Exhibit 6.2
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") is made as of
November 25, 1998.
BY AND AMONG: V.I. Internet Telecommunications Inc., a corporation duly
incorporated under the laws of Canada with legal domicile in Montreal, Province
of Quebec, Canada (hereinafter referred as "Company"), hereby represented by Xx.
Xxxxxxx Xxxxxxxx, Xx. Xxxxxxxxxxx Xxxxxxx, Xx. Xxxx Xxxxx, duly authorized as he
so declares.
ON THE ONE HAND
The State Directory "Specialized Technic and Communications" (SD
"ST&C") of The Ministry of Interior of Russian Federation. (hereinafter referred
jointly as the "Parties" or individually as the "Party")
WHEREAS, "ST&C" is desirous of establishing a voice, fax and data
telecommunication service to/from Russian Federation and other countries on the
base of Internet technology; and
WHEREAS (SD "ST&C") has extensive communications expertise; and
WHEREAS, SD {SD&C} has the resources and capability to implement the
Russian component of any required system that could provide telecommunication
services in St. Petersburg and other areas of the Russian Federation; and
WHEREAS, SD {SD&C} can secure all necessary permits, licenses and
approvals for the legitimate operation of a Russian telecommunication service;
and
WHEREAS, SD {SD&C}, through its normal links with other ministries,
municipal governments and with the Commonwealth of Independent States (CIS), is
desirous of allowing and encouraging these governments to make use of such
telecommunication services; and
WHEREAS, the Company has extensive communications expertise including
marketing and operation of prepaid telecommunication services; and
WHEREAS, the Company has extensive North American and International
management, marketing trade funding and promotional experience and capability;
and
WHEREAS, the Company has long-established links with communications
systems providers and users throughout North America; and
WHEREAS, the Company wishes to establish telecommunication services
to/from North America on its Internet Telephone Protocol network to its
customers to/from the Russian Federation; and
WHEREAS, the Company needs to implement an Internet Telephony Protocol
Communication System (the "System") between, on one hand, Moscow and St.
Petersburg hubs and, on the other hand, the Montreal gateway hub to North
America and the rest of the world, so to be able to provide the
telecommunication services ("Project"); and
WHEREAS, SD {SD&C} wishes to associate with VI to jointly pursue the
implementation of the Project and the operation of the System; and
WHEREAS, the Parties also desire to set forth their mutual
understandings regarding their cooperation and obligations in the implementation
of the Project and the operation of the System as well as the essential elements
of the formation of a new company by them for such purposes.
NOW, THEREFORE, the Parties hereby agree as follows:
1. OBJECTIVE
The purpose of this MOU is to establish the relationship
between the Parties, their respective obligations and the material conditions of
the formation of an operating company that will be used by the Parties to
provide the System in order to meet the needs of the Russian Federation, its
private corporate sector and its private citizens in their communication
connection with North America, Europe and rest of the world.
2. FORMATION OF THE OPERATING COMPANY
The Parties will form a corporation organized under the laws
of Russian Federation. Such corporation shall be known as "Interservice
Telephone Russia" or by any other name agreed to by the Parties and approved by
the competent authorities ("Operating Company"). Such Operating Company will be
created no later than thirty (30) days after execution of this MOU.
2.1 Shareholdings.
The Parties hereby agree that their respective percentages of
equity interests in the Operating Company will be as follows:
Shareholder % Equity Interest
VI - 80%
SD {SD&C} - 20%
a) Indirect Shareholdings and Foreign or Other Ownership Restrictions.
The Parties further agree that their respective equity interest in the
Operating Company may be held by each Party either directly, and/or (in such
Party's sole and absolute discretion) indirectly through one or more of such
party's Affiliates (as defined in Article 6 below).
The Parties acknowledge and agree that the Shareholder's Agreement (as
defined in Section 2.2 below) will include express rights, restrictions and
obligations of each of the shareholders regarding any change of control of any
of the shareholders of the Operating Company (the "Shareholders").
b) Transfer Restrictions and Rights of First
Refusal for Equity Allocated to the Parties.
If, at any time before or after formation of the Operating Company, any
Party should wish to sell part or all of its equity interests in the Operating
Company, that Party must first offer such equity interests to the other Party at
fair market value upon the same terms and conditions that it would offer to sell
such equity interests to a third party, before offering for sale such equity
interests to any third party upon same terms and conditions.
c) Price for Acquisition of Equity Interests.
