SC 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HCTvuPoUnHkaNEnJL+OxMUHY2vYN0o7GBdGMiduHBZpXVviat7962xs2AlIOZvBL H2dbaOuc8Tq1Ft8GMSWwSw== 0000950103-03-002364.txt : 20031212 0000950103-03-002364.hdr.sgml : 20031212 20031212153733 ACCESSION NUMBER: 0000950103-03-002364 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20031212 GROUP MEMBERS: RELIANCE COMMUNICATIONS INFRASTRUCTURE LIMITED GROUP MEMBERS: RELIANCE COMMUNICATIONS UTTAR PRADESH PRIVATE LIMITED GROUP MEMBERS: RELIANCE INDUSTRIES LIMITED GROUP MEMBERS: RELIANCE INFOCOMM LIMITED FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RELIANCE GATEWAY NET LTD CENTRAL INDEX KEY: 0001270047 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: DHIRUBHAI AMBANI KNOWLEDGE CITY STREET 2: BLOCK E SB-14 1ST FL THANE BELAPUR RD CITY: NAVI MUMBAI 400 709 INDIA STATE: K7 ZIP: 0000 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FLAG TELECOM GROUP LTD CENTRAL INDEX KEY: 0001102752 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-58719 FILM NUMBER: 031051911 BUSINESS ADDRESS: STREET 1: CEDAR HOUSE STREET 2: 41 CEDAR AVENUE CITY: HAMILTON HM12 BERMUD ZIP: 00000 MAIL ADDRESS: STREET 1: CEDAR HOUSE STREET 2: 41 CEDAR AVENUE CITY: HAMILTON HM12 BERMUD STATE: D0 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: FLAG TELECOM HOLDINGS LTD DATE OF NAME CHANGE: 20000106 SC 13D 1 dec1003_13d.htm SC 13D

	OMB APPROVAL

	OMB Number:	3235-0145
	Expires:	October 31, 2002
	Estimated average burden
	hours per response............... 14.90

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 13D
Under the Securities Exchange Act of 1934

FLAG Telecom Group Limited

(Name of Issuer)

Common Shares, par value $1.00 per share

(Title of Class of Securities)

G3529X106

(CUSIP Number)

Nancy L. Sanborn
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

December 4, 2003

(Date of Event which Requires Filing of this Statement)

	If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

	Note: Schedules filed in paper format shall include a signed original and five copies of this schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.

	*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

	The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (the “Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

Persons who respond to the collection of information contained in this form are not
required to respond unless the form displays a currently valid OMB control number.

CUSIP No. G3529X106

1	NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Reliance Industries Limited
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) AF; see Item 3
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION India
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 312,039 shares; see Item 5
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 312,039 shares; see Item 5
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.6%; see Item 5
14	TYPE OF REPORTING PERSON (See Instructions) HC

Page 2 of 20 Pages

CUSIP No. G3529X106

1	NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Reliance Communications Infrastructure Limited
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) AF; see Item 3
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION India
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 551,270 shares; see Item 5
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 551,270 shares; see Item 5
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 27.6%; see Item 5
14	TYPE OF REPORTING PERSON (See Instructions) OO

Page 3 of 20 Pages

CUSIP No. G3529X106

1	NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Reliance Communications Uttar Pradesh Private Limited
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) AF; see Item 3
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION India
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 448,000 shares; see Item 5
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 448,000 shares; see Item 5
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.4%; see Item 5
14	TYPE OF REPORTING PERSON (See Instructions) OO

Page 4 of 20 Pages

CUSIP No. G3529X106

1	NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Reliance Infocomm Limited
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) OO ; see Item 3
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION India
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 742,952 shares; see Item 5
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 742,952 shares; see Item 5
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 37.1%; see Item 5
14	TYPE OF REPORTING PERSON (See Instructions) OO

Page 5 of 20 Pages

CUSIP No. G3529X106

1	NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Reliance Gateway Net Limited
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) AF ; see Item 3
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) o
6	CITIZENSHIP OR PLACE OF ORGANIZATION India
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 0
		8	SHARED VOTING POWER 742,952 shares; see Item 5
		9	SOLE DISPOSITIVE POWER 0
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 742,952 shares; see Item 5
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 37.1%; see Item 5
14	TYPE OF REPORTING PERSON (See Instructions) OO

Page 6 of 20 Pages

CUSIP No. G3529X106

Item 1. Security and Issuer.

This Statement (the “Statement”) relates to the common shares, par value $1.00 per share (the “FLAG Common Stock”) of FLAG Telecom Group Limited, a Bermuda corporation (“FLAG”).

The principal executive office of FLAG is 9 South Street, London W1K 2XA, United Kingdom.

Item 2. Identity and Background.

(a)-(c); (f): The names of the persons filing this Statement are Reliance Gateway Net Limited, a company incorporated under the laws of India (“Gateway”), Reliance Infocomm Limited, a company incorporated under the laws of India (“Infocomm”), Reliance Communications Uttar Pradesh Private Limited, a company incorporated under the laws of India (“Uttar Pradesh”) , Reliance Communications Infrastructure Limited, a company incorporated under the laws of India (“Communications”) and Reliance Industries Limited, a company incorporated under the laws of India (“RIL” and, together with Gateway, Infocomm, Uttar Pradesh and Communications, the “Reporting Persons” and each a “Reporting Person”).

The principal business address and principal office address of Gateway is Dhirubhai Ambani Knowledge City, Block E, SB-14, 1st Floor, Thane-Belapur Road, Koparkhairane, Navi Mumbai 400 709, India. Gateway is a holding company and directly owns 100% of Gateway Net Bermuda Limited, a company incorporated under the laws of Bermuda (“Gateway Bermuda”). Gateway Bermuda was formed solely for the purpose of consummating the transactions described in Item 4. The name, business address, present principal occupation or employment and citizenship of each director of Gateway is set forth on Schedule I.

Gateway is a direct, wholly owned subsidiary of Infocomm. The principal business address and principal office address of Infocomm is Dhirubhai Ambani Knowledge City, Block E, SB-14, 1st Floor, Thane-Belapur Road, Koparkhairane, Navi Mumbai 400 709, India. Infocomm is a telecommunications company in India that offers a complete range of telecommunication services for mobile and fixed line telephony, national and international long distance services and a wide range of value added services and applications. The name, business address, present principal occupation or employment and citizenship of each director and executive officer of Infocomm is set forth on Schedule I.

Uttar Pradesh owns a 60.3% indirect interest in Gateway (through its direct 60.3% interest in Infocomm). Uttar Pradesh is a direct, wholly owned subsidiary of Communications. The principal business address and principal office address of Uttar Pradesh is Dhirubhai Ambani Knowledge City, Block E, SB-14, 1st Floor, Thane-Belapur Road, Koparkhairane, Navi Mumbai 400 709, India. Uttar Pradesh is a company in India formed for the purposes of undertaking business in the areas of telecommunication services and information technology. The name, business address, present principal occupation or employment and citizenship of each director of Uttar Pradesh is set forth on Schedule I.

Page 7 of 20 Pages

CUSIP No. G3529X106

Communications owns a 74.2% indirect interest in Gateway (through its direct 100% interest in Uttar Pradesh and direct 13.9% interest in Infocomm). The principal business address and principal office address of Communications is 2nd Floor, Brindavan, Shreeram Mills Premises, Ganpatrao Kadam Marg, Worli, Mumbai, India 400 013. Communications owns the telecommunications infrastructure used by Infocomm to provide telecommunication services in India. The name, business address, present principal occupation or employment and citizenship of each director and executive officer of Communications is set forth on Schedule I.

RIL owns a 42% indirect interest in Gateway (through its direct 45% interest in Communications and direct 8.6% interest in Infocomm) and may be deemed to control Gateway. The principal business address and principal office address of RIL is Maker Chambers IV, 4th Floor, Nariman Point, Mumbai 400 021, India. RIL is a diversified company and has operations that include the exploration and production of oil and gas, the manufacture of petroleum products, polyester products, polyester intermediates, plastics, polymer intermediates, chemicals and synthetic textiles and fabrics. The name, business address, present principal occupation or employment and citizenship of each director and executive officer of RIL is set forth on Schedule I.

(d)-(e): During the last five years, none of the Reporting Persons, and to the best of each Reporting Person’s knowledge, none of the persons listed on Schedule I attached hereto, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

Gateway, FLAG and Harbert Distressed Investment Master Fund, Ltd. (the “Shareholder”) have entered into the HMC Agreement dated as of December 4, 2003 (the “HMC Agreement”), with respect to 742,952 shares of FLAG Common Stock owned by the Shareholder (the “Shareholder Shares”). No Shareholder Shares were purchased by Gateway or FLAG pursuant to the HMC Agreement and thus no funds were used for such purpose. However, Gateway has agreed to pay $1,000,000 to the Shareholder as consideration for the HMC Agreement, upon consummation of the transactions contemplated by the Amalgamation Agreement (as defined in Item 4 below). Infocomm will provide such funds, from its internal sources, to Gateway as a loan. For a description of the HMC Agreement, see “Item 4. Purpose of Transaction” below, which description is incorporated into this Item 3 by reference. A copy of the HMC Agreement is filed as Exhibit A and is incorporated into this Item 3 by reference.

Item 4. Purpose of Transaction.

(a)-(j): The purpose of the HMC Agreement is to facilitate the consummation of the transactions contemplated by the Agreement and Plan of Amalgamation dated as of October 16, 2003 (as amended by amendments dated October 28, 2003 and December 4, 2003, the “Amalgamation Agreement”) between FLAG and Gateway. Except as otherwise provided in

Page 8 of 20 Pages

CUSIP No. G3529X106

this Statement, capitalized terms that are used but not otherwise defined in this Statement shall have the meaning assigned to such terms in the Amalgamation Agreement, a copy of which is attached as Exhibit B hereto and is incorporated herein by reference in its entirety.

Pursuant to Instructions For Cover Page (2) to this Schedule 13D, the following is a description of the relationship among Gateway, the Shareholder and FLAG under the HMC Agreement but is not an affirmation by any of the Reporting Persons of the existence of a group for purposes of Section 13(d)(3) or Section 13(g)(3) of the Securities Exchange Act of 1934 (the “1934 Act”) and Rule 13d-5(b)(1) thereunder.

Pursuant to the HMC Agreement, the Shareholder agreed, among other things, to vote the Shareholder Shares: (a) in favor of the approval and adoption of the Amalgamation Agreement and each of the transactions contemplated thereby and (b) against (i) any proposal made in opposition to or in competition with the Amalgamation and the transactions contemplated by the Amalgamation Agreement, (ii) any amalgamation, scheme of arrangements, merger, reorganization, consolidation, share exchange, business combination, sale of assets, recapitalization, liquidation, winding up, extraordinary dividend or distribution, significant share repurchase or other similar transaction with or involving FLAG, other than the Amalgamation Agreement and the transactions contemplated thereby and (iii) any other action the consummation of which would reasonably be expected to impede, frustrate, interfere with, impair, delay or prevent consummation of the transactions contemplated by the Amalgamation Agreement; provided that the Shareholder shall not be obligated or bound by its agreement to vote as provided in clause (a) above until the time (the “Voting Effective Time”) that is the earlier of (A) the Shareholder shall have received evidence reasonably satisfactory to it that the registration of the FLAG Common Stock under Section 12 of the 1934 Act has been effectively terminated pursuant to Rule 12g-4 promulgated thereunder (the “Deregistration”) prior to the day of the taking of the vote to approve and adopt the Amalgamation Agreement and (B) FLAG and Gateway shall have received written notice from the Shareholder that it has in its sole discretion determined to vote in favor of the approval and adoption of the Amalgamation Agreement.

Also, pursuant to the HMC Agreement, the Shareholder (i) revoked any and all previous proxies granted with respect to the Shareholder Shares, and (ii) granted a proxy appointing Kees van Ophem and/or Patrick Gallagher, FLAG’s Assistant Secretary and Chief Executive Officer, respectively, effective as of the Voting Effective Time, as the Shareholder’s attorney-in-fact and proxy, with full power of substitution, for and in the Shareholder’s name, to vote, express consent or dissent, or otherwise to utilize such voting power in such manner and upon such matters as Gateway or its proxy or substitute shall, in Gateway’s sole discretion, deem proper with respect to the Shareholder Shares in accordance with the Shareholder’s agreement to vote as described above. The proxy granted by the Shareholder is irrevocable and is granted in consideration of Gateway’s agreement to pay the Shareholder an aggregate $1,000,000, upon consummation of the transactions contemplated by the Amalgamation Agreement; provided, however, that such proxy shall be revoked upon termination of the HMC Agreement.

In addition, the Shareholder agreed in the HMC Agreement that during its term it will not, directly or indirectly, (i) grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any Shareholder Shares, (ii) sell, assign, transfer,

Page 9 of 20 Pages

CUSIP No. G3529X106

encumber, deliver pursuant to any tender or exchange offer or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, assignment, transfer, encumbrance or other disposition of, any Shareholder Shares or (iii) seek or solicit any such sale, assignment, transfer, encumbrance, delivery or other disposition or any such contract, option or other arrangement or assignment or understanding and agreed to notify Gateway promptly and to provide all details requested by Gateway if the Shareholder is approached or solicited, directly or indirectly, by any person with respect to any of the foregoing.

The Shareholder also agreed that during the term of the HMC Agreement it will not (i) exercise any rights (including, without limitation, under the Bermuda Companies Act of 1981, as amended) to demand appraisal of any Shareholder Shares which may arise with respect to the Amalgamation, (ii) solicit, initiate or encourage (or authorize any person to solicit, initiate or encourage) any inquiry, proposal or offer from any person to acquire any of the business, property or capital stock of FLAG or any direct or indirect subsidiary of FLAG, or any acquisition of any FLAG Common Stock or other equity interest in, or any assets of, FLAG or any direct or indirect subsidiary of FLAG, whether by merger, amalgamation, purchase of assets, tender offer or other transaction or (iii) participate in any discussions or negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing.

Pursuant to the HMC Agreement, FLAG agreed to use all reasonable efforts to cause the Deregistration to become effective. Notwithstanding the foregoing, in order to continue providing Gateway and the shareholders of FLAG with material information regarding FLAG, FLAG agreed, to the extent permitted by applicable law or regulation, to continue to file with the Securities and Exchange Commission the periodic reports that it would have filed in the absence of the Deregistration.

The HMC Agreement may be terminated by any party thereto at the earlier of the consummation of the Amalgamation and March 10, 2004.

The transactions contemplated by the Amalgamation Agreement are summarized as follows:

On October 16, 2003, Gateway and FLAG entered into the Amalgamation Agreement pursuant to which Gateway has agreed to cause Gateway Bermuda to amalgamate with FLAG. Upon consummation of the Amalgamation, the separate existence of both FLAG and Gateway Bermuda will cease. The new company resulting from the Amalgamation, also to be named “FLAG Telecom Group Limited” (“New FLAG”), will own all of the assets and liabilities of both FLAG and Gateway Bermuda. Pursuant to the Amalgamation Agreement, each share of FLAG Common Stock outstanding immediately prior to the Effective Time will be converted into the right to receive $97.41 in cash. In addition, holders of options to purchase FLAG Common Stock will be entitled to receive, for each option, cash equal to the difference between $97.41 and the applicable exercise price of the option, multiplied by the number of shares of FLAG Common Stock covered by the option. Upon consummation and as a result of the Amalgamation, New FLAG will become a subsidiary of Gateway.

Page 10 of 20 Pages

CUSIP No. G3529X106

The Amalgamation is subject to various conditions and approvals, including approval of the shareholders of FLAG and the satisfaction of other terms and conditions in the Amalgamation Agreement.

The foregoing descriptions of the transactions contemplated by the HMC Agreement and the Amalgamation Agreement are qualified in their entirety by reference to the respective agreements, copies of which are filed respectively as Exhibits A and B hereto, and such exhibits are specifically incorporated by reference in response to this Item 4.

Except as set forth in this Statement, the HMC Agreement and the Amalgamation Agreement, none of the Reporting Persons nor, to the best of each of the Reporting Person’s knowledge, the individuals named in Schedule I hereto, have any plans or proposals which relate to or which would result in or relate to any of the actions specified in subparagraphs (a) through (j) of Item 4 of Schedule 13D.

Item 5. Interest in Securities of the Issuer.

(a): As a result of the HMC Agreement, (i) Gateway may be deemed to beneficially own 742,952 shares of FLAG Common Stock, which constitutes approximately 37.1% of the outstanding shares of FLAG Common Stock, (ii) Infocomm, through its direct interest in Gateway, may be deemed to beneficially own 742,952 shares of FLAG Common Stock, which constitutes approximately 37.1% of the outstanding shares of FLAG Common Stock, (iii) Uttar Pradesh, through its indirect interest in Gateway, may be deemed to beneficially own 448,000 shares of FLAG Common Stock, which constitutes approximately 22.4% of the outstanding shares of FLAG Common Stock, (iv) Communications, through its indirect interest in Gateway, may be deemed to beneficially own 551,270 shares of FLAG Common Stock, which constitutes approximately 27.6% of the outstanding shares of FLAG Common Stock and (v) RIL, through its indirect interest in Gateway, may be deemed to beneficially own 312,039 shares of FLAG Common Stock, which constitutes approximately 15.6% of the outstanding shares of FLAG Common Stock. Each Reporting Person, however, hereby disclaims beneficial ownership of such shares of FLAG Common Stock. The percentage of FLAG Common Stock outstanding calculation is based on 2,000,000 shares of FLAG Common Stock outstanding as of October 16, 2003.

Except through their respective interests in Gateway, to the best of each Reporting Person’s knowledge, none of the persons listed on Schedule I attached hereto beneficially owns any shares of FLAG Common Stock.

