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EXHIBIT 10.27
STOCK PURCHASE AGREEMENT
Among
GLOBAL TELESYSTEMS GROUP, INC.,
KOMPANIYA "INVEST-PROJECT",
SWINTON LIMITED,
GTS-VOX LIMITED
and
MTU-INFORM
dated
September 6, 1995
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STOCK PURCHASE AGREEMENT dated as of September 6, 1995 (this
"Agreement") among Global TeleSystems Group, Inc., a Delaware corporation
("GTS"), Kompaniya "Invest-Project", a limited liability partnership organized
under the laws of the Russian Federation (the "Parent"), Swinton Limited, an
international business company organized under the laws of the Commonwealth of
the Bahamas (the "Seller"), GTS-Vox Limited, a private limited company
organized pursuant to the Companies Xxx 0000 of England and Wales ("GTS-Vox"
and, together with the Seller, the "Swinton Parties"), and MTU-Inform, a
partnership organized under the laws of the Russian Federation ("MTU-Inform").
WHEREAS, GTS-Vox owns beneficially and of record 95 ordinary
registered shares (the "AOZT Shares") of Invest-Project, a closed joint stock
company organized under the laws of the Russian Federation ("AOZT"), and
MTU-Inform owns beneficially and of record the remaining five ordinary
registered shares of AOZT;
WHEREAS, GTS and AOZT entered into a Memorandum of
Understanding dated March 3, 1995 pursuant to which the parties agreed to
cooperate in the joint provision of enhanced telecommunications services in the
city of Moscow;
WHEREAS, AOZT and Moscow City Telephone Network ("MCTN")
entered into an agreement dated May 29, 1995, as amended by Supplement 1
No. 1657 to Agreement No. 1587 dated June 23, 1995 ("Agreement No. 1587"),
pursuant to which AOZT is authorized to receive, construct and sell 150,000
telephone numbers (each, a "Port"), using the 69 zone and portions of the 79
and 71 zones; and
WHEREAS, GTS desires to purchase 5,264 of the ordinary shares
(the "GTS-Vox Shares"), par value one xxxxx xxxxxxxx per share (the "GTS-Vox
Ordinary Shares"), of GTS-Vox from the Seller in exchange for shares (the
"Exchange Shares") of common stock, par value $0.0001 per share, of GTS ("GTS
Common Stock"), and the Seller desires to sell the GTS-Vox Shares to GTS in
exchange for the Exchange Shares, subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and
conditions contained herein and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
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ARTICLE I
PURCHASE AND SALE
SECTION 1.01. Purchase and Sale of the GTS-Vox Shares. Upon
the terms and subject to the conditions of this Agreement, at the Closing, the
Seller shall sell to GTS, and GTS shall purchase from the Seller, the GTS-Vox
Shares.
SECTION 1.02. Purchase Price; Delivery of Exchange Shares. (a)
The purchase price for the GTS-Vox Shares shall be as set forth in this Section
1.02 and may include all or a portion of the Exchange Shares, the GTS Note (as
hereinafter defined) and the cash payments as described herein. The dates on
which GTS may issue portions of the aggregate number of Exchange Shares to the
Seller shall be determined pursuant to the terms of this Section 1.02. The
number of shares of GTS Common Stock which constitute the aggregate number of
Exchange Shares on the dates specified in this Section 1.02 shall be determined
pursuant to Section 1.06 of this Agreement.
(b) At the Closing, GTS shall deliver to the Seller (i)
in cash, one xxxxx per GTS-Vox Share, for a total of L52.94 and (ii) a note in
the principal amount of $693,380, payable to the Seller, subject to the terms
and conditions provided therein, as set forth in Exhibit 1.02(b) (the "GTS
Note").
(c) The parties hereto acknowledge that GTS does not have
all corporate and shareholder approvals required for issuance of the share
certificates referred to in this Section 1.02. GTS shall use its reasonable
commercial efforts to obtain all such corporate and shareholder approvals as
soon as practicable.
(d) By March 31, 1996, the Seller and MTU-Inform shall
cause AOZT to make available 20,000 Ports, in addition to the 5,000 Ports
provided by MTU-Inform to AOZT in accordance with Section 5.02(b), (the "First
Ports") for commencement of service (the "Commencement Date"), and AOZT shall
deliver written notice thereof to GTS. As soon as practicable, but in no event
later than seven days, thereafter:
(i) GTS shall deliver to the Seller a certificate issued
in the name of the Seller, with all required stock transfer tax stamps
affixed and bearing such legends as are required by Section 5.01 (a
"GTS Certificate"), evidencing 37,480 Exchange Shares, or
(ii) if the corporate and shareholder approvals referred
to in Section 1.02(c) have not been obtained by such date, GTS shall
provide the Seller with a note in substantially the form attached
hereto as Exhibit 1.02(d) (a "GTS Note II") in place of such GTS
Certificate.
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(e) As soon as practicable, but in no event later than
seven days, following the delivery of consolidated financial statements and
consolidated statements of net income of AOZT prepared using U.S. dollar
figures (a "Reference Financial Statement"), together with a report thereon
prepared by internationally recognized independent certified public accountants
the appointment of which shall be approved by GTS and the Seller, stating that
such financial statements were prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") consistently applied
and fairly present the consolidated financial position of AOZT as of the end of
such fiscal year (an "AOZT Financial Report"), for AOZT's 1996 fiscal year, (i)
GTS shall deliver to the Seller a GTS Certificate evidencing 25% of the
Reference Exchange Number (as hereinafter defined) of Exchange Shares, subject
to adjustment as provided in Section 1.06(d), or (ii) if the corporate and
shareholder approvals referred to in Section 1.02(c) have not been obtained by
such date, GTS shall provide the Seller with a GTS Note II in place of such GTS
Certificate.
(f) As soon as practicable, but in no event later than
seven days, following the delivery of a Reference Financial Statement, together
with an AOZT Financial Report for AOZT's 1997 fiscal year, (i) GTS shall
deliver to the Seller a GTS Certificate evidencing 25% of the Reference
Exchange Number (as hereinafter defined) of Exchange Shares, subject to
adjustment as provided in Section 1.06(d), or (ii) if the corporate and
shareholder approvals referred to in Section 1.02(c) have not been obtained by
such date, GTS shall provide the Seller with a GTS Note II in place of such GTS
Certificate.
(g) As soon as practicable, but in no event later than
seven days, following the delivery of a Reference Financial Statement, together
with an AOZT Financial Report for AOZT's 1998 fiscal year, (i) GTS shall
deliver to the Seller a GTS Certificate evidencing 25% of the Reference
Exchange Number (as defined herein) of Exchange Shares, subject to adjustment
as provided in Section 1.06(d), or (ii) if the corporate and shareholder
approvals referred to in Section 1.02(c) have not been obtained by such date,
GTS shall provide the Seller with a GTS Note II in place of such GTS
Certificate.
SECTION 1.03. Closing. Upon the terms and subject to the
conditions of this Agreement, the purchase and sale contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at such
place and on such date as GTS and the Parent may mutually agree upon in writing
(the day on which the Closing takes place being the "Closing Date ").
SECTION 1.04. Closing Deliveries by the Seller. At the
Closing, the Seller shall deliver or cause to be delivered to GTS:
(a) a stock certificate evidencing the GTS-Vox Shares
duly endorsed to GTS, accompanied by a stock transfer form duly
executed to GTS, in form
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satisfactory to GTS, and the Seller shall pay for all required stock
transfer tax stamps to be affixed thereon;
(b) a receipt for cash consideration and the GTS Note
delivered by GTS to the Seller pursuant to Section 1.02(b);
(c) a copy of the Indemnity Agreement attached hereto as
Exhibit 1.04(c) (the "Indemnity Agreement"), executed by the Seller;
(d) a copy of the Shareholders Agreement attached hereto
as Exhibit 1.04(d) (the "Shareholders Agreement"), executed by the
Seller;
(e) a certificate of the General Director of the Parent,
certifying (i) the names and signatures of the officers of the Parent
authorized to sign this Agreement and the other documents to be
delivered hereunder, and (ii) a copy of the resolutions duly and
validly adopted by the Board of Directors of the Parent evidencing its
authorization of the consummation of the transactions contemplated by
this Agreement;
(f) a power of attorney for the authorized representative
of the Seller, and a certification from the Person holding such power
of attorney that (i) the names and signatures of the officers of the
Seller authorized to sign this Agreement and the other documents to be
delivered hereunder, and (ii) a copy of the resolutions duly and
validly adopted by the Board of Directors of the Seller evidencing its
authorization of the consummation of the transactions contemplated by
this Agreement;
(g) a certificate of the Secretary or an Assistant
Secretary of GTS-Vox, certifying (i) the names and signatures of the
officers of GTS-Vox authorized to sign this Agreement and the other
documents to be delivered hereunder, (ii) that the Articles of
Association and Memorandum of Association of GTS-Vox attached thereto
are true and correct copies of such documents, (iii) a copy of the
resolutions duly and validly adopted by the Board of Directors of
GTS-Vox evidencing its authorization of the consummation of the
transactions contemplated by this Agreement, and (iv) that the copy
of the minute books and stock register of GTS-Vox attached thereto are
true and correct copies of such documents;
(h) a certificate of the President of AOZT, certifying
(i) that the constituent documents of AOZT attached thereto are true
and correct copies of such documents, and (ii) that the copy of the
minutes of meetings and stock register of GTS-Vox attached thereto are
true and correct copies of such documents;
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(i) a certificate of the First Deputy of the General
Director of MTU-Inform certifying the names and signatures of the
officers of MTU-Inform authorized to sign this Agreement and the other
documents to be delivered hereunder; and
(j) statements from each of the President and the chief
accounting officer of each of GTS-Vox, MTU-Inform and AOZT that as of
the Closing Date, AOZT has no debts, obligations or other Liabilities
and that all reports required to be filed prior to the Closing Date
with any governmental authority by or on behalf of AOZT have been
filed, other than those listed in Schedule 1.04(j).
SECTION 1.05. Closing Deliveries by GTS. At the Closing, GTS
shall deliver to the Seller:
(a) the GTS Note set forth in Section 1.02(b);
(b) a receipt for the GTS-Vox Shares delivered by the
Seller to GTS;
(c) a copy of the Indemnity Agreement, executed
by GTS;
(d) a copy of the Shareholders Agreement,
executed by GTS; and
(e) a certificate of the Secretary or an Assistant
Secretary of GTS certifying (i) the names and signatures of the
officers of GTS authorized to sign this Agreement and the other
documents to be delivered hereunder, and (ii) a copy of the
resolutions duly and validly adopted by the Board of Directors of GTS
evidencing its authorization of the consummation of the transactions
contemplated by this Agreement.
SECTION 1.06. Calculation of the Number of Exchange Shares.
(a) As of the Closing Date, the number of Exchange Shares to be exchanged (the
"Exchange Number") shall be 299,840 (the "Reference Exchange Number").
(b) Time of Adjustment of Exchange Number. The Exchange
Number shall be adjusted as of the last day of AOZT's 1996, 1997 and 1998
fiscal years (each, a "Reference Date") within five days following the delivery
of the Reference Financial Statement together with the AOZT Financial Report
for AOZT's 1996, 1997 and 1998 fiscal years, respectively. The adjustment to
the Exchange Number shall be determined by GTS as set forth in this Section
1.06.
(c) GTS Share Price. The Seller agrees that, solely for
the purpose of determining the Exchange Number, the value of each Exchange
Share shall be deemed to be
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$22.20 on the first Reference Date; $26.64 on the second Reference Date; and
$31.97 on the third Reference Date (the "GTS Share Price"); provided, however,
that:
(i) if shares of GTS Common Stock have been sold to the
public pursuant to a registration statement under the United States
Securities Act of 1933, as amended, solely for the purpose of
determining the Exchange Number, the GTS Share Price with respect to
any Reference Date following such sale shall be the average of the
closing prices for the shares of GTS Common Stock on the principal
stock exchange on which such shares are listed or traded on the last
ten trading days of the fiscal year that includes such Reference Date;
and
(ii) if shares of GTS Common Stock have not been sold to
the public and the Seller notifies GTS, or GTS notifies the Seller,
within three business days after the delivery of any Reference
Financial Statement together with the related AOZT Financial Report
that such party believes that the GTS Share Price does not accurately
reflect the value of the Exchange Shares as of the related Reference
Date, then the GTS Share Price will be determined by the Board of
Directors of GTS in the same manner used to determine the exercise
price of employee stock options under then existing employee stock
option plans of GTS.
(d) Adjustment of Exchange Number. As promptly as
practicable following the delivery of each Reference Financial Statement
together with the related AOZT Financial Report, the Exchange Number shall be
adjusted as follows:
(i) in the event that the Net Income (as hereinafter
defined) reflected in the Reference Financial Statement for the fiscal
year reported on therein differs from the Net Income reflected in the
business plan for AOZT, dated May 24, 1995, attached hereto as Exhibit
A (the "Business Plan") for such period by at least 10%, then the
Exchange Number with respect to the related Reference Date shall be
adjusted by multiplying the Reference Exchange Number by a fraction,
the numerator of which shall be equal to the Net Income reflected in
such AOZT Financial Report for such fiscal year and the denominator of
which shall be equal to the Net Income reflected in the Business Plan
for such fiscal year; and
(ii) in the event that the GTS Share Price with respect to
such Reference Date has been adjusted according to the provisos
included in Section 1.06(c), then the Exchange Number with respect to
such Reference Date, as adjusted pursuant to Section 1.06(d)(i), shall
be multiplied by a fraction, the numerator of which shall be equal to
the GTS Share Price before the adjustment set forth in clauses (i) or
(ii) of Section 1.06(c) and the denominator of which shall be equal to
the GTS Share Price after such adjustment;
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provided, however, in the event that sum of the Net Income reflected in the
Reference Financial Statements for the three fiscal years ending on December
31, 1998 differs from the sum of the Net Income reflected in the Business Plan
for such years by at least 10%, then the Exchange Number shall be adjusted (1)
by multiplying the Reference Exchange Number by a fraction, the numerator of
which shall be equal to the sum of the Net Income reflected in the Reference
Financial Statements for such years and the denominator of which shall be equal
to the Net Income reflected in the Business Plan for such years and (2) as set
forth in Section 1.06(d)(ii), and the number of Exchange Shares to be delivered
pursuant to Section 1.02(f) shall be equal to such adjusted Exchange Number
less the aggregate number of shares previously delivered to the Seller by GTS
pursuant to Section 1.02;
provided, however, that in no event shall the Exchange Number on any Reference
Date exceed 449,760 nor shall the aggregate number of shares of GTS Common
Stock delivered pursuant to Section 1.02 exceed 449,760. For the purposes of
this Section 1.06, "Net Income" shall mean the net income of AOZT, after
deductions of all taxes; provided, that Net Income for 1996 shall be deemed to
include all profits received in 1995 by AOZT attributable to sales of the 5,000
Ports to be provided to AOZT by MTU-Inform pursuant to Section 5.02(b);
provided, however, that in no event shall the aggregate number of shares of GTS
Common Stock delivered as per Article I: (i) exceed 50% of 449,760 in the case
of delivery in accordance with Section 1.02(e); (ii) exceed 75% of 449,760 in
the case of delivery in accordance with Section 1.02(f); and (iii) exceed 100%
of 449,760 in the case of delivery in accordance with Section 1.02(g).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
SWINTON PARTIES AND PARENT
As an inducement to GTS to enter into this Agreement, each of
the Swinton Parties and the Parent hereby, jointly and severally, represents
and warrants to GTS that:
SECTION 2.01. Organization and Standing of the Swinton Parties
and the Parent. The Parent is a limited liability partnership duly formed,
validly existing and in good standing under the laws of the Russian Federation.
The Seller is an international business company duly formed, validly existing
and in good standing under the laws of the Commonwealth of the Bahamas. GTS-Vox
is a private company limited by shares, duly formed, validly existing and in
good standing under Companies Xxx 0000 of England and Wales. AOZT is a closed
joint stock company duly organized, validly existing and in good standing under
the laws of the Russian Federation. Each of the Swinton Parties, the Parent
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and AOZT has the requisite power and all necessary licenses, permits, approvals
and other authorizations to own and operate its properties and assets and to
carry on its businesses as currently conducted or contemplated to be conducted
or operated. None of the Swinton Parties has received notice of proceedings
relating to the revocation of any such license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would adversely affect their ability to perform
its obligations under this Agreement, or would have a material adverse effect
upon the business condition (financial or otherwise), prospects, affairs,
operations, properties or assets of GTS-Vox or AOZT. All actions taken by each
of the Swinton Parties, the Parent and AOZT have been duly authorized, and none
of the Swinton Parties, the Parent or AOZT has taken any action that in any
respect conflicts with, constitutes a default under or results in a violation
of any provision of its respective constituent documents. True and correct
copies of the constituent documents of each of the Swinton Parties, as in
effect on the date hereof, have been delivered by the Seller to GTS.
