision of the ESOP COMMITTEE, this WARRANT is allotted to Mr.
________ residing at ____________ and employed as '__________'. This WARRANT
Certificate entitles the allottee thereof to subscribe to 25 EQUITY SHARES in
the COMPANY at the Exercise Price of Rs. 150/- per share in accordance with the
covenants and conditions attached.
Date of Allotment of the Warrant: April 30,1999
DIRECTOR DIRECTOR
AUTHORISED SIGNATORY
================================================================================
<PAGE> 22
- --------------------------------------------------------------------------------
REDIFF.COM INDIA LIMITED
COVENANTS & CONDITIONS OF WARRANTS
1. REDIFF.COM INDIA LIMITED would, on the basis of the decision of the ESOP
COMMITTEE, allot this WARRANT Certificate to the Eligible EMPLOYEE of
the COMPANY in accordance with the EMPLOYEE STOCK OPTION PLAN 1999 of
the COMPANY.
2. The WARRANT would be subject to a minimum holding period of 12/24/36/48
months from the date of its allotment by the COMPANY to the EMPLOYEE,
i.e., the WARRANT Holder would not be entitled to exercise his right to
subscribe to the EQUITY SHARES of the COMPANY PRIOR to April 30,
2000/2001/2002/2003.
3. The WARRANT would lapse if it is not exercised within a maximum period
of 5 years from the date of its allotment by the COMPANY to the
EMPLOYEE, i.e., by April 30, 2004.
4. The WARRANT allottee would be entitled to subscribe to and be allotted
25 (twenty five) Equity Shares of the face value of Rs. 10/- each of the
COMPANY at the Exercise Price of Rs. 150/- (Rupees one hundred fifty
only) per Equity Share.
5. The WARRANT is non-transferable.
6. The WARRANT is governed by the terms of "EMPLOYEE STOCK OPTION PLAN
1999" of the COMPANY.
AUTHORISED SIGNATORY
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
REDIFF.COM INDIA LIMITED
- --------------------------------------------------------------------------------
ASSOCIATE STOCK OPTION PLAN 1999 ("ASOP")
CONTENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NO. PARTICULARS PAGE
- ------------------------------------------------------------------------------------------
I. INTRODUCTION 1
- ------------------------------------------------------------------------------------------
II. DEFINITIONS 2
- ------------------------------------------------------------------------------------------
III. OBJECTIVES 3
- ------------------------------------------------------------------------------------------
IV. ASOP FEATURES 4
- ------------------------------------------------------------------------------------------
V. ELIGIBLE PERSONS 5
- ------------------------------------------------------------------------------------------
VI. ASOP COMMITTEE 6
- ------------------------------------------------------------------------------------------
VII. WARRANTS 7
- ------------------------------------------------------------------------------------------
VIII. EQUITY SHARES 10
- ------------------------------------------------------------------------------------------
IX. EXIT MECHANISM 11
- ------------------------------------------------------------------------------------------
X. VARIATION OF RIGHTS 12
- ------------------------------------------------------------------------------------------
XI. APPLICABLE LAWS 13
- ------------------------------------------------------------------------------------------
XII. REPRESENTATION 14
- ------------------------------------------------------------------------------------------
EXHIBIT-1 ILLUSTRATION 15
- ------------------------------------------------------------------------------------------
EXHIBIT-2 SPECIMEN LETTER OF APPLICATION FOR EQUITY SHARES 17
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
- --------------------------------------------------------------------------------
REDIFF.COM INDIA LIMITED
- --------------------------------------------------------------------------------
I. INTRODUCTION
1.1 This Document explains the Scheme called "ASSOCIATE STOCK OPTION PLAN
1999" ("ASOP") formulated by REDIFF.COM INDIA LIMITED for the grant of
Stock Options in the form of warrants to enable its eligible ASSOCIATES
to subscribe to the Equity Shares in the company.
1.2 Every person who is eligible to participate in the ASOP does so subject
to the provisions contained in this Scheme.
1.3 REDIFF.COM INDIA LIMITED is a company currently engaged in online
Services including E-Commerce Services.
1
<PAGE> 3
II. DEFINITIONS
The following definitions apply throughout this Plan :
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
NO. TERMS DEFINITIONS
------------------------------------------------------------------------------
<S> <C> <C>
1. ASOP Associate Stock Option Plan of 1999 formulated
by the Company
------------------------------------------------------------------------------
2. COMPANY REDIFF.COM INDIA LIMITED, a company formed and
registered under the Companies Act, 1956 and
whose shares are being offered to its
ASSOCIATES as Stock Options under this Scheme
------------------------------------------------------------------------------
3. ASSOCIATES All the Eligible ASSOCIATES of the COMPANY, as
defined in Para V of this Scheme
------------------------------------------------------------------------------
4. WARRANTS The WARRANTS issued by the COMPANY to the
ASSOCIATES to enable the holders to subscribe to
the EQUITY SHARES of the COMPANY in future at a
predetermined price
------------------------------------------------------------------------------
5. ASOP COMMITTEE A Committee comprising of some of the Directors
of the COMPANY constituted for the purposes of
ASOP
------------------------------------------------------------------------------
6. EQUITY SHARE Equity Share in the COMPANY of the Face Value
(Par Value) of Rs. 10 each or where the Equity
Share of the COMPANY has been split up into a
Par Value of less than Rs. 10, then the
equivalent number of equity shares for the
revised Par Value per Share
------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 4
III. OBJECTIVES OF ASOP
The following are the objectives of this ASOP :
- to encourage ASSOCIATES to contribute their best
- to attract capable people
- to retain capable ASSOCIATES
- to motivate ASSOCIATES
3
<PAGE> 5
IV. ASOP FEATURES
4.1 In this Paragraph, a broad overview of the ASOP is given and each of the
features is explained in detail later on. The basic features of the ASOP
are as follows :
(a) The ASOP is instituted with effect from April 12, 1999.
(b) An ASOP COMMITTEE has been constituted to determine the ASSOCIATES
eligible for the ASOP, the number of WARRANTS to be allotted to
those ASSOCIATES and other related matters.
(c) The COMPANY has created certain number of WARRANTS for issuing to
the ASSOCIATES.
(d) These WARRANTS would then be allotted from time to time by the
COMPANY to the eligible ASSOCIATES as per the decision of the ASOP
COMMITTEE.
(e) One WARRANT would entitle the Warrant Holder to subscribe for
TWENTY FIVE EQUITY SHARES in the COMPANY. Provided however that if
the EQUITY SHARE of the COMPANY is split up into a face (par) value
of less than Rs. 10, then the ASSOCIATE would be entitled to the
equivalent number of EQUITY SHARES of the revised face (par) value
per Share. For example, if the COMPANY'S equity share of the face
value of Rs. 10 is split up into a share of the face (par) value of
Rs. 5, then the entitlement to the number of EQUITY SHARES of Rs. 5
each would be 50 per WARRANT.
(f) The WARRANT Certificate would specify the timing for exercising the
WARRANT, i.e., subscribing to the EQUITY SHARES in the COMPANY and
the other terms and conditions.
(g) The EQUITY SHARES would be issued on the terms and conditions
specified later on in this Scheme.
4
<PAGE> 6
V. ELIGIBLE PERSONS
5.1 All present and future ASSOCIATES of the COMPANY are eligible to
participate in the ASOP.
5.2 ASSOCIATES means all Key Vendors, Software Developers, Retainers,
Software Consultants, Other Consultants, whether Individuals, Firms, or
Companies and such other Business Constituents as may be selected by the
ASOP COMMITTEE.
5.3 ASSOCIATES also include all other persons not eligible to participate in
the EMPLOYEE STOCK OPTION PLAN of the COMPANY.
5
<PAGE> 7
VI. ASOP COMMITTEE
6.1 For the effective implementation and monitoring of the ASOP, the Board
of Directors of the COMPANY has been authorised to constitute an ASOP
COMMITTEE. The Board of Directors has, in its absolute discretion, power
to change the composition of the ASOP COMMITTEE from time to time.
Accordingly, the Board of Directors of the COMPANY has constituted an
ASOP COMMITTEE consisting of the Chief Executive Officer of the COMPANY
and Two Independent Directors.
6.2 The ASOP COMMITTEE would decide the criteria for selecting the
ASSOCIATES who would be eligible for allotment of the WARRANTS. Further,
the ASOP COMMITTEE would select from time to time the ASSOCIATES to whom
the WARRANTS should be allotted and determine the number of WARRANTS to
be allotted to them. The ASOP COMMITTEE may decide to allot different
number of WARRANTS to different ASSOCIATES or to different categories of
ASSOCIATES. The decision of the ASOP COMMITTEE would be final and
binding.
6.3 The major Criteria involved in selection of the Eligible ASSOCIATES
would include the following factors :
ASSOCIATES in key functional areas
Past Contribution / Performance
Current Performance Evaluation
Expected Future Performance / Contribution
Number of years' association with the COMPANY
6.4 The ASOP COMMITTEE shall also frame suitable policies and systems to
ensure that there is no violation of :
a) Securities and Exchange Board of India (Insider Trading)
Regulations,1992; and
b) Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices relating to
the Securities Market) Regulations,1995, by any ASSOCIATE.
6.5 With respect to any matters that are not specifically provided for, the
ASOP COMMITTEE shall have absolute discretion to decide such matters in
the manner deemed fit by it in the best interest of the ASSOCIATES, and
any such decision of the ASOP COMMITTEE shall be binding on all the
ASSOCIATES.
6
<PAGE> 8
VII. WARRANTS
7.1 The COMPANY has created WARRANTS for ASOP, with the rights and
conditions attached to them as specified in the Scheme.
The total number of WARRANTS earmarked by the COMPANY for issue by the
COMPANY to the ASSOCIATES are 3,960 (three thousand nine hundred sixty)
WARRANTS which would entitle the WARRANT Holders to apply for 99,000
(ninety nine thousand only) EQUITY SHARES.
Simultaneously with the institution of the ASOP, the COMPANY has decided
to institute EMPLOYEE STOCK OPTION PLAN (hereinafter referred to as "THE
ESOP") for the purposes of motivating various employees of the COMPANY
to contribute their best for the growth of the COMPANY. Under the ESOP,
the COMPANY has decided to allot 5,600 WARRANTS to its EMPLOYEES which
would entitle them to subscribe to 1,40,000 (one hundred forty thousand
only) EQUITY SHARES of the face (par) value of Rs. 10 each. Further, the
COMPANY has also authorised the Board of Directors of the COMPANY to
issue and allot, in addition to the WARRANTS mentioned above, such
number of further WARRANTS to its EMPLOYEES, at such Exercise Price and
on such other terms and conditions, as the Board of Directors may, in
its absolute discretion decide, subject to compliance with the
applicable laws.