(b): The following information required by Item 2 is based solely upon the Schedule 13D filed with the Securities and Exchange Commission on December 9, 2003 by the HMC Shareholders (as defined below) (the “HMC Schedule 13D”): (i) Gateway may be deemed to share the power to vote 742,952 shares of FLAG Common Stock with the Shareholder, HMC Distressed Investment Offshore Manager, L.L.C. (“HMC Management”), the investment manager of the Shareholder, HMC Investors, L.L.C., its managing member (“HMC Investors”), Philip Falcone, a member of HMC Management and the portfolio manager of the Shareholder,

Page 11 of 20 Pages

CUSIP No. G3529X106

Raymond J. Harbert, a member of HMC Investors, and Michael D. Luce, a member of HMC Investors (each of the Shareholder, HMC Management, HMC Investors, Philip Falcone, Raymond J. Harbert and Michael D. Luce may be referred to herein as an “HMC Shareholder” and collectively may be referred to as the “HMC Shareholders”), (ii) Infocomm, through its direct interest in Gateway, may be deemed to share the power to vote 742,952 shares of FLAG Common Stock with the HMC Shareholders, (iii) Uttar Pradesh, through its indirect interest in Gateway, may be deemed to share the power to vote 448,000 shares of FLAG Common Stock with the HMC Shareholders, (iv) Communications, through its indirect interest in Gateway, may be deemed to share the power to vote 551,270 shares of FLAG Common Stock with the HMC Shareholders and (v) RIL, through its indirect interest in Gateway, may be deemed to share the power to vote 312,039 shares of FLAG Common Stock with the HMC Shareholders. The Shareholder is a Cayman Islands corporation with its principal business address at c/o International Fund Services (Ireland) Limited, Third Floor, Bishop's Square, Redmond's Hill, Dublin 2, Ireland. Each of HMC Management and HMC Investors is a Delaware limited liability company. Each of Philip Falcone, Raymond J. Harbert and Michael D. Luce is a United States citizen. The principal business address for each of HMC Management, HMC Investors, Philip Falcone, Raymond J. Harbert and Michael D. Luce is 555 Madison Avenue, Suite 2800, New York, New York 10022.

However, none of the Reporting Persons is entitled to any rights as a shareholder of FLAG as to the shares of FLAG Common Stock that are subject to the HMC Agreement and each Reporting Person disclaims any beneficial ownership of the shares of FLAG Common Stock that are covered by the HMC Agreement.

To the knowledge of each Reporting Person, based solely upon the HMC Schedule 13D, none of the HMC Shareholders, during the last five years, has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws.

Except through their interests in Gateway, none of the persons listed on Schedule I attached hereto may be deemed to share the power to vote any shares of FLAG Common Stock.

(c): Except with respect to the transactions contemplated by the HMC Agreement and the Amalgamation Agreement which are described in response to Item 4 above and incorporated herein by reference, none of the Reporting Persons nor, to the best of each Reporting Person’s knowledge, the individuals named in Schedule I hereto, has effected any transaction in FLAG Common Stock during the past 60 days.

The descriptions of the transactions contemplated by the HMC Agreement and the Amalgamation Agreement in Item 4 are qualified in their entirety by reference to the respective

Page 12 of 20 Pages

CUSIP No. G3529X106

agreements and documents, copies of which are filed as Exhibits A and B hereto, and such exhibits are specifically incorporated into this Item 5 by reference.

(d): Except as set forth in this Item 5, no other person is known by any of the Reporting Persons to have the right to receive, or the power to direct the receipt of dividends from, or the proceeds from the sale of FLAG Common Stock that may be deemed to be beneficially owned by any of the Reporting Persons.

(e): Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

See “Item 4. Purpose of Transaction” for a description of the HMC Agreement and the Amalgamation Agreement, which are qualified in their entirety by reference to the respective agreements. Copies of the HMC Agreement and the Amalgamation Agreement, filed as Exhibits A and B hereto, are specifically incorporated by reference in response to this Item 6.

In addition, Gateway and FLAG entered into a Letter Agreement dated as of October 16, 2003 (as amended on October 28, 2003, the “Letter Agreement”). Pursuant to the Letter Agreement, Gateway and FLAG agreed that, if FLAG determines, in its sole discretion, that it is necessary, proper or advisable for it to enter into or execute any agreement with any of its shareholders (each, a “Contracting Shareholder”) to waive FLAG's rights to recover, and/or to agree not to take or facilitate any action to seek to recover, profits under Section 16(b) of the 1934 Act from such Contracting Shareholder or its affiliates arising out of the consummation of the Amalgamation and the payment of the Amalgamation Consideration to such Contracting Shareholder or its affiliates, in such form as it shall reasonably determine to be appropriate for such purpose (which form shall be reasonably acceptable to Gateway) (each such agreement, a “Non-Action Agreement”), it may do so. Also, promptly after such a determination by FLAG, Gateway (on behalf of itself and its subsidiaries) agreed, and agreed to cause Gateway Bermuda to, execute with any Contracting Shareholder a Non-Action Agreement in a form substantially similar to that executed with such Contracting Shareholder by FLAG.

Also, RIL and FLAG entered into a letter agreement dated October 16, 2003 (as amended on October 28, 2003, the “RIL Agreement”) whereby RIL agreed (i) to provide the necessary financial resources to enable Gateway to timely pay the entire amount of the Amalgamation Consideration to the exchange agent pursuant to the terms and conditions of the Amalgamation Agreement and (ii) to cause Gateway to timely discharge its other obligations under the Amalgamation Agreement in accordance with the terms and conditions thereof.

The foregoing descriptions of the Letter Agreement and the RIL Agreement are qualified in their entirety by reference to the respective agreements, copies of which are filed respectively as Exhibits C and D hereto, and such exhibits are specifically incorporated by reference in response to this Item 6.

Item 7. Material to Be Filed as Exhibits.

Page 13 of 20 Pages

CUSIP No. G3529X106

Exhibit A	HMC Agreement dated as of December 4, 2003 among Gateway the Shareholder and FLAG

Exhibit B	Agreement and Plan of Amalgamation dated as of October 16, 2003 between Gateway and FLAG; Amendment to the Agreement and Plan of Amalgamation dated October 28, 2003 between Gateway and FLAG; Second Amendment to the Agreement and Plan of Amalgamation dated December 4, 2003 between Gateway and FLAG

Exhibit C	Letter Agreement dated as of October 16, 2003 between Gateway and FLAG; Amendment to the Letter Agreement dated October 28, 2003 between Gateway and FLAG

Exhibit D	Letter Agreement dated October 16, 2003 between RIL and FLAG; Amendment to the Letter Agreement dated October 28, 2003 between RIL and FLAG

Exhibit E	Agreement among the Reporting Persons to file this Statement jointly

Page 14 of 20 Pages

CUSIP No. G3529X106

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

December 11, 2003

Date

/s/ P.M.S. Prasad

P.M.S. Prasad, Authorized Signatory, Reliance
Industries Limited

December 11, 2003

Date

/s/ P.M.S. Prasad

P.M.S. Prasad, Authorized Signatory, Reliance
Communications Infrastructure Limited

December 11, 2003

Date

/s/ P.M.S. Prasad

P.M.S. Prasad, Authorized Signatory, Reliance
Communications Uttar Pradesh Private Limited

December 11, 2003

Date

/s/ P.M.S. Prasad

P.M.S. Prasad, Authorized Signatory, Reliance
Infocomm Limited

December 11, 2003

Date

/s/ P.M.S. Prasad

P.M.S. Prasad, Authorized Signatory, Reliance
Gateway Net Limited

Page 15 of 20 Pages

CUSIP No. G3529X106

SCHEDULE I

DIRECTORS OF GATEWAY

The name, business address, title, present principal occupation or employment of each of the directors of Gateway are set forth below. Gateway has no executive officers. If no business address is given, the director’s business address is Dhirubhai Ambani Knowledge City, Block E, SB-14, 1st Floor, Thane-Belapur Road, Koparkhairane, Navi Mumbai 400 709, India.

Name and Citizenship	Principal Occupation and Address
V K Gandhi The Republic of India	Officer of Reliance Industries Limited
Laxmidas Vallabhdas Merchant The Republic of India	Officer of Reliance Industries Limited Reliance Infocomm Limited “B” Block, 1^stFloor; Dhirubai Ambani Knowledge City, Koparkairane, Navi Mumbai, India 400 709
K R Raja The Republic of India	Officer of Reliance Industries Limited Reliance Infocomm Limited “B” Block, 1^stFloor, SB-1, Dhirubai Ambani Knowledge City, Koparkhairane, Navi Mumbai India 400 709

DIRECTORS AND EXECUTIVE OFFICERS OF INFOCOMM

The name, business address, title, present principal occupation or employment of each of the directors and executive officers of Infocomm are set forth below. If no business address is given, the director’s or executive officer’s business address is Dhirubhai Ambani Knowledge City, Block I, SB-14, 2nd Floor, Thane-Belapur Road, Koparkhairane, Navi Mumbai 400 709, India. The directors are designated with asterisks (*).

Page 16 of 20 Pages

CUSIP No. G3529X106

Name and Citizenship	Principal Occupation and Address
* Mukesh Dhirubhai Ambani The Republic of India	Chairman & Managing Director of Reliance Industries Limited Maker Chambers IV, 5^thFloor, 222 Nariman Point, Mumbai, India 400 021
* Shri Manoj Harjivandas Modi The Republic of India	Consultant
* Anand Jai Kumar Jain The Republic of India	Industrialist
* Bharat Goenka The Republic of India	Executive Director of Tally Solutions Private Limited 331-336 Raheja Arcade, Koramangala, Bangalore, India 560 095

DIRECTORS OF UTTAR PRADESH

The name, business address, title, present principal occupation or employment of each of the directors of Uttar Pradesh are set forth below. Uttar Pradesh has no executive officers.

Name and Citizenship	Principal Occupation and Address
Anand Jai Kumar Jain The Republic of India	Industrialist Reliance Infocomm Limited Block I, 2^ndFloor, Dhirubai Ambani Knowledge City, Koparkhairane, Navi Mumbai, India 400 709
Shri Manoj Harjivandas Modi The Republic of India	Consultant Reliance Infocomm Limited Block I, 2^ndFloor, Dhirubai Ambani Knowledge City, Koparkhairane, Navi Mumbai, India 400 709
K R Raja The Republic of India	Officer of Reliance Industries Limited Block B, 1^stFloor, Dhirubai Ambani Knowledge City, Koparkhairane, Navi Mumbai, India 400 709

DIRECTORS AND EXECUTIVE OFFICERS OF COMMUNICATIONS

Page 17 of 20 Pages

CUSIP No. G3529X106

The name, business address, title, present principal occupation or employment of each of the directors and executive officers of Communications are set forth below. The directors are designated with asterisks (*).

Name and Citizenship	Principal Occupation and Address
*Mukesh Dhirubhai Ambani The Republic of India	Chairman & Managing Director of Reliance Industries Limited Maker Chambers IV, 5^thFloor, 222 Nariman Point, Mumbai, India 400 021
*Anand Jai Kumar Jain The Republic of India	Industrialist Reliance Infocomm Limited Block I, 2^ndFloor, Dhirubai Ambani Knowledge City, Koparkhairane, Navi Mumbai, India 400 709
*Shri Manoj Harjivandas Modi The Republic of India	Consultant Reliance Infocomm Limited Block I, 2^ndFloor, Dhirubai Ambani Knowledge City, Koparkhairane, Navi Mumbai, India 400 709
*K R Raja The Republic of India	Officer of Reliance Industries Limited Block B, 1^stFloor, Dhirubai Ambani Knowledge City, Koparkhairane, Navi Mumbai, India 400 709
Srinivasan Ramesh The Republic of India	Executive Officer of Reliance Communications Infrastructure Limited Reliance Infocomm Limited Block D, 1^stFloor; Dhirubai Ambani Knowledge City, Koparkairane, Navi Mumbai India 400 709

DIRECTORS AND EXECUTIVE OFFICERS OF RIL

The name, business address, title, present principal occupation or employment of each of the directors and executive officers of RIL are set forth below. If no business address is given, the director’s or executive officer’s business address is Maker Chambers IV, 5th Floor, Nariman Point, Mumbai 400 021, India. The directors are designated with asterisks (*).

Page 18 of 20 Pages

CUSIP No. G3529X106

Name and Citizenship	Principal Occupation and Address
* Mukesh Dhirubhai Ambani The Republic of India	Chairman & Managing Director of Reliance Industries Limited
* Anil Dhirubhai Ambani The Republic of India	Vice Chairman & Managing Director of Reliance Industries Limited
* Nikhil Rasiklal Meswani The Republic of India	Executive Director of Reliance Industries Limited
* Hital Rasiklal Meswani The Republic of India	Executive Director Reliance Industries Limited Block I, 2^ndFloor, Dhirubai Ambani Knowledge City, Koparkhairane, Navi Mumbai, India 400 709
* Hardev Singh Kohli The Republic of India	Executive Director Reliance Industries Limited Village Mora, P O Bhatha Surat-Hazira Road, Surat India 394 510
* Ramniklal Hirachand Ambani The Republic of India	Industrialist Yashraj Investments & Leasing Co. P. Ltd. 7, Gadhavi Society Near Ishita Tower Near Swati Society Navrangpura, Ahmedabad India 380 014
* Mansingh Laxmidas Bhakta The Republic of India	Solicitor Kanga & Co. Readymoney Mansion 43 Veer Nariman Road Mumbai India 400 023
* Tonse Ramesh Upendra Pai The Republic of India	Industrialist “Chitrakala” Manipal Karnataka India 576 119
* Yogendra Premkrisha Trivedi The Republic of India	Advocate – Supreme Court of India 23, Atlanta Nariman Point Mumbai India 400 021

Page 19 of 20 Pages

CUSIP No. G3529X106

* Dr. Dharam Vir Kapur The Republic of India	Professional Advisor Meredian Commercial Tower Windsor Place, Janpath New Delhi India 110 001
* Mahesh Prasad Modi The Republic of India	Professional Advisor B-92, Sector 27 Noida, Uttar Pradesh India 201 301
* Sankaramaray Venkitaramanan The Republic of India	Professional Advisor 19, Crescent Avenue Keshavaperumalpuram Chennai India 600 028

Page 20 of 20 Pages

EX-99.A 3 dec1003_ex-a.htm

Exhibit A

HMC AGREEMENT

AGREEMENT dated as of December 4, 2003 (this “Agreement”) among Reliance Gateway Net Limited, a company incorporated under the laws of India (“Reliance Gateway”), FLAG Telecom Group Limited, a company incorporated under the laws of Bermuda (the “Company”), and Harbert Distressed Investment Master Fund Ltd., a Cayman Islands corporation (“Shareholder”).

WHEREAS, the Company and Reliance Gateway have entered into the Agreement and Plan of Amalgamation dated as of October 16, 2003 (as amended on October 28, 2003 and contemporaneously herewith, the “Amalgamation Agreement”; all capitalized terms that are not otherwise defined herein shall have the meaning attributed to them under the Amalgamation Agreement);

WHEREAS, the Company intends to hold a special general meeting of the shareholders of the Company, including any postponement or adjournment thereof, to consider and vote upon the Amalgamation Agreement (the “Company Shareholder Meeting”);

WHEREAS, the Shareholder owns certain common shares, par value $1.00 per share, of the Company (the “Shares”); and

WHEREAS, the parties hereto have agreed to enter into this Agreement to evidence certain agreements relating to the Amalgamation Agreement, the Company Shareholder Meeting and the Shares.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE 1
AGREEMENT TO VOTE; GRANT OF PROXY

Section 1.01. Agreement To Vote. The Shareholder irrevocably agrees to vote, express consent (or dissent, as the case may be) or otherwise utilize the voting power in respect of all Shares that the Shareholder is entitled to vote at the time of any vote at any annual or special general meeting of the shareholders of the Company during the term of this Agreement and at any postponement or adjournment thereof, (a) in favor of the approval and adoption of the Amalgamation Agreement and each of the transactions contemplated thereby and (b) against (i) any proposal made in opposition to or in competition with the Amalgamation and the transactions contemplated by the Amalgamation Agreement, (ii) any amalgamation, scheme of arrangements, merger, reorganization, consolidation, share exchange, business combination, sale of assets, recapitalization, liquidation, winding up, extraordinary dividend or distribution, significant share repurchase or other similar transaction with or involving the Company, other than the Amalgamation Agreement and the transactions contemplated thereby and

(iii) any other action the consummation of which would reasonably be expected to impede, frustrate, interfere with, impair, delay or prevent consummation of the transactions contemplated by the Amalgamation Agreement; provided that the Shareholder shall not be obligated or bound by its agreement to vote as provided in clause (a) above until the time (the “Voting Effective Time”) that is the earlier of (A) the Shareholder shall have received evidence reasonably satisfactory to it that the registration of the Shares under Section 12 of the Securities Exchange Act of 1934 (the “1934 Act”) has been effectively terminated pursuant to Rule 12g-4 promulgated thereunder prior to the day of the taking of the vote to approve and adopt the Amalgamation Agreement and (B) the Company and Reliance Gateway shall have received written notice from the Shareholder that it has in its sole discretion determined to vote in favor of the approval and adoption of the Amalgamation Agreement.

Section 1.02. Grant of Proxy. The Shareholder hereby revokes any and all previous proxies granted with respect to its Shares. By entering into this Agreement, the Shareholder hereby grants a proxy appointing Kees van Ophem and/or Patrick Gallagher, the Company’s Assistant Secretary and Chief Executive Officer, respectively, effective as of the Voting Effective Time, as the Shareholder’s attorney-in-fact and proxy, with full power of substitution, for and in the Shareholder’s name, to vote, express consent or dissent, or otherwise to utilize such voting power in such manner and upon such matters as Reliance Gateway or its proxy or substitute shall, in Reliance Gateway’s sole discretion, deem proper with respect to the Shareholder Shares in accordance with the provisions of Section 1.01. The proxy granted by the Shareholder pursuant to this Section 1.02 is irrevocable and is granted in consideration of Reliance Gateway’s agreements contained in Article 2 of this Agreement; provided, however, that such proxy shall be revoked upon termination of this Agreement in accordance with Section 8.04 hereof.