SECTION 2.02. Power and Authority of the Swinton Parties and
the Parent. Each of the Swinton Parties and the Parent has all necessary power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of the Swinton Parties
and the Parent and (assuming due authorization, execution and delivery by GTS
and MTU-Inform) constitutes a legal, valid and binding obligation of each of
the Swinton Parties and the Parent enforceable against each of the Swinton
Parties and the Parent in accordance with its terms.
SECTION 2.03. Ownership of the Seller, GTS-Vox and AOZT. (a)
The Seller owns of record and beneficially and has good and marketable title
to, free and clear of all Encumbrances (as hereinafter defined), all of the
shares of capital stock of GTS-Vox. No Person (as hereinafter defined) other
than the Seller owns, directly or indirectly, of record or beneficially, any of
the shares of capital stock of GTS-Vox.
(b) Prior to July 22, 1995, the Parent owned of record
and beneficially and had good and marketable title to, free and clear of all
Encumbrances, the AOZT Shares. On July 22, 1995, the Parent transferred the
AOZT Shares to GTS-Vox, pursuant to Agreement of Purchase and Sale No. 5/14,
dated July 6, 1995, between the Parent and GTS-Vox. The transfer of the AOZT
Shares from the Parent to GTS-Vox has been duly registered with all appropriate
authorities under the laws of the Russian Federation.
(c) GTS-Vox owns of record and beneficially, and has good
and marketable title to, free and clear of all Encumbrances, the AOZT Shares.
MTU-Inform owns beneficially and of record five shares of AOZT. No Person other
than GTS-Vox or MTU-Inform owns, directly or indirectly, of record or
beneficially, any interest in AOZT.
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SECTION 2.04. Capitalization of GTS-Vox and AOZT. (a) The
authorized share capital of GTS-Vox consists of 10,000 GTS-Vox Ordinary Shares,
all of which are issued and outstanding. All such issued and outstanding shares
have been duly authorized and validly issued and are fully paid and
nonassessable. There are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments to which GTS-Vox
is a party of any character relating to the issued or unissued share capital
of, or other equity interests in, GTS-Vox or obligating GTS-Vox to grant,
issue or sell any shares of the share capital of, or other equity interests in,
GTS-Vox, by sale, lease, license or otherwise. There are no obligations,
contingent or otherwise, of GTS-Vox to repurchase, redeem or otherwise acquire
any shares of the share capital of GTS-Vox. There are no preemptive rights to
purchase or otherwise acquire any securities of GTS-Vox pursuant to any
provision of Law (as hereinafter defined), or the Memorandum of Association or
Articles of Association of GTS-Vox, in effect on the date hereof (the "GTS-Vox
Constituent Documents") by agreement or otherwise. There are no restrictions
upon payment of dividends by GTS-Vox in the GTS-Vox Constituent Documents or
any agreement to which it is a party.
(b) The authorized capital stock of AOZT consists of 100
ordinary registered shares, all of which are issued and outstanding. All such
issued and outstanding ordinary registered shares have been duly authorized and
validly issued and are fully paid and nonassessable. There are no preemptive
rights to purchase or otherwise acquire any securities of AOZT pursuant to any
provision of Law, or the constituent documents of AOZT, or by agreement or
otherwise. There are no restrictions upon payment of dividends by AOZT in its
constituent documents or any agreement to which it is a party. There are no
outstanding contractual obligations of AOZT to repurchase, redeem or otherwise
acquire any shares of its capital stock or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person.
SECTION 2.05. Required Filings and Consents, No Conflicts. (a)
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any governmental
authority on the part of any of the Swinton Parties, the Parent or AOZT is or
was required in connection with (i) the valid execution and delivery of this
Agreement and the performance of the transactions contemplated hereby or (ii)
the transfer of the AOZT Shares, in each case, except as may be necessary as a
result of any fact or circumstance relating solely to GTS.
(b) The execution and delivery of this Agreement by each
of the Swinton Parties and the Parent do not, and the performance of this
Agreement by each of the Swinton Parties and the Parent will not, (i) conflict
with or violate the constituent documents of such Swinton Party or the Parent,
(ii) conflict with or violate any Law, rule, regulation, order, judgment or
decree applicable to any of the Swinton Parties or the Parent or by which any
property or asset of any of the Swinton Parties or the Parent, as the case may
be, is bound or
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subject or (iii) result in any breach of, constitute a default (or event which,
with the giving of notice or lapse of time or both, would become a default)
under, require any consent under, give to others any right of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result
in the creation of any Encumbrance on any property or asset of any of the
Swinton Parties or the Parent pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which any of the Swinton Parties or the Parent is a party or by
which any of the Swinton Parties or the Parent or any property or asset of any
of the Swinton Parties or the Parent is bound or subject.
SECTION 2.06. Permits; Compliance. AOZT is in possession of
all franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders of any
governmental authority necessary for AOZT to own, lease and operate its
properties or to carry on its business as it is now being conducted (the "AOZT
Permits"), and, as of the date of this Agreement, no suspension or cancellation
of any of the AOZT Permits is pending or, to the knowledge of any of the
Swinton Parties, the Parent or AOZT, threatened. AOZT is not in conflict with,
or in default or violation of, any AOZT Permits.
SECTION 2.07. Compliance with Laws. None of the Swinton
Parties or the Parent is in violation of any applicable Law.
SECTION 2.08. No Prior Activities of GTS-Vox or the Seller.
GTS-Vox and the Seller were formed solely for the purpose of engaging in the
transactions contemplated by this Agreement. Except for obligations or
liabilities incurred in connection with the transactions contemplated by this
Agreement, neither GTS-Vox nor the Seller has incurred, directly or indirectly
through any subsidiary or affiliate, any obligations or liabilities or engaged
in any business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person.
SECTION 2.09. Assets and Contracts of AOZT. (a) AOZT has
good and marketable title to its properties and assets and AOZT has good title
to all its leasehold estates, in each case subject to no Encumbrance, other
than tax, materialmen's or like Encumbrances for obligations not yet due and
payable.
(b) True and correct copies of each contract and
agreement to which AOZT is a party, as in effect on the date hereof, have been
delivered by the Seller to GTS.
SECTION 2.10. Validity of Agreement No.1587. Agreement No.
1587 is valid and in full force and effect. None of the Swinton Parties or the
Parent knows, after due investigation, of any condition of Agreement No. 1587
which has not been fulfilled on or prior to the date on which such condition
was agreed to be fulfilled. None of the Swinton
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Parties or the Parent knows, after due investigation, of any reason that
Agreement No. 1587 may be revoked, canceled, altered or modified in any respect
as a result of the transactions contemplated by this Agreement. Agreement
No. 1587 is binding upon and inures solely to the benefit of AOZT and MCTN and
their permitted assigns, and nothing therein, express or implied, is intended
to or shall confer upon any other Person any legal or equitable right, benefit
or remedy of any nature whatsoever under or by reason of Agreement No. 1587.
Pursuant to Agreement No. 1587, AOZT is authorized to receive, construct and
sell 50,000 Ports using the 79 zone and 100,000 Ports using the 69 zone, and,
upon payment therefor or the waiver of any such payment as permitted by
Agreement No. 1587, AOZT will acquire all right, title and interest to and in
such Ports. The Seller intends to cooperate with GTS in causing AOZT to
construct and sell 100,000 Ports and to negotiate in good faith with GTS with
respect to the construction and sales of the remaining 50,000 Ports. AOZT has
not assigned any rights or obligations of AOZT under Agreement No. 1587 to any
other Person. A true, correct and complete copy of Agreement No. 1587 as in
effect on the date hereof has been provided by the Seller to GTS.
SECTION 2.11. Litigation, Claims, Etc. There are no
actions, suits, arbitrations or legal, administrative, governmental or other
proceedings or investigations pending or, to the best knowledge of each of the
Swinton Parties, the Parent and AOZT, threatened against any of the Swinton
Parties or AOZT, or, to the best knowledge, after due investigation, of each of
the Swinton Parties, the Parent and AOZT, involving any of the properties or
assets of any of the Swinton Parties or AOZT.
SECTION 2.12. Subsidiaries; Employees. The Seller has no
subsidiaries other than GTS-Vox and GTS-Vox has no subsidiaries other than
AOZT. GTS-Vox has no employees.
SECTION 2.13. Investment Representation; Rule 144;
Restrictions on Transfer. The shares of GTS Common Stock being acquired by the
Seller hereunder will be acquired for investment for the Seller's own account
and not with a view to the distribution or resale of any part thereof, except
as otherwise described herein. The Seller understands (a) that the Exchange
Shares are restricted securities within the meaning of Rule 144 under the
United States Securities Act of 1933, as amended (the "Securities Act"); (b)
that such securities are not registered pursuant to the Securities Act and must
be held indefinitely unless they are subsequently registered pursuant to the
Securities Act or an exemption from such registration is available; (c) that,
in any event, the exemption from registration under Rule 144 will not be
available for at least two years from the date of issue of any Exchange Shares
and, even then, will not be available unless: (i) a public trading market then
exists for the shares of GTS Common Stock; (ii) adequate information concerning
GTS is then available to the public; and (iii) other terms and conditions of
Rule 144 are complied with, including, among other things, the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a "market maker" and the number of
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shares being sold in any three-month period not exceeding specified
limitations; and (d) that any sale of such securities may be made by it only in
limited amounts in accordance with such terms and conditions if the seller is
an affiliate of GTS or has held such securities for fewer than three years
(except as otherwise described herein).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MTU-INFORM
As an inducement to GTS to enter into this Agreement,
MTU-Inform hereby represents and warrants to GTS that:
SECTION 3.01. Organization and Standing of MTU-Inform.
MTU-Inform is a limited liability partnership duly formed, validly existing and
in good standing under the laws of the Russian Federation. MTU-Inform has the
requisite power and all necessary licenses, permits, approvals and other
authorizations to own and operate their properties and assets, and to carry on
their businesses as currently conducted or contemplated to be conducted or
operated. MTU-Inform has not received notice of proceedings relating to the
revocation of any such license, certificate, franchise, or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would adversely affect MTU-Inform's ability to perform its obligations
under this Agreement, or would have a material adverse effect upon the business
condition (financial or otherwise), prospects, affairs, operations, properties
or assets of AOZT. All actions taken by MTU-Inform have been duly authorized,
and MTU-Inform has not taken any action that in any respect conflicts with,
constitutes a default under or results in a violation of any provision of its
respective constituent documents. True and correct copies of the constituent
documents of MTU-Inform, as in effect on the date hereof, have been delivered
by MTU-Inform to GTS.
SECTION 3.02. Power and Authority of MTU-Inform. MTU-Inform
has all necessary power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by MTU-Inform and
(assuming due authorization, execution and delivery by GTS and the Swinton
Parties) constitutes a legal, valid and binding obligation of MTU-Inform
enforceable against MTU-Inform in accordance with its terms.
SECTION 3.03. Required Filings and Consents; No Conflicts.
(a) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any governmental
authority on the part of MTU-Inform is or was required in connection with the
valid execution and delivery of this Agreement and the performance of the
transactions contemplated hereby.
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(b) The execution and delivery of this Agreement by
MTU-Inform does not, and the performance of this Agreement by MTU-Inform will
not, (i) conflict with or violate the constituent documents of MTU-Inform, (ii)
conflict with or violate any Law, rule, regulation, order, judgment or decree
applicable to MTU-Inform or by which any property or asset of MTU-Inform is
bound or subject or (iii) result in any breach of, constitute a default (or
event which, with the giving of notice or lapse of time or both, would become a
default) under, require any consent under, give to others any right of
termination, amendment, acceleration, suspension, revocation or cancellation
of, or result in the creation of any Encumbrance on any property or asset of
MTU-Inform pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which any such Person is a party or by which any such Person or any property
or asset of such Person is bound or subject.
SECTION 3.04. Title to and Right to Transfer Ports.
MTU-Inform has all right, title and interest in the Ports to be transferred to
GTS pursuant to Section 5.02 of this Agreement and has the right to transfer
all right, title and interest to and in such Ports to GTS or any company
nominated by GTS as contemplated by Section 5.02 of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GTS
As an inducement to the Swinton Parties to enter into this
Agreement, GTS hereby represents and warrants to each of the Swinton Parties as
follows:
SECTION 4.01. Organization and Standing. GTS is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. GTS has the requisite corporate power and all
necessary licenses, permits, approvals and other authorizations to own and
operate its properties and assets and to carry on its businesses as currently
conducted.
SECTION 4.02. Power and Authority of GTS. (a) Except as
provided in Section 1.02(c), GTS has all necessary power and authority to enter
into this Agreement, to carry out its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by GTS have been duly authorized by all requisite corporate action on
the part of GTS and the performance by GTS of its obligations hereunder and the
consummation by GTS of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of GTS. This Agreement
has been duly executed and delivered by GTS and (assuming due authorization,
execution and delivery by the Swinton Parties and MTU-Inform) constitutes the
legal, valid and binding obligation of GTS, enforceable against GTS in
accordance with its terms, subject to the
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effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 4.03. Capitalization. The authorized capital stock
of GTS consists of two classes: (i) 40,000,000 shares of GTS Common Stock,
17,349,527 shares of which are issued and outstanding; and (ii) 10,000,000
shares of Preferred Stock, none of which are issued and outstanding. All such
issued and outstanding shares have been duly authorized and validly issued and
are fully paid and nonassessable. The Exchange Shares have been duly authorized
and, if delivered to the Seller pursuant to this Agreement, will be validly
issued, fully paid and nonassessable. GTS has reserved for issuance the
Exchange Shares to be issued hereunder. Except for the rights granted by GTS
herein and in connection with its private placements in 1993, 1994 and 1995 and
certain stock options granted by GTS, there are no rights to purchase or
otherwise acquire any securities of GTS pursuant to any provision of law, or
the Certificate of Incorporation or By-Laws of GTS, or by agreement or
otherwise. There are no restrictions upon payment of dividends by GTS in its
Certificate of Incorporation, By-Laws or any agreement to which it is a party.
SECTION 4.04. Required Filings and Consents; No Conflicts.
(a) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any governmental
authority on the part of GTS is required in connection with the valid execution
and delivery of this Agreement and the performance of the transactions
contemplated hereby, except (i) where the failure to obtain such consent,
approval, order, authorization, qualification or designation or to make such
registration, declaration or filing would not prevent GTS from performing any
of its obligations under this Agreement and (ii) as may be necessary as a
result of any fact or circumstance relating solely to the Swinton Parties.
(b) Except as previously disclosed by GTS to the Parent
in writing, the execution and delivery of this Agreement by GTS do not, and the
performance of this Agreement by GTS will not, (i) conflict with or violate the
Certificate of Incorporation or By-Laws of GTS, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to GTS or by
which any property or asset of GTS is bound or subject or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other Encumbrance of any nature on any property or asset
of GTS pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
GTS is a party or by which GTS or any property or asset of GTS is bound or
subject, except for any such conflicts, violations, breaches, defaults or other
occurrences as would not, individually or in the aggregate, adversely affect
the ability
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of GTS to carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Legends on Exchange Shares; Restrictions. (a)
Legends. Each GTS Certificate shall be stamped or otherwise imprinted with a
legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT, THESE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT FIRST OBTAINING AN
OPINION OF COUNSEL, SATISFACTORY TO GLOBAL TELESYSTEMS GROUP, INC.,
THAT SUCH DISPOSITION MAY BE MADE WITHOUT REGISTRATION OF THE
SECURITIES UNDER SUCH ACT. IN ADDITION, THE SALE, TRANSFER,
DISPOSITION OR ENCUMBRANCE OF THESE SECURITIES IS RESTRICTED BY A
STOCK PURCHASE AGREEMENT DATED SEPTEMBER 6, 1995 AMONG GLOBAL
TELESYSTEMS GROUP, INC., KOMPANIYA "INVEST-PROJECT", SWINTON LIMITED,
GTS-VOX LIMITED AND MTU-INFORM, A COPY OF WHICH IS ON FILE AT THE
OFFICE OF GLOBAL TELESYSTEMS GROUP, INC.
(b) Limitation on Transfers of Exchange Shares. The
Seller agrees that, with respect to any GTS Certificate:
(i) it will not, without the prior written consent of
GTS, sell, assign, transfer or encumber the beneficial interest in any
Exchange Shares, except pursuant to an effective registration
statement under the Securities Act or pursuant to the Agreement, dated
as of September 6, 1995, between the Seller, GTS-Vox and the other
parties thereto (the "Seller Shareholders' Agreement"), which provides
for the distribution of the Exchange Shares held by the Seller to the
shareholders of the Seller; provided, that, subject to the provisions
of clause 5.01(b)(iii)(B) below:
(A) the Seller may sell up to 48% of the Exchange
Shares that it receives pursuant to each of subsections
1.02(d), (e) and (f), or pursuant to the GTS Note, at any time
after the date which is six months following the date
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that the Seller receives such Exchange Shares pursuant to such
subsection; provided, however, that in no event may the Seller
sell any Exchange Shares prior to the Commencement Date;
(B) the Seller may sell the remaining Exchange
Shares that it receives pursuant to each of subsections
1.02(d), (e) and (f), or pursuant to the GTS Note, at any time
after the date which is 12 months following the date that the
Seller receives such Exchange Shares pursuant to such
subsection; and
(C) the Seller may sell any of the Exchange
Shares that it receives pursuant to subsection 1.02(g) at any
time after the date which is six months following the date
that the Seller receives such Exchange Shares.