7.2 The existing issued and paid-up capital of the COMPANY consists of
3,62,700 EQUITY SHARES of the face (par) value of Rs. 10 each. The
EQUITY SHARES aggregating to 99,000 to be issued against the WARRANTS
constitute 2.56 % of the Capital of the COMPANY after considering the
issue of the additional EQUITY SHARES against the WARRANTS, assuming
that all the WARRANTS are allotted and exercised and after considering
the EQUITY SHARES to be issued under the ESOP.
The COMPANY reserves the right to issue / earmark further EQUITY SHARES
/ WARRANTS at its discretion, for the purposes of the ESOP and / or
ASOP, subject to compliance with the applicable laws.
7.3 Each WARRANT, will specify the Exercise Price per EQUITY SHARE, i.e. the
price per share to be paid by the WARRANT Holder to the COMPANY for
issue and allotment to him of the EQUITY SHARES which his WARRANT
entitles him to. The Exercise Price of the WARRANT will be decided by
the ASOP COMMITTEE at the time of allotment of the Warrant. The Exercise
Price will be at or around the Fair Market Value of the Equity Shares at
that time.
7.4 The COMPANY will, on the basis of the decision of the ASOP COMMITTEE,
allot from time to time the WARRANTS (also known as "GRANT OF OPTION")
to the eligible ASSOCIATES, without any consideration along with a
covering letter.
7
<PAGE> 9
7.5 Each WARRANT would grant an OPTION, i.e.. entitle the WARRANT Holder, to
subscribe to 25 (Twenty Five) EQUITY SHARES in the COMPANY at the
Exercise Price mentioned above. However, the WARRANT Holder is not
obliged to exercise the Option.
7.6 Once the WARRANTS are allotted to an ASSOCIATE, he would become eligible
for exercising the Option granted to him at any time, i.e., he would be
entitled to apply for the EQUITY SHARES.
7.7 (a)Every WARRANT will have a maximum time for exercising the option
under the WARRANT. The Maximum Period for exercising the option would
be 5 years from the date of allotment of the WARRANT and the WARRANT
allotted to an ASSOCIATE would lapse if it is not exercised by him
within the maximum period of 5 years from the date of its allotment to
him. In the event of the lapse of any WARRANTS, the Board of Directors
of the COMPANY shall be entitled, but not obliged, to issue fresh
WARRANTS in lieu of the lapsed WARRANTS.
(b)If in future the COMPANY makes an Initial Public Offer of EQUITY
SHARES or of any other financial instrument which is convertible into
EQUITY SHARES, and at that time according to the prevailing
regulations / laws of the Securities and Exchange Board of India or
any other law in force, if the COMPANY is not allowed to keep any
WARRANTS outstanding at the time of the Initial Public Offer, then the
Holders of all the outstanding WARRANTS shall exercise their Option
under the WARRANTS prior to the Initial Public Offer, and if such
WARRANTS are not exercised, then they would either lapse or their
validity would be governed by the applicable regulations / laws.
(c)When a WARRANT lapses as specified above, then the WARRANT Holder
shall have no right, title or interest in respect thereof or any claim
against the COMPANY.
7.8 Once the WARRANTS are allotted to an ASSOCIATE, he may exercise the
Option under different WARRANTS at various points of time within the
Maximum Period for exercising the option. However, he must exercise the
Option under a particular WARRANT (for 25 EQUITY SHARES) at one time.
7.9 If any Bonus and / or Rights Shares are issued by the COMPANY or the
EQUITY SHARES of the COMPANY are split up reducing the face (par) value
per share, then the Board of Directors of the COMPANY would, on the
recommendations of the ASOP COMMITTEE, make a fair and reasonable
adjustment to the number of outstanding WARRANTS and / or to the
exercise price.
Similarly, if the COMPANY takes any action which, in the opinion of the
ASOP COMMITTEE, requires any adjustment to the number of outstanding
WARRANTS and /or to the exercise price, then Board of Directors of the
COMPANY would, on the recommendations of
8
<PAGE> 10
the ASOP COMMITTEE, make a fair and reasonable adjustment to the number of
outstanding WARRANTS and / or to the exercise price.
7.10 The WARRANTS granted to an ASSOCIATE shall not be transferable to any
person.
7.11 No person other than the ASSOCIATE to whom the WARRANTS are allotted shall
be entitled to exercise the Option, except in the circumstances provided
hereinafter.
7.12 The ASSOCIATE to whom the WARRANTS are allotted shall not be entitled to
pledge, mortgage, hypothecate or otherwise alienate them in any manner.
7.13 A WARRANT Holder shall be entitled, at anytime to nominate a person /(s)
who shall be eligible to exercise the WARRANT allotted to him in the event
of the death of the WARRANT Holder.
7.14 In the event of death of an ASSOCIATE, all the WARRANTS allotted to him
till the date of his death shall automatically vest in his nominee(s) as
provided in Para 7.13. In the event an ASSOCIATE has not made a
nomination, then the WARRANTS shall automatically vest in his legal heirs.
7.15 An ASSOCIATE shall not have a right to receive any dividend or to vote or
in any manner enjoy the benefits of a shareholder in respect of the
WARRANTS allotted to him, till the EQUITY SHARES are issued and allotted
to him on exercise of the Option.
7.16 ILLUSTRATION
An Illustration explaining the above provisions is given in EXHIBIT-1
attached herewith.
9
<PAGE> 11
VIII. EQUITY SHARES
8.1 The ASSOCIATE to whom WARRANTS have been issued may exercise his Option
to subscribe to the EQUITY SHARES at the predetermined Exercise Price
specified in Para VII above by making a written application to the
COMPANY for this purpose in the prescribed form along with a covering
letter which is attached herewith and marked EXHIBIT-2. The application
shall also be accompanied by the relevant WARRANTS which shall be
cancelled by the COMPANY. The EQUITY SHARES shall be issued by the
COMPANY against the payment by the WARRANT Holder to the COMPANY of the
Exercise Price as specified in Para VII above, in one or more
instalments as the ASOP COMMITTEE may, in its absolute discretion,
decide.
8.2 The EQUITY SHARES would be of the face (par) value of Rs. 10 each. In
the event the COMPANY splits up its EQUITY SHARES thereby reducing the
face (par) value per share after the allotment of the WARRANTS to an
ASSOCIATE which have yet not been exercised by the ASSOCIATE, then the
ASOP COMMITTEE would make a fair and reasonable adjustment to the number
of WARRANTS allotted to the Associate and / or to the Exercise Price.
8.3 The EQUITY SHARES once issued pursuant to WARRANTS would be subjected to
a lock-in period of 4 years from the date of the allotment of the
WARRANTS. For example, if a WARRANT is allotted on 1st January, 2000,
and the EQUITY SHARES are allotted on 1st January, 2001, then they would
be subject to a lock-in till 31st December, 2003 and the ASSOCIATE would
be free to transfer these shares at any time only after that date.
Provided however that the ASOP COMMITTEE is entitled to prescribe from
time to time, in its absolute discretion, a lesser or no lock-in period
for the EQUITY SHARES, in which event the EQUITY SHARES already issued
under the ASOP as well as those which may be issued under ASOP
thereafter will be subject to lock-in accordingly.
8.4 The EQUITY SHARES would carry Voting Rights and other rights in
accordance with the provisions of the Companies Act, 1956 or its
modification from time to time or re-enactment and of the Articles of
Association of the COMPANY as in force from time to time.
8.5 ILLUSTRATION
An Illustration explaining the provisions relating to the Exercise of
Options, the Lock-in Period, etc., is given in EXHIBIT-1 attached
herewith.
10
<PAGE> 12
IX. EXIT MECHANISM
9.1 After the lock-in period for the EQUITY SHARES, as specified in Para
VIII above, the ASSOCIATE would be free to transfer those shares at any
time in accordance with the provision of the Articles of Association of
COMPANY and applicable laws.
9.2 In future, the COMPANY may, but is not obliged to, buy back the whole or
any part of the EQUITY SHARES from the ASSOCIATES, in accordance with
the provisions of the Companies Act, 1956 or its modification or
re-enactment.
9.3 In future, the COMPANY may, but is not obliged to, go in for listing of
its EQUITY SHARES on any of the recognised Stock Exchanges in accordance
with the provisions of the applicable laws at that time.
11
<PAGE> 13
X. VARIATION OF TERMS OF ASOP
10.1 The COMPANY may by a special resolution in a general meeting vary the
terms of the ASOP in respect of the WARRANTS which have not yet been
allotted to the ASSOCIATES.
10.2 The COMPANY will not vary the terms of the ASOP in any manner which may be
detrimental to the interests of the WARRANT Holders.
12
<PAGE> 14
XI. APPLICABLE LAWS
11.1 The issue of WARRANTS and EQUITY SHARES would be subject to the
applicable provisions of the Income Tax Act, 1961.
Accordingly, the eligible ASSOCIATES would accept the WARRANTS and
exercise them subject to the applicable tax provisions from time to
time.
11.2 The ASOP would be subject to all applicable laws at present and those
which may become applicable in the future.
11.3 All disputes, differences, claims and questions which shall arise
between the COMPANY and the ASSOCIATES in relation to the ASOP, shall be
amicably settled. In the event of the failure to do so, the same shall
be settled by an arbitration in accordance with the provisions of the
Arbitration and Conciliation Act, 1996. The site of the Arbitration
shall be Mumbai, Maharashtra, India.
11.4 This Scheme is subject to the jurisdiction of Mumbai, Maharashtra,
India.
13
<PAGE> 15
XII. REPRESENTATION
12.1 Neither the COMPANY nor the ASOP COMMITTEE makes any representation
regarding the performance of the COMPANY or the future value of the
EQUITY SHARES. Each ASSOCIATE should take the decision to exercise the
WARRANTS allotted to him after considering all the Provisions of this
Scheme and other relevant factors.
12.2 This represents the Complete Scheme for ASOP.
14
<PAGE> 16
EXHIBIT-1
ASOP
ILLUSTRATION EXPLAINING PROVISIONS RELATING TO WARRANTS,
SHARES AND LOCK-IN PERIOD
1. Let us assume that Mr. A is allotted 40 WARRANTS on 31st December, 1999.
2. These WARRANTS would entitle him to apply for 1,000 EQUITY SHARES ( 400
Warrants * 25 Shares per Warrant ) of the Face Value of Rs.10 each and he
would be required to pay to the Company Rs.300 per EQUITY SHARE
aggregating to Rs. 300,000.
3. The timing for exercise of the Option granted under the WARRANT to
subscribe to the EQUITY SHARES of the COMPANY, the amount payable and the
lock-in period for the EQUITY SHARES would be as shown in the table below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
WHEN OPTION CAN NO. OF NO. OF AMOUNT LOCK-IN
BE EXERCISED WARRANTS EQUITY PAYABLE @ PERIOD FOR
SHARES OF RS.___/SHARE THE SHARES
FACE VALUE (RS.)