ARTICLE 2
CONSIDERATION

In consideration of (i) the agreement of the Shareholder to vote in favor of the Amalgamation and the approval and adoption of the Amalgamation Agreement and (ii) the other agreements of the Shareholder contained herein, Reliance Gateway hereby agrees to pay to the Shareholder an aggregate $1,000,000, in cash, on the date when the Effective Time occurs. Such amount shall be paid to the Shareholder by wire transfer to a bank account designated by the Shareholder (or if no such account is designated, then by certified or official bank check payable in immediately available funds to the order of the Shareholder in such amount). If the Effective Time does not occur, no payment to the Shareholder shall be required hereunder.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER

The Shareholder represents and warrants to Reliance Gateway and the Company that:

Section 3.01. Corporate Authorization. The Shareholder has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance by the Shareholder of this Agreement and the consummation by the Shareholder of the transactions contemplated hereby have been duly authorized and no other corporate action on the part of the Shareholder is necessary to authorize the execution, delivery or performance by the Shareholder of this Agreement and the consummation by the Shareholder of the transactions contemplated hereby.

Section 3.02. Valid Title. As of November 1, 2003, as of the date hereof and at all times hereafter during the term of this Agreement, the Shareholder was and is the sole, true, lawful and beneficial owner of the Shares set forth opposite the Shareholder’s name on the signature page hereto, and will be the sole, true, lawful and beneficial owner of all Shares acquired by the Shareholder after the date hereof, in each case, with no restrictions on the Shareholder’s voting rights or rights of disposition pertaining thereto, except as set forth in this Agreement. As of November 1, 2003, as of the date hereof and at all times hereafter during the term of this Agreement, none of the Shares set forth opposite the Shareholder’s name on the signature page hereto are, and no Shares acquired by the Shareholder after the date hereof will be, subject to any voting trust or other agreement or arrangement with respect to the voting of such Shares, except as set forth in this Agreement.

Section 3.03. Non-Contravention. The execution, delivery and performance by the Shareholder of this Agreement and the consummation of the transactions contemplated hereby do not and will not contravene or constitute a default under or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Shareholder or to a loss of any benefit of the Shareholder under any provision of applicable law or regulation, the certificate of incorporation, bylaws or other governing documents of the Shareholder or any other agreement, judgment, injunction, order, decree, or other instrument binding on the Shareholder or result in the imposition of any lien on any asset of the Shareholder.

Section 3.04. Binding Effect. This Agreement is the valid and binding Agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights generally. The person signing this Agreement has full power and authority to execute and deliver, and to cause the Shareholder to perform, this Agreement.

Section 3.05. Total Shares. The number of Shares set forth opposite the Shareholder’s name on the signature page hereto are the only Shares beneficially owned

by the Shareholder as of the date hereof and as of November 1, 2003, and (i) the Shareholder owns no options to purchase or sell or rights to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any securities of the Company and (ii) to the Shareholder’s knowledge, none of its affiliates own, beneficially or of record, any Shares or has any of the interests or rights described in clause (i) above, except in each case Shares owned by PCMG Trading Partners XII, L.P. and Alpha US Sub Fund VI, LLC which own 17,668 and 11,695 Shares, respectively.

Section 3.06. Finder’s Fees. No investment banker, broker or finder is entitled to a commission or fee from the Company, Reliance Gateway or any of their respective affiliates in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Shareholder.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 4.01. The Company represents and warrants to the Shareholder and to Reliance Gateway that the Company has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly authorized and no other corporate action on the part of the Company is necessary to authorize the execution, delivery or performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and is a valid and binding Agreement of the Company, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights generally.

Section 4.02. The Company has no securities issued or outstanding other than the Shares.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF RELIANCE GATEWAY

Reliance Gateway represents and warrants to the Shareholder and the Company that Reliance Gateway has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance by Reliance Gateway of this Agreement and the consummation by Reliance Gateway of the transactions contemplated hereby have been duly authorized and no other corporate action on the part of Reliance Gateway is necessary to authorize the execution, delivery or performance by Reliance Gateway of this Agreement and the consummation by Reliance Gateway of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Reliance Gateway and is a valid and binding Agreement

of Reliance Gateway, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights generally.

ARTICLE 6
COVENANTS OF THE SHAREHOLDER

The Shareholder hereby covenants and agrees that:

Section 6.01. No Proxies for, Encumbrances on or Transfers of Shares. Except pursuant to the terms of this Agreement, the Shareholder shall not during the term of this Agreement, without the prior written consent of Reliance Gateway, directly or indirectly, (i) grant any proxies to or enter into any voting trust or other agreement or arrangement with respect to the voting of any Shares or (ii) sell, assign, transfer, encumber, deliver pursuant to any tender or exchange offer or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, assignment, transfer, encumbrance or other disposition of, any Shares. The Shareholder shall not seek or solicit any such sale, assignment, transfer, encumbrance, delivery or other disposition or any such contract, option or other arrangement or assignment or understanding and agrees to notify Reliance Gateway promptly and to provide all details requested by Reliance Gateway if the Shareholder is approached or solicited, directly or indirectly, by any Person with respect to any of the foregoing.

Section 6.02. Appraisal Rights. The Shareholder agrees during the term of this Agreement not to exercise any rights (including, without limitation, under the Bermuda Companies Act of 1981, as amended) to demand appraisal of any Shares which may arise with respect to the Amalgamation.

Section 6.03. No Shop. The Shareholder shall not, during the term of this Agreement, directly or indirectly (i) solicit, initiate or encourage (or authorize any person to solicit, initiate or encourage) any inquiry, proposal or offer from any person to acquire any of the business, property or capital stock of the Company or any direct or indirect subsidiary thereof, or any acquisition of any Shares or other equity interest in, or any assets of, the Company or any direct or indirect subsidiary thereof, whether by merger, amalgamation, purchase of assets, tender offer or other transaction or (ii) participate in any discussions or negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing. The Shareholder agrees to promptly advise Reliance Gateway of the terms of any communications it may receive relating to any of the foregoing.

ARTICLE 7
COVENANTS OF RELIANCE GATEWAY, THE COMPANY AND THE SHAREHOLDER

Section 7.01. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement, to obtain all necessary waivers, consents and approvals and effect all necessary registrations and filings and to rectify any event or circumstances which could impede consummation of the transactions contemplated hereby.

Section 7.02. Termination of Registration. The Company hereby covenants and agrees to use all reasonable efforts to terminate the registration of the Shares under Section 12 of the 1934 Act pursuant to Rule 12g-4 promulgated under the 1934 Act (the “Deregistration”) as promptly as practicable after the date hereof. Notwithstanding the foregoing, in order to continue providing the shareholders of the Company and Reliance Gateway with material information regarding the Company, the Company agrees, to the extent permitted by applicable law or regulation, to continue to file with the Securities and Exchange Commission (the “SEC”) the periodic reports that it would have filed with the SEC in the absence of the Deregistration.

Section 7.03. Company Shareholder Meeting. The Company hereby covenants and agrees not to hold the vote on the approval and adoption of the Amalgamation Agreement prior to the Voting Effective Time. If the scheduled date for the Company Shareholder Meeting occurs prior to the Voting Effective Time, the Company agrees to adjourn or postpone the Company Shareholder Meeting to a later date so the shareholder vote to approve and adopt the Amalgamation Agreement will be held on a date that is after the Voting Effective Time; provided that if the Voting Effective Time does not occur on or before March 10, 2004, the Company shall be permitted to hold the Company Shareholder Meeting at any time thereafter.

Section 7.04. The Company and Reliance Gateway hereby covenant and agree to execute that certain Second Amendment to the Amalgamation Agreement, substantially in the form attached as Exhibit A hereto, contemporaneously with the execution of this Agreement.

ARTICLE 8
MISCELLANEOUS

Section 8.01. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

Section 8.02. Specific Performance. The parties hereto agree that each of Reliance Gateway and the Company would be irreparably damaged if for any reason the Shareholder failed to perform any of its obligations under this Agreement, and that each of Reliance Gateway and the Company would not have an adequate remedy at law for money damages in such event. Accordingly, each of Reliance Gateway and the Company shall be entitled to specific performance and injunctive and other equitable relief to enforce the performance of this Agreement by the Shareholder. This provision is without prejudice to any other rights that Reliance Gateway or the Company may have against the Shareholder for any failure to perform its obligations under this Agreement. The Shareholder shall be entitled to specific performance and injunctive and other equitable relief to enforce the performance of this Agreement by Reliance Gateway and the Company. This provision is without prejudice to any other rights that the Shareholder may have against Reliance Gateway or the Company for any failure to perform their respective obligations under this Agreement.

Section 8.03. Notices. All notices, requests, claims, demands and other communications provided for by this Agreement (unless otherwise specified herein) shall be in writing and delivered by mail, telegram, telex, facsimile or personal delivery and shall be deemed given if delivered in person, by telegram, telex, facsimile or personal delivery when received, and if mailed, when mailed postage prepaid, return receipt requested registered or certified, and addressed to the respective parties as set forth below or at such other address as any party hereto may specify to the other parties hereto in writing (such change of address to become effective only upon receipt of such notification in writing).

If to Reliance Gateway, to:

Reliance Gateway Net Limited
Dhirubhai Ambani Knowledge City
Block E, SB-14, 1st Floor
Thane-Belapur Road
Koparkhairane, Navi Mumbai
400 709, India
Telecopy: 011-91-22-3032-5895
Attention: PMS Prasad

with a copy to:

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: 212-450-3955
Attention: Nancy L. Sanborn

if to the Company, to:

FLAG Telecom Group Limited
9 South Street
London W1K 2XA
United Kingdom
Telecopy: 011-44-207-317-4096
Attention: Kees van Ophem

with a copy to:

Akin Gump Strauss Hauer & Feld LLP
590 Madison Avenue
New York, New York 10022
Telecopy: 212-872-1002
Attention: Kerry E. Berchem and Patrick J. Dooley

If to the Shareholder, to:

Harbert Distressed Investment Master Fund, Ltd.
c/o HMC Distressed Investment Offshore Manager, LLC
555 Madison Avenue
28th Floor
New York, NY 10022
Telecopy: (212) 521-6972
Attention: Philip Falcone

with a copy to:

Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019-6092
Telecopy: (212) 259-6333
Attention: Steven P. Lund

Section 8.04. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by each of the parties hereto. This Agreement may be terminated by any of the parties hereto at the earlier of (i) the Effective Time and (ii) March 10, 2004. Additionally, this Agreement may be terminated by Reliance Gateway immediately upon a breach by the Shareholder or the Company and this Agreement may be terminated by the Shareholder immediately upon a breach by Reliance Gateway or the Company, of any of their respective agreements and covenants set forth herein. In addition, the Shareholder may terminate this Agreement if the Amalgamation Agreement is amended after the date hereof in a manner which is adverse to the shareholders of the Company without the prior written consent of the Shareholder, which shall not be unreasonably withheld. Notwithstanding any such termination, the breaching party shall be fully liable for any and all damages incurred or suffered by the terminating party or parties as a result of such breach.

Section 8.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto.

Section 8.06. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of New York without giving effect to the principles of conflicts of laws thereof.

Section 8.07. Waiver of Jury Trial. Each of the parties hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement. Each of the parties hereto certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver.

Section 8.08. Counterparts; Effectiveness; Benefit. This Agreement may be executed and delivered (including by facsimile transmission) by the parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any person other than the parties hereto and their respective successors and assigns.

Section 8.09. No Third Party Beneficiaries. No party other than the parties hereto shall be an intended beneficiary of this Agreement or any portion hereof.

Section 8.10. Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

Class of Stock	Shares Owned
common	742,952

HARBERT DISTRESSED
INVESTMENT MASTER FUND LTD.

By: HMC Distressed Investment Offshore Manager, LLC

By:	/s/ Philip A. Falcone

Name:
Title:

Philip A. Falcone
Vice President

RELIANCE GATEWAY NET LIMITED

By:

/s/ P.M.S. Prasad

Name:
Title:

P.M.S. Prasad
Authorized Signatory

FLAG TELECOM GROUP LIMITED

By:

/s/ Robert M. Aquilina

Name:
Title:

Robert M. Aquilina
Director

By:

/s/ Eugene I. Davis

Name:
Title:

Eugene I. Davis
Director

By:

/s/ Anthony J. Pacchia

Name:
Title:

Anthony J. Pacchia
Director

EXHIBIT A

Second Amendment to
the Amalgamation Agreement

December 4, 2003

Re: Second Amendment to the Amalgamation Agreement

FLAG Telecom Group Limited
9 South Street
London W1K 2XA
United Kingdom
Attention: Special Committee of the Board of Directors

Dear Members of the Special Committee:

Reference is made to the Agreement and Plan of Amalgamation, dated as of October 16, 2003 (as amended, the “Amalgamation Agreement”), by and between FLAG Telecom Group Limited (the “Company”) and Reliance Gateway Net Limited (“Gateway”). Capitalized terms used herein and not defined shall have the meaning assigned to them in the Amalgamation Agreement.

The purpose of this letter agreement is to amend the Amalgamation Agreement as follows:

(i) Section 2.02(a) be and it hereby is deleted and the following be and it hereby is inserted in place thereof: “Each Share issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive $97.41 in cash, without interest (the “Amalgamation Consideration”). The sum of the aggregate Amalgamation Consideration and all amounts payable in respect of Company Options pursuant to Section 2.05 shall not exceed $210,951,295. Notwithstanding the foregoing, the parties hereto agree and acknowledge that pursuant to that certain HMC Agreement dated as of December 3, 2003 (the “HMC Agreement”) by and among Gateway, the Company and Harbert Distressed Investment Master Fund Ltd. (“HMC”), Gateway shall pay an additional $1,000,000 consideration to HMC in connection with the transactions contemplated hereby. In addition, Gateway agrees that neither it nor any of its affiliates shall pay any other additional consideration to HMC in connection with the transactions contemplated hereby without the prior written consent of the Company.”;

(ii) in the first sentence of Section 2.05(a), the words “use its reasonable best efforts to” be and they hereby are inserted after the word “shall”;

(iii) in the second sentence of Section 2.05(a), the words “to the extent permitted by applicable law,” be and they hereby are inserted after the word “Thereafter,”;

(iv) in the first sentence of Section 2.05(b), the word “reasonable” be and it hereby is inserted prior to the words “best efforts”;

(v) in the second sentence of Section 4.05, the number “198,475” be and it hereby is deleted and the number “198,025” be and it hereby is inserted in place thereof;

(vi) Schedule 4.05 be and it hereby is deleted and Exhibit A hereto be and it hereby is inserted in place thereof;

(vii) in Section 6.01(j), the words “; provided, that the Company shall be permitted to pay Mr. Patrick Gallagher $48,705 in cash in exchange for the cancellation of 500 restricted Shares held by Mr. Gallagher immediately prior to the Effective Time” be and they hereby are inserted at the end thereof;

(viii) in the second sentence of Section 6.02(a), the words “(giving due consideration to the Company’s obligations under the HMC Agreement)” be and they hereby are inserted at the end thereof; and

(ix) in Section 10.01(b), the words “February 28, 2004” be and they hereby are deleted and the words “March 10, 2004” be and they hereby are inserted in place thereof.

These amendments shall be effective as of the date hereof.

This letter agreement shall be governed by and construed in accordance with the laws of Bermuda, without regard to its conflicts of laws principles.

Except as expressly set forth above, nothing contained in this letter agreement shall be deemed to waive, amend or otherwise modify any provision of the Amalgamation Agreement.

This letter agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

EXHIBIT A

Schedule 4.05

FLAG TELECOM GROUP LIMITED - EXERCISE PRICE OF OPTIONS

DATE	QUANTITY	ISSUE PRICE

17 March 2003	118,425 (employees)	$14.00/option

17 March 2003	61,600 (directors)	$14.00/option

8 April 2003	6,000	$25.00/option

2 June 2003	1,550	$34.50/option

1 July 2003	8,200	$31.75/option

1 August 2003	700	$60.00/option

1 September 2003	200	$61.50/option

1 October 2003	200	$60.00/option

3 November 2003 *	1,150	$87.00/option

Total Allocated:	198,025

Total Options:	222,222

Note:

* These options were granted to employees who executed employment agreements with the Company on or prior to October 16, 2003 at which point stock options were pledged under their respective employment agreements.

