EXHIBIT 10.72
Dated 24 September 2004
HTI (1993) Holdings Limited
(a company incorporated in the British Virgin Islands)
▇▇▇▇▇▇▇▇▇ Telecom (BVI) Limited
(a company incorporated in the British Virgin Islands)
▇▇▇▇▇▇▇▇▇ Whampoa Limited
(a company incorporated in Hong Kong)
ETH PASS THROUGH AGREEMENT
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Telephone (▇▇▇) ▇▇▇▇ ▇▇▇▇
Facsimile (▇▇▇) ▇▇▇▇ ▇▇▇▇/2810 1695
Ref L-069967
This Agreement is made on 24 September 2004 between
(1) HTI (1993) HOLDINGS LIMITED, formerly named ▇▇▇▇▇▇▇▇▇ Telecommunications
International Limited, a company incorporated in the British Virgin
Islands ("Transferor");
(2) ▇▇▇▇▇▇▇▇▇ TELECOM (BVI) LIMITED, a company incorporated in the British
Virgin Islands ("Transferee"); and
(3) ▇▇▇▇▇▇▇▇▇ WHAMPOA LIMITED, a company incorporated in Hong Kong ("HWL").
BACKGROUND
(A) The Transferor wishes to pass through to the Transferee the benefit of
all of the Relevant Termsheet Rights and the burden of all of the
Relevant Termsheet Obligations.
(B) The Transferee has agreed to accept the benefit of all of the Relevant
Termsheet Rights and the burden of all of the Relevant Termsheet
Obligations.
(C) The Transferor and the Transferee have entered into this Agreement to
set out the terms of the pass through of such Relevant Termsheet Rights
and Relevant Termsheet Obligations.
(D) Pursuant to its obligations under the Termsheet, the Transferor has
procured the provision by HWL of the Guarantees.
(E) The Transferee has agreed to indemnify HWL against any loss it may incur
as a result of it being obliged to make any payment under the
Guarantees.
(F) As consideration for the Transferee agreeing to indemnify HWL against
losses incurred under the Guarantees, HWL has agreed to pass on to the
Transferee the benefit of the Subrogation Agreement Rights.
1 DEFINITIONS AND INTERPRETATION
1.1 Definitions: In this Agreement, the words and expressions set out below
shall, unless the context otherwise requires, have the meanings
attributed to them below:
"Agreement" means this agreement including the Schedule hereto, as the
same may be amended or supplemented from time to time.
"BL" means Bayerische Landesbank, Hong Kong Branch.
"BL Facility Agreement" means the US$36,200,000 standby letter of credit
facility agreement dated 16 December 2003 between BL and ETH.
"BL Guarantee" means the guarantee dated 19 December 2003 issued by HWL
in favour of BL in relation to the BL Facility Agreement.
"BL Subrogation Agreement" means the subrogation agreement dated 19
December 2003 between ETH, GE Capital Services India Limited, BL and
HWL.
"CL" means CALYON, Hong Kong Branch.
"CL Facility Agreement" means the US$217,000,000 standby letter of
credit facility agreement dated 25 June 2004 between CL and ETH.
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"CL Guarantee" means the guarantee dated 25 June 2004 issued by HWL in
favour of CL in relation to the CL Facility Agreement.
"CL Subrogation Agreement" means the subrogation agreement dated 25 June
2004 between ETH, GE Capital Services India Limited, CL and HWL.
"Confidential Information" has the meaning set out in Clause 9.1.
"Effective Date" has the meaning set out in Clause 2.2.
"ETH" means Essar Teleholdings Limited.
"Facility Agreements" means the BL Facility Agreement and the CL
Facility Agreement.
"Guarantee" means the BL Guarantee and the CL Guarantee.
"Hong Kong" means the Hong Kong Special Administrative Region of the
People's Republic of China.
"Listings" means the listing of securities in ▇▇▇▇▇▇▇▇▇
Telecommunications International Limited, a company incorporated in the
Cayman Islands, on the Stock Exchange of Hong Kong and/or the New York
Stock Exchange.
"New York Stock Exchange" means New York Stock Exchange, Inc.
"Relevant Termsheet Obligations" means the obligations of the Transferor
under the Termsheet which have not expired or been satisfied as at the
date of this Agreement, the principal terms of which are set out in the
Schedule.
"Relevant Termsheet Rights" means the rights, title, interest and
benefit of the Transferor accruing under the Termsheet from the date of
this Agreement, including all claims, proceeds of any claims, awards,
judgments and all moneys which may at any time be paid or become payable
to the Transferor under or in respect of the Termsheet, the principal
terms of which are set out in the Schedule.
"SEC" means the US Securities and Exchange Commission.
"SFC" means the Securities and Futures Commission in Hong Kong.
"Stock Exchange of Hong Kong" means The Stock Exchange of Hong Kong
Limited.
"Subrogation Agreements" means the BL Subrogation Agreement and the CL
Subrogation Agreement.
"Subrogation Agreement Rights" means the rights of HWL against ETH under
the Subrogation Agreements.