OF RS. 10
EACH
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Any time on or 40 1,000 300,000 1st January,
after 31st 2004
December, 1999
-----------------------------------------------------------------------------------
</TABLE>
NOTES :
1. Mr. A must exercise his Option in respect of all the 40 WARRANTS
before 1st January 2005 (i.e., 5 years from the date of allotment of
the Warrants). After 1st January, 2005, all the WARRANTS in respect
of which the Option has not been exercised, would lapse.
2. Once Mr. A has been allotted WARRANTS, he can exercise his Option in
respect of all the WARRANTS at one time or in instalments at
different times. For example, in respect of the 40 WARRANTS which
are allotted to him on 31st December, 1999, he can exercise his
Option for all the 1,000 EQUITY SHARES at one time or he may
exercise his Option in instalments at different times, e.g., 500
EQUITY SHARES on 1st January, 2000, another 300 EQUITY SHARES on
15th June, 2001 and the balance 200 EQUITY SHARES on 15th February,
2002. However, he must exercise his Option in respect of all the
EQUITY SHARES covered by one WARRANT at one time.
15
<PAGE> 17
3. Mr. A need not exercise his Option in respect of all the WARRANTS
allotted to him, if he so chooses. In that event, the WARRANTS for
which he has not exercised the Option would lapse.
REDIFF- ASOP-SCHEME
16
<PAGE> 18
EXHIBIT - 2
SPECIMEN LETTER FOR APPLICTION FOR EQUITY SHARES
Dear Sir,
SUB : APPLICATION FOR EQUITY SHARES
1. I/We am/are glad to inform you that I/we would like to subscribe
to______ (__________________) Equity Shares of Rediff.com India Limited.
of the face value of Rs.10 each at the Exercise Price of Rs. ___ per
share pursuant to the Warrants issued to me /us under the ASSOCIATE
STOCK OPTION PLAN 1999, as per your letter dated -----------.
2. For this purpose, I/we enclose herewith the following :
(a) A Share Application in the format prescribed by the Company
(b) The Warrant Certificates No. ___________ dated _____________
(c) A Cheque of Rs. ________ (Rupees ______________________ only) as
subscription money for the Equity Shares.
3. Please issue to me /us the aforesaid Equity Shares at your earliest.
Thanking you,
( )
------------------------------------
DATED , 1999
------------------------------------
REDIFF.COM INDIA LIMITED
17
<PAGE> 19
================================================================================
REDIFF.COM INDIA LIMITED
(Incorporated in India under the Companies Act, 1956)
Regd. Office : Sterling Centre, 4th Floor, Dr.Annie Besant Road, Worli
Mumbai 400 016, India
WARRANT CERTIFICATE
(ISSUED PURSUANT TO ASSOCIATE STOCK OPTION PLAN 1999)
- --------------------------------------------------------------------------------
REGD. FOLIO NO. : 1
CERTIFICATE NO. : 1
NO. OF WARRANTS : ONE
- --------------------------------------------------------------------------------
Based on the decision of the ASOP COMMITTEE this WARRANT is allotted to
_________residing at____________
This WARRANT Certificate entitles the allottee thereof to subscribe to 25 EQUITY
SHARES in the COMPANY at the Exercise Price of Rs.150/- per share in accordance
with the covenants and conditions attached.
Date of allotment of the Warrant
DIRECTOR DIRECTOR
AUTHORISED SIGNATORY
================================================================================
<PAGE> 20
- --------------------------------------------------------------------------------
REDIFF.COM INDIA LIMITED
COVENANTS & CONDITIONS OF WARRANTS
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1. REDIFF.COM INDIA LIMITED would, on the basis of the decision of the ASOP
COMMITTEE, allot this WARRANT Certificate to the Eligible ASSOCIATE of
the COMPANY in accordance with the ASSOCIATE STOCK OPTION PLAN 1999 of
the COMPANY.
2. The WARRANT Holder would be entitled to exercise his right to subscribe
to the EQUITY SHARES of the COMPANY at anytime after allotment of the
WARRANT to him but the WARRANT would lapse if it is not exercised within
the maximum period of 5 years from the date of its allotment by the
COMPANY to the ASSOCIATE, i.e., by April 30, 2004.
3. The WARRANT allottee would be entitled to subscribe to 25 (twenty five)
EQUITY SHARES of the face value of Rs. 10/- each of the COMPANY at the
Exercise Price of Rs.150/- (One Hundred and Fifty) per Equity Share.
4. The WARRANT is non-transferable.
5. The WARRANT is governed by the terms of "ASSOCIATE STOCK OPTION PLAN
1999" of the COMPANY.
For REDIFF.COM INDIA LIMITED
DIRECTOR
DATE OF ALLOTMENT :
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<PAGE> 1
EXHIBIT 10.3
REDIFF.COM INDIA LIMITED
2000 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees and to promote the success of the
Company's business through the grant of Options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the legal requirements relating to
stock option plans, including, without limitation, the tax, securities or
corporate laws of India and guidelines for the stock option scheme for Indian
software companies linked to ADR/GDR offerings issued by the Ministry of
Finance, Government of India and exchange control laws of India, any stock
exchange or quotation on which the ADSs are listed or quoted, or the applicable
laws of any other country or jurisdiction where Options are, or will be, granted
under the Plan.
(c) "ADR" shall mean an American Depositary Receipt evidencing
American Depositary Share(s) corresponding to Share(s).
(d) "ADS" shall mean an American Depositary Share corresponding
to Share(s).
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the United States Internal Revenue Code of 1986,
as amended.
(g) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.
(h) "Company" means Rediff.com India Limited, a company
incorporated under the laws of India.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company,
excluding any person employed on a temporary basis. An Employee shall not cease
to be an Employee in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. Neither service as a
Director nor payment of
<PAGE> 2
a director's fee by the Company shall be sufficient to constitute "employment"
by the Company. No promoter, nor any relative of a promoter, shall be considered
an Employee for purposes of the Plan.
(l) "Fair Market Value" means the value for one ADS, as reported
on any established stock exchange or market system, on the day of determination.
(m) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Option Agreement" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(q) "Optioned Stock" means the ADSs subject to an Option.
(r) "Optionee" means the holder of an outstanding Option granted
under the Plan.
(s) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 2000 Stock Option Plan.
(u) "Share" means an Equity Share of the Company, as adjusted in
accordance with Section 11 of the Plan.
(v) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan (in the form of ADSs) is 200,000 Shares. The Shares may
be authorized but unissued, or reacquired.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan upon
exercise of an Option, shall not be returned to the Plan and shall not become
available for future distribution under the Plan.
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<PAGE> 3
4. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Board or
a Committee appointed by the Board, which Committee shall be constituted to
comply with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine Fair Market Value;
(ii) to select the Employees to whom Options may from
time to time be granted hereunder;
(iii) to determine the number of ADSs to be covered by
each such Option granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted hereunder;
(vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(d) instead of ADSs;
(vii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws; and
(viii) to construe and interpret the terms of the Plan
and Options granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
5. Eligibility.
(a) Options may be granted only to Employees.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option.
(c) Neither the Plan nor any Option shall (i) confer upon an
Optionee any right with respect to continuing the Optionee's relationship as an
Employee, (ii) interfere in any way with an Optionee's right or the Company's
right to terminate Optionee's relationship as an Employee, with or without
cause, or (iii) change the terms of an Optionee's employment as an Employee.
(d) The following limitations shall apply to grants of Options:
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<PAGE> 4
(i) No Employee shall be granted, in any fiscal year
of the Company, Options to purchase more than 400,000 ADSs.
(ii) In connection with his or her initial service, an
Employee may be granted Options to purchase up to an additional 400,000 ADSs
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 11.
(iv) If an Option is canceled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 11), the canceled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof.
8. Option Exercise Price and Consideration.
(a) The per ADS exercise price for the ADSs to be issued upon
exercise of an Option shall be such price as is determined by the Administrator;
provided, however, that in no case shall the per ADS exercise price of an Option
be less than 90% of Fair Market Value on the date of grant.
(b) The consideration to be paid for the ADSs to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator at the time of grant. Such consideration may consist of (1)
cash, (2) check, (3) promissory note, (provided no Optionee may remit more than
U.S. $50,000 within any five-year period or such other amount or time period as
permitted by Applicable Laws) (4) other ADSs which (x) in the case of ADSs
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the ADSs as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions
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<PAGE> 5
as determined by the Administrator and set forth in the Option Agreement. Unless
the Administrator provides otherwise, the vesting of Options granted hereunder
shall be tolled during any unpaid leave of absence. An Option may not be
exercised for a fraction of an ADS.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the ADSs with respect to which the Option is exercised. Full payment
may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. ADSs issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the ADSs are issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the ADSs, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such ADSs promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the ADSs are issued, except as provided in
Section 11 of the Plan.
(b) Termination of Relationship as an Employee. If an Optionee
ceases to be an Employee, such Optionee may exercise his or her Option within
such period of time as is specified in the Option Agreement to the extent that
the Option is vested on the date of termination (but in no event later than the
expiration of the term of the Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares underlying the ADSs covered by the unvested portion of the
Option shall again become available for issuance under the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
underlying the ADSs covered by such Option shall again become available for
issuance under the Plan.
(c) Death or Disability of Optionee. If an Optionee dies while an
Employee, or ceases to be an Employee as a result of the Optionee's disability,
the vesting and exercisability of the Option shall accelerate in full and the
Option may be exercised within such period of time as is specified in the Option
Agreement to the extent that the Option is vested on the date of death (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement) by the Optionee or Optionee's estate or by a person who
acquires the right to exercise the Option by bequest or inheritance. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares underlying the ADSs covered by such Option shall again
become available for issuance under the Plan.
(d) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
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10. Non-Transferability of Options. The Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of ADSs covered by each outstanding
Option, and the number of Shares (in the form of ADSs) which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per ADS covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Shares, or any other increase
or decrease in the number of issued Shares effected without receipt of
consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of the ADSs subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including ADSs
as to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
ADSs purchased upon exercise of an Option shall lapse as to all such ADSs,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including ADSs
as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
ADS subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of ADSs for each ADS held
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<PAGE> 7
on the effective date of the transaction (and if the holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding ADSs); provided, however, that if such consideration
received in the merger or sale of assets is not solely equity shares (or their
equivalent) of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each ADS subject to the Option,
to be solely equity shares (or their equivalent) of the successor corporation or
its Parent equal in fair market value to the per ADS consideration received by
holders of ADS in the merger or sale of assets.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee to whom an Option is
so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
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14. Conditions Upon Issuance of ADSs.
(a) Legal Compliance. ADSs shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such ADSs shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of
an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the ADSs are being
purchased only for investment and without any present intention to sell or
distribute such ADSs if, in the opinion of counsel for the Company, such a
representation is required.
15. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any ADSs hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required by Applicable Laws.
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APPENDIX A
Rules for U.S. Option Grants
The following additional rules shall apply in the case of Option grants
to U.S. residents.
18. $100,000 Rule Limitation. Notwithstanding a designation of Options
as an Incentive Stock Options, to the extent that the aggregate Fair Market
Value of the ADSs with respect to which Incentive Stock Options are exercisable
for the first time by an Optionee during any calendar year (under all plans of
the Company and any Parent or Subsidiary) exceeds U.S. $100,000, such Options
shall be treated as Nonstatutory Stock Options. For these purposes, Incentive
Stock Options shall be taken into account in the order in which they were
granted. The Fair Market Value of the ADSs shall be determined as of the time
the Option with respect to such ADSs is granted.
19. Term of Option. Notwithstanding Section 7 of the Plan, in the case
of an Incentive Stock Option granted to an Optionee who, at the time the Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
20. Option Exercise Price.
(a) In the case of an Incentive Stock Option
(i) granted to an Employee who, at the time of grant
of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per ADS
on the date of grant.
(ii) granted to any other Employee, the per ADS
exercise price shall be no less than 100% of the Fair Market Value per ADS on
the date of grant.
In the case of a Nonstatutory Stock Option, the per ADS exercise price
shall be determined by the Administrator; provided, however, that in the case of
an Option intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the per ADS exercise price shall be no
less than 100% of the Fair Market Value per ADS on the date of grant.
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EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this day of
_________, 2000 by and between Rediff.com, Limited, an Indian public limited
company (the "Company"), and ("Indemnitee").
WHEREAS, the Company is issuing its American Depositary Shares through a
registered public offering in the United States, and as a result, Indemnitee
will be exposed to litigation risks arising from claims that may be made under
U.S. laws;
WHEREAS, the Company and Indemnitee recognize the increasing difficulty
in obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company will benefit from going public in the United States
and desires to attract and retain the services of highly qualified individuals,
such as Indemnitee, to serve as officers and directors of the Company and to
indemnify its officers and directors so as to provide them with the maximum
protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding arising under the
laws of the United States or any state thereof (other than an action in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company or any subsidiary of the
Company, or by reason of any action or inaction on the part of Indemnitee while
an officer or director, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement (if such settlement is approved in advance
by the Company, which approval shall not be unreasonably withheld) actually and
reasonably incurred by Indemnitee in connection with such action or proceeding
if Indemnitee acted without intentional misconduct or gross negligence.
(b) Proceedings in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding in the
right of the Company to procure a judgment in its favor by reason of the fact
that Indemnitee is or was a director, officer, employee or agent of the Company
or any Subsidiary of the Company by reason of any action or inaction on the part
of Indemnitee while an officer or director such expenses (including attorneys'
fees) actually and
<PAGE> 2
reasonably incurred by Indemnitee in connection with such action or proceeding
if such action or proceeding is adjudged in favor of Indemnitee.
(c) Scope. Notwithstanding any other provision of this Agreement,
Indemnitee shall be entitled to such indemnification, reimbursement and the like
only to the extent permitted under Indian law.
(d) Nonexclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under any other agreement to which Indemnitee is a party. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action or
other covered proceeding.
2. Indemnification Procedure.
(a) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Managing Director of
the Company at the address shown on the signature page of this Agreement (or
such other address as the Company shall designate in writing to Indemnitee). In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
(b) Procedure. Any indemnification provided for in Section 1
shall be made no later than forty-five (45) days after receipt of the written
request of Indemnitee. If a claim under this Agreement, under any statute, or
under any provision of the Company's Articles of Association or Memorandum of
Association providing for indemnification, is not paid in full by the Company
within forty-five (45) days after a written request for payment thereof has
first been received by the Company, Indemnitee may, but need not, at any time
thereafter bring an action against the Company to recover the unpaid amount of
the claim and, subject to Section 9 of this Agreement, Indemnitee shall also be
entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action
or proceeding in advance of its final disposition) that Indemnitee has not met
the standards of conduct which make it permissible under applicable law for the
company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Subsection 2(a) unless and
until such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists.
3. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
action or proceeding, but not, however, for the total amount thereof, the
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<PAGE> 3
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
4. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, applicable law or public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission or any other regulatory body to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company is right under public policy to indemnify Indemnitee.
5. Severability. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 5. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
6. Construction of Certain Phrases. For purposes of this Agreement,
references to the "Company" shall include, in addition to the resulting company,
any constituent company (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that if Indemnitee is or was a director, officer, employee or agent
of such constituent company, or is or was serving at the request of such
constituent company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving company as Indemnitee would have with
respect to such constituent company if its separate existence had continued.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
8. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
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
-3-
<PAGE> 4
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
paid all court costs and expenses, including attorneys, fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), except for the pro-rata
amount of any such costs and expenses relating to material assertions that, as a
part of such action, the court determines were not made in good faith or were
frivolous.
10. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing. Addresses for notice to either party
are as shown on the signature page of this Agreement, or as subsequently
modified by written notice.
11. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the State of Maharashtra, India for
all purposes in connection with any action or proceeding which arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in such courts.
12. Choice of Law. This Agreement shall be governed by and its
provisions construed in accordance with the laws of India.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
REDIFF.COM LIMITED
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address:
Mahalaxmi Engineering Estate
1st Floor, L. J. Road
Behind Khilani College
Mahim (West), Mumbai 400 021, India
AGREED TO AND ACCEPTED:
INDEMNITEE
(signature)
Address:
------------------------------
------------------------------
<PAGE> 1
EXHIBIT 10.5
[PHOTOCOPY OF 20-RUPEE NOTE]
THIS AGREEMENT made at Mumbai this 5th day of July, One thousand nine
hundred ninety nine: BETWEEN SHREENATHJI BALAJI COMPUTECH PRIVATE LIMITED a
Company incorporated and registered under the provisions of Companies Act, 1956
and having its Registered Office at 1314, Bharat Niwas, Soonawala Agiary Lane,
Mahia, Mumbai-400 016., hereinafter called "the Licensor" (which expression
shall, unless it be repugnant to the context or meaning thereof, seen and
include its successors in title) of the One Part AND: REDIFF COMMUNICATION
LIMITED, a company incorporated and registered under the provisions of
Companies Act, 1956 and having its registered office at Sterling
1
<PAGE> 2
Centre, 4th floor, Dr. Annie Besant Road, Worli, Mumbai-400 018 hereinafter
called "the Licensee" (which expression shall, unless it be repugnant to the
context or meaning thereof, mean and include its successors in title) of the
Other Part:
WHEREAS:
1. One Mahalaxmi Engineering Company Private Limited is seized and possessed
of or otherwise well and sufficiently entitled to an area of approximately
10800 sq. ft. of built up area equivalent to 1003.71 square meters or
thereabouts on the first floor of the building known as "Mahalaxmi
Industrial Estate" and is also entitled to two reserved car parking spaces
in the compund situate lying and being at L.J. Road No.1, Mahia, Mumbai
400016 (hereinafter called "the said premises");
2. By a Tenancy Agreement dated the 5th day of April, 1999 made between
Mahalaxmi Engineering Company Private Limited, therein called the Landlord
of the One Part and the Licensor therein called the Tenant of the Other
Part, Mahalaxmi Engineering Company Private Limited has agreed to give the
said premises to the Licensor on monthly tenancy
2
<PAGE> 3
basis at or for the rent and on certain terms and conditions therein
contained;
3. The said Tenancy Agreement is valid and subsisting Agreement and has not
been terminated, revoked and or cancelled by either parties to the said
Agreement;
4. Under the said Tenancy Agreement, Mahalaxmi Engineering Company Private
Limited has permitted the Licensor to further give the said premises either
on leave and licence basis or to sub-let the same to any person or party at
such compensation and on such terms and conditions as the Licensor may deem
fit and proper without obtaining the prior written consent of Mahalaxmi
Engineering Company Private Limited in that behalf;
5. Pursuant to the right given by Mahalaxmi Engineering Company Private
Limited to the Licensor, the Licensor is entitled to give the said premises
on leave and license basis;
6. The Licensee has approached the Licensor and has requested the Licensor to
give the said premises to the Licensee on leave and license basis which the
Licensor has agreed to do on certain terms and conditions
3
<PAGE> 4
mutually agreed upon by and between them;
7. The parties hereto are desirous of recording the said terms and
conditions in the manner hereinafter appearing;
NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE
PARTIES HERETO as under:
1. The Licensor hereby grants to the Licensee and the Licensee hereby
accepts from the Licensor a licence to use and occupy an area of 10800 sq. ft.
of built up area equivalent to 1003.71 square meters or thereabouts on the
first floor of the building known as "Mahalaxmi Industrial Estate" situate at
L.J. Road No. 1, Mahim, Mumbai 400 016 along with two reserved car parking
spaces (hereinafter referred to as "the licensed premises") initially for a
period of three years and twenty one days commencing from the 5th day of July,
1999 provided that the first payment of license fee shall be payable with
effect from 26th day of July 1999 at the monthly licence fee subject to
deduction of tax at source, in the manner hereinafter appearing in clause 2
hereof, with an option to the Licensee to extend the period of the licence for
a further period of three years after the expiry of the initial period of three
years twenty one days on the same terms and conditions as herein contained save
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<PAGE> 5
and except the licence fee and/or compensation payable for the subsequent
period of three years shall be increased by 20% of the licence fee and/or
compensation that is payable for the present period of three years twenty one
days subject to deduction of tax at source in the manner hereinafter appearing
in clause 2 hereof. If the Licensee desires to renew the licence, then in that
event, the Licensee shall give to the Licensor six months advance notice in
writing of its intention to renew the licence for a further period of three
years. If the Licensee is not desirous of renewing the licence, then in that
event, also the Licensee shall give to the Licensor six months advance notice
in writing of its intention not to renew the licence before the expiry of the
current period of three years twenty one days. It is hereby expressly agreed
and understood by and between the parties hereto that the option of renewal
given to the Licensee for renewing the licence for subsequent period of three
years shall be available to the Licensee only if the Licensee has carried out
and complied with all the terms and conditions of the licence and there is no
breach on its part in observing and performing the terms and conditions of this
agreement.
2. The Licensee shall pay to the Licensor licence fee and/or compensation as
under:
(a) Rs. 3,96,000/- (Rupees Three Lakhs Ninety Six
5
<PAGE> 6
Thousands only) per month for the initial period of six months commencing from
26th day of July, 1999 to 25th January 2000;
(b) Rs.3,46,000/- (Rupees Three Lakhs Forty Six Thousand only) per month from
26th January, 2000 to 25th January, 2001;
(c) Rs. 3,96,000/- (Rupees Three Lakhs Ninety Six Thousand only) per month from
26th January, 2001 to 25th July, 2002.
