SHAREHOLDERS AGREEMENT
Dated as of May 30, 2001
among
OPEN JOINT STOCK COMPANY "VIMPEL-COMMUNICATIONS",
ECO TELECOM LIMITED
and
TELENOR EAST INVEST AS,
as the Shareholders
and
CLOSED JOINT STOCK COMPANY "VIMPELCOM-REGION",
as the Company
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATION................................................................ 1
1.01 Definitions.................................................................................... 1
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1.02 Interpretation................................................................................. 10
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ARTICLE II MANAGEMENT OF THE COMPANY..................................................................... 10
2.01 Board of Directors; Shareholders............................................................... 10
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ARTICLE III.............................................................................................. 14
REPRESENTATIONS AND WARRANTIES........................................................................... 14
ARTICLE IV TRANSFERS OF SECURITIES....................................................................... 15
4.01 General........................................................................................ 15
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4.02 Transfers and Liens............................................................................ 16
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4.04 Transfers to Persons Other than Permitted Transferees.......................................... 20
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4.05 Right of First Refusal......................................................................... 20
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4.06 Required Sale Rights........................................................................... 22
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4.07 Co-Sale Rights................................................................................. 22
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4.08 Closing........................................................................................ 23
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4.09 Effectiveness of Transfer...................................................................... 23
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4.10 Improper Transfers Ineffective................................................................. 24
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4.11 Information Letter............................................................................. 24
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4.12 Other Arrangements............................................................................. 25
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ARTICLE V FUNDING COVENANTS; DEBT ACQUISITION; NEW CAPITAL STOCK......................................... 25
5.01 Loans and Financing............................................................................ 25
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5.02 Capital Increase............................................................................... 25
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ARTICLE VI CERTAIN CORPORATE MATTERS..................................................................... 28
6.01 Business Combination........................................................................... 28
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6.02 Non-Compete.................................................................................... 29
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6.03 Charter........................................................................................ 34
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6.04 Amendment of Charter........................................................................... 34
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ARTICLE VII CONFIDENTIALITY.............................................................................. 35
ARTICLE VIII BOOKS AND RECORDS; REPORTING................................................................ 35
8.01 Maintenance of Books and Records............................................................... 35
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8.02 Right to Examine Books and Records............................................................. 36
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8.03 Reporting...................................................................................... 36
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ARTICLE IX INDEMNIFICATION............................................................................... 36
ARTICLE X TERM AND TERMINATION........................................................................... 37
ARTICLE XI DISPUTE RESOLUTION............................................................................ 38
ARTICLE XII MISCELLANEOUS................................................................................ 40
12.01 Notices........................................................................................ 40
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12.02 Entire Agreement............................................................................... 42
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12.03 Waiver......................................................................................... 42
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12.05 No Assignment; Binding Effect; No Third Party Beneficiary...................................... 43
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12.06 Governing Law.................................................................................. 43
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12.07 Severability................................................................................... 43
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12.08 Further Assurances............................................................................. 43
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12.09 Headings....................................................................................... 43
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12.10 Counterparts................................................................................... 43
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12.11 Stop Transfer.................................................................................. 43
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SHAREHOLDERS AGREEMENT (the "Agreement") dated as of the 30th day of May,
2001, by and among OPEN JOINT STOCK COMPANY "VIMPEL-COMMUNICATIONS", an open
joint stock company organized and existing under the laws of the Russian
Federation ("VIP"), Eco Telecom Limited, a company organized and existing under
the laws of Gibraltar ("Eco Telecom"), TELENOR EAST INVEST AS, a company
organized and existing under the laws of Norway ("Telenor") and CLOSED JOINT
STOCK COMPANY "VIMPELCOM-REGION", a closed joint stock company organized and
existing under the laws of the Russian Federation (the "Company") and such other
holders of Securities of the Company as shall be party hereto from time to time.
WITNESSETH
WHEREAS, the Company currently is a wholly-owned subsidiary of VIP;
WHEREAS, the Company has agreed to issue and to sell, and Eco Telecom, VIP
and Telenor have agreed, or have the right, to subscribe for and purchase,
shares of Common Stock and/or Preferred Stock on the terms and subject to the
conditions set forth in the Primary Agreement, dated as of the date hereof, by
and between the Company, as issuer, and Eco Telecom, VIP and Telenor, as
purchasers (the "Primary Agreement");
WHEREAS, Eco Telecom, VIP, Telenor and the Company desire to enter into
this Agreement in respect of certain matters of corporate governance, including
the composition of the Board of Directors and the conduct of the affairs of the
Company, and to provide certain rights and set certain restrictions in
connection with the Common Stock and other Securities of the Company.
NOW, THEREFORE, to implement the foregoing and in consideration of the
mutual terms, conditions and covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.01 Definitions.
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As used herein, the following terms shall have the following meanings:
"Actions or Proceedings" shall mean any action, suit, proceeding or arbitration
commenced, brought, conducted or heard by or before any Governmental or
Regulatory Authority.
"Affiliate" shall mean, with respect to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person including, if such Person is an individual, any
relative or spouse of such Person, or any relative of such spouse of such
Person, any one of whom has the same home as such Person, and also including any
trust or estate for which any such Person or Persons specified herein, directly
or indirectly, serves as a trustee, executor or in a similar capacity
(including, without limitation, any protector or settlor of a trust) or in which
any such Person or Persons specified herein, directly or indirectly, has a
substantial beneficial interest, and any Person who is controlled by any such
trust or estate. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and
"under common control with") shall mean, with respect to any Person, the
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise) of a Person.
"Agreement" has the meaning specified in the preamble.
"Appraiser" shall mean an independent, internationally recognized investment
bank or accounting firm which (i) shall have substantial experience in Russian
corporate transactions and (ii) shall not be an Affiliate of any Party.
"ARCO" shall mean the Agency for Restructuring of Credit Organizations (Agenstvo
po Restruckturizatzii Kreditnykh Organizaziy).
"Assets and Properties" shall mean, with respect to any Person, all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, used, operated, owned or leased by such Person, including,
without limitation, cash, cash equivalents, investments, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Board" shall mean the Board of Directors of the Company.
"Books and Records" shall mean the documents and information which the Company
is obliged to disclose to its shareholders in accordance with the laws of the
Russian Federation and the Charter.
"Business" shall mean the cellular mobile telecommunications business
(including, without limitation, GSM, UMTS, 3G and other new standards or
technologies), it being understood that this shall not include fixed wireless
extensions (including, without limitation, Last Mile Digital Subscriber (LMDS),
Bluetooth, wireless local area network (wireless LAN), and any form of Digital
Subscriber Line (xDSL) services), fixed wireless access (including, without
limitation, point to point and point to multipoint), satellite mobile services,
mobile Internet portals and related content services, and similar businesses.
"Business Combination" shall mean (i) the merger of the Company into VIP
(prisoedinenie), (ii) the purchase by VIP or a wholly owned subsidiary of VIP of
all of the issued and outstanding Common Stock of the Company, or (iii) such
other form of business combination as the Parties may agree (provided, that the
entity which survives the Business Combination shall be listed or quoted on the
New York Stock Exchange or a similar, internationally recognized stock exchange
or market), in each case, with all of the issued and outstanding Common Stock of
the Company to be exchanged for the applicable securities of VIP at the
Combination Ratio determined pursuant to Schedule 3 hereto.
"Business Combination Fees" has the meaning specified in Section 6.01(e).
"Business Combination Review" has the meaning specified in Section 6.01(a).
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"Business Day" shall mean a day other than a Saturday, a Sunday or any day on
which banks located in Moscow, Russia, Oslo, Norway, London, England or New
York, New York are authorized or obliged to close.
"CEO" shall mean the individual executive body (edinolichniy ispolnitelniy
organ) of the Company, whether the title of such officer is "Chief Executive
Officer", "General Director" or otherwise.
"Change of Control" shall mean, with respect to any Party or any Controlling
Person of such Party, (a) the sale or other disposition of all or substantially
all of such Party's or such Controlling Person's assets, in one or a series of
related transactions, to any Person or Persons (other than a Controlling Person
of such Party or any Controlled Affiliate or Controlled Affiliates of such
Controlling Person), (b) the sale or other disposition of more than fifty
percent (50%) of the securities having ordinary voting power for the election of
directors or other governing body of such Party or Controlling Person, in one or
a series of related transactions, to any Person or Persons (other than a
Controlling Person of such Party or any Controlled Affiliate or Controlled
Affiliates of such Controlling Person), (c) the merger or consolidation of such
Party or Controlling Person with or into another Person or the merger of another
Person into such Party or Controlling Person with the effect that any Person or
Persons other than the existing shareholders of such Party or Controlling Person
prior to such transaction own or control, directly or indirectly, more than
fifty (50%) of the securities having ordinary voting power for the election of
directors or other governing body of the Person surviving such merger, or the
Person resulting from such consolidation or (d) the liquidation or dissolution
of such Party or Controlling Person; provided, however, that a Change of Control
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shall not include (i) a bona fide underwritten public offering of the capital
stock of such Party or any Controlling Person of such Party or (ii) any of (w)
the sale of all or substantially all of the assets of Telenor ASA, Telenor
Communication AS, Telenor Mobile Communications AS or CTF Holdings Limited, (x)
the sale of more than fifty percent (50%) of the securities having ordinary
voting power for the election of directors or other governing body of Telenor
ASA, Telenor Communication AS, Telenor Mobile Communications AS or CTF Holdings
Limited, (y) the liquidation or dissolution of Telenor ASA, Telenor
Communication AS, Telenor Mobile Communication AS or CTF Holdings Limited or (z)
any merger, consolidation, divestiture or de-merger to which Telenor ASA,
Telenor Communication AS, Telenor Mobile Communications AS or CTF Holdings
Limited is a party.
"Charter" shall mean the most recent version of the charter (ustav) of the
Company, as registered with the Moscow Registration Chamber (Moskovskaya
registratsionaya palata) on August 31, 1999, as amended on November 24, 2000 and
as it may be amended from time to time.
"Common Stock" shall mean the common stock of the Company, as defined in the
Charter.
"Combination Ratio" shall mean the ratio of the Value of the Company divided by
the Value of VIP, as determined pursuant to Schedule 3 hereto.
"Company" has the meaning specified in the preamble.
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"Consolidated Subsidiary" shall mean, at any time, a consolidated subsidiary of
a Person, as identified in such Person's financial statements for the prior
fiscal year audited in accordance with GAAP.
"Contract" shall mean any agreement, letter of intent, lease, license, evidence
of Debt Obligations, mortgage, indenture, security agreement or other contract
or understanding (whether written or oral), in each case, to the extent legally
binding.
"Controlled Affiliate" shall mean, with respect to any Person, any Affiliate of
such Person in which such Person owns or controls, directly or indirectly, more
than fifty percent (50%) of the securities having ordinary voting power for the
election of directors or other governing body thereof or more than fifty percent
(50%) of the partnership or other ownership interests therein (other than as a
limited partner).
"Controlling Interest" shall mean the ownership or control, direct or indirect,
of more than fifty percent (50%) of the securities having ordinary voting power
for the election of directors or other governing body of a Person or more than
fifty percent (50%) of the partnership or other ownership interest therein
(other than as a limited partner of such Person).
"Controlling Person" shall mean, with respect to any Person, any other Person
which owns or controls, directly or indirectly, more than fifty percent (50%) of
the securities having ordinary voting power for the election of directors or
other governing body of such first Person or more than fifty percent (50%) of
the partnership or other ownership interests therein (other than as a limited
partner of such first Person).
"Co-Sale Notice" has the meaning specified in Section 4.07(a).
"Damages" has the meaning specified in Article IX.
"Debt Obligations" shall mean, with respect to any Person, any obligations of
such Person (i) for borrowed money; (ii) evidenced by notes, bonds, debentures
or similar instruments; (iii) for the deferred purchase price of goods or
services (other than trade payables or accruals incurred in the ordinary course
of business); (iv) arising out of any credit facility or financial
accommodation; (v) in respect of any liabilities and obligations of third
parties (referred to in this definition or otherwise) to the extent that they
are guaranteed by such Person or such Person has otherwise assumed or become
liable for the payment of such liabilities or obligations or to the extent that
they are secured by any Lien upon property owned by such Person, whether or not
such Person has assumed or become liable for the payment of such liabilities or
obligations; (vi) arising under any lease that would be capitalized on the
balance sheet of such Person in accordance with GAAP or Russian Accounting
Standards (RAS) that is otherwise in substance a financing lease; (vii) arising
in respect of any security, any acceptance or documentary credit or any
receivables sold or discounted other than on a non-recourse basis; (viii) for
trade payables incurred in the ordinary course of business; (ix) arising in
connection with damages, fines, penalties, compensatory damages and other
charges of similar kind or nature that may be assessed, charged or appraised
against such Person under any loan agreement, sale-purchase agreement, delivery
of goods (works, services) agreement, lease agreement or any other agreement of
commercial nature; (x) arising in connection with any other transaction that, in
accordance with GAAP or RAS, results in such obligation being treated as
"indebtedness"; (xi)
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any other monetary obligation of a Person to pay an amount of money in excess of
500 minimum monthly wages (as such minimum monthly wage is determined in
accordance with Russian law) to a counter-party either under an agreement or on
another basis, including without limitation on the basis of a normative act of a
state body (including without limitation payments to state bodies such as taxes,
fees or fines) or a judicial decree or Order; and (xii) any other obligations or
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, and whether due or to become due).
"Debt Transaction" means any transaction by which a Standstill Party directly or
indirectly makes any loan or extends any credit to any Protected Party or
otherwise becomes an obligee or holds or is a beneficiary of any Debt Obligation
of any Protected Party (other than the Telenor Service Obligation Agreement).