EX-99.B 4 dec1003_ex-b.htm Exhibit B

Exhibit B

AGREEMENT AND PLAN OF AMALGAMATION

dated as of

October 16, 2003

between

FLAG Telecom Group Limited

and

Reliance Gateway Net Private Limited

TABLE OF CONTENTS

		PAGE

	ARTICLE 1
	DEFINITIONS

Section 1.01.	Definitions	1

	ARTICLE 2
	THE AMALGAMATION

Section 2.01.	The Amalgamation	5
Section 2.02.	Treatment of Shares in the Amalgamation	5
Section 2.03.	Surrender and Payment	6
Section 2.04.	Dissenting Shareholders	7
Section 2.05.	Stock Options	7
Section 2.06.	Withholding Rights	8
Section 2.07.	Lost Certificates	8

	ARTICLE 3
	THE AMALGAMATED COMPANY; GATEWAY

Section 3.01.	Memorandum of Association of Amalgamated Company	8
Section 3.02.	Bye-laws of Amalgamated Company	8
Section 3.03.	Directors and Officers of Amalgamated Company	9

	ARTICLE 4
	REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 4.01.	Corporate Existence and Power	9
Section 4.02.	Corporate Authorization	9
Section 4.03.	Governmental Authorization	9
Section 4.04.	Non-contravention	10
Section 4.05.	Capitalization	10
Section 4.06.	Subsidiaries	11
Section 4.07.	SEC Filings	11
Section 4.08.	Financial Statements	12
Section 4.09.	Absence of Certain Changes	12
Section 4.10.	No Undisclosed Material Liabilities	13
Section 4.11.	Compliance with Laws and Court Orders	14
Section 4.12.	Litigation	14
Section 4.13.	Finders’ Fees	14
Section 4.14.	Taxes	14
Section 4.15.	Employee Benefit Plans	15

Section 4.16.	Licenses and Permits	16
Section 4.17.	Intellectual Property	17
Section 4.18.	Material Contracts	17
Section 4.19.	Required Shareholder Vote	18
Section 4.20.	Rights Plan	18
Section 4.21.	Disclosure Documents	18

	ARTICLE 5
	REPRESENTATIONS AND WARRANTIES OF GATEWAY

Section 5.01.	Corporate Existence and Power	18
Section 5.02.	Corporate Authorization	19
Section 5.03.	Governmental Authorization	19
Section 5.04.	Non-contravention	19
Section 5.05.	Disclosure Documents	20
Section 5.06.	Finders’ Fees	20
Section 5.07.	Financing	20
Section 5.08.	Share Ownership	20

	ARTICLE 6
	COVENANTS OF THE COMPANY

Section 6.01.	Conduct of the Company	21
Section 6.02.	Shareholder Meeting; Proxy Material	22
Section 6.03.	No Solicitation; Other Offers	23
Section 6.04.	Notices of Certain Events	24

	ARTICLE 7
	COVENANTS OF GATEWAY

Section 7.01.	Obligations of Amalgamation Sub	25
Section 7.02.	Indemnification; Directors’ and Officers’ Insurance	25

	ARTICLE 8
	COVENANTS OF GATEWAY AND THE COMPANY

Section 8.01.	Reasonable Best Efforts	26
Section 8.02.	Certain Filings	26
Section 8.03.	Public Announcements	27
Section 8.04.	Further Assurances	27
Section 8.05.	Resolution Period	27

	ARTICLE 9
	CONDITIONS TO THE AMALGAMATION

Section 9.01.	Conditions to the Obligations of Each Party	28

Section 9.02.	Conditions to the Obligations of Gateway and Amalgamation Sub	29

	ARTICLE 10
	TERMINATION

Section 10.01.	Termination	30
Section 10.02.	Effect of Termination	32

	ARTICLE 11
	MISCELLANEOUS

Section 11.01.	Notices	33
Section 11.02.	Survival of Representations and Warranties	34
Section 11.03.	Amendments; No Waivers	35
Section 11.04.	Expenses	35
Section 11.05.	Successors and Assigns	36
Section 11.06.	Governing Law	36
Section 11.07.	Jurisdiction	36
Section 11.08.	Waiver of Jury Trial	37
Section 11.09.	Counterparts; Effectiveness	37
Section 11.10.	Entire Agreement	37
Section 11.11.	Captions	37
Section 11.12.	Severability	37
Section 11.13.	No Third Party Beneficiaries	38
Section 11.14.	Specific Performance	38


	SCHEDULES

Schedule 3.03	Directors of Amalgamated Company
Schedule 4.03	Governmental Authorizations
Schedule 4.05	Company Options
Schedule 4.06	Company Subsidiary Securities
Schedule 7.02	Director and Officer Indemnification and Insurance
	Arrangements
Schedule 9.01(c)	Governmental Approvals

iii

AGREEMENT AND PLAN OF AMALGAMATION

AGREEMENT AND PLAN OF AMALGAMATION (this “Agreement”) dated as of October 16, 2003 between FLAG Telecom Group Limited, a company incorporated under the laws of Bermuda (the “Company”) and Reliance Gateway Net Private Limited, a company incorporated under the laws of India (“ Gateway”).

WHEREAS, the Boards of Directors of Gateway and the Company have each determined that it is advisable and in the best interests of their respective shareholders for Gateway and the Company to enter into a business combination upon the terms and subject to the conditions set forth herein;

WHEREAS, it is contemplated that, subject to the terms and conditions set forth herein, the business combination transaction will be effected by way of an Amalgamation (as defined herein);

WHEREAS, Gateway intends to form a direct or indirect wholly owned subsidiary under the laws of Bermuda (“Amalgamation Sub”) for purposes of effecting the Amalgamation; and

WHEREAS, the Boards of Directors of Gateway and the Company have each approved this Agreement and the transactions contemplated hereby, including the Amalgamation;

The parties hereto agree as follows:

ARTICLE 1
DEFINITIONS

Section 1.01. Definitions. (a) The following terms, as used herein, have the following meanings:

“Acquisition Proposal” means, other than the transactions contemplated by this Agreement, any offer, proposal or inquiry by a Third Party relating to, or any indication of interest by a Third Party in, (i) any acquisition or purchase, direct or indirect, of 20% or more of the consolidated assets of the Company and its Subsidiaries or over 20% of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets of the Company, (ii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any Third Party’s beneficially owning 20% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated

assets of the Company or (iii) an amalgamation or a merger, consolidation, share exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets of the Company.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person; provided that, for the purposes of this Agreement, an “Affiliate” of Gateway shall not include the Company or any of its Affiliates and an “Affiliate” of the Company shall not include Gateway or any of its Affiliates.

“Balance Sheet” means the consolidated balance sheet of the Company as of June 30, 2003 and the footnotes thereto set forth in the Company 10-Q.

“Balance Sheet Date” means June 30, 2003.

“Business Day” means any day, other than Saturday, Sunday or a U.S. or Bermuda federal holiday.

“Companies Act” means the Bermuda Companies Act of 1981, as amended.

“Company 10-Q” means the Company’s quarterly report on Form 10-Q for its period ended June 30, 2003.

“Company SEC Filings” means (i) the Company’s annual report on Form 10-K for its fiscal year ended December 31, 2002, (ii) its quarterly reports on Form 10-Q for its fiscal quarters ended March 31, 2003 and June 30, 2003 (iii) its proxy statement relating to a meeting of the shareholders of the Company held on September 25, 2003, and (iv) all of its other reports, statements, schedules and registration statements filed with the SEC since October 9, 2002 other than the Company Proxy Statement.

“FCC” means the Federal Communication Commission.

“HSR Act” means the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

“Material Adverse Effect” means a material adverse effect on the assets or liabilities of the Company and its Subsidiaries, taken as a whole other than a Material Adverse Effect resulting, directly or indirectly from (i) adverse changes in the global telecommunications industry, (ii) actions taken by competitors of the Company, (iii) actions taken by competitors of Reliance Infocomm Limited, a company incorporated under the laws of India, and its Affiliates, including, without limitation Gateway and Amalgamation Sub, in India or (iv) the public announcement of the transactions contemplated by this Agreement.

“1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“SEC” means the United States Securities and Exchange Commission.

“Shares” means the common shares, $1.00 par value per share, of the Company.

“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person. As used in Article 4, “Subsidiary” means Subsidiary of the Company, and as used in Article 5 “Subsidiary” means Subsidiary of Gateway.

“Third Party” means any Person other than Gateway or any of its Affiliates.

(b) Each of the following terms is defined in the Section set forth opposite such term:

Term	Section
Amalgamation	2.01
Amalgamated Company	2.01
Amalgamation Consideration	2.02
Amalgamation Sub	Recitals
Board of Directors	4.20
Certificates	2.03
Change of Control	10.02
Closing	2.01

Term	Section
Communication Licenses	4.16
Company	Recitals
Company Option	2.05
Company Proxy Statement	4.21
Company Securities	4.05
Company Shareholder Meeting	6.02
Company Subsidiary Securities	4.06
Dissenting Shareholder	2.04
Dissenting Shares	2.04
Effective Time	2.01
Employee Plans	4.15
Exchange Agent	2.03
Exchange Documents	2.03
Exon-Florio	4.03
Extension Period	8.05
FEMA	5.03
Filing Deadline	8.02
GAAP	4.08
Indemnified Party	7.02
Infocomm	10.02
Intellectual Property	4.17
Gateway	Recitals
Permits	4.16
RBI	5.03
Registrar	2.01
Required Capacity	10.02
Resolution Period	8.05
Substantially Equivalent	8.05
Transaction
Superior Proposal	6.03
Tax	4.14
Taxing Authority	4.14
Tax Return	4.14
Termination Fee	11.04

ARTICLE 2
THE AMALGAMATION

Section 2.01. The Amalgamation. (a) Gateway agrees that promptly, but in any event within 20 days after the date hereof, it will cause Amalgamation Sub to be formed under the laws of Bermuda. Gateway agrees that it will own 100% of the common shares of the Amalgamation Sub at the Effective Time. At the Effective Time, Amalgamation Sub shall be amalgamated (the “Amalgamation”) with the Company in accordance with the provisions of the Companies Act and this Agreement, and the separate existence of Amalgamation Sub and the Company shall thereupon cease. The company resulting from the Amalgamation shall operate under the name of “FLAG Telecom Group Limited” and continue under the provisions of the Companies Act and other applicable Bermuda law and is referred to herein as the “Amalgamated Company”.

(b) The Amalgamation shall be consummated by filing with the Registrar of Companies of Bermuda (the “Registrar”) a duly executed and verified application for registration of the Amalgamated Company and such other documents as are required by the Companies Act. The Amalgamation shall be effective on the date shown in the Certificate of Amalgamation issued by the Registrar (the “Effective Time”). Prior to the filing referred to in this Section 2.01(b), a closing (the “Closing”) shall be held, which shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, on the first Business Day on which each of the conditions set forth in Article 9 shall have been fulfilled or waived (if permissible under applicable law), or at such other time and place as Gateway and the Company may agree.

(c) From and after the Effective Time, the Amalgamated Company shall possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Amalgamation Sub, all as provided in the applicable provisions of the Companies Act.

Section 2.02. Treatment of Shares in the Amalgamation. At the Effective Time:

(a) Each Share issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive $95.61 in cash, without interest (the “Amalgamation Consideration”). The sum of the aggregate Amalgamation Consideration and all amounts payable in respect of Company Options pursuant to Section 2.05 shall not exceed $207,000,000.

(b) Each ordinary share of Amalgamation Sub that is issued and outstanding immediately prior to the Effective Time shall be converted into and become one ordinary share of the Amalgamated Company by virtue of the

Amalgamation and without any action on the part of Gateway (or any other holder of any shares of Amalgamation Sub).

Section 2.03. Surrender and Payment. (a) Prior to the Effective Time, the Company shall appoint an agent (the “Exchange Agent”) reasonably satisfactory to Gateway for the purpose of exchanging certificates representing Shares (or any other evidence of ownership of Shares) (the “Certificates”) for the Amalgamation Consideration. Prior to the Effective Time, Gateway will provide to the Exchange Agent, in full, the Amalgamation Consideration to be paid in respect of the Shares (such amount not to be withdrawn). Promptly after the Effective Time, Gateway will send, or will cause the Exchange Agent to send, to each registered holder of Shares at the Effective Time a letter of transmittal (which shall specify that the delivery of the Amalgamation Consideration shall be effected only upon proper delivery of the Certificates to the Exchange Agent) and all other documents that may be reasonably required from each holder to effect the transfer of the Amalgamation Consideration to each such holder or its designee (collectively, the “ Exchange Documents”).

(b) Upon surrender to the Exchange Agent of a Certificate, together with properly completed Exchange Documents, each holder of a Certificate will be entitled to receive the Amalgamation Consideration payable in respect of each Share formerly represented by such Certificate. Until so surrendered, each such Certificate shall, after the Effective Time, represent for all purposes only the right to receive such Amalgamation Consideration.

(c) If any portion of the Amalgamation Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition to such payment that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Shares or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable.

(d) From and after the Effective Time, there shall be no further registration of transfers of Shares. If, after the Effective Time, Certificates formerly representing Shares are presented to the Amalgamated Company, they shall be cancelled and the Amalgamation Consideration shall be paid in accordance with the procedures set forth in this Article 2.

(e) Any portion of the Amalgamation Consideration made available to the Exchange Agent pursuant to Section 2.03(a) (and any interest or other income earned thereon) that remains unclaimed by the holders of Shares six months after the Effective Time shall be returned to Gateway, upon demand, and any such holder who has not surrendered his Shares for the Amalgamation Consideration in accordance with this Section prior to that time shall thereafter look only to

Gateway or the Amalgamated Company for payment of the Amalgamation Consideration in respect of his Shares. Notwithstanding the foregoing, none of Gateway, Amalgamation Sub, the Company, the Amalgamated Company or the Exchange Agent shall be liable to any Person in respect of any Amalgamation Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Subject to applicable law and public policy, if any Certificates shall not have been surrendered immediately prior to such date on which any Amalgamation Consideration in respect of such Certificate would otherwise escheat to or become the property of any governmental entity, any amounts payable in respect of such Certificate shall, to the extent permitted by applicable law and public policy, become the property of Gateway, free and clear of all claims or interest of any Person previously entitled thereto.

(f) Any portion of the Amalgamation Consideration made available to the Exchange Agent pursuant to Section 2.03(a) to pay for Shares for which appraisal rights have been perfected shall be returned to Gateway, upon demand.

Section 2.04. Dissenting Shareholders. Notwithstanding anything in this Agreement to the contrary, any Shares that are held by shareholders of the Company who voted against, or decline to vote in favor of, the Amalgamation (“Dissenting Shareholder”) shall be cancelled at the Effective Time and the Amalgamation Consideration shall be paid at the Effective Time pursuant to this Agreement, subject to the rights of Dissenting Shareholders to require appraisal of their Shares (“Dissenting Shares”) under Section 106 of the Companies Act. In the event that Dissenting Shareholders fail to perfect, effectively withdraw or otherwise lose any right to appraisal and payment under the Companies Act such Dissenting Shareholder shall no longer have any right to appraisal thereunder. The Company shall give Gateway (i) prompt notice of any written demands by Dissenting Shareholders for appraisal of Dissenting Shares or withdrawals of such demands received by the Company pursuant to the Companies Act and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands by Dissenting Shareholders for appraisal of Dissenting Shares under the Companies Act. Except as required by Section 106 of the Companies Act, prior to the Effective Time, the Company shall not make any payment with respect to any demands by Dissenting Shareholders for appraisal of Dissenting Shares or offer to settle or settle or otherwise negotiate any such demands.

Section 2.05. Stock Options. (a) The Company shall cause each option to purchase Shares granted to any employee or director (or former employee or director) of the Company outstanding immediately prior to the Effective Time under any employee stock option or compensation plan or arrangement of the Company (a “Company Option”), whether or not vested or exercisable, to be canceled as of the Effective Time. Thereafter, each Company Option whether or not vested or exercisable shall represent only the right to receive an amount in cash determined by multiplying (i) the excess, if any, of the Amalgamation

Consideration over the applicable exercise price of such Company Option by (ii) the number of Shares such holder could have purchased (assuming full vesting of all Company Options) had such holder exercised such Company Option in full immediately prior to the Effective Time.

(b) Prior to the Effective Time, the Company shall use its best efforts to (i) obtain any consents from holders of Company Options and (ii) make any amendments to the terms of the applicable stock option or compensation plans or arrangements that, in the case of either clauses (i) or (ii), are necessary to give effect to the transactions contemplated by Section 2.05(a). Notwithstanding any other provision of this Section 2.05, payment may be withheld in respect of any employee stock option until such necessary consents are obtained.

Section 2.06. Withholding Rights. Each of the Amalgamated Company and Gateway shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article 2 such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. If the Amalgamated Company or Gateway, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which the Amalgamated Company or Gateway, as the case may be, made such deduction and withholding.

Section 2.07. Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Amalgamated Company, the posting by such Person of a bond, in such reasonable amount as the Amalgamated Company may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall pay, in exchange for such lost, stolen or destroyed Certificate, the Amalgamation Consideration to be paid in respect of the Shares represented by such Certificate, as contemplated by this Article 2.

ARTICLE 3
THE AMALGAMATED COMPANY; GATEWAY

Section 3.01. Memorandum of Association of Amalgamated Company. The memorandum of association of Amalgamation Sub in effect at the Effective Time shall be the memorandum of association of the Amalgamated Company until amended in accordance with applicable law.

Section 3.02. Bye-laws of Amalgamated Company. The bye-laws of Amalgamation Sub in effect at the Effective Time shall be the bye-laws of the Amalgamated Company until amended in accordance with applicable law.

Section 3.03. Directors and Officers of Amalgamated Company. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law, (i) the directors of Amalgamation Sub at the Effective Time shall be the directors of the Amalgamated Company and (ii) the officers of the Amalgamation Sub at the Effective Time shall be the officers of the Amalgamated Company. The names and addresses of such directors are set forth in Schedule 3.03 (which Schedule may be delivered to the Company after the date hereof but prior to the Closing).

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Gateway that:

Section 4.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in compliance with the laws of Bermuda and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except for those licenses, authorizations, permits, consents and approvals the absence of which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

Section 4.02. Corporate Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby are within the Company’s corporate powers and, except for any required approval by the Company’s shareholders in connection with the consummation of the Amalgamation, have been duly authorized by all necessary corporate action on the part of the Company. This Agreement constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy and similar laws or by general principles of equity (whether considered in a proceeding in equity or at law).

Section 4.03. Governmental Authorization. Except as set forth on Schedule 4.03, the execution, delivery and performance by the Company of this Agreement and the consummation of the Amalgamation by the Company require no action by or in respect of, or filing with, any governmental body, agency, official or authority by the Company or any of its Subsidiaries other than (i) the registration of the Amalgamation with the Registrar in accordance with the Companies Act, (ii) compliance with any applicable requirements of the 1934 Act,

(iii) compliance with any applicable requirements of the HSR Act and of laws, rules and regulations analogous to the HSR Act existing in non-U.S. jurisdictions, (iv) compliance with any applicable requirements of the Exon-Florio Statute, Sec. 721 of Title VII of the Defense Production Act of 1950, as amended (50 U.S.C. App. 2170) (“Exon-Florio”) and (v) any actions or filings the absence of which would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect or materially to impair the ability of the Company to consummate the transactions contemplated by this Agreement.

