1
Exhibit 10.4
Joint Venture Letter Agreement
January 19, 1996
The Open Society Institute
000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Chatterjee Fund Management, L.P.
000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
We refer to that certain Senior Note Purchase Agreement (the "Note
Purchase Agreement"), dated as of the date hereof, and executed among the
undersigned (the "Company"), the Open Society Institute ("OSI") and Chatterjee
Fund Management, L.P. ("CFM"). Capitalized terms used herein but not defined
herein shall have the meanings ascribed to such terms in the Note Purchase
Agreement.
The parties hereto affirm and agree that they shall exercise their
best efforts to, promptly after the Closing, enter into a joint venture
agreement, the terms of which shall include the following:
OSI, CFM and the Company will establish a joint venture (the "Joint
Venture") to review and provide financing for investment opportunities
throughout Asia, excluding the countries of the former Soviet Union (the
"Territory"). The Company will act as the operating partner of the Joint
Venture and will make available to the Joint Venture all existing and new
business opportunities of the Company and its subsidiaries applicable to the
Territory ("Ventures") for a time period of at least five years following the
establishment of the Joint Venture, with an option exercisable by either OSI or
CFM to extend such time period for an additional five years. If, during such
time period, both OSI and CFM jointly refuse to invest in the same five
Qualifying Proposals (as defined below), and the Company makes a Qualifying
Investment in each of such five Qualifying Proposals, the Company's obligation
to present Ventures to the Joint Venture shall cease. To constitute a
"Qualifying Proposal," each proposal must meet all of the following criteria:
(i) the proposal shall be submitted to each of OSI and CFM in writing; (ii)
both OSI and CFM shall be given an opportunity to propose reasonable changes to
the
2
2
proposal, which the Company will consider in good faith and (iii) both OSI and
CFM shall have 30 days to consider the proposal, which time period will be
extended by the time taken by the Company to review OSI's or CFM's proposed
changes. To constitute a Qualifying Investment, each investment made by the
Company must be (i) in an amount of not less than $5 million; (ii) consummated
within 90 days of OSI's and CFM's decision, communicated to the Company in
writing, not to invest and (iii) made by the Company on the same terms as were
offered to OSI and CFM. In the event the Company's investment is not made
within such 90 day period or if the Company's investment is to be made on terms
materially different from those offered to OSI and CFM, the Company shall
resubmit the proposal to both OSI and CFM for consideration.
Except for China, both OSI and CFM will have the right to acquire in
aggregate up to a 50% interest in each Venture. With respect to China, (i)
neither OSI nor CFM will be entitled to participate in those Ventures that the
Company has consummated as of the date hereof, which Ventures are set forth on
Exhibit B-1; (ii) OSI and CFM will be entitled to acquire in the aggregate up
to a 25% interest in Ventures that the Company is currently actively
negotiating, which Ventures are set forth on Exhibit B-2 and (iii) both OSI and
CFM will be entitled to acquire in the aggregate up to a 50% interest in all
other Ventures. In all cases in which either OSI or CFM participates in a
Venture, its investment will be on the same basis (i.e., cost) as that made by
the Company. The Company will provide to both OSI and CFM all information the
Company receives, acquires and/or prepares with respect to each proposed
Venture. If, after review of all the factors involved and completion of its
diligence review of a proposed Venture, both OSI and CFM decline to invest in
such Venture, or if both OSI and CFM decline to commence such a review in a
timely fashion, the Company will be free to seek other outside capital
therefor. The fact that either OSI or CFM shall decline to invest in a Venture
(or shall decline to commence a diligence review of a Venture) shall not waive
either OSI's or CFM's right to invest in any subsequent Venture affiliated with
the one that had been declined. The Joint Venture will be organized with a
joint board on which the Company will have a majority of members and day-to-day
management control, provided that fundamental issues (including, without
limitation, mergers, acquisitions, sales of assets and restructurings) will
require the consent of all parties. The Company will exercise day-to-day
management control over the Ventures.
3
3
Notwithstanding the foregoing, commencing on the date hereof until the
execution date of the joint venture agreement, the Company shall make available
to OSI and CFM all Ventures on the terms and conditions described above,
provided that such obligation of the Company shall extend for a time period of
five years from the date hereof, which time period may be extended for an
additional five years by either OSI or CFM. This agreement shall be binding on
the Parties hereto until the execution and delivery of a final joint venture
agreement.
Without in any way limiting the rights of OSI and CFM to make
investment decisions independently, the Company may submit information and
written proposals with respect to Ventures and Qualifying Proposals to The
Chatterjee Group ("TCG") on behalf of OSI and CFM, and the Company may rely on
communications received by it in writing from The Chatterjee Group with respect
to the respective positions and decisions of each of OSI and CFM.
4
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York and may be executed in counterparts by
the parties hereto, each of which counterparts shall be an original and all of
which taken together shall constitute one and the same letter agreement.
Very truly yours,
Global TeleSystems Group, Inc.
By: /s/ XX Xxxxxxxxx
----------------------------------
Name: XX Xxxxxxxxx
Title: Vice President - General Counsel
Accepted and Agreed to by:
The Open Society Institute
By: /s/ XXXXX XXXXX
-------------------------------
Name: Xxxxx Xxxxx
Chatterjee Fund Management, L.P.
By: X. Xxxxxxxxxx
-------------------------------
Name: X. Xxxxxxxxxx
5
EXHIBIT B-1
Existing Ventures in China:
V-Tech: Shanghai VSAT Business
Global Tongda opportunities:
People's Daily: National Data Network
Guangdong Paging: Paging opportunity in Guangdong Province
6
EXHIBIT B-2
Ventures Under Active Negotiations:
Global Tongda opportunities:
Hubei CATV: CATV, data, voice opportunity in Hubei Province
Intelligent Buildings: Value-added services opportunity in Guangdong
Province
800 Mhz-Guangdong: Mobile communications opportunity in Guangdong
China International Travel Services Group: VSAT-based network servicing the
travel industry
Zhanjiang Cellular: 80O Mhz cellular opportunity in partnership with the
People's Liberation Army and Shanghai Intelligence Engineering, Inc.
Wuxi Cellular: GSM cellular opportunity in Wuxi (near Shanghai)