"Direct Competitor" shall mean, as at any date of determination, any Person, or
any Controlling Person of such Person, or any Controlled Affiliate of any such
Controlling Person (other than the Company or VIP or any of their respective
Controlled Affiliates), which is engaged in, or proposes to engage in, the
Business and which owns or controls a telecommunications license for the
Business in the Moscow License Area or in any ten (10) subjects (subyekti) of
the Russian Federation for which any of the Company, VIP, or any of their
respective Controlled Affiliates holds a telecommunications license for the
Business.
"Director" shall mean a member of the Board.
"Eco Telecom" has the meaning specified in the preamble.
"Eco Telecom Contribution Default" has the meaning specified in the Primary
Agreement.
"Eco Telecom Guarantee Agreement" shall mean the Guarantee Agreement, dated as
of the date hereof, between and among CTF Holdings Limited, Eco Holdings
Limited, Telenor, VIP and the Company.
"Endorsement" shall mean an endorsement to this Agreement, in the form of
Exhibit A.
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"Exchange Act" shall mean the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Existing Investments" has the meaning set forth in Section 6.02(b)(ii).
"Final Date" shall have the meaning specified in the Primary Agreement.
"Fair Market Value" shall mean the fair market value of the item to which such
term is applied as determined in accordance with the methodology set forth on
Schedule 1 attached hereto.
"First Closing" has the meaning specified in the Primary Agreement.
"Foreclosure Actions" has the meaning specified in Section 4.03(b)(i).
"Foreclosure Notice" has the meaning specified in Section 4.03(b)(i).
"GAAP" shall mean United States generally accepted accounting principles, as in
effect from time to time.
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"General Meeting of the Shareholders" shall mean any general meeting of the
shareholders (obschee sobraniye aktsionerov) of the Company.
"Governmental or Regulatory Authority" shall mean any court, tribunal,
arbitrator, legislature, government, ministry, committee, inspectorate,
authority, agency, commission, official or other competent authority of the
Russian Federation, any other country or any state, as well as any county, city
or other political subdivision of any of the foregoing.
"Indemnified Person" has the meaning specified in Article IX.
"Independent Director" shall mean any Person who is not an employee, officer,
director or other Affiliate (but who may be a consultant or former employee) of
any Party, any Controlling Person of such Party or any Controlled Affiliate of
such Controlling Person.
"Initiating Shareholder" has the meaning specified in Section 6.01(a).
"Intellectual Property" shall mean patents and patent rights, licenses,
inventions, copyrights and copyright rights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks and trademark rights, service
marks and service xxxx rights, trade names and trade name rights, service names
and service name rights, brand names, processes formulae, trade dress, business
and product names, logos, slogans, industrial models, processes, designs,
methodologies, software programs (including all source codes) and related
documentation, technical information, manufacturing, engineering and technical
drawings, and all pending applications for and registrations of patents,
trademarks, service marks and copyrights.
"IPO" shall mean the initial underwritten public offering of the Company's
Common Stock which results in the listing of the Company's Common Stock (or
Common Stock-linked Securities) on a national or international exchange or
securities trading facility.
"Laws" shall mean all laws, decrees, resolutions, instructions, statutes, rules,
regulations, acts, ordinances and other pronouncements having the effect of law
or regulation of the Russian Federation, any other country or any state, as well
as any county, city or other political subdivision of any of the foregoing
"Licenses" shall mean all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Lien" shall mean any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale Contract, title retention Contract or other Contract to grant
any of the foregoing.
"Management Regulations" shall mean the Management Regulations on the Procedure
for the Company to Conclude Transactions with Interested Parties (Rukovodstvo o
sdelkakh, v sovershenii kotorykh imeetsya zainteresovannost) to be adopted by
the Board in accordance with Section 2.01(e) hereof, pursuant to Sections
11.2.19 and 11.2.22 of the Charter, as a supplement to the provisions set forth
in the Charter which are applicable to the Board.
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"Moscow License Area" shall mean the city of Moscow and the Moscow region
(Moskovskaya Oblast).
"New Securities" has the meaning specified in Section 5.02(a).
"Offer" has the meaning specified in Section 4.04.
"Offer Notice" has the meaning specified in Section 4.05(a).
"Offered Securities" has the meaning specified in Section 4.04.
"Opportunity" has the meaning set forth in Section 6.02(c).
"Option Agreement" shall mean the Option Agreement, as defined in the Primary
Agreement.
"Order" shall mean any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each case, whether preliminary or
final).
"Outstanding Voting Securities" shall mean, collectively, (i) Common Stock,
Preferred Stock and any other Securities now or yet to be authorized that
ordinarily, and in the absence of contingencies, entitle its holder to vote at
any General Meeting of the Shareholders, and that are, at the time specified in
the context in which such term is used, issued and outstanding, and (ii)
Securities that are, at the time specified in the context in which such term is
used, issued and outstanding and convertible into, or exercisable or
exchangeable for, any shares of Securities described in clause (i).
"Party" shall mean (i) each of VIP, Eco Telecom and Telenor and (ii) each Person
that acquires Securities in accordance with this Agreement and executes an
Endorsement.
"Permitted Transferee" shall mean, with respect to any Shareholder, any
Controlling Person of such Shareholder, or any Controlled Affiliate of any such
Controlling Person or Shareholder.
"Person" shall mean any natural person, corporation, general partnership, simple
partnership, limited partnership, limited liability partnership, limited
liability company, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority, whether incorporated or
unincorporated.
"Pledge Arrangement" has the meaning specified in Section 4.03(d).
"Pledge Co-Sale Notice" has the meaning specified in Section 4.03(b)(iii).
"Pledge Notice" has the meaning specified in Section 4.03(a).
"Pledged Securities" has the meaning specified in Section 4.03.
"Pledgee" has the meaning specified in Section 4.03.
"Pledging Shareholder" has the meaning specified in Section 4.03.
"Preferred Stock" shall mean the shares of preferred stock of the Company, as
defined in the Charter.
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"Preferred Stock Purchase Agreement" shall mean the Preferred Stock Purchase
Agreement substantially in the form of Annex A to Schedule 2.07(a) of the
Primary Agreement.
"Preferred Stock Closing" has the meaning specified in the Primary Agreement.
"Primary Agreement" has the meaning specified in the second recital.
"Principal Agreements" has the meaning specified in the Primary Agreement.
"Protected Party" shall mean any of the Company, VIP or any of their respective
Controlled Affiliates.
"Purchasing Shareholder" has the meaning specified in Section 4.05(b).
"Registrar" shall mean the duly appointed shareholder registrar of the Company,
or any successor thereto, as of the date of this Agreement being the Russian
closed joint stock company National Registry Company (Natsionalnaya
Registratsionnaya Kompaniya).
"Registration Rights Agreement" shall mean the Registration Rights Agreement
dated as of the date hereof between the Company, Eco Telecom, VIP and Telenor.
"Rejection Notice" has the meaning specified in Schedule 3 hereto.
"Required Sale Right" has the meaning specified in Section 4.06.
"Required Sale Securities" has the meaning specified in Section 4.07.
"Review Notice" has the meaning specified in Schedule 3 hereto.
"SEC" shall mean the Securities and Exchange Commission of the United States of
America, or any successor thereto.
"Second Closing" has the meaning specified in the Primary Agreement.
"Securities" shall mean Common Stock, Preferred Stock or other capital stock of
the Company, whether now authorized or not, or any option, right, subscription,
warrant, phantom stock right or other contract right to receive Common Stock or
such other capital stock, or securities of any kind whatsoever, that are, or may
become, convertible into or exchangeable or exercisable for, Common Stock or
such other capital stock.
"Securities Act" shall mean the United States Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Selling Shareholder" has the meaning specified in Section 4.04.
"Shareholder Response Notice" has the meaning specified in Section 4.05(b).
"Shareholders" shall mean (i) VIP, for as long as it owns any Securities, (ii)
Eco Telecom, after such date that Eco Telecom has purchased Securities in
accordance with the terms and conditions of the Primary Agreement, and for so
long as Eco Telecom owns any Securities, (iii) Telenor, after such date that
Telenor has purchased Securities in accordance with the terms and conditions
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of the Primary Agreement, and for so long as Telenor owns any Securities and
(iv) each Person that acquires Securities in accordance with this Agreement and
executes an Endorsement, in respect of each such Person for as long as such
Person owns any Securities (and each of the foregoing, individually, a
"Shareholder").
"Specified Legislation" has the meaning specified in the Primary Agreement.
"Specified Percentage" shall mean (i) with respect to the Company, twenty-five
percent (25%) plus one (1) share of the Voting Securities or (ii), with respect
to VIP, twenty-five percent (25%) plus one (1) share of the issued and
outstanding shares of voting capital stock of VIP.
"Standstill Parties" shall mean, with respect to a Party (other than VIP), such
Party, its Controlling Persons, its Controlled Affiliates, any Controlled
Affiliate of any Controlling Person of such Party and any Person acting on
behalf of any of the foregoing, in each case, pursuant to a Contract; provided,
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however, that for the purposes of this definition, neither VIP, nor any of its
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Controlled Affiliates, nor the Company, nor any of its Controlled Affiliates
shall be deemed Controlled Affiliates of any Party or any Controlling Person of
any Party.
"Telenor" has the meaning specified in the preamble.
"Telenor Guarantee Agreement" shall mean the Guarantee Agreement, dated as of
the date hereof, between and among Telenor ASA, Eco Telecom, VIP and the
Company.
"Telenor Service Obligation Agreement" shall mean the Telenor Service Obligation
Agreement dated as of April 1, 1999, between Telenor Russia AS and the Company.
"Third Closing" has the meaning specified in the Primary Agreement.
"Third Closing Date" has the meaning specified in the Primary Agreement.
"Third-Party Pledge Agreement" has the meaning specified in Section 4.03(a).
"Transfer" shall mean any direct or indirect sale, exchange, transfer
(including, without limitation, any transfer by gift or operation of law, or any
transfer of an economic interest in any derivative security of any Security),
assignment, distribution or other disposition, or issuance or creation of any
option or any voting proxy, voting trust or other voting agreement in respect of
any Person or instrument (including, without limitation, any of the Securities),
whether in a single transaction or a series of related transactions, including
without limitation, (a) the direct or indirect enforcement or foreclosure of any
Lien or (b) any Change of Control; provided, that nationalization,
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expropriation, confiscation, bankruptcy (other than any bankruptcy initiated by
the petition of any Party, or any Affiliate of such Party), arrest or any
similar Action or Proceeding initiated by any Governmental or Regulatory
Authority in respect of any Person or instrument shall not constitute a
Transfer.
"UNCITRAL Rules" has the meaning specified in Section 11.01(a).
"Value of the Company" has the meaning specified in Schedule 3 hereto.
"Value of VIP" has the meaning specified in Schedule 3 hereto.
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"VIP" has the meaning specified in the preamble.
"Voting Securities" shall mean, collectively, Common Stock, Preferred Stock and
any other Securities now or yet to be authorized that ordinarily, and in the
absence of contingencies, entitle its holder to vote in any General Meeting of
the Shareholders and that are, at the time specified in the context in which
such term is used, issued and outstanding.
1.02 Interpretation.
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Unless the context of this Agreement otherwise requires, the following rules of
interpretation shall apply to this Agreement:
(a) the singular shall include the plural, and the plural shall include
the singular;
(b) words of any gender shall include the other gender;
(c) the words "hereof", "herein", "hereby", "hereto" and similar words
refer to this entire Agreement and not to any particular Section or any
other subdivision of this Agreement;
(d) a reference to any "Articles", "Section", "Schedule" or "Exhibit" is
a reference to a specific Article or Section of, or Schedule or Exhibit
to, this Agreement;
(e) a reference to any law, statute, regulation, notification or
statutory provision shall include any amendment, modification or re-
enactment thereof, any regulations promulgated thereunder from time to
time, and any interpretations thereof from time to time by any regulatory
or administrative authority;
(f) a reference to any agreement, instrument, contract or other document
shall include any amendment, amendment and restatement, supplement or
other modification thereto; and
(g) a reference to any Person shall include such Person's successors and
permitted assigns under any agreement, instrument, contract or other
document.
ARTICLE II
MANAGEMENT OF THE COMPANY
2.01 Board of Directors; Shareholders.
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(a) General. Except as limited by, or otherwise provided in, this
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Agreement or the Charter, the conduct of the overall business, management
and affairs of the Company shall be the responsibility of the Board and
the CEO.
(b) Composition; Election; Voting.
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(i) From and after the date hereof, the Board shall consist of
nine (9) Directors. Subject to Section 2.01(b)(ii):
(x) Eco Telecom shall nominate five (5) Directors, including
(a) at least one (1) nominee who shall be an Independent
Director and
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(b) at least one (1) nominee who shall also serve on VIP's
board of directors; and
(y) VIP shall nominate four (4) Directors, including (a) two (2)
nominees who shall be members of the senior management of
VIP, in each case whose initial appointment to such senior
management position was approved by the board of directors
of VIP, (b) one (1) nominee who shall be a designee of
Telenor; provided, however, that if Telenor exercises its
-------- -------
option(s) to purchase Voting Securities pursuant to the
Primary Agreement and, after such purchase, Telenor owns
such number of Voting Securities which would entitle Telenor
to cumulatively elect two (2) Directors to the Board
(assuming that the Directors are elected by the cumulative
vote of the shareholders at any General Meeting of the
Shareholders, in accordance with the Charter), then two (2)
of the Directors nominated by VIP shall be designees of
Telenor for so long as Telenor owns at least such amount of
Voting Securities and (c) if, at any time after exercising
(or declining to exercise, as the case may be) its option(s)
to purchase Voting Securities pursuant to the Primary
Agreement, Telenor does not own such number of Voting
Securities which would entitle Telenor to cumulatively elect
two (2) Directors to the Board, then one (1) of the
Directors nominated by VIP shall be either a member of the
senior management of VIP (whose initial appointment to such
senior management position was approved by the board of
directors of VIP) or an Independent Director; provided,
--------
further, that in any event Telenor shall not separately
-------
nominate any additional Directors to the Board.