(ii) in connection with any distribution pursuant to the
Seller Shareholders' Agreement, each of the Persons to whom such distribution
is made (a "Permitted Transferee") shall (A) execute and deliver to GTS an
agreement, in form and substance reasonably satisfactory to GTS, whereby such
Permitted Transferee confirms that, with respect to the Exchange Shares that
are the subject of such distribution, it shall be deemed to be the "Seller" for
purposes of this Section 5.01 and agrees to be bound by all the terms of this
Section 5.01, and (B) deliver to GTS an opinion of counsel, satisfactory in
form and substance to GTS, to the effect that the agreement referred to above
that is delivered by such Permitted Transferee is a legal, valid and binding
obligation of such Permitted Transferee enforceable against such Permitted
Transferee in accordance with its terms. Upon the execution and delivery by
such Permitted Transferee of the agreement referred to in clause (A) of the
preceding sentence and the delivery of the opinion of counsel referred to in
clause (B) of the preceding sentence, such Permitted Transferee shall be deemed
the "Seller" for purposes of this Section 5.01 and shall have the rights and be
subject to the obligations of the Seller under this Section 5.01, in each case
with respect to the Exchange Shares beneficially owned by such Permitted
Transferee.
(iii) (A) it will not sell, assign, transfer or encumber
the beneficial interest in any Exchange Shares, except pursuant to an effective
registration statement under the Securities Act or pursuant to an applicable
exemption from the registration requirements of the Securities Act or pursuant
to the Seller Shareholders' Agreement, and (B) it will, in connection with any
such sale, assignment, transfer or encumbrance, other than pursuant to an
effective registration statement under the Securities Act or the Seller
Shareholders' Agreement, deliver to GTS a copy of an opinion of counsel,
satisfactory to GTS, that such sale, assignment, transfer or encumbrance may be
made without registration of the Exchange Shares pursuant to the Securities
Act.
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(c) Assistance with Sale of Shares. GTS agrees that it
shall use its reasonable efforts to assist the Seller in identifying a
purchaser for the Exchange Shares that the Seller is permitted to sell
pursuant to clauses (A), (B) or (C) or subsection 5.01(b)(i) and that,
if the Seller is unable to identify a purchaser for such shares,
GTS will repurchase such shares at a purchase price equal to:
(i) if shares of GTS Common Stock have been sold
to the public pursuant to a registration statement under the
United States Securities Act of 1933, as amended, the average
of the closing prices for the shares of GTS Common Stock on
the principal stock exchange on which such shares are listed
or traded on the last ten trading days preceding such
repurchase; and
(ii) if no such public sale shall have occurred
prior to such repurchase, (A) the price received by GTS
for shares of GTS Common Stock in the most recent private
placement of such shares or, (B) if no such private placement
has occurred within the three months preceding such purchase,
the price determined by an independent financial institution
of international reputation to be agreed upon by GTS and the
Seller, and, in either case, otherwise on terms and subject to
conditions to be agreed upon by GTS and the Seller.
SECTION 5.02. Commencement Date; Delivery of Ports by
MTU-Inform. (a) MTU-Inform agrees that if the Commencement Date is not on or
prior to March 31, 1996, MTU-Inform shall (i) irrevocably assign to GTS, or a
company nominated by GTS, all right, title and interest of MTU-Inform to and in
500 Ports which it owns for each full month, and that number of Ports equal to
500 multiplied by the portion of any part of a month, by which the Commencement
Date follows March 31, 1996, free of one-time payment for such Ports and (ii)
will indemnify and hold harmless GTS, GTS-Vox and AOZT from and against any and
all payments which may become due to any person with respect to such Ports.
(b) Pursuant to Addendum No. 1, dated August 11, 1995,
between GTS, the Parent, AOZT and MTU-Inform, to the Frame Transaction
Agreement, dated June 23, 1995, between GTS, the Parent, AOZT and MTU-Inform,
MTU-Inform shall assign 5,000 Ports to AOZT, which Ports shall be available for
the immediate commencement of service, free of charge to AOZT, on or prior to
October 1, 1995. As promptly as practicable following the Commencement Date,
GTS-Vox shall cause AOZT to assign 5,000 Ports to MTU-Inform, free of charge to
MTU-Inform, which Ports shall not necessarily be the same Ports as previously
assigned by MTU-Inform to AOZT pursuant to this Section 5.02(b).
SECTION 5.03. Audit of AOZT. GTS and the Seller agree that
they will cause AOZT to retain Ernst & Young to perform an audit of AOZT's
financial statements as soon as practicable following the Closing Date.
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SECTION 5.04. Cooperation with Respect to Implementation of
Agreement No. 1587. The Seller shall cooperate with GTS in causing AOZT to
construct and sell 100,000 Ports and shall negotiate in good faith with GTS
with respect to the construction and sales of the remaining 50,000 Ports.
SECTION 5.05. Membership of AOZT in GTS Group. The Seller,
GTS-Vox, MTU-Inform and GTS agree that following the date of this Agreement,
AOZT shall be a member of the GTS group of companies (the "GTS Group") in Russia
and will follow the standard procedures of the GTS Group, including, but not
limited to, procedures with respect to employee compensation and the
preparation of financial and tax accounts.
SECTION 5.06. Confidentiality. Each of the Swinton Parties,
the Parent and MTU-Inform agrees that it will not, and will cause each of its
affiliates not to, at any time, reveal to any Person or use in any way
detrimental to GTS or its subsidiaries any nonpublic, confidential or
proprietary information relating to the business or affairs of GTS, GTS-Vox or
AOZT that is acquired or otherwise received by any Person in connection with
the transactions contemplated hereby, other than such information that (i) is
generally available to the public (other than as a result of a disclosure by
such Person), (ii) is available to such Person on a nonconfidential basis from
a source that is not prohibited from disclosing such information to such Person
or (iii) after notice and an opportunity to contest, such Person is required to
disclose under any applicable Law or under subpoena or other process of Law.
SECTION 5.07. Further Action. Each of the parties hereto
shall use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Law and execute and deliver such documents and other papers as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Survival of Representations and Warranties.
The representations and warranties contained in this Agreement shall survive
the Closing until the fifth anniversary of the Closing Date. Neither the period
of survival nor the liability of any party hereto with respect to their
representations and warranties shall be reduced by any investigation made at
any time by or on behalf of any other party. If written notice of a claim has
been given prior to the expiration of the applicable representations and
warranties, then the relevant representations and warranties shall survive as
to such claim until such claim has been finally resolved.
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SECTION 6.02. Expenses; Brokers. Except to the extent
expressly provided herein, all costs and expenses, including, but not limited
to, attorneys' and accountants' fees, incurred by GTS in connection with the
transactions contemplated hereby shall be shared equally by GTS, on the one
hand, and the Seller, on the other hand, and all such costs and expenses
incurred by any other party hereto shall be paid by the party incurring such
costs and expenses. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based on arrangements made by or on
behalf of GTS, the Swinton Parties, the Parent, MTU-Inform or AOZT.
SECTION 6.03. Certain Defined Terms. As used in this
Agreement, the following terms have the following meanings:
"Encumbrance" means any security interest, pledge,
mortgage, lien (including, without limitation, environmental and tax
liens), charge, encumbrance, adverse claim, preferential arrangement
or restriction of any kind, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other
exercise of any attributes of ownership.
"Law" means any federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, order, other
requirement or rule of law.
"Liabilities" means any and all debts, liabilities
and obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured or determined or determinable, including, without
limitation, those arising under any Law or any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or
with any governmental authority and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Person" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization, limited
liability partnership, close joint stock company, private limited
company or other entity, as well as any syndicate or group that would
be deemed to be a person under Section 13(d)(3) of the United States
Securities Exchange Act of 1934, as amended.
SECTION 6.04. Notices, Etc. All notices and other
communications required or permitted hereunder shall be in writing and shall be
delivered personally if a receipt is obtained, by facsimile (followed within 24
hours by a hard copy sent by overnight delivery service as hereinafter
provided) or by overnight delivery service with a service that customarily
obtains a receipt for delivery, to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 6.04):
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If to GTS:
Global TeleSystems Group, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, 00xx Xxxxx
XxXxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
If to the Parent:
Kompaniya "Invest-Project"
00 Xxxxxxxxx Xxxxxxxx
Xxxxxx, Xxxxxx 000000
Facsimile No.: 0-000-000-0000
Attention: Xxxxxxx Xxxxxx
If to the Seller:
Swinton Limited
Xxxx House
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxx
Xxxxxxxxxx, Xxxxxxx XX00 0XX
Facsimile No.: 00-0000-000000
Attention: Xxxx Xxxxx-Xxxxx
SECTION 6.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 6.06. Entire Agreement. This Agreement, the Indemnity
Agreement, the Option Agreement and the Shareholders' Agreement constitute the
entire agreement of the parties hereto with respect to the subject matter
hereof and thereof and
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supersedes all prior agreements and undertakings, both written and oral,
between GTS and any of the Swinton Parties with respect to the subject matter
hereof.
SECTION 6.07. Assignment. This Agreement may not be assigned
by operation of law or otherwise without the express written consent of each of
the parties hereto (which consent may be granted or withheld in the sole
discretion of such parties); provided, however, that GTS may assign this
Agreement to any affiliate of GTS without the consent of any of the other
parties hereto.
SECTION 6.08. No Third-Party Beneficiaries. Except for the
provisions of Exhibit 1.04(c) relating to Indemnified Parties, this Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 6.09. Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of, all of
the parties hereto.
SECTION 6.10. Governing Law and Governing Language. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York applicable to contracts executed in and to be performed
entirely within that state. This Agreement shall be executed in the English and
Russian languages; in case of any difference in interpretation between the
English and Russian versions of this Agreement, both versions shall govern.
SECTION 6.11. Arbitration. Where any dispute or disagreement
among the parties hereto, arising out of or in connection with this Agreement,
cannot be settled through negotiations within thirty days after one of the
parties hereto has notified the other parties in writing about the existence of
a respective dispute, the parties shall have the right to initiate an
arbitration procedure for the purpose of settling the dispute or disputes. Such
a procedure shall be conducted at the Arbitration Institute of the Stockholm
Chamber of Commerce (Stockholm, Sweden) under the regulations of the
Arbitration Institute, by three arbitrators appointed in keeping with such
regulations. The arbitration examination shall be conducted in English.
Resolutions and the decision adopted during the arbitration procedure shall be
final and binding for both parties and may be enforced by a law court of a
respective jurisdiction, with the expenses incurred in connection with such an
arbitration procedure to be paid by the losing party.
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SECTION 6.12. Termination. GTS may terminate this Agreement at
any time following the material breach of this Agreement by any of the Parent,
the Seller or MTU-Inform. Any of the Parent, the Seller or MTU-Inform may
terminate this Agreement at any time following the material breach of this
Agreement by GTS.
SECTION 6.13. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
GLOBAL TELESYSTEMS GROUP, INC.
By /s/ XXXXX XXXXXXXXXXX
---------------------------------
Name: Xxxxx Xxxxxxxxxxx
Title: Senior Vice President
[SEAL]
KOMPANIYA "INVEST-PROJECT"
By /s/ XXXXXX X. XXXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: General Director
[SEAL]
SWINTON LIMITED
By /s/ A. CHAMBAZOV
---------------------------------
Name: A. Chambazov
Title: Attorney-in-Fact
[SEAL]
GTS-VOX LIMITED
By [ILLEGIBLE]
---------------------------------
Name: London Auditing and
Consulting Ltd.
Title: Director
[SEAL]
MTU-INFORM
By /s/ X. XXXXXXXXXXX
---------------------------------
Name: X. Xxxxxxxxxxx
Title: First Deputy of General
Director
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INVEST-PROJECT AND GTS
CO-79/69 PROJECT
BUSINESS PLAN
MAY 24, 1995
1. MARKET SIZE
The principal competitors in Moscow have been Comstar, Telmos, and
Combelga. Of these only Comstar, Sovintel, and Telmos have local lines. During
the last three years, the following port takeup has been experienced:
1993 10,000
1994 20,000
1995 40,000
At the present expansion rate of the business sector, through in-process
real-estate developments, annual numbering plan requirements approach 40-50,000
numbers for the ensuing five year period.
2. MOSCOW EXCHANGE PORT AVAILABILITY (DID'S)
There are a series of projects that have been underway in Moscow for the
past year:
o Comstar has 10,000 numbers that should have been available but are not
yet operational due to technical difficulties.
o Telmos and AT&T are putting 400,000 numbers into operation as part of
"The Golden Bullet" project. The first numbers are expected to be
available starting in Q4 1996. Of these, 320,000 numbers will be used
by MGTS to replace existing numbers. An additional capacity of only
80,000 numbers will be available for sale by Telmos.
o Combelga was granted the right to construct a 100,000 numbers zone
according to the Telmos formula. Thus 20,000 numbers will be available
for sale by Combelga. Project start has been scheduled only after
completion of first three phases of Golden Bullet Program. The first
numbers are expected to be operational in Q3 of 1997.
o ASVT (Iskra) together with Xxxxxxx was granted the right to construct
a "100,000" zone by the previous MGTS director. It has been
rescinded by the present director.
The following table summarizes the estimated requirements and port take-up
during the next five year period:
NEW OFFICE NO OF DID'S/ OTHER REQMTS. AVAILABLE FROM
YEAR SPACE (SQ.M.) 100 SQ.M. (CELLULAR, ETC.) TOTAL DID'S MGTS/PROJECTS
-------------------------------------------------------------------------------------------------
1993 30 4 -- 1,200 10,000
1994 170 8 5,000 18,600 20,000
1995 180 10 20,000 38,000 30,000
1996 240 20 30,000 54,000 50,000
1997 300 10 30,000 60,000 50,000
1998 300 10 30,000 60,000 50,000
1999 300 10 30,000 60,000 50,000
GTS/Invest-Project "79-Exchange"\24/5/95 2
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3. GENERAL PROJECT DESCRIPTION
The "79/69 Project" consists of the development and implementation of a
"100,000" zone, by the "Invest-Project," a Closed Joint Stock Company licensed
by MGTS and the Russian Ministry of Communications, within the numbering plan of
Moscow, interconnection thereof to the Sovintel Gateway, the existing MGTS
network, and the buildout of a trunking and distribution network to the customer
base.
The "79" index is part of the "7 million" zone out of which 400,000 numbers
will be built by ATT and MGTS for the GOLDEN BULLET PROJECT. Current schedule
calls for implementation of the first phase of the project in the fourth
quarter of 1996.
The objective of the project from GTS perspective is the generation of
incremental international and intercity revenue for Sovintel and RTS and a new
source of revenue through the sales and rental of local lines.
MGTS has agreed to put the necessary indexes (10 or 20,000 numbers) from
an existing "100,000" zone at our disposition to bridge the gap between the
"258" and the "79/69 Project." Specifically, this implies that this will be the
only organization able to offer new digital switching numbering capacity in the
96 timeframe.
The Invest-Project company will be expanded, through the sale of a 50%
ownership of the company to GTS. This joint-venture will conclude contractual
arrangement with Sovintel and RTS concerning access to networks.
4. BUSINESS STRUCTURE
The following diagram depicts the business structure of the new venture. In
brief, the present Invest-Project shareholders would sell 5% of their shares to
MTU-Inform (in order to maintain a Russian partner). The remaining 95% would be
sold to an offshore company with 2 shareholders. GTS with 52.6312% of the
shares and an offshore company consisting of the present Invest-Project
shareholders with 47.368% of the shares. Thus, GTS would have 50% of the shares
in the Russian legal entity, the present "79/69 Project" shareholders 45% and
MTU-Inform 5%.
[CHART]
GTS/Invest-Project "79-Exchange"\24/5/95 3
27
Fifty percent of the Invest-Project company shares will be sold by the
present shareholders for the price of 50% of the cumulative cash flow,
discounted with a 40% discount factor assuming that the firm has a terminal
value equal to 5 times the cash flow of the seventh year.
Taking the following P&L assumptions into account this cumulative
discounted cash flow amounts to $11.6 million. Thus, 50% of the Invest-Project
shares would be valued at $5.8 million.
5. STRUCTURE OF THE TRANSACTION
The purchase of the Invest-Project shares is a stock transaction, whereby
GTS provides stock to the Invest-Project parent company, in exchange for the 50%
ownership. The provision of stock is based on the following terms:
1. Current GTS stock price based on current company evaluation by
Xxxxxx-Xxxxxxx, at $18.75 per share.
2. Thus, GTS will provide 293,000 shares, over a pre-agreed period of time
and stock growth rate.
3. GTS stock price is assumed to grow at 20% per annum.
4. 12.5% of the shares will be paid at the conclusion of the transaction.
5. 12.5% of the shares will be paid upon putting the first numbers into
operation.