The amount of the capital contributions of the shareholders and other
financing needs of the Operating Company will be as mutually agreed upon by the
Parties. The Parties currently contemplate that the initial capital
contributions will be proportionate to their equity interests in the Operating
Company.
2.2 Shareholders' Agreement.
The parties shall negotiate and form the Operating Company and enter
into a shareholders' agreement setting forth their rights (including voting
rights) and obligations regarding their respective equity interests in the
Operating Company including, among other things, the transfer restrictions,
rights of first refusal and mutually agreed upon provisions (the "Shareholders'
Agreement").
a) The International Operator.
The Parties contemplate that there will be an agreement between the
Company and SD {SD&C} (or their respective Affiliates) with respect to their
supervision and control of the management of the business of the Operating
Company, and that such agreement will be submitted to all Parties.
b) Board Representation and Decision making.
The Parties currently contemplate that the Operating Company will have
a five (5) member board of directors (the "Board") (each director to have one
vote), and the shareholders will be entitled to appoint directors to the Board
in accordance with the equity ownership interests in the Operating Company from
time to time held by them in the Operating Company (unless otherwise agreed in
the Shareholders' Agreement). Based on the percentage of equity interests in the
Operating Company set forth in Section 2.1 above, the Directors would be
appointed as follows:
3 director(s) will be appointed by the Company;
2 director(s) will be appointed by (SD "ST&C").
The Shareholders' Agreement will provide the fundamental decisions
regarding the Operating Company will require a Majority vote. It is currently
contemplated by the Parties that fundamental decisions will be decisions within
the following general categories (to be specifically agreed in detail in the
Shareholders' Agreement);
Annual Financing and Operating Plans
Major Technological Platform choices
Major Transactions including sale of assets
Significant Changes in Financial Leverage
Appointment and Dismissal of the President
c) Operating Company Appointments
The Parties will be entitled to nominate the respective persons to be
appointed as the President of the Operating Company, subject to Super Majority
approval of the Board, and as the Vice-President of Operations of the Operating
Company, subject to simple majority approval of the Board.
2.3 Services Agreement
The Parties agree that the Operating Company may, from time to time,
enter into agreements (collectively the "Services Agreement") with any of the
Parties (or their respective Affiliates) pursuant to which such entities will
provide services to the Operating Company on terms and conditions to be agreed
between such entity, on the one hand, and the Operating Company, on the other
hand.
2.4 Language of Agreements
All agreements (including this MOU) shall be prepared and executed in
both the Russian and English languages. All agreements, when in final form,
shall be promptly sent to an agreed upon translator, and the costs of such
translation shall be shared equally by the Parties.
3. OBLIGATIONS OF THE COMPANY
As part of its contribution to the Project, the Company shall within
three (3) months following the execution of the MOU as well as any other
document required to implement the MOU, except as otherwise provided below,
provide at its costs the following:
3.1 all the technical equipment and telephone lines required to operate
the telecommunication services between Russian Federation and Canada, as well as
the interconnection in Montreal, Canada with the Montreal gateway hub so to
extend the telecommunication services throughout the world;
3.2 the marketing and promotion of the use of the telecommunication
services throughout Canada and the United States by state and private corporate
sectors, telephone corporations and private individuals telecommunication
services through the use of prepaid telephone cards;
3.3 prepaid telephone cards for promotion and sale in Russian
Federation and North America;
3.4 establishment of a credit account record for all the Operating
Company prepaid customers;
3.5 payment for the costs of telephone lines and usage between St.
Petersburg and Moscow as well as local and long distance charges between Russian
Federation and other destinations in the world and vice versa.
3.6 the financing of the Project through proper banking and investment
arrangements and the keeping of (SD "ST&C") inform of such arrangements
throughout the implementation of the Project and the operation of the System;
3.7 an accounting system for the implementation and operation of the
System based on generally accepted accounting principles and the applicable
Russian Federation laws;
3.8 training, both technical and administrative, of the employees of
the Operating Company involved in the implementation and operation of the
System.