Notwithstanding the foregoing, until such time as Telenor
owns or controls 50% or more of the Voting Securities, then
(i) if Telenor has not invested at least $58,500,000 in the
Company by exercising its options to purchase Voting
Securities at the Second Closing and/or the Third Closing,
no more than two (2) Director nominees (including the
Directors nominated pursuant to clause (b) hereof) shall be
affiliated with Telenor and (ii) if Telenor has invested at
least $58,500,000 in the Company by exercising its options
to purchase Voting Securities at the Second Closing and/or
the Third Closing, no more than three (3) Director nominees
(including the Directors nominated pursuant to clause (b)
hereof) shall be affiliated with Telenor.
Notwithstanding the foregoing, if the election of Directors
pursuant to this Section 2.01(b)(i) occurs before Eco Telecom
and/or Telenor first become Shareholders, then VIP shall nominate
the Eco Telecom Director nominees and/or the Telenor Director
nominees, as the case may be, pursuant to the written
instructions received from the respective nominating Party.
11
(ii) Subject to Section 2.01(b)(iii), the provisions of Section
2.01(b)(i) shall terminate on the date on which Eco Telecom
(having once obtained ownership or control of at least the
Specified Percentage of the Company) owns or controls less than
the Specified Percentage of the Company, and on and after such
date the Directors shall be elected by the cumulative vote of the
shareholders of the Company. Upon such termination, Eco Telecom
agrees to use its best efforts to cause the Directors nominated
by (or pursuant to the written instructions of) Eco Telecom to
resign from the Board as expeditiously as practicable, but in no
event later than three (3) Business Days following such event.
Following such termination the remaining Directors or, in their
failure to do so, the Shareholders, shall take all actions
necessary to convene a General Meeting of the Shareholders for
the purpose of electing a new Board as promptly as practicable,
but in no event shall such meeting be held later than five (5)
Business Days after the occurrence of any such termination, and
the Shareholders hereby expressly agree to waive any and all
notice requirements required to be delivered in connection with
such meeting, to the extent permitted by the Laws of the Russian
Federation.
(iii) In the event of an Eco Telecom Contribution Default in connection
with the Second Closing, the provisions of Section 2.01(b)(i)
shall terminate and all five Directors nominated by (or pursuant
to the instructions of) Eco Telecom shall resign from the Board
as expeditiously as practicable, but in no event later than three
(3) Business Days following such event. In the event of an Eco
Telecom Contribution Default in connection with the Third
Closing, the provisions of Section 2.01(b)(i) shall terminate and
four (4) of the five (5) Directors nominated by (or pursuant to
the instructions of) Eco Telecom shall resign from the Board as
expeditiously as practicable, but in no event later than three
(3) Business Days following such event. In either such event, the
Directors shall thereafter be elected by the cumulative vote of
the shareholders of the Company. Following such Eco Telecom
Contribution Default the remaining Directors or, in their failure
to do so, the Shareholders, shall take all actions necessary to
convene a General Meeting of the Shareholders for the purpose of
electing a new Board as promptly as practicable, but in no event
shall such meeting be held later than five (5) Business Days
after the occurrence of any such Eco Telecom Contribution
Default, and the Shareholders hereby expressly agree to waive any
and all notice requirements required to be delivered in
connection with such meeting, to the extent permitted by the Laws
of the Russian Federation.
(c) Chairman. The Board shall elect the Chairman of the Board by a simple
--------
majority vote. Until the earlier to occur of (i) an Eco Telecom Contribution
Default or (ii) the date on which Eco Telecom (having once obtained
ownership or control of at least the Specified Percentage of the Company)
owns or controls less than the Specified Percentage of the Company, the
nominees for the position of Chairman of the Board shall be chosen from the
Directors nominated by (or pursuant to the instructions of) Eco
12
Telecom and may be nominated by any one or more of the Directors. The
Chairman of the Board shall not have any specific powers, other than the
authority to arrange the work of the Board or as otherwise provided by
applicable law and the Charter.
(d) Removal of Directors. VIP has convened a General Meeting of the
--------------------
Shareholders on the date hereof for the purpose of electing the new
Directors pursuant to the terms of Section 2.01(b)(i). Each Director
nominated by (or pursuant to the instructions of) Eco Telecom and elected
to the Board shall be obligated to execute the conditional resignation
letter in the form of Exhibit B upon such Director's election to the Board,
---------
which letter shall be countersigned by the Company and held in escrow as
the Parties may agree.
(e) Approval of Certain Matters. On the date hereof a meeting of the Board
---------------------------
shall be held for the purpose of affording the Directors an opportunity to
vote on the matters set forth in the form of protocol annexed hereto as
Schedule 2.01(e).
(f) Deadlock Recommendation. Until the earlier to occur of (i) an Eco
-----------------------
Telecom Contribution Default or (ii) the date on which Eco Telecom (having
once obtained ownership or control of at least the Specified Percentage of
the Company) owns or controls less than the Specified Percentage of the
Company, in the event that a deadlock arises with regard to a single,
material Board action at two (2) consecutive meetings of the Board convened
within a twenty (20) Business Days period, upon the request of any
Director, a committee consisting of a representative of each of Eco
Telecom, VIP and Telenor shall convene to discuss the deadlock and provide
the Board with a non-binding recommendation for how to resolve such
deadlock.
(g) Vote of Shareholders. The Shareholders hereby agree that they will
--------------------
vote, or will cause to be voted, all of their respective Voting Securities
at any meeting of shareholders (in person or by ballot) in furtherance of
the provisions of this Article II. In addition to the foregoing, until the
earlier of (i) the date on which Eco Telecom owns at least 25% plus one (1)
share of the Voting Securities of the Company or (ii) the date of an Eco
Telecom Contribution Default, VIP shall not take any decisions or actions
in its capacity as a shareholder of the Company without the prior written
consent of Eco Telecom, with respect to the following: (a) requesting the
convocation of a meeting of share holders of the Company, (b) being
considered present for quorum purposes at any meeting of shareholders of
the Company (whether by being represented personally at a meeting or by
submitting a ballot) or (c) voting (or abstaining from voting) any Voting
Securities on issues requiring super-majority consent or cumulative voting
under the Charter or the Laws of the Russian Federation or with respect to
issues under Section 9.2.9 of the Charter; provided, however, that Eco
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Telecom will exercise such rights in furtherance of the provisions of this
Article II; and, provided, further, that if such Eco Telecom Contribution
-------- -------
Default is caused by any Specified Legislation which prevents the Second
Closing or the Third Closing then Eco Telecom shall be given a veto right
(as if it owned the Specified Percentage of the Company), for a period of
one year following the Second Closing Date or the Third Closing Date, as
applicable, with respect to (and only with respect to) the matters set
forth in Sections 9.2.1, 9.2.2, 9.2.3 or 9.2.4 (except with respect to
capital increases contemplated by the Primary Agreement) of the Charter.
13
2.02 CEO.
---
(a) Following the date hereof, and subject to Section 2.02(c), the
Directors nominated to the Board by (or pursuant to the instructions of)
Eco Telecom shall nominate the CEO. The Chairman of the Board shall send
written notice of such nomination to all Directors. Each nominee for the
position of CEO shall be a person experienced in the Business who meets
the criteria set forth on Schedule 2 hereto and who shall be chosen from
----------
among those candidates recommended by an internationally recognized
executive recruiting firm. Each such CEO nominee shall be considered by
the Board within two (2) weeks of being nominated. On the first Business
Day of such two-week period, the Directors shall be given the resume of
such CEO nominee and a copy of the letter from an internationally
recognized executive recruiting firm recommending the CEO nominee, and
shall have the opportunity to interview such nominee prior to the vote on
such nomination.
(b) The CEO shall be appointed in accordance with the provisions of the
Charter. The CEO shall have the rights and responsibilities granted to
general directors under the Laws of the Russian Federation and Section 12
of the Charter; provided that such rights and responsibilities may be
expanded or restricted by a decision of the Board in accordance with the
Charter. It is hereby acknowledged by the Parties that the rights and
responsibilities of the CEO under the Laws of the Russian Federation and
Section 12 of the Charter are substantially the same as those of the
general director of VIP under the Laws of the Russian Federation and
Section 11 of the charter of VIP, as such rights and responsibilities may
be expanded or restricted by the Board or the VIP board of directors,
respectively, in accordance with the Charter or the charter of VIP,
respectively, in each case to the extent permitted by the Laws of the
Russian Federation.
(c) In the event of an Eco Telecom Contribution Default, or on the date
that Eco Telecom, (having once obtained ownership or control of the
Specified Percentage of the Company), owns or controls less than the
Specified Percentage of the Company, the Directors nominated by (or
pursuant to the instructions of) Eco Telecom shall lose the right to
nominate the CEO and the CEO will immediately tender to the Board his or
her resignation as the CEO.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Parties.
---------------------------------------------
VIP, Eco Telecom and Telenor each hereby represent and warrant, in each case
severally and not jointly, as of the date of (and after giving effect to) the
consummation of such Party's purchase of Securities pursuant to the Primary
Agreement, that:
(a) On each date that such Party purchases such Securities, such Party
is the record holder and beneficial owner of such Securities;
(b) Other than Securities which may be purchased pursuant to the terms
of the Primary Agreement, the Preferred Stock Purchase Agreement, the
Option Agreement or this Agreement (and, with respect to VIP only, other
than Securities owned by VIP as of
14
the date of this Agreement), such Securities are the only shares of
capital stock of the Company owned of record or beneficially by such
Party;
(c) With respect to Telenor and VIP only, such Party has sole power of
disposition and sole voting power with respect to all of such Securities,
with no restrictions on such rights, other than such restrictions on
Transfer as arise under applicable United States federal securities laws,
Russian federal securities laws, the terms and conditions of this
Agreement, the Preferred Stock Purchase Agreement, the Option Agreement
and the Registration Rights Agreement;
(d) With respect to Eco Telecom only, no Person other than Eco Telecom
(together with its Controlling Persons) has power of disposition or
voting power with respect to any such Securities, and Eco Telecom is not
subject to any restrictions on such rights, other than such restrictions
on Transfer as arise under applicable United States federal securities
laws, Russian federal securities laws, and the terms and conditions of
this Agreement, the Preferred Stock Purchase Agreement, the Option
Agreement and the Registration Rights Agreement;
(e) Such Securities are held free and clear of all Liens, proxies,
voting trusts or agreements, understandings or arrangements whatsoever,
except for those arising under this Agreement, the Preferred Stock
Purchase Agreement, the Option Agreement and the Registration Rights
Agreement; and
(f) Since the date of this Agreement, there has not been any Change of
Control with respect to such Party or any Controlling Person of such
Party.
3.02 Representations and Warranties of Subsequent Parties.
----------------------------------------------------
Each Person (other than the Parties hereto as of the date hereof) who
subsequently becomes a Shareholder hereunder after the date hereof shall make
the representations and warranties set forth on Annex 1 to the Endorsement,
which representations and warranties shall be incorporated by reference herein,
as though made in this Agreement, upon execution of the Endorsement by such
Person.
ARTICLE IV
TRANSFERS OF SECURITIES
4.01 General.
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(a) The provisions of this Article IV shall be applicable to all
Securities owned, directly or indirectly, by a Party or hereafter
Transferred to a Party in any manner whatsoever.
(b) For the purposes of this Article IV, the fees and expenses incurred
in determining the Fair Market Value of any Securities shall be divided
pro rata among the Shareholders who are party to the relevant
transaction, in proportion to the amount of Securities purchased or sold
by such Shareholder, as the case may be.
15
4.02 Transfers and Liens.
-------------------
(a) Except as provided in this Article IV, no Party may Transfer any or
all of its Securities to, or create or permit any Lien on any Securities
in favor of, any Person.
(b) Notwithstanding Section 4.04, a Shareholder may Transfer any or all
of its Securities to a Permitted Transferee at any time without
compliance with Sections 4.05, 4.06 or 4.07; provided, that such
--------
Permitted Transferee executes an Endorsement, in accordance with Section
4.09 hereof, at the time of such Transfer.
(c) Notwithstanding anything to the contrary contained herein, no Party
may Transfer (or permit the Transfer of) any Securities to, or create or
permit a Lien upon any Securities in favor of, any Person (including,
without limitation, any Permitted Transferee) who is a Direct Competitor.
(d) Notwithstanding Section 4.04, Eco Telecom (or any Controlled
Affiliate of Eco Telecom) may Transfer any or all of its Securities to
Telenor or a Controlled Affiliate of Telenor ASA in accordance with the
terms of the Option Agreement at any time without compliance with
Sections 4.05, 4.06 or 4.07; provided, that Telenor (or any such
--------
Controlled Affiliate of Telenor ASA) executes an Endorsement in
accordance with Section 4.09 hereof.
(e) Until the earlier to occur of the second anniversary of the First
Closing or an Eco Telecom Contribution Default, VIP shall not Transfer to
any Person other than a Permitted Transferee any Voting Securities which
it now owns or which it hereafter acquires.
(f) Notwithstanding anything to the contrary contained herein, Eco
Telecom shall not Transfer (including any Transfer pursuant to any co-
sale rights under this Article IV), or permit the Transfer of, any shares
of Preferred Stock to, or create or permit a Lien upon any shares of
Preferred Stock in favor of, any Person, except that any Transfer
required by Eco Telecom pursuant to the terms of the Preferred Stock
Purchase Agreement or the Primary Agreement shall be expressly permitted
hereunder and shall be an express obligation of Eco Telecom hereunder.