6. 25% of the shares will be paid after the first year of operation.
7. 25% of the shares will be paid after the second year of operation.
8. 25% will be paid after the third year of operation.
9. The quantity of shares will be adjusted linearly based on the actual
cash flow at the end of the period in question. Cash flow greater than
the model, will increase the quantity of shares, and lower cash flow
will reduce the quantity.
10. The quantity of shares will be adjusted linearly based on the share
price growth during the period. Greater growth will reduce quantity of
shares, and slower growth will increase quantity.
6. P&L ASSUMPTIONS
1. 10,000 numbers per year are sold to customers for a price of $500
decreasing by 10%/per year starting from 1996 onwards.
2. 5,000 numbers per year are sold back to MGTS from 1997 onwards for a
fixed price of $300 per number (as agreed by MGTS).
3. Monthly revenue per port sold to customers is $20 decreasing at
10%/year.
4. Average usage per port amounts to 10,000 minutes per year.
o 80% of traffic is local
o 15% of traffic is intercity
o 5% of traffic is international
5. Average revenue per minute for international traffic is $1.85
decreasing at 10%/year.
6. Average price per minute for intercity traffic is $0.45 decreasing at
10%/year.
7. Average revenue per minute for local traffic is $0.01 per minute.
8. Average international traffic settlement is $0.90 per minute decreasing
at 5%/year.
9. Average intercity traffic settlement is $0.45 per minute decreasing at
5%/year.
10. No settlement is assumed for local traffic.
11. We assume that we will sell half of the PABX's needed to distribute
70,000 numbers (140x500 numbers) with a margin of 25%.
12. Compensation of staff, rent of facilities, advertising, telephone, T&E,
insurance and contingency are assumed to be similar to those of
Sovintel and are either a fixed amount or a percentage of total revenue
and costs.
13. International and intercity settlements are based on current average
rates as charged by Rostelecom to third parties assuming that Sovintel
and RTS will charge the same rates to the "79/69 Project".
14. No investment in trunking to connect with the MGTS network is
required. However a one time settlement of $300 and a monthly
settlement of $31.20 per number to
GTS/Invest-Project "79 - Exchange" \24/5/95 4
28
compensate MGTS for the construction and maintenance of the trunking
capacity is required.
6. CAPITAL INVESTMENT
1. Switch is assumed to cost $5 million, as per quotations from Alcatel
and ATT. This investment would be made in 1997. The first 10,000
numbers are provided via the existing DMS-100 from Sovintel. The
"79/69 Company" pays a lease for this facility to Sovintel which is
included in "fixed expenses other/contingency".
2. The 70,000 numbers are assumed to be distributed via 140 PABX's half
of which will be sold. Average cost per PABX amounts to $90k
3. It is assumed that an average of 5 km of fiber-optic will have to
be constructed per PABX (sold plus own investment) at an average cost
of $9k per km including transmission equipment).
5. FINANCING
1. A loan with a maximum outstanding amount of 2.2 million dollars is
required.
2. Loan repayment as per schedule. Interest of 12% is assumed.
3. Vendor financing both from Alcatel and ATT can be obtained to cover
the investment for the switch of 5 million.
GTS/Invest-Project "79-Exchange"\24/5/95 5
29
Notes/Assumptions of "79" Business Plan
A. Capital Investment
1. Investment in the Fiber Optic Distribution Network and in PABXs
assumed at $900k each per year (total of $1,800 per year). In the
second year a Nokia Switch for $5 million is installed for a capacity
of 100,000 ports. 70,000 of these ports are to be sold by the project
and will generate traffic revenue. The remaining 30,000 ports are to
be sold to the Moscow City Telephone Network (MGTS).
B. Revenues
1. Installation
a) Ports are sold to customers at $500 in year 1. The price per port
decreases by 10% each year thereafter.
b) Ports sold to MGTS are at a constant rate of $300 per port over
the life of the project.
2. Traffic
a) Each port was assumed to generate 10,000 minutes per port per
year.
b) Of the minutes generated, the following breakdown was assumed:
5% International, 15% Intercity, 80% Local.
1) International minutes are tariffed at $1.85 per minute in
year 1 decreasing by 10% each year thereafter.
2) Intercity minutes are tariffed at $0.45 per minute in year 1
decreasing by 10% each year thereafter.
3) Local minutes are tariffed at $0.01 per minute in each year.
c) Incoming traffic revenue is earned at the rate of 10 cents per
minute. Volume of minutes is assumed to be equivalent to the
outgoing international minutes.
3. Recurring Charges
a) A monthly charge of $20 per port was assumed on the average
number of ports outstanding for each time period. The charge per
port was assumed to decrease by 10% each year after the first
year.
4. Sale of Equipment
a) It was assumed that there would be $900K of equipment sales per
year.
5. Bad Debt
a) It was assumed that there would be a 2% bad debt rate on ports
sales other than to MGTS, and on all traffic revenues. No bad
debt was assumed on incoming call revenue nor on equipment sales.
C. Cost Of Revenue
1. Installation
a) A connection fee of $300 is paid to MGTS for each port sold and
connected. It was assumed that this expense would not decrease
over time.
2. Traffic
a) International settlement is assumed to start at $0.90 per minute
in year 1 decreasing by 5% each year thereafter.
b) Intercity settlement is assumed to start at $0.36 per minute in
year 1 and remain constant at a level of 80% of intercity
revenues per minute throughout the life of the project.
3. Recurring Charges
30
a) It was assumed that 1 trunk line, at a rate of $41.20 per month,
would be required for each 6 ports in operation. The average number
of ports in service for the period was used in calculating the
cost. It was assumed that the $41.20 cost per trunk line would
not decrease over time.
4. Sale of Equipment
a) It was assumed that equipment was sold at a 25% markup.
5. Other Costs
a) Technical staff cost was assumed to start at $250K in the first
quarter and increase by 10% in the next three quarters as
operations ramp up and the project becomes fully staffed. In
the subsequent years the costs were assumed to increase 10%
each year.
b) Technical facilities were assumed to be $200K per year.
c) Depreciation was calculated on the basis of a 10 year useful life
on a straight line basis.
d) Equipment Maintenance was assumed to be $200K per year.
e) A contingency was calculated on the basis of 15% of
Staff+Facilities+Depreciation costs.
D. Sales, General & Administrative Expenses
1. Sales, Finance, and Administrative staff costs were assumed to start
at $250K in the first quarter and increase by 10% in the next three
quarters as operations ramp up and the project becomes fully staffed.
In the subsequent years the costs were assumed to increase 10% each
year.
2. Administrative facilities were assumed to be $400K per year.
3. Office Telephone costs were assumed to be $25K/year.
4. Advertising was budgeted for at 2% of overall revenue after bad debt.
5. Professional fees were assumed to be $120K in the first year and
$125k/year thereafter.
6. Travel & Entertainment was assumed to be $144k in the first year and
$150k/year thereafter.
7. Insurance and Other were assumed to start at $100K in the first
quarter and increase by 10% in the next three quarters. In the
subsequent years the costs were assumed to increase 10% each year.
8. A contingency was calculated on the basis of 10% of all SG&A expenses.
E. Other Expenses
1. Organizational costs of $240K were assumed to be written off in the
first year.
2. Interest Expense was calculated using a 12% interest rate on loans
outstanding that were necessary to cover shortfalls in cash flow.
3. The full Russian statutory rate of 38% was used in estimating income
tax expense.
31
"79 Project" ---- Income Statement
REVENUES
-------------------------------
1Q 2Q 3Q 4Q TOTAL
-D-R-A-F-T- 1996 1996 1996 1996 1996
Port Revenue 1,080 1,240 1,940 2,108 6,440
Port Revenue MGTS Sales $ 300 0 0 0 0 0
International Traffic 231 694 1,272 1,966 4,163
Intercity Traffic 169 506 928 1,434 3,038
Local Traffic 20 60 110 170 360
Incoming Traffic $ 0.10 13 38 69 106 225
Sale of PBXs 180 180 270 270 900
Bad Debt 2.0% (30) (50) (85) (115) (280)
...... ...... ..... ...... .....
TOTAL REVENUE 1,663 2,668 4,504 6,011 14,845
COST OF REVENUE
-------------------------------
VARIABLE EXPENSES
Port Payment (MGTS) 300 600 600 900 900 3,000
International Settlements 113 338 619 956 2,025
Intercity Settlements 135 405 743 1,148 2,430
Local Settlements 0 0 0 0 0
MGTS Trunk Line Payments $ 41.20 21 62 113 175 371
Sale of PBXs 75.0% 135 135 203 203 675
...... ...... ..... ...... .....
TOTAL VARIABLE FXP 1,003 1,539 2,577 3,381 8,501
FIXED EXPENSES
Comp & Benefit Tech. Staff 10.0% 250 275 303 333 1,160
Facilities 50 50 50 50 200
Depreciation 12 24 42 60 138
Int'l Channels 0 0 0 0 0
Maintenance 50 50 50 50 200
Other/Contingency (% Cost) 15.0% 47 52 59 66 225
...... ...... ..... ...... .....
TOTAL FIXED EXP 409 451 504 559 1,923
...... ...... ..... ...... .....
TOTAL COST OF REVENUE 1,412 1,991 3,081 3,941 10,424
GROSS MARGIN 251 677 1,423 2,071 4,421
GROSS MARGIN % 15% 25% 32% 34% 30%
SALES, GENERAL & ADMINISTRATIVE
-------------------------------
Comp & Benefit/Admin 10.0% 250 275 303 333 1,160
Facilities 100 100 100 100 400
Telephone 6 6 6 6 24
Advertising (% of Rev) 2.0% 33 53 90 120 297
Professional Fees 30 30 30 30 120
Travel & Entertainment 36 36 36 36 144
Insurance & Other 10.0% 100 110 121 133 464
Contingency (% of Cost) 10.0% 56 61 69 76 261
...... ...... ..... ...... .....
TOTAL SG&A 611 671 754 834 2,870
SG&A AS % OF REVENUE 37% 25% 17% 14% 19%
OPERATING MARGIN (360) 5 669 1,237 1,551
OPERATING MARGIN % -22% 0% 15% 21% 10%
OTHER EXPENSE/(INCOME)
-------------------------------
Amort of Org Costs 60 60 60 60 240
Interest Expense 12.0% 15 33 51 54 153
...... ...... ..... ...... .....
"79 Project" ---- Income Statement
TOTAL
1997 1998 1999 2000 2001 2002 1995-2002
REVENUES
-------------------------------
Port Revenue 7,740 8,850 9,530 10,310 10,880 11,240 64,990
Port Tevenue MGTS Salaes 1,500 1,500 1,500 1,500 1,500 1,500 9,000
International Traffic 12,525 18,750 23,625 27,450 30,250 32,175 148,938
Intercity Traffic 9,225 13,875 17,325 20,250 22,275 23,400 109,388
Local Traffic 1,200 2,000 2,800 3,600 4,400 5,200 19,560
Incoming Traffic 750 1,250 1,750 2,250 2,750 3,250 12,225
Sale of PBXs 900 900 900 900 900 900 6,300
Bad Debt (614) (870) (1,066) (1,232) (1,356) (1,440) (6,858)
...... ...... ...... ....... ....... ....... ........
TOTAL REVENUE 33,226 46,255 56,364 65,028 71,599 76,225 363,542
COST OF REVENUE
-------------------------------
VARIABLE EXPENSES
Port Payment (MGTS) 3,000 3,000 3,000 3,000 3,000 3,000 21,000
International Settlements 6,450 10,250 13,650 16,650 19,250 21,775 90,050
Intercity Settlements 7,425 11,250 13,650 16,200 15,150 18,525 87,630
Local Settlements 0 0 0 0 0 0 0
MGTS Trunk Line Payments 1,236 2,060 2,884 3,708 4,532 5,356 20,147
Sale of PBXs 675 675 675 675 675 675 4,725
...... ...... ...... ....... ....... ....... ........
TOTAL VARIABLE FXP 18,756 27,235 33,859 40,233 45,607 49,331 223,552
FIXED EXPENSES
Comp & Benefit/Admin 1,276 1,404 1,544 1,699 1,869 2,055 11,007
Facilities 200 200 200 200 200 200 1,400
Depreciation 868 1,040 1,220 1,400 1,580 4,760 7,998
Int'l Channels 0
Maintenance 200 200 200 200 200 200 1,400
Other/Contingency (% Cost) 350 397 445 495 547 602 3,061
...... ...... ...... ....... ....... ....... ........
TOTAL FIXED EXP 2,887 3,240 3,609 3,994 4,396 4,818 24,866
...... ...... ...... ....... ....... ....... ........
TOTAL COST OF REVENUE 21,673 30,475 37,468 44,227 50,003 54,149 248,418
GROSS MARGIN 11,553 15,780 18,896 20,801 21,596 22,076 115,124
GROSS MARGIN % 35% 34% 34% 32% 30% 29% 32%
SALES, GENERAL & ADMINISTRATIVE
-------------------------------
Comp & Benefit/Admin 1,276 1,404 1,544 1,699 1,869 2,055 11,007
Facilities 400 400 400 400 400 400 2,800
Telephone 25 25 25 25 25 25 174
Advertising (% of Rev) 665 925 1,127 1,301 1,432 525 7,271
Professional Fees 125 125 125 125 125 125 870
Travel & Entertainment 150 150 150 150 150 150 1,044
Insurance & Other 511 562 618 679 747 822 4,403
Contingency (% of Cost) 315 359 399 438 475 510 2,757
...... ...... ...... ....... ....... ....... ........
TOTAL SG&A 3,466 3,950 4,388 4,817 5,223 5,612 30,326
SG&A AS % OF REVENUE 10% 9% 8% 7% 7% 7% 8%
OPERATING MARGIN 8,087 11,830 14,508 15,985 16,373 16,464 84,798
OPERATING MARGIN % 24% 26% 26% 25% 23% 22% 23%
OTHER EXPENSE/(INCOME)
-------------------------------
Amort of Org Costs 0 0 0 0 0 0 240
Interest Expense 144 264 0 0 0 0 561
...... ...... ...... ....... ....... ....... ........