"Termsheet" means the termsheet dated 5 July 2003 between the
Transferor, ETH and ▇▇▇▇ ▇▇▇▇▇▇ Telematics Limited.
1.2 CONSTRUCTION
1.2.1 Any reference in this Agreement to:
(i) a "Clause" or a "Schedule" is a reference to a Clause or
Schedule of this Agreement.
(ii) "law" includes common or customary law and any
constitution, decree, judgment, legislation, order,
ordinance, regulation, statute, treaty or other
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legislative measure, in each case wherever made (and
"lawful" shall be construed accordingly).
(iii) a "person" includes any person, firm, company,
corporation, government state or agency of a state or
any association, trust or partnership (whether or not
having separate legal personality) or two or more of the
foregoing;
(iv) a "regulation" includes any regulation, rule, official
directive, request or guideline (whether or not having
the force of law) of any governmental, intergovernmental
or supranational body, agency, department or regulatory,
self-regulatory or other authority or organisation.
1.2.2 Clause headings are for ease of reference only.
2 EFFECTIVE DATE
2.1 Subject to Clause 2.2, this Agreement shall become effective from the
date it is signed by all the parties.
2.2 Clauses 3 to 8 (inclusive) shall only become effective upon the first
date (the "Effective Date") upon which all of the following events have
occurred:
2.2.1 this Agreement has been validly signed by all the parties; and
2.2.2 the Listings.
3 NOVATION OF TERMSHEET
3.1 CONSENT TO NOVATION
If instructed by the Transferee in writing, the Transferor shall take
such action as the Transferee may reasonably request and shall use
reasonable endeavours to procure the agreement of all counterparties to
the Termsheet to the novation of the Termsheet in favour of the
Transferee and the substitution of the Transferee for the Transferor as
a party to the Termsheet.
3.2 EXECUTION OF DOCUMENTS
If all relevant counterparties consent to a novation pursuant to Clause
3.1 (Consent to novation) above, the Transferor and the Transferee shall
execute such documentation as is necessary so as to effect that
novation.
4 PASS THROUGH OF RELEVANT TERMSHEET RIGHTS AND RELEVANT TERMSHEET
OBLIGATIONS
Prior to the novation of the Termsheet pursuant to Clause 3.2 (Execution
of documents) above:
4.1 the Transferee shall (insofar as it may lawfully do so) perform the
Relevant Termsheet Obligations or take such action as is necessary to
enable the Transferor to perform the Relevant Termsheet Obligations;
4.2 the Transferor shall (insofar as it may lawfully do so and provided it
is reasonable and practicable to do so) act under the direction of the
Transferee in all matters relating to the Termsheet;
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4.3 the Transferor shall co-operate in any reasonable arrangements proposed
by the Transferee designed to enable the Transferee to enjoy the benefit
of the Relevant Termsheet Rights, including enforcement, at the cost of
and for the account of the Transferee, of all rights of the Transferor
against the other parties to the Termsheet; and
4.4 the Transferor shall hold the Relevant Termsheet Rights on trust for the
Transferee absolutely and shall account to the Transferee for any sums
or other benefits received by the Transferor in relation to the
Termsheet immediately upon identification that such sums or benefits are
due to the Transferee.
5 FORM OF DOCUMENTS
5.1 The Transferor represents to the Transferee that the contents of the
Schedule represent a fair and accurate summary of the principal terms of
the Relevant Termsheet Rights and the Relevant Termsheet Obligations as
at the date of this Agreement.
5.2 The Transferor covenants in favour of the Transferee that it shall not
agree to any amendment to (including, without limitation, any waiver or
forbearance of) the Termsheet, the Relevant Termsheet Rights or the
Relevant Termsheet Obligations without the prior written consent of the
Transferee, such consent not to be unreasonably withheld or delayed.
5.3 HWL represents to the Transferee that the copies of the Subrogation
Agreements and the Facility Agreements provided by HWL to the Transferee
on or before the date of this Agreement are true and up to date copies
as at the date of this Agreement.
5.4 HWL covenants in favour of the Transferee that it shall not agree to any
amendment to (including, without limitation, any waiver or forbearance
of) the Subrogation Agreements or the Facility Agreements without the
prior written consent of the Transferee, such consent not to be
unreasonably withheld or delayed.
6 INDEMNITIES IN RELATION TO GUARANTEES
6.1 For valuable consideration, the sufficiency of which the Transferee
hereby acknowledges, the Transferee unconditionally and irrevocably
agrees to indemnify HWL against any and all payments, actions, claims,
demands, suits, proceedings, losses, liabilities, damages, penalties,
costs, charges and expenses of whatever nature which may result or which
it may sustain, suffer or incur in connection with or arising in any way
whatsoever out of its acting as guarantor under a Guarantee, and to pay
to HWL forthwith on demand all moneys and liabilities whatsoever which
may from time to time be claimed or demanded from HWL or which it shall
pay or become liable to pay or sustain, suffer or incur under or by
reason of or in connection with the relevant Guarantee.