Section 4.04. Non-contravention. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not, assuming shareholder approval as contemplated by Section 4.19, (i) violate the Memorandum of Association or Amended and Restated Bye-Laws of the Company, (ii) assuming compliance with the matters referred to in Section 4.03, violate any applicable law, rule, regulation, judgment, injunction, order or decree, (iii) except as set forth in the Company SEC Filings filed prior to the date hereof, require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company or any Subsidiary or to a loss of any benefit to which the Company or any Subsidiary is entitled under any provision of any agreement or other instrument binding upon the Company or any Subsidiary or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or liabilities of the Company and its Subsidiaries or (iv) result in the creation or imposition of any Lien on any asset of the Company or any Subsidiary, except for, in the case of clause (ii), (iii) and (iv), violations, failures to obtain any such consent or other action, defaults, terminations, cancellations, accelerations, losses or Liens that would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect or materially to impair the ability of the Company to consummate the actions contemplated by this Agreement.

Section 4.05. Capitalization. The authorized capital stock of the Company consists of 20,000,000 Shares. As of the date hereof, there were 2,000,000 outstanding Shares and Company Options to purchase an aggregate of 198,475 Shares. The exercise price of each of the Company Options is set forth on Schedule 4.05. All outstanding Shares have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth in this Section 4.05, there are no outstanding (i) shares of capital stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (iii) options or other rights to acquire from the Company or other obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company (the items in clauses (i), (ii) and (iii) above being referred to collectively as the “Company Securities”).

There are no outstanding obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company Securities.

Section 4.06. Subsidiaries. (a) Each Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation (except where good standing may be deemed not to exist due to the proceedings described in the annotations to Schedule 4.06), has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except for those licenses, authorizations, permits, consents and approvals the absence of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) Except as set forth in Schedule 4.06, all of the outstanding capital stock of, or other voting securities or ownership interests in, each Subsidiary, is owned by the Company, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). There are no outstanding (i) securities of the Company or any Subsidiary convertible into or exchangeable for shares of capital stock or other voting securities of or ownership interests in any Subsidiary or (ii) options or other rights to acquire from the Company or any Subsidiary, or other obligation of the Company or any Subsidiary to issue, any capital stock or other voting securities or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities or ownership interests in, any Subsidiary (the items in Section 4.06(b)(i) and Section 4.06(b)(ii) being referred to collectively as the “Company Subsidiary Securities”). There are no outstanding obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any outstanding Company Subsidiary Securities.

Section 4.07. SEC Filings. (a) As of its filing date (or, if amended or superceded by a filing prior to the date hereof, on the date of such filing), each Company SEC Filing filed pursuant to the 1934 Act did not, and each such Company SEC Filing filed after the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(b) Each Company SEC Filing that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such statement or amendment became effective, did not, and each such

Company SEC Filing filed after the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(c) The representations and warranties contained in this Section 4.07 will not apply to statements or omissions included in the Company SEC Filings based upon information furnished to the Company in writing by Gateway or its Affiliates specifically for use therein.

Section 4.08. Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company included in the Company SEC Filings fairly present, in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal or recurring year end adjustments in the case of any unaudited interim financial statements).

Section 4.09. Absence of Certain Changes. Since the Balance Sheet Date through and including the date hereof, except as disclosed in the Company SEC Filings filed prior to the date hereof, or after the date hereof, to the extent expressly permitted by or consented to pursuant to Section 6.01, the business of the Company and its Subsidiaries has been conducted in the ordinary course consistent with past practices and there has not been:

(a) any event, occurrence, development or state of circumstances or facts which has had or would reasonably be expected to have a Material Adverse Effect;

(b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company or any repurchase, redemption or other acquisition by the Company or any Subsidiary of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company or any Subsidiary;

(c) any amendment of any material term of any outstanding security of the Company or any Subsidiary or of any material indebtedness for borrowed money;

(d) any incurrence, assumption or guarantee by the Company or any Subsidiary of any indebtedness for borrowed money other than in the ordinary course of business and in amounts and on terms consistent with past practices;

(e) any creation by the Company or any Subsidiary of any Lien on any material asset other than in the ordinary course of business consistent with past practices, except Liens that would not reasonably be expected to have a Material Adverse Effect or prohibit the ability of the Company to consummate the transactions contemplated by this Agreement;

(f) any making of any loan, advance or capital contributions to or investment in any Person other than loans, advances or capital contributions to or investments in wholly-owned Subsidiaries in the ordinary course of business consistent with past practices;

(g) any (i) entering into of any employment, deferred compensation, severance, retirement or other similar agreement with any director or executive officer of the Company or any Subsidiary (or any amendment to any such existing agreement), (ii) grant of any severance or termination pay to any director or executive officer of the Company or any Subsidiary or (iii) material increase in compensation, bonus or other benefits payable to any director or executive officer of the Company or any Subsidiary pursuant to any employment agreement or severance or retirement plans or policies thereof, other than, in the case of clause (ii) or (iii), any such actions prior to the date hereof in the ordinary course of business consistent with past practice or as otherwise required by law; or

(h) any cancellation of any licenses, sublicenses, franchises, permits or agreements to which the Company or any Subsidiary is a party, or any written notification to the Company or any Subsidiary that any party to any such arrangements intends to cancel or not renew such arrangements beyond the expiration date thereof as in effect on the date hereof, except where such cancellation would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company or materially to impair the ability of the Company to consummate the actions contemplated by this Agreement.

Section 4.10. No Undisclosed Material Liabilities. There are (a) no liabilities of the Company or any Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is (b) no existing conditions, situations or set of circumstances which would reasonably be expected to result in such a liability, in each case other than:

(i) liabilities disclosed and provided for in the Balance Sheet or in the notes thereto or in the Company SEC Filings filed prior to the date hereof;

(ii) liabilities relating to or arising out of the business of the Company or its Subsidiaries that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and

(iii) liabilities incurred after the date hereof to the extent permitted by, and in accordance with, Section 6.01.

Section 4.11. Compliance with Laws and Court Orders. Neither the Company nor any Subsidiary is in violation of, or has since October 9, 2002 violated, or to the knowledge of the Company is under investigation with respect to or has been threatened to be charged with or given notice of any violation of, any applicable law, rule, regulation, judgment, injunction, order or decree, except for violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 4.12. Litigation. Except as set forth in the Company SEC Filings filed prior to the date hereof, there is no action, suit, investigation or proceeding (or any basis therefor) pending against, or, to the knowledge of the Company, threatened against or affecting, the Company, any of its Subsidiaries, any present or former officer, director or employee of the Company or any of its Subsidiaries or any other Person for whom the Company or any of such Subsidiary may be liable or any of their respective properties before any court or arbitrator or before or by any governmental body, agency or official, domestic, foreign or supranational, that, if determined or resolved adversely in accordance with the plaintiff’s demands, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or materially to impair the ability of the Company to consummate the transaction contemplated by this Agreement.

Section 4.13. Finders’ Fees. Except for Houlihan Lokey Howard & Zukin (UK) Ltd., the Company’s financial advisor, a copy of whose engagement agreement will be promptly provided to Gateway or its legal counsel, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the Company or any Subsidiary who might be entitled to any fee or commission from the Amalgamated Company or any of its Affiliates upon consummation of the transactions contemplated by this Agreement.

Section 4.14. Taxes. (a) All material Tax Returns required by applicable law to be filed with any Taxing Authority by, or on behalf of, the Company or any of its Subsidiaries have been filed when due in accordance with all applicable laws, and all such Tax Returns are, or shall be at the time of filing, true and complete in all material respects.

(b) The Company and each of its Subsidiaries has paid (or has had paid on its behalf) or has withheld and remitted to the appropriate Taxing Authority all Taxes due and payable, except where the validity or amount thereof is being contested in good faith by appropriate proceedings.

(c) “Tax” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (including, but not limited to, withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any governmental authority (a “Taxing Authority”) responsible for the imposition of any such tax (whether U.S. or non-U.S.), and any liability for any of the foregoing as transferee, (ii) in the case of the Company or any of its Subsidiaries, liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Effective Time a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement, as a result of which liability of the Company or any of its Subsidiaries to a Taxing Authority is determined or taken into account with reference to the activities of any other Person, and (iii) liability of the Company or any of its Subsidiaries for the payment of any amount as a result of being party to any Tax sharing agreement or with respect to the payment of any amount imposed on any person of the type described in (i) or (ii) as a result of any existing express or implied agreement or arrangement (including, but not limited to, an indemnification agreement or arrangement). “Tax Return” means any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority with respect to Taxes, including information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information.

Section 4.15. Employee Benefit Plans. (a) “Employee Plans” means, collectively, each “employee benefit plan”, as defined in Section 3(3) of ERISA, each employment, severance or similar contract, plan, arrangement or policy and each other plan or arrangement (written or oral) providing for compensation, bonuses, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements, health or medical benefits, employee assistance program, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) which is maintained, administered or contributed to by the Company, any Subsidiary or any of their Affiliates and covers any employee or former employee or service provider or any dependent or beneficiary thereof of the Company or the Subsidiaries, or with respect to which the Company or the Subsidiaries has any liability.

(b) Each Employee Plan has been maintained in compliance with its terms and conditions and with the requirements prescribed by any and all applicable laws, statutes, orders, rules and regulations (including any special provisions relating to qualified plans where such Plan was intended to so qualify) and has been maintained in good standing with applicable regulatory authorities,

except, in each case, as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(c) There has been no amendment to, written interpretation of or announcement (whether or not written) by the Company or any Subsidiary relating to, or change in employee participation or coverage under, any Employee Plan that would increase materially the expense of maintaining such Employee Plan above the level of the expense incurred in respect thereof for the most recent fiscal year ended prior to the date hereof.

(d) Except as set forth in the Company SEC Filings filed prior to the date hereof and with respect to the acceleration of, and payment to, the Company Options as contemplated by this Agreement, the consummation of the transactions contemplated by this Agreement will not (either alone or with any other event), entitle any employee or independent contractor of the Company or any Subsidiary to severance pay or accelerate the time of payment or vesting or trigger any payment of funding of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Employee Plan. Except as set forth in the Company SEC Filings filed prior to the date hereof, there is no contract, plan or arrangement (written or otherwise) covering any employee or former employee of the Company or the Subsidiaries that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Sections 280G or 162(m) of the Code.

Section 4.16. Licenses and Permits. (a) Except where the failure of the following to be true would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (i) the Company or its Subsidiaries own, hold or possess adequate right to use all licenses, franchises, permits, certificates, approvals or other similar authorizations affecting, or relating in any way to, the assets or business of the Company and its Subsidiaries (the “Permits”) required in connection with the operation of the business of the Company and its Subsidiaries, including, without limitation, all required regulatory permits, licenses or other authorizations issued by governmental entities (whether U.S. or non-U.S.) that regulate communications (whether by radio, television, wire, satellite and cable) in each jurisdiction in which the Company and its Subsidiaries operate (the “Communication Licenses”), (ii) the Permits are valid and in full force and effect, (iii) neither the Company nor any Subsidiary is in default under, and no condition exists that with notice or lapse of time or both would constitute a default under, the Permits, (iv) none of the Permits will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated hereby, (v) none of the Permits is subject to conditions or requirements that are not generally imposed on such authorizations and (vi) each Permit is validly held and free and clear of all Liens.

(b) Except as would not, individually or in the aggregate, reasonably be expected to have, a Material Adverse Effect, with respect to any of the Company and its Subsidiaries that holds a Communications License, such holder (i) has operated in all respects in compliance with all terms thereof including all system build-out requirements and (ii) has filed all registrations, statements, documents and reports and paid all fees required by all applicable law relating to, or governmental entity issuing, such Communications License. Except as would not reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect, (A) there is no pending or, to the knowledge of the Company, threatened action by or before any U.S. or non-U.S. governmental entity to revoke, cancel, suspend, modify or refuse to renew any of the Communications Licenses and (B) to the knowledge of the Company, no Person has asserted in writing to a governmental entity that a Communications License should be modified or revoked, or that the Company or any Subsidiary is not in compliance with any Communications License and (C) no event has occurred which would permit the revocation or termination of any of the Communications Licenses or the imposition of any restriction thereon, or that would prevent any of the Communications Licenses from being renewed on a routine basis or in the ordinary course.

Section 4.17. Intellectual Property. The Company and the Subsidiaries own or possess adequate licenses or other rights to use all Intellectual Property Rights necessary to conduct the business now operated by them, except where the failure to own or possess such licenses or rights has not had and would not be reasonably likely to have a Material Adverse Effect and, to the knowledge of the Company, the Intellectual Property Rights of the Company and the Subsidiaries do not conflict with or infringe upon any Intellectual Property Rights of others to the extent that, if sustained, such conflict or infringement has had and would be reasonably likely to have a Material Adverse Effect. For purposes of this Agreement, “Intellectual Property Right” means any trademark, service mark, trade name, mask work, copyright, patent, software license, other data base, invention, trade secret, know-how (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right.

Section 4.18. Material Contracts. Except as set forth in the Company SEC Filings filed prior to the date hereof or as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, each agreement, contract, plan and lease to which the Company or any Subsidiary is a party is a valid and binding agreement of the Company or a Subsidiary, as the case may be, and is in full force and effect, and none of the Company, any Subsidiary or, to the knowledge of Company, any other party thereto is in default or breach in any material respect under the terms of any such agreement, contract, plan or lease, and, to the knowledge of the Company, no event or circumstance

has occurred that, with notice or lapse of time or both, would constitute any event of default thereunder.

Section 4.19. Required Shareholder Vote. The affirmative vote by shareholders of the Company representing 75% of those Shares present in person or by proxy and entitled to vote and voting at the Company Shareholder Meeting (at which there is a quorum of two persons present in person or by proxy representing more than 50% of the issued and outstanding Shares) is the only vote of Company shareholders required for the adoption and approval of this Agreement and the Amalgamation.

Section 4.20. Rights Plan. The Company has not entered into, and its Board of Directors (the “Board of Directors”) has not adopted or authorized the adoption of, a shareholder rights plan or similar agreement.

Section 4.21. Disclosure Documents. (a) At the time the proxy or information statement of the Company to be filed with the SEC in connection with the Amalgamation (the “Company Proxy Statement”) or any amendment or supplement thereto is first mailed to shareholders of the Company, and at the time such shareholders vote on adoption of this Agreement and the Amalgamation, the Company Proxy Statement, as supplemented or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The foregoing notwithstanding, this Section 4.21 shall not be deemed to have been breached by virtue of the fact that the Company filed an amendment or supplement to the Company Proxy Statement after it is first mailed to shareholders of the Company and prior to such shareholders vote of adoption of this Agreement and the Amalgamation if such amendment or supplement is not material to the Company and its Subsidiaries, taken as a whole.

(b) The representations and warranties contained in this Section 4.21 will not apply to statements or omissions included in the Company Proxy Statement based upon information furnished to the Company in writing by Gateway or its Affiliates specifically for use therein.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF GATEWAY

Gateway represents and warrants to the Company that:

Section 5.01. Corporate Existence and Power. Gateway is, and Amalgamation Sub will be, a corporation duly incorporated, validly existing and in compliance with the laws of the jurisdiction of its incorporation and has (or in

the case of Amalgamation Sub will have) all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business, except for those licenses, authorizations, permits, consents and approvals the absence of which would not, individually or in the aggregate, be reasonably expected to have a material adverse effect on Gateway and Amalgamation Sub. After its formation, Amalgamation Sub will not engage in any activities other than in connection with or as contemplated by this Agreement.

Section 5.02. Corporate Authorization. (a) The execution, delivery and performance by Gateway of this Agreement and the consummation by Gateway of the transactions contemplated hereby are within the corporate powers of Gateway and have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and binding agreement of Gateway enforceable against Gateway in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy and similar laws or by the general principles of equity (whether considered in a proceeding in equity or at law).

(b) At and as of the Closing Date, the consummation by Amalgamation Sub of the transactions contemplated hereby will be within the corporate powers of Amalgamation Sub and will have been duly authorized by all necessary corporate action.

Section 5.03. Governmental Authorization. The execution, delivery and performance by Gateway of this Agreement and the consummation by Gateway and Amalgamation Sub of the transactions contemplated hereby require no material action by or in respect of, or material filing with, any governmental body, agency, official or authority other than (i) the registration of the Amalgamation with the Registrar in accordance with the Companies Act, (ii) compliance with any applicable requirements of the 1934 Act, (iii) compliance with any applicable requirements of the HSR Act and of laws, rules and regulations analogous to the HSR Act existing in non-U.S. jurisdiction, (iv) compliance with Indian Foreign Exchange Management Act of 2001 (“FEMA”), which compliance has been effected (v) approvals of the Reserve Bank of India (“RBI”), which approvals have been obtained, (vi) compliance with any applicable requirements of the FCC, (vii) compliance with any applicable requirements of Exon-Florio, (viii) actions and/or filings in connection with the formation of Amalgamation Sub, and (ix) any actions or filings the absence of which would not prohibit the ability of Gateway and Amalgamation Sub to consummate the transactions contemplated by this Agreement.

Section 5.04. Non-contravention. The execution, delivery and performance by Gateway of this Agreement and the consummation by Gateway and Amalgamation Sub of the transactions contemplated hereby do not (with respect to Gateway) and will not (with respect to Gateway and Amalgamation Sub) (a) violate the organizational documents of Gateway or Amalgamation Sub

or (b) require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of Gateway or Amalgamation Sub or to a loss of any benefit to which Gateway or Amalgamation Sub is entitled under any provision of any agreement or other instrument binding upon Gateway or Amalgamation Sub or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of Gateway or Amalgamation Sub, except for failures to obtain any such consent or other action, defaults, terminations, cancellations, accelerations or losses that would not have, individually or in the aggregate, a material adverse effect on Gateway or Amalgamation Sub or prohibit the ability of Gateway or Amalgamation Sub to consummate the actions contemplated by this Agreement.