The above licence fee and/or compensation shall be paid subject to
deduction of tax at source.
The first of such compensation shall commence from the 26th day of July 1999
and the subsequent payments shall be made on or before the 5th day of each and
every succeeding month thereafter. Provided However that if the Licensee
defaults in paying the said licence fee and/or compensation on its due date,
then in that event, the Licensee shall be liable to pay to the Licensor
interest at the rate of 18% per annum from the date of default till the date of
actual payment and if such default continues for more than 30 days then the
Licensor shall give to the Licensee 15 days notice in writing calling up the
Licensee to pay the outstanding amount with interest and if the same is not
paid within the said period of 15 days of the receipt of the notice then in
that event this Agreement shall come to an end and the consequences of
termination shall follow. It
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<PAGE> 7
is agreed and understood by and between the parties hereto that the licence fee
and/or compensation payable by the Licensee to the Licensor shall for all
purpose be deemed to be standard licence fee and/or compensation payable in
respect of the licensed premises and the Licensee shall not make any
application to any Court of Law or before any Forum or before any Authority
challenging the said compensation payable in respect of the licensed premises
and any such action shall be taken as a breach of this Agreement entailing the
consequences as hereinafter set out.
3. In addition to the payment of the Licence fee and/or compensation as
hereinabove provided, the Licensee shall pay all charges for the electricity
and water consumed in the licensed premises as shown by separate meters
installed for the purpose on the Licensor producing original bills in respect
thereof including rentals for the meters installed for the purpose.
4. The Licensor has informed the Licensee that the work of construction is
complete in all respects and that the Occupation Certificate in respect of the
first floor premises has been obtained by the Licensor from the Municipal
Corporation and the Licensor agrees and undertakes that the Licensee shall
comply with all
7
<PAGE> 8
the terms and conditions of the said certificate and will ensure that the
Licensee's right to use and occupy the said premises are not jeopardize in any
manner whatsoever.
5. It is agreed by and between the parties hereto that all present municipal
taxes, cess, dues, duties impositions and outgoings payable in respect of the
licensed premises as also all increases and additional taxes in respect of the
licensed premises shall be borne and paid by the Licensor. All new taxes
introduced by yearly budgetary taxes or by way of any act, order, notification
or ordinance whereby any fresh or new municipal taxes, cess, dues, duties,
impositions, and outgoings becomes payable and are imposed by the Corporation or
by any other Government body or Authority in respect of the licensed premises
the same shall be borne and paid by the Licensee alone. The said amount shall be
paid within a period of twenty one days from the date the Licensor furnishes to
the Licensee a copy of the said bill and in case of non- payment, the same shall
be construed as a breach and the consequences thereof shall follow.
6. The Licensee has informed the Licensor that the Licensee proposes to
carry out certain renovations and alterations in the licensed premises as per
the plans and drawings furnished by the Licensee to the
8
<PAGE> 9
purpose;
(f) Not to cause any nuisance or annoyance to the occupants of the said
building so as to prejudice the right of the Licensor to the licensed
premises;
(g) To permit the Licensor and or its authorised representative at all times
on receipt of clear 48 hours notice in writing to enter upon, view and
examine the status and condition of the licensed premises;
(h) Not to carry out any structural renovations, alterations or repairs to the
licensed premises or any part or portion thereof save and except as
provided in clause 6 hereinabove.
(i) Not to transfer the benefits of this Agreement to any third party other
than an entity registered or incorporated on re-organisation of the
Licensee, which entity must be majority owned and control by the Licensee
and/or management of the Licensee, provided that prior intimation
particulars are furnished to the Licensor in that behalf.
(j) Not to bring in or to store on the licensed premises or any part or
portion thereof any combustible materials or otherwise dangerous things
which may imperil the safety of the building or may increase the premium
of insurance of the licensed premises or render void the
10
<PAGE> 10
insurance;
(k) To perform and observe strictly the provision hereof and also the
provision of law of the country for the time being and from time to time
in force and also the rules and regulations which may for the time being
and from time to time be in force governing the licensed premises;
(l) The Licensee shall be in exclusive possession of the licensed premises and
the juridical possession thereof shall always remain with the Licensor;
(m) To indemnify the Licensor against any loss or damages that may be suffered
as a result of breach of any of the provisions herein contained or
otherwise due to any act or conduct of the Licensee its staff, employees,
servants and agents leading to the breach of the provisions hereof;
(n) On the expiry of sooner determination of this licence or the renewal
thereof to remove itself from the licensed premises and all its staff and
employees and all its belongings and to restore the licensed premises to
its original condition (reasonable wear and tear and loss or damage by
fire, accident, irresistible force or act of God excepted) Provided
However that if the Licensee has carried out any additions and alterations
to the licensed premises and has installed fixtures
11
<PAGE> 11
and fittings false ceiling, flooring and toilet which are of a permanent
nature, then in that event, the Licensee shall not on the expiry or sooner
determination of the License remove the same but shall leave the same in
the licensed premises and the Licensor shall not be called upon to pay any
amount to the Licensee for the same;
(o) Not to put any claim of tenancy or subtenancy or any other right or title
into or in respect of the licensed premises or any part or portion thereof
and this Agreement shall not be construed to create any such right
whatsoever in favour of the Licensee save and except the mere right to use
and occupy the licensed premises as licensee during the validity of the
licence and such right shall automatically come to an end on the expiry or
sooner determination of the Licence;
8. The Licensor hereby covenants with the Licensee as follows:
(a) To bear and pay the municipal taxes, cess, dues, duties, levies, charges,
impositions levied by the Municipal Corporation in respect of the licensed
premises as per clause 5 hereinabove;
(b) To permit the Licensee to carry out such
12
<PAGE> 12
alterations and renovations to the licensed premises as per the plans
sanctioned by the Municipal Corporation and seen by the Licensor in
advance;
(c) Not to transfer or assign the rights in respect of the licensed premises
to any person or party so as to adversely affect the rights of the
Licensee to use and occupy the licensed premises and in case of any such
transfer or assignment the Licensor shall intimate the same to the
Licensee and shall obtain from such party an acknowledgment recognising
the rights of the Licensee to the licensed premises.
(d) The Licensee shall be entitled to use the said premises for 24 hours all 7
days of the week without paying any additional compensation to the
Licensor.
(e) To allow any associate or sister concern under the control of Licensee's
management to use and occupy the licensed premises provided always that
the Licensee shall have a controlling interest in the firm and companies
which are permitted to use and occupy the said leased premises with the
licence. The Licensee shall alone be responsible for the due observance
and performance of the
13
<PAGE> 13
terms and conditions of the licence and the renewal thereof and the
Licensee shall furnish the names of the companies who will be occupying
the licensed premises;
(f) To allow to install windows/spilt air conditioners as per the plans
submitted;
(g) To provide adequate power and sanitation in the licence premises to
enable the Licensee to enjoy use and occupation of the said premises;
(h) To provide security guard round the clock to protect the said Building;
(i) To allow to exhibit any name, sign, symbolograph or writing on the front
door of the said premises and at such places where the occupant of other
premises usually have their name plates;
(j) To permit the Licensee to use both the entrance of the building where the
licensed premises are located and make use of both the lifts save and
except for carrying heavy articles and things in the said lift;
9. If at any time during the said term the licensed premises are
damaged or destroyed by fire, storm, flood, tempest, earthquake, enemies, war,
riot,
14
<PAGE> 14
civil commotion or any other irresistible force, act of God so as to make the
same unfit for use, then in that event the licence hereby created shall
forthwith stand terminated, provided however that if the licensed premises is
destroyed or damaged on account of any negligence on the part of the Licensee,
then in that event, this Agreement shall not come to an end and the Licensee
shall be bound and liable to pay the Licence fee and/or compensation to the
Licensor and the Licensee shall at its own cost and expense restore the licensed
premises and the other parts of the building which are so destroyed in the same
good order and condition as they were at the time of entering into this
Agreement. The Licensee shall at its own cost and expense insure the licensed
premises and the fixtures, fittings and amenities provided therein for an
adequate value and in case of destruction, to re-do the licensed premises at its
own cost and expense as set out hereinabove from and out of the insurance amount
or from any other amount.
10. On expiry or sooner determination of this Licence and the renewals
thereof, as the case may be, the Licensee shall remove its employees and
servants and all its belongings, chattels, articles and the things from the
licensed premises and shall not claim any alternate accommodation and shall
have over vacant possession of the licensed premises to the Licensor.
15
<PAGE> 15
11. It is the express intention of the parties hereto that the Agreement shall
be a mere licence, the use and occupation by the Licensee being restricted for
the purpose of using the licensed premises on the terms and conditions
contained in the licence.
12. Notwithstanding anything herein contained, the Licensor shall be entitled
to determine the licence hereby created by giving to the Licensee forty five
days notice in writing in case the Licensee commits breach of any of the terms
and conditions of this Agreement save and except as provided in clause 2
hereinabove and if such breach is not rectified or remedied within a period of
forty five days from the date of the receipt of such notice then and in that
event, on the expiration of the said period of forty five days the license
hereby granted shall automatically come to an end without any further notice
and the Licensee as also its officers, authorised representative, servants and
agents for the time being shall quit, vacate and give charge of the licensed
premises to the Licensor without raising any dispute or objection thereto.
13. It is hereby agreed by and between the parties hereto that after the
expiry of period of 18 months from the date of the execution of this Agreement
the Licensee shall be entitled to terminate this Agreement by giving six months
advance notice in writing in this
16
<PAGE> 16
behalf to the Licensor. After the expiry of the said period of six months the
Licence hereby granted shall automatically come to an end on such determination
the Licensee shall quit, vacate and handover to the Licensor quiet, vacant and
peaceful possession of the licensed premises in the same good order and
condition as it was at the time of entering into this Agreement, reasonable
wear and tear accepted. Provided, However that if there is any difference or
dispute regarding the damage done to the said premises then in that event the
same shall be referred to an Government approved architect who shall be look
into and decide the quantum of the damage done and the compensation payable in
respect thereof and his decision shall be final and binding by the parties
hereto and the Licensee shall at its own cost and expense restore the said
licensed premises in the same good order and condition as they were at the time
of entering into this Agreement.
14. In the event of the Licensee failing to hand over to the Licensor vacant
possession of the licensed premises on the expiry or sooner determination of
the licence, or the renewal thereof then in that event, without prejudice to
any other right that the Licensor may have against the Licensee, the Licensor
shall be entitled to recover from the Licensee licence fee and/or compensation
at the rate of Rs.39,600/- (Thirty nine thousand six hundred only) per day as
end by way
17
<PAGE> 17
of liquidated damages during the initial period of 3 (three) years and twenty
one days and Rs.47,400-(Forty seven thousand four hundred only) per day as and
by way of liquidated damages for the subsequent period of 3 (three) years till
such time the Licensee vacates and hands over quiet vacant and peaceful
possession of the licensed premises to the Licensor and also pays the damages
as aforesaid for each day the Licensee continue to occupy the licensed premises.