6.2 HWL is hereby further irrevocably authorised and empowered to pay
immediately any amounts demanded from HWL or which HWL from time to time
becomes liable to pay under or by reason of or in connection with a
Guarantee without any reference to or further authority from the
Transferee. Any request or demand received by HWL in connection with a
Guarantee shall constitute conclusive evidence as between the Transferee
and HWL that HWL's liability under that Guarantee has accrued and shall
constitute conclusive authority by the Transferee to HWL for making any
payment requested or demanded. The Transferee shall be bound and liable
to HWL therefore and HWL shall be at liberty to make such payment
without being under any duty to enquire whether any request or demand on
HWL has been properly made, irrespective of notice or knowledge of
dispute or denial of
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the validity of any such request or demand, and the Transferee shall not
be entitled to deny or challenge HWL's authority in the making of such
payment nor to set up any defence of any nature whatsoever.
7 PASS THROUGH OF SUBROGATION AGREEMENT RIGHTS
Provided the Transferee has indemnified HWL and paid to HWL all amounts
demanded by HWL in each case under Clause 6 above, HWL agrees that it
shall:
7.1 insofar as it may lawfully do so and provided it is reasonable and
practicable to do so, act under the direction of the Transferee in all
matters relating to the Subrogation Agreements;
7.2 co-operate in any reasonable arrangements proposed by the Transferee
designed to enable the Transferee to enjoy the benefit of the
Subrogation Agreement Rights, including enforcement, at the cost of and
for the account of the Transferee, of all rights of HWL against the
other parties to the Subrogation Agreements; and
7.3 hold the Subrogation Agreement Rights on trust for the Transferee
absolutely and shall account to the Transferee for any sums or other
benefits received by HWL in relation to the Subrogation Agreements
immediately upon identification that such sums or benefits are due to
the Transferee.
8 FURTHER INDEMNITIES
8.1 HWL agrees to indemnify the Transferee for any loss, cost or expense
incurred by the Transferee as a result of a breach by HWL of its
obligations under this Agreement, except to the extent that the
Transferee incurs such loss, cost or expense as a result of its gross
negligence or wilful misconduct.
8.2 The Transferee agrees to indemnify HWL for any loss, cost or expense
incurred by HWL in the performance of its obligations under this
Agreement, except to the extent that HWL incurs such loss, cost or
expense as a result of a breach by HWL of its obligations under this
Agreement or HWL's gross negligence or wilful misconduct.
8.3 The Transferee agrees to indemnify the Transferor for any loss, cost or
expense incurred by the Transferor in relation to the Termsheet and/or
in the performance of its obligations under this Agreement, except to
the extent that the Transferor incurs such loss, cost or expense as a
result of a breach by the Transferor of its obligations under this
Agreement or the Transferor's gross negligence or wilful misconduct.
8.4 The Transferor agrees to indemnify the Transferee for any loss, cost or
expense incurred by the Transferee as a result of a breach by the
Transferor of its obligations under this Agreement, except to the extent
that the Transferee incurs such loss, cost or expense as a result of its
gross negligence or wilful misconduct.
9 CONFIDENTIALITY
9.1 Each party undertakes that it shall not reveal, and shall cause its
directors, senior executives, employees and agents not to reveal, to any
third party any information concerning the transactions contemplated
hereunder and/or the contents hereof (collectively, "Confidential
Information") without the prior written approval of the other parties
hereto, except in respect of any disclosure made in any public offering
document in connection with the Listings.
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9.2 Nothing in this Clause shall prevent a party hereto from using or
disclosing any Confidential Information which (a) is already known by
such party at the time it is disclosed to it; (b) has been rightfully
received by such party from a third party without a breach of an
obligation of confidentiality; (c) is in the public domain through no
wrongful act of such party; (d) is independently developed by such party
without use, directly or indirectly, of the Confidential Information; or
(e) subject to Clauses 9.3 to 9.5 below, is required to be disclosed by
applicable law, regulation or legal process or by judicial order.
9.3 Notwithstanding anything contained in this Agreement, each party
acknowledges and agrees that the other parties may be required by law or
any competent regulatory body (including but without limitation the
Stock Exchange of Hong Kong, the SFC, the New York Stock Exchange and
the SEC) to issue time sensitive and urgent announcements relating to
this Agreement or matters contemplated under this Agreement. Each party
may, if and when the time frame prescribed by the relevant competent
regulatory body does not reasonably and practically allow the seeking of
consent of the other parties, issue such time sensitive and urgent
announcements without the consent of the other parties but shall procure
to be provided to the other parties drafts of such time sensitive and/or
urgent announcements, and shall consider in good faith any comments
provided to it by the other parties to the extent reasonably practicable
within the time frame stipulated by the relevant competent regulatory
body.