4.03 Pledge.
------
Any Shareholder (a "Pledging Shareholder") may pledge Securities to any Person
(a "Pledgee") to secure a bona fide obligation, provided that the following
--------
terms and conditions are satisfied:
(a) Within three (3) Business Days of the pledge of any Securities to a
Pledgee or the execution of any agreement with a Pledgee concerning such
a pledge (a "Third-Party Pledge Agreement"), the Pledging Shareholder
shall give (i) written notice of the pledge (the "Pledge Notice") to each
of the non-pledging Shareholders (each, a "Non-Pledging Shareholder" and
collectively, the "Non-Pledging Shareholders"), which Pledge Notice shall
set forth the identity of the Pledgee, the amount and term of financing
being secured by the pledge, and the number of Securities pledged thereby
(the "Pledged Securities"), (ii) copies of the relevant pledge agreement,
which pledge agreement shall
16
be delivered subject to the confidentiality provisions set forth in
Article VII hereof and (iii) a written acknowledgement from the Pledgee
(which acknowledgement may be included in the Third-Party Pledge
Agreement) that the Pledgee agrees to the terms and conditions of this
Section 4.03.
(b) The pledge shall be governed by a Third-Party Pledge Agreement,
which shall be binding on the Pledgee and which shall provide that:
(i) The Pledgee, prior to taking any actions to enforce its rights
in or to the Pledged Securities (including, but not limited
to, any foreclosure upon, sale of, or acceptance of title to,
the Pledged Securities) (a "Foreclosure Action"), shall give
at least forty-five (45) days prior written notice of such
intention (a "Foreclosure Notice") to each of the Non-Pledging
Shareholders;
(ii) Upon receipt of such Foreclosure Notice, each of the Non-
Pledging Shareholders shall have the right, at the option of
such Non-Pledging Shareholders to be exercised not later than
forty-five (45) days after receipt of such Foreclosure Notice,
to purchase from the Pledgee (pro rata according to the
respective percentage of Voting Securities owned by each Non-
Pledging Shareholder exercising its purchase rights hereunder
(each, a "Purchasing Shareholder" and collectively, the
"Purchasing Shareholders") relative to the total number of
Voting Securities owned by all other Purchasing Shareholders,
or in such other proportion as such Purchasing Shareholders
may agree among themselves) the underlying obligation (or
portion thereof) at a purchase price equal to the lesser of
(a) the Fair Market Value of the Pledged Securities being
purchased by such Purchasing Shareholder, as determined
without taking into account any decrease in value resulting
from the pledge or (b) the principal amount of the relevant
underlying obligation being purchased by such Purchasing
Shareholder, plus any interest, penalties and other similar
payments (if any) accrued and owing thereon up to, but
excluding, the purchase date thereof. For the avoidance of
doubt, if the Purchasing Shareholder(s) exercise their right
to purchase the underlying obligation hereunder, the
Purchasing Shareholder(s) shall be obligated to purchase, and
the Pledgee shall be obligated to sell, the underlying
obligation in whole and not in part; provided, that if there
--------
is more than one Purchasing Shareholder, the purchase of such
underlying obligation shall be apportioned among the
Purchasing Shareholders in accordance with the immediately
preceding sentence. The Purchasing Shareholder(s)' purchase of
the underlying obligation from the Pledgee shall be effective
upon delivery of a purchase notice by the Purchasing
Shareholder(s) to the Pledgee, and such purchase shall not
require the Pledgee's consent. The Transfer of the relevant
underlying obligation to each Purchasing Shareholder shall be
effective upon payment of the relevant purchase price to the
Pledgee by each such Purchasing Shareholder, which payment
shall be effected not later than forty-five (45) calendar days
after receipt of the Foreclosure Notice.
17
Concurrently with such purchase of the underlying obligation
(or portion thereof), the Third-Party Pledge Agreement shall
be automatically assigned to the Purchasing Shareholder(s).
Thereafter, the Pledging Shareholder shall Transfer the
relevant Pledged Securities to each such Purchasing
Shareholder, free and clear of all Liens, in exchange for
cancellation of the underlying obligation with respect to such
Pledged Securities, without any additional purchase price owed
or payable with respect thereto. For the avoidance of doubt,
the Pledged Securities shall be apportioned among each
Purchasing Shareholder based on the pro rata amount of the
underlying obligation purchased by each such Purchasing
Shareholder;
(iii) If a Pledging Shareholder has entered into any Pledge
Arrangement (as defined in Section 4.03(d)) then the
Purchasing Shareholders or, if there are no Purchasing
Shareholders, any other Non-Pledging Shareholder, shall have
the right to purchase from the Pledging Shareholder such
number of Securities which are the subject of any such Pledge
Arrangement, at a purchase price equal to the Fair Market
Value of such Securities. Any such sale shall be consummated
within 180 days after the date of receipt of the Foreclosure
Notice. For avoidance of doubt, the right set forth in this
Section 4.03(b)(iii) shall exist regardless of whether or not
the Pledgee decides to exercise its rights under such Pledge
Arrangement. If the Purchasing Shareholders or any Non-
Pledging Shareholders, as applicable, waive in writing (or
fail to exercise within such 180-day period) their rights to
purchase the Securities that are the subject of the Pledge
Arrangement, the Pledging Shareholder may Transfer such
Securities to the Pledgee free of any right of first refusal
of the Non-Pledging Shareholders pursuant to Section 4.05
hereof, provided that such Transfer occurs within ninety (90)
days of the expiration of such 180-day period;
(iv) If any Foreclosure Action would result in the Transfer of
Securities such that a Person, together with any of its
Affiliates (other than VIP and any of its Controlled
Affiliates), would acquire a Controlling Interest in the
Company, and the Non-Pledging Shareholders do not elect to
purchase in the aggregate all of the Pledged Securities
pursuant to Section 4.03(b)(ii), then the Non-Pledging
Shareholders shall each have the right, exercisable by written
notice to the Pledging Shareholder and the Pledgee (a "Pledge
Co-Sale Notice") within forty-five (45) days from delivery by
the Pledgee of the Foreclosure Notice, to elect to sell in the
proposed Transfer of Pledged Securities to such Person, all or
any portion of such Non-Pledging Shareholders' Securities free
and clear of any Liens other than obligations under this
Agreement. The Transfer of Securities by the Non-Pledging
Shareholders pursuant to a Pledge Co-Sale Notice shall be at a
price equal to the Fair Market Value thereof or, at the
election of such Non-Pledging Shareholders, such other price
as may be agreed between the Pledgee and the Non-Pledging
Shareholders electing to Transfer their
18
Securities hereunder (which shall not be less than the Fair
Market Value thereof). Failure of any Non-Pledging
Shareholders to provide a Pledge Co-Sale Notice within such
forty-five (45) day period shall be deemed an election by such
Non-Pledging Shareholder not to participate in the proposed
Transfer pursuant to this Section 4.03(b)(iv);
(v) Each Non-Pledging Shareholder shall be an express third-party
beneficiary of the Third-Party Pledge Agreement (and the
Pledge Arrangement, if any) with respect to each such Non-
Pledging Shareholder's rights set forth under this Agreement;
(vi) In the event that the Pledged Securities are Transferred, the
transferee which acquires the Securities agrees to be bound by
the terms and conditions of this Agreement and to execute an
Endorsement; and
(vii) In the event that the Option Agreement is in effect at the
time when a Pledging Shareholder enters into a pledge, such
pledge shall be subject to all rights of Telenor and its
Permitted Transferees set forth in the Option Agreement with
respect to the VIP-R Call Option (as defined therein) and the
Pledgee shall agree to deliver all Pledged Securities subject
to the VIP-R Call Option (and release all such Pledged
Securities from the pledge) in accordance with the terms of
the VIP-R Call Option upon exercise thereof in exchange for,
and upon payment by Telenor of, the VIP-R Call Option Exercise
Price (as defined in the Option Agreement).
(c) The Pledgee shall not be an Affiliate of such Pledging Shareholder and
shall be either:
(i) A licensed Russian bank with equity capital of at least
$200,000,000 which is not subject to ARCO administration and
in which ARCO does not possess any controlling or blocking
rights; or
(ii) A foreign (i.e., non-Russian) bank with an investment grade
rating from Xxxxx'x Corporation (i.e., Baa or higher) or
Standard & Poor's (i.e., BBB or higher), as such ratings are
determined at the time of the pledge; or
(iii) Any other lender or supplier of vendor financing for the
Company that has a long term debt rating of Baa or higher from
Xxxxx'x Corporation or a rating of BBB or higher from Standard
& Poor's, as such ratings are determined at the time of the
pledge.
(d) Any arrangement (a "Pledge Arrangement") which (i) provides the
Pledgee (or any of its Affiliates, designees, successors or assigns) with
the opportunity to obtain such number of Voting Securities which, together
with the Pledged Securities, equals or exceeds the Specified Percentage of
the Company or (ii) requires the Pledging Shareholder to sell to any Person
(whether in connection with an auction or otherwise), such number of Voting
Securities which, together with the Pledged Securities, equals or exceeds
the Specified Percentage of the Company, shall be disclosed to the Non-
Pledging
19
Shareholders in the Pledge Notice; provided, however, that in no event may
-------- -------
a Pledging Shareholder enter into any such Pledge Arrangement unless such
Pledge Arrangement is entered into in connection with a pledge by such
Pledging Shareholder of Pledged Securities which represents at least 24% of
the Voting Securities of the Company and which otherwise complies with this
Section 4.03.
(e) Such Pledged Securities shall be pledged to the Pledgee under one
pledge only, and the underlying obligation secured by such pledge shall not
be secured by any collateral other than the Pledged Securities.
(f) No Shareholder (or group of Shareholders) may pledge Securities to any
one Pledgee which, together with its Affiliates, owns, controls and/or has
pledged to it (or them) Securities which represent 25% or more of the
Voting Securities.
(g) Any breach by the Pledgee of any provision set forth in this Section
4.03 to be observed by the Pledgee shall be deemed a breach of this
Agreement by the Pledging Shareholder.
4.04 Transfers to Persons Other than Permitted Transferees.
-----------------------------------------------------
Any Shareholder (a "Selling Shareholder") may sell or otherwise effect the
physical disposition of (but in no event may otherwise Transfer) any or all of
such Selling Shareholder's Securities (the "Offered Securities") to any Person
from whom the Selling Shareholder receives a bona fide offer (whether or not
such offer is solicited by the Selling Shareholder) that such Selling
Shareholder desires to accept (an "Offer"); provided, that such Selling
--------
Shareholder complies with Sections 4.05, 4.06 and 4.07 prior to effecting any
such sale or disposition; and provided, further, that Transfers in connection
-------- -------
with Foreclosure Actions shall be governed by Section 4.03 rather than Sections
4.05, 4.06 and 4.07.
4.05 Right of First Refusal.
----------------------
(a) A Selling Shareholder, before accepting any Offer, shall first give
sixty (60) days prior written notice of such Offer (the "Offer Notice") to
the other Shareholders. The Offer Notice shall set forth (i) the identity
of the third-party offeror (including its Controlling Persons) (the "Third
Party Offeror"), (ii) the number and type of Offered Securities subject to
the Offer, (iii) the purchase price per share in cash of the Offer (or, if
the Offer consists in whole or in part of non-cash consideration, a
description of such non-cash consideration, the Selling Shareholder's
proposed good faith determination of the fair market value per share
thereof and any valuation by the Third Party Offeror of such non-cash
consideration) and (iv) if applicable, notice of the exercise of its
Required Sale Right pursuant to Section 4.06 hereof.
(b) Upon receipt of the Offer Notice, the other Shareholders shall each
have the first right and option to elect to purchase, for cash, in the
aggregate, all (but not less than all) of the Offered Securities (pro rata
according to the respective percentage of Voting Securities owned by each
of the other Shareholders prior to the giving of the Offer Notice relative
to the total number of Voting Securities owned by such other Shareholders
prior to the giving of the Offer Notice, or in such other proportion as
such other Shareholders
20
electing to purchase such Offered Securities may agree among themselves) at
the purchase price and on the terms and conditions set forth in the Offer
Notice, such election to be made by the other Shareholders by written
notice delivered to the Selling Shareholder (a "Shareholder Response
Notice") within forty-five (45) days from the date of receipt of the Offer
Notice. Failure of any other Shareholder to provide a Shareholder Response
Notice within such forty-five (45) day period shall be deemed an election
by such Shareholder not to purchase any of the Offered Securities. If the
purchase price set forth in the Offer Notice consists in whole or in part
of non-cash consideration, the Shareholder(s) electing to purchase the
Offered Securities (the "Purchasing Shareholder(s)") shall pay such portion
of the consideration in cash equal to the Fair Market Value thereof.
(c) In the event of any election by the other Shareholders to purchase in
the aggregate all of the Offered Securities, a single closing for the
purchase of all of the Offered Securities shall be held at the time and
place designated by the Purchasing Shareholder(s), but in any event no
later than one hundred eighty (180) days following receipt of the Offer.
At such closing, the Selling Shareholder shall deliver to the Purchasing
Shareholder(s), against payment of the purchase price, the Offered
Securities, free and clear of all Liens, and documents required to cause
the Registrar to enter the sale in the Company's share register.