Section 5.05. Disclosure Documents. The information with respect to Gateway and any of its Subsidiaries that Gateway furnishes to the Company in writing specifically for use in any Company Disclosure Document will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading at the time of the filing of such Company Disclosure Document or any supplement or amendment thereto and at the time of any distribution or dissemination thereof.

Section 5.06. Finders’ Fees. There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Gateway who might be entitled to any fee or commission from the Amalgamated Company or any of its subsidiaries upon consummation of the transactions contemplated by this Agreement.

Section 5.07. Financing. Prior to the Effective Time, Gateway will have sufficient cash, available lines of credit or other sources of immediately available funds, outside of India, to enable it to pay the aggregate Amalgamation Consideration payable in respect of all of the Shares and Company Options and to pay all related fees and expenses.

Section 5.08. Share Ownership. As of the date hereof, neither Gateway, or any of its Affiliates owns or has any beneficial interest in any Shares or Company Options.

ARTICLE 6
COVENANTS OF THE COMPANY

The Company agrees that:

Section 6.01. Conduct of the Company. From the date hereof until the Effective Time, the Company and its Subsidiaries shall conduct their business in the ordinary course consistent with past practice and shall use their commercially reasonable efforts to preserve intact their respective business organizations and relationships with third parties and to keep available the services of their present officers and employees. Without limiting the generality of the foregoing, from the date hereof until the Effective Time, the Company shall not (and shall cause its Subsidiaries not to) without the prior written consent of Gateway (which consent shall not be unreasonably withheld or delayed):

(a) adopt or propose any change in its Memorandum of Association or Amended and Restated Bye-Laws or similar organizational documents or any reclassification, recapitalization, stock split or combination, exchange or readjustment of Shares, or stock dividend thereon;

(b) amalgamate, merge or consolidate with any other Person or acquire a material amount of assets of any other Person;

(c) sell, lease, license or otherwise dispose of any material assets or property except (i) pursuant to existing contracts or commitments and (ii) in the ordinary course consistent with past practice;

(d) knowingly take or omit to take any actions, that, individually or in the aggregate with other such actions or omissions by the Company or any of its Subsidiaries, would reasonably be expected to have a Material Adverse Effect;

(e) other than in the ordinary course of business consistent with past practice, waive, release, grant, or transfer any assets of material value;

(f) other than in the ordinary course of business consistent with past practice, modify or change in any material respect any existing material license or customer contract;

(g) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person (other than any majority-owned Subsidiary) which, are in excess of $15 million in the aggregate;

(h) make any loans, advances or capital contributions to, or investments in, any other Person (other than any majority-owned Subsidiary) which are in excess of $15 million in the aggregate;

(i) other than in the ordinary course of business consistent with past practice, make or change any material tax election or settle or compromise any material income tax liability in excess of $15 million in the aggregate;

(j) adopt, propose or enter into any (i) employment, deferred compensation, severance, retirement or other similar agreement with any director or executive officer of the Company or any Subsidiary (or any amendment to any such existing agreement), (ii) grant of any severance or termination pay to any director or executive officer of the Company or any Subsidiary or (iii) material increase in compensation, bonus or other benefits payable to any director or executive officer of the Company or any Subsidiary pursuant to any employment agreement or severance or retirement plans or policies thereof, other than, in the case of clause (ii) or (iii), any increase prior to the date hereof in the ordinary course of business consistent with past practice or as otherwise required by law; or

(k) agree or commit to do any of the foregoing.

Section 6.02. Shareholder Meeting; Proxy Material. (a) Unless the Board of Directors determines in good faith, after consultation with its outside legal counsel, that recommending approval and adoption of this Agreement and the Amalgamation by the Company would, as a result of material new events or developments arising or occurring after the date hereof (including receipt by the Company of a Superior Proposal in compliance with Section 6.03) that were not caused by any action or intentional inaction by the Company or any of its Subsidiaries, violate its fiduciary duties, the Board of Directors shall recommend approval and adoption of this Agreement and the Amalgamation by the Company’s shareholders in accordance with the applicable provisions of the Companies Act. Notwithstanding the foregoing, the Company shall cause a meeting of its shareholders (the “Company Shareholder Meeting”) to be duly called and held as soon as reasonably practicable after the date hereof for the purpose of voting on the approval and adoption of this Agreement and the Amalgamation. In connection with such meeting, the Company shall (i) promptly prepare and file with the SEC, use its commercially reasonable efforts to have cleared by the SEC and thereafter mail to its shareholders as promptly as practicable, the Company Proxy Statement and all other proxy materials for such meeting, (ii) use its commercially reasonable efforts to obtain the necessary approvals by its shareholders of this Agreement and the transactions contemplated hereby and (iii) otherwise comply with all legal requirements applicable to such meeting.

(b) No amendment or supplement to the Company Proxy Statement will be made by the Company without prior consultation with Gateway, except to the extent such consultation is not practicable, given time constraints and Gateway’s unavailability. The Company will promptly notify Gateway of any request by the SEC for amendment of the Company Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information.

Section 6.03. No Solicitation; Other Offers. (a) Neither the Company nor any of its Subsidiaries shall, nor shall the Company or any of its Subsidiaries authorize or permit the Board or, with the knowledge of any executive officer or other member of the management team of the Company, permit any of its or the Company’s Subsidiaries officers, directors, employees, investment bankers, attorneys, accountants, consultants or other agents or advisors to, directly or indirectly, (i) solicit, initiate or take any action to knowingly facilitate or encourage the submission of any Acquisition Proposal, (ii) enter into or participate in any discussions or negotiations with, furnish any information relating to the Company or any of its Subsidiaries or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries (except access that may be required to be afforded to shareholders of the Company pursuant to the laws of Bermuda) to, otherwise cooperate in any way with, or knowingly assist, participate in, facilitate or encourage any effort by any Third Party that may reasonably be expected to be seeking to make, or has made, an Acquisition Proposal or (iii) enter into any agreement with respect to an Acquisition Proposal.

(b) Notwithstanding the foregoing if, prior to the date when the condition set forth in Section 9.01(b) shall have been satisfied, the Company receives a proposal or offer that was not solicited, initiated or knowingly facilitated or encouraged by the Company and that did not otherwise result from a breach of Section 6.03(a) and that the Board of Directors determines in good faith (after consultation with its outside legal counsel and its financial advisor) could reasonably be expected to result in a Third Party making a Superior Proposal, and subject to compliance with Section 6.03(c), the Company may, to the extent it determines it is necessary to comply with the applicable fiduciary duties of the Board of Directors, as determined in good faith by it after consultation with outside counsel, (i) furnish information or access with respect to the Company and its Subsidiaries to such Third Party pursuant to an appropriate confidentiality agreement (a copy of which shall be provided to Gateway) and (ii) participate in discussions or negotiations with such Person regarding such proposal or offer. The Company shall, and shall cause its Subsidiaries and the advisors, employees and other agents of the Company and any of its Subsidiaries to, cease immediately and cause to be terminated any and all existing activities, discussions and negotiations, if any, with any Third Party conducted prior to the date hereof with respect to any Acquisition Proposal and shall use its reasonable best efforts to cause any such Third Party (or its agents or advisors) in possession of confidential information about the Company that was furnished by or on behalf of the Company to return or destroy all such information.

(c) The Board of Directors shall not participate in discussions or negotiations with any Person regarding a proposal or offer or provide information as permitted by Section 6.03(b) unless the Company shall have delivered to Gateway a prior written notice advising Gateway that it intends to take such

action, and the Company shall continue to advise Gateway with respect to such matters after taking such action. In addition, the Company shall notify Gateway promptly after receipt by the Company (or any of its advisors) of any Acquisition Proposal, any inquiry with respect to or that could reasonably be expected to lead to an Acquisition Proposal or any request for information relating to the Company or any of its Subsidiaries or for access to the business, properties, assets, books or records of the Company or any of its Subsidiaries by any Third Party that, to the knowledge of the Company, may be considering making, or has made, an Acquisition Proposal. The Company shall provide such notice orally and in writing and shall identify the Third Party making, and the terms and conditions of, any such Acquisition Proposal, indication or request. If the Company provides any non-public information or access to such Third Parties, the Company shall offer to provide to Gateway the same information and access as is provided to such Third Party on the same terms (including execution of a confidentiality agreement). The Company shall use its reasonable best efforts to keep Gateway fully informed, on a current basis, of the status and details of any such Acquisition Proposal, indication or request.

(d) Nothing contained in this Section 6.03 shall prohibit the Company (i) from taking and disclosing to its shareholders a position and making the disclosure required by Rule 14e-2 promulgated under the 1934 Act, as amended or (ii) from making any other required disclosure to the Company’s shareholders if, in the good faith judgment of the Board of Directors, after consultation with its outside legal counsel, failure to make such other disclosure would be inconsistent with its obligations under law.

“Superior Proposal” means any bona fide, unsolicited written Acquisition Proposal for at least a majority of the outstanding Shares on terms that the Board of Directors determines in good faith by a majority vote, after considering the advice of a financial advisor of nationally recognized reputation and taking into account all the terms and conditions of the Acquisition Proposal, including any break-up fees, expense reimbursement provisions and conditions to consummation, are more favorable and provide greater value to all the Company’s shareholders than as provided hereunder and for which financing, to the extent required, is then fully committed or reasonably determined to be available by the Board of Directors.

Section 6.04. Notices of Certain Events. The Company shall promptly notify Gateway of any of the following of which it has knowledge:

(a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and

(c) any actions, suits, claims, investigations or proceedings commenced or threatened against, relating to or involving or otherwise affecting the Company or any of its Subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Sections 4.12 or 4.16, as the case may be, or that relate to the consummation of the transactions contemplated by this Agreement.

ARTICLE 7
COVENANTS OF GATEWAY

Gateway agrees that:

Section 7.01. Obligations of Amalgamation Sub. Gateway will take all action necessary to cause Amalgamation Sub to promptly perform its obligations under this Agreement and to consummate the Amalgamation on the terms and conditions set forth in this Agreement.

Section 7.02. Indemnification; Directors’ and Officers’ Insurance. If the Amalgamation shall occur, the Amalgamated Company shall, and Gateway shall cause the Amalgamated Company to, cause to be maintained in effect for a period of five (5) years after the Effective Time, the current provisions regarding exculpation and indemnification of, and advance of expenses to, current or former officers and directors (each an “Indemnified Party”) with respect to action taken since October 9, 2002 contained in the Amended and Restated Bye-Laws of the Company or the organizational documents of its Subsidiaries and in any agreements between an Indemnified Party and the Company or its Subsidiaries set forth on Schedule 7.02 on the date of this Agreement. For a period of five (5) years after the Effective Time, the Amalgamated Company shall, and Gateway shall cause the Amalgamated Company to, provide and maintain policies of directors’ and officers’ liability insurance with respect to actions taken since October 9, 2002 (a) providing at least the same coverage and amounts and containing terms and conditions which are, in the aggregate, materially no less advantageous to the insured as those policies currently maintained by the Company set forth on Schedule 7.02 on the date of this Agreement, (b) which shall not result in any gaps or lapses in coverage with respect to matters occurring after October 9, 2002 and prior to the Effective Time, (c) providing coverage for a five (5) year period after the Effective Time with respect to claims arising from acts, facts, errors, omissions or events that occurred since October 9, 2002 and on or before the Effective Time, including, without limitation, in respect of the transactions contemplated hereby, and (d) so long as the premium to be paid by

the Company for such policies does not exceed 200% of the premium to be paid for the 12-month period ending on the date hereof; provided that if such policies cannot be obtained at such cost, the Company shall obtain as much of such policies as can be so obtained at a cost equal to 200% of the premium to be paid for the 12-month period ending on the date hereof. This covenant shall survive the Effective Time and is intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties and their respective heirs and legal representatives.

ARTICLE 8
COVENANTS OF GATEWAY AND THE COMPANY

The parties hereto agree that:

Section 8.01. Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each party will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement.

Section 8.02. Certain Filings. (a) The Company and Gateway shall cooperate with one another (i) in connection with the preparation of the Company Disclosure Documents, including, without limitation, the Company Proxy Statement, each conforming to the requirements of the 1934 Act and other applicable statutes and regulations, (ii) in determining whether any action by or in respect of, or filing with, any governmental body, agency, official, or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (iii) in taking such actions or making any such filings, furnishing information required in connection therewith or with the Company Disclosure Documents and seeking timely to obtain any such actions, consents, approvals or waivers.

(b) The Company and Gateway shall, and Gateway shall cause the Amalgamation Sub to, promptly make all required filings and submissions, and shall use their reasonable best efforts to take all actions, in each case, necessary, proper or advisable under applicable laws and regulations to obtain any required approvals of any governmental authority with jurisdiction over the transactions contemplated by this Agreement. In connection with, and without limiting, the foregoing, each of the parties hereto agree to file any filing or submission with any governmental authority, the absence of which would cause the conditions set forth in Sections 9.01(c) or 9.01(d) to fail, no later than the date (the “Filing

Deadline”) that is 21 days after the date of this Agreement (with respect to the FCC) and that is 30 days after the date of this Agreement (with respect to the HSR Act and the laws, rules and regulations analogous to the HSR Act existing in non-U.S. jurisdictions, if any); provided that if, despite the reasonable best efforts of each of the parties (made in good faith), such filings are not made by the Filing Deadline, then the date set forth in Section 10.01(b) shall be extended for a number of days equal to the number of days between the Filing Deadline and the date such filings are actually made (exclusive).

Section 8.03. Public Announcements. Gateway and the Company will consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any securities exchange, will not issue any such press release or make any such public statement prior to such consultation.

Section 8.04. Further Assurances. At and after the Effective Time, the officers and directors of the Amalgamated Company will be authorized to execute and deliver, in the name and on behalf of the Company or Amalgamation Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Amalgamation Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Amalgamated Company any and all right, title and interest in, to and under any of the rights, properties or assets and obligations and liabilities of the Company and Amalgamation Sub acquired or to be acquired by the Amalgamated Company as a result of, or in connection with, the Amalgamation.

Section 8.05. Resolution Period. (a) If, after the date hereof, any law, regulation, judgment, injunction, order or decree shall be in effect such that the condition set forth in Section 9.01(a) or 9.02(e) is reasonably unlikely to be satisfied prior to February 28, 2004, then the parties hereto agree to use their reasonable best efforts during the period ending on the later of February 28, 2004 and the end of the Resolution Period with respect to such law, regulation, judgment, injunction, order or decree to restructure this transaction into a Substantially Equivalent Transaction that would minimize the effect of such law, regulation, judgment, injunction, order or decree such that the conditions set forth in Sections 9.01(a) and 9.02(e) can be satisfied.

(b) The parties also agree that if any part of a Resolution Period extends beyond February 28, 2004 (such part being hereinafter referred to as the “Extension Period”), then during such Extension Period, the provisions of Section 6.03(b) and 6.03(c) shall terminate on February 28, 2004 and be of no further force and effect (other than the obligations of the Company to keep informed and update Gateway regarding any Acquisition Proposal or any inquiry

or request made by a Third Party as contemplated therein) and, except as set forth herein, the parties shall have no further rights or obligations thereunder.

(c) The parties further agree that if any investigation, proceeding, suit or action shall be pending or instituted in any jurisdiction that Gateway reasonably determines in good faith would have an adverse impact that would be material to the Company and its Subsidiaries (taken as a whole) or Infocomm and its Subsidiaries (taken as a whole), then the parties hereto shall use their reasonable best efforts to restructure this transaction into a Substantially Equivalent Transaction that would minimize the adverse impact of such investigation, proceeding, suit or action.

(d) For the purposes of this Agreement, “Resolution Period” shall mean the 45-day period commencing with respect to any law, regulation, judgment, injunction, order or decree contemplated by Section 9.01(a) or Section 9.02(e), on the date that Gateway reasonably determines in good faith, in accordance with Section 9.01(a) or 9.02(e), as the case may be, that such law, regulation, judgment, injunction, order or decree would cause the condition in Section 9.01(a) and 9.02(e), as the case may be, not to be satisfied. For the avoidance of doubt, a Resolution Period shall commence with respect to each law, regulation, judgment, injunction, order or decree that would cause the condition set forth in Section 9.01(a) or 9.02(e) not to be satisfied.

(e) For the purposes of this Agreement, “Substantially Equivalent Transaction” shall mean a transaction or related transactions that provide the parties hereto with substantially the same benefits as the transactions contemplated by this Agreement on terms substantially equivalent to the terms contained in this Agreement; provided that the consideration paid to the shareholders of the Company in any Substantially Equivalent Transaction shall not be less than the aggregate Amalgamation Consideration.

ARTICLE 9
CONDITIONS TO THE AMALGAMATION

Section 9.01. Conditions to the Obligations of Each Party. The obligations of the Company, Gateway and Amalgamation Sub to consummate the Amalgamation are subject to the satisfaction (or waiver by each party hereto) of the following conditions:

(a) No provision of any applicable law or regulation and no judgment, injunction, order or decree shall be in effect in any jurisdiction (other than India), which seeks to prohibit the consummation of the Amalgamation; provided, however, that the parties shall use their reasonable best efforts to cause any such law, regulation, judgment, injunction, order or decree to be rescinded, vacated,

lifted or otherwise resolved in a manner favorable to the parties hereto. Notwithstanding the foregoing, this condition shall be deemed satisfied unless Gateway reasonably determines in good faith that any such law, regulation, judgment, injunction, order or decree would have an adverse impact that would be material to the Company and its Subsidiaries (taken as a whole) or Infocomm and its Subsidiaries (taken as a whole).

(b) The Amalgamation and this Agreement shall have been approved and adopted by the requisite affirmative vote of the shareholders of the Company at a special general meeting convened to vote on the Amalgamation and this Agreement, or any adjournment or postponement thereof, in accordance with Bermuda Law and the Company’s Memorandum of Association and Amended and Restated Bye-Laws.

(c) The governmental consents, orders and approvals which are identified on Schedule 9.01(c) and are legally required for the consummation of the Amalgamation and the transactions contemplated hereby shall have been obtained and be in effect at the Effective Time.