9.4 Subject to Clause 9.3 above, each party acknowledges and agrees that the
other party may make announcements (save and except those referred to in
Clause 9.3) and/or press releases relating to this Agreement or matters
contemplated under this Agreement on or after the date of this
Agreement, provided that the contents of such announcement or press
release are agreed and approved prior to its issuance by the other party
(which approval shall not be unreasonably withheld or delayed and shall
be given as soon as practicable). Each party shall procure to be
provided to the other parties each draft of such relevant announcement
or press release and if the other parties do not revert to the other
parties within a reasonable period of time from the receipt of the
aforesaid announcement or press release, such party shall be deemed to
have approved the contents of the said announcement or press release for
the above purpose.
9.5 For the avoidance of doubt and notwithstanding anything contained
herein, any circular required to be issued and dispatched by a party to
this Agreement by law or any competent regulatory body (including but
without limitation the Stock Exchange of Hong Kong, the SFC, the New
York Stock Exchange and the SEC) to the extent it relates to the
involvement of the other parties under this Agreement are subject to the
other parties' prior approval, such approval shall not be unreasonably
withheld or delayed and shall be given as soon as practicable.
10 COSTS AND EXPENSES
Each party shall bear its own costs and expenses in connection with its
entry into this Agreement.
11 PARTIAL INVALIDITY
If, at any time, any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under any law of any
jurisdiction, neither the legality, validity or enforceability of the
remaining provisions nor the legality, validity or enforceability of
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such provision under the law of any other jurisdiction will in any way
be affected or impaired.
12 REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of any
party, any right or remedy under this Agreement shall operate as a
waiver, nor shall any single or partial exercise of any right or remedy
prevent any further or other exercise or the exercise of any other right
or remedy. The rights and remedies provided in this Agreement are
cumulative and not exclusive of any rights or remedies provided by law.
13 ENTIRE AGREEMENT
13.1 This Agreement sets out the entire agreement and understanding between
the parties with respect to the subject matter of it.
13.2 Neither of the parties has relied on or has been induced to enter into
this Agreement in reliance on any representation, warranty or
undertaking which is not set out in this Agreement.
14 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and this
has the same effect as if the signatures on the counterparts were on a
single copy of the Agreement.
15 NOTICES
15.1 Delivery: Any notice or other communication required to be given by one
party to another party under this Agreement shall be in writing and
shall be deemed to have been delivered if sent to the recipient at the
address or fax number specified in the signature pages of this
Agreement, marked for the attention of the person(s) specified or such
other address or fax number or such other person(s) as may be notified
to the other parties to this Agreement in writing by the recipient.
15.2 Deemed Delivery: Any notice or demand sent by post as provided in this
Clause shall be deemed to have been given, made or served three (3) days
(in the case of inland post) or seven (7) business days (in the case of
overseas post) after despatch, any notice sent by courier as provided in
this Clause shall be deemed to have been given, made or served at the
time of delivery and any notice sent by fax as provided in this Clause
shall be deemed to have been given, made or served 24 hours after
despatch and receipt of confirmation of error-free transmission (if such
fax is received during business hours and, if not, on the next business
day in the place of receipt).
15.3 Language: Each communication and document made or delivered by one party
to another pursuant to this Agreement shall be in the English language.
16 GOVERNING LAW & Jurisdiction
16.1 Governing Law: This Agreement shall be construed and interpreted in
accordance with the laws of Hong Kong.
16.2 Jurisdiction: Each party to this Agreement irrevocably agrees that the
courts of Hong Kong shall have non-exclusive jurisdiction to hear and
determine any suit, action or
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proceeding, and to settle any disputes, which may arise out of or in
connection with this Agreement ("Proceedings") and, for such purposes,
irrevocably submits to the non-exclusive jurisdiction of such courts.
16.3 Waiver of Objection: Each party to this Agreement irrevocably waives any
objection to the courts of Hong Kong being nominated as the forum to
hear and determine any suit, action or proceeding, and to settle any
disputes, which may arise out of or in connection with this Agreement.
16.4 SERVICE OF PROCESS:
16.4.1 Each party irrevocably consents to any process in any
Proceedings anywhere being served by mailing a copy by post to
it in accordance with Clause 15 (Notices). Such service shall
become effective 30 days after mailing.
16.4.2 Nothing shall affect the right to serve process in any other
manner permitted by law.
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In witness whereof the parties or their authorised representatives have set
their hands the day and year first above written.
HTI (1993) HOLDINGS LIMITED /s/ ▇▇▇▇▇ ▇▇▇▇
By: ▇▇▇▇▇ ▇▇▇▇
Address: ▇▇/▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Fax No: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Attention: Company Secretary
▇▇▇▇▇▇▇▇▇ TELECOM (BVI) LIMITED /s/ ▇▇▇▇▇ ▇▇▇▇
By: ▇▇▇▇▇ ▇▇▇▇
Address: 18/F, Two HarbourFront, ▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇
Fax No: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Attention: Company Secretary
▇▇▇▇▇▇▇▇▇ WHAMPOA LIMITED /s/ ▇▇▇▇▇▇▇ ▇▇▇
By: ▇▇▇▇▇▇▇ ▇▇▇
Address: ▇▇/▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Fax No: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Attention: Company Secretary
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SCHEDULE
Parties Essar Teleholdings Limited ("ETH");
▇▇▇▇▇▇▇▇▇ Telecommunications International Limited ("HTIL"); and
▇▇▇▇ ▇▇▇▇▇▇ Telematics Limited ("Telematics")
Background A. The parties, either directly or through subsidiaries,
are parties to a shareholders agreement dated 2 May 2000
("HETL Shareholders Agreement") for cellular mobile
services in Delhi operating under ▇▇▇▇▇▇▇▇▇ Essar
Telecom Ltd. ("HETL ") and have entered into a term
sheet in June 2001 (4th Licence Term Sheet") for
▇▇▇▇▇▇▇▇▇ Essar South Limited ("HESL"), the joint
venture vehicle holding cellular mobile licences in
Karnataka, Andhra Pradesh and Chennai .