15. It is hereby agreed by and between the parties hereto that the Licensor
shall keep the main key of the licensed premises in escrow with its Advocates
and Solicitors Messrs Kanga and Company and the duplicate thereof shall remain
with the Licensee. The Licensee shall not change the main lock without
obtaining the previous consent in writing of the Licensor. In case the Licensee
changes the main lock, then in that event, the Licensee shall handover to the
Licensor the original key of the lock which the Licensor shall keep the same in
escrow with its Advocate and Solicitors and the duplicate thereof shall be
retained by the Licensee.
16. It is agreed by and between the parties hereto that this Leave and
Licence has been given in pursuance of Section 13A(1), 13(A)(2) and part 11A of
the 1987 amended Bombay Rents (Hotel and Lodging House) Rates Control Act, 1947
which permits giving out of the
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<PAGE> 18
ownership premises on leave and licence and which provides that a Licensee for
residence shall deliver possession of the licensed premises to the Licensor on
expiry of the period of licence and that on the failure of the Licensee to do
so the Licensor shall be entitled to recover possession of the licensed
premises from the Licensee on the expiry of the period of the licence by making
an application to the Competent Authority and Competent Authority, on being
satisfied that the period of the licence has expired, shall pass an order for
eviction of the Licensee and any continuing licensee in possession of the
licensed premises after the expiry of the period of the licence shall render
the Licensee liable to pay damages at double the rate of the licence fee or
discharge for the premises fixed under the agreement of Leave and Licence and
the Licensee agrees that this Agreement of Leave and Licence is subject to the
rights of the Licensor as provided under Section 13(a)(2) of the said Act.
17. It is further agreed by and between the parties hereto that if there is
any change in law governing the licensed premises by way of any act, order,
notification and/or ordinance wherein the Licensee is recognised as the tenant
or deemed to be the tenant of the licensed premises or any superior right is
given to the Licensee then in that event, a day prior to such act, order
notification and/or
19
<PAGE> 19
ordinance this Agreement shall come to an end and the Licensee shall within a
period of 90 days quit, vacate and handover quiet, vacant and peaceful
possession of the Licensed premises to the Licensor. During this period of 90
days the Licensee shall be bound and liable to pay the Licensor compensation
per month as then payable.
18. Any notice intended to be given to the Licensee shall be deemed to be
properly and validly given if it is sent to the Licensee by Registered Post
A.D. to the attention of the Managing Director of the Licensee at licensed
premises and likewise notice meant for the Licensor shall be addressed to and
delivered or sent by Registered Post A.D. to the Licensor's Registered Office
address.
19. Each party shall bear and pay their respective Advocates and Solicitors
costs.
20. This Agreement shall be subject to the jurisdiction of the Courts at
Mumbai.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the day and year first hereinabove written.
20
<PAGE> 20
SIGNED SEALED AND DELIVERED )
by the within named Licensor )
SHREENATHJI BALAJI COMPUTECH )
PRIVATE LIMITED, ) FOR SHREENATHJI BALAJI
COMPUTECH PVT. LTD.
by the hand of its ) /s/ LABASHANKER V. JOSHI
duly authorised signatory ) DIRECTOR
Mr. LABHASHANKER V. JOSHI )
in the presence of . . )
/s/ V. V. MEHTA
VINOD V. MEHTA
[SIGNATURE ILLEGIBLE]
SIGNED SEALED AND DELIVERED )
by the within named Licensee )
REDIFF COMMUNICATION LIMITED )
by the hand of its duly )
authorised signatory )
/s/ Mr. RAJIV WARRIER ) /s/ RAJIV WARRIER
in the presence of . . )
/s/ SN [ILLEGIBLE] )
/s/ SAJIT SUVARNA )
(Sajit Suvarna) )
<PAGE> 21
SHREENATHJI BALAJI COMPUTECH
PRIVATE LIMITED
AND
REDIFF COMMUNICATION LIMITED
LEAVE AND LICENSE AGREEMENT
Dated this 5th day of July, 1999
Messrs. Kanga and Company,
Advocates and Solicitors.
------g:\saa\Rediff.LL
<PAGE> 22
[IMAGE OF TWENTY RUPEES NOTE]
THIS AGREEMENT made and entered into at Mumbai this 5th day of July, One
thousand nine hundred ninety nine: BETWEEN SHREENATHJI BALAJI COMPUTECH PRIVATE
LIMITED a company incorporated and registered under the provisions of Companies
Act, 1956 and having its registered office at 1314, Bharat Niwas, Soonawala
Agiary Lane, Mahim, Mumbai-400 016 hereinafter called "the Licensor" (which
expression shall, unless it be repugnant to the content or meaning thereof,
mean and include its successors in title) of the One Part AND: REDIFF
COMMUNICATION LIMITED a company incorporated and registered under the
provisions of Companies Act,
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<PAGE> 23
1956 and having its registered office at Sterling Centre, 4th floor, Dr. Annie
Besant Road, Worli, Mumbai-400 018 hereinafter called "the Licensee" (which
expression shall, unless it be repugnant to the context or meaning thereof,
mean and include its successors in title and assigns) of the Other Part:
WHEREAS
(1) By and under a Leave and Licence Agreement of even date made between the
parties hereto, the Licensor has permitted the Licensee to use and occupy
the first floor admeasuring in the aggregate 10800 sq. ft. built up area
or thereabouts of the building known as "Mahalaxmi Engineering Estate"
situate at L. J. Road No. 1, Mahim, Mumbai 400 016 (hereinafter called
the "licensed premises") on leave and license basis at or for the
compensation and on the terms and conditions set out in the said Leave
and Licence Agreement;
(2) The term of the license is initially for a period of three years and
twenty one days with an option to renew the license for a further period
of three years;
(3) The Licensee has at the request of the Licensor agreed to deposit with
the Licensor a
2
<PAGE> 24
sum of Rs.71,28,000/- (Rupees Seventy One Lakhs Twenty Eight Thousand
only) as interest free security deposit for the due observance and
performance of the terms and conditions of the Leave and Licence Agreement;
(4) The parties hereto are desirous of recording the understanding arrived at
by between them in the manner hereinafter appearing;
NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE
PARTIES HERETO as under:
1. The Licensee shall simultaneously with the execution of these presents
deposit and keep deposited with the Licensor a sum of Rs.71,28,000/- (Rupees
Seventy One Lakhs Twenty Eight Thousand only) as interest free security deposit
for the due observance and performance of the terms and conditions of the Leave
and Licence Agreement. The said Security Deposit amount of Rs.71,28,000/-
(Rupees Seventy One Lakhs Twenty Eight Thousand only) shall be paid by the
Licensee to the Licensor in the manner following:
(A) Rs.35,64,000/- (Rupees Thirty Five Lakhs Sixty Four Thousand only) shall
be paid by the Licensee to the Licensor on the execution of these presents; and
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<PAGE> 25
(B) Rs.35,64,000/- (Rupees Thirty Five Lakhs Sixty Four Thousand only) shall
be paid by the Licensee to Messrs. Kanga and Company, Advocates and Solicitors
for the Licensor who shall hold the same in escrow for a period of 21 days from
the date of the execution of these presents with liberty to Messrs. Kanga and
Company to release the said sum of Rs.35,64,000/- (Rupees Thirty Five Lakhs
Sixty Four Thousand only) to the Licensor after the expiry of the said period
of 21 days without any reference to the Licensee in that behalf.
2. It is hereby agreed by and between the parties that if the Leave and
Licence Agreement is renewed for a further period of three years then in that
event the Licensee shall deposit and keep deposited with the Licensor a
further sum of Rs.10,69,200/- (Rupees Ten Lakhs Sixty Nine Thousand Two Hundred
only) in addition to the said sum of Rs.71,28,000/- (Rupees Seventy One Lakhs
Twenty Eight Thousand only) so as to make a total deposit of Rs.81,97,200/-
(Rupees Eighty One Lakhs Ninety Seven Thousand Two Hundred only) for the
second term of three years of the license as interest free security deposit for
the due observance and performance of the terms and conditions of the license.
The subsequent amount to be paid as interest free security deposit shall be
paid in advance at least one month prior to the
4
<PAGE> 26
date of the commencement of the Second term of three years. It is hereby agreed
by and between the parties hereto that if the said sum of Rs.10,69,200/-
(Rupees Ten Lakhs Sixty Nine Thousand Two Hundred only) is not paid by the
Licensee to the Licensor one month period to the date of the commencement of
the second term of three (3) years, then in that event, the same shall be
construed as a breach on the part of the Licensee of the terms and conditions
of the Leave and Licence Agreement and on the expiry of the said period of 30
days the Leave and Licence Agreement shall automatically come to an end and the
consequences of termination as set out in the Leave and Licence Agreement shall
follow. Provided However that if before the expiry of the said period of one
month the said additional sum of Rs.10,69,200/- (Rupees Ten Lakhs Sixty Nine
Thousand Two Hundred only) is paid by the Licensee to the Licensor with
interest at the rate of 18% p.a. from the due date to the date of actual
payment, then in that event, the Licensor shall be bound and liable to renew
the licence for a further period of three (3) years on the same terms and
conditions as contained in the Leave and Licence Agreement, Service Agreement
and this Agreement.
3. The Licensee shall also simultaneously with the execution of this
Agreement pay to the Licensor as deposit and keep deposited with the Licensor a
sum of
5
<PAGE> 27
Rs.5,50,000/- (Rupees Five Lakhs Fifty Thousand only) to enable the Licensor to
carry out the work of putting up a false ceiling in the Licensed Premises.
4. The said sum of Rs.5,50,000/- (Rupees Five Lakhs Fifty Thousand only)
shall be refunded by the Licensor to the Licensee together with the interest
free security deposit of Rs.71,28,000/- (Rupees Seventy One Lakhs Twenty Eight
Thousand only) and/or Rs.81,97,200/- (Rupees Eighty One Lakhs Ninety Seven
Thousand Two Hundred only) as the case may be on the expiry or sooner
determination of the Leave and Licence Agreement. However, if the Licensee
terminates the Agreement as per clause 13 of the said Leave and Licence
Agreement then in that event only and not otherwise the Licensor shall not be
entitled to refund the said sum of Rs.5,50,000/- to the Licensee and the
Licensee hereby expressly agrees and consent to the retention of the said sum
of Rs.5,50,000/- (Rupees Five Lakhs Fifty Thousand only) by the Licensor.