4. OBLIGATIONS OF (SD "ST&C")
(SD "ST&C"), as part of its participation into the Project, will
provide at its costs, within one (1) month following the execution of the MOU as
well as any other document required to implement the MOU, unless otherwise
provided below, the following:
4.1 (SD "ST&C") shall secure and execute this MOU as well as any other
document deemed necessary by the Parties to implement the MOU and to establish
the Operating Company;
4.2 (SD "ST&C") shall obtain the issuance of an exclusive and
irrevocable permit(s) from the competent state authorities of the Russian
Federation, as well as any other permit(s) or authorization(s), that is (are)
necessary to implement and operate the System for a period of at least ten (10)
years;
4.3 (SD "ST&C") shall obtain and grant the permission to the Operating
Company to start its activities within ten (10) days following its incorporation
and the issuance of the necessary permit(s);
4.4 (SD "ST&C") shall provide the office space and all other facilities
mutually agreed to between the Parties, as well as the necessary technical and
office personnel that the Parties will deem necessary to install and operate the
System;
4.5 (SD "ST&C") shall install all the equipment provided by VI to
implement the System; (SD "ST&C") shall also install all the facilities (such as
electrical power and outlets, telephone access, internet access, etc.) deemed
necessary to operate the System;
4.6 (SD "ST&C") will assist the Operating Company with the physical
implementation, operation and maintenance of the technical equipment required to
operate the System and will provide the interconnection in Moscow to extend the
telecommunication services throughout Russian Federation and the CIS;
4.7 (SD "ST&C") shall have the MOU as well as any other document
required to implement the MOU, whether mentioned or not in this MOU, registered
with the competent authorities of the Russian Federation within ten (10) days of
their execution by the Parties;
4.8 (SD "ST&C") shall be responsible for the relationship between the
Operating Company and the state authorities of the Russian Federation at all
levels of Government so to maintain a positive relationship in place.
5. OPERATING COMPANY RESPONSIBILITIES
The Operating Company shall have the responsibilities decided by its
shareholders and, without limiting the foregoing, shall be responsible for the
implementation and operation of the System. It is understood and agreed by the
Parties that the Operating Company shall, among other things:
5.1 market and promote the use of the prepaid telecommunication
services in the Russian Federation by state and private corporate sectors at all
levels of Government, as well as by private individuals through the sale of
prepaid telephone cards;
5.2 provide VI with the reimbursement of the calls made by its
customers using the System, including reimbursement from prepaid telephone
cards;
5.3 pay all operational costs and expenses incurred by the Operating
Company, including without limitation cost of rent, employees salaries,
promotion and advertising costs, permits and interconnection fees, and any other
overhead costs and/or expenses. All these costs, fees and expenses shall be
charged to VI with a ten per cent (10%) surcharge. Any local telephone costs for
incoming calls from outside of Russian Federation will be charged to VI at cost.
Any surcharge over costs and/or expenses invoiced to VI shall be adjusted on a
quarterly basis by VI and Operating Company to ensure a fair sharing of profits
and losses for both VI and Operating Company;
5.4 pay, on a weekly basis, the services fees to the Parties resulting
from provision by such Parties of consulting services, in accordance with the
Services Agreements;
5.5 maintain adequate accounting system of its operations based on
generally accepted accounting principles and applicable Russian Federation laws;
open and maintain an operation account with a Russian bank as selected by the
shareholders.
6. CONFIDENTIALITY
Each Party (sometimes hereinafter referred to as a "Receiving Party")
agrees to hold in confidence and not to disclose to any third party (a) any and
all information provided by a Party directly or indirectly on its behalf
(sometimes referred to as a "Disclosing Party") to any Receiving Party, whether
orally or in writing and before or after the date of this MOU, (b) all analysis,
compilations, studies and other documents and records prepared by the Receiving
Party, its advisers or its representatives that are generated from or reflect
such information, (c) any technical, economic and market studies and business
plans jointly prepared by the Parties in relation to the Project, and (d) the
terms of this MOU or any other facts relating to the Project and/or the
Operating Company contemplated hereby (collectively, the "Information"), except
(i) if such Information is required by securities laws or other applicable laws
or court orders in Russian Federation and/or Canada, but only after written
notice of such disclosure requirement has been given by the Receiving Party to
the Disclosing Party, (ii) if such Information is disclosed by the Receiving
Party to its representatives, agents and advisors (who may include lending
institutions and insurance companies) who need to know such Information for the
purpose of assisting the Receiving Party with the evaluation, planning,
establishment and operation of the Project and the Operating Company, but only
after such persons have been directed by the Receiving Party to treat such
Information in accordance with the terms of this MOU, or (iii) with the prior
written consent of the Disclosing Party in respect of the Information referred
to in clauses a) and b) of this Article 6. Further, each Party agrees not to use
the Information for any purpose other than the evaluation, planning,
implementation and operation of the Project and the Operating Company.