B. The parties recognise that ETH has been transferred
certain rights of first refusal in respect of HTIL's
existing partners interests in ▇▇▇▇▇▇▇▇▇ ▇▇▇ Telecom
Private Limited ("HMTL") pursuant to a letter of
intention of ongoing relationship of 2 May 2002.
C. HTIL together with Telematics and IndusInd Telecom
Network Limited, own all the issued share capital in
Fascel Limited ("Fascel"), a cellular mobile licence
holder for Gujarat.
D. HTIL and Telematics own all the issued share capital in
▇▇▇▇▇▇▇▇▇ Telecom East Limited ("HTEL"), a cellular
mobile licence holder in Calcutta.
E. ETH owns or controls all the issued share capital in
Aircel Digilink India Limited ("▇▇▇▇"), a cellular
mobile licence holder for Haryana, Uttar Pradesh East
and Rajasthan.
F. HESL has entered into an agreement to purchase a
cellular mobile licence for Punjab (the "Punjab
Licence")
G. It is the intention of the parties to consolidate the
above cellular operations on the basis of this term
sheet.
Structure Stage 1 - Consolidation
The parties agree to combine the operations of HMTL, HETL, HESL
(including the Punjab Licence), Fascel, HTEL and ▇▇▇▇
("Operating Companies"), by way of transfer of their shares in
the Operating Companies to an Indian holding company ("HoldCo")
in return for shares in HoldCo.
The parties shall use their best endeavours to procure the other
shareholders of the Operating Companies transfer their shares to
HoldCo and take shares in HoldCo on the same terms as those
offered to the parties.
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In the event that the parties are unable to procure such
shareholders to participate in the consolidation then: (i) the
consolidation will take place with those shareholders that are
willing to transfer their shares to HoldCo; and
(ii) the exact structure of HoldCo's ownership will be reviewed
to ensure that there is no breach of India's sectoral cap on
foreign holdings in telecommunications and if such a breach
could be a possibility then the parties shall agree suitable
variations to HoldCo's ownership structure to ensure compliance
with the sectoral cap and protect the interest of the parties as
equitably as possible.
The valuation of such transfers and the amount of shares to be
issued by HoldCo will be as per the agreed valuation
("Valuation"). The date for Valuation shall be 31 December 2002
and the Valuation shall be based on 31 December 2002 accounts.
STAGE 2- IPO
It is the intention of the parties, subject to commercial
factors and prevailing market conditions to undertake an IPO of
HoldCo's shares on or before 31 December 2004.
STAGE 3 - MERGER
Subject to advice from the investment banking advisors of the
parties, it is believed that the optimal structure for HoldCo
and its subsidiaries will be a single entity formed by the
merger of the subsidiaries into HoldCo by way of Indian court
approved scheme of arrangement. The decision regarding when to
undertake such a merger will be taken by the parties in due
course.
▇▇▇▇ Interim HTIL and Telematics shall, on the date of the transfer of ▇▇▇▇
Measures shares to HTEL, immediately procure the appointment of 3 of the
9 directors on the HTEL board to be ETH nominees and obtain the
approval of all HTEL shareholders to the above. From the date of
appointment of the ETH directors to the HTEL board, the
operations and management of HTEL and ▇▇▇▇ shall be governed by
the same provisions as those contained in the HETL Shareholders
Agreement.
The parties acknowledge that the valuation for ▇▇▇▇ excludes the
refund of licence fees that ▇▇▇▇ will receive from the DoT as a
result of the 6 month extension of "Effective Date" and the
Supreme Court decision dated 4th March 2003. The parties have
agreed that such refund will be deemed to be an asset of
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ETH and not ▇▇▇▇ and upon receipt of such refund by ▇▇▇▇ it
shall be paid to ETH.
Options 1. HMTL
ETH has the option ("HMTL Option"), if HTIL's joint venture
partners (Distacom in ▇▇▇▇▇▇▇▇▇ Telecommunications (India)
Limited, Caymans and Max Televentures in HMTL) wish to sell
their respective stakes in HMTL, to purchase such stakes from
HTIL or have HTIL waive its rights of first refusal, if ETH
agrees to purchase direct.