(d) In the event that the other Shareholders do not elect to purchase in
the aggregate all of the Offered Securities in accordance with Section
4.05(b), the Selling Shareholder (i) shall not be required to sell any of
the Offered Securities to any of the other Shareholders and (ii) subject to
Section 4.07, may, within one hundred eighty (180) days following receipt
of the Offer, Transfer to the Third Party Offeror identified in the Offer
Notice all (but not less than all) of the Offered Securities for a purchase
price payable in cash (or, if the Offer Notice states that the purchase
price consists in whole or in part of non-cash consideration, such non-cash
consideration stated therein) equal to or greater than the purchase price
specified in the Offer Notice and otherwise on the same terms and
conditions specified in the Offer Notice. Such Transfer shall be made in
accordance with and subject to Section 4.09. If the Selling Shareholder
fails to effect the Transfer of the Offered Securities on such terms and
within such time period, then such proposed Transfer or any other proposed
Transfer shall again become subject to the provisions of this Section 4.05.
(e) Other than as provided in this Article IV, without the prior written
consent of the Selling Shareholder, the other Shareholders shall not
negotiate with, or sell any of their Securities to, the Third Party Offeror
identified in the Offer Notice until the earliest of (i) one hundred eighty
(180) days following receipt of the Offer by the Selling Shareholder, (ii)
the Transfer of the Offered Securities by the Selling Shareholder or (iii)
the termination of the Offer by the Selling Shareholder.
(f) In the event of an Eco Telecom Contribution Default, neither Eco
Telecom nor its Permitted Transferees which are Affiliates (other than VIP
or any of its Controlled Affiliates) shall have any rights under this
Section 4.05, but shall remain subject to all obligations hereunder;
provided, however, that if such Eco Telecom Contribution Default
-------- -------
21
is caused by any Specified Legislation which prevents the Second Closing,
any rights granted to Eco Telecom pursuant to this Section 4.05 shall not
be suspended.
4.06 Required Sale Rights.
--------------------
If the Offer described in Section 4.04 is delivered after the fifth (5th)
anniversary of the execution of this Agreement and is for a number of Offered
Securities such that, following such Transfer, the Third Party Offeror
identified in the Offer Notice, together with any Affiliate thereof (other than
VIP or any of its Controlled Affiliates), would hold a Controlling Interest in
the Company, and the other Shareholders do not elect to purchase in the
aggregate all of the Offered Securities pursuant to Section 4.05, then such
Selling Shareholder shall have the right (the "Required Sale Right") to require
all, but not less than all, other Shareholders to sell to such Third Party
Offeror a number of Securities (other than Preferred Stock) owned by each other
Shareholder in an amount equal to (i) the number of Securities (other than
Preferred Stock) owned by such other Shareholder multiplied by (ii) a fraction,
the numerator of which is the number of Securities to be Transferred by the
Selling Shareholder, and the denominator of which is the total number of
Securities owned by the Selling Shareholder immediately prior to such proposed
Transfer, which in any event shall equal an amount not greater than the number
of shares to be sold by the Selling Shareholder; provided, however, that neither
-------- -------
Eco Telecom nor its Permitted Transferees which are Affiliates (other than VIP
or any of its Controlled Affiliates) shall have any rights under this Section
4.06 (but shall remain subject to all obligations hereunder) if there has been
an Eco Telecom Contribution Default; provided, that if such Eco Telecom
--------
Contribution Default is caused by any Specified Legislation which prevents the
Second Closing, any rights granted to Eco Telecom pursuant to this Section 4.06
shall not be suspended. The Selling Shareholder shall exercise its Required Sale
Right by reference thereto in the Offer Notice, which shall state the number of
Securities that the Selling Shareholder is requiring each of the other
Shareholders to sell. Failure by the Selling Shareholder to set forth its
Required Sale Right in the Offer Notice shall be deemed a waiver by the Selling
Shareholder of its Required Sale Right with respect to such Offer. The sale of
Securities by the other Shareholders pursuant to this Section 4.06 shall be on
the same terms and conditions as are set forth in the Offer Notice, except that
(A) the purchase price shall be paid in cash and (B) the purchase price per
share shall be the greater of (x) the purchase price per share stated in the
Offer Notice and (y) the Fair Market Value per share of the Securities as of the
date of delivery of the Offer Notice.
4.07 Co-Sale Rights.
--------------
(a) If the Offer described in Section 4.04 is for a number of Offered
Securities such that, as a result of such Transfer, the Third Party
Offeror, together with any of its Affiliates (other than VIP or any of its
Controlled Affiliates), would beneficially hold a Controlling Interest in
the Company, and the other Shareholders do not elect to purchase in the
aggregate all of the Offered Securities pursuant to Section 4.05, and
either (i) the Selling Shareholder does not exercise its Required Sale
Right in respect of such Transfer or (ii) the number of Securities of each
other Shareholder, respectively, with regard to which such Selling
Shareholder exercises its Required Sale Right ("Required Sale Securities")
is less than all of the Securities owned, respectively, by each other
Shareholder, then each other Shareholder shall have the right, exercisable
by written notice to the Selling Shareholder (a "Co-Sale Notice") within
sixty (60) days from
22
delivery by the Selling Shareholder of the Offer Notice, to elect to sell
in the proposed Transfer of Offered Securities to such Third Party
Offeror, all or any portion of such other Shareholder's Securities free
and clear of any Liens other than obligations under this Agreement (other
than any Required Sale Securities); provided, however, that neither Eco
-------- -------
Telecom nor its Permitted Transferees which are Affiliates (other than VIP
or any of its Controlled Affiliates) shall have any rights under this
Section 4.07 (but shall remain subject to all obligations hereunder) if
there has been an Eco Telecom Contribution Default; provided, that if such
--------
Eco Telecom Contribution Default is caused by any Specified Legislation
which prevents the Second Closing, any rights granted to Eco Telecom
pursuant to this Section 4.06 shall not be suspended. The Transfer of
Securities by the other Shareholders pursuant to a Co-Sale Notice shall be
at the purchase price and on the same terms and conditions set forth in
the Offer Notice; provided, however, that, notwithstanding the foregoing,
-------- -------
if the Third Party Offeror identified in the Offer Notice, together with
any of its Affiliates (other than VIP or any of its Controlled
Affiliates), beneficially holds a Controlling Interest in the Company as a
result of more than one Transfer of Securities by the same Selling
Shareholder and/or its Affiliates, then the purchase price of the
Transferred Securities pursuant to such Co-Sale Notice shall be paid to
each other respective Shareholder in cash in an amount equal to the
greatest of (x) the purchase price per share stated in any applicable
Offer Notice, (y) the highest purchase price per share paid by the Third
Party Offeror in any such Transfer and (z) the Fair Market Value per share
of the Securities as of the date of delivery of any applicable Offer
Notice. Failure of any of the other Shareholders to provide a Co-Sale
Notice within such sixty (60) day period shall be deemed an election by
such Shareholder not to participate in the proposed Transfer pursuant to
this Section 4.07.
(b) In the event any of the other Shareholders gives a Co-Sale Notice,
the Selling Shareholder shall have the option to (i) cause the Third Party
Offeror to purchase both the Offered Securities (including any Required
Sale Securities) and the additional Securities to be Transferred by such
other Shareholders pursuant to the Co-Sale Notice or (ii) cancel such
Transfer to the Third Party Offeror.
4.08 Closing.
-------
The closing of any Transfer of Securities pursuant to Section 4.06 or 4.07 shall
be held at the time and place designated by the purchaser(s). At the closing of
such Transfer, (i) each Shareholder participating in the Transfer shall deliver
to the purchaser(s) its Securities to be Transferred to the purchaser(s) free
and clear of all Liens and documents required to cause the Registrar to amend
the Company's share register to reflect the Transfer and (ii) such purchaser(s)
shall pay the purchase price for such Securities and deliver an Endorsement to
the Company and the Shareholders.
4.09 Effectiveness of Transfer.
-------------------------
(a) Securities Transferred in accordance with the terms and conditions of
this Agreement shall remain subject to the provisions of this Agreement;
provided, that no proposed Transfer of Securities shall be effective, nor
--------
shall the Company authorize any proposed Transfer to be recorded by the
Registrar in the Company's share register, unless and until the proposed
transferee, including, but not limited to, any Permitted Transferee,
agrees in
23
writing to assume and be bound by the provisions of this Agreement by
executing and delivering to the Company and each other Shareholder an
Endorsement. Following delivery of such Endorsement, the transferee shall
be deemed to be a Shareholder for purposes of this Agreement, and shall be
entitled to all rights and subject to all obligations of Shareholders
under this Agreement. Notwithstanding the foregoing provisions of this
Section 4.09(a), at any time following an IPO the provisions of this
Article IV shall not apply to any Transfer of Securities by a Shareholder
conducted through the New York Stock Exchange or any other national or
international exchange or securities trading facility on which the
Company's Securities are then listed and traded and, in each such case the
Securities so acquired shall not be subject to this Agreement, and the
transferee shall not be entitled to any rights or subject to any
obligations of the transferor Shareholder under this Agreement.
(b) A Shareholder which effects a Transfer of all of such Shareholder's
Securities in accordance with the terms of this Agreement shall, after
giving effect to such Transfer, cease to be a Party to, or be bound by the
terms of, this Agreement from and after the date of such Transfer.
Notwithstanding the foregoing, no Transfer shall be deemed to relieve the
transferor Shareholder of any obligations of such Shareholder pursuant to
this Agreement accruing, or resulting from actions or omissions of such
Shareholder occurring prior to the date of such Transfer.
4.10 Improper Transfers Ineffective.
------------------------------
Any purported Transfer of, or creation or permission of a Lien upon, any
Securities that is in violation of the provisions of this Agreement shall be
void and of no force or effect whatsoever, and, to the extent within the
Company's control, the Company shall not permit the Registrar to record any such
event on the Company's share register or treat any such transferee as the owner
or pledgee of such Securities for any purpose. Without prejudice to any other
rights or remedies of any Party or the Company, if any Party effects a Transfer
of any Securities to any Person in violation of this Article IV, then any
transferee of such Securities shall receive and hold any and all such Securities
so Transferred without any of the rights, but subject to all of the obligations,
set forth in this Agreement.
4.11 Information Letter.
------------------
The Company will use its reasonable efforts, to the extent permitted by the laws
of the Russian Federation and regulations applicable to the Registrar, to cause
the Registrar to deliver with each (i) share extract issued in due course in
respect of Common Stock and Preferred Stock of the Shareholders, or (ii) copy of
the register of the Company as permitted by the laws of the Russian Federation,
an original information letter on the Registrar's letterhead executed on behalf
of the Registrar which shall contain (in addition to the addressee's details) a
Russian translation of the following text: "THE STOCK OF THE COMPANY IS SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER (AND PLEDGE) AS SET FORTH IN THE
SHAREHOLDERS AGREEMENT DATED AS OF MAY 30, 2001, COPIES OF WHICH MAY BE
FURNISHED BY THE COMPANY UPON WRITTEN REQUEST AND WITHOUT CHARGE." (the
"Information Letter"). The Company shall receive a copy of each such
Information Letter and shall maintain the list of any written requests to
provide copies of the
24
Shareholders Agreement. Each Shareholder shall be entitled to receive from the
Company copies of any such written requests or Information Letters.
4.12 Other Arrangements.
------------------
(a) Except for the Principal Agreements, no Party shall grant any proxy
or enter into or agree to be bound by any understanding or any voting
trust, voting proxy or other voting agreement with respect to any
Securities, nor shall any Party enter into any shareholders agreement or
arrangement of any kind (whether written or oral) with any Person with
respect to any Securities, including, without limitation, any agreement,
understanding or arrangement with respect to the acquisition, ownership,
transfer or other disposition or voting of Securities, nor shall any Party
act, for any reason, as a member of a group or in concert with any other
Person in connection with the acquisition, transfer or other disposition
or voting of Securities in any manner which is inconsistent with any
obligation of such Party under this Agreement, provided that each Party
shall be permitted to Transfer its Securities in accordance with the terms
of this Agreement.
(b) Without prejudice to any other rights or remedies of any Party to
this Agreement, if any representation and warranty made by any Party in
Article III hereof is shown to have been false or misleading when made or
confirmed, or if any Party violates the provisions of this Article IV, the
rights of such Party under this Agreement and the Registration Rights
Agreement shall terminate forthwith, but such Party shall continue to be
bound by all of its obligations hereunder and thereunder.
ARTICLE V
FUNDING COVENANTS; DEBT ACQUISITION; NEW CAPITAL STOCK
5.01 Loans and Financing.
-------------------
Each of the Parties agrees to use its reasonable best efforts and utilize its
existing banking and vendor relationships to ensure that commercial loans and
vendor financing on commercially favorable terms are made available to the
Company. No Party shall be obligated to guarantee or provide any security in
furtherance of such loans or financing.
5.02 Capital Increase.
----------------
(a) From the date hereof through the second (2nd) anniversary of the First
Closing, unless otherwise agreed by all of the Shareholders, and other
than in connection with any issuance of Common Stock and/or Preferred
Stock pursuant to the Primary Agreement or in connection with the
financing of an acquisition of any Opportunity pursuant to Section
6.02(c)(iii) hereof, no Party shall take any action, including, but not
limited to, voting of any Securities, in favor of the sale or issuance by
the Company of any Securities ("New Securities"); provided, that New
--------
Securities shall not include (i) Securities purchased or to be purchased
by a Party under the Primary Agreement; (ii) any borrowing or debt
securities that are not, and will not become, convertible into or
exchangeable for Securities; and (iii) Securities issued in connection
with any share split, share consolidation, share dividend or
recapitalization of the Company; provided, further, that the restriction
--------- -------
contained in this Section 5.02 shall no longer apply if there has been an
Eco Telecom Contribution Default.