32
TOTAL OTHER EXPENSE/(INCOME) 75 93 111 114 393
NEBIT (435) (88) 555 1,123 1,458
Corporate Income Tax 38.0% (165) (33) 212 427 440
Net Income/(Loss) (270) (54) 346 696 718
STATISTICS 1Q 2Q 3Q 4Q TOTAL
1996 1996 1996 1996 1996
LINE STATISTICS
Number of Ports Sold 2,000 2,000 3,000 3,000 10,000
Cumulative Ports 2,000 4,000 7,000 10,000 10,000
Average Number of Ports 1,000 3,000 5,500 8,500 8,500
Mins/Port/year 10,000 2,500 2,500 2,500 2,500 10,000
Total Minutes (000s) 2,500 7,500 13,750 21,250 45,000
Port sales to MGTS
PORTS
Installation Revenue/port 90.0% 500 500 500 500 500
Monthly Revenue/port 90.0% 20 20 20 20 20
Port Revenue (000s) 1,080 1,240 1,940 2,180 6,440
MGTS Port Connection Fee 300 600 600 900 900 3,000
INTERNATIONAL
Revenue per Minute Int'l 90.0% $ 1.85 $ 1.85 $ 1.85 $ 1.85 $ 1.85
Int'l Settl/Min. 95.0% $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90
Pct. Int'l Usage 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Int'l Minutes 125 375 688 1,063 2,250
Int'l Revenue 231 694 1,272 1,966 4,163
Int'l Settlement 113 338 619 956 2,025
Int'l Settlement + Int'l Channel 113 338 619 956 2,025
INTERCITY
Pct. Intercity 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Rev./Min via Rostelekom 90.0% $ 0.45 $ 0.45 $ 0.45 $ 0.45 $ 0.45
Settl/Min vis Rostelekom 80.0% $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 0.36
Rev./Min -- via Rusnet 90.0% $ 0.45 $ 0.45 $ 0.45 $ 0.45 $ 0.45
Settl/Min via Rusnet 80.0% $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 0.36
Pct. Mins. via Rusnet 5.0% 7.% 9.0% 11.0% 8.0%
Avg. Revenue/min $ 0.45 $ 0.45 $ 0.45 $ 0.45 $ 0.45
Intercity Settl/Min. $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 0.36
Intercity Minutes 375 1,125 2,063 3,188 6,750
Intercity Revenue 169 506 928 1,434 3,038
Intercity Settlement 135 405 743 1,148 2,430
LOCAL
Pct. Local 80.0% 80.0% 80.0% 80.0% 80.0% 80.0%
Local Minutes 2,000 6,000 11,000 17,000 36,000
Revenue per Local Minute 100.0% $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01
Local Revenue 20 60 110 170 360
Settle per Local Minute 100.0% $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Local Settlement 0 0 0 0 0
1Q 2Q 3Q 4Q TOTAL
CASH FLOW Investment 1996 1996 1996 1996 1996
---------------------------------------- -------------------------------------------------------------
Beg Bal 0 140 122 152 100 0
Net Income (270) (54) 346 696 718
Add: Depr 12 24 42 60 138
Cash From Operations (258) (30) 388 756 856
Capital Purchases
DMS Upgrade anything more? 0
Fiber Link To Sovintel anything more? 0
Remote Subscriber Units anything more? 0
TOTAL OTHER EXPENSE/(INCOME) 144 264 0 0 0 0 801
NEBIT 7,943 11,566 14,508 5,985 16,373 16,464 83,997
Corporate Income Tax 3,018 4,395 5,513 6,074 6,222 6,256 31,919
Net Income/(Loss) 4,925 7,171 8,995 9,911 10,151 10,208 52,075
STATISTICS TOTAL
1997 1998 1999 2000 2001 2002 1995 - 2002
LINE STATISTICS
Number of Ports Sold 10,000 10,000 10,000 10,000 10,000 10,000 70,000
Cumulative Ports 20,000 30,000 40,000 50,000 60,000 70,000 70,000
Average Number of Ports 15,000 25,000 35,000 45,000 55,000 65,000 65,000
Mins/Port/year 10,000 10,000 10,000 10,000 10,000 10,000 70,000
Total Minutes (000s) 150,000 250,000 350,000 450,000 550,000 650,000 2,445,000
Port sales to MGTS 5,000 5,000 5,000 5,000 5,000 5,000 30,000
PORTS
Installation Revenue/port 450 405 365 329 296 266 2,611
Monthly Revenue/port 18 16 14 13 12 11 15
Port Revenue (000s) 7,740 8,850 9,530 10,310 10,880 11,240 64,990
MGTS Port Connection Fee 3,000 3,000 3,000 3,000 3,000 3,000 21,000
INTERNATIONAL
Revenue per Minute Int'l $ 1.67 $ 1.50 $ 1.35 $ 1.22 $ 1.10 $ 0.99 $ 1.38
Int'l Settl/Min. $ 0.86 $ 0.82 $ 0.78 $ 0.74 $ 0.70 $ 0.67 $ 0.73
Pct. Int'l Usage 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Int'l Minutes 7,500 12,500 17,500 22,500 27,500 32,500 122,250
Int'l Revenue 12,525 18,750 23,625 27,450 30,250 32,175 148,938
Int'l Settlement 6,450 10,250 13,650 16,650 19,250 21,775 90,050
Int'l Settlement + Int'l Channel 6,450 10,250 13,650 16,650 19,250 21,775 90,050
INTERCITY
Pct. Intercity 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Rev./Min via Rostelekom $ 0.41 $ 0.37 $ 0.33 $ 0.30 $ 0.27 $ 0.24 $ 0.34
Settl/Min vis Rostelekom $ 0.33 $ 0.30 $ 0.26 $ 0.24 $ 0.22 $ 0.19 $ 0.27
Rev./Min -- via Rusnet $ 0.41 $ 0.37 $ 0.33 $ 0.30 $ 0.27 $ 0.24 $ 0.34
Settl/Min via Rusnet $ 0.33 $ 0.30 $ 0.26 $ 0.24 $ 0.22 $ 0.19 $ 0.27
Pct. Mins. via Rusnet 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 14.0%
Avg. Revenue/min $ 0.41 $ 0.37 $ 0.33 $ 0.30 $ 0.27 $ 0.24 $ 0.34
Intercity Settl/Min. $ 0.33 $ 0.30 $ 0.26 $ 0.24 $ 0.22 $ 0.19 $ 0.27
Intercity Minutes 22,500 37,500 52,500 67,500 82,500 97,500 366,750
Intercity Revenue 9,225 13,875 17,325 20,250 22,275 23,400 109,388
Intercity Settlement 7,425 11,250 13,650 16,200 18,150 18,525 87,630
LOCAL
Pct. Local 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0%
Local Minutes 120,000 200,000 280,000 360,000 440,000 520,000 1,956,000
Revenue per Local Minute $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01
Local Revenue 1,200 2,000 2,800 3,600 4,400 5,200 19,560
Settle per Local Minute $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Local Settlement 0 0 0 0 0 0 0
TOTAL
CASH FLOW 1997 1998 1999 2000 2001 2002 1995 - 2002
..............................
Beg Bal 256 241 4,451 12,866 22,377 32,308
Net Income 4,925 7,171 8,995 9,911 10,151 10,208 52,078
Add: Depr 860 1,040 1,220 1,400 1,580 1,760 7,998
Cash From Operations 5,785 8,211 10,215 11,311 11,731 11,968
Capital Purchases
DMS Upgrade
Fiber Link To Sovintel
Remote Subscriber Units
33
Nokia Switch 0 5,000
Fiber Distrib. Network 180 180 270 270 900 900
PABXs 180 180 270 270 900 900
Duties and Taxes included 0
Installation included 0
Nokia Services included 0
Test Equipment ??? 0
Subtotal Capital 360 360 540 540 0 1,800 6,800
Cash Funding
Capital ??? 0
Loans 500 600 600 100 1,800 1,000
Loan Repayment (600) (600)
Subtotal Funding 500 600 600 100 (600) 1,200 1,000
Cash Flow for Period 140 (18) 30 (52) 156 256 (15)
Ending Cash 140 122 152 100 256 256 241
Cash Flow w/o Financing (360) (618) (570) (152) 756 (944) (1,015)
IRR -27.1% ERR
Year 1 2
40% .4 1.96
Discounted Cash Flow (674) (518)
Cumulative Discounted Cash Flow (NPV) (674) (1,192)
Cumulative Assets 360 720 1,260 1,800 1,800 1,800 8,600
Loans Outstanding 500 1,100 1,700 1,800 1,200 1,200 2,200
(to cover cash shortfall)
Nokia Switch 5,000
Fiber Distrib. Network 900 900 900 900 900 6,300
PABXs 900 900 900 900 900 6,300
Duties and Taxes
Installation
Nokia Services
Test Equipment
Subtotal Capital 1,800 1,800 1,800 1,800 1,800 17,600
Cash Funding
Capital
Loans
Loan Repayment (2,200)
Subtotal Funding (2,200) 0 0 0 0
Cash Flow for Period 4,211 8,415 9,511 9,931 10,168
Ending Cash 4,451 12,866 22,377 32,308 42,476
Cash Flow w/o Financing 6,411 8,415 9,511 9,931 10,168
IRR 112.3% 168.7% ERR ERR ERR
Year 3 4 5 6 7
40% 2.744 3.8416 5.37824 7.529536 10.5413504
Discounted Cash Flow 2,336 2,190 1,768 1,319 4,823 Terminal value
Cumulative Discounted Cash Flow (NPV) 1,144 3,334 5,103 5,422 11,244 of 5x cash flow
Cumulative Assets 10,400 12,200 4,000 15,800 17,600
Loans Outstanding 0 0 0 0 0
(to cover cash shortfall)
ASSUMPTIONS
Total Per No.
.............................................................................
Switch, 100,000 numbers 5,000,000 71 Up Front
Trunks 0 0
Payment to connect numbers 21,000,000 300 As sold
PABXs 6,300,000 90 As sold, ea 500 Nos = 1 PABX @ 90,000. NOTE: Half to be sold?
Fiber Optic* 6,300,000 90 As sold, ea PABX = 45,000
.......... .......
Total Investment 38,600,000 551
Numbers for use 70,000
..........
Investment per number 551
* FO=500 Nos per PBX=100 PBXs * 5km/PBX @ $9,000/km
Sale Price per No. 500 500
Sales per year of Numbers 10,000
=========================
Revenue Stats % Min Minutes Price % Rev
Intercity 76.4% 621,000 $0.46 285,660 42.2%
International 23.6% 192,000 $2.04 391,680 57.8%
....... .......
813,000 677,340
11,000 ports
.......
62 Rev/port/month
34
Exhibit 1.02(b)
to the Stock Purchase Agreement
GTS NOTE
U.S.$693,380 Date: September 6, 1995
FOR VALUE RECEIVED, the undersigned Global TeleSystems Group,
Inc., a Delaware corporation ("GTS"), HEREBY PROMISES TO PAY to the order of
Swinton Limited, an international business company organized under the laws of
the Commonwealth of the Bahamas (the "Seller"), on or before March 31, 1996, at
the Seller's option, either (i) the principal sum of U.S.$693,380 or (ii) (x)
if the corporate and shareholder approvals referred to in Section 1.02(c) of
the Stock Purchase Agreement (the "Stock Purchase Agreement"), dated as of
September 1, 1995, among GTS, the Seller, Kompaniya "Invest-Project", a limited
liability partnership organized under the laws of the Russian Federation,
GTS-Vox Limited, a private limited company organized pursuant to the Companies
Xxx 0000 of England and Wales, and MTU-Inform, a partnership organized under
the laws of the Russian Federation ("MTU-Inform"), have been obtained by such
date, a certificate (a "GTS Certificate") issued in the name of the Seller,
with all required stock transfer tax stamps affixed and bearing such legends as
are required by Section 5.01 of the Stock Purchase Agreement, evidencing 37,480
shares of common stock, par value $0.0001 per share, of GTS ("GTS Common
Stock") or (y) if such corporate and shareholder approvals have not been
obtained by the payment request date, at any time from the date hereof until
three years following the date of issuance of this Note, at the written
request of the Seller, an amount in U.S. dollars equivalent to the cash value
of such GTS Certificate, where such cash value shall be determined as follows:
(A) if shares of GTS Common Stock have been sold to the
public pursuant to a registration statement under the United States
Securities Act of 1933, as amended, the average of the closing prices
for the shares of GTS Common Stock on the principal stock exchange on
which such shares are listed or traded on the last ten trading days
preceding such payment request date; and
(B) if no such public sale shall have occurred prior to
such payment request date, the price received by GTS for shares of GTS
Common Stock in the most recent private placement of such shares or,
if no such private placement has occurred within the three months
preceding such payment request date, the price determined by an
35
2
independent financial institution of international reputation to be
agreed upon by GTS and the Seller, and, in either case, otherwise on
terms and subject to conditions to be agreed upon by GTS and the
Seller;
provided, that (a) such amount payable in U.S. dollars shall be increased by
five percent if GTS pays any dividends on GTS Common Stock from the date hereof
until the payment request date; and (b) GTS shall make the payment to the
Seller no later than ten days following such payment request date;
provided, further, that in case of either (i) or (ii) above, Invest-Project, a
closed joint stock company organized under the laws of the Russian Federation
("AOZT") has available 20,000 telephone numbers, in addition to the 5,000
telephone numbers provided by MTU-Inform to AOZT in accordance with Section
5.02(b) of the Stock Purchase Agreement, for commencement of service by the
payment request date, which in no event shall be later than March 31, 1996, in
accordance with the terms and conditions of the Stock Purchase Agreement and an
agreement between AOZT and Moscow City Telephone Network, dated May 29, 1995,
as amended by Supplement 1 No. 1657 to Agreement No. 1587 dated June 23, 1995
("Agreement No. 1587"), pursuant to which AOZT is authorized to receive,
construct and sell 150,000 telephone numbers, using the 69 zone and portions of
the 79 and 71 zones and the Seller has provided written notice to GTS of such
availability, as required by Section 1.02(d) of the Stock Purchase Agreement.
No interest shall be payable on this Note. Subject to the
terms and conditions contained herein, the principal amount is payable in
lawful money of the United States of America to the Seller, to such bank
account as shall be designated by the Seller no less than five business days
prior to the requested payment date. This Note is the GTS Note referred to in
Section 1.02(b) of the Stock Purchase Agreement and shall be governed by the
laws of the State of New York applicable to contracts executed in and to be
performed entirely within that state.
This Note may not be assigned by operation of law or otherwise
without the express written consent of each of the parties hereto (which
consent may be granted or withhold in the sole discretion of such parties);
provided, however, that GTS may assign this Note to any affiliate of GTS
without the consent of any of the parties hereto.
GLOBAL TELESYSTEMS GROUP, INC.
By
----------------------------------
Name: Xxxxx Xxxxxxxxxxx
Title: Senior Vice President
36
Exhibit 1.02(d)
to the Stock Purchase Agreement
GTS NOTE II
Date:
----------------------
FOR VALUE RECEIVED, the undersigned Global TeleSystems Group,
Inc., a Delaware corporation ("GTS"), HEREBY PROMISES TO PAY to the order of
Swinton Limited, an international business company organized under the laws of
the Commonwealth of the Bahamas (the "Seller"), at any time from the date
hereof until three years following the date of issuance of this GTS Note II, at
the written request of the Seller, an amount in U.S. dollars equivalent to the
cash value of [INSERT NUMBER OF SHARES TO BE ISSUED PURSUANT TO THE GTS
CERTIFICATE ON SUCH DATE] shares of common stock, par value $0.0001 per share,
of GTS ("GTS Common Stock"), calculated as follows:
(i) if shares of GTS Common Stock have been sold to the
public pursuant to a registration statement under the United States
Securities Act of 1933, as amended, the average of the closing prices
for the shares of GTS Common Stock on the principal stock exchange on
which such shares are listed or traded on the last ten trading days
preceding such payment request date; and
(ii) if no such public sale shall have occurred prior to
March 31, 1996, (A) the price received by GTS for shares of GTS Common
Stock in the most recent private placement of such shares or, (B) if
no such private placement has occurred within the three months
preceding such payment request date, the price determined by an
independent financial institution of international reputation to be
agreed upon by GTS and the Seller, and, in either case, otherwise on
terms and subject to conditions to be agreed upon by GTS and the
Seller;
provided, however, that such amount payable in U.S. dollars shall be increased
by five percent if GTS pays any dividends on GTS Common Stock from the date
hereof until the payment request date; and provided, further, that GTS shall
make the payment to the Seller no later than ten days following such payment
request date.
This GTS Note II shall be governed by the laws of the State of
New York applicable to contracts executed in and to be performed entirely
within that state.
37
2
This GTS Note II may not be assigned by operation of law or
otherwise without the express written consent of each of the parties hereto
(which consent may be granted or withhold in the sole discretion of such
parties); provided, however, that GTS may assign this GTS Note II to any
affiliate of GTS without the consent of any of the parties hereto.
GLOBAL TELESYSTEMS GROUP, INC.
By [ILLEGIBLE]
---------------------------------
Name:
Title:
38
Exhibit 1.04(c) to
Stock Purchase Agreement
FORM OF INDEMNITY AGREEMENT
September 6, 1995
Swinton Limited
Xxxx House
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxx
Xxxxxxxxxx, Xxxxxxx XX00 0XX
Gentlemen:
Reference is made to the Stock Purchase Agreement dated as of
September 6, 1995 (the "Stock Purchase Agreement") among Global TeleSystems
Group, Inc. ("GTS"), Kompaniya "Invest-Project" (the "Parent"), Swinton
Limited, an international business company organized under the laws of the
Commonwealth of the Bahamas ("Swinton"), GTS-Vox Limited ("GTS-Vox") and
MTU-Inform. Capitalized terms used herein and not otherwise defined herein have
the meanings ascribed to them in the Stock Purchase Agreement.
1. Swinton agrees to indemnify GTS and its affiliates,
officers, directors, employees, agents, successors and assigns (each an
"Indemnified Party") and hold them harmless from any and all liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, attorneys' and consultants' fees and
expenses) actually suffered or incurred by them (including, without limitation,
any Action brought or otherwise initiated by any of them) (hereinafter a
"Loss"), arising out of or resulting from:
(i) the breach of any representation, warranty, covenant
or agreement made by any of GTS-Vox, Swinton, the Parent or MTU-Inform
in the Stock Purchase Agreement;
(ii) any liabilities of GTS-Vox and "Invest-Project", a
closed joint stock company organized under the laws of the Russian
Federation ("AOZT"), whether arising before or after the Closing Date,
arising from or relating to the ownership or actions or inactions of
GTS-Vox or AOZT or the conduct of their businesses prior to the
Closing;
39
2
(iii) any claim or cause of action of any third party to
the extent arising out of any action, inaction, event, condition,
liability or obligation of any of GTS-Vox, Swinton, the Parent,
MTU-Inform or AOZT occurring or existing prior to the Closing; or
(iv) any liabilities for taxes of any of GTS-Vox, Swinton,
the Parent, MTU-Inform or AOZT for any period.
To the extent that Swinton's undertakings set forth in this Agreement may be
unenforceable, Swinton shall contribute the maximum amount that it is permitted
to contribute under applicable law to the payment and satisfaction of all
Losses incurred by an Indemnified Party.