In consideration of the HMTL Option and upon completion of such
purchase by ETH or any third party nominated by ETH, ETH shall
waive its rights under clause 8 (b) (ii) of the HETL
Shareholders Agreement to have a deemed equal equity valuation
for HETL and HMTL for the purpose of consolidation.
The parties have agreed the shareholding percentage of HoldCo to
be transferred to ETH because of the deemed equal valuation( the
"Equal Valuation Stake"). In the event that ETH exercises the
HMTL Option, or part thereof, ETH shall simultaneously transfer
to HTIL or its nominee shares equivalent to the Equal Valuation
Stake (or 2/3rds of the Equal Valuation Stake if the HMTL Option
is exercised only in respect of Distacom or 1/3rd of the Equal
Valuation Stake if the HMTL Option is exercised only in respect
of Max India).
2. PUNJAB LICENCE
US$40 million will be required as equity contribution. HTIL and
ETH agree to contribute US$30 million and US$10 million
respectively within 3 months of the completion date of such
purchase ("Subscription Expiry Date"). The parties acknowledge
that the valuation of HESL (and accordingly, the parties' stakes
in HoldCo) is on the basis that the above equity will be
contributed and have calculated their shareholdings in HoldCo
accordingly.
In the event that ETH does not contribute its required equity by
the Subscription Expiry Date, then HTIL has the option to
contribute ETH's share within 30 days of the Subscription Expiry
Date in resturn for an agreed percentage in HoldCo.
If ETH does not make its equity contribution and HTIL does not
exercise its option to contribute ETH's share within 30 days of
the Subscription Expiry Date, HoldCo shall, at its discretion,
either cancel, buy back or transfer to any other shareholder of
HoldCo, the percentage of the issued share
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capital of HoldCo held by ETH which HTIL had the option to
acquire.
3. OTHER OPPORTUNITIES
The parties agree that if any of them become aware of
opportunities to purchase any company holding a cellular mobile
licence in India, they will first offer such opportunity to
HoldCo. HoldCo shall have 20 days from the date of such offer to
confirm whether it wishes to pursue such opportunity. If the
Parties do agree to pursue such opportunity, they shall ensure
such purchase is carried out by HoldCo .
The costs of such purchase and development of the business
(including rollout of any network required) will be borne by the
parties, by subscribing to further equity in HoldCo to be valued
at fair market value, pro rata to their shareholding in HoldCo
on a debt/equity ratio to be agreed, or failing agreement a
ratio of 1:1.
If any of the parties (or any other shareholder of HoldCo ) does
not contribute its share of the equity required for such
purchase and/or development, then such party (or shareholder)
will be diluted accordingly as per the provisions applicable to
any pro rata share issue in respect of HoldCo.
It is agreed that HoldCo may only pursue such other
opportunities with unanimous consent of the parties
Independent Independent Valuation
Valuations Where an independent valuation is required the value of each
business or company will be determined by an average of the two
valuations provided by the overseas offices of globally
recognised investment banking firms, one firm to be appointed by
ETH and one firm to be appointed by HTIL.
Shareholders 1. The Shareholders Agreement for HoldCo, post
Agreements consolidation but pre IPO to be broadly the same as the
HETL Shareholders Agreement but will terminate on IPO.
Agreement will include (i) right to nominate directors
in proportion to the beneficial shareholding (ii) HTIL
to nominate the Chairman of the Board from amongst its
nominees and ETH to nominate the Vice-Chairman of the
Board from amongst its nominees (iii) HTIL to have
certain management rights, including in particular, the
right to nominate Chief Executive Officer (provided that
prior to any nomination ETH shall be consulted), Chief
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Financial Officer, Chief Commercial Officer, Chief
Marketing Officer and Chief Technical Officer for all
operations; A relationship agreement, reflecting the
listed nature of HoldCo and modifying the shareholders
agreement accordingly will be entered into at the time
of IPO and concurrent with the termination of the
Shareholders Agreement.