25
(b) The Parties shall exercise (a) their rights and powers as holders of
the Company's Securities, and (b) their rights and powers granted
hereunder to, and the Company shall, ensure that the Company fulfills all
of its obligations under the Primary Agreement and the Preferred Stock
Agreement to (i) issue a sufficient number of Securities to satisfy the
issuance of Securities to Eco Telecom in connection with the Preferred
Stock Closing, the Second Closing and the Third Closing and any Securities
required to be issued to Telenor and VIP upon exercise of their options in
accordance with, and as defined in, the Primary Agreement, and (ii) to
repurchase shares of Preferred Stock and subsequently dispose of such
shares of Preferred Stock as set forth in the Primary Agreement and the
Preferred Stock Agreement.
5.03 Debt Acquisition.
----------------
(a) A Party and its other Standstill Parties may enter into any Debt
Transactions if and only if such Party and its Standstill Parties comply
with the provisions of this Section 5.03.
(b) In the event a Party or any of its other Standstill Parties enters
into a Debt Transaction, such Party shall, and shall procure that its
other Standstill Parties shall:
(i) Provide written notice thereof to the Protected Party (with a
copy to the Company) within 10 days of entering into a Debt
Transaction, which notice shall constitute an offer to such
Protected Party (an "Offer Notice") (which offer shall be
legally binding on the Standstill Party upon acceptance by such
Protected Party or the Company or the Company's designee on
behalf of such Protected Party; provided such designee is either
a recognized financial institution or telecommunications
equipment vendor of the Company, VIP or the Protected Party) to
sell to such Protected Party, the Company or the Company's
designee, such Debt Obligation (and, if applicable, the
underlying obligation to which such Debt Obligation relates,
such underlying obligation or Debt Obligation, as applicable,
being the "Relevant Obligation") at a purchase price equal to
the lesser of the Fair Market Value thereof, or one hundred
percent (100%) of the aggregate unpaid principal amount of the
Relevant Obligation plus any accrued interest and other amounts,
if any, owing under the Relevant Obligation up to (but
excluding) the purchase date thereof.
(ii) Within ten (10) Business Days from the date of notice of an
intention to accept such offer by the Protected Party, the
Company or the Company's designee, the Standstill Party shall
provide a copy of the document(s) evidencing the outstanding
amount of the Relevant Obligation and a calculation of the
purchase price thereof showing the amount of unpaid principal,
any accrued interest thereon and any other amounts owing
thereunder, as well as the basis for determining the Fair Market
Value thereof ("Price Notice"). Within five (5) Business Days
from the date of receipt of the Price Notice, the Protected
Party, the Company or the Company's designee shall notify the
Standstill Party whether it accepts the
26
offer at such time and, if so, shall purchase such Relevant
Obligation at such time. If the Protected Party, the Company or
the Company's designee, as applicable, do not accept such offer
at such time, the provisions of this Section 5.03(b) shall
remain in effect with respect to such Relevant Obligation.
(iii) The Standstill Party shall not be restricted from selling or
otherwise disposing of the Relevant Obligation at any time prior
to the acceptance of the Offer Notice in accordance with the
terms hereof; provided, however, that the Standstill Party shall
-------- -------
provide written notice to the Protected Party (with a copy to
the Company) within ten (10) days of such sale or disposition.
(c) In the event a Party or any of its other Standstill Parties enters
into a Debt Transaction, such Party shall, and shall procure that its other
Standstill Parties shall, prior to initiating or participating in any
enforcement action or bankruptcy proceeding against any Protected Party
with respect to any Debt Obligation, provide at least 90 days prior written
notice thereof to the Protected Party (with a copy to the Company) and
adhere to the procedures set forth in Section 5.03(b)(i) and 5.03(b)(ii).
(d) In the event a Party or any of its other Standstill Parties initiates
or participates in the initiation of any enforcement action or bankruptcy
proceeding against any Protected Party with respect to any Debt Obligation
without adhering to the provisions of Section 5.03(c), such Party shall,
and shall procure that its other Standstill Parties shall, immediately file
all papers necessary to terminate or cause the termination of such action
or proceeding within five (5) Business Days of receiving notice from the
Protected Party, the Company or any Party that the entity against whom such
bankruptcy proceeding was initiated is a Protected Party, and shall
thereafter use its best efforts to ensure that such enforcement action or
bankruptcy proceeding is terminated, and immediately thereafter or
simultaneously with such actions, the relevant Standstill Party shall make
an offer to sell to such Protected Party (which offer shall be legally
binding on the Standstill Party upon acceptance by such Protected Party or
the Company or the Company's designee, as the case may be, on behalf of
such Protected Party) and shall sell such Relevant Obligation to the
relevant Protected Party or the Company or the Company's designee, as the
case may be, pursuant to Section 5.03(b), if such offer is accepted.
(e) Any breach of Section 5.03(b) shall be deemed cured and no violation
of Section 5.03(b) shall be deemed to have occurred or to exist if: (x)
the aggregate principal amount of the Relevant Obligation is less than
US$10,000,000 (calculated without any accrued interest, penalties or other
similar amounts thereon), and (y) the terms of Section 5.03(b) are complied
with immediately upon the Party becoming aware of it or any of its
Standstill Parties have entered into the Debt Transaction.
(f) Any breach of Section 5.03(c) shall be deemed cured and no violation
of Section 5.03(c) shall be deemed to have occurred or to exist if: (x) the
aggregate principal amount of the Relevant Obligation is less than
US$10,000,000 (calculated without any accrued interest, penalties or other
similar amounts thereon), (y) the Protected Party is
27
neither VIP, nor any Consolidated Subsidiary of VIP, nor the Company, nor
any Consolidated Subsidiary of the Company, and (z) the Standstill Party
complies with Section 5.03(d) and such enforcement action or bankruptcy
proceeding is thereafter terminated.
(g) Each of the Company and VIP will, or will cause each Protected Party
to, promptly inform each other Party if it becomes aware of any violation
of the terms of this Section 5.03.
ARTICLE VI
CERTAIN CORPORATE MATTERS
6.01 Business Combination.
--------------------
(a) From and after the earlier of (i) the Third Closing Date or (ii) with
respect to VIP only, an Eco Telecom Contribution Default, each of Eco
Telecom and VIP shall have the right, for so long as such party is a
Shareholder which owns the Specified Percentage (and, with respect to Eco
Telecom only, so long as there has not occurred an Eco Telecom Contribution
Default), to initiate a review of a Business Combination, in accordance
with the procedures set forth in Schedule 3 hereto (such initiating
Shareholder, the "Initiating Shareholder" and such review, a "Business
Combination Review").
(b) In the event of a Business Combination Review, the Appraisers selected
in accordance with the procedures set forth in Schedule 3 hereto shall
determine the Combination Ratio. If such Appraisers determine that the
Combination Ratio is at least 90% and if two Appraisers' respective
Combination Ratios do not differ by more than 20% from each other, then
each of Eco Telecom, Telenor, VIP and the Company agree to take the
following actions in furtherance of a Business Combination:
(i) Subject to each party's relevant fiduciary duties and obtaining
shareholder, regulatory and other customary and necessary approvals,
each of VIP and the Company agrees to negotiate in good faith and use
all commercially reasonable efforts to take all actions necessary to
effect the Business Combination, including but not limited to entering
into such agreements (subject to usual and customary terms and
conditions) as are necessary to effect the Business Combination;
(ii) Subject to the foregoing, VIP agrees to submit to its
shareholders for approval (a) the Business Combination and (b) the
issuance of capital stock by VIP, or a wholly owned subsidiary of VIP,
or such other entity as the Parties may determine in accordance with
the provisions hereof, in connection therewith; provided, that nothing
--------
hereunder shall be deemed to require the board of directors of VIP to
recommend the Business Combination or such issuance in any such
submission to its shareholders; and
(iii) Each of Eco Telecom, VIP and Telenor and their respective
Permitted Transferees, if any, agrees to take all actions within the
power of such
28
Shareholder (solely in their respective capacity as a shareholder of
the Company) to approve and effect the Business Combination, including
but not limited to voting any securities of the Company held by such
Shareholder, or any of its Controlled Affiliates, in favor of the
Business Combination.
(c) In the event of a Business Combination effected pursuant to Section
6.01(b), VIP will acquire all of the issued and outstanding shares of
Common Stock of the Company in exchange for newly issued shares of capital
stock of VIP, or a wholly owned subsidiary of VIP, or such other entity as
the Parties may determine in accordance with the provisions hereof, at an
exchange ratio equal to the final Combination Ratio determined pursuant to
Schedule 3 hereto.
(d) In the event of a Business Combination Review in which any Appraiser
determines, in accordance with the procedures set forth in Schedule 3
hereto, that the Combination Ratio is less than 90%, or if no two of three
Appraisers have determined Combination Ratios that are within 20% of each
other, then such proposed Business Combination shall not be effected
pursuant to the requirements set forth in this Section 6.01.
(e) In the event that the Initiating Shareholder commences a Business
Combination Review, all fees and expenses of the Initiating Shareholder,
the non-Initiating Shareholder, the Appraisers and the Company incurred in
connection with the Business Combination Review including, in each case,
any legal, banking, accounting, and regulatory fees and expenses
(collectively, the "Business Combination Fees") shall be paid in accordance
with the provisions of Schedule 3 hereto; provided, however, that each
-------- -------
party shall be responsible for its own fees and expenses in connection with
carrying out the provisions set forth in Section 6.01(b)(i) hereof.
(f) The Parties acknowledge and agree it is their intent that, if Eco
Telecom and/or Telenor, individually, own at the Specified Percentage of
VIP immediately prior to the consummation of a Business Combination, Eco
Telecom and/or Telenor, as the case may be, should have the right to
individually own at least the Specified Percentage of VIP following such
Business Combination. Accordingly, if Eco Telecom and/or Telenor,
individually, own at least the Specified Percentage of VIP immediately
prior to a Business Combination, the Parties shall use all commercially
reasonable efforts to provide Eco Telecom and/or Telenor, as the case may
be, with the opportunity to own individually at least the Specified
Percentage of VIP following such Business Combination. If the Parties are
unable to provide Eco Telecom and/or Telenor, as the case may be, with
such opportunity, Eco Telecom and/or Telenor, as the case may be, shall not
be required to take any action in accordance with this Section 6.01 or
Schedule 3 hereto, including, without limitation, the actions specified in
Section 6.01(b)(3), in connection with any such Business Combination.
6.02 Non-Compete.
(a) Subject to Sections 6.02(b) and (c) and the provisos set forth at the
end of this Section 6.02(a) and except for each Party's and its Affiliates'
Existing Investments, each Party or Shareholder, as the case may be, agrees
that such Party or Shareholder, as the
29
case may be, will not, without the prior written consent of the Company,
(i) engage in the Business in any region in Russia, (ii) own or control,
directly or indirectly, more than five percent (5%) of the voting capital
stock in any Person (other than the Company, VIP, or any of their
respective Controlled Affiliates) engaged in the Business in any region in
Russia or (iii) permit any of its Controlled Affiliates (other than the
Company, VIP, or any of their respective Controlled Affiliates) to engage
in the Business in any region in Russia or own or control, directly or
indirectly, more than five percent (5%) of the voting capital stock in any
Person (other than the Company, VIP, or any of their respective Controlled
Affiliates) engaged in the Business in any region in Russia; provided,
--------
however, that the restrictions contained in this Section 6.02(a) shall
-------
apply only to Parties which, together with their Affiliates, own or
control, directly or indirectly, the Specified Percentage of the Company or
the Specified Percentage of VIP; and, provided, further, that from the date
-------- -------
hereof until the earlier of the Third Closing Date or the termination of
this Agreement, Eco Telecom shall be deemed, for the purposes of this
Section 6.02, to own and control the Specified Percentage of the Company
and the Specified Percentage of VIP. Notwithstanding the foregoing, (i)
nothing herein shall prohibit VIP from engaging in the Business in the
Moscow License Area and (ii) nothing herein shall permit the Company to
engage in the Business in the Moscow License Area without the prior written
consent of VIP.
(b) The Parties acknowledge that this Section 6.02 shall not in any way
limit any Party's or any of its Affiliates' right to:
(i) maintain, increase the amount of, or otherwise develop its
Investments in the Company or any of the Company's Controlled
Affiliates, or in VIP or any of VIP's Controlled Affiliates;
(ii) maintain, increase the amount of, or otherwise develop any of
the Investments made or scheduled to be made by such Party or
Affiliate of such Party on or prior to the date hereof in Persons
engaged in the Business in Russia on the date hereof, in each case, as
listed in Schedule 6.02(b) ("Existing Investments"), so long as, as a
consequence of any such maintenance, increase or development of an
Existing Investment, such Party or Affiliate does not own or control,
directly or indirectly, a Controlling Interest in any Person (other
than the Company, VIP, any of their respective Controlled Affiliates
or any Existing Investments) which is engaged in the Business in
Russia;
(iii) acquire through a merger, or exchange of shares or assets of an
Existing Investment (which may include cash and/or other property), or
a consolidation or other similar business combination involving an
Existing Investment, or maintain as a result of the foregoing,
directly or indirectly, an ownership interest in any Person engaged in
the Business in Russia, so long as, as a consequence of any such
transaction, such Party or Affiliate does not own or control, directly
or indirectly, a Controlling Interest in any Person (other than the
Company, VIP or any of their respective Controlled Affiliates) engaged
in the Business in Russia; provided, however, that such Party or
-------- -------
Affiliate shall be permitted to maintain its ownership interest in
such Existing Investment;
30
(iv) without limiting in any way any transactions permitted by
clauses (i), (ii), (iii) or (v) of this Section 6.02(b), acquire or
maintain, directly or indirectly, any ownership interest in any Person
which, on a consolidated basis, derives less than 25% of its revenues
(calculated on a consolidated basis for such Person under GAAP) from
the Business in Russia; or
(v) with respect to any Existing Investment, sell to, merge with or
into, consolidate with, or otherwise effect a change of control with
respect to, any Person which is engaged in the Business in Russia, so
long as, as a consequence of such sale, merger, consolidation or
change of control, such Party or Affiliate does not own or control,
directly or indirectly, a Controlling Interest in any Person (other
than the Company, VIP or any of their respective Controlled
Affiliates) which is engaged in the Business in Russia; provided,
--------
however, that such Party or Affiliate shall be permitted to maintain
-------
its ownership interest in such Existing Investment.