(d) With respect to the Amalgamation, any applicable waiting period, or consent, approval or authorization required, under (i) the HSR Act or (ii) the laws, rules and regulations analogous to the HSR Act existing in non-U.S. jurisdictions, if any, where outside legal counsel for the parties reasonably determine in good faith that filings are required to be made, shall have expired, been terminated or obtained.

Section 9.02. Conditions to the Obligations of Gateway and Amalgamation Sub. The obligations of Gateway and Amalgamation Sub to consummate the Amalgamation are subject to the satisfaction (or waiver by Gateway) of the following further conditions:

(a) Each of the representations and warranties of the Company contained in Section 4.05 or Section 4.06 shall be true and correct as of the Effective Time, as though made on and as of the Effective Time, except that any such representations and warranties that address matters only as of a particular date shall remain true and correct as of such date. Except as set forth in the preceding sentence, each of the representations and warranties of the Company contained in this Agreement shall be true and correct as of the Effective Time (in each case, without regard to Material Adverse Effect or other materiality qualifiers contained therein), as though made on and as of the Effective Time, except (i) that such representations and warranties that address matters only as of a particular date shall remain true and correct as of such date and (ii) where the failure of such representations and warranties to be true and correct would not reasonably be expected to have a Material Adverse Effect or materially to impair the ability of the Company to consummate the Amalgamation. Gateway shall

have received a certificate of an authorized officer of the Company confirming that the conditions set forth in this Section 9.02(a) have been satisfied.

(b) The Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time, and Gateway shall have received a certificate of an authorized officer of the Company confirming that the condition set forth in this Section 9.02(b) has been satisfied.

(c) The last day on which shareholders of the Company may exercise rights pursuant to Section 106(6) of the Companies Act shall have occurred.

(d) The percentage of Shares with respect to which shareholders of the Company have exercised rights pursuant to Section 106(6) of the Companies Act shall not exceed 30% of all Shares entitled to vote at the Company Shareholder Meeting.

(e) No provision of any applicable law or regulation and no judgment, injunction, order or decree shall be in effect in any jurisdiction (other than India) that would have the effect of restraining or prohibiting Gateway’s ownership or operation (or that of its respective Subsidiaries or Affiliates) of all or any portion of the business or assets of Gateway or its Affiliates, as the case may be, or of the Company and its Subsidiaries (taken as a whole), which assets or business provide telecommunication access in, to or from India or compelling Gateway or the Company or any of their Subsidiaries or Affiliates to dispose of or hold separate all or any portion of its business or assets or that provide telecommunication access in, to or from India; provided, however, that the parties shall use their reasonable best efforts to cause any such law, regulation, judgment, injunction, order or decree to be rescinded, vacated, lifted or otherwise resolved in a manner favorable to Gateway and its Affiliates. Notwithstanding the foregoing, this condition shall be deemed satisfied (i) if any such law, regulation, judgment, injunction, order or decree contemplated by this Section 9.02(e) is instigated or originated by Gateway or any of its Affiliates or (ii) unless Gateway reasonably determines in good faith that any such law, regulation, judgment, injunction, order or decree would have an adverse impact that would be material to the Company and its Subsidiaries (taken as a whole) or Infocomm and its Subsidiaries (taken as a whole).

ARTICLE 10
TERMINATION

Section 10.01. Termination. This Agreement may be terminated and the Amalgamation may be abandoned at any time prior to the Effective Time

(notwithstanding any approval of this Agreement by the shareholders of the Company):

(a) by mutual written agreement of the Company and Gateway;

(b) by either the Company or Gateway, if the Amalgamation has not been consummated on or before February 28, 2004 (as such date may be extended by the proviso in Section 8.02(b)); provided that this Agreement may not be terminated pursuant to this clause (b) by (i) a party that is in material breach of its obligations hereunder or (ii) either party unless any Resolution Period commenced prior to such date relating to any law, regulation, judgment, injunction, order or decree shall have expired;

(c) by either the Company or Gateway, if the Board of Directors shall have failed to make or give full support for, or withdrawn or modified in any manner adverse to Gateway, its approval or recommendation of this Agreement or the Amalgamation or made any determination permitted by the first sentence of Section 6.02; provided, that this Agreement cannot be terminated by the Company unless (i) the Company shall have complied with all of its obligations under Section 6.03, (ii) the Company intends to terminate this Agreement and to enter into a binding written agreement concerning a Superior Proposal, (iii) the Company notifies Gateway, in writing, of such intent and at least 72 hours prior to termination of this Agreement, attaching thereto the most current version of such binding agreement (or a description of all material terms and conditions thereof), (iv) Gateway does not make, within 72 hours of receipt of such written notification, an offer that the Board of Directors determines in good faith, after consultation with its financial advisors, is at least as favorable to the shareholders of the Company as such Superior Proposal, it being understood that the Company shall not enter into any such binding agreement with respect to the Superior Proposal during such 72 hour period and (v) the Company shall have paid or made arrangements to pay any amounts due pursuant to Section 11.04(b);

(d) by either the Company or Gateway if the condition set forth in Section 9.01(b) shall not have been satisfied;

(e) by Gateway if the Company shall have breached any representation, warranty, covenant or other agreement contained in this Agreement which would give rise to the failure of a condition set forth in Section 9.02(a) or 9.02(b) and is incapable of being, or is not, cured within 5 days after the giving of written notice to the Company with regard to any breach of Section 6.02, 8.01 or 8.02 and within 45 days after the giving of written notice to the Company with regard to any other breaches; provided, however, that Gateway shall not have the right to terminate this Agreement pursuant to this Section 10.01(e) with respect to a specific breach if more than 45 days have elapsed since the end of the 45 day cure period;

(f) by Gateway if the condition set forth in 9.02(d) shall not have been satisfied; provided that such termination right must be exercised within 15 days of notice that the condition set forth in Section 9.02(d) has not been satisfied;

(g) by Gateway if the Company shall have failed to comply in all material respects with its obligations under Section 6.03.

The party desiring to terminate this Agreement pursuant to Sections 10.01(b)-(g) (inclusive) shall give written notice of such termination to the other party.

Section 10.02. Effect of Termination. (a) If this Agreement is terminated pursuant to Section 10.01, this Agreement shall become void and of no effect with no liability on the part of any party hereto, except that the agreements contained in this Section 10.02 and Sections 11.01, 11.04, 11.05, 11.06, 11.07, 11.08, 11.10, 11.12, 11.13 and 11.14 shall survive the termination hereof. Notwithstanding the foregoing, (i) if a termination resulted from the (A) willful failure of a party to fulfill a condition to the performance of the obligations of the other party or (B) breach by any party hereto of any representation or warranty made as of the date hereof, the party whose breach or failure resulted in such termination shall be fully liable for any and all damages incurred or suffered by the other party as a result of such failure or breach or (ii) if a termination of this Agreement results in the Termination Fee described in Section 11.04 becoming payable, the Company shall be obligated to pay such Termination Fee in accordance with the terms, and at the times, specified therein. Under no circumstances shall any party hereto be liable for punitive, exemplary or special damages.

(b) If this Agreement is terminated by Gateway pursuant to Section 10.01(b), Gateway agrees that if Reliance Infocomm Limited or any of its Subsidiaries (collectively, “Infocomm”) thereafter requires additional capacity into or out of India (by lease or purchase, including indefeasible rights of use) from a Third Party provider any or all of which is available on the Company’s network (“Required Capacity”), Infocomm will notify the Company of such need and ask the Company to submit a proposal to supply such Required Capacity. If the Company submits a proposal for such Required Capacity within 10 days after such request, and such proposal would satisfy any or all of the Required Capacity and is on terms that are substantially equal to or better than the most favorable bona fide proposal submitted to Infocomm by any bona fide Third Party alternative providers, Infocomm will purchase the Required Capacity from the Company on the Company’s proposed terms. If the terms of such proposal are not substantially equal to or better than the most favorable such bona fide proposal, Infocomm will negotiate with the Company in good faith to reach agreement on terms for the Required Capacity that are reasonably acceptable to Infocomm and are at least substantially equal to or better than the most favorable bona fide proposal that Infocomm receives from any bona fide Third Party

alternative providers with respect to the Required Capacity. Infocomm will purchase the Required Capacity from the Company if, following a reasonable period for such negotiations as is customary in the industry, the Company is able to provide terms that are substantially equal to or better than the most favorable terms offered by other Third Party alternative providers. For purposes of this Section 10.02(b), terms shall be considered “substantially equal”, “better” or “most favorable” as determined in good faith by Infocomm based upon its needs for the Required Capacity and the price, quality, delivery and other reasonable criteria.

Infocomm’s obligations under this Section 10.02(b) will terminate upon the earlier to occur of (i) the third anniversary of the date that Gateway terminates this Agreement pursuant to Section 10.01(b) and (ii) the date when a Change of Control occurs.

For the purpose of this Section 10.02(b), “Change of Control” means (i) any "person" or "group" is or becomes the "beneficial owner" (as such terms are used in Rule 13d-3 promulgated under the 1934 Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time or the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Shares (measured by voting power rather than number of shares) or (ii) the Company consolidates or merges with or into any other Person or sells, assigns, conveys, transfers, leases, licenses or otherwise disposes of all or substantially all of its assets and the assets of the Company's direct and indirect subsidiaries (on a consolidated basis) to any other Person, in either in one transaction or a series of related transactions, other than a consolidation or merger or disposition of assets: (x) of or by the Company into or to a 100% owned subsidiary of the Company or (y) pursuant to a transaction in which the outstanding Shares are changed into or exchanged for securities or other property with the effect that the beneficial owners of the outstanding Shares of the Company immediately prior to such transaction, beneficially own, directly or indirectly, at least a 75% of the Shares (measured by voting power rather than number of shares) of the surviving corporation or the Person to whom the Company's assets are transferred immediately following such transaction.

ARTICLE 11
MISCELLANEOUS

Section 11.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given,

if to Gateway or Amalgamation Sub, to:

Reliance Gateway Net Private Limited
Dhirubhai Ambani Knowledge City
Block E, SB-14, 1st Floor
Thane-Belapur Road
Koparkhairane, Navi Mumbai
400 709, India
Telecopy: 011-91-22-3032-5895
Attention: PMS Prasad

with copies to:

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: 212-450-3800
Attention: Phillip R. Mills and Nancy L. Sanborn

if to the Company, to:

FLAG Telecom Group Limited
9 South Street
London W1K 2XA
United Kingdom
Telecopy: 011-44-207-317-0808
Attention: Patrick T. Gallagher

with a copy to:

Akin Gump Strauss Hauer & Feld LLP
590 Madison Avenue
New York, New York 10022
Telecopy: 212-872-1002
Attention: Kerry E. Berchem and Patrick J. Dooley

or such other address or telecopy number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date and at the time of actual receipt by the recipient thereof; provided that if any such notice, request or other communication is given by telecopy, it shall be deemed received when transmission of the telecopy is confirmed by the sender’s telecopier.

Section 11.02. Survival of Representations and Warranties. The representations and warranties contained herein and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time or the termination of this Agreement.

Section 11.03. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or in the case of a waiver, by the party against whom the waiver is to be effective; provided that after the adoption of this Agreement by the shareholders of the Company, no such amendment or waiver shall, without the further approval of such shareholders, alter or change (i) the amount or kind or time or nature of consideration to be received in exchange for any shares of capital stock held by such shareholders or (ii) any of the terms or conditions of this Agreement if such alteration or change would adversely affect such shareholders in any material respect. After the Effective Time, the provisions of Section 7.02 shall not be amended without the consent of the Indemnified Parties.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 11.04. Expenses. (a) Except as otherwise provided in this Section 11.04, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

(b) If the Amalgamation is not consummated in circumstances where this Agreement has been terminated pursuant to Section 10.01(c) or Section 10.01(g), then the Company shall pay Gateway the Termination Fee upon, or promptly following the Company’s receipt of notices of, such termination.

(c) If the Amalgamation is not consummated in circumstances where this Agreement has been terminated pursuant to Section 10.01(d), then the Company shall pay Gateway the Termination Fee if (i) any Acquisition Proposal is pending or publicly announced at the time of the Company Shareholder Meeting and within 9 months of the date of termination of this Agreement, the Company consummates such Acquisition Proposal or enters into an agreement to consummate such Acquisition Proposal which is thereafter consummated or (ii) within 9 months of the date of termination of this Agreement, the Company consummates any Acquisition Proposal or enters into an agreement to consummate any Acquisition Proposal which is thereafter consummated and provides the shareholders of the Company cash, securities or other consideration with an aggregate value in excess of the aggregate Amalgamation Consideration. In either case, such Termination Fee shall be payable upon, or promptly following, the consummation of such Acquisition Proposal.

(d) If the Amalgamation is not consummated in circumstances where this Agreement has been terminated pursuant to Section 10.01(e) (as a result of a breach of any covenant or other agreement by the Company), then the Company shall pay Gateway the Termination Fee if within 9 months of the date of termination of this Agreement, the Company consummates any Acquisition Proposal or enters into an agreement to consummate any Acquisition Proposal which is thereafter consummated. Such Termination Fee shall be payable upon, or promptly following, the consummation of such Acquisition Proposal.

(e) For the purposes of this Agreement, “Termination Fee” shall mean (i) $6,210,000 million in cash or (ii) in the case of clause (ii) of Section 11.04(c), the lesser of (A) the amount set forth in clause (i) above and (B) the amount by which the aggregate value of cash, securities or other consideration payable to the Company’s shareholders pursuant to the Acquisition Proposal contemplated therein exceeds (B) the aggregate Amalgamation Consideration.

(f) This Section shall survive the termination of this Agreement in accordance with Article 10.

Section 11.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, however, no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto. The foregoing notwithstanding, Gateway may, at any time prior to the Closing Date, transfer its rights and obligations hereunder to any of its Affiliates or nominees; provided that such transfer will not materially impair or delay the transactions contemplated hereby; and provided further that no assignment shall limit the assignor’s obligations hereunder.

Section 11.06. Governing Law. This Agreement shall be governed by and construed in accordance with the law of Bermuda, without regard to its conflicts of law principles.

Section 11.07. Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the Supreme Court of Bermuda (unless such court shall not accept jurisdiction in which case the action may be brought in any other courts), and each of the parties hereby consents to the jurisdiction of the Supreme Court of Bermuda (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the

world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 11.01 shall be deemed effective service of process on such party.

Section 11.08. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (a) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (b) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (c) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.08.

Section 11.09. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. Except as otherwise indicated, no provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.

Section 11.10. Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.

Section 11.11. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

Section 11.12. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in

an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 11.13. No Third Party Beneficiaries. Except as provided in Section 7.02 (which is intended to be for the benefit of the Indemnified Persons covered thereby and may be enforced by such Indemnified Persons), no party other than the parties hereto shall be an intended beneficiary of this Agreement or any portion hereof; provided, that the shareholders of the Company shall have the ability to enforce (but only after the Effective Time) any and all rights they may have after the Effective Time to receive their respective portion of the Amalgamation Consideration.

Section 11.14. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement is not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedy to which they are entitled at law or in equity.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the day and year first above written.

FLAG TELECOM GROUP LIMITED

By:	/s/ Eugene I. Davis

	Name:	Eugene I. Davis
	Title:	Director

By:	/s/ Robert M. Aquilina

	Name:	Robert M. Aquilina
	Title:	Director

By:	/s/ Anthony J. Pacchia

	Name:	Anthony J. Pacchia
	Title:	Director


RELIANCE GATEWAY NET PRIVATE LIMITED

By:	/s/ P.M.S. Prasad

	Name:	P.M.S. Prasad
	Title:	Authorized Signatory

October 28, 2003

Re: Amendment of the Amalgamation Agreement and Letter Agreement

FLAG Telecom Group Limited
9 South Street
London W1K 2XA
United Kingdom
Attention: Kees van Ophem

Dear Mr. Kees van Ophem:

Reference is made to (i) the Agreement and Plan of Amalgamation (the “Agreement”) dated as of October 16, 2003 between FLAG Telecom Group Limited (the “Company”) and Reliance Gateway Net Private Limited (“Gateway”) and (ii) the letter agreement (the “16(b) Agreement”) dated as of October 16, 2003 between the Company and Gateway. Capitalized terms used herein and not defined herein shall have the meaning assigned thereto in the Agreement.

The purpose for this letter agreement is to amend the Agreement and the 16(b) Agreement as follows: (i) all references in the Agreement and the 16(b) Agreement to “Reliance Gateway Net Private Limited” are changed to “Reliance Gateway Net Limited,” (ii) the word “million” in Section 11.04(e)(i) of the Agreement is deleted, (iii) in Section 11.10 of the Agreement, the following language is hereby inserted after the word “Agreement” in the first place where it appears “and the letter agreement between the Company and Gateway dated as of date hereof with respect to Section 16(b) of the 1934 Act”, the word “constitutes” is changed to “constitute” and the word “supercedes” is changed to “supercede” and (iv) in Section 11.01 of the Agreement, the telecopy of the Company is changed from “011-44-207-317-0808” to “011-44-207-317-4096” and the name to whom notices to the Company are addressed is changed from “Patrick T. Gallagher” to “Kees van Ophem.” These amendments shall be effective as of October 16, 2003 when this letter agreement is signed on behalf of the Company as provided below.

This letter agreement shall be governed by and construed in accordance with the laws of Bermuda, without regard to its conflicts of laws principles.

Except as expressly set forth above, nothing contained in this letter agreement shall be deemed to waive, amend or otherwise modify any provision of the Agreement or the 16(b) Agreement.

This letter agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

Please confirm that the foregoing is in accordance with your understanding by signing and returning to us an executed duplicate of this letter.