2. An Indemnified Party shall give Swinton notice of any
matter which an Indemnified Party has determined has given or could give rise
to a right of indemnification under this Agreement, within 60 calendar days of
such determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement and the Stock Purchase Agreement in respect of which such right of
indemnification is claimed or arises. The obligations and liabilities of
Swinton under this Agreement with respect to Losses arising from claims of any
third party which are subject to the indemnification provided for in this
Agreement ("Third Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: if an Indemnified Party shall
receive notice of any Third Party Claim, the Indemnified Party shall give
Swinton notice of such Third Party Claim within 30 calendar days of the receipt
by the Indemnified Party of such notice; provided, however, that the failure to
provide such notice shall not release Swinton from any of its obligations under
this Agreement, except to the extent Swinton is materially prejudiced by such
failure and shall not relieve Swinton from any other obligation or liability
that they may have to any Indemnified Party otherwise than under this
Agreement. If Swinton acknowledges in writing its obligation to indemnify the
Indemnified Party hereunder against any Losses that may result from such Third
Party Claim, then Swinton shall be entitled to assume and control the defense
of such Third Party Claim at its expense and through counsel of its choice if
it gives notice of its intention to do so to the Indemnified Party within five
business days of the receipt of such notice from the Indemnified Party;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate, in the judgment of the
Indemnified Party in its sole and absolute discretion, for the same counsel to
represent the Indemnified Party and Swinton, then the Indemnified Party shall
be entitled to retain its own counsel, in each jurisdiction for which the
Indemnified Party determines counsel is required, at the expense of Swinton. In
the event Swinton exercises the right to undertake any such defense against any
such Third Party Claim, as provided above, the Indemnified Party shall
cooperate with Swinton in such defense and make available to Swinton, at
Swinton's expense, all witnesses, pertinent records, materials and information
in the Indemnified Party's possession or under
40
3
the Indemnified Party's control relating thereto as is reasonably required by
Swinton. Similarly, in the event the Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, Swinton
shall cooperate with the Indemnified Party in such defense and make available
to the Indemnified Party, at Swinton's expense, all such witnesses, records,
materials and information in Swinton's possession or under Swinton's control
relating thereto as is reasonably required by the Indemnified Party. No such
Third Party Claim may be settled by Swinton without the prior written consent
of the Indemnified Party.
3. Miscellaneous. (a) Notices, Etc. All notices and
other communications required or permitted hereunder shall be in writing and
shall be delivered personally if a receipt is obtained, by facsimile (followed
within 24 hours by a hard copy sent by overnight delivery service as
hereinafter provided) or by overnight delivery service with a service that
customarily obtains a receipt for delivery, to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 3(a)):
If to GTS:
Global TeleSystems Group, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, 00xx Xxxxx
XxXxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
If to Swinton:
Swinton Limited
Xxxx House
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxx
Xxxxxxxxxx, Xxxxxxx XX00 0XX
Facsimile No.: 00-0000-000000
Attention: Xxxx Xxxxx-Xxxxx
(b) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate
41
4
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
(c) Entire Agreement. This Agreement and the Stock
Purchase Agreement constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, between GTS and Swinton with respect to
the subject matter hereof.
(d) Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of GTS and
Swinton (which consent may be granted or withheld in the sole discretion of
such parties); provided, however, that GTS may assign this Agreement to any
affiliate of GTS without the consent of Swinton.
(e) Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of, GTS and
Swinton.
(f) Governing Law and Governing Language. This Agreement
shall be governed by, and construed in accordance with, the laws of the State
of New York, applicable to contracts executed in and to be performed entirely
within that state. This Agreement shall be executed in the English and Russian
languages; in case of any difference in interpretation between the English and
Russian versions of this Agreement, both versions shall govern.
(g) Arbitration. Where any dispute or disagreement among
the parties hereto, arising out of or in connection with this Agreement, cannot
be settled through negotiations within thirty days after one of the parties
hereto has notified the other parties in writing about the existence of a
respective dispute, the parties shall have the right to initiate an arbitration
procedure for the purpose of settling the dispute or disputes. Such a procedure
shall be conducted at the Arbitration Institute of the Stockholm Chamber of
Commerce (Stockholm, Sweden) under the regulations of the Arbitration
Institute, by three arbitrators appointed in keeping with such regulations. The
arbitration examination shall be conducted in English. Resolutions and the
decision adopted during the arbitration procedure shall be final and binding
for both parties and may be enforced by a law court of a respective
jurisdiction, with the expenses incurred in connection with such an arbitration
procedure to be paid by the losing party.
(h) Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
42
5
If the foregoing is in accordance with your understanding, please sign
and return one counterpart hereof and, upon execution and delivery hereof by
you, this Agreement shall constitute a binding agreement among GTS and Swinton.
Very truly yours,
GLOBAL TELESYSTEMS GROUP, INC.
By: /s/ XXXXX XXXXXXXXXXX
--------------------------------
Name: Xxxxx Xxxxxxxxxxx
Title: Senior Vice President
Accepted and agreed as of the date hereof:
SWINTON LIMITED
By /s/ A. CHAMBAZOV
-------------------------------
Name: A. Chambazov
Title: Attorney-in-Fact
43
Exhibit 1.04(d) to
Stock Purchase Agreement
FORM OF SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT (this "Agreement") dated as of
September 6, 1995 among GTS-Vox Limited, a private limited company organized
pursuant to the Companies Xxx 0000 of England and Wales (the "Company"), Global
TeleSystems Group, Inc., a Delaware corporation ("GTS"), and Swinton Limited,
an international business company organized under the laws of the Commonwealth
of the Bahamas ("Swinton").
WHEREAS, the Company, GTS and Swinton are parties to a Stock
Purchase Agreement dated as of September 6, 1995 (the "Purchase Agreement"),
pursuant to which GTS has agreed to purchase from Swinton, and Swinton has
agreed to sell to GTS, simultaneously herewith, 5,264 ordinary shares, par
value one xxxxx xxxxxxxx per share, of the Company ("Ordinary Shares");
WHEREAS, following such purchase and sale, Swinton will own
4,736 Ordinary Shares; and
WHEREAS, it is a condition to the obligations of the parties
under the Purchase Agreement that the parties hereto enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, the parties hereto
hereby agree as follows:
1. Composition and Number of the Board. (a) Subject to
Section 1(b), each of GTS, on the one hand, and Swinton and those Permitted
Transferees that have complied with the provisions of Section 4, on the other
hand (the "Swinton Parties"), shall be entitled to designate such number of
persons for election to the Board and each committee of the Board equal, in
each case, to one-half of the total number of members thereof, and each of GTS
and the Swinton Parties agrees to vote any Ordinary Shares owned by it to cause
the election of such designees to the Board, and the Company agrees to take all
necessary action to cause the election of each such designee to the Board.
Unless the parties hereto agree otherwise, there shall be four members of the
Board. In the event that a vacancy is created at any time by the death,
disability, retirement, resignation or removal (with or without cause) of any
director, the party designating such director shall have the right to designate
a replacement director to fill such vacancy and each of GTS and the Swinton
Parties agrees to
44
2
vote any Ordinary Shares owned by it to cause the election of each such
designee to the Board, and the Company agrees to take all necessary action to
cause the election of each such designee to the Board. Upon the written request
of the Swinton Parties or GTS, as the case may be, to remove any director
designated by such party, GTS and the Swinton Parties shall take or cause to be
taken all actions necessary to remove the director, and any replacement
director shall be designated by the requesting party and elected as provided in
the first sentence of this Section 1(a). Neither GTS nor the Swinton Parties
shall take any action to cause the removal of any director designated by the
other without cause.
(b) GTS and the Swinton Parties shall be entitled to
designate directors as set forth in Section 1(a), and GTS, the Swinton Parties
and the Company shall take the actions specified in Section 1(a), in each case
so long as the Swinton Parties hold all of the Ordinary Shares held by such
Persons as of the date of this Agreement.
2. Board Procedures. The Board shall follow the
following procedures:
(a) Meetings. The Board shall hold regularly scheduled
meetings at such times as may from time to time be fixed by resolution
of the Board, and no notice (other than the resolution) need be given
of a regularly scheduled meeting. Special meetings of the Board may be
called by any member of the Board or in the manner designated in the
Memorandum of Association of the Company as in effect from time to
time and may be held at any time upon oral, telephonic, telegraphic or
facsimile notice duly given or sent at least seven days, or by written
notice sent by express mail at least seven days, before the meeting to
each director, provided that all such notices to directors located
outside the United Kingdom shall be given or sent orally or by
telephone, telegraph or facsimile transmission (receipt of which has
been duly confirmed). Reasonable efforts shall be made to ensure that
each director actually receives timely notice of any such special
meeting.
(b) Agenda. The Board shall use reasonable efforts to
supply a reasonably detailed agenda to each director reasonably in
advance of each meeting, including each special meeting, of the Board
to adequately inform directors regarding matters to come before the
Board. Any director wishing to place a matter on the agenda for any
meeting of the Board may do so by communicating with the Chairman of
the Board sufficiently in advance of the meeting of the Board so as to
permit timely dissemination to all directors of information with
respect to the agenda items.
(c) Powers of the Board. The Board shall reserve to
itself the power to approve transactions for all business conducted by
the Company that are of a type customarily subject to board approval
as a matter of good corporate practice for corporations organized in
England and Wales, and shall not delegate to any officers of the
Company or to any other Persons the authority to conduct business in
any manner
45
3
that would circumvent, or deprive GTS, the Swinton Parties or any
other Person of the rights or protections accorded to it under, this
Agreement.
(d) Decisions of the Board. All decisions of the Board
shall be made unanimously.
3. Limitation on Amendments to Articles of Association
and Memorandum of Association. Without the consent of GTS or the Swinton
Parties, as the case may be, the Company shall not, and neither the Swinton
Parties nor GTS shall cause or permit the Company to, amend its Articles of
Association or Memorandum of Association in any manner that would be adverse to
such party. GTS and the Swinton Parties agree that this Agreement shall have
priority over GTS-Vox' Articles of Association and that the Chairman of
GTS-Vox shall not have a casting vote.
4. Restriction on Transfer of Ordinary Shares. (a) None
of the Swinton Parties shall, directly or indirectly, make or solicit any sale
of, or create, incur, solicit or assume any Encumbrance with respect to, any
Ordinary Share, except pursuant to the Agreement, dated as of September 6,
1995, between Swinton, the Company and the other parties thereto (the "Swinton
Shareholders' Agreement"), which provides for the distribution of the Ordinary
Shares held by Swinton to the shareholders of Swinton. In connection with such
distribution, each of the Persons to whom such distribution is made (a
"Permitted Transferee") shall (i) execute and deliver to the Company and GTS an
agreement, in form and substance reasonably satisfactory to the Company and
GTS, whereby such Permitted Transferee confirms that, with respect to the
Ordinary Shares that are the subject of such distribution, it shall be deemed
to be a "Swinton Party" for purposes of this Agreement and agrees to be bound
by all the terms of this Agreement, and (ii) deliver to the Company and GTS an
opinion of counsel, satisfactory in form and substance to the Company and GTS,
to the effect that the agreement referred to above that is delivered by such
Permitted Transferee is a legal, valid and binding obligation of such Permitted
Transferee enforceable against such Permitted Transferee in accordance with its
terms. Upon the execution and delivery by such Permitted Transferee of the
agreement referred to in clause (i) of the preceding sentence and the delivery
of the opinion of counsel referred to in clause (ii) of the preceding sentence,
such Permitted Transferee shall be deemed a "Swinton Party" for purposes of
this Agreement and shall have the rights and be subject to the obligations of a
Swinton Party under this Agreement, in each case with respect to the Ordinary
Shares beneficially owned by such Permitted Transferee.
(b) Other than as provided pursuant to Section 4(a), if
any of the Swinton Parties, on the one hand, or GTS, on the other hand, intends
to sell or transfer any Ordinary Shares or shares of common stock of Swinton,
pursuant to a bona fide offer from a third party (the "Offer"), such party (the
"Offeror") shall notify the other party to this Agreement within five business
days of its receipt of the Offer, disclosing the price, terms and
46
4
conditions of the sale and the name of the proposed purchaser. Such notice
shall constitute a written offer to sell such shares to the other party at the
time of the offer, at the price, terms and conditions of the Offer. Such other
party shall have a period of thirty days in which to accept the offer (the
"Offer Period"). In the event that the Offeror has not received from the other
party, within the Offer Period, an irrevocable written acceptance of such offer
to purchase all (but not less than all) of Ordinary Shares or shares of common
stock of Swinton offered to them, then such other party shall be deemed to have
declined to purchase any such shares.
(c) In the event that such other party does not purchase
the shares offered to it pursuant to Section 4(b), the Offeror may sell such
Ordinary Shares or shares of common stock of Swinton to the third party who
made the Offer within ninety days from the expiry of the Offer Period;
provided, however, that such sale shall not be made at a lower price or upon
less favorable terms to the Offeror that the original Offer. If the price
should be decreased or the terms or conditions made more favorable to the
proposed purchaser, then the shares shall be reoffered to the other parties to
this Agreement pursuant to this Section 4.
5. Access to Information. From and after the date
hereof, the Company will permit representatives of GTS and its affiliates to
obtain all documents and other information in the possession of the Company as
may reasonably be requested in order to enable GTS to monitor its investment in
the Company and to exercise its rights under this Agreement, and, to the extent
applicable, to provide such other access and information as GTS may reasonably
require.
6. Representations and Warranties of the Parties. Each
party signatory hereto hereby represents and warrants to the other parties
signatory hereto that (i) such party is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary corporate power and authority to enter into
this Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby and (ii) this Agreement has been duly executed
and delivered by such party, and (assuming due authorization, execution and
delivery by the other parties signatory hereto) this Agreement constitutes a
legal, valid and binding obligation of such party enforceable against such
party in accordance with its terms.
7. Miscellaneous. (a) Notices, Etc. All notices and
other communications required or permitted hereunder shall be in writing and
shall be delivered personally if a receipt is obtained, by facsimile (followed
within 24 hours by a hard copy sent by overnight delivery service as
hereinafter provided) or by overnight delivery service with a service that
customarily obtains a receipt for delivery, to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 7(a)):
47
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If to GTS:
Global TeleSystems Group, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, 00xx Xxxxx
XxXxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
If to Swinton:
Swinton Limited
Xxxx House
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxx
Xxxxxxxxxx, Xxxxxxx XX00 0XX
Facsimile No.: 00-0000-000000
Attention: Xxxx Xxxxx-Xxxxx
(b) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
(c) Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, both written and
oral, between GTS and Swinton with respect to the subject matter hereof.
(d) Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of GTS and
Swinton (which consent may be granted or withheld in the sole discretion of
such parties); provided, however, that GTS may assign this Agreement to any
affiliate of GTS without the consent of the Swinton Parties.
(e) No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other person any legal or
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6
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
(f) Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of, the
Company, GTS and Swinton.
(g) Governing Law and Governing Language. This Agreement
shall be governed by, and construed in accordance with, the laws of the State
of New York, applicable to contracts executed in and to be performed entirely
within that state. This Agreement shall be executed in the English and Russian
languages; in case of any difference in interpretation between the English and
Russian versions of this Agreement, both versions shall govern.
(h) Arbitration. Where any dispute or disagreement among
the parties hereto, arising out of or in connection with this Agreement, cannot
be settled through negotiations within thirty days after one of the parties
hereto has notified the other parties in writing about the existence of a
respective dispute, the parties shall have the right to initiate an arbitration
procedure for the purpose of settling the dispute or disputes. Such a procedure
shall be conducted at the Arbitration Institute of the Stockholm Chamber of
Commerce (Stockholm, Sweden) under the regulations of the Arbitration
Institute, by three arbitrators appointed in keeping with such regulations. The
arbitration examination shall be conducted in English. Resolutions and the
decision adopted during the arbitration procedure shall be final and binding
for both parties and may be enforced by a law court of a respective
jurisdiction, with the expenses incurred in connection with such an arbitration
procedure to be paid by the losing party.
(i) Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
(j) Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
(k) Termination. This Agreement shall terminate on the
tenth anniversary of the date hereof.
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
GTS-VOX LIMITED
[SEAL] By /s/ [ILLEGIBLE]
------------------------------------------
Name: London Auditing and Consulting Ltd.
Title: Director
GLOBAL TELESYSTEMS GROUP, INC.
By /s/ XXXXX XXXXXXXXXXX
------------------------------------------
Name: Xxxxx Xxxxxxxxxxx
Title: Senior Vice President
SWINTON LIMITED
By /s/ A. CHAMBAZOV
------------------------------------------
Name: A. Chambazov
Title: Attorney-in-Fact
50
CLOSING MEMORANDUM
GLOBAL TELESYSTEMS GROUP, INC.
Purchase of 5,264 Ordinary Shares
of
GTS-VOX LIMITED
from
SWINTON LIMITED
September 6, 1995
I. DEFINED TERMS
Any defined term not defined herein, but defined in the Purchase Agreement,
shall have the meaning defined therein and unless otherwise indicated, section
references are to the Purchase Agreement. For convenience of reference, the
following defined terms are used herein, unless the context otherwise indicates:
Agreement Xx. 0000 Xxxxxxxxx Xx. 0000, dated May 29, 1995, between AOZT
and MCTN.
AOZT Invest-Project, a closed joint stock company organized
under the laws of the Russian Federation.
GTS Global TeleSystems Group, Inc., a Delaware corporation.
GTS-Vox GTS-Vox Limited, a private limited company organized
pursuant to the Companies Xxx 0000 of England and
Wales.
Indemnity Agreement Indemnity Agreement, dated as of the date hereof,
between GTS and the Seller.
MCTN Moscow City Telephone Network.