5. The amounts kept as security deposit as aforesaid shall not carry any
interest and shall be refunded by the Licensor to the Licensee on the expiry or
sooner determination of the license without interest but after deducting
therefrom such amount as may be found due and payable by the Licensee to the
Licensor as decided by Government approved architect as
6
<PAGE> 28
stipulated in clause 13 of the Leave and Licence Agreement. The parties will
endeavor to see that the said Architect decides the point referred to him
within a period of 20 days from the date of reference. It is further agreed
that said Security Deposit shall be refunded by the Licensor only on the
Licensee vacating and handing over quiet, vacant and peaceful charge of the
said Licensed Premises. The decision of the Government approved Architect in
that behalf shall be final and binding on the parties hereto.
6. It is hereby agreed by and between the parties hereto that if the Licensee
fails to quit, vacate and hand over to the Licensor quiet, vacant and peaceful
possession of the licensed premises on the expiry or sooner determination of
the Licence, then in that event, the Licensor shall be entitled to forfeit the
entire amount of security deposit lying deposited with the Licensor. Provided
however that if within a period of two months from the expiry or sooner
determination of the Licence, the Licensee vacates and hands over to the
Licensor quiet, vacant and peaceful possession of the licensed premises, then
in that event, the Licensor shall refund to the Licensee the security deposit
amount without interest but after deducting therefrom a sum of Rs.39,600/-
(Rupees Thirty Nine Thousand Six Hundred only) per day as and by way of
liquidated damages during the initial period of
7
<PAGE> 29
three years and twenty one days and Rs.47,500/- (Rupees Forty Seven Thousand
Four Hundred only) per day as and by way of liquidated damages for the
subsequent period of three years. The Licensee hereby expressly consents to
such forfeiture and refund of the balance amount from the said security deposit.
7. In the event of the Licensee being ready and willing to hand over to the
Licensor quiet, vacant and peaceful possession of the licensed premises on the
expiry or sooner determination of the license and the Licensor fails, refuses
or is unable to refund the interest free security deposit amount lying with the
Licensor, then in that event, notwithstanding what is provided in the Licence
Agreement and without prejudice to any other right that the Licensee may have
against the Licensor, the Licensee shall not be bound and liable to vacate and
give possession of the licensed premises to the Licensor and the Licensee shall
be entitled to continue and use the Licensed premises for the monthly license
fee of Re.1/- and without being liable to pay any further license fee in
respect of the licensed premises till such time the Licensor refund to the
Licensee the said security deposit amount. In addition to the aforesaid, the
Licensor shall pay interest on the interest free security deposit at the rate
of 18% per annum from the date of default in refunding the interest free
security deposit till the
8
<PAGE> 30
date of the actual payment of the interest free security deposit.
8. It is hereby agreed by and between the parties hereto that if there is any
default in payment under the Leave and Licence Agreement and Service Agreement
of the license fee and service charges on their respective due dates, then in
that event, the Licensor shall have a right to adjust such unpaid license fee
and service charges out of the amount paid as deposit and shall pay the balance
amount of deposit, if any remaining, immediately to the Licensee without
interest but after deducting therefrom such amount that may be found due and
payable by the Licensee to the Licensor on account of license fee and service
charges remaining unpaid and such license fee and service charges shall be
adjusted against the deposit together with interest @ 18% p.a. from the due
date till the date of actual payment.
9. Out of the interest free security deposit, the Licensor shall be entitled
to retain a sum equivalent to the average of last 6 months bills paid for
electricity, water bill, telephone and municipal taxes if any, payable by the
Licensee and which have remained unpaid at least for a period of three months
in respect of the licensed premises. The Licensor shall refund the said sum
after deducting the aforesaid charges and without interest after the expiry of
the
9
<PAGE> 31
said period of three months.
10. It is agreed by and between the parties hereto that if there is any change
in Law governing the Licensed Premises by way of any act, order, notification
and/or ordinance wherein the Licensee is recognized as the tenant or deemed to
be the tenant of the Licensed Premises or any superior right is given to the
Licensee then in that event a day prior to such act, order, notification and/or
ordinance this Agreement shall come to an end and the Licensee shall within a
period of 90 days quit, vacate and hand over quiet, vacant and peaceful
possession of the Licensed Premises to the Licensor against which the Licensor
shall refund the interest free security deposit to the Licensee but after
deducting therefrom such amounts that may be found due and payable by the
Licensee to the Licensor under the Leave and Licence Agreement and Service
Agreement.
11. This Agreement shall run concurrently and shall be co-terminus with the
Leave and Licence Agreement and Service Agreement. In the event of default
being committed by the Licensee in observing and performing any of the terms
and conditions of the said Leave and Licence Agreement or Service Agreement or
in respect of this Agreement, the same shall be construed as a breach on the
part of the Licensee in respect of the said Leave and Licence Agreement and
Service Agreement and the consequences thereof, as
10
<PAGE> 32
provided therein, shall apply irrespective of the fact whether the breach
is in respect of the said Leave and Licence Agreement or Service Agreement
or this Agreement.
IN WITNESS WHEREOF the parties hereto have hereunto set and subscribed
their respective common seals the day and year first hereinabove written.
SIGNED SEALED AND DELIVERED )
by the withinnamed Licensor )
SHREENATHJI BALAJI COMPUTECH ) SHREENATHJI BALAJI COMPUTECH PVT. LTD.
PRIVATE LIMITED )
by the hand of its ) [SIGNATURE ILLEGIBLE]
duly authorized signatory )
Mr. Labhananker V. Joshi ) DIRECTOR
in the presence of V.V. Mehta)
VINOD V. MEHTA
SIGNED SEALED AND DELIVERED )
by the withinnamed Licensee )
REDIFF COMMUNICATION LIMITED )
by the hand of its duly )
authorized signatory )
Mr. Rajiv Warrier )
in the presence of .... )
/s/ Sajit Suvarna
(SAJIT SUVARNA)
S.N. [ILLEGIBLE]
Received of and from the withinnamed)
11
<PAGE> 33
Licensee a sum of Rs.35,64,000/-(Rupees)
Thirty Five Lakhs Sixty Four Thousand )
only) as and by way of part of the )
security deposit paid by the Licensee )
to the Licensor simultaneously with )
the execution of this Agreement as )
as withinmentioned. )) Rs. 35,64,000/-
WITNESS WE SAY RECEIVED
[SIGNATURE ILLEGIBLE] FOR SHREENATHJI BALAJI COMPUTECH PVT. LTD.
[SIGNATURE ILLEGIBLE]
DIRECTOR
(Licensor)
Receiver
Received of and from the withinnamed )
Licensee a further sum of Rs.5,50,000/- )
(Rupees Five Lakhs Fifty Thousand only) )
as and by way of deposit paid by the )
Licensee to the Licensor simultaneously )
with the execution of this Agreement )
as withinmentioned ) Rs.5,50,000/-
WITNESS WE SAY RECEIVED
[SIGNATURE ILLEGIBLE] FOR SHREENATHJI BALAJI COMPUTECH PVT. LTD.
[SIGNATURE ILLEGIBLE]
(Licensor)
DIRECTOR
12
<PAGE> 34
SHREENATHJI BALAJI COMPUTECH
PRIVATE LIMITED
AND
REDIFF COMMUNICATION LIMITED
DEPOSIT AGREEMENT
Dated this 5th day of July 1999
Messrs. Kanga and Company,
Advocates and Solicitors.
-------------- g:\samirediff.dap
<PAGE> 35
[IMAGE OF A TWENTY RUPEE NOTE]
THIS AGREEMENT made and entered into at Mumbai this 5th day of July, One
thousand nine hundred ninety nine: BETWEEN SHREENATHJI BALAJI COMPUTECH PRIVATE
LIMITED a company incorporated and registered under the provisions of Companies
Act, 1956 and having its registered office at 13/14, Bharat Niwas, Soonawala
Agiary Lane, Mahia, Mumbai-400 016 hereinafter called "the Licensor" (which
expression shall, unless it be repugnant to the context or meaning thereof,
mean and include its successors in title) of the One Part AND: REDIFF
COMMUNICATION LIMITED a Company incorporated and registered under the
1
<PAGE> 36
provisions of Companies Act, 1956 and having its registered office at Sterling
Centre, 4th floor, Dr. Annie Besant Road, Worli, Mumbai-0400 018 hereinafter
called "the Licensee" (which expression shall, unless it be repugnant to the
context or meaning thereof, mean and include it successors) of the Other Part:
W H E R E A S
(1) By and under a Leave and License Agreement of even date made between the
parties hereto, the Licensor has permitted the Licensee to use and occupy
the first floor admeasuring in the aggregate 10800 sq. ft. of built up
area or thereabouts of the building known as "Mahalaxmi Industrial Estate"
situate at L. J. Road No. 1, Mahim, Mumbai 400 016 (hereinafter called the
"licensed premises") on leave and license basis for a term of three years
and twenty one days with an option to renew for a further term of three
years at or for the compensation and on the terms and conditions set out
in the said Leave and License Agreement;
(2) The Licensor has agreed to provide to the Licensee certain fixtures,
fittings and amenities in the licensed premises and two car parking spaces
in the compound of the building
2
<PAGE> 37
where the licensed premises are located for the use and enjoyment by the
Licensee as per the details set out in the list annexed hereto and marked
with letter "A";
(3) The Licensor has also agreed to provide watchmen and sweeper to clean
outside area of the licensed premises;
(4) The parties hereto are desirous of recording the understanding arrived at
by and between them in the manner hereinafter appearing;
NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY MUTUALLY AGREED DECLARED
CONFIRMED AND RECORDED BY AND BETWEEN THE PARTIES HERETO AS UNDER:
1. By and under a Leave and License Agreement of even date, the Licensor
has given permission and/or licence to the Licensee to use and occupy the
licensed premises and the Licensor has also agreed to provide amenities and
render services as provided herein.
3. The Licensor has agreed to render amenities and services to the
Licensee such as providing watchman, sweeper (to clean outside area of Licensed
Premises), electrical fixtures and fittings access towards 2 elevators
installed lying and being in the licensed premises and two reserved car parking
spaces in the compound of the building where the licensed premises are located
(hereinafter collectively referred
3
<PAGE> 38
to as "the facilities") and all such other incidental and other services
relating to the use and enjoyment of the licensed premises and concerning and
relating to the aforesaid services. It is hereby agreed by and between the
parties that the Licensor shall use its best endevour to provide the
facilities and services during the tenure of this Agreement. If for any reason
or due to unforeseen circumstances the Licensor is unable to provide the said
facilities or services, the Licensee shall not terminate this Agreement. The
Licensor however shall use its best efforts to reinstate the services which
they have been unable to provide and the Licensee shall in the meantime
continue to pay every month the service charges as hereinafter provided.