Very truly yours,

RELIANCE GATEWAY NET LIMITED

By:	/s/ P.M.S. Prasad

	Name:	P.M.S. Prasad
	Title:	Authorized Signatory

Accepted and agreed as of
the date first above written:

FLAG TELECOM GROUP LIMITED

By:	/s/ Eugene I. Davis

	Name:	Eugene I. Davis
	Title:	Director

By:	/s/ Robert M. Aquilina

	Name:	Robert M. Aquilina
	Title:	Director

By:	/s/ Anthony J. Pacchia

	Name:	Anthony J. Pacchia
	Title:	Director


cc:		Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 Telecopy: 212-872-1002 Attention: Kerry E. Berchem and Patrick J. Dooley

December 4, 2003

Re: Second Amendment to the Amalgamation Agreement

FLAG Telecom Group Limited
9 South Street
London W1K 2XA
United Kingdom
Attention: Special Committee of the Board of Directors

Dear Members of the Special Committee:

The purpose of this letter agreement is to amend the Amalgamation Agreement as follows:

(ii) in the first sentence of Section 2.05(a), the words “use its reasonable best efforts to” be and they hereby are inserted after the word “shall”;

(iii) in the second sentence of Section 2.05(a), the words “to the extent permitted by applicable law,” be and they hereby are inserted after the word “Thereafter,”;

(iv) in the first sentence of Section 2.05(b), the word “reasonable” be and it hereby is inserted prior to the words “best efforts”;

(v) in the second sentence of Section 4.05, the number “198,475” be and it hereby is deleted and the number “198,025” be and it hereby is inserted in place thereof;

(vi) Schedule 4.05 be and it hereby is deleted and Exhibit A hereto be and it hereby is inserted in place thereof;

(ix) in Section 10.01(b), the words “February 28, 2004” be and they hereby are deleted and the words “March 10, 2004” be and they hereby are inserted in place thereof.

These amendments shall be effective as of the date hereof.

This letter agreement shall be governed by and construed in accordance with the laws of Bermuda, without regard to its conflicts of laws principles.

Except as expressly set forth above, nothing contained in this letter agreement shall be deemed to waive, amend or otherwise modify any provision of the Amalgamation Agreement.

This letter agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

Please confirm that the foregoing is in accordance with your understanding by signing and returning to us an executed duplicate of this letter.

Very truly yours,

RELIANCE GATEWAY NET LIMITED

By:	/s/ P.M.S. Prasad

	Name:	P.M.S. Prasad
	Title:	Authorized Signatory

Accepted and agreed as of
the date first above written:

FLAG TELECOM GROUP LIMITED

By:	/s/ Eugene I. Davis

	Name:	Eugene I. Davis
	Title:	Director

By:	/s/ Robert M. Aquilina

	Name:	Robert M. Aquilina
	Title:	Director

By:	/s/ Anthony J. Pacchia

	Name:	Anthony J. Pacchia
	Title:	Director


cc:	Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 Telecopy: 212-872-1002 Attention: Kerry E. Berchem and Patrick J. Dooley

EXHIBIT A

Schedule 4.05

FLAG TELECOM GROUP LIMITED – EXERCISE PRICE OF OPTIONS

DATE	QUANTITY	ISSUE PRICE

17 March 2003	118,425 (employees)	$14.00/option

17 March 2003	61,600 (directors)	$14.00/option

8 April 2003	6,000	$25.00/option

2 June 2003	1,550	$34.50/option

1 July 2003	8,200	$31.75/option

1 August 2003	700	$60.00/option

1 September 2003	200	$61.50/option

1 October 2003	200	$60.00/option

3 November 2003 *	1,150	$87.00/option



Total Allocated:	198,025

Total Options:	222,222

Note:

* These options were granted to employees who executed employment agreements with the Company on or prior to October 16, 2003 at which point stock options were pledged under their respective employment agreements.

EX-99.C 5 dec1003_ex-c.htm EXHIBIT C

Exhibit C

LETTER AGREEMENT

Reference is made to the Agreement and Plan of Amalgamation (the "Amalgamation Agreement") dated as of October 16, 2003, between FLAG Telecom Group Limited (the "Company") and Reliance Gateway Net Private Limited ("Gateway"), pursuant to which Gateway will acquire the Company pursuant to an amalgamation under Bermuda law, upon the terms and subject to the conditions contained therein. Capitalized terms used herein and not defined shall have the meaning assigned to them in the Amalgamation Agreement.

In furtherance of their respective obligations under Section 8.01 of the Amalgamation Agreement, the parties hereto agree that, if the Company determines, in its sole discretion, that it is necessary, proper or advisable for it to enter into or execute any agreement with any of its shareholders (each, a "Contracting Shareholder") to waive the Company's rights to recover, and/or to agree not to take or facilitate any action to seek to recover, profits under Section 16(b) of the 34 Act from such Contracting Shareholder or its Affiliates arising out of the consummation of the Amalgamation and the payment of the Amalgamation Consideration to such Contracting Shareholder or its Affiliates, in such form as it shall reasonably determine to be appropriate for such purpose (which form shall be reasonably acceptable to Gateway) (each such agreement, a "Non-Action Agreement"), it may do so. Promptly after such a determination by the Company, Gateway (on behalf of itself and its Subsidiaries) shall, and shall cause Amalgamation Sub to, execute with any Contracting Stockholder a Non-Action Agreement in a form substantially similar to that executed with such Contracting Shareholder by the Company. Any such Non-Action Agreement shall be binding on the successors and shareholders of such signatories (including, in the case of the Company and Amalgamation Sub, the Amalgamated Company). Gateway further agrees that, to the extent that is shall not own all of the outstanding stock of Amalgamation Sub or the Amalgamated Company, it shall, if requested by the Company, cause such other shareholders of Amalgamation Sub or the Amalgamated Company to execute a Non-Action Agreement. Except as expressly set forth in this letter agreement, no Non-Action Agreement shall afford any rights to any Contracting Shareholder or any of its affiliates or impose any obligations on the Company, Gateway, Amalgamation Sub or any of their respective Subsidiaries.

The provisions of this Letter Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

This Letter Agreement shall be governed by and construed in accordance with the laws of Bermuda, without regard to its conflicts of laws principles.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the day and year first above written.

FLAG TELECOM GROUP LIMITED

By:	/s/ Eugene I. Davis

	Name: Eugene I. Davis
	Title: Director

By:	/s/ Robert M. Aquilina

	Name: Robert M. Aquilina
	Title: Director

By:	/s/ Anthony J. Pacchia

	Name: Anthony J. Pacchia
	Title: Director

RELIANCE GATEWAY NET PRIVATE LIMITED

By:	/s/ P.M.S. Prasad

	Name: P.M.S. Prasad
	Title: Authorized Signatory

October 28, 2003

Re:	Amendment of the Amalgamation Agreement and Letter Agreement

FLAG Telecom Group Limited
9 South Street
London W1K 2XA
United Kingdom
Attention: Kees van Ophem

Dear Mr. Kees van Ophem:

Reference is made to (i) the Agreement and Plan of Amalgamation (the "Agreement") dated as of October 16, 2003 between FLAG Telecom Group Limited (the "Company") and Reliance Gateway Net Private Limited ("Gateway") and (ii) the letter agreement (the "16(b) Agreement") dated as of October 16, 2003 between the Company and Gateway. Capitalized terms used herein and not defined herein shall have the meaning assigned thereto in the Agreement.

The purpose for this letter agreement is to amend the Agreement and the 16(b) Agreement as follows: (i) all references in the Agreement and the 16(b) Agreement to "Reliance Gateway Net Private Limited" are changed to "Reliance Gateway Net Limited," (ii) the word "million" in Section 11.04(e)(i) of the Agreement is deleted, (iii) in Section 11.10 of the Agreement, the following language is hereby inserted after the word "Agreement" in the first place where it appears "and the letter agreement between the Company and Gateway dated as of date hereof with respect to Section 16(b) of the 1934 Act", the word "constitutes" is changed to "constitute" and the word "supercedes" is changed to "supercede" and (iv) in Section 11.01 of the Agreement, the telecopy of the Company is changed from "011-44-207-317-0808" to "011-44-207-317-4096" and the name to whom notices to the Company are addressed is changed from "Patrick T. Gallagher" to "Kees van Ophem." These amendments shall be effective as of October 16, 2003 when this letter agreement is signed on behalf of the Company as provided below.

This letter agreement shall be governed by and construed in accordance with the laws of Bermuda, without regard to its conflicts of laws principles.

Except as expressly set forth above, nothing contained in this letter agreement shall be deemed to waive, amend or otherwise modify any provision of the Agreement or the 16(b) Agreement.

This letter agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

Please confirm that the foregoing is in accordance with your understanding by signing and returning to us an executed duplicate of this letter.

Very truly yours,

RELIANCE GATEWAY NET LIMITED

By:	/s/ P.M.S. Prasad

	Name:	P.M.S. Prasad
	Title:	Authorized Signatory

Accepted and agreed as of
the date first above written:

FLAG TELECOM GROUP LIMITED

By:	/s/ Eugene I. Davis

	Name:	Eugene I. Davis
	Title:	Director

By:	/s/ Robert M. Aquilina

	Name:	Robert M. Aquilina
	Title:	Director

By:	/s/ Anthony J. Pacchia

	Name:	Anthony J. Pacchia
	Title:	Director


cc:	Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 Telecopy: 212-872-1002 Attention: Kerry E. Berchem and Patrick J. Dooley

EX-99.D 6 dec1003_ex-d.htm

Exhibit D

October 16, 2003

FLAG Telecom Group Limited
9 South Street
London W1K 2XA
United Kingdom

Dear Patrick T. Gallagher:

Reference is made to the Agreement and Plan of Amalgamation (the “Amalgamation Agreement”) dated as of October 16, 2003 between FLAG Telecom Group Limited (the “Company”) and Reliance Gateway Net Private Limited (“Gateway”) pursuant to which Gateway will acquire the Company pursuant to an amalgamation under Bermuda law, upon the terms and subject to the conditions contained therein. Capitalized terms used herein and not defined shall have the meaning assigned to them in the Amalgamation Agreement.

In consideration of your undertaking to execute and deliver the Amalgamation Agreement, Reliance Industries Limited (“Reliance”) hereby agrees (i) to provide the necessary financial resources to enable Gateway to timely pay the entire amount of the Amalgamation Consideration to the Exchange Agent pursuant to the terms and conditions of the Amalgamation Agreement and (ii) to cause Gateway to timely discharge its other obligations under the Amalgamation Agreement in accordance with the terms and conditions thereof. Reliance is aware that the Company has agreed to execute and deliver the Amalgamation Agreement relying upon the representations and agreements contained in this letter agreement. Reliance further confirms that Gateway has all requisite permission and approval from the Reserve Bank of India to remit and pay the Amalgamation Consideration in US dollars and that the consummation by Gateway of the transactions contemplated by the Amalgamation Agreement will comply with the Indian Foreign Exchange Management Act of 2001.

Reliance represents and warrants to the Company that the execution, delivery and performance by it of this letter agreement are within its corporate powers and that this letter agreement has been duly authorized by all necessary corporate action. This letter agreement constitutes a valid and binding agreement of Reliance enforceable against Reliance in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy and similar laws or by the general principles of equity (whether considered in a proceeding in equity or at law).

Reliance further represents and warrants that the execution, delivery and performance by it of this letter agreement (i) require no action by or in respect of, or filing with, any governmental body, agency, official or authority, (ii) do not and will not

violate its organizational documents and (iii) do not require any consent or action (other than performance by Reliance) by any Person.

In addition, Reliance represents and warrants that it currently has and will have sufficient cash, available lines of credit or other sources of immediately available funds to perform its obligations under this letter agreement.

This letter agreement is not assignable by you, other than the assignment by operation of law to the Amalgamated Company upon the consummation of the transactions contemplated by the Amalgamation Agreement, and any other attempted assignment shall be null and void and of no force or effect. This letter agreement may not be amended, and no provision hereof may be waived or modified, except by an instrument in writing signed by us. Without limiting the foregoing, this letter agreement shall not create any rights for such a person or entity under The Contracts (Rights of Third Parties) Act 1999.

This letter agreement is intended to be solely for the benefit of the parties hereto (and the Amalgamated Company) and is not intended to confer, and shall not be deemed to confer, any benefits upon, or create any rights in favor of, any other person or entity. This letter agreement shall remain confidential and neither the existence nor the contents hereof shall be disclosed to any person, other than the Board of Directors of the Company and its Advisors, except as required by law or with the prior written consent of Reliance, which shall not be unreasonably withheld.

This letter agreement shall expire, and Reliance’s obligations shall terminate in full, upon the earlier of (i) termination of the Amalgamation Agreement in accordance with its terms, (ii) the date and time when Gateway shall have provided the entire amount of the Amalgamation Consideration to the Exchange Agent in accordance with the terms and conditions of the Amalgamation Agreement (such amount not to be withdrawn) and (iii) prior to the Effective Time, the date and time when Gateway shall have provided an irrevocable Letter of Credit reasonably acceptable to the Company, established or confirmed by a UK or US Bank, for the benefit of the Company, for the entire amount of the Amalgamation Consideration (such irrevocable Letter of Credit not to be withdrawn until the earlier of six (6) months after the Effective Time or the termination of the Amalgamation Agreement in accordance with its terms).

This letter agreement (i) shall be governed by, and construed in accordance with, the laws of England and Wales and by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, to which India and the United Kingdom are parties and (ii) may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Any dispute, controversy or claim arising out of or in connection with this letter agreement (including any question regarding the existence, validity or termination thereof) shall be referred to and finally resolved by arbitration under the UNCITRAL Arbitration Rules then in effect and the parties hereto agree, and hereby submit to, the jurisdiction of such arbitration. In relation to such arbitration: (a) the appointing authority shall be the London Court of International Arbitration; (b) the number of arbitrators shall be three, each of whom shall be fluent in English; (c) the place of the arbitration shall be London, England; and (d) the language to be used in the arbitral

proceedings shall be English. Judgment upon any award issued in connection with any such arbitration may be entered in, and enforced by, any court of competent jurisdiction. This agreement to arbitrate shall be binding upon the successors and permitted assigns of each party.

Please confirm that the foregoing is in accordance with your understanding by signing and returning to us an executed duplicate of this letter.

Very truly yours,

RELIANCE INDUSTRIES LIMITED

By:	/s/ P.M.S. Prasad

	Name:	P.M.S. Prasad
	Title:	Authorized Signatory

Accepted and agreed as of
the date first above written:

FLAG TELECOM GROUP LIMITED

By:	/s/ Eugene I. Davis

	Name:	Eugene I. Davis
	Title:	Director

By:	/s/ Robert M. Aquilina

	Name:	Robert M. Aquilina
	Title:	Director

By:	/s/ Anthony J. Pacchia

	Name:	Anthony J. Pacchia
	Title:	Director

October 28, 2003

Re:	Amendment of the Letter Agreement

FLAG Telecom Group Limited
9 South Street
London W1K 2XA
United Kingdom
Attention: Patrick T. Gallagher

Dear Mr. Gallagher:

Reference is made to the letter agreement (the “Letter Agreement”) dated as of October 16, 2003 between FLAG Telecom Group Limited and Reliance Industries Limited.

The purpose for this letter agreement is to amend the Letter Agreement as follows: all references to "Reliance Gateway Net Private Limited" are hereby changed to "Reliance Gateway Net Limited." This amendment to the Letter Agreement shall be effective as of October 16, 2003 when this letter agreement is signed on behalf of the Company as provided below.

This letter agreement shall be governed by, and construed in accordance with, the laws of England and Wales, without regard to its conflicts of laws principles.

Except as expressly set forth above, nothing contained in this letter agreement shall be deemed to waive, amend or otherwise modify any provision of the Letter Agreement.

This letter agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

Please confirm that the foregoing is in accordance with your understanding by signing and returning to us an executed duplicate of this letter.

Very truly yours,

RELIANCE INDUSTRIES LIMITED

By:	/s/ P.M.S. Prasad

	Name:	P.M.S. Prasad
	Title:	Authorized Signatory

Accepted and agreed as of
the date first above written:

FLAG TELECOM GROUP LIMITED

By:	/s/ Eugene I. Davis

	Name:	Eugene I. Davis
	Title:	Director

By:	/s/ Robert M. Aquilina

	Name:	Robert M. Aquilina
	Title:	Director

By:	/s/ Anthony J. Pacchia

	Name:	Anthony J. Pacchia
	Title:	Director

EX-99.E 7 dec1003_ex-e.htm

Exhibit E

JOINT FILING AGREEMENT

In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, each of the undersigned hereby agrees to the joint filing of a Statement on Schedule 13D (including any amendments thereto) with respect to the common shares, par value $1.00 per share of FLAG Telecom Group Limited, a Bermuda corporation and further agrees that this Joint Filing Agreement be included as an exhibit to such filings. Each of the undersigned acknowledges that it is responsible for the timely filing of its own Statement on Schedule 13D and any amendments thereto and for the completeness and accuracy of the information concerning itself contained therein and that, as contemplated by Section 13d-1(k)(1)(ii), no other person shall be responsible for the completeness or accuracy of the information concerning itself, unless such person knows or has reason to believe that such information is inaccurate.

Date: December 11, 2003

RELIANCE INDUSTRIES LIMITED

By:

/s/ P.M.S. Prasad

Name:
Title:

P.M.S. Prasad
Authorized Signatory

RELIANCE COMMUNICATIONS
INFRASTRUCTURE LIMITED

By:

/s/ P.M.S. Prasad

Name:
Title:

P.M.S. Prasad
Authorized Signatory

RELIANCE COMMUNICATIONS UTTAR PRADESH
PRIVATE LIMITED

By:

/s/ P.M.S. Prasad

Name:
Title:

P.M.S. Prasad
Authorized Signatory

RELIANCE INFOCOMM LIMITED

By:

/s/ P.M.S. Prasad

Name:
Title:

P.M.S. Prasad
Authorized Signatory

RELIANCE GATEWAY NET LIMITED

By:

/s/ P.M.S. Prasad

Name:
Title:

P.M.S. Prasad
Authorized Signatory

-----END PRIVACY-ENHANCED MESSAGE-----