(c) The Parties acknowledge that this Section 6.02 shall not, in any way
limit the right of Telenor or Eco Telecom, or any of their respective
Permitted Transferees, to identify and pursue on a preliminary basis an
opportunity (the "Opportunity") to obtain a telecommunications license to
engage in the Business or acquire all or a portion of the shares of a
Person holding directly or indirectly a telecommunications license to
engage in the Business, or participate in a tender for such
telecommunications license to engage in the Business, in any region in the
Russian Federation, excluding the Moscow License Area and excluding those
opportunities set forth in Schedule 6.02(c); provided, that neither Telenor
--------
nor Eco Telecom (nor any of their respective Permitted Transferees) may
pursue any such Opportunity more than twice prior to the second anniversary
of the First Closing; and provided, further, that the following conditions
-------- -------
are met:
(i) Upon identifying any such Opportunity, the relevant Party shall
promptly notify the Company thereof in writing, providing all relevant
details to the Company (with a copy to VIP);
(ii) The Company shall have a right of first refusal to pursue any
such Opportunity, exercisable at no cost to the Company. The Board of
the Company shall determine whether to exercise such right and pursue
such Opportunity in accordance with the Management Regulations. If
the Board of the Company determines that the Company should pursue
such Opportunity, the Company shall, within fifteen (15) days of
receipt of such notice from such Party, notify such Party that the
Company has elected to exercise its right of first refusal in respect
of such Opportunity. Thereafter, the Company may pursue such
Opportunity as it shall, in its sole discretion, see fit, and such
Party shall desist from pursuing such Opportunity;
(iii) If the Board of the Company determines that the Company should
not pursue such Opportunity, the Company shall, within fifteen (15)
days of receipt of
31
such notice from such Party, notify such Party that the Company has
elected not to exercise its right of first refusal in respect of such
Opportunity. If such Party decides to pursue such Opportunity, it
shall do so through a Russian special purpose vehicle established
solely for the purpose of owning and developing such Opportunity. Such
special purpose vehicle shall have financial statements audited in
accordance with GAAP commencing from the date of its establishment
prepared by an internationally recognized accounting firm. In such
event:
(A) With respect to any Opportunity for which notice was given
pursuant to Section 6.02(c)(i) prior to the second anniversary
of the First Closing, and with respect to any Opportunity in
any subject (subyekt) of the Russian Federation in which the
Company then holds a license to engage in the Business for
which notice was given pursuant to Section 6.02(c)(i) on or
after the second anniversary of the First Closing, the Company
shall have a call option in respect of all of such Party's
right, title and interest in and to the Opportunity,
exercisable within three (3) years from the date of such
Party's notice to the Company pursuant to Section 6.02(c)(i) at
an exercise price equal to the greater of the Fair Market Value
of such Opportunity and the cost of acquiring and developing
such Opportunity through the date of exercise of such call
option as evidenced by documents provided by such Party to the
Company; and
(B) With respect to any Opportunity for which notice was given
pursuant to Section 6.02(c)(i) on or after the second
anniversary of the First Closing in any subject (subyekt) of
the Russian Federation in which the Company does not then hold
a license to engage in the Business, the Company shall have a
call option in respect of all of such Party's right, title and
interest in and to the Opportunity, exercisable within two (2)
years from the date of such Party's notice to the Company
pursuant to Section 6.02(c)(i), at an exercise price equal to
the greater of the Fair Market Value of such Opportunity and
the cost of acquiring and developing such Opportunity through
the date of exercise of such call option, as evidenced by
documents provided by such Party to the Company;
provided, however, that if such Party decides to sell or otherwise
-------- -------
dispose of such Opportunity prior to the expiration of the relevant
call option period, such Party shall provide thirty (30) days' prior
written notice to the Company and the Company shall decide, prior to
the expiration of such thirty (30) day period, whether to initiate the
due diligence process set forth in Section 6.02(c)(iv) and thereafter,
to exercise its call option in accordance with and subject to the
terms described in this Section 6.02;
(iv) With respect to each call option described in Section
6.02(c)(iii), the Board of the Company shall determine whether to
exercise such call option in
32
accordance with the Management Regulations. If the Board of the
Company determines that the Company should exercise such call option,
the Company shall, at least ninety (90) days prior to the end of such
two (2) year period or three (3) year period, as the case may be,
notify such Party that, subject to due diligence, obtaining the
necessary approvals from all Governmental and Regulatory Authorities
and obtaining the representations and warranties, and guarantee set
forth below, the Company wishes to exercise such call option. The
Company shall have sixty (60) days to conduct a due diligence
investigation in respect of such Opportunity, commencing on the date
on which the Board of the Company notifies such Party of the Company's
wish to exercise such call option. Such Party shall cooperate with the
Company in connection with such due diligence investigation and, upon
request of the Company, its counsel, auditors or financial advisors,
provide the Company with all documents and other information
concerning such Opportunity. In addition, such Party agrees that it
will not vote any of its Securities (and, in the case of Eco Telecom,
exercise any other rights provided hereunder) against the sale or
issuance by the Company or VIP of any shares of capital stock
(provided such Party is given the opportunity to participate on a pro
rata basis in order to maintain its shareholding in the Company and/or
VIP, as applicable, and that such Party may make payment for such
portion of the shares of capital stock of the Company and/or VIP by
contributing the Opportunity (in whole or in part) to the Company
and/or VIP (based on the Fair Market Value of the Opportunity)), or
the borrowing by the Company or VIP of any public debt securities, in
each case, the proceeds of which will be used to finance, directly or
indirectly, the purchase of such Opportunity. If following such due
diligence investigation the Company still wishes to exercise such call
option, it shall, at least thirty (30) days prior to the end of such
two (2) year period or three (3) year period, as the case may be,
notify such Party thereof and instruct its counsel to prepare
definitive documentation to effect the exercise of such call option,
which definitive documentation will include the following:
(A) customary representations by the seller of the Opportunity
and such Party substantially similar to those
representations set forth on Schedule 6.02(c)(iv)(A);
(B) delivery of financial statements of the relevant Person,
audited by an internationally recognized accounting firm in
accordance with GAAP; and
(C) a guarantee by the General Guarantor under (and as defined
in) the Eco Telecom Guarantee Agreement or by the Guarantor
under (and as defined in) the Telenor Guarantee Agreement,
as applicable, of the representations and warranties of the
seller of the Opportunity and Eco Telecom or Telenor, as
applicable, and performance by the seller of the Opportunity
and Eco Telecom or Telenor, as applicable, of the covenants
and other terms in
33
connection with the sale of the Opportunity substantially in
the form of Schedule 6.02(c)(iv)(C); and
(v) If for any reason the Company has not exercised such call
option due to the failure of such Party to meet the requirements set
forth in Section 6.02(c)(iv) within ninety (90) days from the date the
Company notified such Party of its election to exercise the call
option with respect to such Opportunity, such Party shall promptly
sell or otherwise dispose of such Opportunity to a third party which
shall not be an Affiliate of such Party and shall not be a Direct
Competitor; provided, that in any event, such sale or disposition
--------
shall be consummated within 18 months from the date of such notice by
the Company to such Party.
(d) For the avoidance of doubt, any Shareholder hereunder shall be deemed
a "Party" for the purposes of this Section 6.02.
6.03 Charter.
-------
Within three (3) Business Days following the date hereof, the Company shall file
and, as promptly as practicable thereafter, shall register an amended and
restated charter, substantially in the form of Exhibit C hereto, with the Moscow
---------
Registration Chamber. As soon as practicable after the date that the Company
has completed all necessary corporate and regulatory approvals following the
issuance of Preferred Stock to Eco Telecom in connection with the Preferred
Stock Closing, the Company shall file an amended and restated charter,
substantially in the form of Exhibit D hereto, with the Moscow Registration
---------
Chamber in connection with the reorganization of the Company into an open joint
stock company organized and existing under the laws of the Russian Federation.
The Company and the Shareholders shall promptly undertake all other actions
required to be performed in connection with such reorganization including but
not limited to increasing the charter capital to meet the minimum requirements
under Russian Law of open joint stock companies; provided, however, that the
-------- -------
Shareholders shall not be required to make any additional payments to the
Company in connection with respect to such reorganization.
6.04 Amendment of Charter.
--------------------
To the extent that pursuant to applicable law the legality, validity or
enforceability of any of the provisions contained in this Agreement now or at
any time hereafter requires that such provisions, or a reference to such
provisions, be contained in the Company's Charter, or requires any amendment to
the Company's Charter, then the Parties shall cause the Company to take such
action as may be necessary to supplement or amend the Charter as so required,
and each of the Parties hereby consents to such amendment to the fullest extent
permitted by law. Without limiting the generality of the foregoing, the Parties
shall take such action as may be necessary to supplement or amend the Charter to
reflect, and not conflict or be inconsistent with, the provisions of this
Agreement. The Parties also agree, to the extent permitted by law, to waive any
rights or privileges granted to them (including but not limited to redemption
rights, rights of first refusal and the like) by applicable law or the Charter
that conflict or are inconsistent with the terms and conditions of this
Agreement.
6.05 Certain Corporate Actions.
-------------------------
34
Each Shareholder agrees to take all actions necessary to effect the transactions
set forth in, or contemplated by, the Principal Agreements, including, but not
limited to, voting (or causing to be voted) all of such Shareholder's respective
Voting Securities at any meeting of shareholders (in person or by ballot) in
favor of any action to effect the foregoing, and each Shareholder further agrees
to waive any rights under Articles 30 and 75 of the Federal Law "On Joint Stock
Companies" dated December 26, 1996, as amended, or similar rights under Russian
Laws.
ARTICLE VII
CONFIDENTIALITY
Each Party will hold, and will use its best efforts to cause its Affiliates, and
their respective representatives to hold, in strict confidence from any Person
(other than any such Affiliate or representative or a bona fide Pledgee in
connection with any action contemplated by Article IV hereof), unless (a)
compelled to disclose by judicial or administrative process (including, without
limitation, as required to be disclosed under the Act, the Exchange Act or
applicable stock exchange rules) or by other requirements of law or (b)
disclosed in an action or proceeding brought by a Party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the Company or any other Party or any of its or their
Affiliates furnished by the Company or such other Party or their respective
representatives to such Party in such capacity, except to the extent that such
documents or information can be shown to have been (i) previously known by the
Party receiving such documents or information, (ii) in the public domain (either
prior to or after the furnishing of such documents or information hereunder)
through no fault of such receiving Party or (iii) later acquired by the
receiving Party from another source if the receiving Party is not aware that
such source is under an obligation to another Party hereto to keep such
documents and information confidential. In the event that this Agreement is
terminated, upon the request of another Party, each Party hereto will, and will
cause its Affiliates and their respective representatives to, unless otherwise
required by law, promptly redeliver or cause to be redelivered all copies of
documents and information furnished by the other Parties in connection with this
Agreement or the transactions contemplated hereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses, compilations and other
writings related thereto or based thereon prepared by the Party furnished such
documents and information or its representatives.
ARTICLE VIII
BOOKS AND RECORDS; REPORTING
8.01 Maintenance of Books and Records.
--------------------------------
The Company shall maintain such corporate Books and Records necessary or
appropriate for the conduct of its business. Such Books and Records, and the
minutes of actions and/or meetings of the shareholders and directors of the
Company, shall be kept at the principal office of the Company or at such other
reasonable place as the Board may determine.
35
8.02 Right to Examine Books and Records.
----------------------------------
Any Shareholder shall have the right, at such Shareholder's expense, to examine,
audit and make copies of the Books and Records of the Company, in person or by
duly authorized agent or attorney, upon reasonable prior notice to the Company
and during normal business hours.
8.03 Reporting.
---------
The Company shall furnish the following reports to each Party:
(a) As soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, and in any
event within ninety (90) days thereafter, an unaudited consolidated balance
sheet of the Company and its consolidated subsidiaries as at the end of
each such quarterly period, and the related unaudited consolidated
statements of income and cash flows of the Company and its consolidated
subsidiaries for such period and for the current fiscal year to date,
prepared in accordance with GAAP, as adjusted by the accounting procedures
and policies utilized by the Company for internal management reports
consistently applied and setting forth in comparative form the figures for
the corresponding periods of the previous fiscal year, which statements
shall be subject to changes resulting from audit adjustments. Such
statements, upon delivery thereof, shall have been reviewed by the
Company's auditors; and
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred eighty (180) days thereafter,
an audited consolidated balance sheet of the Company and its consolidated
subsidiaries as at the end of such fiscal year, and audited consolidated
statements of income and cash flows of the Company and its consolidated
subsidiaries for such fiscal year, prepared in accordance with GAAP
consistently applied and setting forth in comparative form the figures for
the previous fiscal year. Such statements, upon delivery thereof, shall
have been audited by the Company's auditor, which shall be selected by the
Board in accordance with the Charter and this Agreement from among the
major international accounting firms.