MTU-Inform MTU-Inform, a partnership organized under the laws of
the Russian Federation.
51
Parent Kompaniya "Invest-Project", a limited liability
partnership organized under the laws of the Russian
Federation.
Purchase Agreement Stock Purchase Agreement, dated as of September 6,
1995, among GTS, the Parent, the Seller, GTS-Vox and
MTU-Inform.
Seller Swinton Limited, an international business company
organized under the laws of the Commonwealth of the
Bahamas.
Shareholders Agreement Shareholders Agreement, dated as of the date hereof,
between GTS and the Seller.
S&S Shearman & Sterling, counsel to GTS.
II. ACTIONS TAKEN PRIOR TO THE CLOSING
A. By the Parent
1. On May 6, 1994, V.I. Volchek, director general of the Parent, and X.X.
Xxxxxx, director general of MTU-Inform, executed the Application for
Incorporation of AOZT.
2. On March 3, 1995, the Parent and GTS entered into a Memorandum of
Understanding.
3. On May 24, 1995, the Parent and GTS agreed to a Business Plan.
4. On June 23, 1995, GTS, AOZT and the Parent entered into the Frame
Transaction Agreement.
5. On July 6, 1995, the Parent and GTS-Vox entered into an Agreement of
Purchase and Sale No. 5/14.
6. Between July 20 and July 26, the Parent purchased shares of AOZT.
GTS-VOX duly became a shareholder of AOZT, which is registered with
the Russian State Registration Authority.
52
B. By Swinton
1. On June 22, 1995, Xxxxxxxxxx Xxxxxx, an assistant secretary of
Mossfon Nominees International, Ltd., and Keloine Xxxxx, an assistant
secretary of Mossfon Nominees Limited, executed the Memorandum of
Association of the Seller.
2. On June 22, 1995, Xxxxxxxxxx Xxxxxx, an assistant secretary of
Mossfon Nominees International, Ltd., and Keloine Xxxxx, an assistant
secretary of Mossfon Nominees Limited, executed the Articles of
Association of the Seller.
3. On June 22, 1995, the Registrar General of the Commonwealth of the
Bahamas certified the incorporation of the Seller pursuant to the
International Business Companies Act (No. 2 of 1990) as an
international business company on such date.
4. On September 6, 1995, Swinton and its shareholders entered into a
Shareholders' Agreement.
C. By GTS-Vox
1. On February 1, 1995, Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxx executed the
Memorandum of Association of Swinton Limited.
2. On February 1, 1995, Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxx executed the
Articles of Association of GTS-Vox.
3. On June 28, 1995, the registrar of Companies for England and Wales
certified the incorporation of GTS-Vox under the Companies Xxx 0000 as
a private limited company on such date.
4. On July 4, 1995, it was resolved that Xxxxxxx Muraev be appointed
attorney-in-fact to purchase 95% of MTU-Inform on behalf of GTS-Vox
Limited and a power of attorney was issued on his behalf.
5. On July 6, 1995, the Parent and GTS-Vox entered into an Agreement of
Purchase and Sale No. 5/14.
6. On July 22, 1995, GTS-Vox duly became a shareholder of AOZT.
53
D. By AOZT
1. On May 6, 1994, V.I. Volchek, director general of the Parent, and
X.X. Xxxxxx, director general of MTU-Inform, executed the Application
for Incorporation of AOZT.
2. On May 6, 1994, V.I. Volchek, director general of the Parent, and X.X.
Xxxxxx, director general of MTU-Inform, executed the By-Laws of AOZT.
3. On May 29, 1995, AOZT and MCTN entered into Agreement No. 1587.
4. On June 23, 1995, GTS, AOZT and the Parent entered into the Frame
Transaction Agreement.
5. On June 23, 1995, AOZT and MCTN entered into Supplement 1 No. 1657 to
Agreement No. 1587.
E. By MTU-Inform
1. On May 30, 1992, MTU-Inform was formed and registered.
2. On May 6, 1994, MTU-Inform became a shareholder of AOZT.
3. On June 23, 1995, MTU-Inform approved the terms of the Frame
Transaction Agreement.
4. On July 5, 1995, MTU-Inform agreed that GTS-Vox would become a
shareholder of and the Parent of AOZT.
F. By GTS
1. On March 3, 1995, the Parent and GTS entered into a Memorandum of
Understanding.
2. On May 24, 1995, the Parent and GTS agreed to a Business Plan.
3. On June 23, 1995, GTS, AOZT and the Parent entered into the Frame
Transaction Agreement.
54
III. TRANSACTIONS EFFECTED AND DOCUMENTS DELIVERED AT THE CLOSING
As of September 6, 1995, (i) GTS, each of the Swinton Parties
and MTU-Inform had received, each in form and substance satisfactory to GTS,
all authorizations, consents, orders and approvals of all governmental
authorities and officials and all third-party consents and estoppel
certificates which GTS deemed necessary or desirable for the consummation of
the transactions contemplated by the Purchase Agreement; (ii) GTS had completed
all of its business, legal, accounting and environmental due diligence with
respect to GTS-Vox and AOZT and was satisfied with the results thereof; and
(iii) No event or events had occurred, or were reasonably likely to occur,
which, individually or in the aggregate, had, or could have, a material adverse
effect upon the business condition (financial or otherwise), prospects,
affairs, operations, properties or assets of GTS-Vox or AOZT. [6.02(d), (j),
(k)]. These conditions to the Closing having been met, the Closing was held on
September 6, 1995, (the "Closing Date") at 00/0 Xxxxxxxx Xxxxxxxx, Xxxxxx,
Xxxxxx. All transactions at the Closing were deemed to have taken place
simultaneously, and no transaction was deemed to have been completed, no
document was deemed to have been delivered and no payment was deemed to have
been made until all transactions had been completed, all documents had
been delivered and all payments had been made. Unless otherwise indicated, all
documents were dated the date of the Closing. Unless otherwise indicated, one
copy of each of the documents and certificates was delivered to the Parent, the
Seller, GTS-Vox, MTU-Inform, GTS and S&S, making a total of six copies of each
delivered at the Closing. The persons present at the Closing (in person or by
phone) are listed in Exhibit A attached to this Closing Memorandum.
55
A. From the Parent
1. A certificate, in the form attached hereto as Annex A.1.,
signed by the General Director of the Parent. [1.04(f);
6.02(a)]
2. A certificate, in the form attached hereto as Annex A.2., of
the General Director the Parent. [1.04(f); 6.02(b), (c)]
B. From the Seller
1. Stock certificate evidencing the GTS-Vox Shares duly endorsed
to GTS, and accompanied by a stock transfer form duly executed
to GTS, in form satisfactory to GTS, and the Seller shall pay
for all required stock transfer tax stamps to be affixed
thereon. [1.04(a)]
2. A copy of the Option Agreement, executed by the Seller.
[1.04(d); 6.02(d)]
3. A copy of the Shareholders' Agreement, executed by the Seller.
[1.04(e); 6.02(g)]
4. A certificate, in the form attached hereto as Annex B.1., of
the [Secretary or an Assistant Secretary] of the Seller.
[1.04(f); 6.02(b), (c)]
5. A certificate, in the form attached hereto as Annex B.2.,
signed by a duly authorized officer of the Seller. [1.04(f);
6.02(a)]
6. A receipt, in the form of Annex B.3, for (i) L.52.64
and (ii) the GTS Note delivered by GTS to the Seller pursuant
to Section 1.02(b). [1.04(b)]
C. From GTS-Vox
1. A certificate, in the form attached hereto as Annex C.1.,
signed by a duly authorized officer of GTS-Vox. [1.04(f);
6.02(a)]
2. A certificate, in the form attached hereto as Annex C.2., of
the [Secretary or an Assistant Secretary] of GTS-Vox.
[1.04(e); 6.02(b), (c), (h) and (i)]
3. An undertaking executed by Xxxx Xxxxx-Xxxxx stating that
GTS-Vox will take the stock certificate evidencing the GTS-Vox
Shares to the English tax office and pay to have all
appropriate stock transfer tax stamps affixed thereon.
56
D. From AOZT
1. A copy of the Indemnity Agreement, executed by Swinton.
[1.04(d); 6.02(e)]
2. A certificate, in the form attached hereto as Annex D.1., of
the General Director AOZT. [1.04(e); 6.02(h), (i)]
E. From MTU-Inform
1. A certificate, in the form attached hereto as Annex E.1.,
signed by the First Deputy of the General Director of
MTU-Inform. [1.04(f); 6.02(a)]
2. A certificate, in the form attached hereto as Annex E.2., of
the First Deputy of the General Director of MTU-Inform.
[1.04(f); 6.02(b), (c)]
F. From GTS
1. The GTS Certificate set forth in Section 1.02(b). [1.05(a)]
2. A copy of the Indemnity Agreement, executed by GTS. [1.05(c)]
3. A copy of the Option Agreement, executed by GTS. [1.05(d)]
4. A copy of the Shareholders' Agreement, executed by GTS.
[1.05(e)]
5. A certificate, in the form attached hereto as Annex F.1.,
signed by a duly authorized officer of GTS. [1.05(f);
6.01(a)]
6. A certificate, in the form attached hereto as Annex F.2., of
the [Secretary or an Assistant Secretary] of GTS. [1.05(f);
6.01(b), (c)]
7. A receipt, in the form of Annex F.3., for the GTS-Vox Shares
delivered by the Seller to GTS. [1.05(b)]
57
EXHIBIT A
PERSONS AT CLOSING
From the Parent
X. Xxxxxxx, Director General
From Swinton
A. Chambazov, Attorney-in-Fact
London Corporate Services Limited, represented by M. Muraev, Secretary
From GTS-Vox
London Auditing & Consulting Ltd., represented by Xx. X. Xxxxx-Xxxxx
London Corporate Services Ltd., represented by X. Xxxxx-Xxxxx, Secretary
From AOZT
D.A. Gzomov, General Director
From MTU-Inform
X. Xxxxxxxxxxx, First Deputy of the General Director
From GTS
Xxxxx Xxxxxxxxxxx, Senior Vice President
58
ANNEX A.1
KOMPANIYA "INVEST-PROJECT"
Certificate as to Truth and Correctness of
Representations and Warranties and as to
Performance of and Compliance with
Agreements and Covenants
I, X. Xxxxxxx, the General Director of Kompaniya "Invest-Project", a
limited liability partnership organized under the laws of the Russian
Federation (the "Company"), hereby certify on behalf of the Company in my
capacity as an officer of the Company, and not in my personal capacity, that:
1. The representations and warranties of the Company contained in the
Stock Purchase Agreement, dated as of September 6, 1995, among Global
TeleSystems Group, Inc., the Company, Swinton Limited, GTS-Vox and
MTU-Inform were true and correct when made and are true and correct as
of the date hereof, with the same force and effect as if made as of
the date hereof, other than such representations and warranties as are
made as of another date.
2. The Company has performed or complied with the covenants and
agreements contained in the Stock Purchase Agreement to be complied
with by the Company on or prior to the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 6th day of September, 1995.
/s/ X. XXXXXXX
[SEAL] ----------------------------
X. Xxxxxxx
General Director
59
ANNEX A.2
KOMPANIYA "INVEST-PROJECT"
Certificate as to Truth and Correctness of
Resolutions and as to Election,
Qualification, Incumbency and Signatures
I, X. Xxxxxxx, do hereby certify that:
1. I am the duly elected, qualified and acting General Director of
Kompaniya "Invest-Project", a limited liability partnership organized under the
laws of the Russian Federation (the "Company"), and, in such capacity, have
access to and the authority to certify to the books and records of the Company;
2. Attached hereto as Exhibit A is a true, correct and complete copy of
resolutions duly adopted by the General Meeting and Board of Directors of the
Company at a meeting duly held on [Date], 1995; such resolutions have not been
rescinded and are in full force and effect on the date hereof.
3. The person named below at March 3, 1995, and at all times subsequent
thereto, up to and including the date hereof, has been a duly elected,
qualified and acting officer of the Company holding the office set forth
opposite his name below, and the signature of such person appearing opposite
his name is his genuine signature.
Name Title Signature
M. Muraev ________________________
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 6th day of September, 1995.
/s/ X. XXXXXXX
[Seal] ----------------------------
X. Xxxxxxx
General Director
60
I, M. Muraev, in my capacity as GTS General Counsel-CIS, do hereby
certify that Xx. X. Xxxxxxx is the duly elected, qualified and acting General
Director of the Company and the signature above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of
September, 1995.
/s/ M. MURAEV
----------------------
M. Muraev
GTS General Counsel-CIS
61
ANNEX B.1
SWINTON LIMITED
Certificate as to Truth and Correctness of
Representations and Warranties and as to
Performance of and Compliance with
Agreements and Covenants
Swinton Limited, an international business company organized under the laws
of the Commonwealth of the Bahamas (the "Company") does hereby certify as
follows:
1. The representations and warranties of the Company contained in the
Stock Purchase Agreement, dated as of September 6, 1995, among Global
TeleSystems Group, Inc., Kompaniya "Invest-Project", the company,
GTS/Vox and MTU-Inform were true and correct when made and are true and
correct as of the date hereof, with the same force and effect as if
made as of the date hereof, other than such representations and
warranties as are made as of another date.
2. The Company has performed or complied with the covenants and agreements
contained in the Stock Purchase Agreement to be complied with by the
Company on or prior to the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed by its duly authorized attorney-in-fact this 6th day of September,
1995.
SWINTON LIMITED
/s/ A. Chambazov
------------------------
Name: Mr. A. Chambazov,
Attorney-in-Fact
62
ANNEX B.2
SWINTON LIMITED
Certificate as to Truth and Correctness of
Resolutions and as to Election,
Qualification, Incumbency and Signatures
I, Xxxxxxx Muraev, acting on behalf of London Corporate Services, Ltd. do
hereby certify that:
1. I am the duly elected, qualified and acting Secretary of Swinton
Limited, an international business company organized under the laws of the
Commonwealth of the Bahamas (the "Company"), and, in such capacity, have
access to and the authority to certify to the books and records of the Company;
2. Attached hereto as Exhibit A is a true, correct and complete copy of
resolutions duly adopted by the [Board of Directors] of the Company at a
meeting duly held on [Date], 1995; such resolutions have not been rescinded and
are in full force and effect on the date hereof.
3. The person named below at September 6, 1995, and at all times
subsequent thereto, up to and including the date hereof, has been a duly
elected, qualified and acting officer of the Company holding the office set
forth opposite his name below, and the signature of such person appearing
opposite his name is his genuine signature.
Name Title Signature
---------- ----------- ---------------
London Auditing Director [ILLEGIBLE]
and Consulting Ltd.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 6th day of September, 1995.
/s/ XXXXXXX MURAEV
-------------------------------
Name: Xxxxxxx Muraev
Title: Secretary, London
Corporate Services Ltd.
63
I, London Auditing and Consulting Ltd., in my capacity as director, do
hereby certify that M. Muraev is the duly elected, qualified and acting
Secretary of the Company and the signature above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 6th day of September, 1995.
[ILLEGIBLE]
----------------------------
London Auditing and Consulting
Ltd. Director
64
ANNEX B.3
RECEIPT OF SWINTON LIMITED
dated September 6, 1995
Reference is made to Section 1.04(b) of the Stock Purchase Agreement,
dated as of September 6, 1995, between Global TeleSystems Group, Inc.,
Kompaniya "Invest-Project", Swinton Limited, GTS-Vox and MTU-Inform (the
"Agreement"; unless otherwise defined herein, capitalized terms used herein are
defined as set forth in the Agreement).
Swinton Limited hereby acknowledges receipt of (i) L.52.64 and (ii) the
GTS Note delivered by GTS to Swinton Limited pursuant to Section 1.04(b) of the
Agreement.
By executing this receipt, the Company acknowledges and agrees that all
conditions to the Company's obligation to consummate the transactions
contemplated by the Agreement have been satisfied.
SWINTON LIMITED
By:
-----------------------------
Name: A. Chambazov
Title: Attorney-in-Fact
65
ANNEX C.1
GTS-VOX LIMITED
Certificate as to Truth and Correctness of
Representations and Warranties and as to
Performance of and Compliance with
Agreements and Covenants
GTS-Vox Limited, a private limited company organized pursuant to the
Companies Act of 1985 of England and Wales (the "Company"), does hereby certify
as follows:
1. The representations and warranties of the Company contained in the
Stock Purchase Agreement, dated as of September 6, 1995, among Global
TeleSystems Group, Inc., Kompaniya "Invest-Project", Swinton Limited,
the Company, and MTU-Inform were true and correct when made and are
true and correct as of the date hereof, with the same force and effect
as if made as of the date hereof, other than such representations and
warranties as are made as of another date.
2. The Company has performed or complied with the covenants and
agreements contained in the Stock Purchase Agreement to be complied
with by the Company on or prior to the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed by its duly authorized attorney-in-fact this 6th day of
September, 1995.
GTS-VOX LIMITED
/s/ XXXX XXXXX-XXXXX
---------------------------------------
Xxxx Xxxxx-Xxxxx, representing London
Auditing and Consulting Ltd.