The obligations set forth in the preceding paragraph will not apply to
a Receiving Party in respect of (A) information that is or becomes generally
available to the public other than as a result of a disclosure directly or
indirectly by such Receiving Party or (B) information that is or becomes
generally available to such Receiving Party on a non-confidential basis from a
source other than the Disclosing Party, provided that such source is not known
by such Receiving Party to be subject to any prohibition against transmitting
the information to such Receiving Party and that such Receiving Party is not
aware that the availability of such information from such source resulted
directly or indirectly from information supplied by the Disclosing Party.
As used in this MOU, "Affiliate", with respect to any person or entity,
means any individual, firm, corporation, association, partnership, joint
venture, trust or other entity, now or hereafter existing, which, directly or
indirectly, controls, is controlled by or is under common control with such
person or entity; a person or entity "controls" another person or entity (the
"subject person") if such person or entity (alone or in combination with an
Affiliate(s)), possesses the power, by contract or ownership of voting stock or
other equity interests (i) to elect a majority of the members of the board of
directors (or other similar governing body) of the subject person, or (ii) if
the subject person is not a corporation, to otherwise direct or cause the
direction of the management and policies of the subject person; and "controlled"
has a corresponding meaning.
7. PUBLIC ANNOUNCEMENTS
No news release, public announcement, advertisement or publicity
concerning this MOU, the Project, the Operating Company, the System or any other
matters contemplated hereby may be made without the prior approval of the
Parties, except as may be required by securities laws or other applicable laws
or court orders, in which case, such disclosure shall be subject to clause (i)
of Article 6.
8. EXCLUSIVITY
8.1 Each Party agrees that from the date of execution of this MOU
through the formation of the Operating Company and the execution of the
Shareholders' Agreement (the "MOU Exclusivity Period"), it will not enter into,
will cause its wholly-owned subsidiaries not to enter into and will use its
reasonable, good faith efforts to cause its Affiliates not to enter into, any
discussions, negotiations or agreements with any other person(s) or entity(ies)
(including, without limitation, any telecommunication operator with respect to
investing or agreeing to invest (directly or indirectly) in, or providing
general strategic consultation or advisory services to, any person, entity or
group proposing to provide implementation and operation of an Internet Telephone
Protocol network to customers in Russian Federation, in each case other than
pursuant to this Agreement; provided, however, that nothing in this Article 8
shall be construed as restricting the rights of any Party or of any Party's
Affiliates to continue with its normal correspondence business with any
international telecommunication services carrier or provider.
8.2 The Parties agree that provisions relating to exclusivity for the
period following the MOU Exclusivity Period shall be governed by terms to be
included in the Shareholders' Agreement.
9. TERMINATION
Subject to the survival provisions of Section 13.6, this MOU will
terminate on the first to occur of any of the following events (the "Termination
Date"):
9.1 the date on which this MOU is replaced by the comprehensive legal
agreements and documents referred to in Article 2 hereof,
9.2 the date of the mutual written agreement of all of the Parties to
so terminate.
9.3 If a Party fails to fulfill its obligations under this MOU and,
after having received a notice to that effect from the other Party, does not
cure such failure within sixty (60) days of receipt of the notice, and the
non-defaulting Party terminates this MOU as a result of an arbitration decision
and of its confirmation by a court of competent jurisdiction.
Upon the occurrence of the Termination Date, each Party shall promptly
return to the other Party(ies) all Information obtained by it in relation to the
other Party(ies). In addition, each Party shall remain liable for the payment of
its share of agreed-upon expenses incurred or committed pursuant to Article 3
and 4 hereof through the Termination Date. Unless otherwise agreed in writing by
the Parties hereto, the provisions of Articles 6 and 7 hereof will survive the
Termination date and the termination of this MOU.
10. RELATIONSHIP OF PARTIES
No Party has the power or authority to legally bind the other Party
hereto, and nothing herein contained will be construed as authorizing a Party to
act as an agent or representative of the other Party hereto or to legally bind
the other Party hereto.