2. Rights of First Refusal: ETH shall grant HTIL ROFR over
any sale of its shares in HoldCo on substantially the
same terms as those contained in the HETL Shareholders'
Agreement;
3. HTIL shall grant ETH ROFR (on substantially the same
terms as those contained in the HETL Shareholders'
Agreement) over a sale of its shares in HoldCo if such
sale:
(a) results in HTIL and any of its
associated companies holding, in
aggregate, directly or indirectly, less
than 40% of the issued share capital of
HoldCo; and
(b) is to a company or consortium which has
any of the Indian business groups set
out below holding a 10% or more
interest:
(i) The Reliance Group of Companies;
(ii) The Bharti Group of Companies;
(iii) The Tata Group of Companies
4. Tag Along: HTIL will grant ETH Tag Along rights in
respect ETH's shareholding in HoldCo if HTIL or any of
its associated companies sells its stake, or part
thereof, in HoldCo and such sale results in HTIL and any
of its associated companies holding, in aggregate,
directly or indirectly, less than 40% of the issued
share capital of HoldCo;
5. Decisions of the Board and of shareholders to be by
simple majority subject to certain decisions as set out below
which require consent of all shareholders holding more than 10%
of the issued share capital of HoldCo on the terms indicated
therein:
(i) Approval of the annual business and operating plan,
which shall include the business and operating plans for
each of the operating subsidiaries (the
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"Subsidiaries"). If approval is not granted, HoldCo
shall conduct its business in accordance with the
previous business and operating plan adjusted for any
changes in the consumer price index over the relevant
year until such time as a new business and operating
plan has been approved;
(ii) Mergers, consolidation and acquisition of another
company/business;
(iii) Entry into a new business; (iv) Sale of all or a
substantial part of the business/assets of HoldCo or any
of the Subsidiaries;
(v) Transactions between HoldCo or any of its subsidiaries
and any shareholder of HoldCo or its affiliate other
than any transaction contemplated by the annual business
plan or which is on commercial arm's length terms;
(vi) Entering into High Value contracts (contracts with value
over US$20 million) in respect of HoldCo or any of the
Subsidiaries, not contemplated by the annual business
plan;
(vii) Liquidation, winding up etc;
(viii) Amendments to Memorandum and Articles of Association of
HoldCo or any of the Subsidiaries other than as
contemplated in the annual business plan.;
(ix) Any change in the authorized or issued share capital or
issue of any additional equity shares or other
securities of HoldCo or any of the Subsidiaries other
than as contemplated in the annual business plan.;
(x) A change in the auditors
(xi) Capital calls, other than as contemplated in the annual
business plan. Capital calls that are contemplated in
business plan and the issue of shares because of the
default of a shareholder are not subject to this
requirement.
6. RESERVED DECISIONS
Provided HTIL and any of its associated companies , in aggregate
is the largest single shareholder, and directly or
indirectlyhold at least 40% of the issued share capital of
HoldCo, decisions under clause (i), (vi), (ix) and (xi) will be
treated as Reserved Decisions ("Reserved Decisions"). If the
Directors cannot agree on any of the Reserved Decisions within
seven (7) days of the Board meeting, the following procedures
shall apply:
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A summary of the facts surrounding the disputed Reserved
Decision shall be sent by HoldCo to one of the Directors
nominated by each of ETH and ▇▇▇▇▇▇▇▇▇ ("Concerned Directors");
Within seven (7) days of the receipt of such summary, the
Concerned Directors shall meet and discuss the disputed Reserved
Decision and shall take all steps and to reach a consensus
acceptable to the Shareholders;
If the Concerned Directors are unable to reach a consensus in
the manner set forth in sub-clause (b) above within a further
period of fourteen (14) days, then the matter shall be referred
to the Managing Director/ General Manager of each Shareholder
who shall meet and discuss the disputed Reserved Decision and
shall take all steps and to reach a consensus;
In the event that a consensus can still not be reached within 10
days of the matter being referred to the Managing Director/
General Manager of each Shareholder then the matter will be
referred back to the Board where:
(1) in respect of Reserved Decisions arising under clause
(i), each of the shareholders shall procure that its
appointed directors vote on the resolution to give
effect to HTIL's direction; and
(2) in respect of Reserved Decisions arising under clause
(vi), (ix) and (xi), consent of all directors
representing shareholders holding more than 10% of the
issued share capital of HoldCo, will be required to pass
a resolution on the decision
7. The composition of the board of directors of each of the
Subsidiaries will be identical to that of HoldCo and the
parties shall ensure that the rights given to each party
in respect of HoldCo shall apply mutatus mutandis to
each of the Subsidiaries.
8. The auditor to be PriceWaterhouseCoopers.
9. Each party shall be free to transfer any part of its
stake in HoldCo to any financial investor provided it
has complied with the transfer requirements contained in
the shareholders agreement, including rights of first
refusal and the execution of a deed of adherence. The
parties agree that if such a purchaser holds more than
10% of the issued share capital of HoldCo, that
purchaser only and
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not its successors in title will be entitled to some of
the minority protection rights to be contained in the
shareholders agreement and each party shall be free to
transfer its right to appoint a director or directors to
such purchaser. The parties shall not be permitted to
transfer any minority rights or the right to appoint a
director in HoldCo to any party which is a provider of
telecommunications services that is a competitor of
HoldCo (or any of the Subsidiaries), or a shareholder of
any such competitor, without the the other parties
consent.
Points to note 1. For financing HoldCo or the Subsidiaries to raise third
party debt, the parties will endeavour to raise such
debt on reasonable commercial terms and, in the
following order:
i) without recourse to the shareholders;
ii) failing which, the parties will provide
corporate guarantees or other acceptable form of
credit support (any support referred to
hereafter as "Shareholder Support") for their
respective shares on a pro rata basis;
iii) failing which, the Board will decide whether it
is appropriate to call for any further
Shareholder Support acceptable to the lenders or
to make equity capital calls as above. In the
event the Board decides that further Shareholder
Support is required and one party cannot provide
such Shareholder Support then the party
providing the Shareholder Support shall be
entitled to receive a fee in an amount
satisfactory to the party providing such support
(being not more than the costs saved by the
company).