66
ANNEX C.2
GTS-VOX LIMITED
Certificate as to Truth and Correctness of
Constituent Documents and Resolutions, and as to Election,
Qualification, Incumbency and Signatures
I, London Corporate Services, Ltd., do hereby certify that:
1. I am the duly elected, qualified and acting Secretary of GTS-Vox
Limited, a private limited company organized pursuant to the Companies Xxx 0000
of England and Wales (the "Company"), and, in such capacity, have access to and
the authority to certify to the books and records of the Company;
2. Attached hereto as Exhibit A is a true and correct copy of the
Articles of Association of the Company (the "Articles"), certified by the sole
director, as of September 6, 1995;
3. No amendments have been made to such Articles of Association since
such date; and
4. Attached hereto as Exhibit B is a true and correct copy of the
Memorandum of Association of the Company, certified by the sole director, as of
September 6, 1995.
5. Attached hereto as Exhibit C is a true, correct and complete copy of
resolutions duly adopted by the Board of Directors of the Company at a meeting
duly held on September 6, 1995; such resolutions have not been rescinded and
are in full force and effect on the date hereof.
6. Attached hereto as Exhibits D and E, respectively, are the minute
books and stock register of GTS-Vox, which minute books contain all documents
required to be contained therein as of the date hereof and which stock register
is complete as of the date hereof.
67
7. The person named below at July 6, 1995, and at all times
subsequent thereto, up to and including the date hereof, has been a duly
elected, qualified and acting officer of the Company holding the office set
forth opposite his name below, and the signature of such person appearing
opposite his name is his genuine signature.
Name Title Signature
London Auditing and Director /s/ [ILLEGIBLE]
Consulting Ltd.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 6th day of September, 1995.
/s/ [ILLEGIBLE]
London Corporate Services Ltd.
Secretary
68
I, London Auditing and Consulting Ltd., in my capacity as Director,
do hereby certify that London Corporate Services Ltd. is the duly elected,
qualified and acting Corporate Secretary of the Company and the signature above
is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 6th day of September, 1995.
/s/ [ILLEGIBLE]
--------------------
London Auditing and Consulting Ltd.
Director
69
ANNEX D.1
INVEST-PROJECT
Certificate as to Truth and Correctness of
Constituent Documents
X. X.X. Gzomov, do hereby certify that:
1. I am the duly elected, qualified and acting General Director of
Invest-Project, a closed joint stock company organized under the laws of the
Russian Federation (the "Company"), and, in such capacity, have access to and
the authority to certify to the books and records of the Company;
2. Attached hereto is a true and correct copy of the Articles of
Association of the Company (the "Articles"), certified by the Russian State
Registration Authority, as of September 6, 1995;
3. No amendments have been made to the Articles of Association since
such date; and
4. Attached hereto is a true and correct copy of the Bylaws of the
Company.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 6th day of September, 1995.
/s/ D.A. GZOMOV
---------------------------------
Name: D.A. Gzomov
Title: General Director
[SEAL]
70
I, M. Muraev, in my capacity as GTS General Counsel, CIS, do hereby
certify that D.A. Gzomov is the duly elected, qualified and acting General
Director of the Company and the signature above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 6th day of September, 1995.
/s/ M. MURAEV
-----------------------------------
M. Muraev
GTS General Counsel, CIS
71
ANNEX E.1
MTU-INFORM
Certificate as to Truth and Correctness of
Representations and Warranties and as to
Performance of and Compliance with
Agreements and Covenants
I, X. Xxxxxxxxxxx, the First Deputy of the General Director of
MTU-Inform, a partnership organized under the laws of the Russian Federation
(the "Company"), hereby certify on behalf of the Company in my capacity as an
officer of the Company, and not in my personal capacity, that:
1. The representations and warranties of the Company contained in
the Stock Purchase Agreement, dated as of September 6, 1995,
among Global TeleSystems Group, Inc., Kompaniya
"Invest-Project", Swinton Limited, GTS-Vox and the Company were
true and correct when made and are true and correct as of the
date hereof, with the same force and effect as if made as of the
date hereof, other than such representations and warranties as
are made as of another date.
2. The Company has performed or complied with the covenants and
agreements contained in the Stock Purchase Agreement to be
complied with by the Company on or prior to the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
seal of the Company this 6th day of September, 1995.
/s/ X. XXXXXXXXXXX
-------------------------------------
Name: X. Xxxxxxxxxxx
Title: First Deputy of the General
Director
[SEAL]
72
ANNEX E.2
MTU-INFORM
Certificate as to Truth and Correctness of
Resolutions and as to Election,
Qualification, Incumbency and Signatures
I, X. Xxxxxxxxxxx, do hereby certify that:
1. I am the duly elected, qualified and acting First Deputy of
the General Director of MTU-Inform, a partnership organized under the laws of
the Russian Federation (the "Company"), and, in such capacity, have access to
and the authority to certify to the books and records of the Company;
2. The person named below at September __, 1995, and at all
times subsequent thereto, up to and including the date hereof, has been a duly
elected, qualified and acting officer of the Company holding the office set
forth opposite his name below, and the signature of such person appearing
opposite his name is his genuine signature.
Name Title Signature
---- ----- ---------
X. Xxxxxxxxxxx First Deputy of
the General Director
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
seal of the Company this 6th day of September, 1995.
/s/ X. XXXXXXXXXXX
------------------------------------
X. Xxxxxxxxxxx
First Deputy of the General Director
[SEAL]
73
I, M. Muraev, in my capacity as GTS General Counsel-CIS, do hereby
certify that Xx. X. Xxxxxxxxxxx is the duly elected, qualified and acting First
Deputy of the General Director of the Company and the signature above is his
genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 6th day of September, 1995.
/s/ M. MURAEV
-----------------------
M. Muraev
GTS General Counsel-CIS
74
ANNEX F.1
GLOBAL TELESYSTEMS GROUP, INC.
Certificate as to Truth and Correctness of
Representations and Warranties and as to
Performance of and Compliance with
Agreements and Covenants
I, Xxxxx Xxxxxxxxxxx, the Senior Vice President of Global TeleSystems
Group, Inc., a Delaware corporation (the "Company"), hereby certify on behalf
of the Company in my capacity as an officer of the Company, and not in my
personal capacity, that:
1. The representations and warranties of the Company contained in the
Stock Purchase Agreement, dated as of September 6, 1995, among the
Company, Kompaniya "Invest-Project", Swinton Limited, GTS-Vox and
MTU-Inform were true and correct when made and are true and correct
as of the date hereof, with the same force and effect as if made as
of the date hereof, other than such representations and warranties
as are made as of another date.
2. The Company has performed or complied with the covenants and
agreements contained in the Stock Purchase Agreement to be complied
with by the Company on or prior to the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 6th day of September, 1995.
/s/ XXXXX XXXXXXXXXXX
---------------------------------
Xxxxx Xxxxxxxxxxx
Senior Vice President
75
ANNEX F.2
GLOBAL TELESYSTEMS GROUP, INC.
Certificate as to Truth and Correctness
of Resolutions and as to Election,
Qualification, Incumbency and Signatures
I, Xxxxx Xxxxxxxxxxx, do hereby certify that:
1. I am the duly elected, qualified and acting Senior Vice President of
Global TeleSystems Group, Inc., a Delaware corporation (the
"Company"), and in such capacity, have access to and the authority
to certify to the books and records of the Company;
2. Attached hereto as Exhibit A is a true, correct and complete copy of
resolutions duly adopted by the [Board of Directors] of the Company
at a meeting duly held on [Date], 1995; such resolutions have not
been rescinded and are in full force and effect on the date hereof.
3. The person named below at March 3, 1995, and at all times subsequent
thereto, up to and including the date hereof, has been a duly elected,
qualified and acting officer of the Company holding the office set
forth opposite his name below, and the signature of such person
appearing opposite his name is his genuine signature.
Name Title Signature
---- ----- ---------
Xxxxx Xxxxxxxxxxx Senior Vice President
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 6th day of September, 1995.
/s/ XXXXX XXXXXXXXXXX
---------------------------------
Xxxxx Xxxxxxxxxxx
Senior Vice President
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I, M. Muraev, in my capacity as GTS General Counsel-CIS, do hereby
certify that X. Xxxxxxxxxxx is the duly elected, qualified and acting Senior
Vice President of the Company and the signature above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 6th day of September, 1995.
/s/ M. Muraev
-------------------
M. Muraev
General Counsel-CIS
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ANNEX F.3
RECEIPT OF GLOBAL TELESYSTEMS GROUP, INC.
dated September 6, 1995
Reference is made to Sections 1.04(a) of the Stock Purchase
Agreement, dated as of September 6, 1995, between Global TeleSystems Group,
Inc., Kompaniya "Invest-Project", Swinton Limited, GTS-Vox and MTU-Inform (the
"Agreement"; unless otherwise defined herein, capitalized terms used herein are
defined as set forth in the Agreement).
GTS hereby acknowledges receipt of a stock certificate evidencing the
GTS-Vox Shares duly endorsed to GTS, and accompanied by a stock transfer form
duly executed to GTS, in form satisfactory to GTS.
By executing this receipt, the Company acknowledges and agrees that
all conditions to the Company's obligation to consummate the transactions
contemplated by the Agreement have been satisfied.
GLOBAL TELESYSTEMS GROUP, INC.
By: /s/ XXXXX XXXXXXXXXXX
-----------------------
Name: Xxxxx Xxxxxxxxxxx
Title: Senior Vice President
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ADDENDUM AGREEMENT
THIS ADDENDUM AGREEMENT is made as of this 17 day of January 1997 by and among
Global TeleSystems Group, Inc., a Delaware corporation ("GTS"), Kompaniya
"Invest-Project", a limited liability partnership organized under the laws of
the Russian Federation, Swinton Limited, a company organized under the laws of
the Commonwealth of the Bahamas (the "Seller"), GTS-Vox limited, a private
limited company organized pursuant to the Companies Act of 1985 of England and
Wales ("GTS-Vox"), and MTU-Inform, a partnership organized under the laws of
the Russian Federation.
WHEREAS, the Parties entered into a Stock Purchase Agreement dated
September 6, 1995 (the "Agreement") pursuant to which GTS agreed to purchase
5,264 of the ordinary shares of GTS-Vox from the Seller in exchange for cash
and shares of GTS as further set forth therein;
WHEREAS, the Parties desire to modify the terms and conditions of the
Agreement as set forth herein and in the revised business plan dated April 20,
1996 which is attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the premises and mutual promises and
covenants hereinafter set forth, the parties hereto hereby agree as follows:
A. AMENDMENTS
Capitalized terms used herein without definition shall have the definition
ascribed to them in the Agreement.
1. The following shall be added to the end of Section 1.02(a):
"GTS shall not issue fractional shares to the Seller in connection with any
transaction contemplated herein. Any calculation of shares hereunder which
results in fractional shares shall be rounded to the nearest whole number of
shares."
2. Section 1.02(c) shall be deleted in its entirety and replaced with
the following:
"(c) Within ten days after the execution of this Addendum Agreement, GTS shall
deliver to the Seller eight GTS Certificates,each of which shall represent
3,313 shares of GTS Common Stock. Such GTS Certificates, taken together,shall
constitute 26,506 shares of GTS Common Stock, representing the difference of
between the Reference Exchange Number (as defined herein) and the shares of GTS
Common Stock to be delivered in accordance with Section 1.02(e), (f) and (g)
hereof (without adjustment)."
3. Section 1.02(d)(ii) shall be amended as follows:
a. the words "if the corporate and shareholder approvals referred to in
Section 102(c) have not been obtained by such date," shall be deleted, and
b. the following shall be added to the end of Section 1.02(d)(ii):
1
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"Within ten days after the execution of this Addendum Agreement, and
following the surrender by the Seller of the GTS Note II which was issued to
the Seller by GTS on May 6, 1996 (the "1996 GTS Note II"), GTS shall deliver to
the Seller eight GTS Certificates, each of which represent 4,685 shares of GTS
Common Stock. Such GTS Certificates, taken together, shall constitute 37,480
shares of GTS Common Stock, which is the number of shares of GTS Common Stock
which the 1996 GTS Note II represents."
4. In Section 1.06(a), the number "299,840" shall be deleted and
replaced with the number 405,867.
5. The following revisions shall be made to Section 1.06(d)(i):
a. the word "revised" shall be added before the words "business
plan" on the third line;
b. the date shall be changed to April 20, 1996 on the third line;
c. the word "Revised" shall be added after the first quotation xxxx
and before the words "Business Plan" on the fourth line; and
d. the following shall be added after the words "Business Plan" on
the fourth line: ", provided, however, that the Net Income for
1996 as reflected in the Revised Business Plan shall be
$718,000."
6. In Section 1.06(d)(ii), the number "449,760" shall be deleted and
replaced with the number "747,760" in each of the places specified in (a)
through (d) below.
a. after the word "exceed" in the second and third lines of the
third paragraph of Section 1.06(d)(ii);
b. after the words "exceed 50% of" in the second line of the fourth
paragraph of Section 1.06(d)(ii);
c. after the words "exceed 75% of" in the third line of the
fourth paragraph of Section 1.06(d)(ii);
d. after the words "exceed 100% of" in the fourth line of the
fourth paragraph of Section 1.06(d)(ii).
7. A new Section 1.06(e) shall be added which shall read in its entirety
as follows:
"(e) The parties hereby agree that the total consideration paid by GTS
under the terms of this Agreement shall in no event exceed 747,760 shares of
GTS (or the cash equivalent thereof) plus Section L.52.94. The principal amount
of the GTS Note ($693,380) shall be considered the equivalent of 37,480 shares
of GTS Common Stock for the purposes of this Section 1.06. The GTS Common Stock
equivalent of any other GTS Note issued and payable in cash shall be calculated
in accordance with Sections 1.02(e), (f), (g) and Section 1.06(a)-(d) hereof.
2
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8. Section 2.10 shall be amended as follows:
a. by adding the words ", as amended by Supplement 1 No. 1657 to
Agreement 1587 dated June 23, 1995 and by Addendum No. 1/2392
dated July 29, 1996" after the words "Pursuant to Agreement No.
1587";
b. by deleting the number "50,000" on the eleventh and sixteenth
lines thereof and replacing it with the number "100,000";
9. Section 5.01(a) shall be amended by adding the words ", AS AMENDED
PURSUANT TO AN ADDENDUM AGREEMENT DATED January 17, 1997," after the words
"DATED SEPTEMBER 6, 1995" on the eleventh line of the second paragraph thereof.
10. A new Section 5.01(d) shall be added as follows:
"(d) Number of GTS Certificates. Upon each issuance of GTS Common Stock by
GTS to the Seller hereunder, GTS shall deliver to the Seller eight GTS
Certificates each of which shall represent one-eighth of the aggregate amount
of GTS Common Stock which GTS is obligated to deliver at such time."
B. MISCELLANEOUS
1. This Addendum Agreement shall be attached to and become a part of the
Agreement.
2. All of the representations and warranties contained in the Agreement
continue as of the date hereof to be true and correct in all respects.
3. This Addendum Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
executed in and to be performed entirely within that state (without giving
effect to the conflicts of law principles thereof).
3
81
IN WITNESS WHEREOF, the parties hereto have caused this Addendum Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
GLOBAL TELESYSTEMS GROUP, INC.
By /s/ XXXXX RADZIKOWSKY
----------------------------
Name: Xxxxx Radjikowski
Title: Senior Vice President
KOMPANIYA "INVEST-PROJECT"
By /s/ XXXXXX X. XXXXXXX
----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: General Director
[SEAL]
SWINTON LIMITED
By /s/ A. CHAMBAZOV
----------------------------
Name: A. Chambazov
Title: Attorney-in-Fact
[SEAL]
GTS-VOX LIMITED
By /s/ XXXX XXXXX-XXXXX
----------------------------
Name: Xxxx Xxxxx-Xxxxx
Title: Director of London
Auditing and Consulting Ltd.
[SEAL]
MTU-INFORM
By /s/ X. XXXXXXXXXXX
----------------------------
Name: X. Xxxxxxxxxxx
Title: First Deputy of
General Director
[SEAL]
4
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CERTIFICATE
I hereby declare that, at the time of the execution of the Addendum dated July
29, 1996 to the Agreement No. 1587 between Moscow City Telephone Network, a
Russian joint stock company ("MCTN") and Invest Project, a Russian joint stock
company ("Invest Project") dated May 29, 1995, I disclosed to the governing
bodies of MCTN that I was a member of the board of directors of
TeleCommunications of Moscow ("TCM"), a Russian joint stock company, a legal
successor of Invest Project, a Russian joint stock company. Such members of the
governing body of MCTN have been aware of my continued membership on TCM board
since I was elected in November of 1995.
/s/ A. CHAMBAZOV
_______________________
Name: A. Chambazov
I, Xxxx Xxxxx-Xxxxx, a director of London Auditing and Consulting Ltd., do
hereby certify that the above named individual, Mr. A. Chambazov has signed
this document before me in my presence.
/s/ XXXX XXXXX-XXXXX [Seal]