11. GOVERNING LAW: DISPUTES
11.1 The entering into, construction, and performance of this MOU shall
be governed by and interpreted in accordance with the laws of Russian
Federation.
11.2 The Parties hereto agree that any disputes, controversies or
differences which may arise between or among them out of, in relation to, or in
connection with this MOU or its subject matter, including disputes as to
validity, performance, breach or termination, shall be resolved by them as
expenditiously as possible pursuant to amicable and good faith discussions.
11.3 Any dispute, controversy or difference between or among the
Parties (an "International Arbitration"), which cannot be settled pursuant to
amicable and good faith discussions as provided above, shall be submitted to
binding arbitration in accordance with the Arbitration Rules of the United
Nations Commission on International Trade Law as in force on the date of
commencement of the subject International Arbitration, shall be conducted in
English and in Stockholm, Sweden, and the law governing such arbitration
proceedings shall be law of Russian Federation, and the decision of such
arbitrators shall be rendered in law.
11.4 In the event of any inconsistency between the Russian version and
the English version of this MOU or of any agreement referred to in Article 2,
the English version shall prevail.
11.5 The validity and construction of this Article 11 shall be governed
by the laws of Russian Federation.
12. NOTICES
All notices to be given among the Parties will be validly given when
delivered by courier or by Facsimile as set out below:
If to the Company: ________________
If to (SD "ST&C"): 6 Proletarskaya Xxxxxxxxx xxxxxx, Xx. Xxxxxxxxxx,
000000, Xxxxxx. fax x0 000 000-0000
13. GENERAL
13.1 Preamble; Integration: The preamble and the documents referred
hereto shall form an integral part hereof as if recited at length. The terms and
provisions contained in this MOU together with the documents referred hereto
constitute the entire agreement between the Parties with respect to the subject
matter hereof.
13.2 No Waiver: No amendment or waiver of this MOU shall be binding
unless executed in writing by both Parties. No waiver of any of the provisions
of this MOU shall constitute a waiver of any other provision (whether or not
similar) nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
13.3 Severability. any provision in this MOU which is held to be
illegal or unenforceable in any jurisdiction shall be ineffective to the extent
of such illegality or unenforceability without invalidating the remaining
provisions and any such illegal or unenforceable provision shall be deemed to be
restated to reflect as nearly as possible the original intention of the Parties
in accordance with applicable law.
13.4 Extended Meanings. In this MOU, words importing the singular
number include the plural and vice versa and words importing gender include all
genders. The word "person" includes, subject to the context in which it appears,
an individual, partnership, association, body corporate, trustee, executor,
administrator or legal representative.
13.5 Headings. The division of this MOU into Articles and subsections
and the insertion of headings are for convenience of reference only and shall
not affect its construction or interpretation.
13.6 Survival. The following provisions shall survive the termination
of this MOU together with such other provisions of this MOU which expressly or
by their nature survive termination:
Article 6 CONFIDENTIALITY
Article 7 PUBLIC ANNOUNCEMENTS
Article 11 GOVERNING LAWS, DISPUTES
Article 13 GENERAL
13.7 Binding Effect: This MOU will be binding on and enure to the
benefit of the Parties hereto and their respective successors and permitted
assigns. No Party may assign this MOU or any of their rights or obligations
hereunder or delegate the performance thereof to a third party without the prior
written consent of the other Party except that the Parties may assign this MOU
to one or more of their subsidiaries or Affiliates.
13.8 Counterparts: This MOU may be executed in one or more
counterparts, each of which when so executed shall be deemed an original, but
all of which taken together shall constitute one and the same complete and
executed agreement.
13.9 Effective Agreement: If executed in counterparts, this MOU shall
become effective when each Party to this MOU shall have received counterparts
hereof signed by the other Party hereto.
13.10 Delays: In those cases where the activities of one Party or a
responsibility of one Party called for in this MOU, or otherwise, are dependent
on an activity or responsibility of the other Party, or is dependent on
receiving information or approval from the other Party, and the activity,
responsibility, information or approval is not given or notified in such one
Party, then the activity or responsibility of such one Party may be delayed a
corresponding amount of time.
IN WITNESS HEREOF, the Parties to this MOU have caused it to be
executed and sealed by their duly authorized officers as of the day and year
first written above.
(SD "ST&C")
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V.I. INTERNET TELECOMMUNICATIONS INC.
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