ARTICLE IX
INDEMNIFICATION
The Company shall indemnify, defend and hold harmless the Parties' respective
directors, officers and employees who are acting as a Director or officer of the
Company or any of its Controlled Affiliates, and any other directors or officers
of the Company or any of its Controlled Affiliates, in such Person's capacity as
a Director or officer of the Company or any of its Controlled Affiliates (each
and severally, an "Indemnified Person", and collectively, the "Indemnified
Persons"), from and against any and all liabilities, losses, damages, claims,
fines, penalties, costs and expenses, including reasonable fees and expenses of
counsel selected by the Indemnified Person (collectively, "Damages") to which
the Indemnified Person may become subject by reason of, or in connection with,
any action taken or omitted to be taken by such Person arising out of such
Person's status as a director or officer of the Company or any of its Controlled
Affiliates, to the fullest extent permitted by law, except that the Company
shall not indemnify any Indemnified Person for any Damages (i) arising from such
Indemnified Person's
36
bad faith or willful misconduct, or (ii) as to which indemnification is barred
under applicable law. Attorneys' fees and expenses shall be paid by the Company
as they are incurred, upon receipt, in each case, of an undertaking by or on
behalf of the Indemnified Person to repay such amounts if it is ultimately
determined that such Indemnified Person is not entitled to indemnification with
respect thereto.
The Company shall procure director and officer liability insurance or similar
insurance policy, at its expense, insuring such Indemnified Persons against any
of the Damages for which the Company is obligated to indemnify any Indemnified
Person pursuant to this Article IX. Notwithstanding any other provision of
this Article IX, the Company shall be obligated to indemnify any Indemnified
Person eligible for indemnification hereunder only to the extent payments under
such insurance policy are insufficient to hold harmless such Indemnified Person
in respect of any such Damages (or actions in respect thereof).
ARTICLE X
TERM AND TERMINATION
This Agreement shall take effect on the date hereof and remain in effect until
the earliest of:
(a) at midnight (Moscow time) on the Final Date, if the First Closing has
not occurred by such time ;
(b) the date on which all of the Parties and the Company agree in writing
to the termination of this Agreement;
(c) the date on which a meeting of the shareholders of VIP is held at
which a vote of such shareholders is conducted concerning the transactions
contemplated by this Agreement and the other Principal Agreements and such
shareholders fail to approve such transactions as are required by Russian
Law and the Charter to be approved by such shareholders;
(d) with respect to any Party, such date that such Party has effectively
Transferred, in accordance with Section 4.09, all of its Securities;
provided, that following an Eco Telecom Contribution Default, Eco Telecom's
--------
obligations (and the obligations of any of Eco Telecom's Permitted
Transferees) under Sections 5.03, 6.02(a) and 6.02(b) shall remain in
effect until the Third Closing Date; and
(e) with respect to Telenor only, upon the Third Closing if Telenor has
not purchased the Second Closing Telenor Shares or the Third Closing
Telenor Shares (as such terms are defined in the Primary Agreement),
pursuant to the terms of the Primary Agreement;
provided, that no such termination shall be deemed to relieve any Party of any
--------
obligations of such Party pursuant to this Agreement accruing, or resulting from
actions or omissions of such Party occurring, prior to the date of such
termination; and provided, further, that Section 6.02(c) shall not terminate
-------- -------
with respect to any Party until all call options with respect to any
Opportunities under Section 6.02(c) have lapsed or been exercised.
37
ARTICLE XI
DISPUTE RESOLUTION
11.01 Arbitration; Consent to Jurisdiction; Service of Process; Waiver of
Sovereign Immunity.
(a) Any and all disputes and controversies arising under, relating to or
in connection with this Agreement shall be settled by arbitration by a
panel of three (3) arbitrators under the United Nations Commission on
International Trade Law (UNCITRAL) Arbitration Rules then in force (the
"UNCITRAL Rules") in accordance with the following terms and conditions:
(i) In the event of any conflict between the UNCITRAL Rules and
the provisions of this Agreement, the provisions of this Agreement
shall prevail.
(ii) The place of the arbitration shall be Geneva, Switzerland.
(iii) Where there is only one claimant party and one respondent
party, each shall appoint one arbitrator in accordance with the
UNCITRAL Rules, and the two arbitrators so appointed shall appoint
the third (and presiding) arbitrator in accordance with the UNCITRAL
Rules within thirty (30) days from the appointment of the second
arbitrator. In the event of an inability to agree on a third
arbitrator, the appointing authority shall be the International Court
of Arbitration of the International Chamber of Commerce, acting in
accordance with such rules as it may adopt for this purpose. Where
there is more than one claimant party, or more than one respondent
party, all claimants and/or all respondents shall attempt to agree on
their respective appointment(s). In the event that all claimants and
all respondents cannot agree upon their respective appointments(s)
within thirty (30) Business Days of the date of the notice of
arbitration, all appointments shall be made by the International
Court of Arbitration of the International Chamber of Commerce.
(iv) The English language shall be used as the written and spoken
language for the arbitration and all matters connected to the
arbitration.
(v) The arbitrators shall have the power to grant any remedy or
relief that they deem just and equitable and that is accordance with
the terms of this Agreement, including specific performance, and
including, but not limited to injunctive relief, whether interim or
final, and any such relief and any interim, provisional or
conservatory measure ordered by the arbitrators may be specifically
enforced by any court of competent jurisdiction. Each Party retains
the right to seek interim, provisional or conservatory measures from
judicial authorities and any such request shall not be deemed
incompatible with the agreement to arbitrate or a waiver of the right
to arbitrate.
(vi) The award of the arbitrators shall be final and binding on the
Parties.
38
(vii) The award of the arbitrators may be enforced by any court of
competent jurisdiction and may be executed against the person and
assets of the losing Party in any competent jurisdiction.
(b) Except for arbitration proceedings pursuant to Section 11.01(a), no
action, lawsuit or other proceeding (other than the enforcement of an
arbitration decision, an action to compel arbitration or an application
for interim, provisional or conservatory measures in connection with the
arbitration) shall be brought by or between the Parties in connection
with any matter arising out of or in connection with this Agreement.
(c) Each Party irrevocably appoints CT Corporation System, located on the
date hereof at 000 Xxxxxx Xxxxxx, 13th Floor, New York, New York 10011,
USA, as its true and lawful agent and attorney to accept and acknowledge
service of any and all process against it in any judicial action, suit or
proceeding permitted by Section 11.01(b), with the same effect as if such
Party were a resident of the State of New York and had been lawfully
served with such process in such jurisdiction, and waives all claims of
error by reason of such service, provided that the Party effecting such
service shall also deliver a copy thereof on the date of such service to
the other Parties by facsimile as specified in Section 12.01. Each Party
will enter into such agreements with such agent as may be necessary to
constitute and continue the appointment of such agent hereunder. In the
event that any such agent and attorney resigns or otherwise becomes
incapable of acting, the affected Party will appoint a successor agent
and attorney in New York reasonably satisfactory to each other Party,
with like powers. Each Party hereby irrevocably submits to the non-
exclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York state court sitting in
New York City, in connection with any such action, suit or proceeding,
and agrees that any such action, suit or proceeding may be brought in
such court, provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this Section 11.01 and shall not be
deemed to be a general submission to the jurisdiction of said courts of
or in the State of New York other than for such purpose. Each Party
hereby irrevocably waives, to the fullest extent permitted by Law, any
objection that it may now or hereafter have to the laying of the venue of
any such action, suit or proceeding brought in such a court and any claim
that any such action, suit or proceeding brought in such a court has been
brought in an inconvenient forum. Nothing herein shall affect the right
of any Party to serve process in any other manner permitted by Law or to
commence legal proceedings or otherwise proceed against any other Party
in any other jurisdiction in a manner not inconsistent with this Section
11.01(c).
(d) Each Party hereby represents and acknowledges that it is acting
solely in its commercial capacity in executing and delivering this
Agreement and each of the other Principal Agreements to which it is a
party and in performing its obligations hereunder and thereunder, and
each Party hereby irrevocably waives with respect to all disputes,
claims, controversies and all other matters of any nature whatsoever that
may arise under or in connection with this Agreement or any of the other
Principal Agreements and any other document or instrument contemplated
hereby or thereby, all immunity it may otherwise have as a sovereign,
quasi-sovereign or state-owned entity (or similar entity)
39
from any and all proceedings (whether legal, equitable, arbitral,
administrative or otherwise), attachment of assets, and enforceability of
judicial or arbitral awards.
ARTICLE XII
MISCELLANEOUS
12.01 Notices.
-------
All notices and other communications provided for herein (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made by facsimile or by hand in writing and transmitted by
facsimile or courier and delivered to the "Address for Notices" specified below
or at such other address as shall be designated by such Party in a notice to
each other Party:
If to VIP, to:
Vimpel-Communications
10 Xxxxxx 0-Xxxxx
Xxxxxxxx 00
000000, Xxxxxx
Xxxxxxx Federation
Facsimile No.: x0 000 000 0000
Attention: Xxxxxx Xxxxxxxxxx
General Counsel
With a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
Xxxxx Place II
7 Ulitsa Gasheka
123056, Moscow
Russian Federation
Facsimile No.: x0 000 000 0000
Attention: Xxxxxxx X. Xxxxxxxx
If to Eco Telecom, to:
Eco Telecom Limited
Xxxxx 0, 0 Xxxxx Xxxxx
Xxxxxxxxx
Xxxxxxxxx No.: + 3 504 1988
Attention: Xxxxx Xxxx
With a copy to:
40
OOO Alfa-Eco
21 Novy Arbat
121019 Moscow
Russian Federation
Facsimile No.: + 7 095 202 8364
Attention: Stanislav Shekshnya
And a copy to:
Xxxxxxx Xxxxx CIS Legal Services
00 Xxxxxxxxxxxx Xxxxxxxx
000000 Xxxxxx
Russian Federation
Facsimile No.: x0 000 000 0000
Attention: Xxxxxxxx Xxxxxxx
If to the Company, to:
VimpelCom-Region
10 Ulista 8-Xxxxx
Building 14
125083 Moscow
Russian Federation
Facsimile No.: x0 000 000 0000
Attention: Xxxxxxxx Xxxxxxx
General Counsel
With a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
Xxxxx Place II
7 Ulitsa Gasheka
123056, Moscow
Russian Federation
Facsimile No.: x0 000 000 0000
Attention: Xxxxxxx X. Xxxxxxxx
And a copy to :
Xxxxxxx Xxxxx CIS Legal Services
41
24 Korobeinikov Pereulok
119034 Moscow
Russian Federation
Facsimile No.: x0 000 000 0000
Attention: Xxxxxxxx Xxxxxxx
If to Telenor, to:
Telenor East Invest AS
Xxxxxxxxxxxxxxxxx 0
X-0000 Xxxx
Xxxxxx
Facsimile No.: x00 00 00 0000
Attention: Xxxxxx Xxxxxxxxx
With a copy to:
Advokatene i Xxxxxxx
Xxxxxxxxxxxxxxxxx 0
X-0000 Xxxx
Xxxxxx
Facsimile No.: x00 00 00 0000
Attention: Xxxxx Xxxxxxx
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given and shall be effective when transmitted by
facsimile, personally delivered or, in the case of any notice delivered by
courier, upon receipt, in each case, given or addressed as aforesaid.
12.02 Entire Agreement.
----------------
This Agreement, together with the Principal Agreements, supersedes all prior
discussions and agreements among the parties with respect to the subject matter
hereof and thereof, and contains the sole and entire agreement between the
parties hereto and thereto with respect to the subject matter hereof and
thereof.
12.03 Waiver.
------
Any term or condition of this Agreement may be waived at any time by the party
that is entitled to the benefit thereof, but no such waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party waiving such term or condition. No waiver by any Party of any term or
condition of this Agreement, in one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.
42
12.04 Amendment.
---------
This Agreement may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each party hereto.
12.05 No Assignment; Binding Effect; No Third Party Beneficiary.
----------------------------------------------------------
Except as expressly provided herein, neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective successors and assigns. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties
hereto to confer third party beneficiary rights upon any other Person other than
any Person entitled to indemnity under Article IX.
12.06 Governing Law.
-------------
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of New York, United States of America, without giving effect to any
conflicts of laws principles thereof which would result in the application of a
different law.
12.07 Severability.
------------
If any provision in this Agreement or any other document executed in connection
herewith is or shall become invalid, illegal or unenforceable in any
jurisdiction, the invalidity, illegality or unenforceability of such provision
in such jurisdiction shall not affect or impair the validity, legality or
enforceability of (i) any other provision of this Agreement or any such other
document in such jurisdiction or (ii) such provision or any other provision of
this Agreement or any such other document in any other jurisdiction.
12.08 Further Assurances.
------------------
From time to time, at any Party's reasonable request and without further
consideration, each Party shall execute and deliver such additional documents
and take all such further action as may be reasonably necessary or desirable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement.
12.09 Headings.
--------
The headings contained in this Agreement are for convenience of reference only,
and do not form a part hereof and in no way interpret or construe the provisions
hereof.
12.10 Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which shall constitute one and the same
instrument.
12.11 Stop Transfer.
-------------
43
To the extent permitted by applicable law, each Party agrees with, and covenants
to the other Parties that such Party shall not request that the Company or the
Registrar register the transfer (book-entry or otherwise) of any of such Party's
Securities, unless such transfer is made in compliance with this Agreement.
44
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed by its duly authorized officer, effective as of the day and year
first above written.
OPEN JOINT STOCK COMPANY "VIMPEL-COMMUNICATIONS"
By: /s/ Xxxxxx Xxxxxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxxxx Xxxxx
Title: President
By: /s/ Xxxxxxxx Bychenkov
-------------------------------------
Name: Xxxxxxxx Bychenkov
Title: Chief Accountant
ECO TELECOM LIMITED
By: /s/ Serge Barychkov
-------------------------------------
Name: Serge Barychkov
Title: Attorney-in-Fact
CLOSED JOINT STOCK COMPANY "VIMPELCOM-REGION"
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Attorney-in-Fact
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Accountant
TELENOR EAST INVEST AS
By: /s/ Tron Xxxxx
-------------------------------------
Name: Tron Xxxxx
Title: Attorney-in-Fact
45