2. The parties intend to IPO HoldCo on one or more of the
stock exchanges of India or offshore or a combination
thereof by 31 December 2004. The terms of such IPO will
need to be agreed between the parties at the time in
consultation with investment banking advice received.
The parties agree that the purpose of the IPO will be to
raise money for HoldCo, maximise returns to all
shareholders (both initially and long term) and provide
liquidity. However, the parties acknowledge that they
will be the main promoters of HoldCo and that it may be
necessary for them to agree to a lock in on the sale of
their shares after IPO for such period as advised by
HoldCo's bankers and thereafter agree to an orderly exit
for the sale of any of their shares in HoldCo
3. In the event that the IPO of HoldCo has not happened by
31 December 2004 and ETH wishes to IPO its interest in
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some other way or sell its stake in HoldCo, HTIL shall
provide all reasonable assistance to ETH to enable such
IPO or sale to take place including presentations on
business plans and company performance to any potential
purchaser.
4. HTIL has provided certain credit support for loans to
ETH from GE Capital Services India (together the "ETH
Loans"). HTIL confirms it will continue to provide such
support up to 31 December 2004 on substantially the
following terms:
(a) all the ETH Loans will be repaid on the expiry
of the lock in period following IPO and in any
event on or before 31 December 2004 ("Final IPO
Date") . HTIL will be under no further
obligation to extend support in any way past
this date;
(b) The ETH Loans shall be structured so that ETH
pays an amount equal to 33% of the accrued
interest throughout the term of the loans from
the date of rollover of the ETH Loans until 31
December 2004.
(c) In the event that an IPO has not occurred and
the Loan is not repaid by 30 October 2004
("Option Date"), for the purpose of repayment of
the ETH Loans only, ETH grants a call option to
HTIL and HTIL grants a put option to ETH in
respect of all HoldCo shares held by ETH. The
value of the ETH shares shall be determined by
Independent Valuation within 30 days of the
Option Date ("Valuation Date").
The terms of the call option shall allow HTIL to
require ETH to sell to it such number of HoldCo
shares equal in value to all outstandings under
the ETH Loans in return for HTIL's payment of
such outstandings on ETH's behalf. In the event
that the value of ETH's shares in HoldCo are not
sufficient to repay the outstandings, ETH shall
transfer all its shares in HoldCo to HTIL and
the balance will be payable by ETH to HTIL upon
demand.
The terms of the put option shall allow ETH to
require HTIL to buy from it such number of
HoldCo shares equal in value to all outstandings
under the ETH Loans in return for HTIL's payment
of such outstandings on ETH's behalf. In the
event that the value of ETH's shares in HoldCo
are not sufficient to repay the outstandings,
ETH shall transfer all its shares in HoldCo to
HTIL and the balance will be payable by ETH to
HTIL upon demand.
Either party shall have 20 days from the
Valuation
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Date to exercise the above options and
settlement shall take place on 31 December 2004
("Settlement Date").
Notwithstanding the terms outlined above, if an IPO has not
taken place by the Final IPO Date and the investment bankers for
HoldCo certify that an IPO will in all likelihood take place
before 30 June 2005, then the Final IPO Date, the Option Date
and the Settlement Date will all be extended by a period of 6
months only.
In the event that the ETH Loans are not repaid and an IPO takes
place by the Final IPO Date then the Option Date and the
Settlement Date will be extended to the dates 3 months and 5
months respectively after the expiry of any lock in period
applicable to ETH's shares in HoldCo.
Notwithstanding any of the above, if for any reason HTIL
continues to provide guarantees for the ETH Loans after 31
December 2004, ETH shall pay all interest that accrues on the
ETH Loans throughout the term in accordance with the terms
agreed with the relevant lender(s). If the Stage 1 Consolidation
has not taken place by the Option Date, the references in clause
4 above to "ETH's shares in HoldCo" shall be deemed to be
references to "ETH's shares in HETL".
5. Preferential network / subscriber access on arms length
commercial terms for possible ETH promoted ancillary
businesses - long distance; international long distance;
lottery; call centre / outsourcing; broadband internet
etc.
6. HoldCo to be renamed ▇▇▇▇▇▇▇▇▇ Essar Telecom (India)
Limited. Entity to be presented as ▇▇▇▇▇▇▇▇▇ Essar joint
venture.
7. HTIL agrees that it will assist ETH to obtain funding of
the HMTL Option provided that nothing herein imposes any
obligation on HTIL or any of its associated companies to
provide or procure any financial or legal credit or
other support or undertaking and that a statement to
this effect is made to any potential financier
Pre-Completion 1. Corporate approvals from HTIL, ETH and Telematics.
Conditions 2. Approval of all relevant financial institutions and
other creditors
3. Receipt of all Governmental approvals including DOT, RBI
and FIPB for transfer of foreign shareholders interest
to HoldCo and for issue of shares of HoldCo to foreign
investors.
4. Execution of all relevant documentation including
Shareholders' Agreement.
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Confidentiality The terms of this Term Sheet are confidential and neither party
shall disclose the information contained herein.
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