3. For the services rendered by the Licensor to the Licensee, the Licensee
shall pay to the Licensor service charges of Rs.1,98,000/- (Rupees One lakh
Ninety Eight thousand only) per month for initial period of three years twenty
one days commencing from 5th day to July, 1999 and ending on 25th July 2002
subject to the deduction of tax at sources applicable. The first of such
service charges shall be paid on the 26th day of July 1999 and the subsequent
payment shall be made on or before the 5th day of each and every succeeding
month and thereafter for the entire duration of the license. In case the
license is renewed for
4
<PAGE> 39
an end and the consequences of termination shall follow and the Licensor shall
be entitled to call upon the Licensee to quit, vacate and hand over to the
Licensor quiet, vacant and peaceful possession of the licensed premises as
contemplated in the Leave and Licence Agreement.
6. This Agreement shall run concurrently with and shall be co-terminus with
the Leave and License Agreement. In the event of default being committed by the
Licensee in observing and performing any of the terms and conditions of the
said Leave and License Agreement and the Deposit Agreement or in respect of
this Agreement, the same shall be construed as a breach on the part of the
Licensee in respect of the said Leave and Licence Agreement and the consequence
thereof, as provided therein, shall apply irrespective of the fact whether the
breach is in respect of the said Leave and Licence Agreement or Deposit
Agreement or this Agreement.
IN WITNESS WHEREOF the parties hereto have hereunto set and subscribed
their respective hands and seals the day and year first hereinabove written.
SIGNED SEALED AND DELIVERED )
by the withinnamed Licensor )
SHREENATHJI BALAJI COMPUTECH )
<PAGE> 40
PRIVATE LIMITED, )
by the hand of its ) FOR SHREEMATHJI BALAJI COMPUTECH PVT. LTD.
duly authorized signatory ) /s/ LABHASHANKER V. JOSHI,
MR. LABHASHANKER V. JOSHI ) DIRECTOR
in the presence of . . . )
- -------------------------------
/s/ VINOD V. MEHTA
- -------------------------------
Vinod V. Mehta
/s/ [SIGNATURE ILLEGIBLE]
- -------------------------------
SIGNED SEALED AND DELIVERED )
by the withinnamed Licensee )
REDIFF COMMUNICATION LIMITED )
by the hand of its duly ) /s/ RAJIV WARRIER
Authorized Signatory )
Mr. Rajiv Warrier )
in the presence of . . . )
/s/SN PHATAPLEKAR
- ------------------------------
SN Phataplekar
/s/ SAJIT SUVARNA
- ------------------------------
Sajit Suvarna
<PAGE> 1
EXHIBIT 10.6
[REDIFF ON THE NET LETTERHEAD]
28th December, 1998
Rediffusion Dentsu, Young & Rubicam Limitedd
Sterling Centre
Shivsagar Estate
Worli, Mumbai 400 018
Dear Sirs,
Consequent to your presentation and our discussions we have pleasure in
appointing you as our exclusive Advertising Agency for a period of two years
beginning from 1st January, 1999 on the terms and conditions given below:
You will develop advertising and communication strategies, prepare and execute
effective and efficient media plans, implement these plans in a timely manner
and monitor the effectiveness of the media buys regularly.
You will be entitled to retain a 10% agency commission on all media and
non-media billing. All creative and artworks created by you will be billed to us
as per your standard tariff schedule approved by us.
All commitments you make on our behalf (including financial commitments) must
have our prior written approval and the persons authorised by us to give such
approvals are:
Name and Designation: Mr. Ajit Balakrishnan, Chairman & CEO
All bills submitted by you will be paid by us within 30 days other than those
assignments that need partial payments like film production, market research
etc.
During the period of this agreement and or subsequent extensions you will
maintain full confidentiality of all our information and plans.
All advertising materials prepared by you and paid for by us will remain our
property and will be handed over to us as and when demanded.
This agreement can be extended with the mutual consent of the parties for such
further period of one year at a time.
<PAGE> 2
This agreement can be extended with the mutual consent of the parties for such
further period of one year at a time.
This agreement and or any extension thereof can be terminated by either of the
parties by giving 90 days notice in writing. On termination, we undertake to
settle all outstanding invoices and work in progress, which has our approval.
Any dispute or claim arising under this agreement shall be subject to the
jurisdiction of the courts in Mumbai.
Regd. Off.: Sterling Centre, 4th Floor, Dr. Annie Besant Road,
Worli, Mumbai 400 018. Tel: (022) 4937313/7308,
4940206/5750, Fax: (022) 4936557.
<PAGE> 3
As a token of your acceptances, please sign and return a copy of this letter.
Thanking you,
Yours faithfully,
Rediff Communication Limited
/s/ [SIGNATURE ILLEGIBLE]
Authorised Signatory
REDIFFUSION DENTSU YOUNG & RUBICAM LTD.
[SIGNATURE ILLEGIBLE]
AUTHORISED SIGNATORY
<PAGE> 1
EXHIBIT 10.7
[IMAGE OF A TWENTY RUPEE NOTE]
PROMOTERS AGREEMENT
THIS AGREEMENT made at Mumbai this 9th day of January 1996 between:
REDIFFUSION ADVERTISING PRIVATE LIMITED being a private limited company
registered under the Companies Act, 1956, having its registered office at
Sterling Center, 4th floor, Dr. Annie Besant Road, Worli, Bombay 400 018
hereinafter referred to as RAPL of the first part;
and
MR. AJIT BALAKRISHNAN of Mumbai Indian inhabitant residing at 26D Sagar
Sangeet, 58, Shahid Bhagatsingh Marg, Colaba Bombay 400 005 hereinafter
referred to as AB of the second
<PAGE> 2
part
And
DIWAN ARUN NANDA of Mumbai Indian Inhabitant residing at 15, Tarangini
Apartments, Veer Savarkar Marg, Bombay 400 025 hereinafter referred to as DAN of
the third part.
WHEREAS:
A. The parties hereto had entered into an agreement dated 1st November 1995
(hereinafter called the "PRIOR AGREEMENT") wherein the Parties had inter
alia recorded their intention to promote and incorporate a limited company
under the provisions of the Companies Act, 1956 to carry on the business of
providing online information services, advertising and publicity and other
services thereof on behalf of their clients with the name Rediff
Communication Private Limited (hereinafter referred to as THE COMPANY) or
such other name as may be permitted by the Registrar of Companies and to
share the expenses and fund the Company in the manner stated in the Prior
Agreement;
B. The Company was incorporated on January 9, 1996.
C. Following the incorporation of the Company, the Parties have been able to
broadly ascertain the quantum of funding that will be required and are now
desirous of recording the same.
NOW IT IS AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:
1. The Parties agree that the sums to be advanced to the Company by the
Parties having regard to the proposed growth and business plan of the
Company shall be capitalized by a sum not exceeding Rs. 2,50,00,000/-
(Rupees two crores fifty lakhs) prior to additional funding from venture
capitalists to other investors or lenders.
2. The Parties agree that they shall hold shares in the Company in the
following ratio inter se prior to additional funding from venture
capitalists or other investors or lenders:
<PAGE> 3
* RAPL 50%
* AB 25%
* AB 25%
3. The sums advanced by the Parties from time to time shall not bear any
interest.
4. This Agreement shall be read in conjunction with the Prior Agreement and
not in derogation to the Prior Agreement.
IN WITNESS WHEREOF the Parties hereto have executed this writing on the day and
the year first hereinabove written.
SIGNED AND DELIVERED by the withinnamed [Signature Illegible]
REDIFFUSION ADVERTISING PRIVATE LIMITED
by its authorized signatory Mr. Ajit
Balakrishnan in the presence of:
SIGNED AND DELIVERED by the withinnamed [Signature Illegible]
AJIT BALAKRISHNAN in the presence of:
SIGNED AND DELIVERED by the withinnamed [Signature Illegible]
DIWAN ARUN NANDA in the presence of:
<PAGE> 1
EXHIBIT 16.1
PATKAR & PENDSE
CHARTERED ACCOUNTANTS
9 & 204, Chartered House, 297/298, Dr. Cawasji Hormasji Street
Next to Queens Road Church, Marine Lines, Mumbai - 400 002
Telephone: 206 0309 - 206 2272. Fax: (91-22) 206 0868
19th May, 2000
Securities and Exchange Commission,
450, Fifth Street, N.W.,
Washington, DC 20549
Ladies and Gentlemen:
I have read the section captioned "Change of Accounts" included in the
Registration Statement on Form F-1 or Rediff.com Limited (the "Registrant")
pursuant to which American Depository Shares representing Equity Shares of the
Registrant will be registered under the Securities Act, 1933, as amended. I am
in agreement with the statement contained in the first sentence of the first
paragraph and in the second paragraph therein. I have no basis to agree or
disagree with other statement of the Registrant contained therein.
Very truly yours,
FOR PATKAR & PENDSE
CHARTERED ACCOUNTANTS
/s/ B.M. PENDSE
B.M. PENDSE
PARTNER
<PAGE> 1
EXHIBIT 23.3
DELOITTE HASKINS
& SELLS
- ---------------- --------------------------------------------------------------
Chartered Accountants Telephone: 91 (22) 285 4330
Malatial House. 283 7006
Backbay Reclamation. Facsimile: 91 (22) 202 4499
Mumbai - 400 020. 202 4337
E-mail: [email protected]
The accompanying financial statements do not give effect to the reverse
split of the Company's capital, which was effected on May 3, 2000 and which will
be reflected in the next Amendment of this Registration Statement. The following
consent is in the form which will be furnished by Deloitte Haskins & Sells upon
such change being made in the Company's financial statements and assuming that
from May 3, 2000 to the date of the next Amendment filed no other material
events have occurred that would affect the accompanying financial statements,
the required disclosures therein or our Independent Auditors' Report.
/s/ DELOITTE HASKINS & SELLS
Dated: May 18, 2000
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Rediff.com India
Limited on Form F-1 of our report dated May 3, 2000 appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected
Financial Data", "Summary Financial Data" and "Experts" in such Prospectus.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REDIFF.COM INDIA LIMITED AS OF AND FOR THE YEAR ENDED
MARCH 31, 2000 INCLUDED IN THIS REGISTRATION STATEMENT ON FORM F-1 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 11,575,827
<SECURITIES> 0
<RECEIVABLES> 877,605
<ALLOWANCES> 73,325
<INVENTORY> 0
<CURRENT-ASSETS> 14,134,586
<PP&E> 2,142,585
<DEPRECIATION> 352,911
<TOTAL-ASSETS> 16,061,872
<CURRENT-LIABILITIES> 3,340,053
<BONDS> 0
0
0
<COMMON> 1,236,913
<OTHER-SE> 11,484,906
<TOTAL-LIABILITY-AND-EQUITY> 16,061,872
<SALES> 432,709
<TOTAL-REVENUES> 1,906,100
<CGS> 403,654
<TOTAL-COSTS> 952,559
<OTHER-EXPENSES> 7,868,620
<LOSS-PROVISION> 94,288
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,662,241)
<INCOME-TAX> (3,456)
<INCOME-CONTINUING> (6,665,697)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,665,697)
<EPS-BASIC> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
